M/S MARULARADHYA SIDRAM PATIL PVT. LTD., V. UNION OF INDIA THROUGH

WP/102825/2024

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The case involves M/s. Marularadhya Sidram Patil Pvt. Ltd., a Class-I contractor, who filed a writ petition against the Union of India and various officials of the South Western Railways, challenging the rejection of their technical bid for a tender. The petitioner argued that their bid was unjustly rejected based on TRACES data, which they contended did not accurately reflect their financial capacity as compared to the audited balance sheets submitted. The respondents defended their decision by asserting that the petitioner did not meet the financial eligibility criteria as per the tender requirements. The court found that the respondents had improperly relied on TRACES data instead of the audited balance sheets as stipulated in the tender conditions, leading to an unjust assessment of the petitioner's financial eligibility.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 724174 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-07-2024
• Assessment Year: misc
• Laws Referred To: Articles 226 and 227 of the Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M B KANAVI
• Assessee Lawyers: SHIVRAJ BELLAKKI
• Keywords: Financial Bid; TDS Data; Technical bid; Tender process; TRACES; Writ of Certiorari; Writ of Mandamus; Audited Balance Sheets; Financial Eligibility Criteria
• Section: 226; 227

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 26TH DAY OF JULY, 2024 BEFORE THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM WRIT PETITION NO. 102825 OF 2024 (GM-TEN) BETWEEN: M/S. MARULARADHYA SIDRAM PATIL PVT. LTD., HAVING ITS OFFICE AT, 3RD FLOOR, TULIP BLOCK, J-305, ETA GARDEN APPT, BENGALURU, REPRESENTED BY ITS DIRECTOR, SRI. M.S. PATIL S/O. SIDDARAM PATIL. ...PETITIONER (BY SRI. SHIVARAJ C. BELLAKKI, ADV.) AND: 1. UNION OF INDIA THROUGH REP. BY DEPUTY CHIEF ENGINEER, CN/WORKS/BNC SWR-CONST-HQ-ENGG, SOUTH WESTERN RAILWAYS, HUBBALLI, DIST: DHARWAD. 2. THE GENERAL MANAGER, SOUTHWESTERN RAILWAYS, HUBBALLI-580023, DIST: DHARWAD. 3. THE DIVISIONAL RAILWAY MANAGER, SOUTH WESTERN RAILWAYS, HUBBALLI-580023, DIST: DHARWAD. 4. THE ADDITIONAL DIVISIONAL RAILWAY MANAGER/OP/UBL, THE SOUTHWESTERN RAILWAYS, HUBBALLI-580023, DIST: DHARWAD. 5. THE SENIOR DIVISIONAL ENGINEER/CENTRAL/UBL, SOUTHWESTERN RAILWAYS, HUBBALLI-580023, DIST: DHARWAD. 6. THE SENIOR DIVISIONAL ENGINEER/CO-ORD/UBL, SOUTH WESTERN RAILWAYS, KESHWAPUR, - 2 - HUBBALLI-580023, DIST: DHARWAD. 7. CHIEF ADMINISTRATIVE OFFICER, REP BY DEPUTY CHIEF ENGINEER/CN/WORKS/BNC SWR-CONST-HQ-ENGG, HUBBALLI-580023, DIST: DHARWAD. 8. THE CHIEF ENGINEER CONSTRUCTION/CN/III SOUTH WESTERN RAILWAYS, KESHWAPUR, HUBBALLI-580023, DIST: DHARWAD. 9. M/S SRI. NARASIMHA V. H.NO.-7-15/1, J.S.NAGAR, ROAD NO.8, HUBSIGUDA, HYDRABAD, DIST: HYDRABAD-500001, STATE: TELANGANA. …RESPONDENTS (BY SRI. M.B. KANAVI, ADV. FOR R1-R8; R9-SERVED) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI QUASHING THE COMMUNICATION THROUGH A TEXT MESSAGE FROM THE RESPONDENTS ON 07/05/2024 WHICH READ AS “YOUR TECHNO-COMMERCIAL BID AGAINST TENDER NO.GDG- WD-55 HAS BEEN FOUND TECHNICALLY UNSUITABLE” PRODUCED AS ANNEXURE-E, AND CONSEQUENTLY, ISSUE A WRIT OF MANDAMUS DIRECTING THE RESPONDENTS NO.1 TO 8 TO ACCEPT THE TECHNICAL BID OF PETITIONER AND CONSEQUENTLY, OPEN THE FINANCIAL BID OF THE PETITIONER AND PERMIT HIM TO PARTICIPATE IN THE FURTHER TENDER PROCEEDINGS NOTIFIED VIDE TENDER NOTIFICATION BEARING NO GDG-WD-55 DATED 14/02/2024 PRODUCED AS ANNEXURE-A. THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 25.07.2024, COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: - 3 - ORDER The captioned petition is filed by the petitioner who is a Class-I contractor assailing rejection of his technical bid on the ground that the petitioner is found to be unsuitable. 2. Respondent No.1 vide tender notification dated 23.1.2024 for execution of work of collection supply and stacking of machine crushed hard, durable and graded angular floated a tender. Petitioner participated in the tender process and claims that he has fulfilled all the conditions. Petitioner claims that he has deposited earnest money. Petitioner is aggrieved by the impugned communication sent through text message by respondents on 7.5.2024 which reads as “Your Techno Commercial Bid against Tender No.GDG-WD-55 has been found technically unsuitable.” 3. Petitioner is aggrieved by the action of respondents in assessing the petitioner’s average annual turnover on the basis of TRACES (TDS data). Petitioner contends that the TRACES data does not reflect exact - 4 - payment received by the contractor. Petitioner contends that the TDS deducted is reflected only after the person or organization deducting it, deposits the same to the treasury and files returns to Income Tax Department. Petitioner further contends that audited balance sheets submitted to Income Tax Department in support of his contractual payments clearly substantiates that petitioner has a turnover meeting the criteria indicated in the tender notification. 4. Petitioner has alleged discrimination on the ground that respondents have assessed the turnover of other bidders based on their audited balance sheets and not based on TRACES data. Petitioner has further contended that even the successful bidders’ annual turnover is based on the audited balance sheet and not based on TRACES. Petitioner contends that his bid is less than that of successful bidder arrayed as respondent No.9 and therefore, contends that the rejection of technical bid vide impugned communication is tainted with mala-fides. To substantiate as to why TRACES cannot be a basis to - 5 - assess the contractor’s turnover, petitioner has tried to substantiate on the ground that the payments received by the petitioner during previous financial years are not reflected in the TRACES. Petitioner is placing reliance on bank statements to substantiate that his turnover is above the requisite turnover of Rs.22,62,53,081.43 indicated in tender notification. 5. Per contra, respondents while refuting petitioner’s claim have resisted the writ petition on the ground that petitioner has failed to substantiate that he had a minimum average contractual turnover of Rs.22,62, 53,081.43. Therefore, respondents contend that since petitioner has failed to fulfil the standard financial eligibility criteria his technical bid is rejected and therefore, does not warrant any judicial review at the hands of this Court. The respondents have further contended that respondents were justified in rejecting the petitioner’s technical bid as his annual contractual receipts submitted in audited balance sheet are not matching with that of TRACES. Therefore, respondents contend that it - 6 - was well within the Tender Committee’s authority to reject the technical bid due to differences in the audited balance sheet average and TRACES submitted by the chartered account of the petitioner. 6. The respondents have also filed additional statement of objections contending that tender committee being dissatisfied with the chartered accountant’s clarification has cross-checked the figures through the TRACES submitted by the Chartered Accountant and on cross-verification has found that the contractual value of the petitioner is less than the required value. 7. Heard the learned counsel on record. This Court has meticulously reviewed the averments made in the writ petition, statement of objections filed by respondents. This Court has examined the synopsis submitted by both the parties. 8. Before this Court delves upon the respondents’ assessment of petitioner’s eligibility criteria by taking note - 7 - of TRACES data, this Court deems fit to examine condition NO.4. The eligibility condition at Condition No.4 is culled out, which reads as under: “4. ELIGIBILITY CONDITIONS Standard Financial Criteria S. No Description Confirmation Required Remarks Allowed Documents Uploading 1. Financial Eligibility Criteria: The Tenderer shall be eligible only if he fulfils the following Standard Financial Eligibility Criteria FOR WORKS COSTING ABOVE Rs.50.00 LAKHS: The tenderer must have minimum average annual contractual turnover of V/N or ‘V’ whichever is less, where V= Advertised value of the tender in crores of Rupees N= Number of years prescribed for completion of work for which bids have been invited. The average annual contractual turnover shall be calculated as an average of \"total contractual payments\" in the previous three financial years, as per the audited balance sheet. However, in case balance sheet of the previous year is yet to be prepared/ audited, the audited balance sheet of the fourth previous year shall be considered for calculating average annual contractual turnover. Client certificate from other than Govt Organization should be duly supported by Form 16A/26AS generated through TRACES of Income Tax Department of India. No Technical and Financial No No Allowed (Mandatory) Important: All documents uploaded and remarks/confirmation entered by the bidders against any eligibility condition shall be opened as part of technical bid only - 8 - credentials are required for tenders having value up to Rs.50 lakh. For tenders costing more than Rs.20 crore, eligibility criteria include bid capacity also as specified in clause 10.3 of IRSGCC- April 2022-PART I-\"Regulations for Tenders and Contracts - For the Guidance of Engineers & Contractors for Works Contracts.\" The tender/technical bid will be evaluated based on bid capacity formula detailed as Annexure-VI. The tenderer will be qualified only if it's available bid capacity is equal to or more than the total bid value of the present tender 9. The tender notification clearly contemplates standard financial criteria. The tender in terms of Condition No.4 has to fulfil the financial eligibility by demonstrating that his minimum average annual contractual turnover is more than Rs.22,62,53,081.43. To demonstrate his financial eligibility, petitioner has produced the certified balance sheets issued by the chartered accountant. Therefore, while ascertaining the petitioner’s financial eligibility, the tender committee could not have compared the TRACES data. - 9 - 10. The procedure followed by the respondents in evaluating the petitioner’s technical bid was critically flawed due to their reliance on TRACES (TDS data) for assessing financial eligibility, contrary to the clear requirements set forth in the tender notification. The tender document explicitly specified that the average annual contractual turnover should be demonstrated through audited balance sheets, which are prepared by chartered accountants and submitted to the Income Tax Department. These audited balance sheets provide a detailed and accurate record of the petitioner’s financial transactions over the relevant period and are considered a reliable measure of financial capacity. 11. In contrast, TRACES data only reflects the tax deducted at source and does not provide a complete picture of the petitioner’s actual financial receipts. This data is contingent on the timing of tax deposits and filings, which means it may not capture all payments received in a financial year, particularly if there are delays in the deposit - 10 - of TDS or reporting. Consequently, relying on TRACES data introduces an inherent risk of misrepresentation, as it fails to encompass the full scope of financial transactions reported in the audited balance sheets. 12. By deviating from the prescribed method of using audited balance sheets and instead using TRACES data, the respondents not only contravened the procedural requirements but also compromised the fairness and accuracy of the evaluation process. This approach led to an unjust assessment of the petitioner’s financial eligibility, resulting in the improper rejection of his bid. Such procedural deviations undermine the principles of transparency and fairness in the tendering process, adversely affecting the petitioner’s ability to compete on an equal footing and casting doubt on the integrity of the tender evaluation process. The Court further noted that the respondents' inconsistent treatment of the petitioner's and other bidders' financial documents indicated potential malafides. The acceptance of audited balance sheets for the successful bidder while rejecting the petitioner's bid - 11 - based on TRACES data suggested a lack of uniformity in the evaluation process. This inconsistency undermined the fairness and transparency expected in public procurement processes. 13. For the reasons stated supra, this Court proceeds to pass the following: ORDER (i) The writ petition is allowed; (ii) The impugned communication dated 07.05.2024, issued by the respondents, stating \"Your Techno-Commercial Bid against Tender No.GDG-WD-55 has been found technically unsuitable,\" is hereby quashed; (iii) The respondents are directed to recommence the tender process from the stage of opening the technical bids, ensuring compliance with the eligibility criteria as specified in the tender notification; (iv) The respondents shall evaluate all technical bids, including that of the petitioner, based on the audited balance sheets, as - 12 - prescribed in the tender conditions, and adhere to the principles of fairness and transparency in the tendering process; (v) No costs. Sd/- JUDGE *alb/- "