We must strictly adhere to the terms of a contract

One of the possible reasons for this extremely low ranking given to our country is the failure of all parties concerned in strictly adhering to the terms of documents such as the NIT and the GTC, the Bench observed. The Supreme Court in Central Coalfields Limited & Anr vs. SLL – SML (Joint Venture Consortium) & Ors. has held that, decision taken by the employer about essentiality of a term of the Notice Inviting Tender should be respected and lawfulness of that can be questioned on very limited grounds. The Bench comprising of Justices Madan B. Lokur and R.K. Agrawal set aside a Judgment by Jharkhand High Court wherein it had set aside the rejection of the bid of SLL-SML by Central Coalfields Limited. In this case, the bid given by JVC was cancelled as the bank guarantee submitted was not in the format given in the NIT read with the GTC. The Court observed: “whether a term of the NIT is essential or not is a decision taken by the employer which should be respected. Even if the term is essential, the employer has the inherent authority to deviate from it provided the deviation is made applicable to all bidders and potential bidders as held in Ramana Dayaram Shetty. However, if the term is held by the employer to be ancillary or subsidiary, even that decision should be respected. The lawfulness of that decision can be questioned on very limited grounds, as mentioned in the various decisions discussed above, but the soundness of the decision cannot be questioned, otherwise this Court would be taking over the function of the tender issuing authority, which it cannot.” The Court also, referring to principle enunciated in Nazir Ahmad v. King Emperor, observed: “There is a wholesome principle that the Courts have been following for a very long time and which was articulated in Nazir Ahmad v. King Emperor namely “Where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden.” There is no valid reason to give up this salutary principle or not to apply it mutatis mutandis to bid documents. This principle deserves to be applied in contractual disputes, particularly in commercial contracts or bids leading up to commercial contracts, where there is stiff competition. It must follow from the application of the principle laid down in Nazir Ahmed that if the employer prescribes a particular format of the bank guarantee to be furnished, then a bidder ought to submit the bank guarantee in that particular format only and not in any other format.” Referring to Low ranking of India in global ease of business rating, the Court said: “One of the possible reasons for this extremely low ranking given to our country is the failure of all parties concerned in strictly adhering to the terms of documents such as the NIT and the GTC. In so far as the present case is concerned, the NIT was floated on 5th August, 2015 and one year later, we are still struggling with the issue of acceptance of a bank guarantee for a contract of about Rs. 2000 crores – certainly not a small sum.”

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