Disqualification of blacklisted bidder from power project tender upheld — Patna High Court, 2022

Case Background

The dispute arose out of a large public tender floated by North Bihar Power Distribution Company Limited (NBPDCL) for the Mukhyamantri Krishi Vidyut Sambhad Yojana. The work involved construction of 11 KV dedicated feeders, extension of 11 KV lines, installation of distribution transformers, erection of LT lines with AB cable and related rural electricity works in all nine circles of NBPDCL.

NBPDCL issued Request for Proposal (RFP) NIT No. 01/PR/NBPDCL/2021 for appointment of a Project Management Agency (PMA). The estimated project cost was about Rs. 614.64 crores, making it a high-value and sensitive public contract. Bids were to be submitted in two parts: a technical bid and a financial bid. Only technically qualified bidders’ financial bids would be opened.

The petitioner, REC Power Development and Consultancy Limited (REC-PDCL), a Government of India controlled Navratna PSU and subsidiary of REC Ltd., participated as a bidder. The company works across India in power distribution projects and consultancy and claimed to be providing services to 41 power distribution companies in 28 States for projects worth over Rs. 85,000 crores.

REC-PDCL submitted its online bid on 06.04.2021. The technical bids were opened on 08.04.2021. As per Clause 1.1.3(e) of the RFP, every bidder had to submit an affidavit that it had not been blacklisted or debarred by any Government department, public limited company or bilateral/multilateral funding agency as on the date of bid opening. REC-PDCL submitted an affidavit dated 01.04.2021 declaring that it was not blacklisted or debarred as on the bid opening date.

Later, NBPDCL learnt through an email that REC-PDCL had been blacklisted by Namami Gange and Grameen Jalapurti Vibhag, Government of Uttar Pradesh, by an order dated 11.12.2020. On 24.08.2021, the Chief Engineer (Project-I/Rural), NBPDCL, wrote to REC-PDCL seeking clarification about this blacklisting.

REC-PDCL replied on 25.08.2021. It admitted that it had been blacklisted by Namami Gange and Grameen Jalapurti Vibhag in connection with a baseline survey tender relating to the Jal Jeevan Mission in Uttar Pradesh. However, it pointed out that this blacklisting order was challenged before the Allahabad High Court, Lucknow Bench, and that on 17.12.2020 that High Court had stayed the blacklisting order. REC-PDCL argued that because of the stay, the blacklisting order was not in force on 06.04.2021 (bid submission) or 08.04.2021 (bid opening).

Despite this explanation, NBPDCL, through an email dated 02.09.2021, declared REC-PDCL’s bid “non-responsive” and disqualified it from the tender. The reason recorded was that REC-PDCL had been blacklisted by Namami Gange & Grameen Jalapurti Vibhag, Uttar Pradesh, and that an interim court order staying the blacklisting did not create eligibility in absence of final adjudication. REC-PDCL immediately sent another email on the same day asking NBPDCL to reconsider, but there was no change.

By this time, the tender process went ahead, and NBPDCL awarded the PMA contract to another bidder, creating third-party rights. REC-PDCL then approached the Patna High Court under Article 226 of the Constitution, challenging the disqualification order and seeking a direction to consider its bid.

What the Court Examined and Decided

Justice Mohit Kumar Shah of the Patna High Court examined two broad aspects: first, the effect of the Allahabad High Court’s interim stay of the blacklisting order; and second, whether REC-PDCL’s conduct in filing its affidavit and not disclosing the blacklisting was acceptable in light of the RFP conditions.

On behalf of REC-PDCL, senior counsel argued that the blacklisting order dated 11.12.2020 had been stayed by the Allahabad High Court on 17.12.2020 after finding a prima facie case. The interim order clearly stated that the blacklisting order would “remain stayed” till further orders. Relying on the Supreme Court decision in Consolidated Coffee Ltd. v. Agricultural Income Tax Officer Madikeri, it was argued that when a stay operates, the order that is stayed “does not exist in the eye of law” for that period. Therefore, on the date of bid submission and opening, REC-PDCL could not be treated as blacklisted.

Counsel further relied on Clause 1.2.28 of the RFP, which stated that a bidder is ineligible to participate “in case the blacklisting/debarment is in force and effective on the date of submission of the bid.” According to REC-PDCL, since the blacklisting order had been stayed before the tender process even began, it was neither “in force” nor “effective,” and there was no requirement in the RFP to disclose a stayed blacklisting order or pending litigation.

The petitioner also claimed that NBPDCL’s rejection email was a cryptic one-line order, not a speaking order, allegedly violating principles of natural justice. It argued that the stay order in its favour was binding on all, even on parties who were not before the Allahabad High Court, and cited decisions like Reliance Energy Ltd. and Vidya Charan Shukla to emphasise the need for clarity and fairness in tender conditions and the duty of authorities to follow court orders.

NBPDCL, through its counsel, responded that the writ petition had become largely academic because the contract had already been finally awarded to another bidder, and implementation of the project had commenced. However, it still sought an authoritative pronouncement on the effect of an interim stay of blacklisting in public tenders.

NBPDCL argued that an interim order is only temporary and cannot be treated as a final declaration of rights. In competitive public tenders involving huge amounts of public money, treating a blacklisted bidder with an interim stay as fully clean would risk serious prejudice. If the blacklisting is later upheld by the Allahabad High Court, it would be impossible to undo the contract and restore status quo.

NBPDCL also emphasised that REC-PDCL’s affidavit dated 01.04.2021 was materially false. Clause 1.1.3(e) required an affidavit that the firm was not blacklisted or debarred as on the bid opening date. The company admittedly had a subsisting blacklisting order, even if stayed. Yet it declared that it was not blacklisted or debarred by any Government department or public company. The RFP also contained Clause 1.2.20, allowing the owner to reject any bid if a material misrepresentation was discovered.

According to NBPDCL, REC-PDCL had not only concealed the fact of blacklisting but also kept silent about the pending writ petition and the interim stay. This amounted to “suppression vari and suggestio falsi” (concealing truth and suggesting falsehood). The tendering authority, NBPDCL, was entitled to consider this non-disclosure as a serious breach of trust and disqualify the bidder.

NBPDCL referred to several Supreme Court decisions on interim orders and tender interference, including Asian Resurfacing of Road Agency (P) Ltd. v. CBI, Empire Jute Co. Ltd. v. Jute Corporation of India, Devendra Kumar v. State of Utranchal, State of AP v. Chinam Naidu, and Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. The consistent theme from these judgments was that interim orders are temporary; they cannot be used to gain long-term advantage without final adjudication, and courts should show restraint in interfering with administrative decisions in tender matters.

After hearing both sides, the Patna High Court framed the core question: whether NBPDCL’s decision to hold the petitioner’s bid non-responsive under Clause 1.1.3(e) of the RFP was legally sustainable.

The Court first examined the nature and effect of the Allahabad High Court’s stay. It accepted that the blacklisting order dated 11.12.2020 had been stayed by the interim order dated 17.12.2020. However, the Court noted that the blacklisting order still “exists” in law unless and until it is finally set aside. The challenge before the Allahabad High Court may or may not succeed; that uncertainty remains.

Given this uncertainty, and the high financial stakes and technical nature of the NBPDCL project, the Court held that the impact of an interim stay must be viewed differently in the context of public contracts. The interim order could not be implemented “as if it is a final verdict,” because that would amount to pre-judging the case pending before another High Court and might prejudice other bidders and the principal employer.

The Court then turned to the limits of judicial review in tender matters. Relying heavily on Supreme Court authorities like Tata Cellular v. Union of India, Afcon Infrastructures Ltd. v. Nagpur Metro Rail Corporation Ltd., and later cases such as Silppi Constructions Contractors, Bharat Coking Coal Ltd., Vidarbha Irrigation Development Corporation, Siemens Public Communication Networks (P) Ltd. and N.G. Projects Limited v. Vinod Kumar Jain, the Court reiterated that:

Judicial review in contractual matters is very limited. Courts do not sit as appellate bodies to substitute their views for that of expert tender committees. Interference is justified only when there is illegality, irrationality, mala fides, or procedural impropriety, or when the decision is so unreasonable that no reasonable authority could have reached it.

In this case, the Court found that NBPDCL had applied the RFP conditions uniformly, with no sign of bias, favouritism or mala fide intent. The “normal rules of the game” in the RFP were followed.

Crucially, the Court focused on REC-PDCL’s affidavit and conduct. It held that the affidavit dated 01.04.2021, wherein the petitioner declared that it had not been blacklisted or debarred, was “apparently false.” The company knew of the blacklisting order dated 11.12.2020 and of the pending litigation along with the interim stay obtained by it. Despite this, it chose not to disclose the blacklisting or the stay.

The Court rejected the petitioner’s argument that, because of the stay, there was no obligation to mention the blacklisting. It held that details of previous blacklisting were “mandatory and essential information” for the tendering authority to evaluate pre-qualification. A duty was clearly cast on the bidder to disclose such crucial facts. Non-disclosure amounted to suppression of vital information.

Referring to the Supreme Court judgment in K.D. Sharma v. Steel Authority of India Ltd., the Court recalled that fraud involves deliberate deception and that even solemn proceedings stand vitiated if they are tainted by fraud. It observed that the petitioner’s interpretation of the RFP clauses to avoid disclosure was “devoid of any substance” and constituted non-disclosure and suppression of material facts.

Therefore, even apart from the debate about the effect of the stay order, the Court held that the petitioner’s bid was liable to be rejected under Clause 1.2.20 and Clause 1.2.28 of the RFP due to material misrepresentation.

On these findings, the Court concluded that NBPDCL’s decision to treat REC-PDCL’s bid as non-responsive and to disqualify it did not suffer from arbitrariness or illegality. There was no reason for the Patna High Court to interfere, particularly because the contract had already been awarded and third-party rights had arisen.

Accordingly, the writ petition was dismissed, without any order as to costs. The Court also noted that the Supreme Court and other decisions relied upon by the petitioner, including Consolidated Coffee Ltd., Reliance Energy Ltd. and Vidya Charan Shukla, were distinguishable on facts and had no application here.

Why This Judgment Matters

This judgment is significant for companies bidding in government tenders, especially in the infrastructure and power sectors. It conveys a clear warning: if a bidder has ever been blacklisted, even if that order is under challenge and temporarily stayed, the fact of blacklisting must still be truthfully disclosed where the tender requires such information.

The Patna High Court recognised the existence of an interim stay granted by the Allahabad High Court, but refused to treat it as wiping out the blacklisting for tender purposes. For tendering authorities, this decision supports a cautious approach when dealing with blacklisted entities who rely on interim orders. For bidders, it underscores that any attempt to “take shelter” behind a stay order and file a blanket “no blacklisting” affidavit can be treated as material misrepresentation.

The judgment also reiterates the narrow scope of judicial review over public tenders. Courts will not lightly interfere with technical evaluations or eligibility decisions taken by expert committees, particularly in large projects involving public money and strict timelines. Unless clear mala fides, arbitrariness, or breach of tender rules is shown, the decisions of the tendering authority will normally stand.

For individuals and businesses who feel unfairly excluded from public contracts, the ruling highlights two practical lessons: challenge a blacklisting order directly before the appropriate court, and, while that challenge is pending, always make full and honest disclosures in any new tender process. Misleading affidavits can close the door even where there might be a sympathetic case on the merits.

Legal Issues and Answers

• Issue: Does an interim stay of a blacklisting order by another High Court make a bidder fully eligible under an RFP clause requiring that it should not be blacklisted as on the date of bid opening?
  Answer: No. The Patna High Court held that the blacklisting order continues to exist until finally set aside. In a public contract, an interim stay cannot be treated as a final verdict, and the tendering authority can still rely on the fact of blacklisting while assessing eligibility.
• Issue: Can a bidder who has been blacklisted but has obtained a stay of that order submit an affidavit stating it is “not blacklisted” without disclosing the blacklisting and pending litigation?
  Answer: No. The Court held that such non-disclosure amounts to material misrepresentation and suppression of vital facts, especially where the RFP requires disclosure about blacklisting. On this ground alone, the bid can be rejected under the RFP.
• Issue: Was NBPDCL’s decision to declare the petitioner’s bid non-responsive arbitrary or unreasonable so as to justify interference under judicial review?
  Answer: No. The Court found that NBPDCL applied the tender conditions fairly, without mala fides or favouritism, and within its contractual discretion. Hence, the decision-making process did not warrant interference.

Cases Cited by the Court

• Consolidated Coffee Ltd. v. Agricultural Income Tax Officer Madikeri & Ors., (2001) 1 SCC 278
• Reliance Energy Ltd. v. Maharashtra State Road Development Corporation, (2007) 8 SCC 1
• Tata Cellular v. Union of India, (1994) 6 SCC 651
• Vidya Charan Shukla v. Tamil Nadu Olympic Association & Ors., AIR 1991 Madras 323 (FB)
• Asian Resurfacing of Road Agency (P) Ltd. v. CBI, (2018) 16 SCC 299
• Devendra Kumar v. State of Utranchal, (2013) 9 SCC 363
• State of AP v. Chinam Naidu, (2005) 2 SCC 746
• Empire Jute Co. Ltd. v. Jute Corporation of India, (2007) 14 SCC 680
• Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd., (2005) 6 SCC 138
• Kalabharati Advertising v. Hemant Vimalnath Narichania, (2010) 9 SCC 437
• Abhimanyoo Ram v. State of Uttar Pradesh & Anr., (2008) 17 SCC 73
• United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal, (2004) 8 SCC 644
• Afcon Infrastructures Ltd. v. Nagpur Metro Rail Corporation Ltd. & Anr., (2016) 16 SCC 818
• Consortium of Titagarh Firema Adler S.P.A.-Titagarh Wagons Ltd., (2017) 7 SCC 486
• Silppi Constructions Contractors, (2020) 16 SCC 489
• Bharat Coking Coal Ltd., (2020) 16 SCC 759
• Vidarbha Irrigation Development Corporation, 2019 SCC OnLine SC 89
• Siemens Public Communication Networks (P) Ltd., (2008) 16 SCC 215
• N.G. Projects Limited v. Vinod Kumar Jain & Ors., 2022 SCC OnLine SC 336
• K.D. Sharma v. Steel Authority of India Ltd. & Ors., (2008) 12 SCC 481

Case Details

Case Number: Civil Writ Jurisdiction Case No. 16313 of 2021

Case Title: REC Power Development and Consultancy Limited (REC-PDCL) v. North Bihar Power Distribution Co. Ltd. & Anr.

Citation: 2022 (4) PLJR 759

Court: High Court of Judicature at Patna

Coram: Hon’ble Mr. Justice Mohit Kumar Shah

Date of Judgment: 30-09-2022

Advocates:

• For the petitioner: Mr. P.K. Shahi, Senior Advocate; Mr. Mukesh Kumar, Advocate
• For the respondents/NBPDCL: Mr. Vinay Kirti Singh, Senior Advocate; Mr. Anand Kumar Ojha, Advocate; Mr. A.K. Karn, Advocate

Nature of the Case: Writ petition under Article 226 challenging disqualification of bid and non-responsiveness in a public tender for appointment of Project Management Agency.

Link to the Judgment: Click here to access the Patna High Court judgment

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