Simplified Explanation of the Judgment
In this case, the Patna High Court examined whether a government-owned company’s bid for a public electricity project in Bihar could be lawfully rejected because it had previously been blacklisted by another state department, even though that blacklisting order was under an interim stay from another High Court.
The petitioner, a central government “Navratna” PSU engaged in power sector consultancy and project execution, submitted a bid for appointment as Project Management Agency (PMA) under the Mukhyamantri Krishi Vidyut Sambhad Yojana floated by the North Bihar Power Distribution Company Limited (NBPDCL). The project involved high-value electrical infrastructure works across nine circles, with a total estimated cost exceeding ₹600 crores.
As per the Request for Proposal (RFP), bidders were required to submit an affidavit confirming they had not been blacklisted or debarred by any government department, public company, or funding agency on the date of bid opening.
The petitioner filed an affidavit dated 1 April 2021 stating it had not been blacklisted. However, NBPDCL later learned that the petitioner had been blacklisted by Namami Gange & Grameen Jalapurti Vibhag, Government of Uttar Pradesh, via an order dated 11 December 2020. That order was stayed on 17 December 2020 by the Allahabad High Court (Lucknow Bench) in ongoing litigation. The petitioner argued that because the blacklisting was under stay, it was “not in force” and need not be disclosed.
NBPDCL rejected the bid, reasoning that:
- The blacklisting order still existed until set aside, and an interim stay did not equate to final clearance.
- The petitioner’s affidavit stating “no blacklisting” amounted to misrepresentation and suppression of a material fact.
- Clause 1.1.3(e) and Clause 1.2.28 of the RFP required disclosure of blacklisting status, and Clause 1.2.20 allowed rejection of bids for material misrepresentation.
The petitioner challenged the rejection before the Patna High Court, arguing:
- The interim stay effectively nullified the blacklisting for the purposes of eligibility.
- The order was in rem and binding on all authorities, including NBPDCL.
- The rejection was arbitrary, non-speaking, and violated natural justice.
NBPDCL countered that:
- Interim orders are temporary and cannot be treated as final clearance, especially in public contracts.
- Non-disclosure of blacklisting, regardless of stay, breached essential eligibility conditions.
- Public interest and tender fairness required strict adherence to eligibility norms.
The Patna High Court upheld NBPDCL’s decision. The Court reasoned:
- An interim stay does not erase the fact of blacklisting; it only suspends its operation.
- In public contract matters with high financial stakes, interim orders cannot be treated as final verdicts.
- Judicial review in tender cases is limited to examining the decision-making process, not substituting the Court’s view for that of the tendering authority.
- The petitioner’s failure to disclose the blacklisting was material misrepresentation and justified rejection under the RFP.
The writ petition was dismissed without costs.
Significance or Implication of the Judgment
This ruling has significant implications for companies participating in public tenders:
- Interim Stay ≠ Final Clearance: Even if a blacklisting order is stayed, bidders must disclose it when tender conditions require disclosure of any blacklisting. Concealing such information risks outright disqualification.
- Full Disclosure Duty: The Court reinforced that bidders have a duty to be transparent about any disqualification history, as it affects eligibility assessments.
- Public Interest in Tender Integrity: The decision underscores that courts will give tendering authorities leeway in applying eligibility conditions strictly to protect public funds and fairness in competitive bidding.
- Judicial Restraint in Tender Cases: The High Court reiterated that its role is not to re-evaluate tender decisions but to ensure they are free from arbitrariness, bias, or mala fides.
Legal Issue(s) Decided and the Court’s Decision with Reasoning
- Whether an interim stay of a blacklisting order removes the obligation to disclose blacklisting in a tender affidavit?
Decision: No. The Court held that the blacklisting order still exists until quashed, and its non-disclosure amounts to misrepresentation. - Whether NBPDCL acted arbitrarily in rejecting the bid?
Decision: No. The rejection was consistent with RFP clauses 1.1.3(e), 1.2.20, and 1.2.28, and in public interest. - Extent of judicial review in tender matters
Decision: The Court reiterated that judicial review is limited to the legality of the decision-making process, not the merits of the decision itself.
Judgments Referred by Parties
- Consolidated Coffee Ltd. v. Agricultural Income Tax Officer (2001) 1 SCC 278
- Reliance Energy Ltd. v. Maharashtra State Road Development Corp. (2007) 8 SCC 1
- Vidya Charan Shukla v. Tamil Nadu Olympic Association AIR 1991 Madras 323
- Tata Cellular v. Union of India (1994) 6 SCC 651
- Asian Resurfacing of Road Agency (P) Ltd. v. CBI (2018) 16 SCC 299
- Devendra Kumar v. State of Uttarakhand (2013) 9 SCC 363
- Empire Jute Co. Ltd. v. Jute Corporation of India (2007) 14 SCC 680
Judgments Relied Upon or Cited by Court
- Tata Cellular v. Union of India (1994) 6 SCC 651
- Afcon Infrastructures Ltd. v. Nagpur Metro Rail Corp. Ltd. (2016) 16 SCC 818
- N.G. Projects Ltd. v. Vinod Kumar Jain 2022 SCC Online SC 336
- K.D. Sharma v. Steel Authority of India Ltd. (2008) 12 SCC 481
Case Title
REC Power Development and Consultancy Limited v. North Bihar Power Distribution Co. Ltd. & Anr.
Case Number
Civil Writ Jurisdiction Case No. 16313 of 2021
Coram and Names of Judges
Hon’ble Mr. Justice Mohit Kumar Shah
Names of Advocates and who they appeared for
- For the Petitioner: Mr. P.K. Shahi, Sr. Advocate; Mr. Mukesh Kumar, Advocate
- For the Respondents: Mr. Vinay Kirti Singh, Sr. Advocate; Mr. Anand Kumar Ojha, Advocate; Mr. A.K. Karn, Advocate
Link to Judgment
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
