2009 (2) TMI 784 - HC - VAT and Sales Tax

Interpretation of the price bid made by the petitioner (Arraycom) - extent of judicial review in the event of a misinterpretation of its bid - Held that - Prasar Bharati acted completely arbitrarily in loading the bid of Arraycom with an amount that was not at all justified. The result of the loading is that the bid of Arraycom got unnaturally inflated and became higher than the bid of BECIL. This was clearly wrong on the part of Prasar Bharati and we can correct that error which has a serious and material consequence. The award of the contract to BECIL, on this basis, was clearly erroneous and it deserves to be set aside. Since we have concluded that the bid of Arraycom was lower than the bid of BECIL, we set aside the award of the contract in favour of BECIL and allow the writ petition. Since there is no other bidder in the fray, we direct Prasar Bharati to award the contract to the lowest bidder, that is, Arraycom at its bid price of ₹ 51.57 crores. Arraycom will be entitled to costs of ₹ 50,000 payable by Prasar Bharati. We direct Prasar Bharati to deposit the amount by means of a cheque drawn in favour of the Registrar General of this court within four weeks from today.

Summary

Issues Involved:
1. Interpretation of the price bid made by the petitioner (Arraycom).
2. Extent of judicial review in the event of a misinterpretation of Arraycom's bid.

Detailed Analysis:

1. Interpretation of the Price Bid Made by the Petitioner (Arraycom):

The core issue revolved around the interpretation of Arraycom's bid, particularly the inclusion of sales tax in the quoted price. Arraycom's bid was for Rs. 51.57 crores, inclusive of sales tax, while BECIL's bid was for Rs. 47.35 crores, with sales tax to be added separately. Prasar Bharati reduced Arraycom's bid by the sales tax amount to achieve parity for comparison, resulting in a basic price of Rs. 49.58 crores for Arraycom. This was still higher than BECIL's basic price. However, Prasar Bharati further calculated the bid with a 12.5% sales tax, which Arraycom argued was unnecessary.

The court agreed with Arraycom, stating that the bid was inclusive of sales tax, regardless of whether concessional forms C/D were provided. Clause 4.2 of the NIT stipulated that the bidder must specify any statutory charges not borne by them, failing which the bidder would bear the charges. Since Arraycom did not specify otherwise, it would bear any additional sales tax burden, making the bid Rs. 51.57 crores under all circumstances.

2. Extent of Judicial Review in the Event of a Misinterpretation of Arraycom's Bid:

The court examined whether it could correct Prasar Bharati's misinterpretation of Arraycom's bid. Citing the Supreme Court's decision in Tata Cellular v. Union of India, the court emphasized its supervisory role in ensuring fair decision-making. The court found that Prasar Bharati acted arbitrarily by incorrectly loading Arraycom's bid with additional sales tax, inflating it unnaturally and making it higher than BECIL's bid. This erroneous interpretation led to awarding the contract to BECIL, which was unjustified.

The court concluded that Prasar Bharati's actions were arbitrary and incorrect, warranting judicial intervention. Consequently, the award of the contract to BECIL was set aside, and Prasar Bharati was directed to award the contract to Arraycom at its bid price of Rs. 51.57 crores. Additionally, Prasar Bharati was ordered to pay costs of Rs. 50,000 to Arraycom.

Conclusion:

The judgment highlighted the importance of accurate interpretation of bid documents and the role of judicial review in correcting administrative errors. The court's decision ensured that the contract was awarded to the rightful lowest bidder, Arraycom, thereby upholding fairness and transparency in the tender process.