Gauhati High Court Holds Non-Disclosure of QCBS Method in Tenders Insufficient to Prove Malafides

Introduction

In a significant ruling on tender processes, the Gauhati High Court has clarified that the mere failure to disclose the use of the Quality and Cost Based Selection (QCBS) method in a tender notice does not, by itself, substantiate claims of malafides, favoritism, or corruption. This decision came in Writ Appeal No. 183 of 2025, M/s Vertex Construction v. The State of Nagaland & Ors. , where a Division Bench comprising Chief Justice Ashutosh Kumar and Justice Arun Dev Choudhury dismissed an appeal challenging the award of a contract under the Pradhan Mantri Gram Sadak Yojana (PMGSY). The court emphasized the limited scope of judicial review in tender matters, particularly after work has commenced, prioritizing public interest over procedural lapses. The case underscores the balance between transparency in procurement and the need to avoid disrupting ongoing public projects funded by central schemes.

The appellant, M/s Vertex Construction, alleged irregularities in the evaluation process for road construction works in Nagaland, claiming it was the lowest bidder (L-1) but lost due to an undisclosed QCBS evaluation. The respondents included the State of Nagaland and the successful bidder, M/s S.N. Enterprise. While disapproving of the lack of disclosure, the court refused to set aside the contract, citing the risk of lapsing central funds and halting infrastructure development.

Case Background

The dispute arose from a Notice Inviting Tender (NIT) issued by the Government of Nagaland's Public Works Department (PWD) on October 22, 2024, for five construction works under PMGSY-III Batch-I (2024-25). PMGSY is a centrally sponsored scheme aimed at providing all-weather road connectivity to rural areas, with strict timelines to prevent the lapse of central funding. Eligible Class-I contractors, including the appellant M/s Vertex Construction and respondent No. 4 M/s S.N. Enterprise, submitted bids.

Both the appellant and respondent No. 4 qualified the technical evaluation threshold, and their financial bids were opened. The appellant emerged as the L-1 (lowest) bidder based on financial quotes alone. However, the tendering authority applied the QCBS method, which combines technical (60%) and financial (40%) scores, to select the contractor. This method was decided upon in a pre-bid meeting on August 10, 2023—over a year before the NIT—but was neither mentioned in the NIT nor the Standard Bidding Documents (SBD), nor were the meeting minutes uploaded to the department's website or notified to bidders.

The appellant, unaware of the QCBS application until obtaining information via a Right to Information (RTI) query, filed a writ petition (WP(C) No. 12/2025) before a single judge of the Gauhati High Court (Kohima Bench). The single judge, in an order dated May 23, 2025, upheld the contract award to M/s S.N. Enterprise, noting that the decision to use QCBS was made transparently in the pre-bid phase when bidder identities were unknown, and the appellant had skipped subsequent pre-bid meetings. Aggrieved, M/s Vertex Construction appealed to the Division Bench, arguing that the non-disclosure vitiated the process and warranted quashing the award.

The timeline is critical: The pre-bid decision predated the NIT by 14 months, and by the time of the appeal hearing in December 2025, substantial work had progressed, with completion targeted for March 2026. This context highlighted the stakes, as any interference could jeopardize central funding under PMGSY, forcing the state to bear completion costs.

Arguments Presented

The appellant, represented by Advocate A. Gautam, contended that the undisclosed adoption of QCBS constituted a material deviation from the SBD terms, rendering the process arbitrary and violative of Article 14 of the Constitution, which guarantees equality. As the L-1 bidder, M/s Vertex argued it was unfairly disadvantaged by the hidden criteria, which awarded respondent No. 4 higher technical marks—allegedly 100 out of 100—despite the latter's bid deficiencies. The appellant highlighted that Clause 23.1 of the SBD required post-award disclosure of evaluation details, which was not done until the RTI revelation. It accused the authority of favoritism, pointing to preferential scoring for respondent No. 4's possession of a core-cutter machine, while ignoring the appellant's 20 cited completed projects that were overlooked in technical evaluation.

Relying on precedents like Dutta Associates Private Limited v. Indo Merchantiles Private Limited (1997) 1 SCC 53, the appellant asserted that undisclosed changes in evaluation criteria prejudice bidders and must lead to process invalidation. It also cited Naga Construction v. East West Construction (2019) 4 GLR 370, emphasizing that such secrecy offends transparency principles. Further, the appellant challenged the single judge's reliance on the pre-bid meeting, arguing that any modifications from such meetings must be issued as corrigenda and notified to all prospective bidders, as per SBD mandates. Non-compliance, it claimed, created a "hidden agenda," especially since the NIT was issued long after the meeting, making prior knowledge improbable.

In response, the State of Nagaland, represented by Additional Advocate General M. Kechii, and respondent No. 4 M/s S.N. Enterprise, represented by Advocate M. Jamir, defended the process under Rule 192(iii) of the General Financial Rules, 2017, which permits QCBS for complex projects like PMGSY roads. They noted that the August 2023 pre-bid meeting explicitly adopted QCBS for all PMGSY packages, and a follow-up meeting on January 12, 2024—nine months before the NIT—reiterated this, which the appellant attended but ignored. The respondents stressed that bidder identities were unknown at the decision stage, precluding malafides. They argued that the appellant's prior participation in other PMGSY tenders using QCBS, where it also failed to win, undermined favoritism claims.

The respondents invoked the limited judicial review doctrine, citing Supreme Court rulings like Jagdish Mandal v. State of Orissa (2007) 14 SCC 517, which caution courts against acting as appellate authorities in tenders. They highlighted the public interest: Disrupting the contract would halt progress on rural connectivity, risk central fund lapse, and cause irreversible harm, outweighing procedural issues. Respondent No. 4 emphasized its technical superiority, including essential equipment like the core-cutter, justifying the QCBS outcome.

Legal Analysis

The Division Bench meticulously analyzed the interplay between procedural transparency and substantive public interest in tender jurisprudence. It acknowledged the appellant's grievance as valid in principle, agreeing that non-disclosure of QCBS deviated from ideal practices and bordered on procedural illegality. However, the court distinguished this from substantive flaws warranting contract cancellation, applying the doctrine of limited judicial interference in administrative decisions.

Central to the reasoning was the timing of the QCBS decision: Made months before the NIT when bidders were unidentified, it negated allegations of targeted favoritism. The court referenced Tata Cellular v. Union of India (1994) 6 SCC 651, which established that courts should not substitute their views for administrative expertise unless irrationality, malafides, or arbitrariness is proven. Similarly, Raunaq International Limited v. I.V.R. Construction Limited (1999) 1 SCC 492 was invoked to underscore deference in public projects where stakes involve societal benefits like rural infrastructure.

The bench drew on Michigan Rubber (India) Limited v. State of Karnataka (2012) 8 SCC 216 and Banshidhar Construction Private Limited v. Bharat Coking Coal Limited (2024) 10 SCC 273, cautioning against upturning progressed contracts absent fraud. In Silppi Constructions Contractors v. Union of India (2020) 16 SCC 489 and N.G. Projects Limited v. Vinod Kumar Jain (2022) 6 SCC 127, the Supreme Court emphasized weighing public interest against irregularities; here, PMGSY's central funding deadline (March 2026) tipped the scales. The recent Kirloskar Ferrous Industries Limited v. Union of India (2025) 1 SCC 695 reinforced non-interference in substantially advanced works to avoid chaos.

The court differentiated procedural lapses (non-upload of minutes, lack of notification) from malafides, noting the appellant's familiarity with QCBS from prior tenders. While disapproving the opacity—echoing Dutta Associates on deviation prejudice—it held that judicial review post-commencement is restrained, per Jagdish Mandal . No evidence of corruption emerged, and the single judge's findings of no "hidden system" were upheld. Thus, the ruling reinforces that transparency is aspirational but not always dispositive when public welfare is at risk, potentially guiding future PMGSY and similar procurements.

Key Observations

The judgment is replete with incisive observations balancing equity and pragmatism. Key excerpts include:

• “True it is that it would have been more fairer if such disclosure were made in the NIT/SBD or it would have been declared upfront before the evaluation and all the bidders would have been notified regarding such evaluation method; but not doing so, in our estimation, falls in the realm of procedural illegality, which does not automatically warrant setting aside of the contract.”

• “Considering the fact that the decision to adopt QCBS system was taken several months before the issuance of the NIT/SBD when it was not known as to who all will be the bidders, the appellant cannot raise grounds of malafides; or favouritism; or corruption. The appellant had also participated in the tender for other works under the PMGSY where QCBS system had been adopted and had failed to bag that contract.”

• “While we cannot approve undisclosed deviation from the tender terms but we do reckon that disproportionate relief is required to be avoided. Setting aside the contract at this stage would cause irreversible harm to the public interest, far outweighing the procedural grievance of the appellant.”

• “Needless to state that judicial review in tender matters is limited, particularly after the commencement of the work. The Supreme Court in many cases has cautioned that the Court ought not to act as an appellate authority over the administrative decisions and that even if some procedural aberration is found, the Court must weigh the larger public interest before granting relief.”

These quotes encapsulate the court's nuanced approach, prioritizing systemic continuity over isolated procedural faults.

Court's Decision

The Division Bench dismissed the writ appeal on December 19, 2025, upholding the single judge's order and the contract award to M/s S.N. Enterprise. No costs were imposed. While declining interference, the court recorded strong disapproval of the tendering authority's failure to disclose QCBS or upload pre-bid minutes, issuing prospective directions: Future tenders must explicitly state evaluation methodologies, including QCBS proposals, to ensure fairness.

The implications are far-reaching for public procurement, especially in time-bound schemes like PMGSY. This ruling deters frivolous challenges based solely on non-disclosure, reinforcing that courts will not disrupt advanced projects without proof of mala fides, thus safeguarding central funds and infrastructure timelines. For legal practitioners, it signals a higher threshold for tender writs post-award, emphasizing evidence of bias over procedural nitpicks. In Nagaland and similar regions, it may streamline rural development bids but could invite scrutiny if authorities exploit the leniency on disclosures. Overall, the decision promotes administrative efficiency while urging proactive transparency, potentially influencing GFR interpretations and reducing litigation in contract disputes.

This outcome aligns with evolving jurisprudence favoring public interest in an era of ambitious infrastructure goals, ensuring that procedural hurdles do not derail national schemes. Legal professionals advising on tenders should now stress pre-bid vigilance and document all evaluation rationales meticulously to preempt appeals.