Gauhati High Court Reinforces Deference to Employer's Interpretation of Tender Conditions Unless Arbitrary or Perverse - 2025-04-26

Tracking Legal Developments.

Gauhati High Court Upholds Employer's Right to Interpret Tender Conditions, Overturns Single Judge's Order on Labour License Requirement

Guwahati: The Gauhati High Court, in a division bench ruling dated March 4, 2025, set aside a single judge's order that had interfered with a government department's tender evaluation process. The court emphasized the limited scope of judicial review in contractual matters and reinforced the principle that the authority issuing a tender is the best interpreter of its own conditions, absent mala fide, perversity, or arbitrariness.

The judgment was delivered by the bench of Honourable the Chief Justice and Honourable Mr. Justice N. Unni Krishnan Nair in a set of connected appeals (WA/354/2024 and WA/27/2025) challenging the single judge's order in WP(c)3526/2024.

Background of the Case

The case originated from a Notice Inviting Tender (NIT) issued by the Director, Animal Husbandry and Veterinary Department, Assam, on February 23, 2024, for the construction of a new Multicare Hospital at Joysagar in Sivasagar District. The NIT prescribed a two-stage evaluation process, starting with technical bids.

M/S Friend Enterprise (appellant in WA/354/2024) and M/S Consulting Engineer (NG) (respondent/writ petitioner) were among the bidders. The Tender Evaluation Committee (TEC) found the bid of M/S Consulting Engineer (NG) to be "non-responsive" during the technical evaluation. The reason cited was that the labour license submitted by the firm was valid only for Kamrup (Metro) District, whereas the work was to be executed in Sivasagar District.

Aggrieved by this decision, M/S Consulting Engineer (NG) filed a writ petition (WP(c)3526/2024), which the learned Single Judge allowed on September 23, 2024. The Single Judge held that while a labour license was an essential qualification, the specific requirement for a license covering the work location (Sivasagar) or the whole state was not explicitly disclosed in the NIT. The Single Judge deemed this an undisclosed or "hidden criteria," making the TEC's decision arbitrary and violative of Article 14 of the Constitution. The Single Judge also interpreted the Contract Labour (Regulation and Abolition) Act, 1970, and Rules, 1971, to mean that a work-specific license is required after the contract is awarded, suggesting the pre-bid requirement was only for capability assessment. The matter was remitted back to the TEC for a fresh decision.

Arguments Before the Division Bench

The appellants (M/S Friend Enterprise and the State of Assam through the Animal Husbandry & Veterinary Department) argued that the NIT, particularly Clause 2.A(d)(iii) of Section IV read with the work location, implicitly required a labour license relevant to Sivasagar District or the whole state. They contended that the employer's interpretation was reasonable and consistent with assessing a bidder's technical capacity for the specific work. They highlighted that the Single Judge erred by substituting the employer's reasonable interpretation with their own view, especially concerning the application of the Contract Labour Act at the bid evaluation stage versus the execution stage. They also argued that the respondent did not possess a historical document showing a relevant license, justifying the lack of opportunity to furnish one later under Clause 30 of the ITB.

Mr. R. Singha, counsel for M/S Consulting Engineer (NG), maintained that the labour license is primarily required post-contract award. He argued that submitting a license for Kamrup(M) demonstrated capability. He reiterated that the specific requirement for a Sivasagar/State-wide license was a hidden condition not explicitly stated in the NIT, making the rejection arbitrary.

High Court's Analysis and Findings

The Division Bench, after reviewing the NIT clauses and hearing arguments, found that:

1. Labour License is Mandatory: Clause 35.2(e) of the ITB, read with Clause 1 and 2 of Section IV, clearly makes the labour license a mandatory qualification criterion forming part of the bid evaluation process.
2. Employer's Interpretation Deference: Citing a series of Supreme Court judgments ( Jagdish Mandal , Afcons Infrastructure , Galaxy Transport Agencies , Agmatel India , N.G. Projects ), the Court reiterated that the author of the tender document (the employer) is the best person to understand and interpret its requirements. Judicial interference is warranted only if the interpretation is mala fide, perverse, or so arbitrary that no responsible authority could have reached it. If two interpretations are possible, the employer's interpretation must be accepted.
3. Interpretation Not Arbitrary: The employer's interpretation that the labour license, required for assessing technical capacity for work in Sivasagar (Section IV), must cover Sivasagar District or the whole state was found to be a plausible and reasonable interpretation of the NIT conditions, not an arbitrary or hidden criterion.
4. Single Judge's Error: The Single Judge erred by second-guessing the employer's interpretation and by concluding that the requirement was arbitrary merely because it was not explicitly detailed. The Single Judge also incorrectly relied on the timing of when a license is required under the Contract Labour Act for work execution, which is distinct from the pre-qualification criteria for bid evaluation as set out in the NIT. The Court stated that the Single Judge's conclusions effectively rendered express conditions in the NIT redundant, which is impermissible.
5. Historical Documents: The Court agreed with the Single Judge's finding (unchallenged by the respondent) that M/S Consulting Engineer (NG) did not have any historical document showing a labour license relatable to Sivasagar or the whole state, thus justifying the TEC's action regarding historical documents.
6. No Arbitrariness Under Article 14: The employer did not declare the respondent's license "invalid" generally, but "non-responsive" to the tender conditions based on its limited geographical scope. The employer's interpretation and subsequent decision, being reasonable and uniformly applied, did not violate Article 14.

Conclusion

The Gauhati High Court concluded that the Single Judge's judgment was contrary to the tender conditions and the established principles laid down by the Supreme Court regarding judicial review of tender processes. Consequently, the Division Bench set aside the single judge's order and dismissed the writ petition filed by M/S Consulting Engineer (NG), upholding the Tender Evaluation Committee's decision.