No Violation by Above par Rate in Below Par Restriction in Railway Contract: Gauhati HC

The Gauhati High Court has ruled that tender conditions must be interpreted with deference to the employer, affirming that minor deviations in rate above or below par restriction in railway contract do not necessitate disqualification unless explicitly prohibited by the contract.

Justice Sanjay Kumar Medhi adjudicated on a writ petition filed under Constitution of India challenging the award of a railway housekeeping contract. The dispute centered on whether a bidder’s decision to quote 'above par' for staff bonus components, contrary to an 'at par' instruction, mandated a summary rejection when the final net value remained the most competitive.

Key Takeaways

Employer as Best Judge

Courts must defer to the author of the tender document for interpreting its clauses unless the interpretation is patently absurd or unreasonable.

Restraint in Commercial Matters

Judicial interference in the evaluation of tenders and award of contracts is limited as these are essentially commercial functions of the state.

Impact of Rebates

Specific prohibitions (like quoting below par for statutory dues) are strictly enforceable, but the validity of a bid is assessed on the final net value after accounting for rebates.

Absence of Hidden Criteria

Unless a restriction is explicitly stated as a ground for summary rejection in the NIT, adopting a flexible approach to achieve the lowest price does not constitute a 'hidden criterion.'

Court's Rationale on Clause Interpretation

The Gauhati High Court carefully examined Clause 12 and Clause 13 of the Schedule of Rates. It observed that while Clause 12 directed bidders to quote 'at par' for bonuses, the specific penalty of 'summary rejection' was reserved only for quoting 'below par.' The Bench found that the respondent's bid, despite quoting above par initially, remained valid as the subsequent rebate did not bring the bonus component below the prescribed minimum threshold.

The Court, in its reasoning, observed: "In the opinion of this Court, Clauses 12 and 13 of the tender conditions will not amount to a restriction to quote the bonus component above par and the only restriction was to quote below par which will lead to summary rejection. This Court finds force in the contention that the interpretation of the owner of the contract is to be given due deference unless such interpretation is absolutely unreasonable or absurd."

Ratio

The author of a tender document is the best judge of its interpretation. A Writ Court exercising jurisdiction under Article 226 must not interfere with a commercial decision of the state unless the decision-making process is vitiated by mala fides or the interpretation of tender conditions is perverse. Where an NIT provides for summary rejection only for quoting 'below par,' a bid quoted 'above par' cannot be rejected at the threshold if the final net value is otherwise compliant.

Background

The petitioner, M/S Tharu and Sons, challenged the award of a tender for 'Integrated Housekeeping Services' of the Brahmaputra Mail and NE Express to Urmila International Services Pvt. Ltd. (Respondent No. 4). The petitioner, who emerged as L2, argued that Respondent No. 4 violated the Notice Inviting Tender (NIT) by quoting 'above par' for the bonus component (Schedule 2), which was supposedly fixed.

The petitioner relied on Md. Makrub Khan @ Md. Junu Khan Vs. Manuj Kumar Sarmah ( "(2011) 3 GLR 15": 2011 CaseBase(GAU) 91) and Dutta Associates Pvt. Ltd. Vs. Indo Merchantiles Pvt. Ltd. ( "(1997) 1 SCC 53": 1996 CaseBase(SC) 1539) to argue that the Railways had adopted a 'hidden criterion' to favor the L1 bidder. They also cited Hasmat Ali Vs. State of Assam to emphasize the need for objectivity in state largesse. However, the Railways, relying on NG Projects Ltd. Vs. Vinod Kumar Jain and Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Limited ( "(2016) 16 SCC 818": 2016 CaseBase(SC) 338), argued that the primary restriction was against quoting 'below par' to ensure statutory compliance with bonus payments. The Gauhati Court also referred to the principles in Prakash Asphaltings and Toll Highway’s (India) Limited Vs. Mandeepa Enterprises ( "(2026) 4 SCC 310": 2025 CaseBase(SC) 739) and Jagdish Mandal v. State of Orissa ( "(2007) 14 SCC 517": 2006 CaseBase(SC) 535) regarding judicial restraint.

The Gauhati High Court concluded that since the rebate offered by Respondent No. 4 did not result in the bonus falling below the mandated rate, there was no violation of the core tender conditions. Finding no evidence of mala fides, the Court dismissed the petition.

Case Details:
Case No.: WP(C)/2224/2026
Neutral Citation: 2026:GAU-AS:13623
Case Title: M/S THARU AND SONS VS THE UNION OF INDIA AND 3 ORS
Appearances:
For the Petitioner(s): Shri KN Choudhury, Sr. Adv., Shri G. Rahul, Mr. D M Nath
For the Respondent(s): Shri H. Gupta, CGC, Ms. B. Talukdar (R4), Mr. S J Sarmah (R4)

Source: 2026 CaseBase(GAU) 1274