Tender Rejection Arbitrary And Unwarranted | Bombay High Court Holds Proprietor Experience Must Be Treated As LLP | Directs Fresh Financial Bid Opening And Limited Renegotiation
Isabella Mariam
The High Court of Judicature at Bombay Division Bench of Chief Justice Alok Aradhe and Justice Sandeep V. Marne held that a tendering authority acted erroneously in rejecting a bid based on the non-submission of a notarized business transfer agreement. The Court directed that the petitioner was qualified and eligible for the opening of the financial bid. It further instructed that the tendering authority must invite both the petitioner and the successful bidder for renegotiation and award the contract to the party offering the lowest bid.
By setting aside the communication dated 4 October 2024 that adjudged the petitioner’s bid as non-responsive, the Court clarified that the petitioner had adequately qualified the eligibility criteria and should have been considered. The Bench stated that the rejection was unwarranted as it failed to appreciate the legal framework regarding the consideration of a partner's experience as that of a newly formed Limited Liability Partnership. The Court stated that proper evaluation of the petitioner’s bid was necessary to preserve fair competition and public interest.
A tender notice dated 23 August 2024 was issued by the National Highway Division, Pune, under Respondents 1 and 2, for execution of road maintenance work on NH-965D, estimated at Rs. 3,22,63,404/-. The petitioner submitted its bid for the tender. However, during technical evaluation, the bid was declared non-responsive.
The reasons provided by the tendering authority for rejection included the absence of a notarized business transfer agreement, failure to submit legal documentation establishing a relationship between the petitioner and M/s. Nandkumar Constructions, non-certification of annual turnover by a statutory auditor, non-submission of bid capacity in the prescribed format, and omission of documentation regarding the Plant Engineer and Quality Surveyor.
The petitioner submitted a representation on 23 September 2024, providing the requested documents, including a Memorandum of Understanding for Business Transfer with M/s. Nandkumar Constructions. A scrutiny meeting was held on 3 October 2024, after which a letter dated 4 October 2024 was issued, confirming the bid’s rejection.
Respondent No. 4 was declared the successful bidder. An order dated 10 October 2024 restrained execution of any work order pending the hearing. The petitioner argued that the rejection was arbitrary and that it ought to have been granted an opportunity to cure deficiencies as per Government Resolution dated 17 September 2019. The petitioner further stated that M/s. Nandkumar Constructions had merged into the LLP and that its experience should be considered.
The petitioner relied on the Supreme Court's judgement in New Horizons Limited and another vs. Union of India and others (1995) 1 SCC 478, where the Court held that experience of a constituent partner can be treated as that of the partnership or entity formed. The petitioner argued that the partner of M/s. Nandkumar Constructions was also a partner in the LLP, and that the merger had legal effect.
Respondents 1 and 2, through their counsel, argued that there was no valid business transfer agreement and that the petitioner misrepresented a merger. They also cited a judgment from the Punjab and Haryana High Court in A.G. Construction Co. vs. Food Corporation of India and others (2021 SCC OnLine P&H 306) to argue that experience of a partner cannot be treated as that of the LLP.
Respondent No. 4 opposed the petition, arguing that the LLP and its partner are separate entities under Section 23 of the Limited Liability Partnership Act, 2008. It was submitted that the business transfer agreement was forged and dated inconsistently. It was also noted that work orders were issued in the name of M/s. Nandkumar Constructions even after the alleged merger.
The petitioner responded by reiterating the submission of documents and asserting that the statutory auditor certification was valid. It further claimed that the required technical staff and plant documents were uploaded. The petitioner requested fair treatment and qualification of its bid.
The Court observed that “Petitioner’s bid has been rejected by Respondent Nos.1 and 2 vide communication dated 4 October 2024 citing the reason of non-submission of notarized business transfer agreement.” The Court reviewed the scrutiny sheet and noted that multiple deficiencies were cited, many of which were later clarified by the petitioner.
It was recorded that “the Petitioner was directed to submit a legal document evidencing merger or relation with M/s. Nandkumar Constructions.” The Court found that the petitioner had submitted a Memorandum of Understanding for Business Transfer.
The Court referred to New Horizons Limited where it was held that “experience of the constituent partner of the firm can be considered/counted as experience of the firm.” The Court stated, “It is the experience of the persons executing the work that will have to be considered.”
Referring to Sagar Lookouts vs. MHADA, the Court stated, “Experience is not a property as contemplated under section 14 of the Partnership Act.” It further stated, “The firm may not have the experience but the partners who are to execute the work are experienced.”
Rejecting Respondent No. 4’s reliance on Section 23 of the LLP Act, the Court clarified, “In our view, provisions of Section 23 of the Act would not make inapplicable to a LLP, the principle of reckoning an experience of partner prior to his entry into partnership firm as experience of the firm.”
The Court also addressed the argument concerning Section 60 of the Act and merger procedures, stating, “Section 60 of the Act deals with compromise or arrangement of LLP with its creditors or partners. Here we are not concerned with any arrangement between the existing partners of the LLP.”
It concluded that “tendering authority has grossly erred in holding Petitioner’s bid as non-responsive.” The petitioner’s bid met eligibility and should have been considered.
The Court issued the following directions:
“Order dated 4 October 2024 adjudging Petitioner’s bid as non-responsive is set aside.”
“Petitioner is held eligible for opening of the financial bid and its financial bid be accordingly opened.”
“After opening of Petitioner’s financial bid, the tendering authority shall invite both Petitioner and Respondent No.4 for renegotiation process and thereafter proceed to award tender to the entity offering the lowest bids. It is clarified that except Petitioner and Respondent No.4 no other bidder will be entitled to participate in the renegotiation process.”
Advocates Representing the Parties:
For the Petitioners: Mr. Yuvraj Narvankar, Advocate instructed by Mr. Suryajeet P. Chavan
For the Respondents: Ms. Neha S. Bhide, Government Pleader with Mr. O.A. Chandurkar, Additional GP and Ms. G.R. Raghuwanshi, AGP; Mr. Tejas Deshmukh with Mr. H.D. Chavan; Mr. Dashrath A. Dubey
Case Title: Nandkumar Infrastructure LLP v. The Superintendent Engineer & Ors.
Neutral Citation: 2025: BHC-AS:24979-DB
Case Number: Writ Petition No.13895 of 2024
Bench: Chief Justice Alok Aradhe; Justice Sandeep V. Marne
