LARSEN AND TOUBRO LTD. & ANR. versus UNION OF INDIA & ORS.

Citation: [2011] 5 S.C.R. 1127 · Decided: 05-05-2011 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Dismissed

Judgment (excerpt)

[2011) 5 S.C.R. 1127 
LARSEN AND TOUBRO LTD. & ANR. 
v. 
UNION OF INDIA & ORS. 
(SLP (C) No. 27217 of 2010) 
MAY 05, 2011 
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] 
A 
B 
Government Contracts - Bid - Request For Proposal 
sent to bidders for supply of Fast Patrol Vessels - Tender 
condition that the price was to be firm and fixed for the entire 
C 
duration of the contract and not subject to escalation -
Petitioner No.1, lowest bidder claiming the benefit of Foreign 
Exchange Rate Variation (FERV) without specifying the foreign · 
currency - Respondent No. 4, second lowest bidder indicating 
a firm rate of exchange as on the date of opening of the o 
commercial bid - Subsequently, petitioner No. 1 amending 
its bid by withdrawing its initial offer and offering the quoted 
price without FERV content - However, the bid of petitioner 
No. 1 declared as non-responsive and contract awarded to 
respondent No. 4 ~ Writ petition by petitioner No. 1 -
E 
Dismissed by High Court - Interference with - Held: Not 
called for - Standard of eligibility as laid down in the notice 
for tender could not be changed arbitrarily as that would be 
violative of Article 14 of the Constitution - In the absence of 
compliance with the terms and conditions relating to a firm 
F 
and fixed price offer, petitioner No. 1 stood excluded from 
consideration, even though it tried to make its bid responsive 
by withdrawing the initial offer and substituting it with another 
offer - Offer made by respondent No. 4 satisfied the 
requirements of firm and fixed offer - Administrative law -
Constitution of India, 1950 - Article 14. . 
" . G 
Respondent No.1 sent a Request For Proposal (RFP) . 
to petitioner No.1 and others for supply of 20 Fast Patrol· 
Vessels for Indian Coast guard. The tender condition was 
1127 
H 
1128 
SUPREME COURT REPORTS 
[2011) 5 S.C.R. 
A that the price was to be firm and fixed for the entire 
duration of the contract and would not be subject to 
escalation. Petitioner No.1 and others submitted their bid 
containing a technical proposal and a commercial 
proposal in two parts. Their technical bids were 
8 successful and thereafter, the commercial bids were 
opened. In its commercial offer, petitioner No.1 claimed 
the benefit of Foreign Exchange Rate Variation without 
specifying the foreign currency which was the basis of 
the foreign exchange component. The offer of petitioner 
C No.1 was found to be the lowest but its bid was held to 
be non-responsive. Respondent No. 4, Public Sector 
Undertaking was the second lowest bidder. The price 
offered by respondent No. 4 contained a foreign 
exchange rate component which was to be considered 
at a particular rate as applicable on a future date at the 
D time of opening of the bid. Thereafter, petitioner No. 1 
withdrew its offer and offered the quoted price without 
the Foreign Exchange Rate Variation content. However, 
the Contract Negotiation Committee declared the bid of 
petitioner No. 1 as non-responsive and awarded the 
E contract to respondent No.4. The petitioners then filed a 
writ petition seeking direction upon respondent Nos. 1 to 
3 to consider the bid of petitioner No. 1 in response to 
RFP and to invite the petitioner for negotiation and 
thereafter, to accept the same in terms of the RFP. The 
F High Court dismissed the same. Therefore, the petitioners 
filed the instant Special Leave Petition. 
Dismissing the Special Leave Petition, the Court 
HELD: 1.1. Where tenders are invited for grant of 
G Government Contract, the standard of eligibility laid down· 
in the notice for tenders could not be changed arbitrarily 
as that would be hit by the provisions of Article 14 of the 
Constitution. An executive authority has to be rigorously 
H 
LARSEN AND TOUBRO LTD. & ANR. v. UNION OF 1129 
INDIA & ORS. 
held to the standards by which it professes its actions 
A 
to be judged and it must scrupulously observe those 
standards on pain of invalidation. Every action of the 
Executive Government must be informed with reason and 
should be free from arbitrariness, the same being the very 
essence of the rule of law. [Para 15) [1136-C-E] 
B 
1.2. The High Court did not commit any error in 
dismissing the writ petition filed by the petitioners since 
in the absence of compliance with the terms and 
conditions relating to firm and fixed price offer, the 
petitioners stood excluded from consideration. The offer C 
in this regard made by respondent No.4 satisfies the 
requirements of a

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