The Gauhati High Court, in a significant ruling delivered by Justice Michael Zothankhuma on November 12, 2024, dismissed a writ petition challenging the rejection of a technical bid under the tender process for handloom and accessory supplies. The case, M/S Chayanika Handloom Products & Anr v. State of Assam & Ors [Case No. WP(C)/4258/2024], examined whether the absence of a third year’s income tax return could disqualify a Micro and Small Enterprise (MSE) bidder despite exemptions under government policies.
Case Background
The petitioner, M/S Chayanika Handloom Products, represented by proprietor Hrishikesh Deka, challenged the rejection of their technical bid by the Directorate of Handloom and Textiles, Assam. The rejection cited non-compliance with Clause 13(h) of the Notice Inviting Tender (NIT), which mandates submission of income tax returns and audited financial statements for the last three years.
The tender, issued on January 11, 2024, sought empanelment of manufacturers and suppliers for government handloom schemes. The petitioner, an MSE, claimed exemption from turnover and experience requirements under Clause 3(e) of the NIT but did not provide the income tax return for the financial year 2022–2023.
Legal Issues
1. Exemption Scope for MSEs:
Whether Clause 3(e) of the NIT, which exempts MSEs from turnover and experience requirements, extends to mandatory submission of income tax returns under Clause 13(h).
2. Interpretation of “Turnover” vs. “Income Tax Returns”:
Whether income tax returns can substitute for turnover documentation and qualify for exemption under Clause 3(e).
3. Judicial Review in Tender Matters:
To what extent courts can interfere with technical disqualification decisions made by tendering authorities.
Court Observations and Ruling
The court ruled against the petitioners, emphasizing the distinction between financial turnover and income tax returns:
– Difference Between Turnover and Tax Returns: The court highlighted that “annual turnover” refers to revenue generated from sales, whereas income tax returns provide broader financial data, including deductions and liabilities. Justice Zothankhuma noted, “Annual turnover and income tax returns serve different purposes and cannot be interchangeably treated for tender compliance.”
– Clause 3(e) Exemption Not Applicable: The court found that Clause 3(e) exempts MSEs from turnover and experience requirements but not from submitting income tax returns under Clause 13(h). The latter is a mandatory technical requirement to demonstrate financial compliance.
– Judicial Review in Tender Cases: Citing precedents such as Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Silppi Constructions Contractors v. Union of India, the court reiterated that tendering authorities have discretion in interpreting and enforcing tender terms. The court stated, “Judicial interference in tender processes should be minimal unless decisions are arbitrary or unreasonable.”
The petitioners were represented by Advocate B. Sharma, while the state respondents were represented by Advocate R. Dhar, and private respondents (competing bidders) by Advocate D.K. Nath. The court upheld the state’s decision to disqualify the petitioner for failing to comply with Clause 13(h) and dismissed the writ petition.
