Why Delhi High Court quashed ₹56 crore catering tender awarded by IRCTC

The Delhi High Court on April 22 quashed a ₹56 crore catering contract awarded by the Indian Railway Catering and Tourism Corporation (IRCTC) to RK Associates and Hoteliers Pvt. Ltd for failing to disclose pending criminal cases..The Court held that such non-disclosure violated key tender conditions aimed at upholding anti-corruption principles.A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela ruled that IRCTC acted in contravention of its own tender terms by awarding the contract despite the bidder's failure to disclose transgressions affecting its credibility.“The process by which the respondent No.2 (RK Associates) has been issued the Letter of Award is vitiated being in contravention of the conditions of the tender documents ... Such a failure is undoubtedly not in conformity with the principle of fairness in public tenders,” the Court held..MS Deepak and Co., a rival bidder who placed a bid of ₹41 crores had challenged the April 17, 2024 Letter of Award (LoA) to RK Associates (successful bidder who submitted a bid of ₹56 crores). Deepak and Co. argued that RK Associates had failed to disclose a pending case, which was lodged in 2015 against railway officials and some private licensees including RK Associates. The case was probed under the Prevention of Corruption Act and the Prevention of Money Laundering Act (PMLA).Deepak and Co. added that though the criminal proceedings have been stayed by the Supreme Court, it did no absolve RK Associates from its duty to disclose the pendency of this case to the IRCTC as required under Sections 2(g) and 3 of the Integrity Pact..The Court found merit in these arguments and categorically rejected IRCTC’s contention that only transgressions within the last three years required disclosure.“In our considered opinion, the time period of ‘last three years’ occurring in Section 5 cannot be interpolated or imported to Section 3... The bidder is under a mandate to disclose all such transgressions irrespective of the period when they are said to have occurred," the Court said. It further emphasized that this non-disclosure deprived IRCTC of the opportunity to assess whether the reliability or credibility of RK Associates was in question."Had the criminal antecedents relating to the period prior to past three years been disclosed as mandated... (IRCTC) would have been in a position to take a decision as to whether the 'reliability and credibility' of (RK Associates) was in question or not and depending on such decision the tender process could/ should have proceeded further. However, in the instant case, what we find is that there is no disclosure," it noted. .The Court further underscored that public authorities have obligation to uphold transparency.“Every possible step needs to be taken to remove any chances of transgression which may impinge on anti-corruption approach," it added. The Court also relied on a Division Bench ruling of the Calcutta High Court in Damodar Valley Corporation v. BLA Projects, which approved the view that prior transgressions, even beyond three years, must be disclosed when credibility is at stake..The Court, however, rejected the petitioner’s claim that IRCTC acted illegally by allowing RK Associates to rectify a deficiency noted during its submission of the signed the Integrity Pact, by allowing it to add missing witness signatures to this agreement after opening financial bids.“The Integrity Pact, as submitted by the tenderer initially under the signatures of its authorised signatory, was duly compliant… The requirement of witness signatures was premature," the Court clarified. .The Court proceeded to quash the April 2024 Letter of Award issued by IRCTC in favour of RK Associates. The IRCTC was directed to initiate the tender process afresh, and complete the same within a period of three months.To prevent disruption of services, RK Associates will continue operations until a new contract is awarded, the Court added..The petitioners were represented by Senior Advocate Kirti Uppal with Advocates Himanshu Pathak, Riya Gulati, Amit Singh and Archisha Satyarthi..IRCTC was represented by Solicitor General Tushar Mehta with Advocates Saurav Agrawal, Anshuman Chowdhury and Aarya Bhat..RK Associates was represented by Senior Advocates Sandeep Sethi and Jayant Mehta with Advocates Jasmeet Singh, Gautam Khazanchi, Mahinder Singh Hura, Saif Ali, Pushpendra S. Bhadoriya, Vijay Sharma, Riya Kumar, Rajat Sinha, Pranav Menon, Vaibhav Dubey and Saurav..[Read Judgment]