The World Bank is not a government agency: Delhi High Court – Finance and Banking

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In a recent decision in A2Z Infraservices Ltd. vs. North Delhi Municipal Corporation1, the Delhi High Court (“Supreme Court“) ruled that the World Bank is not a government agency. In this article, we run through the facts and findings of the aforementioned case.

Quick facts

The first responder (“NDMC“) had issued a call for tenders for a certain project (“Project“) in which A2Z Infraservices Ltd. (“Petitioner“) had participated. On September 30, 2021, NDMC rejected the Applicants’ bid for the Project on the grounds that the Applicant did not disclose that it was barred by the World Bank with effect from March 17, 2021 to November 11, 2024 According to NDMC, the Applicant was required to submit a commitment under clause No. 20(r) of the RFP (“Tender“) document that he had not been blacklisted or delisted by any government agency in the recent past whose exclusion was still pending as of the date of the offer to purchase.

Agreed by the decision of NDMC, the petitioner preferred the writ petition to the High Court requesting, among others, the following landforms:

  1. First, issue a writ, order or proper direction to rescind and rescind the NDMC’s decision disqualifying and prohibiting the petitioner from participating in any further bidding for the project.
  2. Second, issue a writ, order or proper direction to NDMC to consider the offer submitted by the applicant in accordance with the terms of the RFP document.

Plaintiff’s Arguments

The Applicant challenged NDMC’s decision to prevent it from participating in the rehabilitation of the Project on the grounds that the World Bank could not be considered a government agency within the meaning of Term 20(r) of the terms of the invitation to tender. According to the claimant, for the World Bank to be considered a government agency, it would have to be established that it acts as an agent of the Indian government. It was argued that an agent is bound by the instructions of the principal. Therefore, the petitioners argued that the World Bank certainly could not be considered a government agency.

Petitioner relied on the decision of the Federal Circuit Court of Appeals in Case No. 2008-3004, namely
Philip W. Sedgwick c. Merit Systems Protection Board, in which a US court ruled that the World Bank was not a federal agency. The petitioner also relied on the decisions in which it was held that the World Bank was not an authority under Article 12 of the Constitution of India and therefore no order would be against it . Finally, the Applicant relied on the decision in M/s GVR Infra Projects c. Indian Union & Anr.2 In this case, the single learned judge rejected the NHAI’s argument equating the World Bank with the central or state governments of India, or an entity controlled by the Indian government.

NDMC Memory

The NDMC argued that the World Bank has India’s representatives on its body, which includes the Union finance minister. Additionally, the Indian government had voting rights in the World Bank. Therefore, the World Bank would fall under the term government agency.

High Court decision

The High Court, after hearing the parties, held that the World Bank or any other international body which had excluded the claimant in the present case could not be considered a government body. Indeed, none of these international bodies were bound by the guidelines issued by the Indian government.

The High Court observed that the Indian government has no real or pervasive control over the affairs of the international bodies mentioned above. It is for this reason that international bodies such as the World Bank have been found to be exempt from the jurisdiction in writing of the High Court as they are not “States” or “other authorities” within the meaning of the said expressions in Articles 12 , and 226 of the Constitution of India.

The High Court noted that clause 20(r) read together with clause 55 were criminal in nature as they seek to exclude the bidder who fails to make proper disclosure of his exclusion by a government body. The said clauses therefore had to be interpreted strictly. The High Court held that, by mere implication, the World Bank could not be construed as a government agency. The High Court concluded that the government agency in the present case could certainly not be interpreted as encompassing within its scope bodies such as the World Bank.

Therefore, the High Court held that the petitioner could not be barred from participating in the re-tender process unless the NDMC amended the terms and conditions of the tender to specifically exclude all bidders who have been banned by international bodies like the World Bank. The motion in brief was decided in these terms.

Comment

It is a common occurrence in public tenders to ask bidders for a commitment stating that they have not been excluded or blacklisted by any government or government agency before. This is a common practice to eliminate bidders based on their past performance. These tenders also contain a clause that allows the tenderer to prohibit any tenderer from continuing to participate in the tendering process on the grounds that they have previously been blacklisted.

Since these tender conditions are criminal in nature, they must be interpreted strictly. The exclusion of any company has serious consequences on its activity. More often than not, these companies are by default ineligible to participate in most other public tenders that require a commitment that the company has an unblemished performance record and has not been previously blacklisted. . In this case, the High Court correctly ruled that the World Bank could not be treated as a government agency and gave the NDMC the possibility of modifying its tender conditions.

Footnotes

1. A2Z Infraservices Ltd. vs. North Delhi Municipal Corporation, WP (C) 11480 of 2021.

2. M/s GVR Infra Projects c. Indian Union & Anr., WP (C) 8090/2014.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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