Supreme Court Stays High Court Order in Tender Dispute: Commissioner, Directorate of Logistics vs. M/s. Almighty Techserv (28 February 2020)

LEGAL ISSUE: Whether the High Court’s order to cancel a tender and order re-tendering was correct, particularly concerning the inclusion of landing charges in bid price calculations.

CASE TYPE: Government Contract/Tender Dispute

Case Name: Commissioner, Directorate of Logistics vs. M/s. Almighty Techserv, Proprietor Mr. Manish Dalmia & Anr.

Judgment Date: 28 February 2020

Introduction

Date of the Judgment: 28 February 2020
Citation: (2020) INSC 123 (28 February 2020)
Judges: Deepak Gupta, J. and Aniruddha Bose, J.

Can a High Court order the cancellation of a tender and direct re-tendering when there is a dispute over the calculation of bid prices? The Supreme Court of India addressed this question in a case involving the supply of videoscopes for the Central Board of Excise and Customs (CBEC). The core issue revolved around whether the High Court was correct in its assessment of the tender process and the inclusion of landing charges in the bid price. The Supreme Court bench comprising of Justice Deepak Gupta and Justice Aniruddha Bose heard the matter.

Case Background

In 2018, the Central Board of Excise and Customs (CBEC), through its Directorate of Logistics, issued an e-tender for the supply, installation, and maintenance of 74 videoscopes at various field formations. Several bids were received, and the tender was awarded to M/s. ASVA Power Systems India Pvt. Ltd. M/s. Almighty Techserv, an unsuccessful bidder, challenged this award, claiming that their bid should have been considered the lowest. The High Court ruled in favor of M/s. Almighty Techserv, stating that the tender awarded to M/s. ASVA Power Systems India Pvt. Ltd. was illegal. The High Court also calculated that the government had incurred a loss of approximately Rs. 63 lakhs due to the incorrect tender award. This order of the High Court was challenged by the Department and M/s. ASVA Power Systems India Pvt. Ltd.

Timeline

Course of Proceedings

The High Court ruled that the award of the tender to M/s. ASVA Power Systems India Pvt. Ltd. was illegal. The High Court also calculated that the tender of M/s. Almighty Techserv should have been considered the lowest, and that the government had incurred a loss of approximately Rs. 63 lakhs due to the incorrect tender award. The High Court ordered a re-tender. This order was challenged by the Department and M/s. ASVA Power Systems India Pvt. Ltd. before the Supreme Court.

Legal Framework

There are no specific legal provisions mentioned in the judgment.

Arguments

The arguments presented before the Supreme Court were primarily focused on the interim relief sought by the petitioners.

• Arguments by the Department (Commissioner, Directorate of Logistics):
  • Mr. Aman Lekhi, learned Additional Solicitor General, argued that the 74 videoscopes were urgently required by the Department.
  • He contended that the High Court’s judgment was incorrect.
  • He submitted that the equipment had already been imported into India and was ready for installation.
  • He requested a stay on the High Court’s order to allow the procurement to proceed.
• Arguments by M/s. ASVA Power Systems India Pvt. Ltd.:
  • Mr. K.V. Viswanathan, learned senior counsel, supported the Department’s arguments.
  • He argued that his client’s tender was the lowest because it included all customs charges.
  • He contended that the High Court erred in holding that landing charges could not be added to the bid price of M/s. Almighty Techserv.
• Arguments by M/s. Almighty Techserv:
  • Mr. Gopal Sankaranarayanan, learned senior counsel, argued that the High Court’s judgment was correct.
  • He submitted that there was no error in the High Court’s decision.
  • He alleged that the successful bidder had made false statements in the High Court and was not entitled to any discretionary relief.

Issues Framed by the Supreme Court

The Supreme Court did not frame specific issues for the interim relief stage. However, the core issue was whether to stay the High Court’s order to cancel the tender and order re-tendering, considering the urgent need for the videoscopes.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

No authorities (cases or statutes) were cited in this interim order.

Judgment

The Supreme Court, while not going into the merits of the case, considered the urgency of the matter.

The Court observed that the tender was floated in 2018 and that fresh tendering might cause a long delay in procuring the videoscopes, which were urgently required by the customs authority. The Court also noted that it was not sure whether the government would gain or lose in monetary terms if a fresh tender was floated.

The Court permitted the Department to procure the videoscopes from M/s. ASVA Power Systems India Pvt. Ltd. However, it directed that a sum of Rs. 63 lakhs be deducted from the payment to be made to M/s. ASVA Power Systems India Pvt. Ltd. The final decision regarding this amount would be made after a detailed hearing. The court also stated that if M/s. ASVA Power Systems India Pvt. Ltd. insisted on full payment at this stage, then there would be no interim stay, and the Department would have to float a fresh tender.

What weighed in the mind of the Court?

The Supreme Court’s primary concern was the urgent need for the videoscopes by the customs authority. The potential delay caused by re-tendering and the uncertainty of financial gain or loss were also major factors. The Court’s decision was influenced by the need to balance the interests of all parties while ensuring that public interest was not hampered.

The court’s decision was primarily based on the factual urgency of the situation, while also considering the legal aspects of the dispute. The court considered that “the tender in question was floated in the year 2018” and that “Fresh tendering may lead to long delay in procuring all these videoscopes which are urgently required by customs authority to scan the imported goods.” The court also noted that “If a fresh tender for supply of videoscopes is floated we are not even sure whether the Government will gain or lose in monetary terms.”

Key Takeaways

• The Supreme Court granted interim relief, staying the High Court’s order for re-tendering.
• The Department was permitted to procure videoscopes from M/s. ASVA Power Systems India Pvt. Ltd.
• A sum of Rs. 63 lakhs was to be deducted from the payment to M/s. ASVA, pending final hearing.
• The court prioritized the urgent need for the videoscopes to ensure smooth functioning of the customs authority.

Directions

The Supreme Court directed that out of the payment to be made to M/s. ASVA Power Systems India Pvt. Ltd., a sum of Rs. 63 lakhs shall be deducted. Orders with regard to that amount shall be passed after hearing the parties in detail at the time of final hearing. The Court also stated that if M/s. ASVA Power Systems India Pvt. Ltd., insists on full payment at this stage then there shall be no interim stay and the Department will have to float fresh tender.

Specific Amendments Analysis

There is no discussion about any specific amendments in this judgment.

Development of Law

This case does not lay down any new legal principle. However, it emphasizes the importance of balancing the need for fair tendering processes with the practical requirements of government functioning. The ratio decidendi of the case is that in matters of urgent public interest, the court may grant interim relief to ensure that the work is not hampered while the legal issues are being resolved.

Conclusion

The Supreme Court’s interim order in this case highlights the Court’s willingness to consider the practical implications of its decisions, particularly in cases involving urgent public needs. While the Court did not delve into the merits of the High Court’s judgment, it prioritized the immediate requirement of the customs authority for the videoscopes, while ensuring that the financial interests of the government are also protected.

Category

• Government Contracts
  • Tender Disputes
• Interim Relief
  • Stay Orders

FAQ

Q: What was the main issue in this case?
A: The main issue was whether the Supreme Court should stay the High Court’s order to cancel a tender and order re-tendering for the supply of videoscopes.

Q: Why did the Supreme Court grant interim relief?
A: The Supreme Court granted interim relief because the videoscopes were urgently needed by the customs authority, and re-tendering would cause significant delays.

Q: What is the significance of the Rs. 63 lakh deduction?
A: The Rs. 63 lakh deduction was a measure to protect the government’s financial interests, pending a final decision on the matter.

Q: What happens if M/s. ASVA insists on full payment?
A: If M/s. ASVA insists on full payment, the interim stay would be lifted, and the Department would have to float a fresh tender.

Q: What is the next step in this case?
A: The Supreme Court will hear the case in detail and pass a final order, particularly regarding the Rs. 63 lakh deduction.