Supreme Court Upholds BEST’s Tender Award to EVEY, Dismissing Tata Motors’ Challenge (2023)

LEGAL ISSUE: Whether a tender process can be challenged by a technically disqualified bidder and whether a successful bidder can rectify a minor clerical error in a non-essential document.

CASE TYPE: Contract Law, Tender Process

Case Name: Tata Motors Limited vs. The Brihan Mumbai Electric Supply & Transport Undertaking (BEST) and Others

[Judgment Date]: May 19, 2023

Can a company that didn’t meet the technical requirements of a tender challenge the tender process itself? The Supreme Court of India recently addressed this question while examining a dispute over a tender for electric buses in Mumbai. The core issue revolved around whether the Brihan Mumbai Electric Supply & Transport Undertaking (BEST) was correct in rejecting Tata Motors’ bid and accepting EVEY Trans Pvt. Ltd.’s bid, despite a minor error in EVEY’s submission. The Supreme Court, in this judgment, clarified the scope of judicial review in tender matters and emphasized the need for minimal interference in commercial decisions. The judgment was delivered by a three-judge bench comprising of Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice Pamidighantam Sri Narasimha, and Justice J. B. Pardiwala, with the majority opinion authored by Justice Pardiwala.

Case Background

The Brihan Mumbai Electric Supply & Transport Undertaking (BEST) issued a tender on February 26, 2022, for the supply, operation, and maintenance of 1400 Single Decker AC Electric Buses for public transport in Mumbai. The tender specified that the buses must be able to run 200 kilometers on a single charge under actual conditions, with air conditioning, and using no more than 80% of the battery’s capacity. Eight companies, including Tata Motors and EVEY Trans Pvt. Ltd. (EVEY), participated in the bidding process.

During a pre-bid meeting on March 11, 2022, Tata Motors requested that BEST consider its bid for a 200 km range with a 75-minute opportunity charging time during the day, and range testing conditions as per AIS 040/FAME II standards. However, BEST rejected this request and emphasized that the buses must meet the 200 km range requirement in “actual conditions,” excluding any reference to AIS 040 or standard testing conditions.

Tata Motors submitted its bid on April 25, 2022, guaranteeing a 200 km operating range with 80% State of Charge (SoC), but specified that this was achievable under “standard test conditions as per AIS 040”. EVEY, on the other hand, submitted its bid on May 2, 2022, claiming compliance with all tender conditions, including the 200 km range in a single charge.

EVEY initially submitted Annexure Y, an undertaking from the Original Equipment Manufacturer (OEM) regarding the operating range, which mentioned a 1-hour opportunity charging time. This was inconsistent with the tender requirements. However, EVEY later clarified this as a clerical error and submitted a revised Annexure Y on May 6, 2022, aligning with the tender conditions.

BEST declared Tata Motors’ bid “technically non-responsive” on May 6, 2022, due to the deviation from the “actual conditions” requirement. EVEY’s bid was deemed “technically responsive,” and after opening the price bids, EVEY was declared the L1 bidder.

Aggrieved by the rejection, Tata Motors filed a writ petition before the High Court of Judicature at Bombay, challenging BEST’s decision. During the pendency of the writ petition, BEST awarded the tender to EVEY on May 20, 2022. The High Court, in its judgment dated July 5, 2022, upheld the disqualification of Tata Motors but also set aside the award to EVEY, citing that EVEY’s revised Annexure Y was submitted after the deadline, and directed BEST to consider a fresh tender process. This led to the appeals before the Supreme Court by all three parties.

Timeline

Course of Proceedings

Tata Motors challenged BEST’s decision to reject its bid before the High Court of Judicature at Bombay. The High Court upheld BEST’s decision to disqualify Tata Motors, noting that the company had deviated from the tender’s requirement of a 200 km operating range in “actual conditions”. However, the High Court also examined the case of EVEY and found that EVEY had submitted a revised Annexure Y after the deadline for bid submissions, which was against the tender conditions. Consequently, the High Court set aside the award of the tender to EVEY and directed BEST to initiate a fresh tender process.

Aggrieved by the High Court’s decision, Tata Motors, EVEY, and BEST all approached the Supreme Court. Tata Motors challenged its disqualification, while EVEY and BEST challenged the cancellation of the tender award to EVEY.

Legal Framework

The judgment primarily revolves around the interpretation and application of tender conditions, specifically concerning technical specifications and the permissibility of rectifying errors in bid documents. The relevant clauses of the tender document include:

• Clause 3.5(e) and Clause 12 of Section 2 of Schedule IX, which specify the technical requirements for the electric buses, particularly the 200 km operating range in “actual conditions.”
• Clause 5.1.1 of Schedule II, which outlines the mode and manner of submission of the bid proposal and lists the annexures to be submitted.
• Clause 16 of Schedule I, which prohibits any additions, corrections, or submissions of documents after the opening of the technical bid.

The Supreme Court also considered the general principles of judicial review in tender matters, emphasizing the need for minimal interference in commercial decisions unless there is evidence of arbitrariness, mala fides, or irrationality.

Arguments

Arguments on behalf of EVEY

• EVEY argued that the mistake in the initial Annexure Y was a clerical error, which was promptly rectified. They relied on the case of W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. [(2001) 2 SCC 451] to argue that equitable relief can be granted when a bidder makes a material mistake of fact and rectifies it promptly.
• They contended that Clause 16 of Schedule I should not apply to Annexure Y, as it was not required to be submitted with the bid documents but only by the successful bidder.
• EVEY emphasized that Annexure F, which specifies compliance with technical specifications, is the essential condition of the tender. They relied on the case of Kanhaiya Lal Agrawal v. Union of India and Others [(2002) 6 SCC 315] to argue that non-compliance with Annexure Y only leads to a penalty or termination of the contract, and not rejection of the bid.
• They argued that the writ court should not interfere with the employer’s decision on whether to accept a bid, citing N.G. Projects Limited v. Vinod Kumar Jain and Others [(2022) 6 SCC 127].
• EVEY contended that there was no favouritism, as other bidders were also technically qualified, and the tender was awarded after opening price bids.
• Relying on Raunaq International Ltd. v. I.V .R. Construction Ltd. and Others [(1999) 1 SCC 492] and S.S. & Company v. Orrisa Mining Corporation Limited [(2008) 5 SCC 772], they argued that the High Court should not have entertained a challenge from an unsuccessful party once Tata Motors was found technically non-compliant.

Arguments on behalf of Tata Motors

• Tata Motors argued that the acceptance of EVEY’s revised Annexure Y was illegal, as it violated Clause 16 of Schedule I, which prohibits any additions or corrections after the bid submission deadline. They relied on Poddar Steel Corporation v. Ganesh Engineering Works and Others [(1991) 3 SCC 273] and W.B. State Electricity Board (supra) to support this claim.
• They contended that BEST’s actions were arbitrary and unfair, and they had the locus to challenge the tender process, citing Monarch Infrastructure (P) Ltd v. Commissioner, Ulhasnagar Municipal Corporation and Others [(2000) 5 SCC 287], Meerut Development Authority v. Association of Management Studies and Another [(2009) 6 SCC 171], and Maa Binda Express Carrier and Another v. North-East Frontier Railway and Others [(2014) 3 SCC 760].
• Tata Motors argued that Annexure Y was an important part of the technical evaluation and could not be considered incidental.
• They submitted that the argument that Annexure Y was optional and not required at the time of bid submission was an afterthought. They cited Jagannath Behera & Ors. v. Raja Harihar Singh Mardaraj Bhramarbara Roy [1958 SCR 1067], Karanpura Development Co. Ltd v. Raja Kamakshya Narain Singh Etc. [1956 SCR 325], Vasantkumar Radhakisan Vora v. Board of Trustees of Port of Bombay [(1991) 1 SCC 761], and Steel Authority of India Ltd v. Gupta Brother Steel Tubes Ltd [(2009) 10 SCC 63].
• They submitted that a fresh tender was warranted due to the arbitrary tender process and delay in the supply of buses, and that it would be in public interest.
• They argued that the High Court erred in upholding their disqualification, as they had complied with the essential conditions of the tender, and certain departures were permissible.

Arguments on behalf of BEST

• BEST argued that the tender document specified mandatory eligibility conditions, including the submission of Annexure F, which Tata Motors had deviated from.
• They highlighted that Annexure F stated that any variations contradicting BEST’s requirements would render the bid non-responsive.
• They submitted that Tata Motors’ bid was rightly rejected for specifying “standard test conditions” instead of “actual conditions.”
• BEST contended that Annexure Y was not a mandatory condition for being a responsive bidder and was only required from the successful bidder.
• They argued that EVEY’s revised Annexure Y was a rectification of a clerical error.
• They submitted that re-tendering would be against public interest, as recent tenders had resulted in higher costs, citing a similar tender by Convergency Energy Services Limited (CESL).

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the High Court, after upholding the disqualification of Tata Motors, was justified in undertaking further exercise to ascertain whether EVEY also stood disqualified and that BEST in its discretion may undertake a fresh tender process?

Treatment of the Issue by the Court

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

Authorities

Cases Relied Upon by the Court

Legal Provisions Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court analyzed the authorities cited by the parties and distinguished them from the facts of the present case. The court emphasized that while the principles of fair play and natural justice apply to tender processes, courts must also be mindful of the commercial nature of such processes and the need for minimal interference. The court held that the High Court had erred in interfering with BEST’s decision to accept EVEY’s bid, as there was no evidence of mala fides or arbitrariness.

• The Court distinguished the case of W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. [(2001) 2 SCC 451], stating that the principle of equitable relief cannot be applied in this case.
• The Court relied on Kanhaiya Lal Agrawal v. Union of India and Others [(2002) 6 SCC 315] to differentiate between essential and collateral conditions, deeming Annexure Y as collateral.
• The Court cited N.G. Projects Limited v. Vinod Kumar Jain and Others [(2022) 6 SCC 127] to emphasize that writ courts should refrain from imposing their decisions on employers in tender matters.
• The Court cited Raunaq International Ltd. v. I.V .R. Construction Ltd. and Others [(1999) 1 SCC 492] to emphasize that judicial relief should not be granted to a party that does not fulfill the tender criteria.
• The Court cited S.S. & Company v. Orrisa Mining Corporation Limited [(2008) 5 SCC 772] to emphasize that an unsuccessful party should not be allowed to challenge the tender process.
• The Court distinguished the case of Poddar Steel Corporation v. Ganesh Engineering Works and Others [(1991) 3 SCC 273], stating that the principle of strict adherence cannot be applied in this case.
• The Court distinguished the cases of Monarch Infrastructure (P) Ltd v. Commissioner, Ulhasnagar Municipal Corporation and Others [(2000) 5 SCC 287], Meerut Development Authority v. Association of Management Studies and Another [(2009) 6 SCC 171], and Maa Binda Express Carrier and Another v. North-East Frontier Railway and Others [(2014) 3 SCC 760], finding no arbitrariness in the present case.
• The Court cited Jagannath Behera & Ors. v. Raja Harihar Singh Mardaraj Bhramarbara Roy [1958 SCR 1067], Karanpura Development Co. Ltd v. Raja Kamakshya Narain Singh Etc. [1956 SCR 325], Vasantkumar Radhakisan Vora v. Board of Trustees of Port of Bombay [(1991) 1 SCC 761], and Steel Authority of India Ltd v. Gupta Brother Steel Tubes Ltd [(2009) 10 SCC 63], to emphasize that new points cannot be raised for the first time in a Special Leave Petition.
• The Court relied on Silppi Constructions Contractors v. Union of India , [(2020) 16 SCC 489] to emphasize that courts should exercise restraint in interfering with contractual matters.
• The Court relied on Association of Registration Plates v. Union of India and Others , [(2005) 1 SCC 679] to highlight the financial burden of re-tendering on the public exchequer.
• The Court relied on Air India Ltd. v. Cochin International Airport Ltd. [(2000) 2 SCC 617] to emphasize that the award of contracts is a commercial transaction, and the state must be fair to all parties.
• The Court relied on Jagdish Mandal v. State of Orissa and Others, [(2007) 14 SCC 517] to emphasize that courts should not interfere with tender decisions unless they are mala fide or against public interest.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The Court emphasized that the High Court should not have entertained a challenge to the tender process from a technically disqualified bidder.
• The Court held that the operating range of 200 km in “actual conditions” was a material condition of the tender, and Tata Motors’ bid was rightly rejected for deviating from it.
• The Court found that Annexure Y was not a part of the technical bid and was required to be submitted by the successful bidder; therefore, the revision was permissible.
• The Court emphasized the need for minimal judicial interference in tender matters, especially when no mala fides or arbitrariness is evident.
• The Court considered the potential financial burden on the public exchequer if a fresh tender process was initiated.

The Court’s reasoning was based on a careful analysis of the tender conditions and the actions of BEST. The Court concluded that BEST’s decision to accept EVEY’s bid was not arbitrary or unfair, and the High Court had erred in settingaside the tender award.

Final Order

The Supreme Court allowed the appeals filed by BEST and EVEY and dismissed the appeal filed by Tata Motors. The court upheld the tender award to EVEY and set aside the judgment of the High Court.

Flowchart of the Case

Sentiment Analysis

Key Takeaways

• Scope of Judicial Review in Tender Matters: The Supreme Court emphasized that courts should exercise restraint in interfering with tender decisions unless there is evidence of arbitrariness, mala fides, or irrationality.
• Technical Specifications: Bidders must strictly adhere to the technical specifications outlined in the tender documents. Any deviations, especially on essential conditions, can lead to disqualification.
• Rectification of Errors: Minor clerical errors in non-essential documents can be rectified, especially when they do not affect the core technical or financial aspects of the bid.
• Locus Standi: A technically disqualified bidder does not have the locus standi to challenge the tender process itself.
• Public Interest: Courts must also consider the public interest and the potential financial burden on the public exchequer when deciding on tender disputes.

Conclusion

The Supreme Court’s judgment in the case of Tata Motors Limited vs. The Brihan Mumbai Electric Supply & Transport Undertaking (BEST) and Others clarifies the legal principles surrounding tender processes and judicial intervention. It underscores the importance of adhering to tender conditions, the permissibility of rectifying minor errors, and the need for minimal judicial interference in commercial decisions. The judgment reaffirms that tender processes are primarily commercial in nature, and courts should not act as super-administrators, second-guessing the decisions of tendering authorities, unless there is clear evidence of illegality, arbitrariness, or mala fides. This case serves as a significant precedent for future tender disputes, emphasizing the need for a balanced approach between ensuring fairness and respecting the commercial autonomy of tendering authorities.