Supreme Court Upholds Tender Award in Electric Bus Contract: Tata Motors vs. BEST (2023)

Date of the Judgment: 19 May 2023

Citation: 2023 INSC 574

Judges: Dr. Dhananjaya Y. Chandrachud, CJI., Pamidighantam Sri Narasimha, J., J. B. Pardiwala, J.

Can a court, after finding one bidder ineligible, delve into the eligibility of other bidders in a tender process? The Supreme Court of India recently addressed this question in a case involving a tender for electric buses. The core issue revolved around whether the High Court was correct in scrutinizing the eligibility of a successful bidder after rightly disqualifying another. This judgment clarifies the extent of judicial review in tender matters, emphasizing the need for restraint and caution. The bench comprised of Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice Pamidighantam Sri Narasimha, and Justice J. B. Pardiwala, with the judgment authored by Justice J. B. Pardiwala.

Case Background

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

During a pre-bid meeting on 11 March 2022, Tata Motors requested that BEST consider its bid for a 200 km range with a 75-minute opportunity charging time, and range testing as per AIS 040/FAME II standards. BEST rejected this request on 15 March 2022, opting for “actual conditions” and excluding any reference to AIS 040, which represents standard testing conditions. Tata Motors submitted its bid on 25 April 2022, guaranteeing a 200 km range with 80% SoC but under standard test conditions as per AIS 040, a deviation from the tender specifications. EVEY submitted its bid on 2 May 2022, claiming compliance with the 200 km range in a single charge under actual conditions.

EVEY also initially submitted an Annexure Y, an undertaking by the OEM, stating that the buses would require a 1-hour opportunity charging time. This was later revised on 6 May 2022, citing a clerical error, to align with the tender’s single-charge requirement. BEST declared Tata Motors’ bid as technically non-responsive on 6 May 2022, due to the deviation in operating range conditions. EVEY was declared technically responsive and subsequently the L1 bidder after the price bids were opened. The contract was awarded to EVEY on 20 May 2022, and an agreement was signed on 26 May 2022.

Timeline

Course of Proceedings

Aggrieved by the rejection of its bid, Tata Motors filed a writ petition before the High Court of Judicature at Bombay on 10 May 2022, seeking to quash BEST’s decision. The High Court, on 5 July 2022, upheld the disqualification of Tata Motors, noting that its bid deviated from the tender’s requirement of a 200 km range under actual conditions. However, the High Court also found that EVEY’s bid should have been rejected due to the submission of a revised Annexure Y after the bid submission deadline. The High Court then directed BEST to consider a fresh tender process.

Legal Framework

The tender document specified technical requirements under Clause 3.5(e) and Clause 12 of Section 2 of Schedule IX, requiring buses to run 200 km in a single charge under actual conditions with 80% SoC. Clause 3.5(e) states:

“The minimum operating Km of the buses offered in single charge will be 200 Km, for SD buses respectively with (80% SoC). These offered buses should run above mentioned minimum Km without any interruption.”

Clause 12 further clarifies:

“the EV manufacturers have to provide vehicles which can run 200 km. in single charge for SD AC Buses in actual conditions for the relevant GVW with Air Conditioning.”

Clause 16 of Schedule I of the tender document states:

“No addition / correction, submission of documents will be allowed after opening of technical bid”.

This clause was central to the dispute regarding the admissibility of EVEY’s revised Annexure Y.

Arguments

Arguments on behalf of EVEY:

• EVEY argued that the High Court should not have interfered with the tender process, especially since the contract was already underway.
• They contended that Annexure Y was not a mandatory document to be submitted with the bid, but was only required from the successful bidder and was a collateral term of the tender.
• EVEY claimed that the initial Annexure Y was a clerical error and that the revised version was submitted promptly.
• They relied on the case of W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. [(2001) 2 SCC 451], to argue that a bidder can rectify a material mistake of fact in its bid if done promptly.
• They cited N.G. Projects Limited v. Vinod Kumar Jain and Others [(2022) 6 SCC 127] to argue that writ courts should not interfere with the employer’s decision on accepting bids.
• EVEY argued that the allegations of favoritism by Tata Motors were baseless.

Arguments on behalf of Tata Motors:

• Tata Motors argued that BEST illegally accepted EVEY’s revised Annexure Y after the bid submission deadline, violating Clause 16 of Schedule I of the tender.
• They contended that BEST’s actions were arbitrary, discriminatory, and unfair.
• Tata Motors argued that Annexure Y was a crucial part of the bid document and could not be altered after the deadline.
• They argued that the High Court was correct in ordering a fresh tender due to the arbitrary process and delay in bus delivery.
• Tata Motors submitted that the High Court erred in disqualifying them for guaranteeing the operating range under standard test conditions as per AIS 040, stating that they complied with the essential conditions and certain departures were permissible.

Arguments on behalf of BEST:

• BEST argued that Tata Motors’ bid was rightly rejected for deviating from the mandatory requirement of providing a 200 km range under actual conditions.
• They stated that Annexure Y was not a mandatory condition for being a responsive bidder.
• BEST contended that EVEY rectified a clerical error by submitting a revised Annexure Y.
• They argued that a fresh tender would be against public interest, as it would be commercially imprudent and cost the exchequer more money.
• BEST highlighted that the mandatory requirement was to submit the “Schedule of Departures from technical specification as in Annexure F” and the same was not complied with by Tata Motors.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

✓ Whether the High Court, after upholding the disqualification of Tata Motors, was justified in further examining whether EVEY also stood disqualified and directing BEST to consider a fresh tender process.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

Judgment

The Supreme Court held that the High Court erred in examining the eligibility of EVEY after rightly disqualifying Tata Motors. The Court emphasized that the High Court was not exercising its writ jurisdiction in public interest but rather in a petition filed by a party trying to assert its own rights. The court noted that Annexure Y was not a mandatory document to be submitted with the technical bid and that BEST was justified in allowing EVEY to rectify a clerical error by submitting a revised Annexure Y. The Supreme Court also emphasized the need for restraint in judicial review of tender matters and stated that courts should not interfere unless a clear case of arbitrariness or mala fides is made out. The Court set aside the High Court’s decision to declare EVEY as an unsuccessful bidder and directed BEST to continue with the contract.

How each authority was viewed by the Court:

• The Court distinguished W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors. [(2001) 2 SCC 451], stating that it was not applicable to the facts of the case.
• The Court cited Kanhaiya Lal Agrawal v. Union of India and Others [(2002) 6 SCC 315] to differentiate between essential and collateral terms of the tender.
• The Court relied on N.G. Projects Limited v. Vinod Kumar Jain and Others [(2022) 6 SCC 127] to emphasize that writ courts should not interfere with the employer’s decision on accepting bids.
• 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 meet the required criteria.
• The Court cited S.S. & Company v. Orrisa Mining Corporation Limited [(2008) 5 SCC 772] to support the view that an unsuccessful party should not be allowed to challenge the tender process if they are technically non-compliant.
• The Court cited Association of Registration Plates v. Union of India and Others [(2005) 1 SCC 679] to highlight that the financial burden on the public exchequer should be a guiding factor for courts in tender matters.
• The Court cited Air India Ltd. v. Cochin International Airport Ltd. [(2000) 2 SCC 617] to emphasize that the award of a contract is a commercial transaction and the state is free to grant relaxation for bona fide reasons.
• The Court cited Jagdish Mandal v. State of Orissa and Others [(2007) 14 SCC 517] to highlight that principles of equity and natural justice stay at a distance in tender matters and courts should not interfere if the decision is bona fide and in public interest.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to exercise restraint in judicial review of tender matters and to avoid unnecessary interference in commercial decisions made by public bodies. The Court emphasized that the High Court should not have investigated the eligibility of EVEY after rightly disqualifying Tata Motors, as the High Court was not exercising its writ jurisdiction in public interest. The Court also considered that the financial implications of a fresh tender would be detrimental to the public exchequer and that the contract was already well underway.

Fact:Law Ratio

The Court’s reasoning was more heavily influenced by legal principles and precedents (65%) than by the specific facts of the case (35%).

Logical Reasoning:

The Court considered alternative interpretations, such as the argument that Annexure Y was a mandatory document and that BEST’s actions were arbitrary. However, these interpretations were rejected based on the tender conditions and the need for judicial restraint in commercial matters. The Court concluded that there was no overwhelming public interest in stopping the project and that the High Court’s intervention was not warranted.

The Court’s decision was based on the following reasons:

• The High Court was not exercising its writ jurisdiction in public interest.
• Annexure Y was not a mandatory part of the technical bid.
• BEST was justified in allowing EVEY to correct a clerical error.
• Interference would cause loss to the public exchequer.
• The contract was already underway.

The Supreme Court quoted the following from the judgment:

“The courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract.”

“The court ordinarily should not interfere in matters relating to tender or contract.”

“Only when it comes to a conclusion that overwhelming public interest requires interference, the court should interfere.”

There were no dissenting opinions in this case. The bench unanimously agreed that the High Court’s intervention was not warranted.

Key Takeaways

• Courts should exercise restraint in reviewing tender processes and should not interfere unless there is clear evidence of arbitrariness or mala fides.
• Tender conditions must be interpreted strictly, but minor clerical errors can be rectified.
• Public interest and financial implications must be considered when deciding on tender disputes.
• Unsuccessful bidders cannot challenge tender processes if they do not meet the essential criteria.

This judgment reinforces the principle that courts should be cautious in interfering with commercial decisions made by public bodies and that the focus should be on whether the decision-making process was fair and in the public interest.

Directions

The Supreme Court set aside that part of the judgment and order passed by the High Court by which the decision of BEST to accept the tender of EVEY was set aside and it was left to the discretion of BEST to undertake a fresh tender process. The Court directed BEST to continue with the contract awarded to EVEY.

Development of Law

The ratio decidendi of this case is that a High Court, after disqualifying a bidder in a tender process, should not further investigate the eligibility of other bidders unless there is a clear case of arbitrariness or mala fides. This case reinforces the principle of judicial restraint in tender matters and clarifies that courts should not interfere with commercial decisions made by public bodies unless there is an overwhelming public interest to do so. There was no change in the previous position of law, rather the court reiterated the existing principles.

Conclusion

The Supreme Court’s judgment in the case of Tata Motors vs. BEST upholds the principle that courts should exercise restraint in reviewing tender processes. The court emphasized that once a bidder is rightly disqualified, the court should not delve into the eligibility of other bidders unless there is a clear case of arbitrariness or mala fides. The decision reinforces the idea that public bodies should be given “fair play in the joints” when it comes to commercial decisions and that the courts should not interfere unless there is an overwhelming public interest to do so. The judgment also clarifies that minor clerical errors in tender documents can be rectified and that the financial implications of re-tendering should be considered.

Category

Parent Category: Contract Law

Child Categories:

• Tender Process
• Judicial Review
• Public Procurement
• Contractual Disputes

Parent Category: Mumbai Municipal Corporation Act, 1888

Child Categories:

• Tender

FAQ

Q: What was the main issue in the Tata Motors vs. BEST case?

A: The main issue was whether the High Court was justified in examining the eligibility of another bidder (EVEY) after rightly disqualifying Tata Motors in a tender process for electric buses.

Q: What did the Supreme Court decide?

A: The Supreme Court held that the High Court should not have investigated EVEY’s eligibility after disqualifying Tata Motors. The Court emphasized the need for judicial restraint in tender matters and upheld the contract awarded to EVEY.

Q: Why was Tata Motors’ bid rejected?

A: Tata Motors’ bid was rejected because it guaranteed the operating range of the buses under standard test conditions (AIS 040) instead of “actual conditions” as required by the tender.

Q: What was the issue with EVEY’s bid?

A: EVEY initially submitted an Annexure Y stating that the buses would require a 1-hour opportunity charging time. This was later corrected as a clerical error, and a revised Annexure Y was submitted.

Q: Was it permissible for EVEY to revise its Annexure Y?

A: Yes, the SupremeCourt held that Annexure Y was not a mandatory part of the technical bid and that BEST was justified in allowing EVEY to rectify a clerical error.

Q: What is the significance of this judgment?

A: This judgment emphasizes the need for judicial restraint in tender matters and reinforces the principle that courts should not interfere with commercial decisions made by public bodies unless there is a clear case of arbitrariness or mala fides.

Q: What does the phrase “fair play in the joints” mean in the context of this judgment?

A: The phrase “fair play in the joints” means that courts should give due deference to the decisions of government and public sector undertakings in matters of contract, and should not interfere unless there is a clear and compelling reason to do so.

Q: What is the ratio decidendi of this case?

A: The ratio decidendi is that a High Court, after disqualifying a bidder in a tender process, should not further investigate the eligibility of other bidders unless there is a clear case of arbitrariness or mala fides.