Supreme Court Upholds Tender Process: Bharat Coking Coal Ltd. vs. AMR Dev Prabha & Ors. (2020) INSC 229 (18 March 2020)

Introduction

Date of the Judgment: 18 March 2020

Citation: (2020) INSC 229

Judges: S. A. Bobde (Chief Justice of India), B. R. Gavai J., Surya Kant J. (authored by S.A. Bobde, CJI)

Can a court interfere in a tender process where a party claims a breach of contract, or is judicial review limited to cases involving public interest? The Supreme Court of India addressed this question in a case involving Bharat Coking Coal Ltd. (BCCL), clarifying the scope of judicial review in tender matters. The court emphasized that not every contractual dispute involving a state entity warrants intervention by writ courts, especially when the primary concern is a private commercial interest rather than a public law issue.

Case Background

Bharat Coking Coal Ltd. (BCCL), a subsidiary of Coal India Ltd., initiated a tender process for hiring Heavy Earth Moving Machinery (HEMM) for coal mining operations. M/s C1 India Pvt Ltd was appointed as the service provider for conducting the e-tender process. The tender was floated on 09.03.2015 with an initial estimate of Rs 1694.84 crores. The e-reverse auction was scheduled for 04.05.2015 and 05.05.2015, with the auction closing at 6:00 PM on the second day. The auction was designed to automatically terminate if a bid remained unresponded for 30 minutes.

On 05.05.2015, some bidders reported connectivity issues around 12:55 PM. The last bid of Rs 2345 Crores by M/s AMR-Dev Prabha (Respondent No. 1) at 12:33 PM went unresponded for 30 minutes, leading to the auction’s automatic closure at 1:03 PM. Upon receiving confirmation of a network fault from Tata Communications Ltd (TCL) at 2:11 PM, C1-India, with the concurrence of BCCL officials, decided to restart the auction at 2:30 PM. This decision was communicated to all bidders via telephone and email. The resumed auction resulted in M/s RK Transport Co. (Respondent No. 6) being declared the successful bidder with a bid of Rs 2043 crores at 7:27 PM.

M/s RK Transport Co. was unable to submit the Performance Bank Guarantee within the stipulated 28 days. BCCL condoned the delay and the job was started on the ground. Three months later, on 10.08.2015, AMR-Dev Prabha filed a writ petition in the High Court of Jharkhand, claiming to be the successful bidder at 1:03 PM and seeking the quashing of the Letter of Acceptance (LOA) issued to RK Transport.

Timeline

Course of Proceedings

The Single Judge of the High Court dismissed the writ petition filed by AMR-Dev Prabha, holding that BCCL had provided a level playing field, there was a genuine connectivity issue, and the resumption of the auction was as per the terms of the NIT. The judge also noted that AMR-Dev Prabha had participated in the resumed auction and that BCCL’s condonation of delay in submission of guarantee by RK Transport was permissible.

The Division Bench of the High Court, however, allowed the appeal, quashing the LOA issued to RK Transport. The court held that BCCL and C1-India failed to maintain the sanctity of the auction process, committed serious illegality, and demonstrated a lack of fair play. The High Court directed for re-conducting the auction and ordered a vigilance enquiry into the matter.

Legal Framework

The judgment refers to the Notice Inviting Tender (NIT) which outlines the terms and conditions of the tender process. The NIT specifies that bidders are responsible for their connectivity, and that the auction would automatically close if a bid remained unresponded for 30 minutes. It also outlines that the auction period would be paused in case of technical faults at the service provider’s end and extended by the period of the fault.

The Supreme Court also considered the scope of judicial review in tender matters, referencing precedents like RD Shetty v. International Airport Authority of India [(1979) 3 SCC 489] and Tata Cellular v. Union of India [(1994) 6 SCC 651]. These cases establish that courts are concerned with the legality of the decision-making process and not the soundness of the decision itself.

Arguments

Arguments by BCCL and C1-India (Appellants):

• The scope of judicial review in contractual matters is limited, and deference should be given to the commercial wisdom of the executive.

  • The decision to resume the auction was not illegal, irrational, or arbitrary, as it was aimed at discovering a better price.
  • There was no allegation of extraneous gratification or violation of any statute.

• AMR-Dev Prabha’s participation in the resumed auction prevents it from challenging the process.

  • Alternate remedies under contract and civil law are available.

• Multiple independent authorities, including CERT-In and one of the IEMs, upheld the entire process.

  • The slight delay in decision-making was due to C1-India attempting to determine the source of the interruption.
  • No prejudice was caused to any bidder, and AMR-Dev Prabha had ample opportunity to bid.
  • The decision to resume was taken in good faith and in the public interest, resulting in substantial savings for the public exchequer.

• AMR-Dev Prabha’s actions demonstrate a personal interest rather than a public interest.

  • The lack of on-the-spot protest and the delay in filing the writ petition indicate a commercial opportunism.
  • Any infirmity was minor and inconsequential, and there was substantive compliance with the tender process.
  • Hyper-technical compliance is not always possible or desirable, and strict procedural compliance can defeat the ends of substantive equality.

Arguments by AMR-Dev Prabha (Respondent No. 1):

• AMR-Dev Prabha was the lowest bidder (L-1) when the auction automatically concluded at 1:03 PM.

  • Any resumption was impermissible and contrary to contractual terms.
  • The resumption was to benefit particular parties, as demonstrated by the refusal of BCCL to accept a lower bid.

• Public interest should be prioritized, and the State instrumentality should accept the best available price, irrespective of formal technicalities.

  • Participation in the resumed bidding process does not waive the illegality of the resumption.
  • The extension of 1 hour and 27 minutes was wrong, and the time should have been calculated from 12:55 PM, resulting in an extension of 1 hour and 35 minutes.

• There were irregularities in the resumption process, including delayed communications, login issues, and the use of two accounts by one entity.

  • BCCL impermissibly referred the matter to CERT-In instead of producing all relevant records.
  • The first IEM held that there was no problem on the appellant’s end that would necessitate stoppage or resumption of the auction process.

• The cause of action arose after Respondent No. 6 failed to submit the Performance Guarantee within 28 days.

Submissions of Parties

Issues Framed by the Supreme Court

1. Whether the writ petition was maintainable considering the nature of tender processes?
2. Whether there were lapses on the part of BCCL and C1-India in the auction process?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• RD Shetty v. International Airport Authority of India [(1979) 3 SCC 489] – Supreme Court of India. This case was cited to discuss the scope of judicial review in tender matters.
• Tata Cellular v. Union of India [(1994) 6 SCC 651] – Supreme Court of India. This case was used to outline the grounds for judicial review of administrative action, including illegality, irrationality, and procedural impropriety.
• Air India Ltd v. Cochin International Airport Limited [(2000) 2 SCC 617] – Supreme Court of India. This case emphasizes that latitude ought to be granted to the State in exercise of executive power.
• Jagdish Mandal v. State of Orissa [(2007) 14 SCC 517] – Supreme Court of India. This case discusses the limitations of judicial review in tender matters and the need to resist attempts by unsuccessful tenderers to make mountains out of molehills.
• Raunaq International Ltd. v. IVR Construction Ltd. [(1999) 1 SCC 492] – Supreme Court of India. This case highlights the need for public interest to be involved in entertaining a writ petition challenging the award of a contract.
• Maa Binda Express Carrier v. North-East Frontier Railway [(2014) 3 SCC 760] – Supreme Court of India. This case states that submission of a tender is no more than making an offer and that bidders are only entitled to fair, equal and non-discriminatory treatment in the evaluation of their tenders.
• Master Marine Services (P) Ltd v. Metcalfe & Hodg Kinson (P) Ltd [(2005) 6 SCC 138] – Supreme Court of India. This case illustrates that if a prayer for re-bidding is on account of a desire to get a better price, then involvement of Article 14 of the Constitution would not be made out.
• Shobikaa Impex (P) Ltd. v. Central Medical Services Society [(2016) 16 SCC 233] – Supreme Court of India. This case notes that the State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons.
• Central Coalfields Ltd v. SLL-SML (Joint Venture Consortium) [(2016) 8 SCC 622] – Supreme Court of India. This case emphasizes that courts ought not to sit in appeal over decisions of executive authorities or instrumentalities.
• Siemens Aktiengeselischaft & Siemens Ltd. v. DMRC Ltd. [(2014) 11 SCC 288] – Supreme Court of India. This case emphasizes that courts are concerned only with lawfulness of a decision, and not its soundness.
• Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation Ltd [(2016) 16 SCC 818] – Supreme Court of India. This case states that the authority having authored the documents, is better placed to appreciate their requirements and interpret them.
• Ram and Shyam Co v. State of Haryana [(1985) 3 SCC 267] – Supreme Court of India. This case was cited by the respondent to argue that public interest ought to be prioritized.

Legal Provisions Considered by the Court:

• Article 14 of the Constitution of India – Right to Equality.
• Article 19(1)(g) of the Constitution of India – Freedom to practice any profession, or to carry on any occupation, trade or business.

Authorities 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 Court cited RD Shetty v. International Airport Authority of India [(1979) 3 SCC 489]* and Tata Cellular v. Union of India [(1994) 6 SCC 651]* to reiterate that judicial review in tender matters is limited to the decision-making process and not the decision itself.
• The Court cited Air India Ltd v. Cochin International Airport Limited [(2000) 2 SCC 617]* to emphasize that latitude ought to be granted to the State in exercise of executive power.
• The Court cited Jagdish Mandal v. State of Orissa [(2007) 14 SCC 517]* to highlight that courts should resist attempts by unsuccessful tenderers to make mountains out of molehills.
• The Court cited Raunaq International Ltd. v. IVR Construction Ltd. [(1999) 1 SCC 492]* to emphasize that there must be a substantial amount of public interest involved for courts to intervene in disputes between two rival tenderers.
• The Court cited Maa Binda Express Carrier v. North-East Frontier Railway [(2014) 3 SCC 760]* to state that submission of a tender is no more than making an offer and that bidders are only entitled to fair, equal and non-discriminatory treatment in the evaluation of their tenders.
• The Court cited Master Marine Services (P) Ltd v. Metcalfe & Hodg Kinson (P) Ltd [(2005) 6 SCC 138]* to illustrate that if a prayer for re-bidding is on account of a desire to get a better price, then involvement of Article 14 of the Constitution would not be made out.
• The Court cited Shobikaa Impex (P) Ltd. v. Central Medical Services Society [(2016) 16 SCC 233]* to note that the State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons.
• The Court cited Central Coalfields Ltd v. SLL-SML (Joint Venture Consortium) [(2016) 8 SCC 622]* to emphasize that courts ought not to sit in appeal over decisions of executive authorities or instrumentalities.
• The Court cited Siemens Aktiengeselischaft & Siemens Ltd. v. DMRC Ltd. [(2014) 11 SCC 288]* to emphasize that courts are concerned only with lawfulness of a decision, and not its soundness.
• The Court cited Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation Ltd [(2016) 16 SCC 818]* to state that the authority having authored the documents, is better placed to appreciate their requirements and interpret them.
• The Court cited Ram and Shyam Co v. State of Haryana [(1985) 3 SCC 267]* which was cited by the respondent, but the court did not agree with the contention of the respondent.

What weighed in the mind of the Court?

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

• The Court found that the primary grievance of the respondent was a breach of contract, and not a public law issue.
• The Court emphasized that the scope of judicial review in contractual matters is limited.
• The Court found that BCCL and C1-India acted in a bona fide manner and that there was no evidence of mala fide or fraudulent intent.
• The Court noted that the decision to resume the auction was plausible and aimed at discovering a better price.
• The Court considered the fact that AMR-Dev Prabha participated in the resumed auction and did not raise any objections at the time.
• The Court was also influenced by the reports of independent authorities such as CERT-In and one of the IEMs, which supported the view that there were technical issues and that the resumption of the auction was justified.
• The Court also considered the fact that the respondent was seeking a special opportunity of negotiation, which would be detrimental to other participants.

Logical Reasoning

Judgment

The Supreme Court allowed the appeals filed by Bharat Coking Coal Ltd., M/s RK Transport, and M/s C1 India Pvt Ltd, and dismissed the appeal filed by AMR-Dev Prabha. The Court set aside the Division Bench judgment of the High Court and dismissed the writ petition filed by AMR-Dev Prabha.

The Court held that the High Court should have deferred to the interpretation of the NIT by BCCL unless it was patently perverse or mala fide. The Court also held that the High Court failed to effectively evaluate whether larger public interest was being affected. The Court noted that the interest of Respondent No. 1 was purely private and monetary in nature.

The Court observed that the High Court erred in holding that there were no technical difficulties during the auction process. The Court noted that the decision to resume the auction was plausible and aimed at discovering a better price. The Court also held that the condonation of delay by BCCL in the submission of guarantees by Respondent No. 6 was permissible.

The Court emphasized that judicial review in tender matters is limited to the decision-making process and not the decision itself. The Court reiterated that not every contractual dispute involving a state entity warrants intervention by writ courts.

The Court quoted from the judgment:

• “It is settled that constitutional courts are concerned only with lawfulness of a decision, and not its soundness.”
• “Courts ought not to sit in appeal over decisions of executive authorities or instrumentalities.”
• “Plausible decisions need not be overturned, and latitude ought to be granted to the State in exercise of executive power so that the constitutional separation of powers is not encroached upon.”

Key Takeaways

• Judicial review in tender matters is limited to the decision-making process and not the decision itself.
• Writ courts should not intervene in contractual disputes involving state entities unless there is a clear violation of public law.
• Courts should give deference to the interpretation of contractual terms by the authority that drafted them unless it is patently perverse or mala fide.
• The State is allowed to take decisions that are plausible, even if they are not the most ideal.
• A bidder’s participation in a resumed tender process without protest may preclude them from challenging the process later.
• Public interest must be a significant factor for courts to intervene in tender disputes.
• Courts should not interfere in tender matters for the sole purpose of obtaining a better price.