SUPREME COURT SETS ASIDE ARBITRARY TENDER REJECTION IN THE MATTER OF: BANSHIDHAR CONSTRUCTION PVT. LTD. VS. BHARAT COKING COAL LIMITED & OTHERS [2024 INSC 757]

Introduction:

The Supreme Court of India, comprising a bench of Justice Bela M. Trivedi and Justice Satish Chandra Sharma, delivered a significant judgment on 04.10.2024, in the case Banshidhar Construction Pvt. Ltd. vs. Bharat Coking Coal Limited & Others. This judgement reinforces the importance of fairness and transparency in government contracts.

Facts of the Case:

1) Bharat Coking Coal Limited (BCCL), responsible for coal mining operations in India, issued a Notice Inviting Tender (NIT) on 16.08.2023, for the rehabilitation, operation, and excavation of coal from the Amalgamated East Bhuggatdih Simlabahal Coal Mine. This project, with a 25-year duration on a revenue-sharing basis, was part of BCCL’s Bastacolla Area operations. The NIT specified several mandatory requirements under Clause 10, which outlined the eligibility and qualification criteria, including submission of critical documents such as Power of Attorney (PoA) and audited financial statements.

2) Banshidhar Construction Pvt. Ltd. (hereinafter referred to as the appellant) participated in the tender by submitting its technical bid on 29.11.2023, before the deadline of 01.12.2023. The company had duly executed a Power of Attorney (PoA) on November 7, 2023, authorizing one of its directors, Ms. Lalti Devi, to represent the company in the tender process. This PoA was notarized on 14.11.2023, and submitted along with other bid documents, including those related to financial capacity and legal status.

3) On 04.12.2023, BCCL opened the technical bids. The appellant’s technical bid was disqualified on 06.04. 2024, for alleged non-compliance with Clause 10 of the NIT, specifically concerning the notarization of the PoA after the signing of bid documents. Meanwhile, Respondent No. 8, another bidder, was allowed to submit its incomplete audited financial statements after the bid opening, despite this being a mandatory requirement under Clause 10. Consequently, Respondent No. 8 was declared the successful bidder on 07.04.2024, after the financial bids were opened.

Proceedings at the Jharkhand High Court:

Aggrieved by BCCL’s decision, the appellant filed a writ petition before the High Court of Jharkhand at Ranchi, challenging the rejection of its technical bid and the acceptance of Respondent No. 8’s bid. The High Court, however, dismissed the petition, upholding BCCL’s decision to reject the appellant’s bid while accepting Respondent No. 8’s bid despite non-compliance with the NIT. The High Court held that BCCL had acted within its discretion in the bidding process.

The appellant challenged this decision in the High Court of Jharkhand, but their petition was dismissed, prompting the present appeal before the Supreme Court.

Issues Raised in Supreme Court:

1) Whether BCCL’s rejection of the appellant’s bid for a technicality related to notarization was justified, while accepting Respondent No. 8’s bid, which had failed to comply with the more substantial requirement of submitting audited financial reports.

2) Whether the actions of BCCL in allowing Respondent No. 8 to submit documents post-bid opening constituted arbitrary and discriminatory treatment, violating the principles of fairness and transparency.

3) Whether BCCL’s decision-making process in awarding the contract to Respondent No. 8 was legally sustainable under the principles of judicial review and government contracts.

Appellant’s Arguements (Banshidhar Construction Pvt. Ltd. :

The counsel for the Appellant argued that BCCL’s rejection of the appellant’s bid was arbitrary and based on an inconsequential technicality. The Power of Attorney (PoA) in favor of Ms. Lalti Devi was executed on 7.11.2023, and notarized on 14.11.2023, well before the deadline for bid submission on 01.12.2023. The notarization date should not have impacted the validity of the PoA, as it was duly submitted before the bid submission deadline.

The counsel for the Appellant contended that while the appellant’s bid was rejected for a minor procedural issue, Respondent No. 8’s bid was accepted despite failing to meet the mandatory requirement of submitting audited financial statements. These documents were provided only after BCCL sought clarification on 09.04.2024, which was well after the technical bids had been opened. This unequal treatment reflected bias and favouritism, violating the principles of fairness in tender processes.

The appellant further argued that its bid, amounting to approximately Rs. 700 crores, was more competitive and favorable to BCCL. The acceptance of Respondent No. 8’s bid, which was ineligible and non-compliant, resulted in a significant financial loss to the public exchequer.

Respondents’ Arguments:

Solicitor General Tushar Mehta, representing BCCL, argued that the rejection of the appellant’s bid was in line with Clause 10 of the NIT. The bid documents were signed by the appellant’s representative on 13.11.2023, but the PoA was notarized on 14.11.2023. BCCL maintained that at the time of signing, the appellant’s representative lacked the requisite authority, rendering the bid non-compliant with the tender conditions.

BCCL justified its acceptance of Respondent No. 8’s bid, explaining that the Tender Committee had sought shortfall documents (audited financial reports) after the bid opening. This approach, BCCL claimed, was consistent with its treatment of other bidders and did not involve the replacement of bid documents.

The respondents urged the Court to exercise judicial restraint in reviewing administrative decisions related to tendering processes. They argued that infrastructure projects of national importance, like the one in question, require minimal judicial interference, especially when there is no evidence of mala fide intent or gross arbitrariness in the decision-making process.

Supreme Court’s Analysis:

The Court meticulously examined Clause 10 of the NIT, which laid down the mandatory submission of audited financial documents and other qualification criteria. It observed that Respondent No. 8 had failed to submit the audited financial reports required under the NIT before the bid opening. The subsequent submission of these documents upon BCCL’s request was a clear violation of the tender’s mandatory provisions. On the other hand, the appellant had duly submitted all documents, including the notarized PoA, before the deadline.

The Court found BCCL’s reason for rejecting the appellant’s bid baseless and arbitrary. It ruled that the notarization of the PoA after the signing of bid documents did not affect the validity of the appellant’s bid submission. The appellant had fulfilled all the formalities, and BCCL’s rigid interpretation of the notarization date was unwarranted and discriminatory.

The Supreme Court strongly condemned BCCL’s acceptance of Respondent No. 8’s bid despite clear non-compliance with the NIT. Allowing Respondent No. 8 to submit critical financial documents after the technical bid opening was inconsistent with the principle of equal treatment of all bidders. This selective leniency towards Respondent No. 8’s bid demonstrated favoritism and violated Article 14 of the Constitution, which guarantees equality before the law.

The Court reiterated the principles governing judicial review in government contracts, emphasizing that while courts should not act as appellate bodies in contract matters, they are duty-bound to examine the fairness and legality of the decision-making process. Any form of arbitrariness, discrimination, or mala fide conduct in awarding contracts warrants judicial intervention to protect public interest.

Judgment:

The Supreme Court set aside the decisions of BCCL dated 06.05.2024, rejecting the appellant’s bid and declaring Respondent No. 8 as the successful bidder. The Court directed BCCL to cancel all actions undertaken pursuant to this decision, including the Coal Mining Agreement entered into with Respondent No. 8 on 27.06.2024. BCCL was further instructed to initiate a fresh tender process in accordance with the law and principles of fairness.

 

Ashita

Associate

The Indian Lawyer & Allied Services.