In a landmark judgment, the Supreme Court of India emphasized that the highest bidder in a tender process does not acquire a vested right to have the contract concluded in their favor unless there is a concluded contract. The case involved the Indore Vikas Praadhikaran (IDA) and Shri Humad Jain Samaj Trust, with the verdict delivered by a bench comprising Justice Bela M. Trivedi and Justice Satish Chandra Sharma in Civil Appeal No. [9940 of 2022].
Background of the Case
The dispute arose from a tender floated by the IDA on July 17, 2020, for leasing a plot of land in Indore. Shri Humad Jain Samaj Trust emerged as the highest bidder, offering ₹25,671.90 per square meter against a base price of ₹21,120 per square meter. However, during the tender evaluation, IDA discovered an outstanding property tax liability of ₹1.25 crore on the land, which had not been factored into the base price. Consequently, IDA canceled the bids and decided to issue a fresh tender with a revised base price of ₹26,000 per square meter.
The Trust, aggrieved by the rejection, challenged the decision before the Madhya Pradesh High Court. While the Single Judge upheld the IDA’s decision, the Division Bench overturned it, directing the IDA to allot the land to the Trust if it agreed to pay ₹26,000 per square meter.
Key Legal Issues
1. Vested Rights of the Highest Bidder: Whether the highest bidder acquires a right to claim allotment in the absence of a concluded contract.
2. Judicial Review of Administrative Decisions: The scope of judicial intervention in administrative decisions concerning tenders.
3. Cancellation of Tenders for Public Revenue: The legality of canceling tenders to generate higher revenue.
Supreme Court’s Observations and Decision
The apex court allowed the IDA’s appeal, holding that the highest bid does not confer any vested rights on the bidder until the bid is accepted and a letter of allotment is issued. The court highlighted the following:
1. Judicial Restraint in Administrative Actions: Quoting the landmark Tata Cellular v. Union of India case, the court reiterated, “Judicial review is concerned not with the decision but with the decision-making process.”
2. Freedom of Administrative Bodies: The court underscored that authorities have the discretion to accept or reject bids to protect public revenue. It stated, “The right to refuse the highest bid is inherent and cannot be construed as arbitrary unless shown to be malafide.”
3. Flawed Base Price Justification: The decision to reject the bids and issue a fresh tender was justified as the earlier base price did not account for substantial property tax liabilities.
4. No Concluded Contract: The absence of a letter of allotment meant there was no concluded contract, aligning with precedents like Haryana Urban Development Authority v. Orchid Infrastructure.
Key Quote from the Judgment
“The bidder has no right in the matter of bid except fair treatment… The terms of the tender empower the authority to accept or reject any or all bids, which was exercised in this case for valid and cogent reasons.”
The court directed IDA to issue a fresh Notice Inviting Tender (NIT) to ensure transparency and maximize revenue. It clarified that the Trust is free to participate in the fresh tender process.
Counsel Representation
– Appellants (IDA): Senior Advocate Mr. Balbir Singh
– Respondents (Shri Humad Jain Samaj Trust): Advocate on Record for the Trust.
