In a significant ruling, the Supreme Court of India provided a detailed explanation of the scope of judicial review in government contracts. The judgment came in Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Limited (Civil Appeal No. 11005 of 2024), where the apex court set aside a tender award made by Bharat Coking Coal Limited (BCCL). The bench, comprising Justice Bela M. Trivedi and Justice Satish Chandra Sharma, emphasized that while courts should exercise restraint in interfering with government contracts, any decision-making process marred by arbitrariness, bias, or unreasonableness is subject to judicial review.
Background of the Case:
The appellant, Banshidhar Construction Pvt. Ltd., challenged the rejection of its technical bid by BCCL, a subsidiary of Coal India Limited, for a tender related to the reopening and operation of the Amalgamated East Bhuggatdih Simlabahal Coal Mine. The technical bid of Banshidhar Construction was rejected on the grounds of non-compliance with Clause 10 of the Notice Inviting Tender (NIT) regarding submission of a Power of Attorney for signing the bid. However, the appellant argued that the rejection was arbitrary and discriminatory, especially since the successful bidder, Respondent No. 8, had failed to meet mandatory requirements as well.
Legal Issues Involved:
The case primarily raised questions about the arbitrariness and fairness of the bidding process. Two key issues were addressed by the Court:
1. Arbitrary Rejection of Technical Bid: Whether BCCL was justified in rejecting the appellant’s technical bid for a minor alleged discrepancy related to the notarization of the Power of Attorney, even though the bid was submitted within the stipulated time frame.
2. Favouritism in Awarding the Contract: Whether BCCL unlawfully allowed the successful bidder, Respondent No. 8, to submit essential documents after the deadline, in clear violation of the NIT requirements.
Observations of the Court:
Justice Bela M. Trivedi, writing for the bench, underscored that while courts do not sit as appellate bodies in matters related to government contracts, they are empowered to scrutinize the decision-making process to ensure it is free from arbitrariness, bias, or illegality. Quoting from the judgment, the court stated:
“The Government bodies being public authorities are expected to uphold fairness, equality, and public interest even while dealing with contractual matters. Right to equality under Article 14 abhors arbitrariness.”
The court also emphasized the importance of transparency in the bidding process, noting that government contracts, particularly those involving large-scale infrastructure projects, must adhere to the principles of fairness and equality. The bench referred to previous decisions, such as Sterling Computers Ltd. v. M & N Publications Ltd. and Tata Cellular v. Union of India, to highlight the limits of judicial intervention. It reiterated that judicial review is primarily concerned with examining whether the decision-making process was rational and not arbitrary.
The Court’s Decision:
The Supreme Court found that BCCL’s rejection of Banshidhar Construction’s bid was unjustified. The court held that the Power of Attorney submitted by the appellant was duly notarized and compliant with the requirements of the NIT. In contrast, the successful bidder, Respondent No. 8, had failed to submit mandatory financial documents on time and was allowed to rectify this after the technical bid evaluation. The court ruled this as a clear case of favoritism and arbitrariness, stating:
“The impugned decision of BCCL in rejecting the appellant’s bid and accepting Respondent No. 8’s bid, despite non-compliance with mandatory conditions, was grossly arbitrary, illegal, discriminatory, and violative of Article 14 of the Constitution of India.”
The court set aside the tender award to Respondent No. 8 and annulled the subsequent agreement between BCCL and the successful bidder. It ordered that BCCL could initiate a fresh tender process, ensuring compliance with the principles of fairness and transparency.
Case Details:
– Appellant: Banshidhar Construction Pvt. Ltd.
– Respondents: Bharat Coking Coal Limited & Others (Respondent No. 8: M/s. Simlabahal Coal Mines Pvt. Ltd.)
– Bench: Justice Bela M. Trivedi and Justice Satish Chandra Sharma
– Senior Counsel for Appellant: Mr. Ravi Shankar Prasad
– Senior Counsel for Respondents: Mr. Tushar Mehta (Solicitor General), Mr. Anupam Lal Das, Mr. Vikramjit Banerjee
– Case Number: Civil Appeal No. 11005 of 2024
