The Supreme Court expounded that,“Ordinarily, a writ court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer unless something very gross or palpable is pointed out”.
Apex Court Bench comprising of CJI DY Chandrachud, Justice P.S Narsimha, and Justice J.B Pardiwala stated that “The court ordinarily should not interfere in matters relating to tender or contract. To set at naught the entire tender process at the stage when the contract is well underway would not be in the public interest. Initiating a fresh tender process at this stage may consume a lot of time and also loss to the public exchequer to the tune of crores of rupees. The financial burden/implications on the public exchequer that the State may have to meet with if the Court directs issue of a fresh tender notice should be one of the guiding factors that the Court should keep in mind”.
Brief Facts of the Case:
A set of Civil Appeals were filed before the Supreme Court challenging the impugned order issued by the High Court of Bombay. The first appeal was filed by TATA Motors Limited, the original petitioner in the writ petition before the High Court. The second appeal was filed by EVEY Trans Pvt. Ltd., the original second respondent, before the High Court. The third appeal was filed by the Brihan Mumbai Electric Supply & Transport Undertaking (hereinafter referred to as “BEST”), the original first respondent before the High Court. BEST is a statutory corporation operating under the provisions of the Mumbai Municipal Corporation Act of 1888.
Brief Background of the Case:
BEST issued a tender with the objective of procuring 1400 Single Decker AC Electric Buses, along with their operation and maintenance, for a duration of 12 years. The tender issued by the BEST (hereinafter referred to as “the Tender”) also included civil infrastructure development at the BEST depots.
The Tender document outlined specific technical specifications under Clause 3.5(e) and Clause 12 of Section 2 of Schedule IX (Technical Specifications). These specifications required bidders to provide Single Decker Buses capable of running 200 Km without interruption in real-world conditions, with not more than 80% battery consumption. TATA Motors and EVEY were among the eight market players participating in the Tender process.
During a pre-bid meeting held TATA Motors submitted their pre-bid points, requesting BEST to consider their bid based on certain conditions. However, BEST published the minutes of the meeting rejecting the modifications requested by TATA Motors. BEST specifically included references to "actual conditions" in the Tender specifications and excluded any mention of "AIS 040" or "Standard Conditions." AIS 040 certification was based on standard testing conditions, whereas the Tender required compliance with actual road conditions, accounting for factors such as passenger load and traffic. BEST issued Corrigendum No. 8, specifying the deadline for bid submission and the date for opening the technical bids.
TATA Motors submitted their bid guaranteeing an operating range of 200 Km with 80% State of Charge (hereinafter referred to as “SoC”) based on standard test conditions as per AIS 040. This deviated from the Tender specifications. EVEY submitted their bid claiming full compliance with the Tender conditions, including the minimum operating range of 200 Km in a single charge. EVEY pointed out that TATA Motors was the only bidder referring to "standard test conditions" instead of "actual road conditions" while complying with the minimum operating range requirement. The Tender bids were opened, and BEST deemed TATA Motors, along with four other bidders, as "technically non-responsive" due to technical deviations in their Annexure F and Annexure Y. EVEY's bid was considered "technically responsive."
During the pendency of TATA Motors' writ petition challenging the disqualification, BEST awarded the Tender to EVEY. An agreement for the operation of Stage Carriage Services was entered into between EVEY and BEST. EVEY provided the required Performance Bank Guarantee and a subsidy bank guarantee. BEST released the subsidy amount to EVEY's account. EVEY also supplied 8 buses to BEST.
Procedural History:
The High Court of Bombay, in its order, upheld the disqualification of TATA Motors for failing to comply with the technical requirements of the Tender. The High Court also discussed why EVEY's bid should have been rejected, noting that Annexure Y submitted with their technical bid should not be treated as an incidental document. The High Court concluded that the email, should not have been considered, and the technical bid evaluation lacked fairness.
All three parties—BEST, TATA Motors, and EVEY—are before the Court with their respective petitions. An interim stay was granted regarding the judgment as it relates to EVEY, and any supply of buses by EVEY would be subject to the outcome of the petitions without any future claims for equity.
Contentions of the EVEY:
EVEY argued that equitable relief can be granted to a bidder if they made a material mistake in their bid and promptly rectified it upon discovery. They contended that Clause 16 of Schedule I of the Tender did not apply to Annexure Y since it was to be submitted by the "Successful Bidder" after bid evaluation. Furthermore, they pointed out that in the original Annexure Y submitted, EVEY had mentioned that their offered buses would run the minimum distance without interruption. They addressed the allegations of favoritism made by TATA Motors, stating that EVEY was declared the winning bidder after opening the price bids, alongside two other technically qualified parties. They argued that once the High Court found TATA Motors to be technically non-compliant, it should not have entertained their challenge to the tendering process as the contract was already in progress.
Contentions of the TATA Motors:
TATA Motors argued that the contract awarded to EVEY by BEST is inherently illegal. They contended that by allowing bidders to correct errors at a later stage, there is a risk of unequal treatment among bidders. They further contended that BEST's actions could be considered arbitrary, discriminatory, and unfair and that TATA Motors has the right to challenge them. They argued that the High Court correctly observed that the battery range guarantee can only be given by the original equipment manufacturer (hereinafter referred to as “OEM”) from whom the bidder is purchasing the battery.
Therefore, it cannot be deemed incidental and was considered an important part of BEST's technical evaluation. They argued that the High Court's suggestion for a fresh tender is justified, particularly due to the arbitrary tender process and the delay in supplying buses as per the Tender timeline. They argued that the High Court made an error by upholding his client's disqualification solely based on the guarantee of the operating range in 'standard test conditions as per AIS 040'. They claimed that TATA Motors had complied with the essential conditions, and certain deviations under the Tender were permissible.
Contentions of the BEST:
BEST argued that Clause 5.1.1 (v), which included Annexure F, was a mandatory condition for qualifying as a bidder at the technical bidding stage. TATA Motors deviated from this mandatory requirement when filing Annexure F. They emphasized that if variations were found contradicting BEST's requirements, such bids would be considered non-responsive. They stated that TATA Motors, along with other bidders, including EVEY, adhered to this mandatory condition, while TATA Motors was declared a non-responsive bidder at the technical stage.
They further argued that Annexure Y, although required to be filled by the successful bidder, was neither a condition precedent for being a responsive bidder nor a mandatory condition for contract award. They contended that issuing a fresh tender notice would be against the public interest. The contract awarded to EVEY entailed BEST paying Rs. 46.81/KM. BEST examined the possibility of re-tendering and found that a similar tender issued by Convergency Energy Services Limited (hereinafter referred to as “CESL”), a government undertaking, resulted in a payment of Rs. 1,200 Crore more than the contract rate awarded by BEST. Therefore, opting for re-tendering would be commercially imprudent.
Observations of the Court:
The Supreme Court acknowledged its role as the guardian of fundamental rights and expounded that, “This Court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters.”
SC Bench further stated that, “This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution”.
Bench further stated that, “The courts must realize their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. The courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer”.
The Court expressed the view that the High Court should have been cautious in reversing BEST's decision to allow EVEY to submit a revised Annexure Y. The Court believed that BEST did not commit any error or show favouritism in permitting the revision due to a clerical error. The Court emphasized that interfering with the tender process at a later stage would not be in the public interest and could cause significant delays and financial losses to the public exchequer.
The Court highlighted that the award of a contract is a commercial transaction, and the state and public sector entities must be fair to all concerned. Judicial review should only be invoked in furtherance of public interest and not to protect private interests or decide contractual disputes.
The decision of the Court:
The Supreme Court quashed the impugned judgment of the High Court. The appeal of TATA Motors was dismissed, while the appeals filed by EVEY and BEST were partly allowed.
Case Title: Tata Motors Ltd. v The Brihan Mumbai Electric Supply & Transport Undertaking and Ors.
Case No.: Civil Appeal No. 3897 of 2023
Citation: 2023 Latest Caselaw 506 SC
Coram: Hon’ble CJI Mr. D.Y Chandrachud, Hon’ble Mr. Justice J.B Pardiwala and Hon’ble Mr. Justice P.S Narasimha
Advocates for Petitioner: Ms. Nandini Gore, Adv., Ms. Aditi Bhatt, Adv., Mr. Sarthak Gaur, Adv., Mr. Yash Dubey, Adv., Ms. Manvi Rastogi, Adv., M/s.Karanjawala & Co., AOR, Mr. Abhinav Mukerji, AOR, Mr. Akshay C. Shrivastava, Adv., Mrs. Bihu Sharma, Adv., Ms. Pratishtha Vij, Adv., Mr. Anjandas Gupta, Adv., Ms. Rimali Batra, Adv., Mr. Abhishek Lalwani, Adv. and M/s.D.S.K. Legal, AOR
Advocates for Respondent: Mr. Anjandas Gupta, Adv., Ms. Rimali Batra, Adv., Mr. Abhishek Lalwani, Adv., M/s.D.S.K. Legal, AOR, Ms. Nandini Gore, Adv., Ms. Aditi Bhatt, Adv., Mr. Sarthak Gaur, Adv., Mr. Yash Dubey, Adv., Ms. Manvi Rastogi, Adv., M/s. Karanjawala & Co., AOR, Mr. Abhinav Mukerji, AOR, Mr. Akshay C. Shrivastava, Adv., Mrs. Bihu Sharma, Adv., Ms. Pratishtha Vij, Adv., Mr. Anshul Rai, Adv. and Mr. Sameer Rohatgi, Adv.
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