Case: THE BHARAT COKING COAL LTD. &amp; ORS Vs. AMR DEV PRABHA &amp; ORS

3. BCCL, a subsidiary of Coal India Ltd, operates coking coal mines in India and as part of its operations regularly outsources many mining and processing functions to external entities. Such allocation of tasks is done through competitive bidding processes, with Respondent No. 4 [M/s C1 India Pvt Ltd (hereinafter C1 India) – an online procurement facilitator] being appointed as the service provider for e-tendering of its contracts4. A Notice Inviting Tender ( NIT) was issued by the appellant on 09.03.2015 for purposes of Hiring of HEMM for removal of OB, extraction and transportation of coal with fire fighting from XIV, XII, XI/XII, XII, XI, IX/X, V/VI/VII/VIII, IV/VIII, IV(T), IV(B), III, II I(T) and I(B) seams at Patch-DE (Mega Project) of Dhansar-Ena colliery of Kusunda Area along with crushing of coal by portable crusher (NIT No 312). An initial estimate of Rs 1694.84 crores was prepared by the appellant, with the aim of contracting the firm which offered the lowest cost estimate for fulfilment of the tender work5. The bidding was slated to be conducted on the online e-reverse auction platform of C1-India on 04.05.2015 and 05.05.2015, with C1- India having near complete supervision and autonomy over the auction process. In turn, C1-India had hosted its server with Tata Communications Ltd ( TCL) which was also providing internet connectivity through a leased line to C1-India. As per terms of the NIT, the auction would close at 6:00PM on 05.05.2015. However, the auction would automatically terminate in case any particular bid went unresponded for a period of 30 minutes. In case of any technical faults at the service providers end, the auction period was to be paused and extended by the period of the fault; however, bidders were to be responsible for connectivity problems at their end6. Although the auction proceeded smoothly on the first day, on 05.05.2015 at around 12:55PM, C1-India is stated to have received certain telephone calls from various participants claiming that there were connectivity problems leading to failure in submitting bids. An email was thus sent by C1-India to TCL at 12:59PM stating my link is down. In response, TCL informed C1-India through an email at 2:11PM that bandwidth issues had indeed been experienced owing to a dual fiber cut in their intra-city network as well as a fault in their patch cord. In the interregnum, the last bid of Rs 2345 Crores made by M/s AMR-Dev Prabha (Respondent No. 1) at 12:33PM went unresponded for thirty minutes, and the auction was automatically closed at 1:03PM7. Taking conscious notice of these technical issues communicated by TCL and estimating that a lower price could be discovered had such fault not arisen, C1-India (allegedly with the concurrence of BCCL officials) took a decision to restart the auction process at 2:30PM. Such resumption, with the possibility of extension of time, was communicated to all bidders telephonically, as well as through emails sent between 2:17PM and 2:36PM. Accordingly, various bids were received by many participants, including numerous bids from the now aggrieved Respondent No. 1 and the ultimately successful Respondent No. 6. The auction proceeded to the extended time of 1 hour and 27 minutes (calculated as being the time of interruption between the erroneous closure at 1:03PM and subsequent resumption at 2:30PM), and Respondent No. 6 was declared successful with a bid of Rs 2043 crores at 7:27PM8. This was communicated to BCCL, which then after assessing eligibility of M/s RK Transport (Respondent No. 6, hereinafter RK Transport), issued Letter of Acceptance ( LOA) on 30.05.2015. As per earlier agreed contractual terms, a Performance Bank Guarantee had to be submitted within 28 days of receipt of LOA. Respondent No. 6 was unable to do so, and it requested BCCL to provide an additional two months for compliance. The appellant returned the Earnest Money Deposit ( EMD) to all unsuccessful bidders, including Respondent No. 1, through speed post on 18.06.2015. Finally, the requisite guarantees were submitted after a delay of 49 days, which was condoned by the appellant and job was started on the. Three months after closure of the auction, Respondent No. 1 preferred a Writ Petition before the High Court of Jharkhand at Ranchi on 10.08.2015, praying for a declaration that it emerged as the successful L-1 bidder at 1:03PM on 05.05.2015, and for quashing of the LOA issued by the appellant to Respondent No. 6 for being arbitrary. Simultaneously, it was also prayed that directions be issued to BCCL for awarding the contract to them and for conducting enquiry into the entire matter10. During the pendency of the Writ Petition, Respondent No. 1 invoked Clause 20 of the NIT which provided for an integrity pact under which two Independent External Monitors ( IEM) had been appointed. A report was received from one of these two IEMs on 23.09.2016 which held that there had been no technical problem and that resumption of the auction process at 2:30PM was unjustified. It is relevant to mention that this report was submitted by the first IEM, acting unilaterally and without according hearing to C1-India and RK Transport11. Simultaneously, the appellant approached the second IEM who post receiving response from all parties presented a divergent report with the observation that there was no possibility of collusion and noting that the interruption in bandwidth had been established and thus the subsequent resumption by C1-India was in consonance with specified procedure12. In light of such conflict, BCCL first approached the Standardization, Testing & Quality Certification (STQC) Directorate seeking an audit, and later upon them expressing inability to do so owing to the technical nature of the dispute; the appellant approached the Director General of CERT-In (an independent body under the Ministry of Communications & IT of the Government of India). An Incident Analysis Report was consequently submitted by the CERT-In to BCCL on 30.12.2015. This report broadly concurred with the observations of the second IEM and found that the process was not afflicted by collusion, and confirmed the existence of connectivity problems which necessitated resumption of the auction process13. On 16.08.2017, the learned Single Judge dismissed the first respondents writ, holding that a level playing field had been provided by BCCL to all bidders; there indeed was a connectivity issue and the subsequent resumption of auction was as per terms of the NIT; award of contract to RK Transport was not arbitrary for not only was it L-1 but also had offered a bid much better than that of AMR-Dev Prabha. Further, the first respondent was held to have acquiesced to any possible irregularity in the process by participating in the resumed auction, and BCCLs condonation of delay in submission of guarantee by RK Transport was held to be permissible and in public interest14. This was challenged by Respondent No. 1, before a Division Bench of the High Court. During the pendency of the letters patent appeal, on 18.09.2017, counsel for AMR-Dev Prabha offered a lower bid of Rs 1950 Crores for the job, which they portrayed as being far better than their earlier bid of Rs 2345 Crores which they had made at 12:33PM on 05.05.2015. This, however, was refused by the appellant and instead a work order was issued to Respondent No. 6 on 23.11.2017, who shortly afterwards commenced work15. The Division Bench allowed the appeal vide impugned judgment dated 12.04.2018 and quashed the LOA issued by BCCL in favour of RK Transport and held that all consequent work was invalid. The Division Bench of the High Court further directed reconduction of the auction and ordered a vigilance enquiry into the matter. Taking cognizance of the ratio of RD Shetty v. International Airport Authority of India (1979) 3 SCC 489     and Tata Cellular v. Union of India (1994) 6 SCC 651 wherein this Court had elucidated the breadth and permissibility of judicial review in tender matters, the High Court opined that it was concerned not with the outcome but only the manner in which the decision to award work-contract was arrived at16. Analysing the terms of the NIT, the High Court held that it was the bidders responsibility to comply with system requirements, with BCCL not being liable for any technical difficulties or connectivity failures. Tender could be paused only in case of technological/system failure at the service providers end and once concluded, could only be revoked in limited circumstances. Not only were the complaints non- actionable for C1-India was continuously connected to TCL which meant there were no problems at the service providers end, but even otherwise C1-India failed to pause the auction process during the crucial period which it ought to have as per the terms of the NIT17. Noting the absence of any call records or other proof of technical complaints by the bidders, the delay in communication of resumption of auction process (observing how emails were sent till 2:37PM whereas auction resumed at 2:30PM), failure to revoke/cancel declaration of AMR-Dev Prabha as L1 bidder and erroneous calculation of the extended time (7:27PM instead of 7:35PM), the Court held that BCCL and C1-India failed to maintain the sanctity of the auction process and committed serious illegality which raised doubts on procedural propriety and indicated arbitrariness in the decision making process. Such deviations from terms of the NIT were held to not only be mere aberrations, but indicative of a complete lack of fair play which affected integrity of the entire process, rendering it contrary to public interest and consequently illegal.

Reasoning:
36. In the present case, although it is clear that the Division Bench of the High Court was cognizant of these principles surrounding scope of judicial review, however, it failed to effectively evaluate whether larger public interest was being affected. On the contrary, we feel that the interest of Respondent No. 1 was purely private and monetary in nature37. First, AMR-Dev Prabhas initial prayer sought to nullify the award of contract, which if granted, would have increased the sums payable by the State instrumentality from Rs 2043 crores to Rs 2345 crores. Second, the conduct of Respondent No. 1 over the course of the present proceedings, as highlighted by the appellants, further bolsters the lack of public interest. Whereas initially the first respondent was seeking quashing of the LOA issued to Respondent No. 6 owing to arbitrariness on part of BCCL and on the ground that sanctity of the auction process had been violated; later, before the Division Bench, Respondent No. 1 sought to make a new offer of Rs 1950 Crores. This shows how AMR-Dev Prabhas priority was only to secure the contract and not to uphold the law or protect larger public interest38. Even otherwise, granting such a prayer means that Respondent No. 1 would have gotten a special opportunity of negotiation, to the detriment of all other participants, which would probably be a more egregious violation of equality envisaged under Article 14 than the procedural adherence which they were initially seeking to protect39. Additionally, we are not impressed with the first respondents argument that there is a certain public interest at stake whenever the public exchequer is involved. There are various factors in play, in addition to mere bidding price, like technical ability and timely completion which must be kept in mind. And adopting such interpretation would permanently blur the line between contractual disputes involving the State and those affecting public law40. Further, the first respondent has failed to demonstrate which public law right it was claiming. The main thrust of AMR-Dev Prabhas case has been on the fact that at 1:03PM on 05.05.2015 it was declared the lowest bidder (or L-1). However, being declared the L-1 bidder does not bestow upon any entity a public law entitlement to award of the contract,However, being declared the L-1 bidder does not bestow upon any entity a public law entitlement to award of the contract,as noted in Maa Binda Express Carrier v. North-East Frontier Railway (2014) 3 SCC 760  :8. The scope of judicial review in matters relating to award of contracts by the State and its instrumentalities is settled by a long line of decisions of this Court. While these decisions clearly recognise that power exercised by the Government and its instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. The bidders participating in the tender process cannot, therefore, insist that their tenders should be accepted simply because a given tender is the highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behalf of the Government. All that participating bidders are entitled to is a fair, equal and non-discriminatory treatment in the matter of evaluation of their tenders. It is also fairly well settled that award of a contract is essentially a commercial transaction which must be determined on the basis of consideration that are relevant to such commercial decision. This implies that terms subject to which tenders are invited are not open to the judicial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or class of tenderers. So also, the authority inviting tenders can enter into negotiations or grant relaxation for bona fide and cogent reasons provided such relaxation is permissible under the terms governing the tender process41. Instead, precedent laid down by this Court in Master Marine Services (P) Ltd v. Metcalfe & Hodg Kinson (P) Ltd, (2005) 6 SCC 138 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 out42. Further, regular recourse was made over the course of proceedings by learned senior counsel for the first respondent on terms of the NIT. Findings in the impugned order too were based upon disputed interpretation of such contractual terms. Thus, it is clear that there was neither any public law right of the first respondent which was affected, nor was there any public interest sought to be furthered(II) Infirmities in the auction process43. On merits also, we do not feel that the impugned order is correct in its conclusion that there were substantial procedural lapses on part of BCCL and C1-India which amount to arbitrariness, and ought to be remedied by way of judicial review44. Instead, having the benefit of a detailed inquiry report of the Central Vigilance Commission ( CVC), we are of the firm opinion thatboth the appellant and Respondent No. 4 acted in a bona fide manner and as per their abilities. Even if it is true that BCCL could have assumed more responsibility and C1-India could have exercised a more proactive role in checking for internet issues, yet the possibility of improvement cant be a ground for striking down an authoritys action. Additionally, no allegation of the decisions being accentuated by illegal gratification, or otherwise being fraudulent or contrary to a statute have either been clearly made or established46. We do not deem it necessary to venture into the existence of technical problems of limited bandwidth, for the same is a question of fact. However, given the concurrent finding of the second IEM, CERT- In, TCL, as well as the CVC, we feel that the Division Bench erred in holding that there were no technical difficulties. Furthermore, such a conclusion is at odds with subsequent occurrences. A finding that there were no internet problems implies that no other bidder deemed it appropriate to counter the bid of Rs 2345 crores offered by Respondent No. 1 at 12:33PM and that it was the competitively determined lowest price. However, it is obvious that minutes into the resumption of the auction process bids started coming in and more than a dozen bids were received subsequently, with the last bid of Rs 2043 crores having been made mere seconds before closure of the auction at 7:27PM47. With regard to other allegations concerning condonation of Respondent No. 6s delay in producing guarantees, we would only reiterate that there is no prohibition in law against public authorities granting relaxations for bona fide reasons48. Even if there had been a minor deviation from explicit terms of the NIT, it would not be sufficient by itself in the absence of mala fide for courts to set aside the tender at the behest of an unsuccessful bidder. (Central Coalfields Ltd v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622  ) This is because notice must be kept of the impact of overturning an executive decision and its impact on the larger public interest in the form of cost overruns or delays49. There is also no need to venture into questions concerning quantum of extension of time. It is clear that the same message was communicated by CI–India to all, stating that the auction process would be extended by a period equivalent to the time between closure of auction at 1:03PM and resumption at 2:30PM. Not only did such uniform communication put all bidders on an equal footing, but there was no possibility of any confusion given the clear wordings of the email. When it is not the case of Respondent No. 1 that they thought that auction would close at 7:35PM and hence they were taken by surprise at the early closure, nor did they in fact highlight or object to such interpretation over the course of the resumed auction process, the question is moot and a finding ought not to be given on it50. Additionally, we also do not see merit in the justification for delay in filing writ proffered by the first respondent. It is claimed that the cause of action arose when Respondent No. 6 failed to submit guarantees within a period of 28 days. However, we do not see how that would allow AMR-Dev Prabha to challenge the entire process of auction, or overcome the settled legal principle of privity of contract between Respondent No. 6 and the appellant(III) Deference to authoritys interpretation51. Lastly, we deem it necessary to deal with another fundamental problem. It is obvious that Respondent No. 1 seeks to only enforce terms of the NIT. Inherent in such exercise is interpretation of contractual terms. However, it must be noted that judicial interpretation of contracts in the sphere of commerce stands on a distinct footing than while interpreting statutes52. In the present facts, it is clear that BCCL and C1-India have laid recourse to Clauses of the NIT, whether it be to justify condonation of delay of Respondent No. 6 in submitting performance bank guarantees or their decision to resume auction on grounds of technical failure. BCCL having authored these documents, is better placed to appreciate their requirements and interpret them. (Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation Ltd, (2016) 16 SCC 818     at ¶ 15.)53. The High Court ought to have deferred to this understanding, unless it was patently perverse or mala fide. Given how BCCLs interpretation of these clauses was plausible and not absurd, solely differences in opinion of contractual interpretation ought not to have been grounds for the High Court to come to a finding that the appellant committed illegality32. In cases where a constitutional right is infringed, writs would ordinarily be the appropriate remedy. In tender matters, such can be either when a party seeks to hold the State to its duty of treating all persons equally or prohibit it from acting arbitrarily; or when executive actions or legislative instruments are challenged for being in contravention to the freedom of carrying on trade and commerce. However, writs are impermissible when the allegation is solely with regard to violation of a contractual right or duty. Hence, the persons seeking writ relief must also actively satisfy the Court that the right it is seeking is one in public law, and not merely contractual. In doing so, a balance is maintained between the need for commercial freedom and the very real possibility of collusion, illegality and squandering of public resources.