Home > Recent Judgements > The Highest Bidder In The Tender Process Is Not Entitled To A Contract: Supreme Court
Nov 29, 2024
BACKGROUND
In the case between Indore Vikas Praadhikaran (IDA) & Anr. Vs Shri Humud Jain Samaj Trust & Anr., the case revolves around a tender notice that was issued by the Indore Development Authority(“IDA”) on July 17, 2020 for lease of land at the rate of ₹21,120 per square meter. The Respondent No.1 however submitted the highest bid of ₹25,671.90 per square meter. Nevertheless, corporations discontinued the tender due to unpaid property taxes totalling ₹1.25 crores on the land in question where another tender invite was issued at the scratched reserve price of ₹26000 per square meter. Instead, Respondent No.1 was seeking the court’s review of the termination order. It is true that the Division Bench of the High Court ordered the IDA to award the work to Respondent No1 as the Single Bench dismissed the petition. The IDA decided to appeal to the Supreme Court. In the end the Supreme Court reversed the order of the Division Bench and ruled that the highest bidder is not entitled to get the contract by right if there is no letter of allotment or concluded contract.
ISSUES
- Whether the highest bidder in a Notice Inviting Tender (“NIT”) process has a vested right to have the contract awarded in their favour?
- Whether the absence of a letter of allotment in favour of the highest bidder constitutes a lack of a concluded contract, thereby invalidating claims for relief?
- Whether the High Court’s Division Bench erred in interfering with the tendering process by directing the contract to be awarded to the highest bidder and modifying the base price?
- Whether the rejection of the highest bid by the IDA was done in a fair and lawful manner, in compliance with the terms and conditions of the NIT?
JUDGEMENT
The Supreme Court quashed the order given by a division bench of the High Court which directed the IDA to grant the contract to Respondent No. 1 solely on the grounds that it had the highest bid in the tendering process. The Court pointed out that the putting in the highest bid in tendering process does not guarantee a bidder a right to the award of contract especially in circumstances when no allotment letter or a bid has been accepted. The court supported the decision of the IDA to regard the first tender as cancelled because of the emergence of a property tax liability which was not previously accountable and to call for a new tender to obtain better revenue because the decision had no bad faith in it. The judgment reinforced the principle that permissive authorities of tendering may extend or reject the bids made by tenderers if there are sufficient reasonable grounds in the interest of the public to do so and decided that the High Court was wrong to interfere with this administrative decision.
OBSERVATION
The Supreme Court noted that the highest bidder in a NIT does not have an automatic right to an award since no contract is said to be completed without the letter of allotment. It also supported the prerogative to the tendering authority to cancel or reject the bids on adequate grounds, focusing that the High Court was wrong to omitting the bidding process by dealing with the starting price or changing the respondent’s offer. The Court reasoned that in the absence of mala fide intent, an allotment letter or contract cannot be a condition to restraining authority from dismissing the highest tenderer.
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