Principles Of Natural Justice Stay At A Distance In Commercial Matters: SC Upholds Bombay HC's Order Disqualifying Tata Motors

The process was for an E-buses Tender for supplying 1,400 electric buses worth Rs. 2,450 crores. As per the Tender, the first and foremost requirement was the prescribed operating range of the single-decker buses which would operate for around and average of 200 Kms in a single charge in “actual conditions” with 80% SoC without any interruption.

“…The High Court has rightly observed in its impugned judgment that the bid of the TATA Motors failed to comply with the said clause. TATA Motors deviated from the material and the essential term of the Tender. It may not be out of place to state at this stage that it is only TATA Motors who deviated from the condition referred…”, a bench of CJI D.Y. Chandrachud, Justice P.S. Narasimha, Justice J.B. Pardiwala while ruling against TATA Motors, observed in the matter.

“However, we are of the view that the High Court having once declared TATA Motors as “non-responsive” and having stood disqualified from the Tender process should not have entered into the fray of investigating into the decision of BEST to declare EVEY as the eligible bidder. We are saying so because the High Court was not exercising its writ jurisdiction in public interest. The High Court looked into a petition filed by a party trying to assert its own rights”, the bench further noted in the judgment.

Senior Advocate Dr. Abhishek Manu Singhvi, appearing for TATA Motors at the outset, vehemently argued that the contract awarded by BEST to EVEY is per se illegal. He further contended that the actions of BEST could be termed as arbitrary, discriminatory, unfair, and that TATA Motors has locus to challenge the same as no legitimacy should be granted to tender processes tainted with malice. It was further stipulated that the High Court was justified to call for a fresh tender in the present matter, as it is warranted.

Senior Advocate Mukul Rohatgi, appearing for EVEY while placing strong reliance on the decision of the apex court in W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors., (2001) 2 SCC 451 submitted, “that the equitable relief can be granted to the bidder where it has made a material mistake of fact in the bid and upon discovery of that mistake he has acted promptly and rectified his mistake”. Furthermore, it was argued that the writ court should not interfere with such matters as the injunction or interference in the tender would lead to additional costs on the State and is against public interest.

Solicitor General Tushar Mehta, appearing for BEST, however, argued that TATA Motors deviated from the mandatory requirement while filing the said Annexure F. The noncompliant deviation was, “Shall meet the operating range requirement of 200 KMS @ 80% SOC in single charge as certified per AIS 040”.

Further submitted that none of the bidders including EVEY deviated from this mandatory condition. On the requirement of Annexure Y, he submitted that it was neither a condition precedent for being a responsive bidder nor a mandatory condition for awarding the contract.

The High Court in its order had upheld the disqualification of TATA Motors and rejected their claim from being considered as an eligible bidder as they failed to comply with the technical requirements of the Tender.

“…it is unambiguous that operating range provided in the tender document is that the electric vehicles manufacturers have to provide the vehicles which can run 200 kms in single charge for SD air conditioning buses in actual conditions for relevant GVW air conditioning. The prima donna requirement of the tender document it appears is that the electric vehicle offered should run 200 Kms in a single charge for Single Decker air conditioning bus in actual conditions with 80% SoC without any interruption… . Petitioner No.1 did not submit its bid for 200 Kms@ 80% SoC in single charge on actual condition but at standard test conditions as per AIS 040… The tender of the Petitioner certainly was not compliant with the said clause. The Petitioner has deviated from the material and the substantial term of the tender. The Petitioner, as such, is rightly disqualified for deviating from the material requirements stipulated in the tender”, the High Court in its order had observed.

However, the High Court even discussed why EVEY's bid should also have been rejected, and had further declared EVEY as an unsuccessful bidder.

“…We are aware that the principle of equity and natural justice stay at a distance and no judicial interference is warranted in case of an error in assessment. However, the same holds good, if the decision is bona fide. We are also aware that interference of the Court would lead to some delay. It would be seen that earlier also the tenders were issued. However, because of non-sanction of subsidy, the earlier tender process was scrapped and fresh tender process was issued. For accepting the bid of Respondent No.2, 90 days’ time is provided to it for getting the prototype vehicle. The said period is not over. It is not even one month. The Respondent No.2's tender is accepted. The Courts upon coming to the conclusion that the decision making process was not fair. The same lacked fair play in action and arbitrary, will have to step in”, the High Court bench had further added.

In the matter, the Apex Court while relying on Jagdish Mandal v. State of Orissa and Others, (2007) 14 SCC 517 observed, "that while invoking power of judicial review in matters as to tenders or award of contracts, certain special features should be borne in mind that evaluations of tenders and awarding of contracts are essentially commercial functions and principles of equity and natural justice stay at a distance in such matters". Further was also of the opinion that courts should exercise a lot of restraint while exercising judicial review in contractual or commercial matters. Further noted, that the contracts entered into between private parties are not subject to scrutiny under writ jurisdiction.

The appeal filed by TATA Motors was thereby, dismissed, while the appeals filed by EVEY and BEST were allowed.

Cause Title: Tata Motors Limited v. The Brihan Mumbai Electric Supply & Transport Undertaking (Best) And Others

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