Bidders Have To Exercise A Greater Than Ordinary Degree Of Care To Maintain Sanctity & Integrity Of Tender Process: Supreme Court

In this case, the Court, considering the doctrine of proportionality, directed to conduct a fresh e-auction of the mining lease of the Orahuri manganese and iron ore block and also directed the Appellant/Bidder to deposit Rs 3,00,00,000/- for his failure to act with the required degree of care during e-auction.

The Bench of Justice Sanjiv Khanna and Justice Dipankar Datta observed, “However, we would be remiss in not observing that the e-auction in question was a competitive bidding process which demanded a high degree of caution and care on the part of the appellants. As was noted by this Court in Patel Engineering Co. Ltd. (supra), the bidders being experienced corporate entities are expected to have the assistance of technical experts, and exercise a greater than ordinary degree of care, if not meticulousness, to obviate and prevent such situations, in order to maintain the sanctity and integrity of the tender process. Though there has been a human error, but the same also evinces a degree of remiss and carelessness the result of which is bound to cost the public exchequer heavily in terms of time, effort and expense.”

Senior Advocate Mukul Rohatgi appeared for the Appellant whereas AOR Prakash Ranjan Nayak appeared for the Respondents.

State of Odisha/Third Respondent floated a tender document for e-auction of mining lease of, inter alia, Orahurimanganese and iron ore block. The appellant cleared the first round of the process and was subsequently informed that the e-auction would be conducted. As scheduled, the auction process commenced, and the bid went from 84% to 104.05%. With no bidder countering the same, the e-auction concluded with the last bid recorded as that of the Appellant at 140.10%.

Having realized that it had committed a mistake, the Appellant reached out to the Director of Mines and Geology, sought to inform the mistake and prayed for rectification of its bid. The Director of Mines and Geology informed the appellant of its bid of 140.10% having been accepted, being the highest bid, and that it was declared as the Preferred Bidder.

The Appellant/preferred bidder was required to deposit the first instalment of the upfront payment within fifteen days of such declaration, failing which, the security deposit would stand forfeited, the Appellant was directed to deposit Rs 3,64,88,526/-. Aggrieved, thereby, the appellant invoked the writ jurisdiction of the High Court which subsequently, held that the appellant having admitted to have made a bid of 140.10%, such bid could not at a subsequent stage be pleaded as a mistake.

The Court said that after perusing the visual step-by-step process of e-auction, it was evident that once the bidder enters the numerical value and clicks on ‘Bid’, a pop-up does appear showing the bid in numerical and in words; however, the system does not provide any option to cancel such bid or to re-type the bid amount, should any error or mistake in the bid be noticed.

“We, thus, presume that in case of an error or mistake, a bidder may choose not to submit the bid with the Digital Signature Certificate with the result that it has to quit the process. This lends weight to the appellant’s submission that there was indeed a human error or mistake, rectification of which was not permitted by the system.”, the Court held.

On the issue of whether such an error or a mistake would entitle the appellant to request a fresh e-auction process, the Court observed, “…it is evident that there was no opportunity available on the platform for the appellant to rectify the error in the bid, having once entered it. Even if any bidder like the appellant had realized that the bid amount requires to be rectified, it could not have done so because of the system not permitting such a course. It had either to suffer the effects of the error or mistake, i.e., forfeiture of Bid Security on failure to deposit the first instalment of the upfront payment, or quit the process realising such error/mistake having been committed by it. It seems that anyone committing an error or mistake in submitting the bid and seeking to rectify it would be caught between the devil and the deep sea. Upon discovery of the error or mistake that was committed, the appellants have satisfied us on the point that they wasted no time in informing the respondents and sought an opportunity to rectify the same.”

The Court relied on its judgment in W. B. State Electricity Board v. Patel Engg. Co. Ltd. (2001) and said that the present case was distinguishable from the judgment as Specific averments made by the appellant are present in the pleadings that upon realisation of its mistake, telephone calls were made to the first respondent, as well as to the helpline numbers of the second respondent, both of which went unanswered. The respondents, in their counter affidavit, have not specifically denied the said averments; hence, by application of the doctrine of non-traverse, the aforementioned averments are deemed to have been admitted by the respondents, the Court furthered.

Accordingly, the Court quashed the impugned order passed by the High Court and communication passed by the Director of Mines, extending liberty to the Respondents to conduct fresh e-auction as per law. The Court also directed the Appellant to pay the first respondent Rs 3,00,00,000/- within a month from the date for his failure to act with the required degree of care, which has not only had the effect of inevitably delayed the mining project but would also cost both the respondents and the other participant bidders precious time, effort and money.

Cause Title: M/s Omsairam Steels & Alloys Pvt. Ltd. v. Director of Mines and Geology, BBSR & Ors. (Neutral Citation: 2024 INSC 520)

Appearances:

Appellant: Senior Advocate Mukul Rohatgi, AOR Dhananjaya Mishra, Advocate Navneet Dogra.

Respondents: AOR Prakash Ranjan Nayak, Advocates Animesh Dubey and Advocate Rajiv Shukla.

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