High Court Under Article 226 Cannot Permit Party To Modify Its Offer Without Hearing Other Parties: Supreme Court

The bench of Justices MR Shah and AS Bopanna in the present matter was considering a special leave petition assailing Gujarat High Court's judgement in which the High Court had directed ONGC to finalize the contract with an applicant on the condition that it would lift the gas within 65 days from the date of allotment instead of 75 days as offered by it earlier.

Top Court while allowing the SLP in Vaibhavi Enterprise v. Nobel Cera Coat observed that,

"So the procedure adopted by the High Court while disposing of the writ petition by permitting / allowing the original writ applicant to modify its offer and that too in exercise of powers under Article 226 of the Constitution of India, as observed herein above, is unsustainable and unknown to law. We have our own doubt whether in exercise of powers under Article 226 of the Constitution of India, the High Court could have permitted one of the bidders to revise / modify its offer. Even in the facts and circumstances of the case, the High Court felt that instead of inviting fresh bids, the same could be allowed, in that case also, similar opportunities ought to have been given to the other applicants also."

Factual Background

On July 22, 2020 ONGC had invited "Expressions of Interest" for demand assessment for natural gas produced from the two fields (VAD#3 and VAD#5). The demand assessment was to be undertaken by ONGC and the ultimate approval for allocation was to come from the Ministry of Petroleum and Natural Gas, Government of India. If allotted, the gas supply had to operate for a period of five years from the date of award.

Pursuant to Nobel Cera Coat, Vaibhavi Enterprise and Tanish Cerachem Private Limited submitting their interest, ONGC sought Ministry's approval for gas allocation. When the matter was pending consideration before the Union Government, in December 2020, Tanish Cerachem Private Limited revised its response and offered to commence offtake of gas within 65 days of allotment. Vaibhavi Enterprise however offered to lift gas from the field / block situated at a place called Vadtal, District Bhavnagar within a period of 75 days.

Having regards to the revised offer from Tanish Cerachem Private Limited, ONGC thought it fit to re-invite the bids from all the three shortlisted applicants and accordingly on March 8, 2021, invited all the three applicants to place fresh bids.

Vaibhav Enterprise submitted to the fresh tendering process and submitted its bid but Nobel Cera Coat did not submit any fresh bid.

Case Before Gujarat High Court

Challenging ONGC's letter dated March 8, 2021 so far as it called for "expected period of readiness to offtake gas from ONGC's offer letter", Nobel Cera Coat approached the High Court. Relief was also sought for issuance of directions to ONGC to proceed with the award of gas allocation on the basis of an offer dated July 22, 2020.

The Gujarat High Court while disposing the writ directed ONGC to finalize the contract with Nobel Cera Coat on the condition that it would lift the gas within 65 days from the date of allotment instead of 75 days as offered by it earlier.

Aggrieved, the other two applicants viz. Tanish Cerachem Private Limited and Vaibhavi Enterprise approached the Supreme Court.

Supreme Court's Analysis

The bench of Justices MR Shah and AS Bopanna opined that the procedure adopted by the High Court while disposing the writ in Nobel Cera Coat's favour was unsustainable and that the High Court had passed its order without giving any opportunity of being heard to other applicants.

Top Court while adjudicating the writ also took into consideration that out of the other two applicants who had submitted their EOI one of them was ready and willing to life the gas within 65 days. Laying emphasis on Nobel Cera Coat's offer of lifting gas within 75 days till and later revising its offer, the bench said, "unfortunately High Court allowed / permitted the original writ applicant to revise its offer to lift the gas from 75 days to 65 days and that too in exercise of powers under Article 226 of the Constitution of India."

Case Title: Vaibhavi Enterprise v. Nobel Cera Coat Limited (Civil Appeal No. 6289 Of 2021) and Tanish Cerachem Private Limited v. Nobel Cera Coat Limited (Civil Appeal No.6290 Of 2021)

Citation : LL 2021 SC 585

Counsels: Advocate Santosh Krishnan appeared for Vaibhavi Enterprise and Tanish Cerachem Private Limited. Advocate Saurav Agrawal appeared for Nobel Cera Coat Limited and Additional Solicitor General Vikramjit Banerjee appeared for ONGC