Vedanta Moves Orissa High Court Challenging Tender Issued By NALCO As Discriminatory Against SEZ Units

The Orissa High Court has issued notice in a writ petition filed by Vedanta Ltd. challenging eligibility conditions prescribed by the National Aluminium Company (NALCO) for participation in the tender for sale of calcined alumina for a period spanning from August 2023 to March 2024.

While denying any interim relief to Vedanta to take part in the bid, the Division Bench of Dr. Justice Bidyut Ranjan Sarangi and Justice Murahari Sri Raman agreed to consider the matter on merit.

Factual Background

The NALCO invited a bid for export sale of calcined alumina on 30.06.2023 stipulating, inter alia, the condition that only overseas bidders intending to import the calcined alumina to a foreign destination outside the territory of India will be eligible to participate in the tender.

It further espoused that the shipment will be done from the Visakhapatnam port on a Free On Board (FOB) basis after getting the “Let Export Order” under Section 51 of the Customs Act and the invoice representing the sale transaction will be issued only in the name of the participating successful overseas bidder.

The petitioner-Vedanta was aggrieved by the aforementioned eligibility clauses as by imposition of such conditions, the domestic manufacturers and even Special Economic Zone (SEZ) units located in India were disqualified. Being aggrieved by such condition, the petitioner approached the Court in the present writ petition.

Arguments of the Petitioner-Vedanta

Dr. Abhishek Manu Singhvi, Senior Counsel appearing for the Vedanta Ltd. argued that the said eligibility conditions are not based on any principle and are wholly unreasonable and arbitrary, since NALCO will get all duty and forex benefits even if the SEZ unit participates in the tender.

It was further contended that even if the petitioner-SEZ participates, then it will not cause prejudice to the opposite party-NALCO, which will get same duty drawback benefits. He placed reliance on Rule 23 of the SEZ Rules, 2006 which provides for identical export benefit on supply to SEZ.

Therefore, he argued, the differentiation between overseas buyers and the SEZ Unit is wholly arbitrary, non-intelligible and has no nexus with the object to be achieved and thereby violates Article 14.

He further contended that the eligibility conditions are against public interest as the NALCO being a government company must ensure utilization of natural resources in India for value addition in the domestic market. In the guise of eligibility conditions, NALCO is choosing to sell natural resource at a lower price to the overseas entities, he alleged.

Furthermore, he submitted that the impugned conditions violate the ‘doctrine of public trust’. It was also contended that as NALCO is a Central Public Sector Enterprise established for the development of the Aluminium Sector in India, it has the additional duty of disposing of these mined natural resources in consonance with the public trust doctrine under Article 39(b) i.e. in a manner which sub-serves public interest.

It was also pointed out that the eligibility conditions are violative of the National Mineral Policy, 2019, which provides that minerals shall be mined in a manner so as to promote domestic industry and to ensure that the needs of domestic industry are fully met.

Arguments of the Respondent-NALCO

Mr. K.K. Venugopal, Senior Advocate appearing for the NALCO contended that in view of the law laid down by the Apex Court, there should be judicial restraint in administrative action and therefore, the High Court cannot sit as a Court of appeal but merely it can review the manner in which the decision was made.

It was contended that the court does not have the expertise to correct the administrative decision. The terms of the invitation to tender cannot be opened to judicial scrutiny because the invitation to tender is in the realm of contract, he added.

It was further argued that the tendering authority must have the freedom of contract and thus, quashing its decisions may impose heavy administrative burden and lead to increase in unbudgeted expenditure. Therefore, he prayed for dismissal of the writ petition.

Court’s Order

After hearing counsel for the parties, the Court was of the view that the dispute requires consideration and as such, it asked the opposite parties to file counter affidavits within four weeks.

An interim application was filed by the Vedanta Ltd. seeking ad interim ex-parte direction permitting it to participate in the tender for sale of calcined alumina for the period from 01.08.2023 to 31.03.2024 for a quantity of 2,40,000 MT of alumina. However, the Court dismissed such application and said,

“As this Court is considering the eligibility criteria, in view of the arguments advanced by the respective parties and allowing the opposite parties to give their reply, this Court is not inclined to pass any interim order at this stage.”

Case Title: Vedanta Ltd., BBSR v. Union of India & Ors.

Case No.: W.P.(C) No. 21287 of 2023

Order Dated: July 13, 2023

Counsel for the Petitioner: Dr. A.M. Singhvi & Mr. Ashok Kumar Parija, Senior Advocates along with Mr. P.K. Nayak, Advocate

Counsel for the Respondents: Mr. Prasanna Kumar Parhi, DSGI along with Mr. J. Nayak, CGC for Union of India; Mr. K.K. Venugopal, Mr. Ashok Gupta & Ms. Pami Rath, Senior Advocates along with Ms. Sucheta Gumansingh, Advocate

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