Highest Bidder In Tender Process Has No Vested Right To Contract : Supreme Court

In a recent case, the Supreme Court observed that the highest bidder in the Notice Inviting Tender (NIT) cannot have a vested right to have the auction concluded in his favor. The Court added that for the contract to be executed, a letter of allotment must be issued in favor of the successful bidder.

The bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma heard a civil appeal filed by Indore Development Authority (“Appellant”) challenging the High Court's Division Bench order directing the Appellant to award a contract in favor of the respondent no.1 because it made the highest bid in NIT auction process.

The appellant contended that making the highest bid doesn't guarantee to award of the contract in respondent no.1's favor, rather the tendering authority i.e., the appellant has the right to cancel or reject the tender process on valid grounds.

An NIT was issued on July 17, 2020, with a reserve price of ₹21,120 per square meter. for leasing out of land. The respondent no.1 submitted the highest bid of ₹25,671.90 per square meter. However, the Tender Evaluation Committee discovered an outstanding property tax of ₹1.25 crores, not factored into the base price. Therefore, it cancelled the initial tender process and issued a second tendering process with a revised reserve price of Rs. 26,000/- per square meter. Instead of participating in the second tendering process, Respondent No.1 filed a Writ Petition before the High Court, where the Single Bench dismissed the same on the ground that making the highest bid in the tendering process doesn't guarantee to award of the contract in its favor.

However, the Division Bench of the High Court set aside the Single Bench order and directed the Appellant to award contract to the respondent No. 1, considering that its bid was the highest. Following this, the appeal was presented before the Supreme Court by the appellant.

Before the Supreme Court, the appellant argued that the respondent's bid was cancelled after the Tender Committee discovered an outstanding property tax of ₹1.25 crore on the land. Considering the location, tax payment to the Municipal Corporation, and potential for higher revenue from future tenders, the bid was rejected

Setting aside the Division Bench's order, the judgment authored by Justice Sharma held that the High Court committed an error while sitting over an appeal and fixing the base price/modifying the offer made by respondent no.1.

“In the considered opinion of this Court, the Division Bench should not have interfered in the matter and could not have gone to the extent of fixing the base price/modifying the offer made by respondent and, therefore, in light of the aforesaid judgment as the High Court has virtually passed an order sitting in appeal over the decision of the government in absence of any mala fide exercise of power by the IDA, the judgment passed by the Division Bench of the High Court deserves to be set aside and is, accordingly set aside.”, the court observed.

Reference was made to the case of Haryana Urban Development Authority Vs. Orchid Infrastructure Developers Pvt. Ltd (2017), where the Court reiterated that the highest bidder has no vested right to have the auction concluded in his favor. The Government or its authority could validly retain the power to accept or reject the highest bid in the interest of public revenue.

Further, the Court reasoned that since there was no allotment letter granted by the appellant to respondent no.1, therefore, “in the absence of allotment letter and acceptance of highest bid, no relief could have been granted in favour of respondent No.1 as there was no concluded contract in the matter and the decision taken by the Tender Evaluation Committee to generate more revenues could not have been interfered with in the manner and method as has been done by the Division Bench of the High Court of Madhya Pradesh at Indore Bench.”

“The bidder has no right in the matter of bid except of fair treatment and cannot insist on further negotiation as has been done in the present case. The terms and conditions of NIT, particularly condition No. 6, empower the IDA to accept or reject any or all bids. In the present case, the bid was rejected for valid and cogent reasons and, therefore, the order passed by the Division Bench of the High Court of Madhya Pradesh is set aside.”, the court held.

Accordingly, the appeal was allowed.

Appearance:

For Petitioner(s) Mr. Balbir Singh, Sr. Adv. Ms. Vanshaja Shukla, AOR

For Respondent(s) Mr. Rakesh Dahiya, AOR Mr. Pashupathi Nath Razdan, AOR

Case Title: INDORE VIKAS PRAADHIKARAN (IDA) & ANR. VERSUS SHRI HUMUD JAIN SAMAJ TRUST & ANR.

Citation : 2024 LiveLaw (SC) 931

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