Commercial matters. Apex court cautions HC in Tata Motors case

A writ court should not ordinarily involve itself in matters related to tender or contract, the Supreme Court said in a recent case, Tata Motors vs The Brihan Mumbai Electric Supply and Transport Undertaking. It said that a writ court should exercise caution when attempting to impose its decision on the acceptance or rejection of a tender bid, unless there are exceptional reasons.

The SC observed that initiating a new tender process while a contract is already in progress results in delays and financial losses for the public exchequer.

In this case, BEST, in 2022, put out a tender for procurement of 1,400 single-decker AC electric buses with drivers for public transport service within Mumbai. As per the tender conditions, bidders were to submit single-decker buses that could travel 200 km on a single charge without stopping. Tata Motors Ltd and EVEY Trans Private Limited submitted bids.

BEST, in May 2022, held that Tata Motors was ‘technically non-responsive’. EVEY therefore became the L1, or lowest-cost, bidder. Tata Motors approached the Bombay High Court to get BEST to reconsider its bid.

The HC said that while it was true that Tata Motors’ bid was rightly disqualified by BEST, even EVEY should have been disqualified as it had resubmitted certain annexures after the bid closure date. Therefore, the HC ordered BEST to hold a new tender on the grounds that no bidder can submit or rectify documents after the closure of bid. All three parties — Tata Motors, EVEY, and BEST — approached the SC with their respective petitions.

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The apex court opined that the HC should not exercise its power of judicial review in commercial matters unless the parties demonstrated malicious intent, irrationality, arbitrariness, or bias.

The apex court judges Surya Kant and JB Pardiwala further observed: “This court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this court has cautioned, time and again, that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This court is normally loath to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts, but this discretionary power must be exercised with a great deal of restraint and caution.”

The Supreme Court felt that the HC was correct up to the point of judging that Tata Motors had deviated from an essential term of the tender, but it should not have gone beyond that. The verdict said: “The High Court has rightly observed in its impugned judgement that the bid of 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 to above. 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.”

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