{"id":303514,"date":"2023-10-04T16:00:11","date_gmt":"2023-10-04T10:30:11","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=303514"},"modified":"2023-10-06T12:16:13","modified_gmt":"2023-10-06T06:46:13","slug":"courts-exercise-restraint-exercising-judicial-review-contracts-involving-complex-technical-issues-sc-reiterates","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/10\/04\/courts-exercise-restraint-exercising-judicial-review-contracts-involving-complex-technical-issues-sc-reiterates\/","title":{"rendered":"Courts should exercise restraint in exercising power of judicial review in contracts involving complex technical issues; SC reiterates"},"content":{"rendered":"
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Supreme Court:<\/span> In an appeal against the judgment of the division bench of Karnataka High Court, wherein the Court quashed the Letter of Intent which was issued by Bharat Heavy Electricals Limited(\u2018BHEL\u2019), in favour of the appellant and directed BHEL to consider the bid submitted by Macawber Beekay Pvt. Ltd. (\u2018MBP Ltd.) in terms of a notice inviting tenders dated 24 -06-2022, the full bench of Dr. Dhananjaya Y Chandrachud*<\/span>, CJI, J B Pardiwala and Manoj Misra , JJ. reiterated that in contracts involving complex technical issues, the Court should exercise restraint in exercising the power of judicial review. Even if a party to the contract is \u2018State\u2019 within the meaning of Article 12<\/a> of the Constitution<\/a>, and as such, is amenable to the writ jurisdiction of the High Court or the Supreme Court, the Court should not readily interfere in commercial or contractual matter. Thus, it was held that the interference of the Division Bench in the judgment of the Single Judge was not warranted.<\/p>\n

Background:<\/p>\n

In this case, BHEL was awarded a contract for setting up the Yadadri Thermal Power Station. A part of the work was sought to be subcontracted. BHEL invited bids for undertaking the work of design, engineering, and other related works pertaining to an ash handling plant. The appellant submitted its bid. On 29-09-2022, a letter of intent was issued to the appellant for a total contract value of Rs 378.64 crores. The controversy in the present case turns on the pre-qualification requirement for bidders, notified by BHEL.<\/p>\n

On 23-07-2020, the Public Procurement Division in the Department of Expenditure of the Union Ministry of Finance issued an Order imposing certain restrictions under Rule 144(xi) of the General Financial Rules 2017, whereby a prospective bidder from a country that shares a land border with India, would be eligible to bid, only if such bidder is registered with the Competent Authority.<\/p>\n

MBP Ltd. instituted a writ petition before the High Court contending that the award of the contract to the appellant was in breach of the conditions which were imposed in the Order dated 23-07-2020 of the Union Ministry of Finance. The contention was that the Chinese company which had entered into a consortium agreement with the appellant to enable the appellant to fulfill the eligibility conditions under the tender floated by BHEL was required to be registered with the competent authority, according to the Public Procurement Order. It was urged that in the absence of such registration, the tender submitted by the appellant did not meet the technical requirements and could not have been considered by BHEL.<\/p>\n

The Single Judge dismissed the writ petition, however, the division bench of the High Court said that the Chinese company, as a part of the bidding consortium, was required to register, in absence of registration, the bidding consortium was ineligible to participate in the tender process. Thus, the appellant filed the present appeal.<\/p>\n

Analysis<\/p>\n

The Court noted Clause 01.01.01 and Clause 01.01.02 of the pre-qualification requirement for bidders notified by BHEL and said that though the bidder itself was not able to meet the requirements of clause 01.01.01, such non-compliance would be obviated if the bidder collaborated or associated with an entity that met the requirements of sub-clauses (a), (b) and (c) either individually or in conjunction with the bidder himself. In that case, the bidder was required to furnish a consortium agreement jointly executed with the collaborator\/associate to accept joint and several responsibilities towards the tendering authority. It was in pursuance of the above requirement that the appellant submitted a consortium agreement with the Chinese company.<\/p>\n

The Cour noted that the Procurement Order has been clarified by an Office Memorandum (\u2018OM\u2019). The OM stipulates that in terms of paragraph 11 of the Order dated 23-07-2020, in the case of a works contract including a turnkey contract, the contractor shall not be allowed to subcontract the work to any contractor from a country that shares a land boundary with India unless the contractor is registered with the competent authority.<\/p>\n

The Court further noted that the bid submitted by the appellant was lower than the bid submitted by MBP Ltd. During the course of the hearing, it has been submitted that MBP Ltd would be willing to match the bid which was submitted by the appellant and if the contract is awarded to it in pursuance of the impugned judgment of the Division Bench of the High Court, it would take over the contract from the stage where it was left by the appellant. However, BHEL and Telangana State Power Generation Company have stated that since the ongoing work is design intensive, substituting a new entity would require redesigning of the whole project at a significant cost to the exchequer. Thus, the Court said that this will cause insuperable difficulties in the implementation of the contract since the work under the contract has progressed.<\/p>\n

The Bench said that BHEL and the Telangana State Power Generation Company found that the agreement with the Chinese company was in the nature of a service agreement and not a \u201cconsortium\u201d under clause 7.2 of the pre-qualification requirements. The bid was made by the appellant as a standalone entity and not in a consortium comprising the unregistered Chinese entity. It was neither a joint bid nor a bid made by a bidding consortium. Thus, the registration requirement did not apply<\/p>\n

The Court viewed that the Division Bench, which was considering an appeal against a judgment of a Single Judge rejecting the writ petition, ought to have proceeded with circumspection.<\/p>\n

Thus, the Court set aside the impugned judgment and restored the judgment of the Single Judge.<\/p>\n

[BTL EPC Ltd v Macawber Beekay Pvt Ltd, BTL EPC Ltd., 2023 SCC OnLine SC 1223<\/a>, Decided on 18-09-2023<\/span>]<\/p>\n

*Judgment Authored by: Justice Dr. DY Chandrachud<\/span><\/strong><\/p>\n

Not here to do miracles but to work on bringing institutional changes: Justice DY Chandrachud shares his to-do list as the 50th CJI<\/a><\/p><\/blockquote>\n