SC Invalidates Bid Selection Process Over Procedural Arbitrary Favouritism in Tender

In a significant ruling, the Hon’ble Supreme Court of India in the case of Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Limited & Others, 2024 SCC OnLine SC 2700, dated October 4, 2024, addressed the procedural irregularities in government tenders, the Hon’ble Supreme Court of India clarified the legal standing of a Power of Attorney (PoA) in the context of bid submissions.

The dispute arose when respondent, Bharat Coking Coal Limited (BCCL), issued a Notice Inviting Tender (NIT) for a Mega project on 16.08.2023, to reopen, salvage, rehabilitate, develop, construct, and operate coal excavation and extraction from the Amalgamated East Bhuggatdih Simlabahal Coal Mine and deliver it to the Authority at the Bastacolla Area of BCCL on revenue sharing basis, for a period of twenty-five years.

The appellant, Banshidhar Construction Pvt. Ltd. (“Banshidhar”), responding to the NIT, submitted its bid supported by a PoA executed on 07.11.2023, authorizing its director to represent the company. Although the PoA was notarized on 14.11.2023, the bid documents were signed on 13.11.2023. Therefore, despite fulfilling the primary requirements of the tender process, the Banshidhar’s bid was rejected by the technical committee of BCCL, on the grounds that the PoA holder lacked the requisite authority to sign the bid documents on 13.11.2023, as the notarization had occurred only on 14.11.2023.

The Hon’ble Supreme Court of India held that BCCL’s interpretation of the PoA’s notarization date as a ground for rejection was legally untenable. The court reiterated that the PoA had been duly executed on 07.11.2023, conferring the necessary authority on Banshidhar’s representative to execute the bid documents. The subsequent notarization on 14.11.2023 was deemed a procedural formality that did not retroactively invalidate actions taken in good faith by the PoA holder.

Additionally, the apex court also noted that BCCL had allowed another bidder, to submit its bid without fulfilling all the mandatory requirements, specifically by not providing the audited financial documents mandated under Clause 10 of the NIT. Despite this, BCCL allowed the other bidder to provide the missing documents after the technical bids were opened. The court stated that this selective relaxation of requirements, particularly when Banshidhar’s bid had been rejected for an ostensibly minor procedural lapse, was deemed discriminatory and violative of Article 14 of the Constitution of India, 1950. The Hon’ble Supreme Court of India reaffirmed that any deviation from the essential terms of the NIT must apply uniformly to all bidders.

In light of these findings, the Hon’ble Supreme Court of India set aside BCCL’s rejection of Banshidhar’s technical bid and the acceptance of other bidder’s bid. The court further directed that a fresh tender process be initiated, ensuring that the bidding process is conducted in accordance with the law.