The Supreme Court also set aside the Madras high court order of April 29 directing the state to float fresh tenders with generic specifications. The Supreme Court also set aside the Madras high court order of April 29 directing the state to float fresh tenders with generic specifications

The Supreme Court also set aside the Madras high court order of April 29 directing the state to float fresh tenders with generic specifications.
The Supreme Court also set aside the Madras high court order of April 29 directing the state to float fresh tenders with generic specifications.
INDIA NEWS
SC seeks ₹30 lakh as deposit from firms after challenge to award of tender

The Court cautioned High Courts from falling into an error by sitting as an “appellate authority” on technology and commercial expediency in tender matters and said that the Courts should only consider whether the choice of decision to award the tender was “lawful” and not whether it was “sound”.

UPDATED ON SEP 18, 2021 04:14 AM IST
To curb misuse by frivolous litigants who challenge award of tender processes before High Courts, the Supreme Court on Friday set an example by directing deposit of over ₹30 lakh towards litigation costs and other expenses incurred by the successful bidder and the Tamil Nadu government in defending multiple rounds of litigation over a state government tender issued in October last year for supply of hologram excise labels on liquor bottles sold by state.
The top court also set aside the Madras high court order of April 29, 2021 directing the state to float fresh tenders with generic specifications and noted the present reality where every tender is challenged before Court either by parties who did not take part in bidding or in public interest litigations.
The Court cautioned High Courts from falling into an error by sitting as an “appellate authority” on technology and commercial expediency in tender matters and said that the Courts should only consider whether the choice of decision to award the tender was “lawful” and not whether it was “sound”.
Justifying award of costs, the bench of Justices Sanjay Kishan Kaul and Hrishikesh Roy said, “There seems to be often hesitancy in our judicial system to impose costs, presuming as if it is a reflection on the counsel. This is not the correct approach. In a tussle for enforcement of rights against a State different principle apply but in commercial matters costs must follow the cause.”
Based on counsel fees and other actual expenses incurred by the successful bidders – Uflex Limited and Montage Enterprises – as well as Tamil Nadu Government, the bench ordered the corporate entities who challenged the tender before the High Court – Kumbhat Holographics and Alpha Lasertek India LLP – to equally share the burden of costs of over ₹23.25 lakh to the successful bidders and ₹7.58 lakh to the state government within four weeks.
The bench said, “The tender jurisdiction was created for scrutiny of commercial matters and, thus, where continuously parties seek to challenge award of tenders, we are of the view that the succeeding party must get costs and the party which loses must pay costs.” The Court noted that the salutary principles governing award of costs are that it should ordinarily follow the event, ought to be realistic keeping in view the ever increasing litigation expenses, and must serve the purpose of curbing frivolous and vexatious litigation.
The genesis of the litigation in the present case was a notice inviting tender for production and supply of polyester based hologram excise labels to be pasted across the liquor bottle caps sold by the Tamil Nadu State Marketing Corporation. The notice issued on October 1, 2020 set out the technical specifications and eligibility criteria.
Two companies – Kumbhat Holographics and Alpha Lasertek challenged the tender conditions before the High Court claiming that the tender eligibility criteria were tailor-made to favour Uflex and Montage Enterprises. The single judge of Madras High Court dismissed their petition in February 2021 but a Division Bench reversed this finding ordering fresh award of tenders. This decision was challenged in the top court by Uflex and Montage.
Uflex argued in Supreme Court that the two companies before the High Court had not bid for the tender as one did not meet the benchmark of having eight-year experience in supplying holograms while the other was a partnership concern. The petitioners told the Supreme Court that the High Court committed an error by examining the funding pattern of the successful bidders.
Faulting the HC, the top court said, “The present case is not one of an inter-corporate battle or of minority shareholders claiming the rights or any debts due, where the principle of lifting the corporate veil should be applied….It is thus our view that the Division Bench has fallen into an error in almost sitting as an appellate authority on technology and commercial expediency which is not the role which a Court ought to play.”
Merely because a company is more efficient and obtains better technology, makes more competitive bids and, thus, succeeds more cannot be a factor to deprive that company of commercial success, the bench observed. The Court found that this exactly was the position in the present case where the two original petitioners endeavoured “to continuously create impediments in the way of the succeeding party merely because they themselves had not so succeeded.”
The ground reality today, the top court said, is that almost no tender remains unchallenged with unsuccessful parties or parties not even participating in the tender approaching High Court under Article 226 of the Constitution.
“A tenderer or contractor with a grievance can always seek damages in a civil court and thus, attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted,” the bench held.
The supreme court on Friday directed a deposit of over ₹30 lakh towards litigation costs and other expenses incurred by a successful bidder, and the Tamil Nadu government in defending multiple rounds of litigation over a state government tender issued in October last year for the supply of hologram excise labels on liquor bottles sold by state. The successful bidder is Uflex Limited and Montage Enterprises.
The top court also set aside the Madras High Court order of April 29, 2021, directing the state to float fresh tenders with generic specifications and noted the present reality where every tender is challenged before the court either by parties who did not take part in bidding or public interest litigations.
The court cautioned high courts from falling into an error by sitting as an “appellate authority” on technology and commercial expediency in tender matters and said that the Courts should only consider whether the choice of decision to award the tender was “lawful” and not whether it was “sound”.
Justifying the award of costs, the bench of Justices Sanjay Kishan Kaul and Hrishikesh Roy said, “There seems to be often hesitancy in our judicial system to impose costs, presuming as if it is a reflection on the counsel. This is not the correct approach. In a tussle for enforcement of rights against a State different principle apply but in commercial matters costs must follow the cause.”
Based on counsel fees and other actual expenses incurred by the successful bidders – Uflex Limited and Montage Enterprises – as well as Tamil Nadu Government, the bench ordered the corporate entities who challenged the tender before the High Court – Kumbhat Holographics and Alpha Lasertek India LLP – to equally share the burden of costs of over ₹23.25 lakh to the successful bidders and ₹7.58 lakh to the state government within four weeks.
The bench said, “The tender jurisdiction was created for scrutiny of commercial matters and, thus, where continuously parties seek to challenge the award of tenders, we are of the view that the succeeding party must get costs and the party which loses must pay costs.” The Court noted that the salutary principles governing the award of costs are that it should ordinarily follow the event, ought to be realistic keeping in view the ever-increasing litigation expenses, and must serve the purpose of curbing frivolous and vexatious litigation.
The genesis of the litigation in the present case was a notice inviting tender for production and supply of polyester-based hologram excise labels to be pasted across the liquor bottle caps sold by the Tamil Nadu State Marketing Corporation. The notice issued on October 1, 2020, set out the technical specifications and eligibility criteria.
Two companies – Kumbhat Holographics and Alpha Lasertek challenged the tender conditions before the High Court claiming that the tender eligibility criteria were tailor-made to favour Uflex and Montage Enterprises. The single judge of Madras High Court dismissed their petition in February 2021 but a Division Bench reversed this finding ordering a fresh award of tenders. This decision was challenged in the top court by Uflex and Montage.
Uflex argued in Supreme Court that the two companies before the High Court had not bid for the tender as one did not meet the benchmark of having eight-year experience in supplying holograms while the other was a partnership concern. The petitioners told the Supreme Court that the High Court committed an error by examining the funding pattern of the successful bidders.
Faulting the HC, the top court said, “The present case is not one of an inter-corporate battle or minority shareholders claiming the rights or any debts due, where the principle of lifting the corporate veil should be applied….It is thus our view that the Division Bench has fallen into an error in almost sitting as an appellate authority on technology and commercial expediency, which is not the role which a Court ought to play.”
Merely because a company is more efficient and obtains better technology, makes more competitive bids and, thus, succeeds more cannot be a factor to deprive that company of commercial success, the bench observed. The court found that this exactly was the position in the present case where the two original petitioners endeavoured “to continuously create impediments in the way of the succeeding party merely because they had not so succeeded.”
The ground reality today, the top court said, is that almost no tender remains unchallenged with unsuccessful parties or parties not even participating in the tender approaching High Court under Article 226 of the Constitution.
“A tenderer or contractor with a grievance can always seek damages in a civil court and thus, attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising the power of judicial review, should be resisted,” the bench held.