Case Note & Summary
The dispute arose from a tender notice issued by the West Bengal State Electricity Board inviting bids for the sale of surplus power. The appellants, Global Energy Ltd. and H. Dhaul, challenged the requirement of a Rs.30 lakhs earnest money deposit, claiming it was discriminatory against private entities compared to public sector undertakings exempted from this requirement. They filed a writ petition in the Calcutta High Court, which allowed them to participate in the tender by providing a bank guarantee instead of the earnest money. This interim order was contested by M/s Adani Exports Ltd. and M/s PTC India Ltd., leading to a Division Bench setting aside the interim relief. The Supreme Court examined the legality of the tender conditions and the interim order, emphasizing that the terms of the invitation to tender are not subject to judicial scrutiny unless they are arbitrary or discriminatory. The court found that the exemption for public sector undertakings was rational and upheld the requirement for earnest money as a necessary condition for serious bidders. The court dismissed the appeals, affirming the Electricity Board's decision not to award the contract to the appellants due to their lack of the requisite trading license. The appeals were dismissed with costs quantified at Rs.25,000 to be paid to the Electricity Board.
Headnote
A) Administrative Law - Tender Conditions - Judicial Scrutiny of Tender Terms - Not open to judicial scrutiny unless arbitrary or discriminatory - The court held that the terms of the invitation to tender are in the realm of contract and cannot be altered by judicial intervention unless shown to be arbitrary or discriminatory. The exemption granted to public sector undertakings was based on rational criteria and did not warrant judicial interference. (Paras 9-10). B) Electricity Law - Earnest Money Requirement - Validity of Tender Conditions - The court upheld the requirement of earnest money as a normal condition of tender, aimed at ensuring that only financially sound parties participate. The exemption for public sector undertakings was justified and did not render the tender condition illegal. (Paras 8-10).
Issue of Consideration
Whether the condition requiring deposit of Rs.30 lakhs as earnest money by Power Utilities other than Central/State Government Organizations and Public Sector Undertakings was discriminatory and illegal.
Final Decision
The Supreme Court dismissed the appeals, affirming the validity of the earnest money requirement and the Electricity Board's decision not to award the contract to the appellants due to their lack of the requisite trading license. Costs were awarded to the Electricity Board amounting to Rs.25,000.
Law Points
- Tender conditions
- Earnest money deposit
- Judicial scrutiny of tender terms
- Discriminatory practices in tendering
- Electricity trading regulations
