Case Note & Summary
The appeals arose from an interim order of the Rajasthan High Court in an intra-court appeal, which directed status quo and restrained the signing of a contract for operation and management of warehouses under a PPP model. The appellant, Rajasthan State Warehousing Corporation, had issued a tender on 12 March 2020 for 71 locations. The writ petitioners challenged clause 5(5)(i) of the tender regarding experience in storage of MSP procured food grains. The Single Bench dismissed the writ petitions on 19 May 2020. Technical bids were opened on 20 May 2020, and letters of intent were issued to successful bidders on 21 May 2020. In the intra-court appeal, the Division Bench on 29 May 2020 and 10 June 2020 passed orders of status quo and directed that the contract shall not be signed without leave of the court. The Supreme Court noted that the appellant had granted short-term tenders to the writ petitioners for 4 months expiring on 3 July 2020, and the successful bidders offered 71% revenue as against 42% by the short-term tenderers. The Court held that the High Court's interim order was passed without recording reasons and without considering public interest, especially when the tender was for storage of food articles. Relying on Raunaq International Ltd. v. I.V.R. Construction Ltd. and Nitco Tiles Ltd. v. Gujarat Ceramic Floor Tiles Mfg. Assn., the Court emphasized that interim orders in contractual matters must balance public interest and that the party obtaining the stay should be accountable for consequences. The Supreme Court set aside the interim orders, allowing the appeals, but clarified that the grant of contract shall be subject to the final orders of the High Court in the pending appeals.
Headnote
A) Public Procurement - Interim Stay - Public Interest - The court must weigh conflicting public interests before granting interim orders in contractual matters; an interim order that stops a project from proceeding must provide for reimbursement of costs to the public if the litigation fails (Paras 9-11).
B) Tender Law - Eligibility Criteria - Judicial Review - The inviting agency is the best judge of its requirements; a condition in the tender cannot be challenged merely because it was not present in earlier years or in other states (Para 5).
C) Contract Law - Acceptance - Letter of Intent - Under Rule 70(8) of the Rajasthan Transparency in Public Procurement Rules, 2013, acceptance of an offer is complete as soon as the letter of intent is posted or sent by email (Para 6).
D) Supreme Court - Article 136 - Interim Orders - Though the Court does not generally interfere with interim orders, it will do so when the order affects public revenue and is passed without reasons (Para 8).
Issue of Consideration
Whether the High Court was justified in granting an interim order of status quo and restraining the signing of the contract after the bidding process was complete, without recording reasons and without considering public interest.
Final Decision
The Supreme Court allowed the appeals, setting aside the orders dated 29 May 2020 and 10 June 2020 granting status quo. However, the grant of contract shall be subject to the orders which may be passed by the High Court in the pending intra-court appeals.
Law Points
- Public interest in contract execution
- Interim stay in contractual matters
- Scope of Article 136
- Eligibility criteria in tenders
- Letter of intent as acceptance
Case Details
Civil Appeal Nos. 2651-2656 of 2020 (arising out of SLP (Civil) Nos. 7746-7751 of 2020) and connected appeals
Hemant Gupta, Aniruddha Bose
Rajasthan State Warehousing Corporation
Star Agriwarehousing and Collateral Management Limited & Ors.
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Nature of Litigation
Civil appeals against interim orders of the High Court in a public procurement tender dispute.
Remedy Sought
Appellant sought setting aside of the High Court's interim order of status quo and restraint on signing the contract.
Filing Reason
The High Court passed an interim order of status quo and directed that the contract shall not be signed without leave of the court, after the bidding process was complete and letters of intent were issued.
Previous Decisions
The Single Bench of the High Court dismissed the writ petitions on 19 May 2020. The Division Bench in intra-court appeal passed interim orders on 29 May 2020 and 10 June 2020 granting status quo and restraining signing of the contract.
Issues
Whether the High Court was justified in granting an interim order of status quo and restraining the signing of the contract without recording reasons and without considering public interest.
Whether the Supreme Court should interfere with an interim order under Article 136 of the Constitution.
Submissions/Arguments
Appellant argued that the eligibility criteria are determined by the agency inviting bids and cannot be challenged on the ground that it was not a condition in earlier years. The appellant also argued that the short-term tenderers offered only 42% revenue as against 71% by successful bidders, causing financial loss.
Successful bidders argued that under Rule 70(8) of the Rajasthan Transparency in Public Procurement Rules, 2013, acceptance is complete upon sending the letter of intent.
Writ petitioners argued that the appeals are against an interim order and the Court should not interfere; the appellant could seek leave from the High Court.
Ratio Decidendi
In contractual matters, interim orders that stop the project from proceeding must be passed only after weighing public interest; if the litigation fails, the party obtaining the stay must compensate the public for delay and cost escalation. The High Court's interim order without reasons and without considering public interest is not sustainable.
Judgment Excerpts
We do not find any merit in the argument that the Special Leave Petitions are directed against an interim order, therefore, this Court should not interfere in the order passed.
In the matters of contract, the grant of interim order to restrain the successful bidders from executing the contract is not in public interest, more so, when the tender is for storage of food articles in the warehouses of the State Government undertaking.
Procedural History
The writ petitions challenging the tender conditions were dismissed by the Single Bench of the Rajasthan High Court on 19 May 2020. Technical bids were opened on 20 May 2020 and letters of intent issued on 21 May 2020. In intra-court appeals, the Division Bench passed interim orders on 29 May 2020 and 10 June 2020 granting status quo and restraining signing of the contract. The appellant filed Special Leave Petitions in the Supreme Court, which were converted into civil appeals.
Acts & Sections
- Rajasthan Transparency in Public Procurement Rules, 2013: Rule 70(8)
- Constitution of India: Article 136
