Case Note & Summary
The Karnataka Power Corporation Limited (the Corporation) issued a notice inviting tender on 02.12.2020 for the selection of a Mine Operator for the development and operation of the Mandakini-A coal block, with a contract period of 15 years extendable by 10 years. Kanchan India Limited and Emta Coal Limited (the petitioners) formed a consortium named EMTA-KIL and submitted their bid on 18.01.2022, along with a bank guarantee. After evaluation, the consortium emerged as the lowest bidder (L1) and was called for price negotiations, where they agreed to a reduction. Meanwhile, two directors of Emta Coal Limited, Mr. U.K. Upadhaya and Mr. Bikash Mukherjee, resigned on 22.07.2022. Subsequently, on 31.08.2022, these individuals were convicted for offences under Sections 120B and 420 of the Indian Penal Code. The Corporation, after learning of the conviction, queried the consortium on 03.10.2022. The petitioners clarified that the directors had already resigned. On 11–14.10.2022, the High Court of Delhi suspended the sentences of the convicted persons. Despite this, the Board of Directors of the Corporation, in its 287th meeting on 21.10.2022, resolved to cancel the original tender and re-tender the work, which was communicated to the consortium by email on 04.11.2022. The petitioners filed the instant writ petition under Article 226 of the Constitution, challenging the recall and seeking restoration of the tender in their favour. They contended that the cancellation was arbitrary, violated Section 14 of the Karnataka Transparency in Public Procurement Act, 1999, and was based on no valid reason. The Corporation defended its action, asserting a statutory right under Section 14 to cancel before acceptance without recording reasons in writing, arguing that the lowest bidder has no vested right, and that the conviction of former directors justified loss of faith. The court framed the issue whether the Corporation’s action was lawful and heard detailed arguments from both sides, but the judgment text provided does not include the court’s final analysis and decision; the order was reserved and the text ends mid-discussion. Thus, the conclusion of the matter is not reflected in the available text.
Headnote
A) Public Procurement – Cancellation of Tender – Scope of Section 14, Karnataka Transparency in Public Procurement Act, 1999 – Section 14 – The petitioners argued that the recall of tender without reasons is contrary to Section 14, while the respondent claimed a statutory right to cancel before award without recording reasons. The issue was whether such cancellation is legally valid. (Paras 6, 7, 9, 10) B) Public Procurement – Right of Lowest Bidder – No Vested Right – General Principles – The respondent contended that a lowest bidder gets no vested right to award, which is a settled principle. The petitioners asserted that after being declared L1 and participating in negotiations, they had a legitimate expectation. (Para 7) C) Public Procurement – Grounds for Cancellation – Conviction of Ex-Directors – Change in Consortium – The respondent argued that conviction of two former directors (Sections 120B, 420 IPC) of the second petitioner, even after resignation, justifies loss of faith and cancellation. The petitioners countered that the conviction was of individuals who had resigned and not of the company, and no tender condition prohibited participation of companies with accused directors. (Paras 3, 7, 8, 9) D) Administrative Law – Judicial Review – Scope in Tender Matters – Article 226 – The respondent stressed limited judicial review over tender decisions; the court's power is confined to reviewing the decision-making process for arbitrariness. (Para 7) E) Administrative Law – Decision-Making – Multiple Legal Opinions – The respondent sought opinions from a retired Supreme Court judge and the Advocate General, and there is no bar on seeking a second opinion before arriving at a decision. (Paras 7, 12)
Issue of Consideration
Whether the respondent/Corporation was right in law in recalling the earlier tender and issuing fresh tender notification in the peculiar facts and circumstances of the case.
Law Points
- Section 14
- Karnataka Transparency in Public Procurement Act
- 1999
- cancellation of tender before acceptance
- no vested right of lowest bidder
- limited judicial review
- loss of faith due to conviction of ex-directors
- legitimate expectation
- re-tendering
