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Arbitration & Commercial LawSupreme Court of India

National Highways Authority of India v. M/s Gwalior Jhansi Expressway Limited

Civil Appeal · 2018 INSC 609Decided 13 Jul 2018
Civil Appeal No. 3288 of 2018
Chief Justice Dipak Misra · Justice A.M. Khanwilkar · Dr. Justice D.Y. Chandrachud

Background

NHAI had engaged Gwalior Jhansi Expressway Limited (GJEL) to widen a stretch of National Highway No.75, but terminated the concession after alleging GJEL fell badly behind schedule and abandoned the site. An Arbitral Tribunal, acting on an interim application, directed NHAI to let GJEL match the lowest bid received in a fresh re-tender and exercise a contractual "Right of First Refusal" (ROFR) even though GJEL had not actually participated in that re-tender. The Delhi High Court upheld the Tribunal's order, and NHAI appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that a right to match the lowest bid (ROFR) could only be exercised by a party that had actually participated in the bidding process; GJEL could not claim the benefit of ROFR while sitting outside the re-tender altogether. The Court found this core legal error meant the Arbitral Tribunal's order allowing GJEL to leapfrog into the contract without bidding violated the "fundamental policy of Indian law," a recognised ground for a court to set aside an arbitral award. It rejected GJEL's argument that its prior part-performance of the original project justified bypassing the tender process. Both the Tribunal's order and the High Court's confirmation of it were quashed, and GJEL's underlying application was dismissed.

Lesson Learnt

A contractual right to "match the lowest bid" is not a free pass to re-enter a contract without competing in the tender for it: courts will strike down arbitral awards that ignore basic principles of fair competitive bidding, even in a commercial dispute.

National Highways Authority of India v. M/s Gwalior Jhansi Expressway Limited – Legal Case Shots | LegalAware