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Elektron Lighting Systems Pvt. Ltd. & Anr. v. Shah Investments Financial Developments & Consultants Pvt. Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 9151-9152 of 2015)Decided 20 Nov 2015
Civil Appeal Nos. 9151-9152 of 2015
Justice Dipak Misra · Justice Prafulla C. Pant

Background

The Aurangabad Municipal Corporation invited bids in August 2014 to replace street lights with LED fittings on a build-operate-transfer basis. Two bidders were disqualified at the technical stage, and the contract was awarded to the appellants. The High Court upheld the disqualifications but quashed the entire work order, because the appellants had also offered, in a separate letter, to be given advertising rights on the street light poles.

Decision Breakdown

The Supreme Court allowed the appeals in part. It held that the High Court erred in quashing the main contract, because the tender process was not hasty and the appellants' technical bid was properly accepted, and the MOU and VAT returns were on record. The Court applied the established limits on judicial review of tenders, which permit interference only for mala fides, arbitrariness or unfairness. It found the advertising-rights element unfair, because the corporation granted those rights without inviting tenders for them, and it held that this part was severable from the main contract. The advertising-rights part therefore remains quashed, and the corporation may invite tenders for it.

Lesson Learnt

Courts give government tender decisions considerable deference and will not interfere merely because a bidder has been disqualified. A valuable public asset, such as advertising rights, must be offered through an open process rather than granted as a side deal, and a severable unfair part of a contract can be struck down without destroying the valid remainder.

Official source (sci.gov.in)View Judgment (PDF)

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