By Adv. R. S. Agrawal :
In the matters of contract, 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. Therefore, the grant of interim order which impinges upon the grant of contract by the appellant is not in public interest and that too without recording any reasons when the writ petition was dismissed by the Single Judge.
IN THE judgement of the case – Rajasthan State Warehousing Corporation v. Star Agri warehousing and Collateral Management Limited & Others, delivered on June 24, 2020, at the Supreme Court, Justice Hemant Gupta and Justice Aniruddha Bose have underscored the need for the Courts to weigh conflicting public interests prior to grant of interim direction in contractual matters. The appeals in this case were directed against the interim order passed by the Rajasthan High Court on May 29, 2020, whereby in an intra-court appeal, the HC passed an order of status quo with a further direction that other formalities may proceed but the contract shall not be signed without the leave of the Court.
Being aggrieved because of the said interim order, the Rajasthan State Warehousing Corporation Ltd. filed appeal. It was urged by the appellant’s counsel that the tender was given for warehouses at 71 locations on March 12, 2020 for operation and management of the warehouses under Public Private Participation (PPP) Model. Certain queries were raised by the writ petitioners before the High Court (respondents before the SC) in respect of Clause 5(5) (i) of the notice inviting bid.
The said Clause reads as under: “The bidder (either directly or through its 100% owned subsidiary) should have experience in preservation, maintenance and storage of not less than 4.00 Lac MT on an average basis for last 3 Financial Years (2016-17 to 2018-19) of MSP procured food grain, pulses, oilseeds of Central/State Government agencies at par with CWC/SWC/FCI/NAFED etc. in any State/Union Territory across India.” There was pre-bid conference and thereafter certain clarifications/ amendments were issued. The Clause 5(5)(i) was retained as such. The writ petitions were filed challenging the tender conditions and the clarification issued. Such writ petitions were dismissed by the HC Single Bench on May 19, 2020. It was on May 20, 2020, technical bids were opened and the appellants in civil appeals arising out of 8 special leave petitions were found to be successful bidders.
A letter of intent was issued on May 21, 2020. In an intra-court appeal the HC passed an order stating that “In the meantime, status quo as on date shall be maintained till the next date. Other formalities may proceed, but the contracts shall not be signed without leave of this Court.” The High Court maintained the above interim order on June 10, 2020. Appellant’s counsel intimated to the Court that the order of May 29, 2020 has been complied with by appellant. He submitted that pleadings in the matter are complete and prayed for urgent disposal of the matter. Accordingly, the SC had fixed date for final disposal of the matter on July 6, 2020 and continued the interim order of May 29, 2020 till then.
The contention of the appellant’s counsel has been that what should be eligibility criteria is to be determined by the Agency inviting bids as it is the best judge of its requirement and expectations from the tenderer. Such condition cannot be challenged on the ground that in the earlier year such was not the condition or similar condition is not the condition of the tender in the other States. It was vehemently contended by Akhil Sibal, the Senior counsel appearing for the successful bidders that for 38 locations, the appellant granted short-term tender to the writ petitioners for 4 months in March, 2020 and the said time is due to expire on July 3, 2020. The writ petitioners are the short-term tenderers, who have offered 42% revenue to the State as against 71% of the revenue offered by the successful bidders after the competitive bidding. Therefore, the appellant will suffer huge financial loss if after the completion of the tender process, the tenderers are not permitted to manage and operate the warehouses.
Successful bidders’ counsel referred to Rule 70(8) of the Rajasthan Transparency in Public Procurement Rules, 2013 that acceptance of an offer is complete as soon a letter of intent is posted and/or sent by e-mail. Therefore, as far as the tenderer is concerned, the contract is complete. On the other hand, Senior counsel appearing for the writ petitioners pointed out that the special leave petitions are directed against an interim order, therefore, the SC should not interfere in the interim order, so passed. The Court has granted liberty to the appellant to seek leave from the HC for execution of the contract but instead of availing such remedy, the appellant approached the SC under Article 136 of the Constitution of India. The apex court did not find any merit in the argument that the Special Leave Petitions are directed against an interim order, therefore, the SC should not interfere in the order passed.
Though the SC generally do not interfere in an interim order passed in an appeal under Article 136 of the Constitution but when after the dismissal of the writ petition, the division bench has passed an order of stay without recording any reason affecting revenue of the State, the SC cannot permit the public interest to suffer. The question of grant of interim stay in contractual matters was examined by the SC in its judgement of the case – Raunaq International Ltd. v. IVR Construction Ltd. & Others –(1999) 1 SCC 492. It has observed that before entertaining a writ petition and passing any interim order in such petitions, the court must carefully weigh conflicting public interests. Only when it comes to a conclusion that there is an overwhelming public interest in entertaining the petition, the court should intervene.
The party at whose instance interim orders are obtained has to be made accountable for the consequences of the interim order. The public must be compensated both for the delay in implementation of the project and cost escalation resulting from such delay. Unless an adequate provision is made for this in the interim order, the interim order may prove counterproductive. Since the matters are pending for final determination before the High Court, the Supreme Court has refrained itself from making any comment upon the merits of the arguments advanced by the parties. In the matters of contract, 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.
Therefore, the finding of the Supreme Court is that the grant of interim order which impinges upon the grant of contract by the appellant is not in public interest and that too without recording any reasons when the writ petition was dismissed by the Single Judge. Consequently, the SC has set aside the orders of May 29, 2020 and June 10, 2020 granting status quo and allowed these appeals. However, the SC has made grant of contract subject to the orders which may be passed by the HC in the intra-court appeals pending before it.