2024 (7) TMI 860 - SC - Indian Laws

Attribution of bid to a bona fide mistake - prayer for recommencement of the e-auction process - bona fide and inadvertent human error - HELD THAT - It is well settled that, normally, the courts would be loath to interfere in commercial matters, especially when such interference has the effect of delaying the execution of mega projects of national importance. It is evident that while undertaking the exercise of judicial review of matters relating to tenders, the court has to strike a fair balance between the interests of the Government, which is always expected to advance the financial interests of the State, and private entities. As observed by this Court, not every small mistake must be perceived through the lens of a magnifying glass and blown up unreasonably. The present case is precisely of such a nature. A mere typographical error forms the fulcrum of the present lis and, thus, the principles of proportionality, reasonableness and equity demand that the appellant s grievance be heard. This Court, on the facts of the case in Patel Engineering Co. Ltd. 2001 (1) TMI 921 - SUPREME COURT , held that negligent mistakes in bid documents could not be permitted to be corrected on the basis of equity. There, the bidders had merely informed the State authorities of the alleged mistake in their bid more than two months after the same was announced in front of all the bidders who responded to the tender. It is as clear as daylight that the forfeiture of the entirety of the appellant s security deposit worth Rs 9,12,21,315/- as against evident human error, which has not been shown to even border on mala fides, or knowingly done, is punitive. The enforcement of an otherwise commercially unviable bid, with the forfeiture of the deposit hanging over the appellant s head akin to a sword of Damocles, can hardly be said to be in either party s best interests. Perhaps, the respondents could consider to provide a cross check and affirmation, from the party, to avoid human errors and mistakes. The impugned communication issued by the first respondent - The civil appeal stands partly allowed.

Summary

Issues Involved:
1. Bona fide mistake in bid submission.
2. Rectification of bid errors in e-auction.
3. Applicability of judicial review in commercial matters.
4. Proportionality of penalties in bid errors.
5. Equitable relief for mistakes in bids.

Issue-wise Detailed Analysis:

1. Bona fide mistake in bid submission:
The appellant mistakenly entered a bid of 140.10% instead of 104.10% during an e-auction for a mining lease. Despite realizing the error and immediately contacting the first respondent, the appellant's request for rectification was denied.

2. Rectification of bid errors in e-auction:
The appellant argued that the e-auction platform did not provide any option to correct or cancel an erroneous bid. The system only allowed the bid to be authenticated with a Digital Signature Certificate, without any scope for rectification or retraction. The Court noted that the appellant acted promptly upon realizing the mistake, contacting the first respondent immediately and sending an email within two hours after the auction concluded.

3. Applicability of judicial review in commercial matters:
The Court referred to its prior decision in Silppi Constructions Contractors v. Union of India and Ors (2019 SCC OnLine SC 1133), emphasizing that judicial review in commercial matters should be exercised with restraint. The Court should interfere only in cases of arbitrariness, irrationality, mala fides, or bias. The Court acknowledged that the present case involved a mere typographical error and thus warranted consideration under the principles of proportionality, reasonableness, and equity.

4. Proportionality of penalties in bid errors:
The Court considered whether the forfeiture of the appellant's security deposit of Rs 9,12,21,315/- was proportionate to the mistake made. The Court found that the punishment was disproportionate, especially since the error was a bona fide human mistake. The Court applied the doctrine of proportionality, which requires balancing the interests of the government and private entities, and ensuring that penalties are not excessively onerous.

5. Equitable relief for mistakes in bids:
The Court referred to W. B. State Electricity Board v. Patel Engg. Co. Ltd. (2001) 2 SCC 451, which outlines conditions under which equitable relief can be granted for mistakes in bids. The Court found that the appellant met these conditions: the mistake was promptly reported, and the appellant acted in good faith. The Court concluded that holding the appellant to the erroneous bid would be unconscionable and disproportionate.

Conclusion:
The Supreme Court set aside the impugned judgment and order of the High Court. The Court quashed the communication from the first respondent that accepted the appellant's erroneous bid. The Court allowed the respondents to conduct a fresh e-auction and directed the appellant to pay Rs 3,00,00,000/- as a penalty for the mistake, with specific allocations for the amount paid. The civil appeal was partly allowed, with each party bearing their own costs.