"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, April 8, 2010

BSNL v. Telephone Cables

Court: Supreme Court of India 
Case No: Civil Appeal No. 868/ 2010 (SLP (C) No. 28248/ 2008
Date: 22.01.2010
Bench: RV Raveendran & KS Radhakrishnan, JJ

Facts:
27.03.2001: BSNL invited tenders through a notice inviting tenders
                 Subsequently, after evaluation of bidders, NICCO Corpn. had obtained the highest rating. Telephone Cables Ltd (TCL), however, contended that it had obtained the highest ratings and not NICCO.

11.09.2001: BSNL issued advance purchase orders to NICCO

18.09.2001: TCL filed a writ before the Delhi High Court praying for, inter alia, quashing of the advance purchase orders to NICCO.

29.04.2004: After almost three years, a Division Bench of the Delhi High Court held that the assessment of vendor rating by BSNL was erroneous and since BSNL had already warded contracts with respect to most of the quantity, the High Court ordered that for the quantity for which contract was not awarded, BSNL shall enter into contract with TCL for supply of such balance quantity if TCL obtains the highest rating. Further, even when no prayer was made by TCL for compensation, the High Court went on to hold that in case the petitioner is entitled to further supplies, it would be open to the petitioner to pursue remedies against the respondents for compensation or damages that may be available to it in law.

01.04.2005: BSNL filed a SLP against the decision of the Division Bench, which was dismissed.

26.10.2005: BSNL had already awarded purchase orders to  other contractors for the balance quantity  of the tender and even in these processes, TCL did not get the highest rating to it to be awarded the contract. Hence, TCL issued a notice contending that TCL was denied business opportunity and was therefore entitled to Rs. 10.6 crores as compensation.

10.07.2006: BSNL rejected TCL's demand

27.09.2006: A writ petition was filed before the Delhi High Court for payment of 10.6 crores as compensation  and Rs. 20,000 as costs. However, the said petition was withdrawn and he right to undertake appropriate actions for pursuing civil remedies were reserved. 

30.06.2007: TCL sent a notice invoking arbitration against BSNL demanding about Rs. 10.6 crores as damages.

17.07.2007: BSNL rejected the request for arbitration

01.08.2008: Consequent to an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, a single judge of the Delhi High Court allowed the application and appointed a retired judge of the same High Court as the arbitrator. 

BSNL filed an SLP before in the Supreme Court against against this order of the Delhi  High Court.

The Supreme Court noted that:
  •  Clause 30 of the Instruction to Bidders (ITB) did not contain a clause for reference of disputes to arbitration. It simply provided that courts at New Delhi would have jurisdiction to entertain claims arising out of the tender
  • There was no contract between TCL and BSNL. 
  • The invitation to tender barred claims from being made on account of rejection or non-acceptance of a bid.
In view of the above, the court allowed BSNL's appeal. There is nothing significant about this decision allowing the appeal as the law on this issue is fairly well settled. But what is worth noting is the two page obiter on:
  1. the practice of courts making observations regarding reservation of liberty of a litigant to seek further remedy to claim "non-existent rights". The court was right in pointing this aspect. In a case on the constitutional validity of a tax that I came across, the court had clearly granted an  interim stay against recovery of the tax till final disposal. Despite the same, the revenue chose to demand the said tax. When the demand was challenged in view of the stay order, the  High Court granted a stay order but the court went on to hold unnecessarily that the revenue could recover tax in accordance with law. Construing this part of the order of the High Court as authorising the revenue to demand the tax whose constitutional validity was under question, the revenue raised a further demand. We had to approach the court again for re-iterating the stay and preventing the revenue from raising further demands.
  2. the imprudent fetters imposed by the courts on the public sector undertakings (PSUs) in allowing them to conduct business. Historical reasons (such as monopoly of PSUs) no more exist to have the severe mechanisms to check arbitrariness of PSUs. Also, new means of checking illegal action of PSUs such as Right to Information Act etc have come. Hence the court correctly held  that a level playing field should be provided to the public sector under takings to compete with the private sector. 
A detailed analysis of the court-imposed fetters on PSUs would be the subject matter of a future post in this blog. 

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