"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.

Friday, May 8, 2015

Costs in Writs and Appeals Dealing with Commercial Disputes

Recently, a three-judge Bench of the Supreme Court held in the case of NTPC v. Ashok Kumar Singh (pdf) that where there was a clear clause in the Notice Inviting Tender that Earnest Money Deposit (EMD) would be forfeited on revocation of tender, forfeiture of EMD on the happening of such an event was valid.

The High Court in the Writ Petition (from which the matter went on appeal through an SLP) challenging forfeiture of EMD got confused between the rudimentary concepts of revocation of bid by the bidder and revocation of the notice inviting tender, and quashed the forfeiture. The Supreme Court reversed this decision and held that the revocation of the tender/ bid and consequent forfeiture was clearly covered under the conditions of the NIT.

Two aspects are noteworthy here:  
  1. The matter was worth only Rs.7.8 lakhs. For this, the case went up to the Supreme Court. I am not surprised if the total costs towards this litigation (including advocate fee, travel costs of NTPC officials, loss of manhours, etc.)(which is ultimately the tax payers’ money) would have been more than Rs. 7.8 lakhs. This is in addition to the precious judicial time (of the High Court and of the three judges of the Supreme Court).  
  2. Had the bidder been a private party, the case would have gone to the Civil Court. Merely because bidder could file a Writ Petition in what is actually a commercial dispute does not mean that the real nature of the dispute, that is, commercial, is lost. In such a scenario, I am aghast that the Supreme Court did not award costs in favour of NTPC. Costs shifting in writ petitions seeking redressal of commercial disputes should be the norm. This will eliminate frivolous challenges like the one in the present case.
The fact that such a simple dispute has gone to the level of the highest court is appalling. Thankfully, the Supreme Court had delivered an excellent judgement to correct the blunder of the High Court.

Frivolous challenges to Tender related decisions has become the norm, especially in the case of Tender Notices of Public Sector Undertakings which are generally government entities competing with private players in the market. In such cases, the courts should not treat challenges to decisions in Tender processes as violation of Article 14 simpliciter but should view these as commercial disputes. Compensatory costs would have twin benefits in such cases. One, it would reduce considerably frivolous challenges and thereby enhance the competitiveness of the PSUs and two, it would compensate, to an extent, costs incurred in litigating the case.
 
This could be implemented right away through a series of directions by the Supreme Court under Article 142 of the Constitution of India in an appropriate case.

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