The Supreme Court has recently emphasized the importance of judicial restraint when reviewing contracts that encompass technical matters, highlighting the need for a cautious approach in such cases.
The matter was heard before Chief Justice DY Chandrachud, Justice J B Pardiwala and Justice Manoj Misra
"..in contracts involving complex technical issues, the Court should exercise restraint in exercising the power of judicial review. Even if a party to the contract is ‘State’ within the meaning of Article 12 of the Constitution, and as such, is amenable to the writ jurisdiction of the High Court or the Supreme Court, the Court should not readily interfere in commercial or contractual matters,” a bench observed.
In the present case, Bharat Heavy Electricals Limited (BHEL) was granted a contract to establish the Yadadri Thermal Power Station with a capacity of 5x800 MW. BHEL then solicited bids to subcontract a portion of the project. Following this, the appellant, BTL EPC Ltd, was issued a letter of intent in recognition of its bid.
The case of the 1st Respondent(Macawber Beekay Pvt Ltd, a rival bidder) was that the Appellant had entered into a consortium agreement with a Chinese company to fulfil the eligibility conditions under the tender. On 23 July 2020, the Finance Ministry issued an order imposing a restriction that a prospective bidder from a country that shares a land border with India, would be eligible to bid only if such bidder is registered with the Competent Authority. The 1st Respondent approached the Karnataka High Court contending that the award of contract to the Appellant was in breach of the 2020 order the Finance Ministry. Their contention was that the Chinese company in question was not registered with the competent authority and hence the Appellant failed to meet the requirements for award of tender.
The Supreme Court was subsequently tasked with reviewing the appeal against the division bench of the Karnataka High Court. This division bench had invalidated the letter of intent that Bharat Heavy Electricals Limited (BHEL) had issued in favor of the Appellant. The High Court had ordered BHEL to assess the bid submitted by the 1st Respondent in accordance with the terms outlined in the tender notice.
In view of the submissions of the Appellant, the Apex Court held that the tendering authority was best suited to interpret the tender terms and that the High Court should not have interfered with the same:
“The Court ought to defer to the discretion of the tender inviting authority which, by reason of having authored the tender documents, is best placed to interpret their terms. The Courts ought not to sit as courts of appeal but review the decision-making process and examine arbitrariness or mala fides, if any.”
“Even in a writ appeal, it is well settled that the Division Bench would ordinarily not interfere with the judgment of a Single Judge unless it suffers from perversity or error,” the Supreme Court opined in this context.
The Court set aside the order of the Division Bench and restored the order of the Single Bench of the High Court.
Case Title: BTL EPC Lt V. Macawber Beekay Pvt Ltd, Civil Appeal No 5968 of 2023
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