SC upholds NHAI decision to annul bidding process for project

The Supreme Court on Tuesday upheld the National Highways Authority of India’s (NHAI’s) decision to annul its tendering process for six-laning of the Kagal-Satara section of NH48 in Maharashtra The NHAI, the court said, is free to determine what it considers to be a reasonable bid and can also, at any time, decide to withdraw the tender.

The NHAI had annulled the bidding process in March this year mentioning “administrative reasons/issues” as the reason for annulment on its website.

Malaysian company IJM Corporation Berhad, which had emerged as the sole bidder for the NHAI’s tender, had challenged the decision alleging that this annulment of the tender was arbitrary and done in an illegal manner, and against all extant policy guidelines. It further said that it had satisfied all the requirements under the request for proposal (RFP) as well as the NHAI’s policy circular, and should have been awarded the works for Package-1. “As per the settled law, the NHAI does not have the unfettered discretion to reject bids and cannot act arbitrarily against its own guidelines and also deprive IJM of its constitutional and legal rights,” the appeal said, while challenging the Delhi High Court’s May 12 judgment that dismissed the company’s petition.

A bench led by Justice Indira Banerjee also rejected IJM’s appeal, reiterating that the foreign company had no right to be privy to the commercial estimation and decision that the NHAI may arrive at, as that is a matter over which the NHAI is entitled to maintain confidentiality to safeguard its financial interest. It said that there is no case of change of rules of the game midway.

“It is open to the entity floating the tender to determine for itself what it considers to be reasonable bid expected in such tender. This exercise can be undertaken by it any time during the tender process, as no vested right to award of tender is created in favour of any party only because it is found to be L1 or H1 in the tender. The entity floating the tender can at any time decide to withdraw the tender, provided the same is for valid and germane reason and not actuated by any malice,” the HC had stated.

While the authority had refused to allow inspection of the original documents as directed by the HC, the NHAI on May 2 had intimated the company that it was expecting premium at the rate of 10.77%, and its board did not agree to awarding the project to IJM and directed for restructuring and rebidding for the project.

This alleged expectation of the NHAI was contrary to the tender documents and amounted to changing the rules of the game when the same had already started, senior counsel Ranjit Kumar argued on behalf of IJM.

“… In PPP projects in road sector under BOT (toll model) it is the concessionaire, which incurs the entire cost of constructions of the road and operates and maintains it at its own cost, and transfers the entire asset to NHAI at the end of the concession period,” he argued.

While the concessionaire recovers the entire cost of construction, operation and maintenance (which includes its equity investment and debt) along with reasonable profits, by collecting toll, the NHAI, without investing, gets a duly constructed and maintained road at the end of the concession period, which it can further use for commercial exploitation, the Malaysian firm stated in its appeal filed through counsel Abhishek Singh. It added that in a PPP project, no public money is involved and therefore, there is no loss to the public exchequer.

Senior counsel Prag Tripathi and counsel Abhay Gupta appeared for the NHAI.