A) Abstract / Headnote

This judgment addresses the legality of a decision by the Himachal Pradesh Housing and Urban Development Authority (HIMUDA) to cancel and subsequently restore a tender awarded to Respondent No. 2, M/s Vasu Constructions. The Supreme Court scrutinized procedural irregularities, bias, and collusion, emphasizing accountability in public tender processes. It held that a Letter of Intent (LOI) does not establish binding legal rights, criticizing HIMUDA’s actions for violating principles of transparency and fair competition. The judgment quashed the impugned High Court order and imposed heavy costs on HIMUDA, advocating for adherence to due process in tender matters.

Keywords: Tender irregularities, public exchequer, procedural malfeasance, LOI non-binding, Article 12 liability.

B) Case Details

i. Judgment Cause Title: Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban Development Authority & Another

ii. Case Number: Civil Appeal No. 4626 of 2024

iii. Judgment Date: 2nd April 2024

iv. Court: Supreme Court of India

v. Quorum: Justice Bela M. Trivedi and Justice Pankaj Mithal

vi. Author: Justice Bela M. Trivedi

vii. Citation: [2024] 4 S.C.R. 1; 2024 INSC 257

viii. Legal Provisions Involved:

• Constitution of India – Article 12
• Tender law principles concerning LOI

ix. Judgments Overruled (if any): None explicitly overruled.

x. Case Related to: Administrative Law, Constitutional Law, Public Contracts.

C) Introduction and Background of the Judgment

This appeal arose from a contentious tendering process initiated by HIMUDA in 2018 for constructing a commercial complex in Shimla. Gross irregularities in bid evaluation prompted cancellation of the initial tender and issuance of fresh bids. Subsequent legal challenges questioned the tender’s reinstatement favoring M/s Vasu Constructions. The High Court, by accepting statements from HIMUDA and the favored bidder, sanctioned continuation of the tender despite prior findings of irregularities. The Supreme Court intervened to uphold transparency and fairness in public contracts.

D) Facts of the Case

1. HIMUDA issued a Notice Inviting Tender (NIT) in November 2018 for a project valued at ₹45.05 crore.
2. The technical and financial bids were opened in December 2018. The appellant (Level 9 Biz Pvt. Ltd.) qualified technically but ranked L2, while M/s Vasu Constructions was declared L1.
3. A Letter of Intent (LOI) was issued to M/s Vasu Constructions, but pending litigations led to its withdrawal in January 2019.
4. Independent committees formed by HIMUDA and the High Court identified significant irregularities, including favoritism and technical ineligibility of M/s Vasu Constructions.
5. In 2021, HIMUDA canceled the tender based on findings from these committees and issued fresh bids.
6. M/s Vasu Constructions challenged this cancellation in a writ petition, which was disposed of by the High Court in 2022 without substantive adjudication, allowing continuation of the earlier tender.
7. The appellant approached the Supreme Court, alleging malafide intent and collusion between HIMUDA and M/s Vasu Constructions.

E) Legal Issues Raised

1. Could a High Court dispose of a writ petition by merely accepting statements from the tenderee (HIMUDA) and the successful bidder without scrutinizing prior findings of irregularities?
2. Does an LOI confer legal rights to a bidder in the absence of a formal agreement?
3. Was HIMUDA’s conduct in reinstating the tender process contrary to the principles of fairness and transparency under Article 12?

F) Petitioner’s Arguments

• The petitioner contended that the High Court disregarded findings of gross irregularities established by independent committees.
• It argued that permitting the execution of the project without reopening bids violated principles of competitive fairness.
• The petitioner emphasized the non-binding nature of the LOI, which negates any automatic rights for the favored bidder.

G) Respondent’s Arguments

• HIMUDA claimed that reinstating the tender served public interest by avoiding project delays.
• Respondent No. 2 asserted readiness to execute the project under previously agreed terms, alleging no prejudice to competing bidders.

H) Related Legal Provisions

1. Constitution of India – Article 12: Defines “State” and imposes obligations for adherence to fairness and public accountability.
2. Tender Law: Principles requiring transparency, fairness, and equality in public procurements.

I) Judgment

a. Ratio Decidendi

1. The Letter of Intent (LOI) is non-binding and does not create enforceable contractual rights unless followed by a formal agreement.
2. HIMUDA, as a “State” entity under Article 12, must act transparently, ensuring procedural fairness in tendering.

b. Obiter Dicta

1. The Court criticized the tendency of public entities to misuse judicial processes to justify irregular actions.
2. It emphasized the need for judicial oversight in ensuring fair competition in public contracts.

c. Guidelines Issued

• Independent committees’ findings must guide tender cancellations and reinstatements.
• Affected parties must be heard in legal challenges concerning public tenders.
• Fresh bids should be called where prior processes are found tainted.

J) Conclusion and Comments

This judgment underscores the judiciary’s role in safeguarding fairness in administrative decisions involving public resources. The Supreme Court’s imposition of costs on HIMUDA reflects accountability and deterrence against malfeasance in state actions.

K) References

Important Cases Referred

• Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. (2016) 11 SCC 592: On judicial interference in tender processes.
• B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548: On the binding nature of LOIs.

Important Statutes Referred

• Constitution of India, Article 12