Tender Inviting Authority Can't Bind Bidders When Market Is Substantially Altered Amid Delay In Opening Bids: Madras High Court

The Madras High Court has allowed a petition for quashing the tender process after the bidders approached the court citing Indonesia's ban on the export of RBD Palmolein and other palm products as a Force Majeure Event which made it impossible for them to complete the tender process.

Justice GR Swaminathan noted that Indonesia is a major supplier of Palmolein and therefore the ban order imposed by the said exporter itself has momentous consequences on the market.

The major factor that weighed with the court in granting relief was that the Tender Authority failed to open the bid on time and in the intervening period, the ban was imposed. Hence, it was of the view that though bidders offers constitute "Standing Offers" so as to bind them the moment the tenders were opened and accepted by the Respondent Corporation, however, this position will follow only where the tender had taken place as per the tender notification. 

In the present case, the court observed that the opening of the tender was delayed by seven days. In between this, an adverse development in the form of ban on exports by the Indonesian Government took place which would have a bearing on the price aspects as well as the availability of the commodity. If the same was known to the petitioners beforehand, they would not have offered the terms set out in the tender document.

"The tender inviting authority having failed to open the tenders at the notified time cannot now insist that the tender process must be taken to its logical conclusion after occurrence of the supervening events that fundamentally altered the market situation," the court said.

Background

The Tamil Nadu Civil Supplies Corporation issued a notification dated 04.04.2022 for the supply of 2,00,000 nos. of one litre Fortified RBD Palmolein oil pouches to which the petitioners applied in response. The tender date was fixed as 21.04.2022 but the price bids were opened only on n 28.04.2022 at 04.58 p.m. In the meanwhile, the Government of Indonesia imposed a ban on export of Palmolein oil and other products. 

The petitioners relied on Section 56 of the Indian Contract Act, 1872 and sought for quashing of the tenders citing Force Majeure.

On the other hand, respondents submitted that the petition was not maintainable as the tender notification provides for an arbitral remedy, and also since the issue arises out of a commercial contract, the petitioners could not approach the High Court to avail public law remedy. The respondents also submitted that the petitioners had not sent any communication before the opening of the tenders and chose to wait till the tenders were opened. 

The court overruled these arguments by citing the ratio laid down by the Supreme Court in U.P. Power Transmission Corporation Ltd. v.CG Power & Industrial Solutions Limited wherein the Apex court had held that the existence of an arbitration clause does not debar the court from entertaining a writ petition. The court observed that in the present case, there were no disputed questions of facts that would preclude the court from hearing the matter. 

The court then discussed Section 8 of the Tamil Nadu Transparency in Tenders Act, 1991, and Rule 21 of the Tamil Nadu Transparency in Tender Rules, 2000 which discusses the opening of tenders. Section 8 as well as Rule 21(1) contain the expression 'shall'. Even as per the Tender Notification, Clause 8 of the notification stated that the short e-tenders received upto 11.00 a.m. on 21.04.2022 will be opened by the Managing Director, Tamil Nadu Civil Supplies Corporation or any other authorised officer at 11.30 a.m. on 21.04.2022. 

In the case on hand, the conduct of the respondents was not in consonance with the statutory provision read with the relevant tender clause. 

The court relied on Jamshed Hormusji Wadia vs Board Of Trustees, Port Of Mumbai where the Supreme Court had held that instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts. 

Thus, the court, applying the principles of fairness and reasonableness was inclined to grant relief to the petitioners in light of three circumstances:

1. The supervening event has had a significant effect

2. The petitioners could not reasonably have contemplated the same at the time when they made the offer and 

3. It would be unjust to require them (petitioners) to stand by their offer

Case Title: M/s.KTV Health Foods Pvt Ltd v. Tamil Nadu Civil Supplies Corporation

Case No: W .P.Nos.11645 of 2022

Citation: 2022 LiveLaw (Mad) 285

Counsel for the Petitioner: Mr.Mani Sundargopal

Counsel for the Respondent: Mr.R.Shunmugasundaram, Advocate General Assisted by Ms.A.G.Shakeenaa Standing Counsel

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