As per case facts, an auction notice for a sand quarry lease was issued, and the highest bidder's bid was declared non-responsive by the Tender Committee for failing to submit ...
No Acts & Articles mentioned in this case
2025 INSC 1295
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2025
(@ OUT OF S.L.P. (C) NO. 5829 OF 2023)
M/S SHANTI CONSTRUCTION PVT. LTD. …APPELLANT
VERSUS
THE STATE OF ODISHA & ORS. …RESPONDENT S
WITH
CIVIL APPEAL NO. OF 2025
(@ OUT OF S.L.P. (C) NO.16140 OF 2023)
JUDGMENT
ALOK ARADHE, J.
Leave granted.
2. Both these appeals emanate from the judgment dated
01.03.2023 passed by the High Court of Orissa in a writ petition.
These appeals involved the issue of interpretation of the term
‘previous Financial Year’ as defined in Rule 27(4)(iv) of Odisha
Minor Mineral Concession Rules, 2016 (hereinafter, referred to as
‘the Rules’).
2
3. The relevant facts leading to filing of these appeals are as
under.
3.1 The Tehsildar, Tangi Chowdwar, Cuttack on 11.07.2022
issued a notice inviting bids for extraction of sand on lease for a
period of five years of Mahanadi Sand Quarry under Tehsil Tangi
Chowdwar, District Cuttack, in the State of Orissa (hereinafter,
referred to as ‘auction notice’). The bids were required to be
submitted in a sealed cover on or before 18.07.2022. The sealed
envelopes were to be opened on 19.07.2022 and after verification
of bid documents, the lease was to be granted in favour of the
highest bidder. Clause 5 of the tender incorporates provision of
the amended Rule 27(4)(iv) of the Rules and requires the bidders
to submit either (i) Income Tax Return of previous financial year
showing annual income for an amount not less than the amount
of additional charge offered and the royalty payable for the
minimum guaranteed quantity for one whole year; Or (ii) Bank
Guarantee valid for a period of eighteen months for the amount
not less than the amount as above.
3.2 In response to the auction notice, 20 bidders submitted
their bids. The unsuccessful bidder submitted its bid for grant of
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quarry lease for a period of five years quoting rate of Rs.2127.27
per cubic meter, whereas, the successful bidder submitted its bid
quoting a rate of Rs.1250/- per cubic meter.
3.3 The Tender Committee in its meeting held on 19.07.2022
examined the bids. The bid of the unsuccessful bidder who had
quoted the highest rate was declared non -responsive on the
ground that it failed to comply with provision of Rule 27(4)(iv) of
the Rules, as it did not submit the Income Tax Return for
financial year 2021-2022. The bid of the successful bidder was
found to be technically responsive and he was declared to be the
highest bidder.
3.4 The Tehsildar on 25.07.2022 issued Form -F by which
intimation was sent to the successful bidder informing him that
he is successful bidder and he was called upon to (i) convey his
acceptance to the terms and conditions and (ii) to deposit an
amount of Rs.1,26,75,000/- under Rule 27(7) and 27(9) of the
Rules. The successful bidder on 25.07.2022 conveyed his
acceptance to the terms and conditions prescribed in the
communication dated 27.07.2022 and deposited an amount of
Rs.1,26,75,000/- through RTGS from Bank of India.
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3.5 The unsuccessful bidder filed a writ petition , on
10.08.2022, before the High Court, in which challenge was made
to award of tender in favour of successful bidder. The High Court
by an ex-parte interim order dated 24.08.2022 directed that any
action taken in pursuance of issuance of Form-F to the
successful bidder shall not be given effect to till further orders.
3.6 The High Court by an order dated 01.03.2022 inter alia
held that bid of the unsuccessful bidder was rightly rejected on
account of non-compliance with Rule 27(4)(iv) of the Rules and
upheld the grant of tender in favour of successful bidder.
However, the High Court held that there is a huge difference
between the rates quoted by unsuccessful and successful bidder
and the grant of tender to successful bidder shall result in huge
loss to public exchequer. The Tehsildar was, therefore, directed to
call upon the successful bidder to match the highest price offered
by the unsuccessful bidder, in the interest of the State exchequer
and public at large. The unsuccessful bidder is aggrieved by the
impugned judgment in so far as it upholds the rejection of its bid,
whereas the successful bidder is aggrieved by the impugned
judgment in so far as it requires him to match bid of the
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unsuccessful bidder. In the aforesaid factual background, both
the unsuccessful bidder as well as the successful bidder, are
before us.
4. A Bench of this Court in the Special Leave Petition filed by
the unsuccessful bidder, granted an ad -interim order on
29.03.2023, directing the parties to maintain status quo in
relation to the contract in question until further orders.
5. Learned senior counsel for the unsuccessful bidder
submitted that the Tender Committee ought to have appreciated
that the unsuccessful bidder had submitted the Income Tax
Return for the financial year 2020-2021 along with its bid. It is
further submitted that Tender Committee ought to have
appreciated that the tender was floated in the midst of the year
and the unsuccessful bidder had filed the provisional balance
sheet for the financial year 2021-2022, as, the last date for filing
the Income Tax Return for unsuccessful bidder , which is a
company, was 31.10.2022. It is, therefore, urged that Tender
Committee had misinterpreted Rule 27(4)(iv) of the Rules and it
ought to have appreciated that the unsuccessful bidder had
complied with the mandate of the Rule. It is urged that the High
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Court has failed to exercise its jurisdiction under Article 226 of
the Constitution of India. It is pointed out that out of the period
of five years of lease, a period of three years and three months,
has already expired. Therefore, in the facts and circumstances of
the case, the Tehsildar be directed to issue a fresh tender. In
support of aforesaid submissions, reliance has been placed on
the decisions in B.S.N. Joshi & Sons Ltd. v. Nair Coal Services
Ltd. & Others
1
, Jagdish Mandal v. State of Orissa & Others
2
and UFLEX Limited v. Government of Tamil Nadu & Others
3
.
6. Learned counsel for the State submitted that it is ready and
willing to award the tender for the remainder of the period in
favour of successful bidder, on the rate quoted by the
unsuccessful bidder. Alternatively, it is submitted that
respondent Nos. 1 and 2 are willing to refund the amount
deposited by the successful bidder without any interest, as the
lease deed could not be executed in favour of successful bidder
due to the litigation.
1
(2006) 11 SCC 548
2
(2007) 14 SCC 517
3
(2022) 1 SCC 165
7
7. On the other hand, learned counsel for the successful
bidder urged that the decision of the Tender Committee which
rejected the bid of the unsuccessful bidder is justified, as it failed
to comply with Rule 27(4)(iv) of the Rules. It is pointed out that
the Income Tax Returns now produced by the unsuccessful
bidder do not disclose an annual income above the threshold
value. It is urged that, in the absence of arbitrariness or mala
fides, the terms of a Tender are not open to judicial scrutiny. In
support of aforesaid submission, reference has been made to a
decision of this Court in Afcons Infrastructure Ltd. v. Nagpur
Metro Rail Corporation Ltd. & Anr.
4
It is contended that upon
declaration of successful bidder coupled with acceptance of terms
and conditions of the grant and on deposit of statutory amount, a
vested right is created in favour of a successful bidder and
execution of formal lease deed is a ministerial act. In support of
aforesaid submission, reliance has been placed on decisions of
this Court in Gujarat Pottery Works v. B.P. Sood, Controller
of Mining Leases for India
5
, Bhushan Power and Steel Ltd. v.
S.L. Seal, Addl. Secretary (Steel and Mines), State of Odisha
4
(2016) 16 SCC 818
5
1966 SCC OnLine SC 126
8
& Ors.
6
and a decision of Karnataka High Court in Aane Mines
and Minerals, Nagarjuna Hills, Panjagutta, Hyderabad v. State
of Karnataka & Another
7
.
8. It is submitted that delay in execution of the lease deed is
not attributable to the successful bidder and the lease deed could
not be executed due to litigation. It is further submitted that an
act of Court cannot prejudice a party i.e. actus curiae neminem
gravabit. In support of aforesaid proposition, reference has been
made to a decision in Doiwala Sehkari Shram Samvida Samiti
Ltd. v. State of Uttaranchal and Ors.
8
It is contended that
public auctions are corner stones of public accountability and
transparency and concluded auction in the absence of mala fides
or breach of law should not be cancelled. In support of aforesaid
submission, reliance has been placed on the decisions in Subodh
Kumar Singh Ratho ur v. Chief Executive Officer and Ors.
9
and Prakash Asphaltings and Toll Highways (India) Ltd. v.
6
(2017) 2 SCC 125
7
2019 SCC OnLine Kar 3791
8
(2007) 11 SCC 641
9
2024 SCC OnLine SC 1682, (2024) 15 SCC 461
9
Mandeepa Enterprises and Ors.
10
Lastly, it is contended that
the successful bidder is now ready to match the rates offered by
the unsuccessful bidder and therefore, the Tehsildar be directed
to execute the lease deed in favour of the successful bidder for a
fresh period of five years.
9. We have considered rival submissions and have perused the
record. The contours of judicial review in contractual matters are
settled by a long line of authority. The ‘heart beat of fair play’ in
tender matters is non-arbitrariness and fairness in State action.
The court’s interference is limited to cases where the decision
making process is shown to be arbitrary, irrational, mala fide or
contrary to public interest. (See : Michigan Rubber (India) Ltd.
v. State of Karnataka & Others
11). The same principle resonates
in Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal
Ltd. & Others
12 wherein this Court reiterated that decisions of
the Government must be free from arbitrariness and guided by
the constitutional mandate contained in Article 14 of the
Constitution of India. The principle of restraint enunciated in
10
2025 SCC OnLine SC 1959
11
(2012) 8 SCC 216
12
(2024) 10 SCC 273
10
TATA Cellular v. Union of India
13
that Courts do not interfere in
contractual matters of the State, is accompanied by an equally
strong duty to intervene in decision making process if the same is
irrational, perverse or against public interest.
10. A public tender is not a private bargain. It is instrument of
governance, a mechanism through which the State discharges its
solemn duty as trustee of public wealth. Its purpose is not merely
procedural compliance, but maximisation of public value through
a process i.e. fair, transparent and competitive. The obligation of
the Tendering Authority is therefore twofold, namely, to interpret
its own terms with consistency and to ensure that such
interpretation advances, not defeats, the object of tender. The
court must intervene in a case of demonstrable misconstruction
of a tender condition or irrationality which affects the public
interest. When an interpretation of a tender condition narrows
competition and excludes the highest bidder on a ground
unsupported by law, the decision making process is vitiated. The
interpretation of the terms of tender must, therefore, serve the
13
(1994) 6 SCC 651
11
object and purpose of the tender mainly to maximise the revenue
to the State, when it deals with a natural resource.
11. Now, we apply the aforesaid well settled legal principles to
the facts of these cases. The controversy in both these appeals
essentially turns upon the correct interpretation of Rule 27(4)(iv)
of the Rules, as amended on 11.03.2022. The said Rules reads as
under :-
“(iv) Income Tax Return of previous financial
year showing annual income for an amount not
less than the amount of additional charge
offered and the royalty payable for the
minimum guaranteed quantity for one whole
year or Bank guarantee valid for a period of
eighteen months for the amount not less than
the amount as above.”
12. Clause 5 of the auction notice which substantially
incorporates the aforesaid Rule is extracted below:-
“5. As per the provision of Section 27(4)(iv) of
the OMMC Rules 2016, the applicant has to
deposit the equivalent amount of the royalty
against the minimum guaranteed quantity
(MGQ) and the proposed additional charges or
a bank guarantee of more than that amount
valid for next 18 months or the income -tax
return of the previous financial year. Bank
Guarantee > MGQ X (Royalty + offered
Additional Charge).
12
13. Thus, Clause 5 of the auction notice which incorporates
Rule 27(4)(iv) of the Rules and inadvertently refers to it as Section
24(4) of the Rules, mandates the applicant (i) to deposit the
equivalent amount of royalty against the minimum guarantee
quantity and the proposed additional charges or a (ii) bank
guarantee of more than that amount valid for next 18 months or
(iii) the Income Tax Return of previous financial year.
14. The unsuccessful bidder is a company. It is axiomatic from
the stand taken by the State in its counter, that the unsuccessful
bidder had filed the Income Tax Return for the Financial Year
2020-2021. The auction notice was issued in the midst of the
year i.e. on 11.07.2022. The proper construction of the phrase
‘previous Financial Year’ therefore, assumes critical importance.
Rule 27(4)(iv) of the Rules requires the bidder to produce an
Income Tax Return of the “previous Financial Year”. The said
Rule has to be read in harmony with the provisions of the Income
Tax Act, 1961. Under Section 139(1) of the aforesaid Act, a
company may file the Income Tax Return for the Financial Year
2021-2022 up to 31
st of October, 2022. As per auction notice, the
bids were required to be submitted on 18.07.2022. The period for
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filing the Income Tax Return for Financial Year 2021-2022
(relevant to Assessment Year 2022-2023) was yet to expire.
Therefore, on the said date the bidder could not have been
expected to file an Income Tax Return for Financial Year 2021-
2022 along with its bid documents, as the statutory period for
filing the same had not expired.
15. The reasonable understanding of the term ‘previous
Financial Year’ must therefore, be treated to mean the year
immediately preceding Financial Year i.e. 2020-2021, for which
the unsuccessful bidder had filed the Income Tax Return. The
term ‘previous Financial Year’ in the case of unsuccessful bidder
was to be treated as Financial Year 2020-2021 and not 2021-
2022. The aforesaid interpretation is in consonance with the
provisions of the Income Tax Act, 1961. The Tender Committee,
however, proceeded on a narrow and erroneous understanding of
the expression of the term ‘previous Financial Year’ and
erroneously concluded that since the unsuccessful bidder had
not filed the Income Tax Return for Financial Year 2021-2022,
therefore it had not complied with the mandate contained in Rule
27(4)(iv) of the Rules. The Tender Committee has erroneously
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interpreted the tender condition which excludes the highest
bidder and defeats the purpose of the tender. Such an
interpretation by the Tender Committee undermines the principle
that State must act to enhance and not diminish, the public
exchequer in case it is dealing with natural resources. When an
authority acting under a tender misinterprets the tender
condition that diminishes competition and deprives the State of
its legitimate revenue, the constitutional duty of the court to
interfere is beyond question. The High Court while deciding the
writ petition has failed to advert itself to the aforesaid aspect of
the matter. The impugned judgment passed by the High Court,
therefore, cannot be sustained. In view of our aforesaid
conclusion, it is not necessary for us to advert to various other
contentions urged by the parties.
16. Now, we advert to the relief which may be granted to the
unsuccessful bidder. It is well settled that tenders and public
auctions, specially for natural resources, are not mere
commercial transactions, but an exercise in public trust. The
State as custodian of natural wealth is obligated to secure the
best value for public resources consistent with the principles of
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fairness and transparency [(See : Natural Resources Allocation,
In Re, Special Reference No.1 of 2012
14
and Subodh Kumar
Singh Rathour (supra)]. In the instant case, the auction notice
was issued on 11.07.2022. The Tehsildar issue d a Form-F in
favour of the successful bidder on 25.07.2022. The bid of the
successful bidder was accepted for a period of five years, out of
which a period of three years and three months has already
lapsed. There is no material on record to indicate the present rate
of sand per cubic meter. However, there is an upward trend so
far as prices of sand is concerned which can safely be inferred
from the fact that successful bidder after filing the Special Leave
Petition, at the time of hearing of the appeal, has submitted that
successful bidder is now willing to match the rate offered by the
unsuccessful bidder. However, the successful bidder is entitled to
refund of the amount deposited by him along with interest on the
principle of restitution. Therefore, in the facts and circumstances
of the case, we issue following directions :-
(i) The impugned judgment dated 01.03.2023 passed in
Writ Petition (C) No. 20402 of 2022 passed by the High
Court is quashed and set aside.
14
(2012) 10 SCC 1
16
(ii) The Tehsildar Tangi Chowdwar, Cuttack, shall issue a
fresh auction notice for grant of lease of extraction of
sand for Mahanadi Sand Quarry as per Odisha Minor
Mineral Concession Rules, 2016.
(iii) The unsuccessful and successful bidders, including all
concerned, shall be entitled to submit their bids.
(iv) The contract for extraction of sand shall be awarded in
respect of Mahanadi Sand Quarry in accordance with
Odisha Minor Mineral Concession Rules, 2016.
(v) The State shall refund the amount deposited by the
successful bidder within 30 days along with interest at
the rate of 6% per annum from the date of deposit till
such payment is made.
17. Accordingly, the appeals are disposed of.
……………….……………J.
[SANJAY KUMAR]
..…….…………………….J .
[ALOK ARADHE]
NEW DELHI,
NOVEMBER 7, 2025.
In a significant ruling, the Supreme Court of India addressed a critical aspect of Tender Conditions Interpretation, specifically focusing on the term 'previous Financial Year' within the context of the Odisha Minor Mineral Concession Rules, 2016. This judgment, M/S Shanti Construction Pvt. Ltd. v. The State of Odisha & Ors. (2025 INSC 1295), now stands as a crucial reference point for legal professionals and is readily available on CaseOn, offering detailed insights into its implications for tender processes involving natural resources.
The central legal question before the Supreme Court was whether the Tender Committee correctly interpreted the term 'previous Financial Year' as defined in Rule 27(4)(iv) of the Odisha Minor Mineral Concession Rules, 2016 (hereinafter referred to as 'the Rules'). This interpretation directly impacted the rejection of the highest bidder's tender for a sand quarry lease, raising concerns about fairness, competition, and public interest.
The core of this dispute lies in:
The case originated from an auction notice issued on July 11, 2022, for a sand quarry lease. Bids were to be submitted by July 18, 2022. The Tender Committee rejected the bid of M/S Shanti Construction Pvt. Ltd. (the unsuccessful bidder), who had quoted the highest rate, on the grounds that it failed to submit the Income Tax Return for the financial year 2021-2022, as required by Rule 27(4)(iv).
The unsuccessful bidder argued that, being a company, the statutory deadline for filing its ITR for FY 2021-2022 was October 31, 2022. Since the auction notice was issued in July 2022, before this deadline, it was impossible to submit the ITR for 2021-2022. Instead, it had submitted the ITR for the preceding financial year, 2020-2021. The bidder contended that the Tender Committee misinterpreted 'previous Financial Year' and that the High Court failed to exercise its jurisdiction appropriately, especially given that a significant portion of the five-year lease period had already elapsed due to litigation.
The State initially offered to award the tender to the successful bidder at the higher rate or refund the amount deposited. The successful bidder, while acknowledging its willingness to match the higher rate during the appeal, argued that its initial acceptance of the tender created a vested right. It further contended that any delay in lease execution was due to court proceedings, aligning with the principle of actus curiae neminem gravabit.
The Supreme Court found that the Tender Committee's interpretation of 'previous Financial Year' was indeed erroneous and narrow. When the auction notice was issued on July 11, 2022, the ITR filing period for FY 2021-2022 (Assessment Year 2022-2023) had not yet expired for companies. Therefore, the reasonable interpretation, in consonance with the Income Tax Act, 1961, was that the 'previous Financial Year' should refer to the financial year immediately preceding the one for which returns were due but not yet filed—namely, FY 2020-2021. The Court emphasized that a public tender is not a private bargain but an instrument of governance aimed at maximizing public value, especially concerning natural resources. The Tender Committee's misinterpretation led to diminishing competition and depriving the State of legitimate revenue, thereby vitiating the decision-making process.
For legal professionals tracking such complex rulings, CaseOn.in offers invaluable 2-minute audio briefs that distill the essence of these judgments, making it easier to grasp the nuances of the court's reasoning and its practical implications, even for intricate cases involving tender conditions and statutory interpretations.
The Supreme Court quashed and set aside the High Court's judgment. It ruled that the rejection of the unsuccessful bidder's highest offer was based on an incorrect interpretation of the tender conditions. Recognizing that a substantial part of the lease period had passed, and to ensure fairness and maximize public revenue, the Court issued the following directions:
This judgment serves as a vital read for several reasons:
Disclaimer: All information presented in this blog post is for informational purposes only and does not constitute legal advice. Readers are encouraged to consult with a qualified legal professional for advice pertaining to their specific circumstances.
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