LEVEL 9 BIZ PVT. LTD. V. HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY & ANR

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(Civil Appeal No. 4626 of 2024)+++

02 April 2024

CITATION	[2024] 4 S.C.R. 1; 2024 INSC 257
YEAR OF JUDGEMENT	2024
STATUTES REFFERED	Administrative law, Constitution law & Public contracts.
PETITIONER	Level 9 BIZ Pvt. Ltd.
RESPONDENT	HIMUDA & M/s. Vasu Constructions
BENCH	Bela M. Trivedi & Pankaj Mithal, JJ.

INTRODUCTION

Matter deals with the order delivered by the High Court of Himachal Pradesh and its correctness, disposing the writ petition by accepting the statements of the legal representatives of (respondent no. 1-tenderee) HIMUDA and (respondent no. 2-successful bidder) M/s. Vasu Constructions, permitting (HIMUDA) HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY to withdraw the cancellation of initial tendering process order and permitting M/s. Vasu Constructions to perform the conditions of the project in the same sense as in the initial tender, although the said tender was withdrawn already by the (HIMUDA) HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY in view of the report of the independent Committee confirming gross irregularities and illegalities committed by the officers of the HIMUDA.

FACTS OF THE CASE

The case revolves around a Notice issued by HIMUDA inviting for tender on 15/16 November 2018 for the construction of a commercial complex at Vikas Nagar, Shimla valued Rs. 45.05 crore. The Technical and Financial Bids were open in December 2018 where the Appellant (Level 9 BLZ Pvt. Ltd.) and Respondent (M/s. Vasu Constructions) were both found to be qualified but the Appellant was ranked L2 and the respondent was ranked L1. A Letter of Intent (LOI) was issued by M/s. Vasu Constructions (Respondent 1) in the favour of HIMUDA (Respondent 2) but after the Writ petition filed by Dilip S. Rather (unsuccessful bidder) and the issuance of Notice from the High Court, it was withdrawn by the HIMUDA stating the pendency of case in the High Court in January, 2019. Independent Committee was also formed by HIMUDA (HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY) after whose report the High Court identified Prima Facie irregularities, favouritism and ineligibility of M/s. Vasu Constructions (Respondent 2). In 2021, (HIMUDA) HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY cancelled the tender after the order of the court and issued fresh bids. M/s. Vasu Constructions challenged the cancellation in a writ petition which was disposed by the HC in 2022 without substantive adjudication, allowing continuance of the earlier tender. The appellant approached the Supreme Court under the Special Leave Petition (SLP) challenging the impugned decision of the High Court alleging malafide intent and collusion between Respondent 1 &2.

ISSUES RAISED

The question put before was that whether the High Court could have disposed of the (CWP) Civil Writ Petition by simply accepting the statements of the advocates representing (HIMUDA) HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY and M/s. Vasu Constructions without reviewing the report made by the Committee constituted by the High Court confirming gross irregularities and illegalities committed by the officers of HIMUDA?
It was questioned that whether the Letter of Intent (LOI) is merely an expression of intention to enter into a contract or does it create any right in favour of the party to whom it is issued and is there any binding legal relationship between the party issuing the LOI and the party to whom such LOI is issued?
It was asked that whether the (respondent no.1) HIMUDA’s conduct is contrary to principles of fairness and transparency within the meaning of Article 12 of the Constitution of India with HIMUDA being a ‘State’?

ARGUMENT OF THE PETITIONER

Advocates-on-Record (AOR) Ritesh Khatri was representing the petitioner.
The petitioner argued that the High Court neglected the report/findings of the Committee constituted by the single judge bench of the High Court that there were irregularities and illegalities committed by the officers of the HIMUDA in allotment of the tender and that M/s. Vasu Constructions wasn’t technically qualified.
The Petitioner argued that it was violation of principle of Fair Competition from the High Court to give opportunity of hearing to the HIMUDA and M/s. Vasu Constructions before passing the impugned order of disposing of the petition on the basis of statements of the legal representatives for the respondent number 1 (the HIMUDA) & respondent number 2 (M/s. Vasu Constructions) and permitting them to go ahead with execution of the work as per the initial tender which was already cancelled by the HIMUDA without reopening bids.
The Petitioner contented that the non-binding of the Letter of Intent (LOI) cancels all the rights for the favoured bidder from the side of tenderee.

ARGUMENT OF THE RESPONDENT

Advocates-on-Record (AOR) Shankar Divate was the legal representative for the respondent.
HIMUDA contested that the competent authority had withdrawn the cancellation of initial tendering process for avoiding any further public delay and that the project cost is going to be enhanced due to delay in execution of the project, which will cause additional burden on the public exchequer.
The Respondent number 2 (M/s. Vasu Construction) had contended that offer made by the (respondent number 1) HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY (HIMUDA) is acceptable and they are ready to execute the project on the same terms and conditions and rates as per initial tender of 2018.

PRINCIPAL APPLIED

The case deals with the Article 12 of the Constitution of India which defines ‘State’ and puts upon the state a burden to stick to the process if fairness and accountability to the public. Further the Tender Law was checked in the case where the principles requiring fairness, equality and transparency in the public procurement was resolved through the judgement. The court also fixed the need of a detailed agreement/ contract between the parties after the LOI (Letter of Intent) is received by the other party in cases related to mega scale.

JUDGEMENT

The Bench of Bela M. Trivedi & Pankaj Mithal held that when the common order was passed in the Writ Petition No. 3021 of 2018 filed by the petitioner Dilip Singh and Writ Petition No. 363 of 2019 filed by the present complainant (Level 9 BIZ Pvt. Ltd.), recording the said findings of the commission appointed by it, pursuant to which order, the replier no. 1 had cancelled the tender on 05.02.2021 and had issued a new Notice of Tender (NIT).

It was peremptory on the part of the respondent no. 2 to implead the said two pleaders as the party repliers in the new solicitation filed by it i.e. 1481/2021. It was illegal on the part of the High Court to give occasion of hail to the HIMUDA and M/ s. Vasu Constructions before passing the impugned order of disposing the petition after the statements of the lawyers for to the HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY (HIMUDA) and M/ s. Vasu Constructions and permitting them to go ahead with prosecution of the work through original tender which was formerly cancelled by the HIMUDA.

Indeed, an LOI was issued by the HIMUDA in favour of M/ s. Vasu Construction but the same was withdrawn due to the pendency of actions in the High Court. The Letter of Intent is just an expression of intention to enter into a contract and doesn’t produce any right in favour of the party to whom it’s issued. Further there’s no binding legal relationship between the party issuing the (LOI) Letter of Intent and the party to whom similar it’s issued. A detailed agreement contract is needed to be drawn up between the parties after the Letter of Intent (LOI) is entered by the other party more particularly in case of contract of such a mega scale design.

Since, there was no right created in favour of the M/ s. Vasu Construction and since HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY( HIMUDA) had formerly accepted the recommendations of the Committee appointed by the High Court and the order passed by the High Court, and had cancelled the tender and issued fresh( NIT) Notice of Tender on 17.11.2021, the HIMUDA couldn’t have agreed to allow the M/ s. Vasu Construction, Technically Disqualified, to go ahead with the prosecution of the design in question and that too without giving the other two parties any occasion to negotiate still, all the three parties who had shared in the original tender.

If HIMUDA was keen to give the installations to the public without causing any fresh burden on the public exchequer, then Dilip Singh, Level 9 BIZ Pvt. Ltd. & M/ s. Vasu Construction should have been handed with the occasion to negotiate with it.

ANALYSIS

According to the judgement of this case, the Respondent i.e, HIMUDA was fined with Rs. 5 Lakh forfeiture for violating the principle of fair competition in the Tender Allotment between Level 9 BIZ Pvt. Ltd. and M/ s. Vasu Constructions and for the irregularities & illegalities committed by the officers of the HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY(HIMUDA) set up in the report of the commission constituted by the High Court in the construction of the marketable complex worth Rs. 45.05 crore in Shimla.

Also, the action of the commission to continue the original tender with M/ s. Vasu Constructions which it had cancelled after the report of the commission of the High Court and the judgement of the said court showcase the prima facie malafide intent of HIMUDA. It made HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY (HIMUDA) to suffer the penalty being a State under the Article12 of the Constitution of India and violating the principle of fair competition and for being not responsible to its people in reality but simply in the statement of public detention.

In this case, the concept of LOI was clarified by the Supreme Court. The Letter of Intent (LOI) (Issued by the HIMUDA in favour of M/ s. Vasu Construction but the same was withdrawn due to the pendency of legal proceeding/suit in the High Court) was just an expression of intention to enter into a contract and doesn’t produce any right in favour of the party to whom it’s issued nor does it creates a binding legal relationship effect between the party issuing the (LOI) Letter of Intent and the party to whom similar it’s issued. Substantially, there’s a demand of a detailed agreement contract between the parties after the Letter of Intent (LOI) is entered by the other party especially in a mega scale design.

CONCLUSION

To conclude, the court held the write judgement in the Level 9 BIZ Pvt. Ltd. vs. HIMUDA, 2024 case by asserting that penalty on the HIMUDA which falls under the dimension of Article 12 of the Constitution and is a ‘State,’, need to follow the principle of conducting Fair Competition and Impartiality in the Tender Allotment for the Mega systems in the Public interest and it should also take care about its responsibility for its people.

The non-compliance with the orders of the Court and talking the High Court to ride is an act Prima Facie shows( HIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY) HIMUDA’s malafide intent of favouring M/ s. Vasu Constructions for the allotment of tender in the construction of Complex at Shimla.

If the Supreme Court won’t enter into these kinds of matters also it’ll lead to loose practices of corruption and malfunctioning of the government’s superintendent (executive) organ.

Thus, in my opinion Justice Bela M. Trivedi’s verdict in this case was accurate and immorally sound.

REFERENCES

This Article is written by Yuvraj Pandey, a law student at University of Allahabad, Prayagraj.

Legal Inter at Legal Vidhya.

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