STATE OF JHARKHAND, through its Secretary, (Mines & Geology) VS SOCIEDADE DE FOMENTO INDUSTRIAL PVT. LTD.

CITATION	2023 INSC 1010
DATE OF JUDGEMENT	20 November 2023
COURT	Supreme Court of India
APPELLANT	State of Jharkhand
RESPONDENT	Sociedade De Fomento Industrial Pvt. Ltd
BENCH	Justice S.V.N. Bhatti, Justice Sanjiv Khanna

INTRODUCTION

This case concerns a Civil Appeal filed before the High Court of Jharkhand in Ranchi on August 24, 2022, regarding L.P.A. No. 165 of 2022. The appellants are the State of Jharkhand and the Director of Mines and Geology, Ranchi, who were respondents in the L.P.A. The respondent in this case is SOCIEDADE DE FOMENTO Industrial Private Limited, which has its headquarters in Margao, Goa. In Writ Petition (C) No. 5152/2021, the respondent pleaded with the State of Jharkhand to follow certain regulations in conducting the second round of auction and to refrain from taking any action that might impair its rights in the tender process.

FACTS OF THE CASE

1. The lawsuit started with a tender notice that the State of Jharkhand published on October 25, 2019, asking for bids to be considered for the allocation and e-auction issuance of a mining lease for bauxite ore in certain areas. By the deadline of December 16, 2019, the responder had physically submitted the bid letter but had neglected to upload the technical bid and IPO online. 
2. After the responder failed to provide the required electronic notification on October 25, 2019, the Tender Evaluation Committee (TEC) recommended, during its meeting on December 17, 2019, that the auction be cancelled. A fresh notice was then sent out for a second attempt at an auction on January 28, 2020.
3. The TEC reported at the meeting on June 11, 2020, that in response to the updated notice, just one expression of interest had been received. In a letter dated December 27, 2021, the appellants decided to revoke the auctions that were started by the notifications dated October 25, 2019 and January 28, 2020.
4. dissatisfied with the appellants’ lack of action, the respondent filed Writ Petition No. 5152/2021 to contest the tender’s unfinished status and request that its bid be taken into consideration. The appellants contended that the exchequer could suffer a loss because the respondent only submitted one proposal in the second attempt, and no bids were received in response to the first notice.
5. In the decision of August 24, 2022, the Single Judge said that the first attempt was invalidated since there were no electronic bids. It was decided that a fresh notice should be issued in 2020. The court noted that circumstances where there are less than three technically eligible bidders are covered under Rule 9 of the Mineral (Auction) Rules.
6. The Single Judge concluded that a second auction attempt was unnecessary because there were no technically qualified bidders in the first attempt for both blocks. It was deemed reasonable for the government to decide to cancel the initial effort and then publish a new notice. The court decided that involvement under writ jurisdiction is not warranted unless the decision to cancel and reissue a tender is shown to be arbitrary or mala fide.
7. The writ petition was dismissed because the respondent was unable to show arbitrariness or mala fide intent. The current Civil Appeal is filed by the State of Jharkhand and the Director of Mines and Geology, contesting the Single Judge’s judgment.

ISSUES RAISED

1. Whether the State Government has begun a second round of auction procedures in response to the notices issued on December 27, 2021 and January 21, 2022?
2. Whether the State seeks a fresh tender even though it participated in the procedure described in Rule 9(11)(b) of the Rules during the second auction round?

CONTENTIONS OF THE APPELLANT 

1. Mr Arunab Chowdhury argues that the contested judgment is entirely illegal and suggests that the court should not be able to examine decisions involving state contracts. He emphasises the importance of the Mineral (Auction) Rules (M(A) Rules) and the Mines and Mineral (Development and Regulation) Act, of 1957. He contends that the Division Bench was unable to understand the methodical analysis of the bidding procedure described in M(A) Rules for mineral auctions Rule 9, Sub-Rules (6), (11), and (12).
2. The council of the appellant argues that the Impugned Judgment overly focused on the legality of annulling the NIT dated 25.10.2019 rather than understanding the consequences of acknowledged circumstances. Chowdhury contends that rather than considering the ramifications of recognized circumstances, the Impugned Judgment unduly concentrated on the legitimacy of annulling the NIT dated 25.10.2019. He points out that the Appellants decided against following the TEC’s advice and instead decided not to launch a completely fresh tender. The verdict suggests that the TEC’s decision is consistent with the existing Rules and should have been reviewed, resulting in the continuation of the tender procedure for price evaluation.
3. He further asserts that the Division Bench overlooked critical circumstances, including the impracticality of assessing the sole response from the Respondent and proceeding with a single-price bid. There was no offer available for the TEC to review during the meeting on June 11, 2020, due to the lack of communication on the technical bid. The first auction attempt should be cancelled, as advised by the TEC, and by Rule 9(12), the reserved price in the first round of the second attempt shall be the highest initial offer from a technically qualified bidder.

CONTENTIONS OF THE RESPONDENT

1. According to Mr. Dhruv Mehta, the auction complied with the M(A) Rules and the MMDR Act. He draws attention to the responsibility placed upon the Appellants by both the unamended Rule 9 of M(A) Rules and Sub-Rule (12) of Rule 9. He claims that the appellants decided to proceed with the second auction attempt and cancel the NIT dated 25.10.2019, in response to the TEC’s judgment on December 17, 2019.
2. He emphasizes that the Appellants, by choice, only annulled the first attempt and not the process initiated through NIT dated 25.10.2019. The second NIT was issued with the same terms and conditions as the auction’s cancelled first attempt, per Sub-Rules (11) and (12) of the M(A) Rules. According to Mehta, the purpose of the Rules is to guarantee certainty when approving mining leases, hence the fact that there was no requirement for a minimum number of bids for the second try is meaningless.
3. Mehta contends that the Appellants must process the price bid and make a decision following the Rules even in the event of a single answer. In response to the Appellants’ contention on the decision-making procedure, he maintains that the Division Bench was justified in judging the Appellants. The suggestion made by the TEC on June 11, 2020, which advised additional review rather than annulment, conflicted with the decision to cancel the tender procedure. He requests the dismissal of the appeal.

JUDGEMENT

The court scrutinized the annulment of the first attempt of an auction process for mining lease rights. Since no technical offer was received before the deadline, the Technical Evaluation Committee (TEC) suggested annulment. According to the court, Sub-Rule (10) of Rule 9 should only be applied in circumstances where there are less than three technically competent bids, not when there are none at all. 

The court highlighted that the first attempt was null and invalid since there was no genuine bidder or cash bid. It contended that holding a second try under the same conditions did not always mean holding a de novo auction. The court considered how to interpret the second proviso of Sub-Rule (12) of Rule 9, which said that challenges would arise even if the authorities chose to try again after just one offer was received. The court made it clear that the challenged judgment misinterpreted the TEC’s advice, which did not require the authorities to process the bidder’s price by Sub-Rule (10).

The court emphasized the commercial nature of contracts and the narrow scope of judicial review in tender procedures, citing prior legal decisions. It highlighted the relevance of public interest, mala fide intents, and procedural fairness in interfering. The respondent’s contention that the second proviso was required was rejected by the court, which affirmed the annulment and declared that the authorities had the authority to recommence the auction procedure. It highlighted the court’s duty to refrain from interfering with executive discretion and the legislative requirement to act in the public interest. In the end, the court dismissed the contested decision and granted a cost-free civil appeal.

ANALYSIS

The court correctly emphasized the particular conditions that support the application of Rule 9’s Sub-Rule (10) and pointed out that Sub-Rule (10) is no longer relevant because the initial attempt is void if there isn’t a legitimate bidder. The court correctly recognized the issues that arise from receiving just one offer on the second try in its reading of the second proviso to Sub-Rule (12) of Rule 9. The court provided important clarification about the continuity of the process by stating that a second attempt does not always mean a de novo auction. Addressing the misunderstanding surrounding the Technical Evaluation Committee’s (TEC) recommendation, the court aptly clarified that the TEC’s suggestion did not compel authorities to process the bidder’s price under Sub-Rule (10), correcting a key oversight in the impugned judgment. 

The court emphasized the commercial nature of contracts and the narrow scope of judicial review in tender proceedings by making relevant references to other court rulings. This is consistent with the rule that judges shouldn’t get involved unless there is an obvious breach of the law, dishonest intent, or a threat to the public interest. 

CONCLUSION

The court’s analysis provides a comprehensive understanding of the nuances involved in the auction process for mining lease rights. It correctly reads the regulations, skilfully negotiates the legal requirements, and dispels any misunderstandings resulting from the lower court’s ruling. The court emphasizes how crucial it is to follow legislative guidelines and act for the greater good of the public by maintaining the first attempt’s annulment and defending the authorities’ authority to arrange another auction. The ruling strikes a suitable balance between procedural issues, legal interpretation, and the general rules guiding these kinds of business dealings.

REFERENCES

1. https://lawyerenews.com/wp-content/uploads/2023/11/20-Nov-2023-State-Jharkhand-Vs-Socediad-Ltd.pdf 
2. https://mynation.net/judgments/state-of-jharkhand-through-its-secretary-mines-geology-vs-sociedade-de-fomento-industrial-pvt-ltd-20-11-2023/ 
3. https://www.verdictum.in/court-updates/supreme-court/company-not-insist-auction-one-bidder-sub-rule-12-rule-9-mineral-auction-amendment-rules-1505545?infinitescroll=1 

This Article is written by Bokka Twinkle student of Damodaram Sanjivayya National Law University (DSNLU) an intern at Legal Vidhiya.

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