Government Tender Dispute: Supreme Court Allows Urgent Procurement of Videoscopes

The Supreme Court of India, in its judgment dated 28 February 2020, addressed a significant government procurement dispute concerning the award of a tender for the supply and installation of videoscopes by the Directorate of Logistics under the Central Board of Excise and Customs (CBEC). The case involved a challenge by M/s. Almighty Techserv against the awarding of the tender to M/s. ASVA Power Systems India Pvt. Ltd., with allegations of miscalculation of costs and procedural errors.

Background of the Case

The dispute arose when the Directorate of Logistics floated an e-tender for the supply, installation, and maintenance of 74 videoscopes to be used by various field formations of CBEC. Multiple bids were received, and the contract was awarded to M/s. ASVA Power Systems India Pvt. Ltd. However, M/s. Almighty Techserv, an unsuccessful bidder, challenged the award before the High Court, alleging that the tender process was flawed and that their bid should have been considered as the lowest.

The High Court ruled in favor of M/s. Almighty Techserv, holding that the government’s calculation of bid costs was incorrect and resulted in a loss of approximately Rs. 63 lakhs to the exchequer. It further ordered a re-tendering process. This decision was subsequently challenged before the Supreme Court by the government and M/s. ASVA Power Systems India Pvt. Ltd.

Arguments of the Parties

Petitioner (Government & M/s. ASVA Power Systems India Pvt. Ltd.) Argued:

The High Court’s ruling was erroneous, as the bid evaluation process considered all applicable charges, including customs duties and other levies.
The tender process followed standard procurement guidelines, and M/s. ASVA Power Systems India Pvt. Ltd. was rightfully awarded the contract as the lowest bidder.
The equipment was urgently required by the customs department, and re-tendering would cause significant delays in procurement, affecting operations.
The equipment had already been imported into India and was ready for installation.

Respondent (M/s. Almighty Techserv) Argued:

The High Court had correctly determined that M/s. ASVA Power Systems India Pvt. Ltd.’s bid was not the lowest when calculated correctly.
The petitioner had misrepresented costs, leading to a financial loss for the government.
The successful bidder made false statements before the High Court and should not be entitled to discretionary relief.

Supreme Court’s Analysis and Observations

1. Urgency of Equipment Procurement

The Supreme Court acknowledged the critical nature of the equipment required by the customs department and the adverse impact of any further delays. The Court stated:

“Fresh tendering may lead to long delay in procuring all these videoscopes which are urgently required by customs authorities to scan the imported goods.”

Given the national importance of these devices in ensuring secure and efficient customs inspections, the Court found it necessary to allow procurement to proceed.

2. Assessment of Financial Implications

Although the High Court found that the tender process led to a loss of approximately Rs. 63 lakhs, the Supreme Court decided that:

“If a fresh tender for supply of videoscopes is floated, we are not even sure whether the Government will gain or lose in monetary terms.”

The Court emphasized that while financial considerations are essential, the greater public interest in timely procurement outweighs the potential savings or losses from re-tendering.

3. Fairness in Bid Evaluation

The Supreme Court did not make a final ruling on whether the bid evaluation process was flawed but indicated that the matter required further examination during a detailed hearing.

“At this stage, we are not going into the merits of the case which will require detailed hearing.”

Interim Relief and Final Order

Given the urgency of the situation, the Supreme Court granted interim relief, allowing the government to proceed with procurement from M/s. ASVA Power Systems India Pvt. Ltd. However, the Court imposed a financial safeguard by ordering:

Rs. 63 lakhs shall be deducted from the payment to M/s. ASVA Power Systems India Pvt. Ltd.
The final decision regarding the deducted amount will be made after the detailed hearing of the case.
If M/s. ASVA Power Systems India Pvt. Ltd. insists on full payment at this stage, the government will have to cancel the order and initiate fresh tendering.

The Supreme Court concluded:

“Public interest requires that the Government be permitted to procure the videoscopes from M/s. ASVA Power Systems India Pvt. Ltd., and we permit the Department to do so.”

Conclusion

This judgment underscores the delicate balance courts must maintain between procedural fairness in government tenders and the urgent requirements of public administration. The Supreme Court’s decision highlights:

Public interest considerations take precedence over procedural disputes when urgent equipment is required for essential government functions.
The financial impact of bid miscalculations must be weighed against potential delays and inefficiencies caused by re-tendering.
While allowing procurement, the Court ensured financial accountability by withholding Rs. 63 lakhs pending a detailed hearing.

By permitting procurement with financial safeguards, the Supreme Court ensured that critical customs operations were not hindered while keeping room for further judicial scrutiny on the legality of the tender process.

Petitioner Name: Commissioner, Directorate of Logistics.
Respondent Name: M/s. Almighty Techserv, Proprietor Mr. Manish Dalmia & Another.
Judgment By: Justice Deepak Gupta, Justice Aniruddha Bose.
Place Of Incident: India.
Judgment Date: 28-02-2020.

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