Summary
The highest bidder in a sand-quarry auction was rejected for not filing the income tax return for FY 2021-22, though bids closed in July 2022 before the statutory due date for that return. The Supreme Court held that 'previous Financial Year' in Rule 27(4)(iv) of the Odisha Minor Mineral Concession Rules, 2016 had to be read with the Income Tax Act and meant FY 2020-21; the rejection was a misconstruction that reduced competition and State revenue. As most of the lease term had lapsed, a fresh auction was ordered.
Issues
- What 'previous Financial Year' means in Rule 27(4)(iv) of the Odisha Minor Mineral Concession Rules, 2016 when a tender is issued before the due date for filing the latest year's income tax return.
- Whether the highest bidder's bid was wrongly rejected as non-responsive, and whether the High Court erred in upholding the rejection.
- What relief should be granted when much of the lease period had already elapsed.
Provisions considered
- Rule 27(4)(iv) (as amended on 11.03.2022), Odisha Minor Mineral Concession Rules, 2016The rule requires the income tax return of the previous financial year showing sufficient income, or an 18-month bank guarantee. Read in harmony with the Income Tax Act, it was held to mean the year for which the return was already due when bids were submitted, i.e. FY 2020-21. The Tender Committee's reading excluded the highest bidder and was erroneous. (¶¶ 2, 11, 12, 13, 14, 15)
- Section 139(1), Income Tax Act, 1961A company could file its return for FY 2021-22 up to 31.10.2022, so on the bid date of 18.07.2022 the bidder could not be expected to produce that return. (¶¶ 14, 15)
- Articles 14 and 226, Constitution of IndiaJudicial review of tenders is confined to arbitrariness, irrationality, mala fides or action against public interest. A demonstrable misconstruction of a tender condition that excludes the highest bidder and diminishes State revenue vitiates the decision-making process and calls for intervention. (¶¶ 5, 9, 10, 15)
Held
- Courts do not ordinarily interfere in State contracts, but must intervene where the decision-making process is arbitrary, irrational, mala fide or against public interest. A public tender is an instrument of governance through which the State acts as trustee of public wealth; the tendering authority must interpret its terms consistently and so as to advance the object of the tender, which for a natural resource is chiefly maximisation of revenue. (¶¶ 9, 10)
- An interpretation of a tender condition that narrows competition and excludes the highest bidder on a ground unsupported by law vitiates the decision-making process. (¶¶ 10, 15)
- 'Previous Financial Year' in Rule 27(4)(iv) must be read with the Income Tax Act, 1961. As a company's return for FY 2021-22 could be filed up to 31.10.2022 and bids were due on 18.07.2022, the previous financial year for the bidder was FY 2020-21, for which it had filed its return. Rejecting its bid for want of a FY 2021-22 return was erroneous, and the High Court failed to consider this. (¶¶ 14, 15)
- Auctions of natural resources are an exercise in public trust and the State must secure the best value. As three years and three months of the five-year lease had lapsed and sand prices were rising, a fresh auction was ordered rather than award to either bidder. The successful bidder, whose lease deed was never executed, was entitled on the principle of restitution to a refund of its deposit with interest. (¶ 16)
Result
Appeals disposed of; High Court judgment set aside; the Tehsildar to issue a fresh auction notice for the sand quarry under the 2016 Rules, open to both bidders and others; the State to refund the successful bidder's deposit within 30 days with interest at 6% per annum from the date of deposit.