Bombay High Court Upholds Dharavi Redevelopment Re-Tendering: “No Concluded Contract Without Letter of Award; Government Can Cancel Tenders in Public Interest”

Court’s Decision

The Bombay High Court dismissed the petition challenging the cancellation of the initial tender process for the Dharavi Redevelopment Project. The court upheld the re-tendering decision, affirming the government’s discretion to revise the tender process to address public interest concerns. It ruled that the cancellation was not arbitrary, as it stemmed from material changes in the project scope, including the inclusion of railway land.

The court stated: “No conclusive contract existed between the petitioner and the State as the Letter of Award was not issued, and mere communication of the bid being highest does not constitute a concluded agreement.”

Facts

1. The Maharashtra Government initiated a tender in November 2018 for the Dharavi Redevelopment Project.
2. The petitioner, SecLink Technologies Corporation, was declared the highest bidder in January 2019, offering Rs. 7,200 crores.
3. Despite this, several unresolved issues arose, including the inclusion of railway land, a significant alteration to the project scope.
4. The Committee of Secretaries (CoS) recommended canceling the earlier tender process and proceeding with a fresh tender. This decision was approved by the Cabinet in October 2020.
5. The petitioner challenged this decision, arguing it was arbitrary and violated their legitimate expectations.
6. In the new tender process, Adani Properties Pvt. Ltd. was declared the highest bidder, with the work order issued in July 2023.

Issues

1. Whether the cancellation of the earlier tender process was arbitrary and violated Article 14 of the Constitution of India.
2. Whether the petitioner’s bid and the letter dated 8th March 2019 created a concluded contract.
3. Whether changes in the new tender process were designed to exclude the petitioner unfairly.

Petitioner’s Arguments

1. Arbitrary Cancellation:
   • The petitioner argued that the reasons for cancellation were non-existent and contradicted the tender documents.
   • It was claimed that railway land was always a part of the earlier tender, as clarified in pre-bid meetings.
2. Delay and Expenditure:
   • The petitioner highlighted that the financial bid was opened in January 2019, yet the decision to cancel the tender was made over a year later.
   • During this time, the petitioner incurred significant expenses in preparing for the project.
3. Concluded Contract:
   • The letter dated 8th March 2019, which declared the petitioner as the highest bidder, amounted to a Letter of Award and thus constituted a concluded contract.
4. Tailored Fresh Tender:
   • The petitioner argued that the conditions in the fresh tender were deliberately altered to exclude it, such as limiting consortium members and modifying financial eligibility criteria.

Respondent’s Arguments

1. Public Interest and Material Changes:
   • The inclusion of railway land significantly altered the project scope, necessitating a fresh tender to ensure integration.
   • The changes aimed to ensure the viability and success of the redevelopment project.
2. No Concluded Contract:
   • The respondents argued that the letter dated 8th March 2019 did not constitute a Letter of Award, as it lacked the necessary conditions to establish binding obligations.
   • Several preconditions, including forming an SPV and providing financial guarantees, were not fulfilled.
3. Legal Justification for Cancellation:
   • The tender documents explicitly allowed the government to cancel or re-tender at any stage without assigning reasons.
4. Impartiality in Fresh Tender:
   • The new tender conditions were crafted to reflect the altered project scope and ensure fair competition.

Analysis of the Law

1. Discretion to Cancel Tenders:
   • The court emphasized that government entities have the right to cancel a tender process when public interest demands it.
   • Reliance was placed on tender documents that allowed cancellation without liability.
2. No Concluded Contract:
   • The court distinguished between an acknowledgment of a bid being highest and a Letter of Award, ruling that the latter is essential for creating binding obligations.
3. Judicial Restraint in Tender Matters:
   • Courts should not interfere in tender processes unless decisions are arbitrary, discriminatory, or violate fundamental rights.
   • Reference was made to Tata Cellular v. Union of India and Michigan Rubber (India) Ltd. v. State of Karnataka, which underscore this principle.

Precedent Analysis

1. Tata Cellular v. Union of India:
   • Affirmed judicial restraint in economic policy matters unless decisions are irrational or arbitrary.
2. GMR Airports Ltd. v. Mihan India Ltd.:
   • Held that a Letter of Award is a prerequisite for concluding a contract. A mere letter of acknowledgment does not suffice.
3. Michigan Rubber (India) Ltd. v. State of Karnataka:
   • Clarified that tender terms must ensure transparency and fairness but can be tailored to meet specific project needs.

Court’s Reasoning

1. No Concluded Contract:
   • The letter dated 8th March 2019 merely declared the petitioner as the highest bidder but did not satisfy the conditions for a concluded contract.
   • Key preconditions, such as forming an SPV and depositing financial guarantees, were not met.
2. Public Interest in Re-Tendering:
   • The inclusion of railway land necessitated modifications to ensure the project’s feasibility and integration.
   • The court noted that such changes were not arbitrary but aligned with the larger public interest.
3. No Evidence of Bias:
   • The petitioner’s claim that the fresh tender excluded it was dismissed, as the revised conditions were designed to address the project’s altered scope.

Conclusion

The High Court upheld the cancellation of the earlier tender and the validity of the subsequent tender process. It dismissed the petitioner’s claims, emphasizing that public interest justified the government’s actions.

Implications

1. Reinforces Public Interest Principle:
   • The ruling highlights that public interest can justify deviations from initial tender conditions.
2. Clarifies Tender Process Requirements:
   • It underscores the importance of a Letter of Award in concluding contracts.
3. Discretionary Powers of Government:
   • Affirms the government’s authority to cancel tenders if project requirements evolve.

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