Supreme Court Sets Aside Tender Award After Finding Collusion and Irregularities in Public Procurement

In Level 9 BIZ Pvt. Ltd. v. Himachal Pradesh Housing and Urban Development Authority & Anr. (2024 Latest Caselaw 202 SC), the Supreme Court set aside the High Court's order restoring a cancelled government tender. The Court held that public authorities cannot ignore findings of serious irregularities in the tender process and award contracts through private arrangements that undermine transparency, fairness and equal opportunity. 

HIMUDA invited tenders for the construction of a commercial complex in Shimla. The respondent contractor emerged as the lowest bidder and was initially issued a Letter of Intent (LOI). However, competing bidders challenged the tender process before the High Court, alleging serious irregularities. An independent committee appointed by the High Court found substantial irregularities in the evaluation process and concluded that both technically qualified bidders had been wrongly declared eligible. Acting upon these findings, HIMUDA cancelled the tender and subsequently issued a fresh Notice Inviting Tender (NIT). The respondent contractor challenged the cancellation before the High Court. During the proceedings, HIMUDA informed the Court that it wished to withdraw the cancellation order and proceed with the original tender. Accepting the statements made by the parties, the High Court permitted the contract to proceed. The appellant, who had not been heard in those proceedings despite being affected by the decision, challenged the order before the Supreme Court. 

The principal issue was whether the High Court was justified in restoring the cancelled tender merely on the basis of statements made by the parties, despite earlier findings of serious irregularities in the tender process and without hearing all affected parties. 

The Supreme Court found the High Court's approach to be legally unsustainable. The Court observed that:

•The original tender had been cancelled after an independent committee found serious irregularities and illegalities in the tender process.

•HIMUDA had itself accepted the committee's findings and issued a fresh tender. 

•The appellant and another affected bidder were not impleaded or heard before the High Court passed the impugned order. 

•The High Court ignored the earlier findings of the independent committee and allowed the matter to be disposed of solely on the basis of statements made by HIMUDA and the successful bidder. 

•A Letter of Intent merely expresses an intention to enter into a contract and does not create any enforceable legal right in favour of the bidder. The Supreme Court further held that if HIMUDA genuinely intended to proceed with the project without causing financial loss to the public exchequer, it ought to have afforded all eligible participants an equal opportunity rather than favouring one bidder. The Court concluded that HIMUDA had acted in collusion with the successful bidder and had misused the judicial process to revive a tender already found to be vitiated by irregularities. 

The Supreme Court:

•Allowed the appeal. 

•Set aside the High Court's order. 

•Imposed costs of ₹5,00,000 on HIMUDA. 

•Clarified that HIMUDA was free to initiate a fresh tender process in accordance with law and after following due process. 

The judgment reinforces the principles of fairness, transparency and equal opportunity in public procurement. It reiterates that government authorities cannot bypass established tender procedures or revive cancelled tenders through private arrangements, particularly after independent findings of irregularities. The decision also clarifies that a Letter of Intent does not create an enforceable contractual right and underscores the obligation of courts to hear all affected parties before passing orders that impact public contracts.