Supreme Court of India
LEVEL 9 BIZ PVT. LTD.versusHIMACHAL PRADESH HOUSING AND URBAN DEVELOPMENT AUTHORITY & ANOTHER
- Citation
- 2024 INSC 257
- Decided
- 2 April 2024
- Disposal
- Appeal(s) allowed
- Bench
- BELA M TRIVEDI
Holding
The Supreme Court held that the High Court's order was void for ignoring the independent committee’s findings and for treating a Letter of Intent as creating a right, and therefore quashed the order, allowing the appeal and imposing costs on HIMUDA.
Summary
Level 9 Biz Pvt. Ltd. challenged a Himachal Pradesh High Court order that allowed HIMUDA to withdraw its cancellation of an earlier tender and let the originally successful bidder, M/s Vasu Constructions, execute the project on the same terms despite the tender having been cancelled on grounds of irregularities. The High Court had disposed of the writ petition by merely recording the statements of HIMUDA and the bidder, without hearing the other interested parties or considering the findings of an independent committee that had recommended cancellation. The Supreme Court examined whether such a disposal was permissible, whether a Letter of Intent creates any enforceable right, and whether HIMUDA, as a State entity, acted malafide. It held that the Letter of Intent is only an expression of intent and does not confer any right, and that the High Court failed to apply its mind, ignored the committee’s findings, and thus erred. Consequently, the Supreme Court set aside the impugned order, allowed the appeal, and imposed a heavy cost on HIMUDA, while directing that a fresh tender process be conducted lawfully.
Issues considered
- Whether the High Court could lawfully dispose of the writ petition by merely accepting the statements of the parties without hearing other affected parties and without applying mind to the independent committee's findings.
- Whether a Letter of Intent issued in a tender process creates any enforceable right or binding contract.
- Whether HIMUDA, as a State entity under Article 12, can be held liable for malafide collusion and be ordered to pay costs.
- Whether the order of the High Court should be quashed for lack of proper reasoning and disregard of statutory and procedural requirements.
Legislation cited
- Constitution of Indias. Art.12
Subjects
Cancellation of initial tendering processTenderIrregularities and illegalitiesNotice inviting tenderLetter of intentBurden on the public exchequerMisuse process of lawCostFresh tender processAgreement/contract
Judgment
[2024] 4 S.C.R. 1 : 2024 INSC 257
Level 9 Biz Pvt. Ltd.
v.
Himachal Pradesh Housing and Urban
Development Authority & Another
(Civil Appeal No. 4626 of 2024)
02 April 2024
[Bela M. Trivedi* and Pankaj Mithal, JJ.]
Issue for Consideration
Matter pertains to the correctness of the order passed by
the High Court disposing the writ petition by accepting the
statements of the respondent no. 1-tenderee and respondent
no. 2-successful bidder, permitting the respondent no.1 to
withdraw the cancellation of initial tendering process order and
permitting the respondent no. 2 to execute the project on the
same terms and conditions as in the initial tender, though the
said tender was already withdrawn by the respondent no.1 in
view of the report of the independent Committee confirming
gross irregularities and illegalities committed by the officers of
the respondent no.1.
Headnotes
Tender – Notice inviting tender – Issuance of letter of intent in
favour of the successful bidder by the tenderee – Challenge
to, by the unsuccessful bidder – Cancellation of initial tender
process by the tenderee and withdrawal of the letter of intent
issued in favour of the successful bidder on account of
pending litigations in the High Court – Thereafter, issuance of
fresh NIT by tenderee – Challenge to – High Court disposed
of the writ petition by merely accepting the statement of the
tenderee that it had no objection to go ahead with the initial
tendering process and the statement of the initial successful
bidder that it was ready to execute the project on the same
terms and conditions as initially agreed, though the said
tender was already withdrawn by the tenderee in view of the
irregularities and illegalities committed by it, as recorded by
an independent committee appointed by the High Court in
earlier writ petitions – Correctness:
* Author
2 [2024] 4 S.C.R.
Digital Supreme Court Reports
Held: No right whatsoever created in favour of the respondent no.
2-successful bidder, and the respondent no. 1 HIMUDA-tenderee
cancelled the tender and issued fresh NIT, as such the respondent
no. 1 could not have agreed to allow the respondent no. 2, who
was found to be not technically qualified, to go ahead with the
execution of the project in question and that too without giving
the other two parties any opportunity to negotiate – Respondent
no. 1 in collusion with the respondent no. 2, took the High Court
for a ride and misused the process of law for covering up the
irregularities and illegalities committed in the tender process by the
officers of the respondent no. 1 – High Court also could not notice
the ill-intention of the respondent nos. 1 and 2 and disposed of
the petition, permitting them to go ahead with the original tender
– Thus, the impugned order having been passed without proper
application of mind and without assigning any cogent reason for
brushing aside the findings recorded by the Independent Committee
and the observations made by the Single Bench, is quashed
and set aside – Also, the respondent no.1, though ‘State’ within
the meaning of Art. 12, acted malafide and in collusion with the
respondent no.2, and took the High Court for a ride, heavy cost
of Rs. 5,00,000/- imposed on the respondent no. 1 – Constitution
of India – Art. 12. [Paras 11-14]
Tender – Notice inviting tender – Letter of Intent – Nature of:
Held: Letter of Intent is merely an expression of intention to enter
into a contract – It does not create any right in favour of the
party to whom it is issued – There is no binding legal relationship
between the party issuing the LOI and the party to whom such
LOI is issued – Detailed agreement/contract is required to be
drawn up between the parties after the LOI is received by the
other party. [Para10]
List of Acts
Constitution of India.
List of Keywords
Cancellation of initial tendering process; Tender; Irregularities
and illegalities; Notice inviting tender; Letter of intent; Burden on
the public exchequer; Misuse process of law; Cost; Fresh tender
process; Agreement/contract.
[2024] 4 S.C.R. 3
Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban
Development Authority & Another
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4626 of 2024
From the Judgment and Order dated 18.10.2022 of the High Court of
Himachal Pradesh at Shimla in CWP No. 1481 of 2021
Appearances for Parties
P.S. Patwalia, Sr. Adv., Ritesh Khatri, Ms. Deveshi Chand, Advs. for
the Appellant.
Anoop G. Chaudhari, Navin Pahwa, Sr. Advs., Shankar Divate, J. P.
Mishra, D. K. Thakur, Rajeev Kumar Gupta, Tavleen Singh, Joginder
Mann, Ms. Vallabhi Shukla, Divyansh Thakur, Bimlesh Kumar Singh,
Kanwal Chaudhary, Neeraj Agarwal, Santosh Kumar Yadav, Ms.
Niharika, Nishant Anand, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
Bela M. Trivedi, J.
1. Leave granted.
2. The Appellant – Level 9 BIZ Pvt. Ltd., who was not a party to the
proceedings, being Civil Writ Petition No. 1481 of 2021, filed by
the Respondent No.2 – M/s. Vasu Constructions in the High Court
of Himachal Pradesh at Shimla, has challenged the impugned
order dated 18.10.2022 passed by the High Court in the said
proceedings. The High Court passed the impugned order disposing
of the said CWP by merely accepting the statement made on behalf
of the Respondent No.1 – Himachal Pradesh Housing and Urban
Development Authority (HIMUDA) that it wanted to withdraw the
cancellation of initial tendering process order dated 05.02.2021,
and the statement made on behalf of the Respondent No. 2 that it
was ready to execute the project on the same terms and conditions
and the rates as per the initial tender dated 15.11.2018, though
the said tender was already withdrawn by the Respondent no. 1
HIMUDA in view of the irregularities and illegalities committed by it,
as recorded by an independent committee appointed by the High
Court in earlier writ petitions filed by the present appellant and one
Dalip S. Rathore.
4 [2024] 4 S.C.R.
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3. The broad facts giving rise to the present appeal may be stated
as under: -
DATES EVENTS
15/16.11.2018 Notice Inviting Tender (NIT) was issued by
HIMUDA (R-1) for the construction of proposed
commercial complex of Vikas Nagar, Shimla, at
estimated cost of Rs.45,05,62,074/-
15.12.2018 Technical Bids were opened and on the same
day Financial Bids were also opened. (Appellant
& R-2 were the only found to be qualified – But
the Appellant was L2)
17.12.2018 LOI was issued by the R-1 in favour of R-2.
24.12.2018 One Unsuccessful bidder Dalip S Rathore
filed Writ Petition being CWP 3021 of 2018
challenging the technical specifications &
ineligibility of Respondent No.2, also seeking
cancellation of the Tender. The High Court
issued notice.
02.01.2019 R-1 HIMUDA withdrew the LOI dated 17.12.2018
of R-2 M/S Vasu Constructions stating that the
case is pending in the High Court and the work
will be awarded only as per the decision of the
High Court.
05.01.2019 R-1 HIMUDA constituted a committee, which
reviewed the tender process and concluded that
there were many lapses which warranted actions
against the erring officials.
07.01.2019 Another Committee constituted by R-1
submitted a report that Shri Dalip Singh was
not qualified and M/s. Vasu Constructions was
qualified.
23.02.2019 Appellant – Level 9 BIZ Pvt. Ltd. filed a writ
petition CWP 363 of 2019, praying for rejection
of Technical Bid and Financial Bid of the R-2 M/s.
Vasu Constructions
[2024] 4 S.C.R. 5
Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban
Development Authority & Another
25.11.2020 High Court passed a detailed order on 25.11.2020
in CWP No. 3021/2018 and 363/2019.
In Para 29 High Court observed-
“[..] this Court is prima facie of the
view that some of the officers manning
high positions in HIMUDA have not
acted responsibly and in the interest
of organization, rather have attempted,
directly or indirectly, to give undue
benefit to some of the contractors.
Having seen the record, this Court is
compelled to draw a conclusion that the
officers responsible for evaluation of the
tender in question, did not scrutinize the
documents submitted by the tenderers
along with their bids properly and, with
a view to ensure ouster of some eligible
contractors and awarding the same to
their favourites, have made an attempt
to justify their action by giving totally
implausible reasoning.”
In para 31, High Court observed-
“But, for the reasons, best known
to the authority, it still proceeded to
award the tender in favour of M/s. Vasu
Construction Company.”
The High Court therefore to instill confidence in
the general public and to ensure transparency in
the system, constituted an independent committee
to enquire into the tender process in question, and
directed the committee to submit its report in a
sealed cover to the Court.
02.01.2021 Committee constituted by High Court filed its report.
08.01.2021 High Court disposed of both Petitions being Nos.
3021/2018 and 363/19 and directed registry
to initiate separate proceedings against erring
officials, observing as under: -
6 [2024] 4 S.C.R.
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14. Since the committee, after having
perused the records, has arrived at
a definite conclusion that on account
of shortcomings/irregularities, tender
in question requires to be cancelled,
nothing much is left for this court to
adjudicate in these matters. Leaving
everything aside, learned counsel for the
petitioners in both the petitions, being
satisfied with the findings of enquiry
committee as well as suggestions made
therein, are not willing to prosecute
the cases further and have prayed to
dispose of the same as having been
rendered infructuous.
15. In view of aforesaid, both the
petitions are disposed of as infructuous
alongwith all pending applications.
Interim directions, if any, stand vacated.
However, liberty is reserved to the
parties to file fresh petition(s), if any, if
they still remain aggrieved.
16. However, this court, having taken
note of the fact that the enquiry committee
despite having found officers lacking in
discharge of their duties, has failed
to fix responsibility and recommend
action, criminal or departmental, deems
it necessary to direct the Registry
of this Court to register separate
proceedings, enabling this Court to pass
appropriate orders so as to ensure strict
compliance of recommendations given
in the report of enquiry committee and
pass appropriate orders with regard
to initiation of criminal/ departmental
proceedings against the erring officials.
[2024] 4 S.C.R. 7
Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban
Development Authority & Another
Registry is directed to register separate
proceedings and list the same on
17.3.2021. The order dated 25.9.2020,
this judgment and the enquiry report
submitted by the committee constituted
by this Court, shall form part of the fresh
proceedings.
05.02.2021 Respondent No.1 cancelled the Tender in view
of the Order dated 08.01.2021 passed by the
High Court.
03.03.2021 Respondent No.2 filed a new Writ Petition against
Respondent No.1, i.e., CWP 1481 of 2021
challenging order dated 05.02.2021.
Respondent no. 2 also filed separate two LPAs
being LPA No. 6/2021 and 12/2021 against the
common order dated 08.01.2021 passed in CWP
No. 3021/2018 and CWP No. 363/2019 by the
Single Bench.
17.11.2021 R-1 HIMUDA issued fresh NIT for the same work.
01.12.2021 The Division Bench of High Court passed an
interim order in LPA No. 6/2021, 12/2021 and CWP
No. 1481/2021 staying the NIT dated 17.11.2021
till further orders.
18.10.2022 The Division Bench disposed of the Writ Petition
No. 1481/2021 upon statement of the Executive
Engineer of Respondent No.1 observing as under:
7. Learned counsel for the respondent on
instructions of Mr. Rajesh Thakur, Executive
Engineer, HIMUDA, Division, Shimla-9, has
submitted that the competent authority wants
to withdraw the cancellation of initial tendering
process order dated 5th February, 2021, bearing
No. 5806-11, as the public is deprived from the
facilities, which would have been available to them
after completion of the project. The project cost is
going to be enhanced due to delay in execution
of the project, which will cause additional burden
8 [2024] 4 S.C.R.
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on the public exchequer. The various Government
departments/PSUs are facing acute shortage of
office accommodation, therefore, in larger public
interest, the authority has no objection to go ahead
with initial tendering process, in case the petitioner
is ready to execute the work at the same rate and
terms and conditions as were agreed at the time
of finalization of the initial NIT dated 15.11.2018
(Annexure P-2). The time period for execution
of work will start from date of fresh award letter
which will be issued in favour of the petitioner
within 15 days.
8.Learned Senior counsel for the petitioner, on
instructions from the petitioner, has submitted
that offer made by the respondent is acceptable
to the petitioner and petitioner is ready to execute
the project on the same terms and conditions
and rates as per initial tender dated 15.11.2018
(Annexure P-2).
Nov. 2022 Contract Agreement was signed between
Respondent 1 & 2. Work started.
12.12.2022 The Appellant filed the SLP challenging the
impugned order dated 18.10.2022 and the Court
while issuing notice, granted stay of operation of
the impugned order dated 18.10.2022.
4. The question that has been posed before us in the instant appeal
is, whether the High Court could have disposed of the CWP filed
by the respondent no. 2 by simply accepting the statements
made on behalf of the learned advocates for the respondent no.
1 and respondent no. 2, virtually permitting the respondent no.1
HIMUDA to withdraw the cancellation of initial tendering process
order dated 05.02.2021 and permitting the respondent no. 2 M/s
Vasu Constructions to execute the project on the same terms
and conditions and at the rates as per the initial tender dated
15.11.2018, though the said tender was already withdrawn by
the Respondent No.1 HIMUDA in view of the report made by the
independent Committee constituted by the High Court confirming
gross irregularities and illegalities committed by the officers of
[2024] 4 S.C.R. 9
Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban
Development Authority & Another
HIMUDA and in view of the order dated 08.01.2021 passed by
the Single Bench?
5. As could be seen from the chronology of events, the appellant and
the respondent No. 2 were declared qualified in the Technical Bids
opened on 15.12.2018 and on the same day, the financial bid of the
said two parties were also opened. The respondent no.2 being L-1,
the Letter of Intent dated 17.12.2018 was issued by the Respondent
No.1 in favour of the respondent no.2. Subsequently, an unsuccessful
bidder M/s Dalip Singh Rathore filed a writ petition being No.
3021/2018 in the High Court, alleging irregularities and illegalities in
the tender process and challenging the eligibility of the respondent
no. 2, also seeking cancellation of the Tender. The appellant also
filed CWP No. 363/2019 praying for the rejection of the Technical
and Financial Bids of the respondent no.2. The respondent no.1
HIMUDA in the meantime appointed a committee on 01.01.2019 to
review the tender process. The respondent no.1 also vide the letter
dated 02.01.2019 withdrew the Letter of Intent issued in favour of
the respondent no.2. Subsequently, the High Court also appointed
an Independent Committee to look into the alleged illegalities and
irregularities vide the order dated 25.11.2020, in order to instill
confidence in the general public and to ensure transparency in the
system.
6. As transpiring from the order dated 08.01.2021, the said Independent
Committee submitted the report, arriving at a definite conclusion that
the officers responsible for evaluation of the tender had not acted
responsibly and fairly, as a consequence of which both M/s Vasu
Constructions Company (respondent no.2 herein) and M/s Level 9
Biz Pvt. Ltd. (the appellant herein) were wrongly declared eligible in
the Technical Bid. The Committee had concluded that since both the
bidders were not technically qualified as per the terms and conditions
of the NIT, the tender needed to be cancelled. The recommendations
made by the said Committee, except the recommendation for deletion
of condition with regard to NPA, were stated to have been accepted
by the Enquiry Committee of the respondent no. 1 HIMUDA. The High
Court recorded the statements of the concerned counsels for the
parties and disposed of the petitions being CWP Nos. 3021/2018 and
363/2019 vide Order dated 08.01.2021 observing that the petitions
had been rendered infructuous, however reserved a liberty for the
parties to file fresh petition(s), if any, if they still remained aggrieved.
10 [2024] 4 S.C.R.
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7. Subsequently, the respondent no.1 HIMUDA cancelled the tender
on 05.02.2021 in view of the said order dated 08.01.2021 passed
by the High Court. The said action of the respondent no.1 came to
be challenged by the Respondent No.2 M/s Vasu Constructions by
filing a petition being CWP No. 1481/2021. The respondent no. 2
also filed two LPAs being 6/2021 and 12/2021 being aggrieved by
the common Order dated 08.01.2021 passed by the Single Bench.
The Division Bench of the High Court disposed of the CWP No.
1481/2021 vide the impugned order dated 18.10.2022 accepting the
statements made by the learned counsels for the respondent nos.
1 and 2 as stated hereinabove.
8. We are at loss to understand as to how the said petition filed by
the respondent no.2 could have been disposed of by the Division
Bench by merely recording and accepting the statements of the
learned counsels for the respondent nos. 1 and 2, when the tender
in respect of NIT dated 15.11.2018 was cancelled by the respondent
no.1 HIMUDA on account of the gross irregularities and illegalities in
the tender process found by the Independent Committee constituted
by the High Court and on account of the order passed by the High
Court on 08.01.2021? We are also at loss to understand as to how
the Executive Engineer of HIMUDA, could have made the statements
before the Division Bench that the competent authority of the
respondent no.1 wanted to withdraw the cancellation of the initial
tendering process order dated 05.02.2021 and that the respondent
no. 1 had no objection to go ahead with the initial tendering process,
in case the respondent no.2 was ready to execute the work on
the same terms and conditions as were agreed at the time of
finalization of NIT dated 15.11.2018, when the respondent no. 1
itself had decided to cancel and in fact cancelled the initial tendering
process vide its order dated 05.02.2021 accepting the findings of
the committee constituted by the High Court to the effect that there
were irregularities and illegalities committed by the officers of the
HIMUDA in processing the tender and that the respondent no. 2 was
not technically qualified?
9. When the common order dated 08.01.2021 was passed in the Writ
Petition No. 3021 of 2018 filed by the petitioner Dalip Singh and Writ
Petition No.363 of 2019 filed by the present appellant, recording the
said findings of the committee appointed by it, pursuant to which
order, the respondent no.1 had cancelled the tender on 05.02.2021,
[2024] 4 S.C.R. 11
Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing and Urban
Development Authority & Another
and had issued a fresh NIT on 17.11.2021, it was incumbent on the
part of the respondent no. 2 to implead the said two petitioners as
the party respondents in the new petition filed by it i.e. 1481/2021,
and it was also incumbent on the part of the High Court to give
opportunity of hearing to the said petitioners before passing the
impugned order disposing of the said petition merely recording the
statements of the learned counsels for the respondent nos. 1 and
2, and permitting the respondent nos. 1 and 2 to go ahead with
execution of the work as per the initial tender which was already
cancelled by the respondent no.1.
10. Though it is true that initially an LOI was issued by the respondent
no. 1 in favour of the respondent no. 2 on 17.12.2018, but the same
was withdrawn by the respondent no. 1 as per the letter dated
02.01.2019 on account of pending litigations in the High Court. In
any case, it hardly needs to be reiterated that the Letter of Intent is
merely an expression of intention to enter into a contract. It does not
create any right in favour of the party to whom it is issued. There
is no binding legal relationship between the party issuing the LOI
and the party to whom such LOI is issued. A detailed agreement/
contract is required to be drawn up between the parties after the LOI
is received by the other party more particularly in case of contract
of such a mega scale.
11. Since, there was no right whatsoever created in favour of the
respondent no. 2, and since the respondent no. 1 HIMUDA had
already accepted the recommendations of the Committee appointed
by the High Court and the order dated 08.01.2021 passed by the
High Court, and had cancelled the tender and issued fresh NIT on
17.11.2021, the respondent no. 1 could not have agreed to allow the
respondent no. 2, who was found to be not technically qualified, to
go ahead with the execution of the project in question and that too
without giving the other two parties any opportunity to negotiate. If the
respondent no. 1 was so keen to provide the facilities to the public
without causing any additional burden on the public exchequer, all
the three parties who had participated in the original tender should
have been given the opportunity to negotiate with it.
12. Having regard to the entire chain of events, and the conduct of
the respondent nos. 1 and 2, we have no hesitation in holding that
the respondent no. 1 in collusion with the respondent no. 2, had
12 [2024] 4 S.C.R.
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taken the High Court for a ride and misused the process of law for
covering up the irregularities and illegalities committed in the tender
process by the officers of the respondent no. 1, and for anyhow
awarding the contract to the respondent no. 2 under the guise of
the court’s order. It is a matter of surprise for us that the High Court
also could not notice the ill-intention of the respondent nos. 1 and 2
and disposed of the petition, permitting them to go ahead with the
original tender, ignoring the reports of the independent committee
and the observations made by the Single Bench in the Order dated
08.01.2021 with regard to the irregularities and illegalities committed
by the officers of the respondent no. 1 HIMUDA.
13. The impugned order having been passed without proper application of
mind and without assigning any cogent reason for brushing aside the
findings recorded by the Independent Committee and the observations
made by the Single Bench in the order dated 08.01.2021, the same
deserves to be quashed and set aside. Since, we have found that
the respondent no.1 HIMUDA, though ‘State’ within the meaning
of Article 12 of the Constitution of India, had acted malafide and in
collusion with the respondent no.2, and had taken the High Court for
a ride, the present appeal deserves to be allowed with heavy cost.
14. In that view of the matter, the impugned order passed by the High
Court is set aside. The appeal is allowed with cost of Rs. 5,00,000/-
to be deposited by the respondent no. 1 HIMUDA with the Supreme
Court Advocates-on-Record Association, within two weeks from today.
However, it is clarified that the respondent no.1 shall be at liberty
to initiate a fresh tender process in accordance with law and after
following the due process of law.
Headnotes prepared by: Nidhi Jain Result of the case:
Appeal allowed.
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