About | Blog | News Alert | 

jigarbakotra@gmail.com

Search for Articles 

Home > India > Litigation, Mediation & Arbitration

CONTRIBUTOR

Most Read: Contributor India, June 2021

ARTICLE

India: Case Analysis

22 August 2018
by
Rupesh Gupta
(New Delhi)
Singh & Associates

Your LinkedIn Connections

with the authors

Case Title:
National Highways Authority of India versus Gwalior Jhansi
Expressway Limited (Decision by Hon'ble Supreme Court
of
India in Civil Appeal No. 3288 of 2018 on 13.07.2018)

Facts:
On December 17, 2006, National Highways Authority of India
('NHAI') entered into a Concession Agreement
with Gwalior
Jhansi Expressway Limited ('GJEL') for  the work of
widening of existing two-lane portion, from Km
16.000 to Km 96.127,
to four lanes in the States of Uttar Pradesh and Madhya Pradesh.
NHAI asserted that
GJEL failed to undertake the project work at the
requisite pace, inter alia, due to inadequate deployment of
machinery, plant, material and manpower. GJEL had achieved only 62%
progress and eventually abandoned
the project site in March 2012.
NHAI then issued a Cure Period Notice on October 19 2013, requiring
GJEL to
cure the breaches within 30 days from receipt of the
notice. GJEL denied the notice by a written reply. NHAI
thereafter,
issued letters expressing its intention to issue termination notice
of the Concession Agreement.
GJEL then filed a petition under
Section 9 of the Arbitration and Conciliation Act 1996
('Act of 1996') seeking
stay of Cure Period Notice
dated October 19 2013, as well as the notice expressing the
intention to issue
termination notice. The High Court of Delhi
passed an interim stay on March 12, 2014, restraining the
appellant
from taking any coercive action and the petition was finally
disposed-off on April 22, 2015 with a
direction to the Arbitral
Tribunal, which was already constituted in the meantime, that the
interim order dated
March 12, 2014 would continue during the
pendency of the arbitral proceedings with liberty to the parties to
seek its modification or revocation before the Arbitral Tribunal
('AT').

GJEL filed an application under Section 17 of the Act, on May

17, 2016, before the AT seeking interim
directions including an
interim measure to permit GJEL to invite tender/bid for executing
the balance work
under the Concession Agreement on Engineering
Procurement and Construction basis subject to Claimant
being
granted the Right of First Refusal (ROFR) for matching the lowest
bid and in the event the Claimant
matches the said lowest bid
permit the Claimant to complete the said balance/remnant works on
the terms
and conditions of the tender/bid invited on Engineering
Procurement and Construction basis except for the
provision, if
any, for furnishing Bank Guarantees. By an Order dated July 23,
2016, the relief of ROFR was
allowed by the AT.

Subsequently, tender was floated by NHAI for the balance work

and bids were invited in public domain.
However, on April 25, 2017,
GJEL moved an application before the AT under Section 17 of the
Act, seeking,
inter alia, permission of the AT to complete the
balance work at its risk and cost. It was asserted that NHAI did
not give option of ROFR and match the lowest bid, in line with the
order dated July 23, 2016. Its contended
that NHAI was proceeding
to conclude the tender process by issuing LOI/LOA in favour of the
L-1 bid working
behind GJEL's back. NHAI asserted that GJEL
chose to remain silent during the entire bidding process and
since
GJEL did not participate in the bidding process, it would not get
the right to match the lowest bid.

The AT, vide order dated May 24,, 2017 allowed the application
filed by GJEL. NHAI filed an appeal under
Section 37(2)(b) of the
Act of 1996 before the High Court of Delhi but the same was
dismissed on August 21,
2017.

The said decision was challenged before the Hon'ble Supreme

Court of India on the ground that GJEL cannot
be permitted to
exercise ROFR sans participation in the bidding process and
notwithstanding the terms and
conditions of the tender
documents.
Issues involved:
a. Whether the interim order dated May 24, 2017, passed by the AT
under Section 17 of the Act of 1996
and order dated August 21,
2017, passed by the Hon'ble High Court are justified and
legal?

b. Whether the right of GJEL to match the bid of L-1 or to

exercise ROFR would have come into play only if
GJEL was to
participate in the tender process pursuant to the notice inviting
tenders from the interested
parties?

Decision:
The Hon'ble Supreme Court took note of the tender conditions
and observed that the plain wording of the
eligibility clause in
the tender documents and the incidental stipulations made it
explicitly clear that GJEL was
required to participate in the
tender process by submitting its sealed bid (both technical and
financial). GJEL
neither participated in the tender process despite
the express terms in the tender documents nor challenged
the
validity of the tender conditions which stipulated the requirement
for GJEL to participate in the tender
process.

The Hon'ble Court further observed that no specific and

express exemption from participating in the tender
process was
sought by GJEL while seeking the interim order dated July 23, 2016.
Since no specific exemption
was granted to GJEL from participation,
GJEL was obliged to comply with the terms and conditions of the
tender documents publicly notified by NHAI.

The Hon'ble Court therefore, opined that since GJEL failed

to participate in the bidding process in consonance
with such
notified terms and conditions of the tender, GJEL lost the
opportunity granted to it under the order
dated July 23, 2016, to
match the lowest bid or to exercise ROFR. Another aspect that led
to the conclusion
was that the tender notice was disclosed before
the Arbitral Tribunal on  December 10, 2016. GJEL did not
follow up the tender documents which were placed in public domain.
The application under Section 17 of the
Act of 1996 was filed on
April 25, 2017, after the opening of technical bids on January 05,
2017, and financial
bids on March 29, 2017. Further, the third
parties  who participated in the bidding process, were likely
to be
prejudiced by allowing GJEL to match the lowest bid or
exercise ROFR, without participating in the bidding
process despite
the express stipulation in this regard in the tender documents.

The aforesaid findings gave the conclusion that the decision of

the AT as confirmed by the High Court falls foul
of the fundamental
policy of Indian law.

This decision of the Hon'ble Supreme Court has its

impeccable strength in as much as the Hon'ble Court has
given
prime consideration to the terms and conditions of the tender
floated by NHAI which were neither acted
upon nor challenged by
GJEL during the relevant time. The interim relief was sought from
AT after the
financial bids were opened. The Hon'ble Court gave
importance to the express and true intent of the earlier
interim
order dated July23, 2016, and observed that since there was no
specific direction in favour of GJEL not
to participate in the
tender process, GJEL could not be later allowed to assert the said
understanding and seek
interim relief from AT. In the facts and
circumstances, to allow the relief to GJEL to match the lowest bid
or
exercise ROFR was held to be against the public policy of Indian
law.

The content of this article is intended to provide a general

guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

AUTHOR(S)

Rupesh Gupta
Singh & Associates

About
|
Blog
|
Contact Us
|
Contributors
|
Feedback
|
Free News Alerts
|
T&Cs
| Unsubscribe
|
Your Privacy

  © Mondaq® Ltd 1994 - 2021. All Rights Reserved.