Delhi High Court to Examine MCD's Tender Cancellation in Toll Collection Case.


08 April 2025 Constitutional & Government >> Constitution & Law Procedure  

The Delhi High Court is set to delve into a petition filed by Sahakar Global Limited JV and another, challenging the Municipal Corporation of Delhi's (MCD) decision to abandon a tender process for toll and environment compensation charge collection. The petitioners, who were the 'H-1' (highest) bidder, allege that the cancellation is arbitrary and without justifiable reason.

The case, heard by the Honourable Chief Justice Mr. Devendra Kumar Upadhyaya and the Honourable Mr. Justice Tushar Rao Gedela, centers on a tender initiated on February 7, 2024, by the MCD to engage a contractor for collecting Toll and Environment Compensation Charges at 154 border points in Delhi for a period of three years. The annual reserve price for this collection was set at Rs. 847,00,00,000/-.

 
 

Sahakar Global Limited JV, a consortium including Sahakar Global Limited, Prakash Asphaltings & Toll Highways (India) Ltd., and Skylark Infra Engineering Pvt. Ltd., participated in the tender. They deposited an earnest money of Rs. 18.70 Crores and were declared technically qualified on April 3, 2024. Their financial bid of Rs. 864,18,18,999/- was the highest, exceeding the reserve price by Rs. 17.18 Crores per annum.

Despite being declared the 'H-1' bidder, the Letter of Award was not issued to the petitioners. The MCD informed them that the 'Standing Committee,' the competent authority for approval, had not been in existence since January 2023. Subsequently, the petitioners filed a writ petition (W.P.(C) 9268/2024) seeking a direction for the MCD to award the contract. The bid validity was extended by the petitioners until November 3, 2024, along with the EMD Bank Guarantee.

On October 5, 2024, the MCD House took the impugned decision to "explore the possibility of time gap arrangement by engaging the existing contractor on same terms & conditions of existing contract at new H-1 rate so that there is no revenue loss to MCD or any other time gap arrangement and parallelly explore how the revenue can be increased by bringing more competition within 6 months". This decision, communicated via a letter dated November 5, 2024, effectively abandoned the existing tender process. The existing contractor, M/s Sahakar Global SDMC JV LLP, was engaged for a six-month interim period at a weekly toll collection remittance of Rs. 16,61,88,827/-. The earnest money deposited by the petitioners was also released.

Petitioners' Arguments:

The petitioners, represented by Senior Advocate Mr. Neeraj Kishan Kaul, argue that the tender cancellation is unsustainable as it was done without due process or an opportunity for them to be heard. Mr. Kaul contended that the MCD Commissioner had on various occasions recommended issuing the Letter of Award to the petitioner, but these recommendations were ignored in favor of an arbitrary decision without justifiable reason.

The petitioners further argue that the cancellation compromises the sanctity of the tender process and frustrates their legitimate expectation of fair treatment. They emphasized that merely the possibility of more revenue cannot be considered public interest. Drawing attention to a Ministry of Finance circular, Mr. Kaul argued that re-tendering incurs costs and delays, and a lack of competition cannot be solely determined by the number of bidders. He asserted that even with a single bid, the process should be valid if adequately publicized, with sufficient time given for submissions, non-restrictive criteria, and reasonable prices compared to market values.

MCD's Defense:

Senior Advocate Mr. Sanjiv Sen, representing the MCD, vehemently opposed the petition, citing clauses in the tender document that reserve the MCD's right to reject any or all bids without assigning reasons. Mr. Sen argued that no vested right accrues to an 'H-1' bidder for the issuance of a Letter of Award.

Mr. Sen highlighted the MCD House's resolution, which, despite the Commissioner's proposal to award the contract to the 'H-1' bidder, decided to explore alternative arrangements and increased competition. He argued that the House was not bound by the Commissioner's recommendation and made the decision in public interest. On instructions, Mr. Sen stated that the tentative base price in a new tender could exceed Rs. 900 Crores, with an expectation of fetching over Rs. 1,000 Crores, thus increasing public revenue. He cited Supreme Court judgments affirming that the State is not bound to accept the highest bid if public interest is served.

Judicial Review and State Contracts:

The High Court's discussion extensively referenced the Supreme Court's jurisprudence on judicial review of State actions in contractual matters, particularly the Three-Judge Bench judgment in Subodh Kumar Singh Rathour v. Chief Executive Officer & Ors.. This case clarified that while contractual disputes are generally not amenable to writ jurisdiction, they become so when the State acts arbitrarily, unfairly, or unreasonably.

The Court noted that Subodh Kumar Singh Rathour emphasized that the State's power to alter or cancel a contract must be exercised bona fide and genuinely reflect public interest or policy change. It also underscored the sanctity of public tenders and contracts, asserting that arbitrary terminations undermine legitimate expectations and erode trust in public procurement processes.

The High Court acknowledged that Subodh Kumar Singh Rathour dealt with a situation where a contract was cancelled after work had commenced, whereas in the present case, no Letter of Award or work order had been issued. However, the Court also noted that judicial review is permissible even prior to the award of a contract if there is procedural impropriety, arbitrariness, favoritism, or a lack of application of mind.

The Delhi High Court will now consider these arguments and the legal precedents to determine whether the MCD's decision to cancel the tender was justified and whether it warrants judicial interference under Article 226 of the Constitution of India.