Introduction:
The Supreme Court recently addressed a critical issue regarding the sanctity and integrity of government auctions, ruling that bidders in such competitive processes must exercise a high degree of care. This judgment was delivered in the case involving M/s Omsairam Steels & Alloys Pvt. Ltd. and the Director of Mines and Geology, Bhubaneswar, where a mistaken bid led to significant consequences. The bench of Justice Sanjiv Khanna and Justice Dipankar Datta highlighted the responsibilities of corporate entities in competitive bidding and allowed a fresh auction while imposing costs on the appellant for their oversight.
The case stemmed from an e-auction conducted by MSTC Ltd. under the authority of the Director of Mines and Geology, Bhubaneswar. The State of Odisha issued a tender for the e-auction of a mining lease for the Orahuri manganese and iron ore block on January 9, 2023. The appellant, M/s Omsairam Steels & Alloys Pvt. Ltd., participated by submitting the necessary fees and a bid security of Rs. 9,12,21,315 in the form of a bank guarantee.
The auction process involved two rounds: submission of technical bids and initial price offers, followed by an e-auction for technically qualified bidders. The appellant cleared the first round, and the e-auction began on March 21, 2023, with a floor price of 84.00 percent. After seven hours and 136 bids, the appellant accidentally entered a bid of 140.10 percent instead of the intended 104.10 percent, winning the auction by default.
Arguments:
Senior Advocate Mukul Rohatgi, representing the appellant, argued that the erroneous bid was a bona fide human error. He emphasized that the final bid of 140.10 percent was significantly higher than necessary and pointed out that the appellant promptly notified the authorities about the mistake, requesting rectification.
Advocate Prakash Ranjan Nayak, representing the respondents, contended that the e-auction process had concluded definitively and could not be reopened due to the appellant’s alleged mistake. He noted that the e-auction platform provided a pop-up confirmation requiring authentication via a Digital Signature Certificate, which the appellant complied with, thus invalidating their claim of a mistake.
Court’s Judgment:
The Supreme Court, recognizing the limited scope of judicial review in commercial matters, found grounds to grant equitable relief for the appellant’s bona fide mistake. The court noted the appellant’s immediate action to inform the authorities and dismissed the respondents’ argument regarding the finality of the auction. Justice Sanjiv Khanna and Justice Dipankar Datta observed that the erroneous bid lacked commercial sense and allowing it to stand would be unconscionable.
The court applied the doctrine of proportionality, stating that the forfeiture of the security deposit for a clear human error was disproportionate and punitive. The bench remarked:
“The enforcement of an otherwise commercially unviable bid, with the forfeiture of the deposit hanging over the appellant’s head akin to a sword of Damocles, can hardly be said to be in either party’s best interests.”
The court directed the appellant to pay Rs. 3,00,00,000 within a month, allocating Rs. 2,75,00,000 for costs incurred by the respondents and other bidders, and Rs. 25,00,000 for charitable purposes benefiting the young tribal population in the district where the mine is located.