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The first round of litigation

3. There were several bidders including the respondent and NICCO Corporation Ltd. BSNL awarded the highest vendor rating (V-1), to NICCO. The respondent claimed that on a proper evaluation of bidders, it should have been given the highest Vendor Rating (V-1) in regard to 10P x 0.5 (UA) size cable instead of NICCO; that if it had been adjudged as V-1, it would have secured a Purchase Order for a quantity of 5.842 LCKM from BSNL; that as NICCO was adjudged as V-1, the appellant treated the respondent as one of the `other bidders' and consequently placed an order only for a quantity of 0.536 LCKM; and that resulted in a shortfall of 5.306 LCKM in the order placed on it. The respondent therefore filed Writ Petition [C] No.5808/2001 in the Delhi High Court on 18.9.2001 alleging that BSNL had arbitrarily adjudged NICCO as the person with the highest Vendor Rating thereby pushing it down to the category of `other bidders' which adversely affected the size of its order. It prayed for the following reliefs :

(a) to quash the Advance Purchase Orders dated 11.9.2001 issued by BSNL to NICCO.

(b) to issue a direction to BSNL to issue fresh Advance Purchase Orders in terms of the Vendor Rating as on 22nd May, 2001 (date of the opening of the Tender) to it (respondent herein); and

(c) to quash the Revised Delivery Rating of NICCO as set out in the Internal Office memo dated 27.7.2001.

4. A Division Bench of the Delhi High Court allowed the said writ petition by order dated 29.4.2004 (reported in (2004) Delhi Law Times 112). It held that assessment of Vendor Rating done by BSNL in regard to NICCO was not proper. It therefore directed BSNL to redo the Vendor Rating by following the formulae laid down in the tender document, as indicated in the judgment. As the High Court was aware that by then contracts had already been awarded in respect of most of the tendered quantity and only a negligible quantity remained, it issued the following consequential direction :

Some collateral issues

19. This case makes it necessary to refer to two areas of concern. The first relates to misuse by litigants, of routine observations made by courts reserving liberty to a litigant to seek further remedy, while disposing the matters, to claim non-existent rights and remedies. Second relates to the unenviable position to which public undertakings are reduced, for lack of freedom and unnecessary litigation.

Misuse of liberty reserved for further action

20. In the first writ petition filed by the respondent, the issue was whether the BSNL while evaluating the bidders had committed an error in adjudging NICCO as V-1 (vendor with the highest rating). The assessment of vendor rating (VR) was governed by the following formula : VR = 0.6PR + 0.3DR + 0.1 QR (PR, DR and QR referring to price rating, delivery rating and quality rating). The formula for arriving at PR was simple. QR did not involve any formula. But the formula prescribed to arrive at DR was complicated. The High Court found that the delivery rating (DR) of NICCO was modified by BSNL on a representation by NICCO, which led to NICCO, being adjudged as V-1. The High Court found that the modification of Delivery Rating was not warranted and consequently held that the vendor rating of NICCO was not proper. But it did hold that there was any malafides, bias or arbitrariness in the process of assessment of vendor rating by BSNL. In other words, the rating of NICCO as V-1 was apparently on account of a bonafide error in assessment or wrong understanding of the principles relating to assessment of Vendor Rating. The High Court directed correction of that error. The High Court was also aware that by the time it decided the writ petition, BSNL had completed the process of placing of purchase orders and only a very small quantity remained unallotted (In fact according to BSNL even this quantity had been transferred to next year's tender). Consequently, the High Court while disposing of the first writ petition directed the BSNL to reassess the vendor rating, and if as a result the respondent secured V-1 rating, to allot to it, any unallotted quantity of cables. So far so good.

21. But the High Court did not stop there. It proceeded to observe at the end of the order that after giving effect of balance supply, if the respondent was entitled to further supplies, it will be open to the respondent to pursue its remedies against the appellant for compensation/damages that may be available to it in law.

22. Where the terms of the bid documents barred any claim being made on account of the rejection or non-acceptance of any bid, the bid inviter would not incur any liability to any aggrieved bidder, and the bidder would not have any cause of action in private law. But as the bids were invited by BSNL, which is `state' for the purpose of Article 12, a writ petition was entertained, when respondent alleged arbitrariness in the process of assigning vendor-rating. In the absence of a finding in regard to arbitrariness, bias or malafides in the decision but only a mere error in assessment, the High Court ought not to have interfered in the tender process. In fact, it did not set aside the contract awarded to NICCO. But the High Court chose to issue a direction for re-assessment of the vendor rating and if respondent was found to have V-1 rating, then place a purchase order for the quantity that remained over after all the purchase orders. This was unobjectionable as a public law remedy. Having done so, there was no justification for the High Court to make any observation regarding compensation, as that was impermissible on the facts and circumstances, either in public law or private law. In fact, it was not based on any prayer. That unwarranted observation while disposing of the first writ petition, though it did not cast any liability on BSNL, was sufficient to persuade the designate of the Chief Justice while exercising jurisdiction under section 11 of the Act to assume that the High Court in the order dated 29.4.2004 had ordered the respondent to pursue the remedy against the appellant for compensation/damages and therefore, an arbitrator should be appointed to decide the claim.