Sunday, June 4, 2023

Judicial Interpretation of Contracts in sphere of Commerce stands on a distinct footing than while interpreting statutes: Supreme Court

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Supreme Court set aside the judgment of Jharkhand High Court which had quashed the e-auction of coal extraction in Kusunda Area. Apex Court allowed appeal filed by Bharat Coking Coal Limited and connected appeals by M/s RK Transport and M/s C1 India Pvt Ltd. Also, Apex Court dismissed the appeal filed by AMR­Dev Prabha.

A Bench  of Chief Justice S.A. Bobde, Js. Gavai and Js. Surya Kant set aside the judgment of the High Court dated 12.04.2018.

The appeals were preferred by Bharat Coking Coal Ltd. being aggrieved by the order dated 12.04.2018 passed by a Division Bench of the High Court of Jharkhand at Ranchi, wherein a writ petition filed by AMR­Dev Prabha had been allowed and the auction process conducted by M/s C1 India Pvt Ltd was set aside and the resultant award of tender by   BCCL to M/s RK Transport Co. had also been quashed.

BCCL,  operates coking coal mines in India and outsources mining and processing functions to external entities. Such allocation of tasks was done through bidding processes, with M/s C1 India Pvt Ltd – an online procurement facilitator being appointed as the service provider for e­-tendering of its contracts. A Notice Inviting Tender (NIT) was issued by the appellant   for purposes of ‘Hiring of HEMM for removal of OB, extraction and transportation of coal with fire fighting.  An estimate of Rs 1694.84 crores was prepared, with the aim of   contracting the firm which offered the lowest cost estimate. In technical faults at the service provider’s end, the auction period was to be paused and extended by the period of   the fault.

It was held by the Court that even if there had been a minor deviation from explicit terms of the NIT, it would not be sufficient in the absence of mala fide for courts to set aside the tender at the behest of an unsuccessful bidder. It is because notice must be kept of the   impact of overturning an executive decision and its impact on the larger public interest in the form of cost overruns or delays.

As per Court, the fundamental problem to be dealt with in this case was “enforcement of terms of NIT”. For this kind of exercise what is inherent is interpretation of contractual terms.

The Bench noted that judicial interpretation of contracts in the sphere of commerce stands on a distinct footing than while interpreting statutes. It held that it is clear that BCCL and C1­India have laid recourse to Clauses of the NIT, whether it be to justify condonation of delay in submitting performance bank guarantees or their decision to resume auction on grounds of technical failure. BCCL having authored these documents, is better placed to appreciate their requirements and interpret them. The High Court ought to have deferred to this understanding, unless it was patently perverse or mala fide. Given how BCCL’s interpretation of these clauses was plausible, differences in opinion of contractual interpretation ought not to have been grounds for the High Court to come to a finding   that the appellant committed illegality.

-India Legal Bureau

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