Simplified Explanation of the Judgment

The Patna High Court recently addressed a dispute concerning the allocation of work orders for supplying polyethylene sheets to flood-affected districts. The petitioner, a partnership firm engaged in the supply of such materials, was aggrieved by the decision of the Disaster Management Wing, Patna, to distribute the work order among multiple vendors despite the petitioner being the lowest bidder (L-1).

The issue arose from a tender floated on 18 April 2022, wherein the petitioner had quoted ₹218.88 per kg and was later declared L-1. However, the District Purchase Committee unilaterally reduced the accepted rate to ₹207 per kg without the petitioner’s explicit consent. Despite this, the petitioner signed the contract hoping to secure a large volume of orders. Contrary to expectations, the authorities allocated the contract to five vendors, not just the L-1 bidder.

The petitioner alleged that this was in violation of the tender conditions, especially Clause 6, which emphasized awarding the contract to the L-1 bidder. Moreover, it was claimed that the firm had the capacity to meet the entire demand and thus deserved exclusive allocation.

However, the government explained that the petitioner had failed to supply the required materials within the stipulated 10-day period. To meet urgent needs in flood-prone districts, alternative vendors were engaged. Furthermore, the polyethylene sheets provided by the petitioner were found to be substandard by CIPET, Hajipur. The district authorities subsequently issued a show-cause notice and, being dissatisfied with the response, blacklisted the petitioner’s firm.

The Court examined the tender rules and found that multiple bidders were selected under clear provisions allowing allocation beyond L-1 in case of supply default. Importantly, Clause 9 of the tender allowed blacklisting in case of non-compliance. The contract emphasized both timely delivery and quality verification, and the petitioner failed on both counts.

Also, the Court noted that the contract’s term had expired on 31 March 2024. As a result, the case was deemed academic with no active grievance surviving.

Regarding the petitioner’s claim for compensation under Section 73 of the Contract Act, the Court rejected it, stating that no valid breach by the government was established.

Significance or Implication of the Judgment

This ruling emphasizes the importance of performance over mere selection as the lowest bidder in public procurement. It supports the government’s right to diversify vendors in urgent relief scenarios and to act against non-compliant suppliers.

For contractors, it highlights that being L-1 does not automatically entitle them to exclusive rights—timely and quality supply are crucial. For the public sector, it underlines the need to adhere to tender rules transparently while ensuring service delivery in critical situations like disaster relief.

Legal Issue(s) Decided and the Court’s Decision

• Whether the L-1 bidder is entitled to exclusive allocation of the work order
  ➤ No. The tender allowed distribution among multiple bidders upon failure by one.
• Was unilateral rate reduction by authorities valid?
  ➤ Yes. All selected vendors agreed to supply at the reduced rate of ₹207/kg.
• Was blacklisting justified?
  ➤ Yes. Petitioner failed to supply on time and supplied substandard materials.
• Was the petition maintainable after contract expiry?
  ➤ No. The matter was considered academic as the contract had already ended.
• Is compensation under Section 73 of the Contract Act justified?
  ➤ No. No breach of contract by the authorities was found.

Case Title
M/s S.N. Sons v. State of Bihar & Ors.

Case Number
CWJC No. 7395 of 2023

Coram and Names of Judges
Hon’ble The Chief Justice K. Vinod Chandran
Hon’ble Mr. Justice Harish Kumar

Names of Advocates and who they appeared for
For Petitioner: Mr. Abhishek Singh, Mr. Neeraj Kumar
For Respondents: Mr. S.D. Yadav (AAG-9), Mr. Braj Bhushan Mishra
For Pvt. Respondent No. 8: Mr. Shambhu Sharan Singh, Mr. Utkarsh Bhushan

Link to Judgment
https://www.patnahighcourt.gov.in/ShowPdf/web/viewer.html?file=../../TEMP/026562a2-4e5c-4b88-b995-bf0880c6ac08.pdf&search=Blacklisting

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