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Synopsis

The Supreme Court has directed the Odisha government to conduct a fresh e-auction process of a mining lease allowing a plea by the successful bidder that it was being forced to accept an exorbitant, unrealistic and unsustainable bid of 140.10%, entered in computer due to typographical and human error.

A bench of Justices Sanjiv Khanna and Dipankar Datta quashed the communication issued by Director of Mines and Geology on forfeiture of security in the interest of equity and in exercise of power under Article 142 of the Constitution.

The court, however, directed the appellant M/s Omsairam Steels & Alloys Pvt Ltd to pay Rs three crore to the respondents towards loss of revenue arising out of the delay in commencing mining activities, costs towards expenses incurred for the earlier e-auction process and for the fresh process, and other sundry purposes, if any, for Orahuri manganese and iron ore block and others.

Acting on a plea against the Orissa High Court's order refusing to entertain a writ petition by the appellant, the bench confirmed its interim order of April 6, 2024, which had extended to the state government the liberty to conduct a fresh e-auction as per law. 

The High Court had said the appellant was bound by its bid and the dispute was beyond the confines of the writ jurisdiction.

"The Mineral Auction Rules governing the e-auction process does neither provide any method for a bidder to withdraw the mistaken bid, nor does the e-auction method seem to provide any recourse for rectification or allow a bidder to quit the process without jeopardising its right as regards a forfeiture of the Bid Security. In such a factual matrix, holding the appellant accountable to what is evidently an extravagant bid erroneously or mistakenly offered, as compared to the immediately preceding bids, would seem to us to be unconscionable, on facts," the bench said.

During the hearing, both parties showed a visual step-by-step auction process functions, which made it evident that once the bidder enters the numerical value and clicks on ‘Bid’, a pop-up does appear showing the bid in numerical and in words; however, the system does not apparently provide any option to cancel such bid or to re-type the bid amount, should any error or mistake in the bid be noticed, the court noted.

"We, thus, presume that in case of an error or mistake, a bidder may choose not to submit the bid with the Digital Signature Certificate with the result that it has to quit the process. This lends weight to the appellant’s submission that there was indeed a human error or mistake, rectification of which was not permitted by the system," the bench said.

The court also noted trend of rate of enhancement of bid by the appellant that it enhanced the prevailing bid 47 out of 137 times and its enhancement ranged between 0.05% and 2.00%, and the fact that the bidders were playing safe by marginally increasing the prevailing bid price to test each other leading to increase of the Floor Price from 84.00% to a highest of 104.05%, the appellant did not intend to enhance the bid by 36.05%. 

Applying the balancing test to the present case, the bench said it is as clear as daylight that the forfeiture of the entirety of the appellant’s security deposit worth Rs 9,12,21,315 as against evident human error, which has not been shown to even border on mala fides, or knowingly done, is punitive. 

The court thus directed the appellant to pay Rs three crore due to its failure to act with the required degree of care, which has not only had the effect of inevitably delaying the mining project but would also cost both the respondents and the other participant bidders precious time, effort and money. Out of such money, the court ordered Rs 25 lakh should be expended towards charitable purposes for development of the young tribal population of the district where the subject mine is situate.