Background: The case involved an e-auction conducted by MSTC Ltd. for a mining lease in the Orahuri manganese and iron ore block in Odisha. The appellant, M/s Omsairam Steels & Alloys Pvt. Ltd., participated in the auction and submitted the required bid security. However, during the final stages of the auction, the appellant mistakenly entered a significantly higher bid than intended, leading to substantial financial implications.
Auction Process: The e-auction followed a two-round process under the Mineral Auction Rules, 2015. The first round involved the submission of technical bids and initial price offers, while the second round required qualified bidders to submit their final price offers. The appellant's erroneous bid of 140.10% instead of 104.10% concluded the auction, with no counter-bids received.
Legal Dispute: Upon realizing the mistake, the appellant immediately sought rectification from the Director of Mines but was rejected. The appellant's writ petition to the Orissa High Court was dismissed, leading to an appeal to the Supreme Court. The appellant argued that the error was a bona fide mistake and not a deliberate act, while the respondents contended that the e-auction had attained finality and could not be reopened.
Supreme Court's Decision: A bench comprising Justices Sanjiv Khanna and Dipankar Datta heard the case. The Court acknowledged the appellant's prompt action in reporting the mistake and found the respondents' insistence on the finality of the auction unpersuasive. The Court emphasized the importance of maintaining a balance between the interests of the state and private parties. It held that the forfeiture of the security deposit for a clear human error, without any mala fides, was disproportionate and punitive.
Doctrine of Proportionality: The Court applied the doctrine of proportionality, stating that the enforcement of an unviable bid, coupled with the threat of forfeiture, was not in the best interests of either party. It suggested that respondents consider implementing measures to avoid human errors in future auctions.
Conclusion and Implications: The Supreme Court quashed the impugned communication and ordered a fresh e-auction. Additionally, it imposed a ₹3 crore cost on the appellant, with ₹2.75 crore allocated for covering various costs and ₹25 lakh directed towards charitable purposes for the tribal population in the district where the mine is located. This decision highlights the critical need for greater care and diligence in public auctions, setting a precedent for future cases to ensure the efficient and fair utilization of public funds.
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