Delhi High Court Sets Aside BSNL’s Rescission of Multi-Crore IT Contract with Private Firm

Introduction

In a significant judgment, the Delhi High Court quashed Bharat Sanchar Nigam Limited’s (BSNL) decision to withdraw a purchase order awarded to Millennium Automation Private Limited. The order pertained to a multi-crore project for providing centralized billing and internet protocol data recovery (IPDR) solutions. The court held that BSNL’s action was arbitrary, unreasonable, and lacked substantive evidence to support its claims of collusion and malpractice.

The Case at a Glance

The purchase order in question, dated July 19, 2024, involved the supply, installation, testing, commissioning, and maintenance of IT hardware and software for BSNL’s centralized mobile billing system and IPDR management solution. However, BSNL rescinded the contract on August 6, 2024, alleging collusion and malafide conduct by the private IT company during the tendering process.

Millennium Automation challenged the decision before the Delhi High Court, arguing that BSNL’s allegations were baseless and lacked supporting evidence. The petitioner claimed it had already invested heavily in procuring supplies and provided documentation of equipment clearance to BSNL just a day before the contract’s rescission.

High Court’s Observations

Justice Sanjeev Narula delivered the judgment on November 19, 2024, highlighting the following key aspects:

1. Arbitrariness of BSNL’s Actions:
   The court criticized BSNL for acting unfairly, stating that as a state-owned entity under Article 12 of the Constitution of India, it is obligated to act transparently and equitably. The rescission of the purchase order lacked a reasonable basis and violated principles of administrative fairness.
2. Absence of Tangible Evidence:
   The court noted that BSNL’s claims of “compromised integrity” and collusion were unsupported by any concrete evidence. It held that allegations of such gravity must be substantiated by tangible proof rather than conjecture or perception.
3. Unreasonable Timing:
   The court highlighted the petitioner’s submission of supplier documentation on August 5, 2024, followed by BSNL’s abrupt rescission the very next day. This sequence of events further pointed to arbitrary decision-making by the telecom giant.
4. Sanctity of the Tendering Process:
   While emphasizing the importance of maintaining the integrity of public procurement, the court underscored that any deviation must be backed by material evidence. It ruled that BSNL’s failure to do so rendered its actions unsustainable in law.

Judgment

The Delhi High Court set aside BSNL’s rescission of the purchase order, terming the action “unreasonable, arbitrary, and unsustainable”. The court directed BSNL to honor the terms of the original contract and ensure fairness in its dealings.

The judgment further clarified that serious allegations like collusion and malpractice cannot rest on assumptions. “There must be tangible evidence to substantiate such charges, especially when they serve as the basis for rescinding a purchase order,” the court observed.

Implications

1. Strengthening Accountability in Public Procurement:
   The case reinforces the principle that state-owned entities must act fairly and reasonably in all contractual dealings. Arbitrary cancellations undermine the sanctity of public procurement processes and expose organizations to judicial scrutiny.
2. Protection of Contractors’ Rights:
   The ruling highlights the judiciary’s role in protecting contractors from unfounded allegations and ensuring that public authorities do not abuse their position.
3. Upholding Investment Confidence:
   The court’s decision serves as a reminder that private entities entering into contracts with government bodies must be treated fairly, fostering confidence in public-private partnerships.

Conclusion

The Delhi High Court’s judgment against BSNL underscores the importance of fairness, transparency, and accountability in public procurement. By setting aside the rescission of the purchase order, the court has sent a strong message to state entities about adhering to constitutional principles and legal norms in their contractual engagements.

Keywords:

Delhi High Court, BSNL contract, public procurement, arbitrary decision, state-owned entity, Millennium Automation, centralized billing system, IPDR solution, tendering process, administrative fairness.

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