Flexibility in Tender Obligations Under Lex Non Cogit Ad Impossibilia: Supreme Court Decision in M/S OM GURUSAI Construction v. M/S V.N. Reddy

Introduction

The case of M/S OM GURUSAI Construction Company v. M/S V.N. Reddy ([2023] INSC 760) adjudicated by the Supreme Court of India on August 23, 2023, addresses critical issues pertaining to tender compliance deadlines and the application of legal maxims in contract execution. The appellant, OM Gurusai Construction Company, contested the validity of a work order issued by the Executive Engineer of the Lower Wardha Project Division, Wardha, after being deemed the lowest bidder in a tender for "construction of land development works (Part-I) of Gadegaon main minor offtaking @ R.D. 4995 M on Nandgaon Dy". The central issue revolved around the appellant’s compliance with Clause 2.22.0(ix) of the tender conditions, which mandated the submission of additional performance security within two working days of bid opening.

Summary of the Judgment

The Supreme Court examined whether the appellant breached the strict deadline stipulated in the tender conditions by submitting the additional performance security on the third working day, on March 17, 2021, due to a nationwide bank employees' strike on the second day. The High Court had previously set aside the work order, holding that the tendering authority was bound by the rigid interpretation of Clause 2.22.0(ix), thereby removing the appellant from eligibility. However, the Supreme Court overturned this decision, emphasizing the applicability of the legal maxim lex non cogit ad impossibilia (the law does not compel a person to perform the impossible). The Court held that the tendering authority exercised reasonable discretion by accepting the performance security on the earliest possible day post-strike, thereby upholding the appellant’s compliance under exceptional circumstances.

Analysis

Precedents Cited

The Supreme Court's reasoning was supported by several key precedents that emphasize flexibility and the application of legal maxims in contractual obligations:

Mahanth Ram Das v. Ganga Das (1961) 3 SCR 763: This case highlighted that procedural orders, although strict, are not immutable and can be interpreted in light of unforeseen circumstances.
Raj Kumar Dey v. Tarapada Dey (1987) 4 SCC 398: The Court applied the maxim lex non cogit ad impossibilia, asserting that law does not enforce impossible actions.
HUDA v. Dr. Babeswar Kanhar (2005) 1 SCC 191: Reinforced the importance of applying general principles of justice and necessity when specific legal provisions are silent.
Rosali v. TAICO Bank (2009) 17 SCC 690: Demonstrated the Court’s willingness to accommodate delays caused by bank strikes when fulfilling legal obligations.
Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited (2016) 16 SCC 818 and Uflex Limited v. Government of Tamil Nadu (2022) 1 SCC 165: Emphasized deference to tendering authorities unless there is evidence of mala fide or perverse reasoning.
Jagdish Mandal v. State of Orissa (2007) 14 SCC 517: Provided a framework for courts to evaluate the propriety of judicial interference in tender-related disputes, focusing on mala fide intentions, arbitrariness, and public interest impact.

Legal Reasoning

The Supreme Court meticulously dissected the High Court's rationale, identifying overreach in its analysis, especially regarding the extension of time for work completion, which was deemed beyond the High Court’s purview without comprehensive factual evidence. The pivotal legal reasoning included:

Application of lex non cogit ad impossibilia: The Court held that the appellant was not compelled to meet an impossible deadline due to the unforeseen bank strike, thereby upholding the submission made on March 17, 2021.
Discretion of Tendering Authority: Recognized that the Executive Engineer, as the authority, has the competence to interpret tender conditions in light of real-world constraints and should not be second-guessed by higher courts unless mala fide intent or irrationality is proven.
Rejection of High Court’s Overreach: The Supreme Court criticized the High Court for venturing into matters requiring discretionary judgment without a complete factual record, particularly concerning the extension of work deadlines.
Consistency with Precedent: By aligning with previous judgments like Rosali v. TAICO Bank, the Court reinforced the principle that strict adherence to procedural timelines should be flexible in the face of legitimate impediments.

Impact

This landmark decision has profound implications for future tendering processes and judicial interventions in contractual obligations:

Enhanced Flexibility in Tender Compliance: Entities participating in tenders can anticipate that strict deadlines may be interpreted with consideration for extenuating circumstances, promoting fairness.
Judicial Restraint: The judgment underscores the judiciary’s role in deferring to administrative authorities in matters of technical and procedural discretion unless there is clear evidence of malintent or irrationality.
Strengthening of Legal Maxims in Contract Law: Reinforces the applicability of lex non cogit ad impossibilia in ensuring that contractual obligations do not become punitive in the face of genuine obstacles.
Precedential Value: Serves as a guiding precedent for courts to balance strict legal provisions with the practical realities faced by parties in contractual agreements.

Complex Concepts Simplified

Lex Non Cogit Ad Impossibilia

This Latin maxim translates to "the law does not compel a person to perform what is impossible." In this context, it means that the appellant was not legally obligated to meet the performance security submission deadline that was rendered unfeasible due to a bank strike.

Article 226 of the Constitution of India

This article empowers High Courts to issue certain writs for the enforcement of fundamental rights and for any other purpose. The High Court had invoked this to interfere with the tendering process, but the Supreme Court limited its scope, highlighting that such discretionary matters should primarily be handled by the relevant authorities unless public interest is demonstrably affected.

Tendering Authority’s Discretion

The authority issuing tenders possesses the discretion to interpret and apply the tender conditions based on the specific circumstances of each case. This ensures that rigid application of rules does not lead to unjust outcomes when unforeseen events occur.

Conclusion

The Supreme Court's judgment in M/S OM GURUSAI Construction Company v. M/S V.N. Reddy significantly underscores the judiciary’s recognition of practical impediments in contractual obligations and reinforces the principle that legal frameworks should be applied with discretion and compassion. By invoking lex non cogit ad impossibilia, the Court affirmed that rigid procedural adherence should not override substantive fairness, especially when parties act in good faith under challenging circumstances. This decision not only safeguards the interests of competent tenderers facing genuine obstacles but also delineates the boundaries of judicial intervention, thereby promoting a balanced and equitable legal environment.