Parties engaging in mindless appeals in commercial disputes must bear costs: SC

The Supreme Court has said that the parties which engaged themselves in "mindless appeals" in commercial disputes must face the consequences, including costs.

"In carrying on commercial litigation, parties must weigh the commercial interests, which would include the consequences of the matter not receiving favourable consideration by the courts. Mindless appeals should not be the rule," a bench of Justices Sanjay Kishan Kaul and Hrishikesh Roy said in a judgement on Friday.

The court directed two companies to pay Rs 23.25 lakh to a successful bidder and Rs 7.58 lakh to the Tamil Nadu for cost and litigation expenses for challenging a tender process for hologram stickers to prevent sale of spurious liquor in the state.

The top court said the judicial review of contractual matters has its own limitations, which is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence, it added.

Maintaining that the succeeding parties in such disputes must get costs, the bench said, "There seems to be often a hesitancy in our judicial system to impose costs, presuming as if it is a reflection on the counsel. This is not the correct approach. In a tussle for enforcement of rights against a state different principle apply but in commercial matters costs must follow the cause."

The court allowed an appeal by Uflex Ltd against the Madras HC's order directing the state government to float a fresh tender.

"Merely because a company is more efficient, obtains better technology, makes more competitive bids and, thus, succeeds more cannot be a factor to deprive that company of commercial success on that pretext," the court said.