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Interfering In Government Tender's With Writ Jurisdiction-A Perspective

The Government is the largest litigator in the land, and Writ Petitions account for a majority of these litigations. Since Writ Petitions can only be preferred against the State as per Article 12 of the Constitution, Government bodies are the exclusive bodies against which Writ Petitions can be preferred. This Article will discuss in what circumstances the writ jurisdiction of the Courts can be invoked in a government tender, and in what circumstances the Court will intervene, and when it will not.

Tata Cellular Vs Union Of India [1]:

The Department of Telecommunications, Government of India invited tenders from Indian companies with a view to license Cellular Mobile Phone Service in the 4 metro cities of India. Who were short-listed at the first stage were invited for the second stage. 4 of the companies which were rejected challenged the same by way of Writ Petition in the Delhi High Court, which came to be rejected. Before the Supreme Court they alleged that one of the members of the Selection Committee son worked in one of the companies which had been selected , and therefore there was real likelihood of bias. The Supreme Court rejected this allegation and said that the said member was one of the many members of the selection committee, and no allegation of bias could be attributed due to this. However the Supreme Court directed that the bid of Tata Cellular be reconsidered in light of the fact that they met all the criteria of the bids, and still were rejected.

The Apex Court laid down some the following guidelines in respect of court interference in awarding of tenders:
  1. The modern trend points to judicial restraint in administrative action.
  2. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
  3. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible.
  4. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract.
  5. The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
  6. Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

Municipal Corporation, Ujjain & Anr. v. BVG India Limited and Ors. [2]:
In the case the Appellant had challenged High Court's order, whereby the Court had set aside the contract awarded in favour of Global Waste Management Cell Private Limited by Ujjain Municipal Corporation for door to door collection and transportation of Municipal Solid Waste.

The tender floated by Municipal Corporation was awarded to Global Waste Management Cell Pvt. Ltd. amongst the three bidders by getting the highest score. However, the award of contract was challenged by the unsuccessful bidder (B.V.G. India Limited) before the High Court. The High Court subsequently set aside the contract awarded to Global Waste Management Cell Pvt. Ltd. Aggrieved by High Court's decision, the Appellant Municipal Corporation approached the Supreme Court.

In view of the facts and circumstances, the Supreme Court allowed the appeal and set aside High Court's order. One of the intrinsic issue on which the Apex Court elucidated was scope of judicial review of administrative decisions.

Supreme Court:
That the successful bidder was more technically qualified and it got more marks. Normally, the contract could be awarded to the lowest bidder if it is in the public interest. Merely because the financial bid of BVG India Ltd. is the lowest, the requirement of compliance with the Rules and conditions cannot be ignored.

That a statutory authority granting licences should have the latitude to select the best offer on the terms and conditions prescribed. As clarified earlier, the power of judicial review can be exercised only if there is unreasonableness, irrationality or arbitrariness and in order to avoid bias and mala fides.

That evaluating tenders and awarding contracts are essentially commercial transactions/contracts. If the decision relating to award of contract is in public interest, the Courts will not, in exercise of the power of judicial review, interfere even if a procedural aberration or error in awarding the contract is made out.

That the power of judicial review will not be permitted to be invoked to protect private interest by ignoring public interest.

That attempts by unsuccessful bidders with an artificial grievance and to get the purpose defeated by approaching the Court on some technical and procedural lapses, should be handled by Courts with firmness.

That the exercise of the power of judicial review should be avoided if there is no irrationality or arbitrariness.

While arriving at its decision, the Supreme Court heavily relied on its verdict in the case of Tata Cellular v. Union of India, wherein the Court had remarked that the terms of the tender are not open to judicial scrutiny as the invitation to tender is a matter of contract. Thus, only when a decision making process is so arbitrary or irrational that no responsible authority proceeding reasonably or lawfully could have arrived at such decisions, power of judicial review can be exercised.

However, if it is bona fide and in public interest, the Court will not interfere in the exercise of power of judicial review even if there is a procedural lacuna. The power of judicial review will not be permitted to be invoked to protect private interest by ignoring public interest.

In these cases we can see that the Constitutional Courts usually do not interfere in tender matters, as it believed that commercial wisdom cannot be supplanted by judicial wisdom. Now let us see the cases in which the Constitutional Courts have interfered.

State Of Up Vs Sudhir Kumar Singh & Ors[3]:

Respondent had been awarded tender for loading/unloading of goods from various storage units controlled by the UP government. The Respondent was awarded the tender in the region of Eastern Uttar Pradesh. The Managing Director of the Uttar Pradesh Warehousing Corporation received complaint about financial irregularities and unilaterally cancelled the tender awarded in the Respondent's favour, without giving them the opportunity to explain oneself.

The action of the Petitioner was challenged by way of Writ Petition in the Allahabad High Court. The High Court contended that the tender had been cancelled without giving the Petitioner an opportunity to be heard, which was an flagrant violation of Natural Justice, and quashed the order of cancellation as being arbitrary and mala fide. The State of UP appealed to the Supreme Court of India.

The Supreme Court contended that Audi Alterum partem is an intrinsic part of natural justice and the state cannot act in a whimsical and capricious manner while discharging any of its functioning, and that cancellation of the tender without giving opportunity to hear the other side is a manifest disregard for natural justice, and hence the stand cancellation order is quashed.

Eursian Equipment And Chemicals Ltd Vs State Of West Bengal[4]:

The Petitioners were engaged in the business of selling cinchona products, their tender to supply the State Government was accepted. Their final offer was rejected by the State Government even though their offer was the highest. They filed a Writ Petition before the Calcutta High Court which was rejected and the arguments of the State that they had not declared customs, which amounted to hiding material facts was upheld. Appeal was made to the Supreme Court of India.

The Supreme Court said that even when enters into the domain of trading and business it is still bound by the procedural fairness of Article 14 of the Constitution of India, and the government is duty to act in a unbiased manner. Activities carried out by the Government contain a public element in them, and therefore it is expected that government should act fairly, duty to act fairly is a vital part of the rules of natural justice. The Supreme Court directed the Government of West Bengal to hear them before they are blacklisted.

Ram & Shyam v/s State Of Haryana[5]:

The State of Haryana under its powers under the Haryana Minor Minerals Act granted various leases for mining in the Faridabad area. The Petitioners gave the highest bid for a particular mine, which was accepted by the presiding officer of the auction but unilaterally reversed by the State Government. The Single Bench and Division Bench of the Punjab and Haryana High Court rejected the Writ Petition and contended that alternative remedies have to be exhausted before recourse is sought to the Writ Courts.

Supreme Court:
We do not agree with the observations of the High Court as regarding exhaustion of alternate remedies which as held in State of Uttar Pradesh vs Mohammed Nooh, a mere rule of convenience. Supreme Court criticized the action of the State Government and said that the State is the public trustee of the wealth of the country and is duty bound to act in a manner to maximize the value of the country, and not awarding the tender to the Petitioner despite his being the highest offer is mala fide.

As per the above illustrated case Laws we can see that Courts are usually loath to interfere in tenders, and usually prefer that they be dealt by personal who are subject-matter experts. It is however to be noted that Courts will not hesitate to interfere if salutary principles of natural justice, such as Audi Alterum Partem and the rule against bias is breached.

  1. AIR 2000 7 SCC
  2. Civil Appeal No. 3330 Of 2018
  3. Civil Appeal No. 3498 Of 2020
  4. 1975 AIR 266
  5. 1985 AIR 1147

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