Headnote:Contract-Tender-Procedure for awarding contract-Two conditions prescribed as pre-requisite for participation in tender-Appellant did not fulfil conditions-After expiry of time limit for closing of tender Government waiving one of the conditions-Clause 6(a)-Commissioner allowing opening tender of appellant also and allowing appellant to fulfil the other condition-Commissioner finalising tenders on basis clause 6(a) had stood waived-Awarding contract in favour of appellant-High Court holding Municipal Corporation had acted arbitrarily as appellant did not fulfil eligibility conditions on last date prescribed for submission of tenders-While quashing award of contract liberty given to invite fresh tender-High Court justified in setting aside award of contract.
       Held : There have been several decisions rendered by this Court on the question of tender process, the award of contract and evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus :
        (i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest;
        (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate;
        (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons.
       Broadly stated, the courts would not interfere with the matter of administrative action or changes made therein, unless the Government a action is arbitrary or discriminatory or the policy adopted has no nexus with the object it seeks to achieve or is mala fide. (Paras 10 & 11)
       In the instant case the High Court is justified in setting aside the award of contract in favour of M/s. Monarch Infrastructure (P) Ltd. because it had not fulfilled the conditions relating to Clause 6(a) of the Tender Notice but the same was deleted subsequent to the last date of acceptance of the tenders. The High Court had taken the view that if a term of the tender having been deleted after the players entered into the arena it is like changing the rules of the game after it had began and, therefore, if the Government or the Municipal Corporation was free to alter the conditions fresh process of tender was the only alternative permissible. Therefore, we find that the course adopted by the High Court in the circumstances is justified because by reason of deletion of a particular condition the wider net will be permissible and a larger participation or more attractive bids could be offered. Public interest in the present case would be definitely served by reason of allowing the tender process to be completed by accepting the highest offer made by M/s. Monarch Infrastructure (P) Ltd. subject to raising its bid to Rs.42 crores matching with that of Ramchand Mahadeo Rao, though invalid, for Rs. 41,51,00,000/- for the period of 11 months which he is willing to raise to Rs.42 crores. We are not allowing M/s. Konark Infrastructure (P) Ltd. or M/s. Jai Krishna Infrastructure such an opportunity as they had made lower bids. (Paras 12 & 14)

Judgement Key Points

Key Points: - The Government/tendering authority may act in public interest and avoid arbitrariness or discrimination in contract award. (!) (!) - The High Court's setting aside of Monarch Infrastructure’s award was justified due to non-fulfilment of Clause 6(a) before bids were accepted, and deletion of Clause 6(a) after acceptance raises fairness concerns. (!) - The Supreme Court held that despite deleting a tender condition, broader participation and public interest can justify continuing the tender process, potentially awarding to a higher responsive bid, subject to non-arbitrariness and fair treatment. (!) (!) - The Court affirmed that the Government may reject even the highest bid for valid, non-arbitrary reasons in public interest. (!) (!)

How to ensure non-arbitrary tender award while avoiding discrimination and upholding public interest?

What is the court’s stance on deleting tender conditions after bids have been submitted and its effect on fairness?

What are the consequences and permissible actions when a tender process is found to be irregular or arbitrary?

JUDGMENT

Rajendra Babu, J.-Leave granted in all the three sets of petitions.

2. Ulhasnagar Municipal Corporation issued a Notice inviting tenders for appointment of agents for collection of Octroi subject to the terms and conditions set forth therein fixing 4 p.m. on March 23, 2000 to be the time of submission of the tender and fixing 5 p.m. on the same day for opening of the tenders. On March 21, 2000 M/s. Milleniun Infrastructure (P) Ltd. filed a writ petition No. 1456 of 2000 in the High Court at Mumbai challenging the imposition of two conditions contained in Clauses 6(a) and 6(b) of the Tender Booklet as unconstitutional and seeking deletion of these two conditions as pre-requisite for its participation in the tender. On March 21, 2000, a Division Bench of the High Court and having heard the parties adjourned the matter till March 24, 2000 at 11 a.m. by making it clear that there shall be no interim relief except that the Ulhasnagar Municipal Corporation shall not issue work order till further orders. However, on March 23, 2000 M/s. Millenium Infrastructure (P) Ltd. withdrew the aforesaid writ petition. Five persons tendered their documents and papers and they are M/s. Konark Infrastructure (P) Ltd., appellant in Civil Appeal arising out of S.L.P. (C) No. 6717-18 of 2000, M/s. Monarch Infrastructure (P) Ltd., appellant in Civil Appeal arising out of 6298 of 2000 and respondent No. 3, M/s. Jai Krishna Infrastructure (P) Ltd., respondent No. 4, M/s Oriental Veneers (P) Ltd. respondent No. 5, M/s Sample Infrastructure, respondent No. 6 in the Appeal fixed by M/s Konark Infrastructure (P) Ltd. The Commissioner of the Ulhasnagar Municipal Corporation, however, intimated the tenderers that as the High Court was seized of a writ petition he did not propose to open the tenders until further orders from the High Court on March 24, 2000. However, he sought for information of the numbers of the tenders filed and the tenderers qualifying and not qualifying conditions Clauses 6(a) and 6(b) of the Tender Booklet. On March 24, 2000 the tenders were opened and an objection was raised that M/s Monarch Infrastructure (P) Ltd. did not fulfil the conditions either under Clause 6(a) or Clause 6(b) in spite of which, it is stated, the Commissioner insisted on opening the same. The Commissioner informed the parties that Clause 6(a) had been waived of by reason of the order made by the Government in exercise of its powers under Section 451 of the Municipal Corporation Act, 1949. The Commissioner allowed M/s. Monarch Infrastructure (P) Ltd. to furnish a certificate as to Clause 6(b) by a Chartered Accountant as to its networth which discloses Rs. 4.5 crores approximately. The Commissioner proceeded to finalise the tenders on the basis that Clause 6(a) had stood waived or deleted in view of the order of the Government issued under Section 451 of the Municipal Corporation Act and awarded the contract in favour of M/s. Monarch Infrastructure (P) Ltd. The appellant M/s. Konark Infrastructure (P) Ltd. filed a writ petition challenging the award of contract to M/s. Monarch Infrastructure (P) Ltd. on various grounds.

3. The High Court allowed the writ petition filed by M/s. Konark Infrastructure (P) Ltd. and held that the deletion of clause 6(a) of the Tender Booklet took place after offers were received on March 23, 2000 and the offers had been received on the basis of Clause 6(a) and Clause 6(b) which would define the conditions of eligibility. Therefore, the High Court held that the Municipal Corporation had acted arbitrarily in considering the bid of M/s Monarch Infrastructure (P) Ltd. which did not fulfil the eligibility conditions on the last date which was prescribed for the submission of the tenders. Therefore, the High Court took the view that once a decision was taken to delete the application of Clause 6(a) and offers which were received on March 23, 2000 being made on the basis of existence of Clause 6(a), fairness and equal treatment require

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