IMPORTANT POINT
Court cannot strike down the terms of tender prescribed by the Government because it feels that some other terms in tender would have been fair, wiser or logical and Court could interfere only if policy decision was arbitrary, discriminatory or malafide.

Headnote:Constitution of India-Article 226-Terms of tender prescribing eligibility criteria-Extent of judicial review-Courts can scrutinise the award of contracts by government or its agencies in exercise of its powers of judicial review to prevent arbitrariness or favourism-Eligibility criteria that turn over of tenderer must be more than Rs. 20 crores for last three years in a contract for installation and commissioning of computer systems in 748 schools where expenditure involved was to the tune of Rs. 100 crores could not be said either arbitrary or discriminatory or actuated by malafide-Impugned order striking down arbitrary and irrational was liable to be set aside.
       Held : It is well settled now that the courts can scrutinise the award of the contracts by the government or its agencies in exercise of its powers of judicial review to prevent arbitrariness or favouritism. However, there are inherent limitations in the exercise of the power of judicial review in such matters. The point as to the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders has been examined in depth by this Court in Tata Cellular vs. Union of India [1994 (6) SCC 651]. (Para 9)
       It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide. Directorate of Education, Government of NCT of Delhi had invited open tender with prescribed eligibility criteria in general terms and conditions under tender document for leasing of supply, installation and commissioning of computer systems, peripherals and provision of computer education services in various government/government aided senior secondary, secondary and middle schools under the Directorate of Education, Delhi. In the year 2002-2003, 748 schools were to be covered. Since the expenditure involved per annum was to the tune of Rs. 100 crores the competent authority took a decision after consulting the technical advisory committee for finalisation of the terms and conditions of the tender documents providing therein that tenders be invited from firms having a turnover of more than Rs. 20 crores over the last three years. The hardware cost itself was to be Rs. 40-45 crores. The government introduced the criteria of turnover of Rs. 20 crores to enable the companies with real competence having financial stability and capacity to participate in the tender particularly in view of the past experience. We do not agree with the view taken by the High Court that the term providing a turnover of at least Rs. 20 crores did not have a nexus with either the increase in the number of schools or the quality of education to be provided. Because of the increase in the number of schools the hardware cost itself went upto Rs. 40-50 crores. The total cost of the project was more than 100 crores. A company having a turnover of Rs. 2 crores may not have the financial viability to implement such a project. As a matter of policy government took a conscious decision to deal with one firm having financial capacity to take up such a big project instead of dealing with multiple small companies which is a relevant consideration while awarding such a big project. Moreover, it was for the authority to set the terms of the tender. The courts would not interfere with the terms of the tender notice unless it was shown to be either arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice the court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender notice under consideration and order change in them, unless it is of the opinion that the terms were either arbitrary or discriminatory or actuated by malice. The provision of the terms inviting tenders from firms having a turnover of more than Rs. 20 crores has not been shown to be either arbitrary or discriminatory or actuated by malice. (Paras 12 and 13)

JUDGMENT

Bhan, J.-The core point which calls for determination in these appeals is the extent of judicial review permissible in exercise of jurisdiction under Article 226 of the Constitution to the terms of tender prescribing eligibility criteria. Whether the High Court could change the terms incorporated in the tender notice on the ground of its being inappropriate and that the objective would be better served by adopting a different eligibility criteria?

2. Directorate of Education, Government of National Capital Territory of Delhi, appellants herein, took a decision to establish computer labs in the National Capital Territory area in all government schools by the year 2003 in collaboration with private sector. Under the scheme evolved (computer education project), the education department is to provide functional literacy to the students from class VIth to Xth and teaching of computer science and informatics practices subjects to plus two stage, as per CBSE syllabus.

3. In the first phase for the year 2000-2001, 115 schools were taken up for imparting computer education. Tenders were called from the firms having a turnover of Rs. 2 crores. As per terms of tender notice the firm was to provide hardware of establish the lab in the concerned schools. The total contract was for a sum of Rs. 14.62 crores. Since the lowest tenderer was not in a position to carry out the project in 115 schools, the contract was divided amongst four parties. In the year 2001-2002 the turn over clause was amended, instead Rs. 2 crores the turn over of Rs. 5 crores was prescribed. Because of the several representations filed the tender was cancelled and fresh tenders were invited from the firms having a turnover of Rs. 2 crores or above. The tender was for 275 schools, the total cost of the project being approximately Rs. 30 crores. The lowest tenderer was again not in a position to take up the entire project. The other seven tenderers agreed to lower their prices to bring it at par with the rate of the lowest tenderer. Thus the contract had to be distributed amongst eight parties, i.e., 35 schools each to seven parties and 28 to one party. For the final phase of 2002-2003 the tenders were called for all the 748 schools. The cost of project was approximately Rs. 100 crores. Because of the difficulty faced in the earlier years that the lowest tenderers were not able to implement the entire project, the government took a policy decision to deal with one company having financial capacity to take up such a project instead of dealing with a number of small companies which were unable to take up the entire project individually. Accordingly, Government took a decision to invite tenders from firms having a turnover of Rs. 20 crores or more for the last three financial years ending with 31.3.2002. The decision was taken to provide quality education which was the top priority of the department as it was felt that it would be easier for the department to deal with one company which is well managed and not seven or eight who individually are not in a position to take up the whole project compelling the Government to distribute the contract amongst bidders at the lowest rate having no scope to negotiate the rates any further.

4. Aggrieved by the term of clause inviting tenders from firms having a turnover of Rs. 20 crores or more, the respondents filed writ petitions in the High Court of Judicature at Delhi.

5. Writ petitions were heard by a Division Bench. The Bench came to the conclusion that neither the increase in number of schools nor the quality of education to be provided appeared to have nexus with the financial turnover of the bidder inasmuch as the financial turnover had nothing whatsoever to do with the computer education. It was held that the term was arbitrary and it had nothing to do with the objective sought to be achieved, namely, the quality of education to be imparted. That the impugned condition appeared to have been incorporated solely with an inte

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2004 Supreme(SC) 291

IMPORTANT POINT Court cannot strike down the terms of tender prescribed by the Government because it feels that some other terms in tender would have been fair, wiser or logical and Court could interfere only if policy decision was arbitrary, discriminatory or malafide.

Cases Referred (3)

IMPORTANT POINT
Court cannot strike down the terms of tender prescribed by the Government because it feels that some other terms in tender would have been fair, wiser or logical and Court could interfere only if policy decision was arbitrary, discriminatory or malafide.