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SUPREME COURT OF INDIA
Deepak Gupta, Surya Kant, JJ.
THE SILPPI CONSTRUCTIONS CONTRACTORS – PETITIONER(S)
VERSUS
UNION OF INDIA AND ANR. ETC. ETC. – RESPONDENT(S)
SPECIAL LEAVE PETITION(CIVIL)NOS. 13802-13805 of 2019
Decided On : 21-06-2019
(a) Constitution of India - Article 226 - Judicial review - Courts should exercise restraint in contractual or commercial matters. (Para 19)
(b) Government contract - Interpretation - Authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted - Courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. (Para 20)
(c) Government contract - Dispute - Necessary party - High Court holding that in all cases challenging the decision of the tendering authority, all tenderers should be made party - Not proper. (Para 21)
(d) Government contract - Tender - Authority using adverse remarks of sister concern against petitioner firm - Generally not proper. (Para 22)
(e) Manual of Contracts, 2007 - Clause 1.19 - All partners of appellant partnership concern directors of sister company - Held, partnership firm and the sister concern are related firms - Adverse remarks made against sister concern can be used against partnership firm. (Para 24)
(f) Administrative law - Government contract - Order of the authority and appellate authority rejecting a tender - Neither quasi judicial nor judicial - Forum not required to state reasons at every stage - Reasons, however, need to be given in counter affidavit to the writ petition. (Para 25)
(g) Government contract - Arbitration - Arbitral tribunal passing an award on some issue in favour of petitioner - That issue could not be used against the petitioner - Award being a binding adjudication would bind the parties unless set aside. (Para 28)
(h) Government contract - Extension of time - Does not mean that the contractor is not at fault - Instantly, adverse remarks against sister concern - Neither challenging the same nor getting its licence renewed - Held, such remarks rightly taken into consideration, (Para 29, 30)
Facts of the case:
Respondent Nos. 1 and 2 issued notice inviting tenders for two works at Kochi. The estimated cost of the works were Rs. 53 crores and Rs. 72 crores respectively. The petitioner “The Silppi Constructions Contractors”, ploaded its competitive bid on the site and complied with all the conditions. The technical bids of the petitioner were rejected by the tendering authorities on 28.03.2019. The petitioner filed appeals before the appellate authority on 28.03.2019 itself which were rejected on 09.04.2019.
Thereafter, the petitioner filed a writ petition which was allowed and the respondents 1 and 2 were directed to consider the financial bid of the petitioner.
The writ appeals were allowed by the division bench holding firstly, that the scope of interference in contractual matters is very limited; secondly, that the learned single judge ought not to have interfered with the decision of the administrative authorities with regard to the sister company since it was not shown that the said decision was mala fide; thirdly, since the sister company had not challenged the adverse remark the learned single judge could not have set aside the same in the writ petition filed by the petitioner firm; and lastly, the direction of the learned single judge to direct the tendering authorities to consider the financial bid of the petitioner virtually meant that the technical bid of the petitioner was accepted.
Finding of the Court:
There is no infirmity in the impugned order.
Result: SLPs dismissed.
ORDER
1. Keeping in view the urgency of the matter, after detailed hearing the Special Leave Petitions were dismissed and we had directed that a reasoned order would follow. Hence the present order.
2. Respondent Nos. 1 and 2 issued notice inviting tenders for two works at Kochi. The estimated cost of the works were Rs. 53 crores and Rs. 72 crores respectively. The petitioner “The Silppi Constructions Contractors”, (hereinafter referred to as the firm) uploaded its competitive bid on the site and complied with all the conditions. The technical bids of the petitioner were rejected by the tendering authorities on 28.03.2019. The petitioner filed appeals before the appellate authority on 28.03.2019 itself which were rejected on 09.04.2019.
3. Thereafter, the petitioner filed a writ petition in the High Court of Kerala and the main ground raised was that no reasons were given either while rejecting its tender or the appeals. In the counter filed to the writ petition the stand taken by the respondents was that the petitioner’s tenders were rejected since the petitioner did not satisfy the eligibility criteria for submission of the bid. It was also specifically urged that a sister concern of the petitioner’s firm namely “M/s Silppi Realtors and Contractors Pvt. Ltd.”, (hereinafter referred to as the sister company), had not renewed its enlistment and had adverse remarks against it in respect of workload return of ‘SS’ Class Contractors for the quarter ending September, 2017. It was urged that since the adverse remarks had been given to the sister company the petitioner firm could not be awarded the contract.
4. The learned single judge allowed the appeal holding that the order passed by the appellate authority was not a speaking order and, therefore, not legally sustainable. The learned single judge also observed that the adverse remarks made against the sister company could not be used against the petitioner. The learned single judge went on to hold that the remarks against the sister company were not justified. The writ petition was accordingly allowed and the respondents 1 and 2 were directed to consider the financial bid of the petitioner.
5. Respondent nos. 1 and 2 and some of the tenderers who were not parties before the learned single judge filed writ appeals. These writ appeals were allowed by the division bench holding firstly, that the scope of interference in contractual matters is very limited; secondly, that the learned single judge ought not to have interfered with the decision of the administrative authorities with regard to the sister company since it was not shown that the said decision was mala fide; thirdly, since the sister company had not challenged the adverse remark the learned single judge could not have set aside the same in the writ petition filed by the petitionerfirm; and lastly, the direction of the learned single judge to direct the tendering authorities to consider the financial bid of the petitioner virtually meant that the technical bid of the petitioner was accepted.
6. Aggrieved, the original writ petitioner is before us in these petitions. This Court in a catena of judgments has laid down the principles with regard to judicial review in contractual matters. It is settled law that the writ courts should not easily interfere in commercial activities just because public sector undertakings or government agencies are involved.
7. In Tata Cellular vs. Union of India, (1994) 6 SCC 651 it was held that judicial review of government contracts was permissible in order to prevent arbitrariness or favouritism. The principles enunciated in this case are :
“94. …….
(1) The modern trend points to judicial restraint in administrative action.
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
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