2016 Supreme(MP) 866

IN THE HIGH COURT OF MADHYA PRADESH AT GWALIOR BENCH
Alok Aradhe, S.A. Dharmadhikari, JJ.
M/s. Holoflex Ltd. & Ors. - Petitioners
Versus
State of M.P. and others - Respondents
Writ Petition No. 4448, 4594, 4664, 5071, 4448 of 2016
Decided on : 06-09-2016

The scope of judicial review of tender conditions is limited. The Court will not interfere with the conditions unless they are arbitrary, discriminatory, or actuated by malice.

Headnote:

TENDER CONDITIONS - JUDICIAL REVIEW - SCOPE - CONTRACT AWARDED BY STATE - CONDITIONS IN TENDER NOTICE - WHETHER CONDITIONS ARE RATIONAL, ARBITRARY, VIOLATIVE OF ARTICLE 14 AND TAILOR-MADE TO SUIT RESPONDENTS - WHETHER CONDITIONS ARE AGAINST THE OBJECT OF CREATING A LEVEL PLAYING FIELD AND CONTRARY TO PUBLIC POLICY AND PUBLIC INTEREST - WHETHER CONDITIONS ARE CONTRARY TO GUIDELINES ISSUED BY CENTRAL VIGILANCE COMMISSION - WHETHER INSERTION OF CONDITIONS LEADS TO FORMATION OF CARTEL, WHICH IS AGAINST PUBLIC POLICY - WHETHER RESPONDENTS ARE SEPARATE LEGAL ENTITIES.

Fact of the Case:

Petitioners, companies engaged in manufacture and supply of security holograms and authentication solutions, challenged the validity of conditions 2 and 4 in the Notice Inviting Tenders (NIT) dated 8.6.2016 for supply of security holograms to authorised bottlers in the State of Madhya Pradesh. Condition 2 required an annual turnover of not less than Rs. 40 Crores for the preceding three years, while condition 4 prescribed a minimum Net worth of Rs. 30 Crores as on 31.3.2015. Petitioners contended that the conditions were tailor-made to suit respondents No.3 and 4, that they were arbitrary and violative of Article 14, and that they defeated the object of creating a level playing field. Respondents contended that the conditions were incorporated in the NIT in public interest to ensure that spurious liquor was not supplied and that the remote possibility of misbranding/mislabelling was eliminated.

Finding of the Court:

The Court held that the impugned tender conditions were not irrational, arbitrary, violative of Article 14, or tailor-made to suit respondents No.3 and 4. The Court further held that the conditions were not against the object of creating a level playing field and were not contrary to public policy and public interest. The Court also held that the conditions were not contrary to the guidelines issued by the Central Vigilance Commission and that the insertion of the conditions did not lead to the formation of a cartel, which was against public policy. Finally, the Court held that respondents No.3 and 4 were separate legal entities.

Issues: 1. Whether the impugned tender conditions are irrational, arbitrary, violative of Article 14 and are tailor-made to suit the respondents No.3 and 4? 2. Whether impugned tender conditions are against the object of creating a level playing field and contrary to public policy and public interest? 3. Whether the conditions contained in impugned Notice Inviting Tender are contrary to the guidelines issued by Central Vigilance Commission? 4. Whether insertion of impugned tender conditions leads to formation of cartel, which is against public policy? 5. Whether respondents No.3 and 4 are separate legal entities.

Ratio Decidendi: 1. The scope of judicial review of tender conditions is limited. The Court will not interfere with the conditions unless they are arbitrary, discriminatory, or actuated by malice. 2. The State has the right to get the right and most competent person and should have freedom in the matter of formulating conditions of tender documents, unless the action of tendering authority is found to be malicious and is a misuse of statutory powers, the tender conditions are unassailable. 3. The doctrine of level playing field is subject to public interest. 4. The guidelines issued by the Central Vigilance Commission are directory in nature and the authority issuing the tender can formulate the terms and conditions inviting tender. 5. A cartel is an association of producers who by agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity.

Final Decision: The writ petitions were disposed of with the direction that the Excise Commissioner as well as the tender committee shall act with utmost objectivity while dealing with the evaluation of the tenders and shall bear in mind that public interest as well as public exchequer is of paramount consideration while awarding the contract. In case the tender committee comes to the conclusion that the respondents No.3 and 4 have formed any cartel, an appropriate action shall be taken in accordance with the terms and conditions of the Notice Inviting Tender including Clause 37 of the Notice Inviting Tender, which empowers the Excise Commissioner to reject all or any of the tenders.