1. Challenge to tender conditions for security labels — Allegations of tailor-made specifications to favor specific bidders — Writ proceedings under Article 226 of the Constitution. (Para 9 , 10 , 11 , 13 , 14 , 15 , 17 , 18 , 19 , 20 )
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2021 Supreme(SC) 571
SUPREME COURT OF INDIA
SANJAY KISHAN KAUL, HRISHIKESH ROY, JJ.
UFLEX LTD. - APPELLANT
VERSUS
GOVERNMENT OF TAMIL NADU & ORS. - RESPONDENTS
CIVIL APPEAL NOS.4862-4863 OF 2021
DECIDED ON : 17-09-2021
Important Points
Judicial review of government tenders is limited to checking for arbitrariness, irrationality, or mala fides. Courts must exercise restraint, avoiding substituting their own views for the administrative authority's technical or commercial decisions, and should defer to the tendering authority's interpretation of tender documents absent perversity or malice.
Subject
Administrative Law - Public Procurement
Act Referred
CONSTITUTION OF INDIA: Art.226, Art.14
TAMIL NADU TRANSPARENCY IN TENDER PUBLIC-PRIVATE PARTNERSHIP PROCUREMENT RULES: R.15
TAMIL NADU TRANSPARENCY IN TENDERS ACT: S.10(2)
TAMIL NADU TRANSPARENCY IN TENDERS RULES: R.30(a)
UK CIVIL PROCEDURE RULE: R.44.2
TAMIL NADU TRANSPARENCY IN TENDER PUBLIC-PRIVATE PARTNERSHIP PROCUREMENT RULES: R.15
TAMIL NADU TRANSPARENCY IN TENDERS ACT: S.10(2)
TAMIL NADU TRANSPARENCY IN TENDERS RULES: R.30(a)
UK CIVIL PROCEDURE RULE: R.44.2
Headnote
Constitution of India, 1950 - Article 226 and 14 - Tender Act - sub-section 2 of 10 and 2(aa) - Seek damages in a civil court - Public Interest Litigation - Judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide - Purpose is to check whether choice of decision is made lawfully and not to check whether choice of decision is sound. In evaluating tenders and awarding contracts - Court cannot lose sight of fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, “attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted - Scrutiny of tenders in writ proceedings under Article 226 of Constitution of India – Appears that window has been opened too wide as almost every small or big tender is now sought to be challenged in writ proceedings almost as a matter of routine – Held, Court have set forth aforesaid so that there is appreciation of the principles that in carrying on commercial litigation, parties must weigh commercial interests, which would include consequences of matter not receiving favourable consideration by courts - Mindless appeals should not be rule - Court are conscious that in given facts of case respondents have succeeded before the Division Bench though they failed before learned single Judge - Suffice to say that all parties before us are financially strong and took a commercial decision to carry this legal battle right up to this Court - Writ proceeding under Article 226 of Constitution but it is really a commercial dispute - Failing party cannot hide behind veneer of present dispute being in nature of a writ proceeding - Tender jurisdiction was created for scrutiny of commercial matters and, thus, where continuously parties seek to challenge award of tenders – Court are of the view that the succeeding party must get costs and the party which loses must pay costs - Court have scrutinised bill of fee and costs – Court are inclined to allow actual costs. However, we have modulated the costs insofar as appellant is concerned to the extent of indicated amount of Advocate-on-Record and allow 50% of the same. The total costs, thus, payable to petitioner/appellant - State Government cannot be left behind so far as their compensation of costs in defending such a litigation is concerned and we, thus, allow the costs - Ordered Accordingly.
Legal Category Hierarchy
- administrative law
- constitutional law
- contract law
- corporate law
- practice and procedure
Advocates appeared:
For the Appellant(s) : Mr. Abhishek Singh, AOR Mr. Shreshth Arya, Adv.
For the Respondent(s): Ms. Meenakshi Arora, Sr. Adv. Mr. Vivek Jain, AOR Ms. Dwarkesh Prabhakaran, Adv. Mr. Palash Bhatkoti, Adv. Mr. Nitin Sharma, Adv. Mr. Sandeep Bagmar R., Adv. Mr. Nirvikar Singh, Adv. Mr. Siddhant Buxy, AOR Mr. Ranjit Kumar, Sr. Adv. Mr. Amit Anand tiwari, Addl. Adv. Gen. Dr. Joseph Aristotle S., AOR Ms. Preeti Singh, Adv. Ms. Ripul Swati Kumari, Adv. Mr. T. Mahipal, AOR Mr. Abhinav Agrawal, AOR Mr. Mohit D. Ram, AOR
For the Appellant(s) : Mr. Abhishek Singh, AOR Mr. Shreshth Arya, Adv.
For the Respondent(s): Ms. Meenakshi Arora, Sr. Adv. Mr. Vivek Jain, AOR Ms. Dwarkesh Prabhakaran, Adv. Mr. Palash Bhatkoti, Adv. Mr. Nitin Sharma, Adv. Mr. Sandeep Bagmar R., Adv. Mr. Nirvikar Singh, Adv. Mr. Siddhant Buxy, AOR Mr. Ranjit Kumar, Sr. Adv. Mr. Amit Anand tiwari, Addl. Adv. Gen. Dr. Joseph Aristotle S., AOR Ms. Preeti Singh, Adv. Ms. Ripul Swati Kumari, Adv. Mr. T. Mahipal, AOR Mr. Abhinav Agrawal, AOR Mr. Mohit D. Ram, AOR
Table of Contents
2. Dispute over generic technical specifications — Allegations of conflict of interest and tailor-made conditions — Claims for domestic enterprise preference under the Tender Act. (Para 13 , 17 , 18 , 19 , 20 , 27 , 28 , 29 , 30 , 31 , 32 , 34 , 35 , 36 , 37 , 38 , 39 )
3. Judicial review of tenders is limited to checking for arbitrariness and irrationality — Courts must defer to the tendering authority's interpretation of technical requirements. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 )
4. Courts shall not substitute their own view for that of the administrative authority in tender matters unless the decision-making process is arbitrary or irrational. (Para 2 , 4 , 7 , 40 )
5. Impugned order set aside — Appeals allowed — Actual costs awarded to the successful party. (Para 50 , 59 , 60 )
6. What is the scope of judicial review regarding the award of government contracts and tenders?
Judicial review is intended to prevent arbitrariness, irrationality, unreasonableness, bias, and mala fides. The court checks whether the decision was made lawfully, not whether the choice of decision is sound, exercising restraint to avoid substituting its view for that of the administrative authority. (Para 2 , 4 , 7 )
7. Who is the primary authority for interpreting the terms and requirements of a tender document?
The owner or employer of a project, having authored the tender documents, is the best person to understand and interpret its requirements. Constitutional courts must defer to this understanding unless there is mala fide or perversity in the application of the terms. (Para 6 )
8. When can a court interfere in a tender process on the grounds that conditions were tailor-made for a specific bidder?
Interference is warranted only if the decision-making process is so arbitrary or irrational that no responsible authority could have reached it, or if the conditions are found to be malicious and a misuse of statutory powers. (Para 4 , 5 , 47 )
9. What principles govern the award of costs in commercial disputes brought before constitutional courts?
In commercial matters, costs should ordinarily follow the event to indemnify successful litigants and deter frivolous or vexatious litigation. Courts should award realistic costs based on actual expenses incurred by the succeeding party. (Para 51 , 53 , 56 , 57 )
JUDGMENT :
SANJAY KISHAN KAUL, J.
1. The enlarged role of the Government in economic activity and its corresponding ability to give economic ‘largesse’ was the bedrock of creating what is commonly called the ‘tender jurisdiction’. The objective was to have greater transparency and the consequent right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India (hereinafter referred to as the ‘Constitution’), beyond the issue of strict enforcement of contractual rights under the civil jurisdiction. However, the ground reality today is that almost no tender remains unchallenged. Unsuccessful parties or parties not even participating in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. The Public Interest Litigation (‘PIL’) jurisdiction is also invoked towards the same objective, an aspect normally deterred by the Court because this causes proxy litigation in purely contractual matters.
2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance. 1[ Jagdish Mandal v. State of Orissa , (2007) 14 SCC 517]
3. We cannot lose sight of the fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, “attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted.” 2[Id.]
4. In a sense the Wednesbury principle is imported to the concept, i.e., the decision is so arbitrary and irrational that it can never be that any responsible authority acting reasonably and in accordance with law would have reached such a decision. One other aspect which would always be kept in mind is that the public interest is not affected. In the conspectus of the aforesaid principles, it was observed in Michigan Rubber v. State of Karnataka , (2012) 8 SCC 216 as under:
“23. From the above decisions, the following principles emerge:
(a) the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the wor
