Article

In the case of Tata Cellular v. Union of India [(1994) 6 SCC 651], the Hon’ble Supreme Court had held that power of judicial review would apply to the exercise of contractual powers by Government bodies. However, the Court added a word of caution that although the power of judicial review exists to prevent arbitrariness and favoritism by the Government, the power comes with inherent limitation since “Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State”. Therefore, while the tenets of Article 14 have to be kept in view by the Government while exercising the tender jurisdiction, however the right to choose cannot be considered to be an arbitrary power. The Government always has with it the right to refuse the lowest or any other tender.

The Court went on to lay down the scope of judicial review in the matters related to administrative decision of Government and the award of tenders by the Governments. The Court clarified that the Court cannot sit as a court of appeal and thus cannot substitute its own decision. The Court laid down in clear terms that “The Government must have freedom of contract” provided such decision is not arbitrary  and passes the test of principles of natural justice and that of reasonableness as per the Wednesbury principle.

Recently, the Hon’ble Apex Court once again dealt with the similar issue in the matter of M/s. N.G. Projects Limited v. M/s. Vinod Kumar Jain &Ors. [CIVIL APPEAL NO. 1846 OF 2022].  The Court held that construction of roads being an essential part of development of infrastructure in any State, “[w]e find that the interference in contract awarded to the appellant is wholly unwarranted and has caused loss to public interest.”

The issue arises out of tenders invited by the Road Construction Department of Jharkhand in June 2019 for reconstruction of a road connecting cities in Jharkhand. Respondent No. 1 participated in the bid and submitted Bank Guarantee as bid security. However, the tender was cancelled in August 2019 and a fresh notice inviting tender was invited. In the technical evaluation of bids, it was found by the Tender Evaluation Committee that Respondent’s bid was found to be non-responsive for several reasons. The Bank Guarantee was not as per the format prescribed in Standard Bidding Document. It was rather issued on a date preceding the date of the NIT. The amount mentioned was different in numeric and words. The bid capacity of Respondent No. 1 was less than the estimated cost of work. Lastly, the affidavit and undertaking supporting the bid were not properly notarized.

The technical bid of the appellant on the other hand was found to be substantially responsive.  After due evaluation of its financial bid, work contract was issued to the appellant in October 2019. The appellant started the work on time and completed earth work for 21.9 kms out of the 24 kms proposed road which monetarily was a work for Rs.8.5 crores as per the appellant.

Respondent No. 1 filed a Writ Petition in October 2019 for quashing of the decision of the Technical Evaluation Committee where its bid was held as nonresponsive. The State defended its decision. The Hon’ble Single Bench of the High Court passed its judgment in favor of the Respondent setting aside award of contract granted to the appellant.The Division Bench of the High Court dismissed the appeals.

On appeal, the Apex Court first went on to observe the tests laid down inTata Cellular [Supra] and also discussed the decision of the Court in Central Coalfields Limited &Anr. v. SLL-SML (Joint Venture Consortium) &Ors [(2016) 8 SCC 622] where it was held that “there must be judicial restraint in interfering with administrative action…the soundness of the decision taken by the employer ought not to be questioned.” The Court in the case had emphasized on the importance of the issue of the acceptance or rejection of a bid or a bidder which should also be looked from the point of view of the employer and not the aggrieved party alone.

Similarly in Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited &Anr [(2016) 16 SCC 818] it was held that “the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions.” In Silppi Constructions Contractors v. Union of India and Ors.[2019 SCC OnLine SC 1133] it was held that the courts may not interfere in the commercial matters. Very recently, in National High Speed Rail Corpn. Ltd. v. Montecarlo Ltd. [2022 SCC OnLine SC 111], the Hon’ble Supreme Court held that the High Courts should be “extremely careful and circumspect” in exercise of its discretion while entertaining writ petitions and/or while granting stay in such matters. In Uflex Ltd. v. Government of T.N. [(2022) 1 SCC 165], the Apex Court stated that 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”.

Having analyzed catena of judgments, the Apex Court went on to opine that the interpretation of terms of the contract should be viewed from the perspective of the employer and by the employer. Applying the principles laid down by the Hon’ble Supreme Court, the Court in the present mattter observed that the respondent was at fault by not following the terms of the fresh NIT. The Court then went on to observe that recently an amendment was made in the Specific Relief Act, 1963 and a new clause (ha) was inserted in Section 41. The intent of the legislature was that infrastructure projects should not be generally stayed by the Courts especially while exercising its jurisdiction under Article 226 of the Constitution of India. The Court held that “the Writ Court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the presentday economic activities of the State and this limitation should be kept in view”.

The Court further added that the injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs and secondly, by being deprived of the infrastructure for which the present-day Governments are expected to work.In addition to the word of caution against grant of stays and injunctions by the High Courts, the Supreme Court also showed its concern that multiple layers of exercise of jurisdiction also delays the final adjudication challenging the grant of tender. It was therefore suggested that such matters be entrusted to a Division Bench of the High Court.