Tender Law V

Tata Cellular v. Union of India, (1994) 6 SCC 651, Paragraph 94 states, “Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.” Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818 has laid down, “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. 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. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to Constitutional Courts but that by itself is not a reason for interfering with the interpretation given.” This view of law has been subsequently followed repeatedly. See, Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 [Paragraph 25], Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81 [Paragraphs 38 and 39] and State of Madhya Pradesh v. U.P. State Bridge Corporation Ltd., 2020 SCC OnLine SC 1001 [Paragraphs 24 to 26]. Galaxy Transport Agencies v. New J.K. Roadways, 2020 SCC OnLine SC 1035 after referring to Paragraph 15 of Afcons held, “The 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. If two interpretations are possible then the interpretation of the author must be accepted.”

High Court has not adverted to any of these decisions and has clearly overstepped bounds of judicial review in such matters.

Hon’ble Justice R.F. Nariman, M/s. Utkal Suppliers v. M/s. Maa Kanak Durga Enterprises, [Civil Appeal Nos. 1517-1518 of 2021].

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Harshit Agarwal v. Union of India, (2021) 2 SCC 71 held, judicial review of administrative action is permissible on grounds of illegality, irrationality and procedural impropriety. An administrative decision is considered as flawed if it is illegal, and a decision is illegal if it pursues an objective other than that for which the power to make the decision was conferred. The discretion exercised by the decision maker is subject to judicial scrutiny if a purpose other than the specified purpose is pursued.

Hon’ble Justice Hemant Gupta, Punjab State Co-operative Milk Producers Federation Ltd. v. Balbir Kumar Walia, [Civil Appeal No. 7427 of 2011] decided on 09.07.2021.

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In evaluating tenders and awarding contracts, 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. We cannot lose sight, a tenderer or contractor with a grievance can always seek damages in a Civil Court and thus, “attempts by unsuccessful tenderers… to make mountains out of molehills of some technical/procedural violation… and persuade Courts to interfere… should be resisted” [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517].

Burgeoning litigation in this field caused an epilogue in Caretel Infotech Ltd. v. Hindustan Petroleum Corporation Limited, (2019) 14 SCC 81.

Economics must be permitted to play its role for which tendering authority knows best as to what is suited in terms of technology and price for them.

Hon’ble Justice Sanjay Kishan Kaul, Uflex Ltd. v. Government of Tamil Nadu, [Civil Appeal No. 4862-4863 of 2021] decided on 17.09.2021.

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It is pertinent to examine, role of Constitutional Courts in reviewing a tender process. An observation of judicial restraint while reviewing such contracts is a continuing trend which can be seen in a catena of cases.

Often, parties entertain an idea of a long­-drawn-­out litigation. The purpose of imbibing ‘spirit of competition’, in a process such as that of a bidding process, is lost in this meandering exercise and delays suffered.

The object of judicial review cannot be, in every contract where some parties lose out, a second opportunity is provided to such parties to pick holes so as to disqualify successful parties.

Hon’ble Chief Justice of India, Hon’ble Justice N.V. Ramana, City and Industrial Development Corporation of Maharashtra v. Shishir Realty Private Limited, [Civil Appeal No. 3956-­3957 of 2017] decided on 29.11.2021.

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It would suffice to refer to 3-Judge Bench decision of this Court in Galaxy Transport Agencies v. New J.K. Roadways, 2020 SCC OnLine SC 1035 wherein, among others, Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., AIR 2016 SC 4305 has also been considered.

The author of a tender document is taken to be the best person to understand and appreciate its requirements; and if its interpretation is manifestly in consonance with the language of the tender document or subserving the purchase of the tender, Court would prefer to keep restraint. Further, technical evaluation or comparison by Court is impermissible; and even if an interpretation given to a tender document by the person inviting offers is not as such acceptable to Constitutional Courts, that, by itself, would not be a reason for interfering with the interpretation given.

Hon’ble Justice Dinesh Maheshwari, M/s. Agmatel India Pvt. Ltd. v. M/s. Resoursys Telecom, [Civil Appeal No. 786 of 2022] decided on 31.01.2022.

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The scope of judicial review in matters of tenders/public auction has been explored in depth by this Court in a catena of cases. Plausible decisions need not be overturned and latitude ought to be granted to State. However, allegations of illegality, irrationality and procedural impropriety would be enough grounds for Courts to assume jurisdiction and remedy such ills.

It was consistently stressed by this Court, need for overwhelming public interest should always be kept in mind to justify judicial intervention in contracts involving State and its instrumentalities and while exercising power of judicial review in relation to contracts.

See, Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517; Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489.

Hon’ble Justice Ajay Rastogi, State of Punjab v. Mehar Din, [Civil Appeal No. 5861 of 2009] decided on 02.03.2022.

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The approach of Court should be not to find fault with magnifying glass in its hands, rather Court should examine whether the decision-making process is after complying with the procedure contemplated by the tender conditions. If there is total arbitrariness or a tender has been granted in a mala fide manner, still Court should refrain from interfering in the grant of tender but instead relegate parties to seek damages for wrongful exclusion rather than to injunct execution of contract.

Hon’ble Justice Hemant Gupta, M/s. N.G. Projects Limited v. M/s. Vinod Kumar Jain, [Civil Appeal No. 1846 of 2022] decided on 21.03.2022.  

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In view of City and Industrial Development Corporation of Maharashtra v. Shishir Realty Private Limited, [Civil Appeal No. 3956-­3957 of 2017], it is apparent, Government contracts, granted by Government bodies, is expected to uphold fairness, equality and rule of law. Right to equality under Article 14 abhors arbitrariness. A transparent bidding process is favored by Court to ensure, constitutional requirements are satisfied.

Hon’ble Justice Vineet Saran and Hon’ble Justice J.K. Maheshwari, MIHAN India Limited v. GMR Airports Limited, [Civil Appeal No. 3699 of 2022] decided on 09.05.2022.