Meeting the vast
infrastructural needs of the country often involves the invitation of
high-value tenders by public authorities. Given the special focus on
infrastructure by the government, the magnitude of these tenders has increased
manifold. One of the most challenging tasks for the authorities is to establish
eligibility criteria for bidders and other terms and conditions of the tender.
Frequently, questions are raised regarding the eligibility criteria and terms
& conditions set out by the authorities, with allegations that these
criteria have been tailored to suit a specific person or entity. Furthermore,
the interpretation of these terms and conditions is often questioned. There are
instances where it is alleged that a reverse engineering process is employed to
achieve this objective by crafting tender conditions in such a manner that only
one party fits the bill. This endeavour is often categorized as “Decision
Oriented Systematic Analysis”.
Disputes regarding the eligibility or
ineligibility of bidders frequently reach the High Court and eventually the
Supreme Court. In a recent judgment by the Supreme Court, a Hon’ble Justice
noted that almost no tender remains unchallenged today. Unsuccessful parties or
those who did not even participate in the tender often seek to invoke the
jurisdiction of the High Court under Article 226 of the Constitution.
Complaints are sometimes raised before investigating authorities, leading to
extensive investigations. This cycle of investigation can jeopardize the
reputation and career of those involved in the tender process, despite their
genuine, sincere, and judicious approach to their responsibilities. Authorities
involved in the tender process breathe a sigh of relief if there are no
allegations or litigations during the awarding process.
It is pertinent to mention that every public
authority has a robust and multi-layered system for setting out eligibility
criteria, terms, and conditions of the tender, and for evaluating the bids.
Despite the well-established system for the entire tendering process,
authorities always operate in a critical mode. There is a system in place to
remove inconsistencies in the tender document and address bidders' queries in
well-structured pre-bid meetings and pre-bid queries before the final
submission of bids. However, sometimes, tender authorities take the safe route
by annulling the tendering process due to trivial issues and initiating a fresh
tender process, as nobody wants to suffer from any allegations or litigation.
There is a general perception that Hon’ble
Courts will intervene, scrutinize the terms & conditions, interpret the
tender, and review bidders’ eligibility or ineligibility. This article
highlights the jurisdiction of public authorities and Hon’ble Courts in tender
matters, as elaborated in various judgments by the Hon’ble Supreme Court of
India.
1. Caretel Infotech Ltd. Vs Hindustan Petroleum
Corporation Limited : 2019 (6) SCALE 70 : 2019
Legal Eagle (SC) 426
The Court observed,
“Normally parties would be governed by their contracts and the tender terms,
and really no writ would be maintainable under Article 226 of the Constitution
of India. Given that Government and public sector enterprises venture into economic
activities, the Court found it appropriate to build in certain checks and
balances of fairness in procedure. However, the window for scrutiny of tenders
in writ proceedings under Article 226 has been opened too wide, resulting in
almost every tender, big or small, being challenged. This affects the efficacy
of commercial activities of public sectors, making the awarding of contracts a
cumbersome exercise with long litigation processes. The private sector, often
competing in the same field, enjoys promptness and efficiency levels that make
public sector tenders non-competitive. This outcome could hardly have been the
intended objective.”
2. Tata Cellular Vs Union of India : 1994 6 SCC 651 : 1994 Legal Eagle (SC) 653
The
Court elucidated several principles:
-
The modern trend points to
judicial restraint in administrative actions.
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The Court does not sit as a
court of appeal but merely reviews the decision-making process.
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The Court lacks the expertise
to correct administrative decisions. If a review is permitted, it would be
substituting its decision, which may be fallible.
-
The terms of the invitation to
tender cannot be open to judicial scrutiny as they are in the realm of
contract. Decisions to accept or award contracts are reached through several
tiers and are qualitative, often made by experts.
-
The Government must have the
freedom of contract. Fair play in administrative actions is necessary, but
decisions must be free from arbitrariness, bias, or mala fides.
-
Quashing decisions can impose
heavy administrative burdens and unbudgeted expenditures on the administration.
3. Jagdish Mandal vs State of Orissa: 2007 14 SCC 517 : 2006 Legal Eagle (SC) 1145
The Court noted,
“Judicial review of administrative action is intended to prevent arbitrariness,
irrationality, unreasonableness, bias, and mala fides. Its purpose is to check
whether decisions are made lawfully, not to assess the soundness of decisions.
When reviewing tenders or contracts, certain special features must be
considered. Contracts are commercial transactions. Evaluating tenders and
awarding contracts are commercial functions, where principles of equity and
natural justice are distant. Courts will not interfere if the decision is bona
fide and in public interest, even if procedural aberrations or assessment
errors are made. Judicial review should not protect private interests at public
expense or resolve contractual disputes. Unsuccessful bidders with grievances
can seek damages in civil courts. Courts should resist interference motivated by
unsuccessful bidders’ grievances or rivalry, as it may delay public works and
increase costs. Courts should ask whether the authority’s decision is mala fide
or intended to favor someone or is so arbitrary that no reasonable authority
could have reached it, and whether public interest is affected.”
4. Michigan Rubber Vs State of Karnataka : 2012 (8) SCC 216 : 2012 Legal Eagle (SC) 389
The
Court laid down principles:
-
Fairness and non-arbitrariness are essential
in state actions, and judicial review is limited to ensuring the state acts
validly and reasonably.
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Fixing the value of a tender is
within the executive’s purview, with limited court interference unless the
action is arbitrary or unreasonable.
-
Courts should concede greater
latitude to state authorities in formulating tender conditions and awarding
contracts, unless actions are malicious or misuse statutory powers.
-
Preconditions for tenders
ensure contractors have the capacity and resources to execute the work
successfully.
-
Reasonable, fair, and public
interest actions by the state in awarding contracts should face minimal court
interference, as no one has a fundamental right to conduct business with the
government.
5. Bharat Coking Coal Ltd. vs. AMR Dev Prabha &
Ors : 2020 Legal Eagle (SC) 295
The Court stated,
“Judicial interpretation of commercial contracts differs from statutory
interpretation.”
6. Afcons Infrastructure Ltd. Vs Nagpur Metro Rail
Corporation Ltd.: 2016 (16) SCC 818 : 2016
Legal Eagle (SC) 666
The Court held, “The owner or employer of a
project, having authored the tender documents, is the best person to understand
and appreciate its requirements and interpret the documents. Courts must defer
to this understanding unless there is mala fide or perversity. A different
interpretation by the courts is not a reason for interference.”
7. Silppi Constructions Contractors Vs Union of India: AIR online 2019 SC 2430 : 2019 Legal Eagle (SC) 883
The Court emphasized the need for restraint
and caution in judicial intervention in state contracts. Courts should defer to
expert opinions unless decisions are arbitrary or unreasonable. The authority
floating the tender is the best judge of its requirements, and minimal court
interference is warranted. Courts should only interfere to prevent arbitrariness,
irrationality, bias, mala fides, or perversity.
8. Montecarlo Ltd. Vs NTPC Ltd. : AIR 2016 SC 4946 : 2016 Legal Eagle (SC) 1181
The Court noted,
“Tenders involve highly complex technical subjects, requiring expertise in
evaluation. The private sector’s competitive commercial field necessitates
objective scrutiny of technical and financial bids. Judicial review is
warranted only if the process is arbitrary, mala fide, or favors one party.
Courts should follow the principle of restraint in technical evaluations or
comparisons.”
9. M/s Agmatel India Pvt. Ltd. Vs M/s Resoursys
Telecom: 2022 Legal Eagle (SC) 98
The Court
reiterated that the tender document author is the best person to understand its
requirements. Courts should exercise restraint unless the interpretation is
arbitrary, unreasonable, or against public interest.
10. Balaji Ventures Pvt. Ltd. Vs Maharashtra State
Power Generation Company Ltd. : 2022 Legal
Eagle (SC) 642
The Court
observed, “The eligibility criteria in the tender document applied to all
bidders. The owner has the freedom to set criteria unless they are arbitrary or
mala fide. Bidders cannot challenge criteria that do not suit them. Courts have
limited roles in reviewing tender conditions, as it is an offer to compete.”
11. M/s. N.G. Projects Limited Vs M/s. Vinod Kumar
Jain : 2022 Legal Eagle (SC) 308
The Court held,
“Satisfaction of tender conditions is primarily upon the authority inviting
bids. Courts should not impose their decisions over the employer’s. Courts lack
expertise in examining tender terms and conditions. Interference should be
minimal unless decisions are arbitrary or mala fide. Interference leads to
additional costs and delays in public interest projects.”
12. Airport Authority of India Vs Centre for Aviation
Policy, Safety & Research (CAPSR): 2022 SCC
online SC 1334 : 2022 Legal Eagle (SC) 1130
The Court noted, “Tender terms are within
the domain of the tenderer and not open to judicial scrutiny unless arbitrary,
discriminatory, or mala fide. The government must have a free hand in setting
terms.”
In summary, the following principles can be
drawn from the decisions of the Hon’ble Supreme Court:
1. The tender inviting
authority is free to set eligibility criteria and conditions unless they are
arbitrary, discriminatory, or mala fide.
2. The author of the tender
document is best suited to understand and interpret its requirements.
3. If two interpretations
are possible, the author’s interpretation must be accepted.
4. If the tender authority
follows healthy standards and norms, court interference is limited.
5. Courts review the
decision-making process, not act as courts of appeal.
6. There should be no
cancellation of awards due to procedural errors or wrongful exclusion;
unsuccessful bidders can seek damages in civil court.
7. Courts have no role in
imposing fair, wiser, or logical decisions on tender authorities.
8. In most cases, the
Supreme Court upholds the views of the tender inviting authority unless the
terms are arbitrary, discriminatory, or mala fide.
The judgments have broadened the concept of
Article 14 of the Constitution of India and provided a wider scope to public
authorities while inviting and awarding tenders.