2006 (12) TMI 447 - SC - Indian Laws

Whether the High Court in exercise of power of judicial review, was justified in quashing the award of the contract relating to first stretch to Jagdish Mandal and award of contract relating to second stretch to Laxman Sharma and directing reconsideration of tender? Held that - Appeal allowed. There were good and adequate reasons for the Committee to reject the lowest tenders of fifth respondent in both cases and there was no justification for the High Court to interfere with the contracts awarded to the respective appellant in these two appeals. We also record the statement made by the counsel for the appellants in the two appeals, on instructions, that the appellants are ready and willing to execute their respective works, without seeking any revision in rates or compensation for the delay in commencement of the work on account of pendency of the legal proceedings till now. The statement is recorded.

Issues Involved:
1. Validity of Earnest Money Deposit (EMD) submitted by the fifth respondent.
2. Rejection of tender due to unduly low rates quoted by the fifth respondent.
3. Scope of judicial review in tender processes and award of contracts.

Detailed Analysis:

1. Validity of Earnest Money Deposit (EMD):

The second respondent invited tenders for the construction of Right Extension Main Canal. The fifth respondent submitted the lowest bid and furnished the EMD by pledging a postal Term Deposit (TD) of Rs.1,70,000. A complaint alleged that the TD was manipulated. The postal authorities confirmed that the TD should not be taken into account, leading the Committee to declare the fifth respondent's tender as non-responsive. The High Court, however, found the Committee's rejection arbitrary based on a police investigation report suggesting the TD was genuine. The Supreme Court emphasized that the Committee acted reasonably based on the postal department's communication and that judicial review should not reassess the Committee's decision with subsequent reports. The Court concluded that the Committee's decision was neither arbitrary nor unreasonable.

2. Rejection of Tender Due to Unduly Low Rates:

For the second stretch of the canal, the fifth respondent quoted an unduly low rate for the cement concrete lining item, which constituted a significant portion of the total work. The Committee rejected the tender, suspecting the low rate could jeopardize the project. The High Court did not consider this aspect, assuming the rejection was solely due to the EMD issue. The Supreme Court held that the Committee's decision was valid as it reasonably assessed the risk of the low rate affecting project completion. The Court noted that such technical assessments by expert committees should not be interfered with by the judiciary unless clearly irrational or arbitrary.

3. Scope of Judicial Review in Tender Processes and Award of Contracts:

The Supreme Court reiterated the limited scope of judicial review in tender processes, emphasizing that courts should not interfere unless there is material violation of terms, arbitrariness, or mala fides. The Court cited several precedents underscoring the principle that judicial review is intended to check the legality of the decision-making process, not the decision's merits. The Court concluded that the High Court overstepped its jurisdiction by substituting its judgment for that of the expert Committee.

Conclusion:

The Supreme Court allowed the appeals, setting aside the High Court's judgment and upholding the Committee's decisions to reject the fifth respondent's tenders. The Court emphasized the importance of maintaining judicial restraint in reviewing administrative decisions related to tender processes, affirming that the Committee acted within its discretion and based on reasonable grounds. The appellants were permitted to execute the works without seeking any revision in rates or compensation for delays caused by the legal proceedings.

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