2004 (3) TMI 791 - SC - Indian Laws

Extent of judicial review permissible u/Article 226 of the Constitution regarding the terms of tender prescribing eligibility criteria - Whether the High Court could change the terms incorporated in the tender notice on the ground of its being inappropriate - HELD THAT - A company having a turnover of ₹ 2 crores may not have the financial viability to implement such a project. As a matter of policy government took a conscious decision to deal with one firm having financial capacity to take up such a big project instead of dealing with multiple small companies which is a relevant consideration while awarding such a big project. Moreover, it was for the authority to set the terms of the tender. The courts would not interfere with the terms of the tender notice unless it was shown to be either arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice the court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender notice under consideration and order change in them, unless it is of the opinion that the terms were either arbitrary or discriminatory or actuated by malice. The provision of the terms inviting tenders from firms having a turnover of more than ₹ 20 crores has not been shown to be either arbitrary or discriminatory or actuated by malice. This apart SSI having a turnover of more than ₹ 20 crores was the lowest bidder. Faced with the situation that the bids given by the respondents were not competitive with the bid given by SSI Limited, learned counsel for the respondents contended that because of the fall in price in the computer hardware and lowering of duty on the imports of the computers or its components the government should invite fresh bids. It is not for us to comment as to what course is to be adopted by the appellants, in the changed circumstances attributable to lapse of time. It is for them to decide whether to continue with the tenders already floated, if necessary be making negotiations so as to bring down the rates quoted or to invite fresh tenders. Conclusion The Supreme Court set aside the judgment of the High Court and dismissed the writ petitions filed by the respondents. The appeals were accepted, and no order as to costs was made. The court left it to the appellants to decide whether to continue with the tenders already floated or to invite fresh tenders in light of the changed circumstances.

Summary

Issues Involved:
1. Extent of judicial review permissible u/Article 226 of the Constitution regarding the terms of tender prescribing eligibility criteria.
2. Whether the High Court could change the terms incorporated in the tender notice on the ground of its being inappropriate.

Summary:

Issue 1: Extent of Judicial Review u/Article 226
The Supreme Court examined the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders. It reiterated that courts can scrutinize the award of contracts by the government or its agencies to prevent arbitrariness or favoritism. However, there are inherent limitations in the exercise of judicial review in such matters. The principles deduced from Tata Cellular vs. Union of India [1994 (6) SCC 651] were highlighted, emphasizing judicial restraint in administrative action, the court's role in reviewing the decision-making process rather than the decision itself, and the necessity for the government to have freedom of contract. The court also referenced Air India Limited vs. Cochin International Airport Limited [2000 (2) SCC 617] and Monarch Infrastructure (P) Ltd. vs. Commissioner, Ulhasnagar Municipal Corporation and Others [2000 (5) SCC 287], reinforcing that the terms of the invitation to tender are not open to judicial scrutiny as they fall within the realm of contract.

Issue 2: High Court's Authority to Change Tender Terms
The Supreme Court disagreed with the High Court's view that the term requiring a turnover of at least Rs. 20 crores did not have a nexus with the increase in the number of schools or the quality of education to be provided. The court noted that the government introduced the turnover criteria to ensure financial stability and capacity to implement the project, which involved significant expenditure. The court emphasized that it is for the authority to set the terms of the tender, and courts should not interfere unless the terms are shown to be arbitrary, discriminatory, or actuated by malice. The provision of the turnover criteria was not found to be arbitrary or discriminatory.

Conclusion:
The Supreme Court set aside the judgment of the High Court and dismissed the writ petitions filed by the respondents. The appeals were accepted, and no order as to costs was made. The court left it to the appellants to decide whether to continue with the tenders already floated or to invite fresh tenders in light of the changed circumstances.