2007 (9) TMI 695 - HC - Companies Law

Summary

Issues Involved:
1. Extent of judicial review permissible u/s Article 226 of the Constitution of India in respect of tender eligibility criteria.
2. Allegation of arbitrary and oppressive tender conditions.
3. Compliance with Rule 17 of the Karnataka Transparency in Public Procurement Rules, 2000.

Summary:

1. Extent of Judicial Review u/s Article 226:
The core issue is whether the High Court can change the terms of a tender notice on the grounds of inappropriateness and better objective achievement through different criteria. The Court emphasized that terms of the invitation to tender are not open to judicial scrutiny as they fall within the realm of contract. The Government must have a free hand in setting tender terms, and courts can only interfere if the policy decision is arbitrary, discriminatory, malafide, or actuated by bias. The Court cited the Apex Court's decision in Directorate of Education v. Educomp Datamatics Ltd., stating that courts cannot strike down tender terms because they feel other terms would be fairer or more logical.

2. Allegation of Arbitrary and Oppressive Tender Conditions:
The petitioner argued that the tender conditions were designed to exclude them from participating. The conditions required a minimum average annual turnover of Rs. 500 crores and supply of 5,000 sets of Tyres, Tubes, and Flaps per annum to specific manufacturers. The respondents contended that these conditions were imposed to ensure high-quality supplies, as the petitioner's previous supplies were found defective. The Court found that the conditions were not arbitrary or malafide but were set to ensure quality and performance. The decision to hike the turnover requirement from Rs. 200 crores to Rs. 500 crores was made after detailed discussions and was not intended to exclude the petitioner.

3. Compliance with Rule 17 of the Karnataka Transparency in Public Procurement Rules, 2000:
The petitioner claimed that the tender notification violated Rule 17. The Court noted that the tender notification was published in a newspaper, and the terms were available on the website. The reduction of the tender period from 60 days to 45 days was approved by the competent authority with recorded reasons, complying with Rule 17(2). The corrigendum issued to modify the tender conditions was also found to be clear and advantageous to the petitioner, as it deleted the specific manufacturers' names while maintaining the pre-qualification criteria.

Conclusion:
The Court concluded that the tender conditions were neither arbitrary nor malafide and complied with the relevant rules. The petition was rejected, affirming that the terms set by the tendering authority were within their prerogative and did not warrant judicial interference.