New Delhi, Aug. 18: The Supreme Court has held that the government and its undertakings must have a free hand in deciding tender terms and courts would only interfere with the process if it was arbitrary, discriminatory, mala fide or actuated by bias.
“Courts cannot interfere with the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical,” a two-judge bench said in a judgment yesterday.
The top court was dealing with a case involving a company which had contested the pre-qualification criteria laid down by Karnataka State Road Transport Corporation (KSRTC) for acquiring tyres.
M/s Michigan Rubber (India) Ltd, which is engaged in the manufacture and supply of tyres, tubes and flaps, contested the pre-qualification criteria.
These specified that only tyre manufacturers who have supplied a minimum average of 5000 sets of tyres, tubes and flaps set per annum, in the preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-07 were eligible to participate, for supply of respective size/type of tyres, tubes and flaps set.
They should produce purchase order copies and invoice supplies in support of the same. The firm should have minimum average annual turnover of Rs 500 crore in the preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-07 from the sale of tyres, tubes and flaps, the conditions further said.
The company challenged them saying these were incorporated to exclude it and other similarly-situated companies from the tender process on wholly extraneous grounds.
The company claimed that it had been successful in obtaining all three previous contracts and supplied these products to the KSRTC.
There were no complaints pertaining to short supply and quality. The company’s financial capacity was never in doubt at any point of time, its petition said.
These pre-qualification criteria were hence included to exclude the company from the tender bidding process with an ulterior motive, it claimed. Both a single judge and a division bench dismissed the company’s petition.
The company then challenged the high court decision of July 2, 2008, in the Supreme Court.
The corporation had floated the tender on August 4, 2005.
In the top court, the corporation argued that the tender conditions had been fixed by a high-level committee.
The panel decided to have the best of equipment for vehicles which ply on road and hence it was decided to ensure that only those manufacturers who could fulfil these stringent conditions should be allowed, the corporation said.
After hearing both sides, a two-judge bench yesterday rejected the company’s appeal.
The top court said that interfering in administrative decisions would strive to a right balance between government discretion and the need to remedy unfairness.
Summing up earlier decisions, the top court said that courts should be restrained and cautious in dealing with such matters as they do not have the expertise to correct the administrative decision.
“If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible.”
“If the government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited,” the top court said citing earlier judgments.
“In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to state authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted,” the bench said.
“Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and resources to successfully execute the work,” it said.
“If the state or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim fundamental right to carry on business with the government.”
“Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should ask itself the following questions: (i) whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached; and (ii) whether public interest is affected. If these answers are in negative, then there should be no interference by high courts,” the bench said.
The bench comprised Justices P. Sathasivam and Ranjan Gogoi.