State instrumentality in tendering must act fairly and record reasons when rejecting the highest offer.

A government company or development authority acting in tender matters is an instrumentality of the State and must conform to Article 14, so its dealings with tenderers must be fair, non-arbitrary, and subject to judicial review. When such a public authority rejects the highest tender offer, the decision may still be commercially justified, but it should ordinarily rest on recorded reasons and be communicated unless there is specific justification for non-communication. Recording reasons promotes transparency, accountability, and reviewability, and prevents uncanalised discretion in public contracting.

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Issues: (i) whether the respondent, being a government company and development authority, was "State" under Article 12 and bound by Article 14 in its dealings with tenderers; (ii) whether rejection of the highest tender offer without recorded reasons was arbitrary and impermissible.

Issue (i): whether the respondent, being a government company and development authority, was "State" under Article 12 and bound by Article 14 in its dealings with tenderers.

Analysis: The respondent, though engaged in a commercial or trading activity, remained an instrumentality of the State. Such an authority must act within the ambit of the rule of law and cannot conduct itself arbitrarily in public dealings. Its actions are subject to judicial review and must conform to constitutional discipline under Article 14.

Conclusion: The respondent was State within Article 12 and was bound to act fairly and non-arbitrarily.

Issue (ii): whether rejection of the highest tender offer without recorded reasons was arbitrary and impermissible.

Analysis: The State may seek the best bargain in respect of its property, and absence of mala fides does not by itself invalidate the decision to refuse the highest offer. However, when a public authority rejects the highest offer, the decision should ordinarily be supported by reasons recorded on the file and communicated to the concerned party, unless there is specific justification for non-communication. Recording reasons promotes transparency, accountability, credibility, and meaningful review of executive action.

Conclusion: Reasons should ordinarily be recorded and made available when the highest offer is rejected.

Final Conclusion: The appeals did not succeed, but the decision clarified that public authorities rejecting the highest tender offer must ordinarily act on recorded reasons in order to satisfy constitutional standards of fairness and accountability.

Ratio Decidendi: A State instrumentality acting in tender matters must not exercise uncanalised discretion; when it rejects the highest offer, it should ordinarily record and communicate reasons so that the action remains fair, reviewable, and consistent with Article 14.

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