2012 (3) TMI 512 - SC - Indian Laws

Supreme Court Upholds Tender Criteria for Quality Supplies & Public Safety

M/s Michigan Rubber (India) Ltd. Versus The State of Karnataka & Ors.

The Supreme Court upheld the pre-qualification criteria in a tender process, finding them reasonable and not discriminatory. The criteria aimed to secure ... Eligibility of award - tender proceedings - Held that:- As observed earlier, the Court would not normally interfere with the policy decision and in matters challenging the award of contract by the State or public authorities. In view of the above, the appellant has failed to establish that the same was contrary to public interest and beyond the pale of discrimination or unreasonable. We are satisfied that to have the best of the equipment for the vehicles, which ply on road carrying passengers, the 2nd respondent thought it fit that the criteria for applying for tender for procuring tyres should be at a high standard and thought it fit that only those manufacturers who satisfy the eligibility criteria should be permitted to participate in the tender. As noted in various decisions, the Government and their undertakings must have a free hand in setting terms of the tender and only if it is arbitrary, discriminatory, mala fide or actuated by bias, the Courts would interfere. The 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. In the case on hand, we have already noted that taking into account various aspects including the safety of the passengers and public interest, the CMG consisting of experienced persons, revised the tender conditions. We are satisfied that the said Committee had discussed the subject in detail and for specifying these two conditions regarding prequalification criteria and the evaluation criteria. On perusal of all the materials, we are satisfied that the impugned conditions do not, in any way, could be classified as arbitrary, discriminatory or mala fide. The learned single Judge considered all these aspects in detail and after finding that those two conditions cannot be said to be discriminatory and unreasonable refused to interfere exercising jurisdiction under Article 226 of the Constitution and dismissed the writ petition. The well reasoned judgment of the learned single Judge was affirmed by the Division Bench of the High Court. Issues Involved:1. Reasonableness and fairness of the pre-qualification criteria in the tender.2. Allegations of arbitrariness, discrimination, and exclusion of the appellant-Company.3. Judicial review of administrative actions in tender processes.4. Public interest and safety considerations in tender conditions.5. Compliance with statutory provisions and procedural fairness.Detailed Analysis:1. Reasonableness and Fairness of the Pre-Qualification Criteria:The appellant-Company challenged the pre-qualification criteria specified in Condition Nos. 2(a) and 2(b) (amended to Condition Nos. 4(a) and 4(b)) of the Tender No. G-23-07 dated 05.07.2007, arguing that they were 'unreasonable, arbitrary, discriminatory and opposed to public interest.' The criteria required tyre manufacturers to have supplied a minimum average of 5000 sets per annum in the preceding three years to specified vehicle manufacturers and to have a minimum average annual turnover of Rs. 500 crores. The Supreme Court, after reviewing the materials and submissions, found that these conditions were not arbitrary or discriminatory but were intended to ensure the supply of good quality tyres from reliable sources.2. Allegations of Arbitrariness, Discrimination, and Exclusion:The appellant-Company claimed that the pre-qualification criteria were designed to exclude it and other similarly situated companies from the tender process. However, the Court noted that the criteria were formulated by the Contract Management Group (CMG) of KSRTC, which consisted of high-level officials with technical knowledge. The CMG had deliberated on the conditions and decided that they were essential to ensure the procurement of quality tyres for public safety. The Court concluded that the conditions were not imposed with an ulterior motive but were aimed at obtaining reliable and experienced suppliers.3. Judicial Review of Administrative Actions in Tender Processes:The Court referenced several precedents, including Tata Cellular vs. Union of India and Raunaq International Ltd. vs. I.V.R. Construction Ltd., emphasizing that judicial review of administrative actions in tender processes is limited. The Court does not sit as an appellate body but reviews the decision-making process to ensure it is free from arbitrariness, bias, and mala fides. The terms of the tender, being in the realm of contract, are generally not open to judicial scrutiny unless they are proven to be arbitrary or unreasonable.4. Public Interest and Safety Considerations in Tender Conditions:The respondents highlighted that the tender conditions were formulated to ensure the safety and comfort of passengers by procuring high-quality tyres. The Court acknowledged that public safety is a significant consideration and that the KSRTC's decision to impose stringent pre-qualification criteria was justified in this context. The criteria aimed to ensure that only manufacturers with a proven track record and substantial financial capacity could participate, thereby minimizing the risk of substandard supplies.5. Compliance with Statutory Provisions and Procedural Fairness:The Court noted that the KSRTC is governed by the Karnataka Transparency in Public Procurements Act, 1999, and the Rules made thereunder. The tender conditions and subsequent amendments were approved by the CMG and the competent authority, ensuring procedural fairness. The appellant-Company was aware of the tender conditions and the corrigendum issued, and it had the opportunity to raise queries, which were suitably addressed.Conclusion:The Supreme Court concluded that the pre-qualification criteria were not arbitrary, discriminatory, or mala fide. The criteria were formulated after due deliberation by a competent body (CMG) to ensure public safety and procurement of quality materials. The Court affirmed the decisions of the learned Single Judge and the Division Bench of the High Court, finding no valid ground for interference. Consequently, the appeal was dismissed with no order as to costs.