2016 (7) TMI 1626 - SC - Indian Laws

Supreme Court upholds State's tender cancellation, stresses competitive bidding

The Supreme Court overturned the High Court of Jharkhand's decision and allowed the State of Jharkhand's appeal. The Court upheld the government's ... Seeking direction for opening of technical and financial bid of the respondent - HELD THAT:- Admittedly, in the pre-bid meeting held on 24.03.2014, ten tenderers have participated. After conclusion of the pre-bid meeting on 24.03.2014, as a result of stringent conditions prescribed in clause 4.5(A)(a) and 4.5(A)(c), only three tenderers could participate in the bidding process and submit their bids. Upon scrutiny two were found non-responsive. In our considered view, High Court erred in presuming that there was adequate competition. In order to make the tender more competitive, tender committee in its collective wisdom has taken the decision to cancel and re-invite tenders in the light of SBD norms - While exercising judicial review in the matter of government contracts, the primary concern of the court is to see whether there is any infirmity in the decision-making process or whether it is vitiated by mala fide, unreasonableness or arbitrariness. The right to refuse the lowest or any other tender is always available to the government. In the case in hand, the respondent has neither pleaded nor established mala fide exercise of power by the appellant. While so, the decision of tender committee ought not to have been interfered with by the High Court. In our considered view, the High Court erred in sitting in appeal over the decision of the appellant to cancel the tender and float a fresh tender. Equally, the High Court was not right in going into the financial implication of a fresh tender. When the SLP came up for hearing, by an order dated 10.08.2015, while granting interim stay on the operation of the impugned judgment, this Court directed that the appellants shall be free to invite fresh tenders and process the same, but no allotment shall be made without permission of this Court - The learned Attorney General submitted that the entire sub-mergence area of the proposed Icha Dam is in the scheduled area and the remaining land for Icha Dam can be acquired only with the prior consent of the Gram Sabha of the affected villages. It is further stated that the issue was discussed in the meeting of Tribal Advisory Council held on 27.09.2014 and that Tribal Advisory Council and the sub-committee opined that the construction of Icha-Kharkai Dam may be cancelled. Learned Attorney General therefore submitted that there are some issues which need to be resolved before floating a fresh tender of Icha dam. The impugned judgment of the High Court is liable to be set aside. Appeal allowed. Issues Involved:1. Validity of the High Court's decision to dismiss the appellant’s Letters Patent Appeal.2. Application of CVC Guidelines, specifically clauses 4.17 and 4.18.3. Government's prerogative to award or cancel tenders.4. Financial implications of re-tendering.5. Judicial review of administrative decisions regarding tenders.Detailed Analysis:1. Validity of the High Court's Decision:The Supreme Court reviewed the High Court of Jharkhand's judgment dated 13.03.2015, which dismissed the appellant’s Letters Patent Appeal. The High Court had affirmed the Single Judge's order directing the opening of the technical and financial bid of the respondent. The Supreme Court found that the High Court did not appropriately consider the clauses in the Notice Inviting Tender (NIT) and the Standard Bidding Documents (SBD), which allow the government to cancel tenders without assigning reasons.2. Application of CVC Guidelines:The core issue was whether the tender committee should have applied clause 4.17 or clause 4.18 of the CVC Guidelines. Clause 4.17 pertains to single quotes or single valid acceptable quotes and suggests proceeding with the tender. Clause 4.18 deals with re-tendering due to lack of competition from restrictive specifications. The High Court had concluded that clause 4.17 should have been invoked since three companies participated initially, indicating competition. However, the Supreme Court found that the stringent conditions in the tender led to inadequate competition, justifying the application of clause 4.18(d) for re-tendering.3. Government's Prerogative to Award or Cancel Tenders:The Supreme Court emphasized that the government has the right to cancel tenders and invite fresh ones to ensure competitiveness, as long as the decision is not arbitrary or unreasonable. The Court cited precedents such as *Rajasthan Housing Board v. G.S. Investments* and *Uttar Pradesh Avas Evam Vikas Parishad v. Om Prakash Sharma*, which uphold the government's discretion in tender matters. The Court noted that the appellant-state was within its rights to reject the bid based on clause 24 of NIT and clause 32.1 of SBD, which allow for cancellation without assigning reasons.4. Financial Implications of Re-tendering:The High Court had noted that the estimated project value increased from Rs. 698 crores to Rs. 738 crores within a few months, suggesting that re-tendering could further escalate costs, causing a loss to the state exchequer. The Supreme Court, however, found that the decision to re-tender was justified to ensure broader competition and was not influenced by financial implications alone.5. Judicial Review of Administrative Decisions:The Supreme Court reiterated that judicial review of administrative decisions, especially regarding government contracts, should focus on the decision-making process rather than the decision itself. The Court cited *Tata Cellular v. Union of India* and *Master Marine Services v. Metcalfe & Hodgkinson*, emphasizing that courts should not substitute their judgment for that of the administrative body unless there is evidence of mala fide or arbitrariness. The Supreme Court found no such infirmity in the tender committee's decision to cancel and re-invite tenders.Conclusion:The Supreme Court set aside the High Court's judgment, allowing the appeal by the State of Jharkhand. The Court upheld the government's decision to cancel the tender and invite fresh tenders, emphasizing the need for competitive bidding and adherence to established guidelines. The judgment underscores the government's discretion in tender processes and the limited scope of judicial review in such administrative decisions.