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of <h1>Supreme Court Upholds Tender Conditions, Deters Frivolous Litigation, and Confirms No Conflict of Interest in Uflex Case.</h1> <h3>UFLEX LTD. Versus GOVERNMENT OF TAMIL NADU & ORS.</h3> UFLEX LTD. Versus GOVERNMENT OF TAMIL NADU & ORS. - (2022) 1 SCC 165 Issues Involved:1. Tender jurisdiction and judicial review2. Allegations of bias and arbitrariness in tender conditions3. Evaluation of technical and commercial specifications4. Conflict of interest and corporate relationships5. Rights of MSMEs under tender laws6. Costs and consequences of litigationDetailed Analysis:1. Tender Jurisdiction and Judicial Review:The judgment discusses the expanded role of the government in economic activities and the corresponding increase in challenges to tender processes. The court emphasizes that judicial review in tender matters is limited to preventing arbitrariness, irrationality, unreasonableness, bias, and mala fide actions. The court's role is not to assess the soundness of decisions but to ensure they are made lawfully. The 'Wednesbury principle' is applied, meaning a decision can only be overturned if it is so unreasonable that no reasonable authority would have made it.2. Allegations of Bias and Arbitrariness in Tender Conditions:The respondents argued that the tender conditions were skewed to favor specific bidders, particularly Uflex and Montage, by requiring eight years of experience and significant prior supply to state excise departments. The court noted that the terms of the tender should be fair and not arbitrary, but also recognized that the state has the discretion to set conditions to ensure quality and reliability. The court found that the conditions were not arbitrary and were within the state's discretion.3. Evaluation of Technical and Commercial Specifications:The court examined whether the technical specifications were generic enough to allow wider participation. The respondents contended that the specifications were designed to exclude most bidders except Uflex and Montage. The court noted that the tendering authority is the best judge of its requirements and that the court should not interfere unless there is clear evidence of mala fide or irrationality. The court found that the technical specifications were justified and aimed at ensuring the quality and security of the holograms.4. Conflict of Interest and Corporate Relationships:The respondents alleged that Uflex and Montage had a conflict of interest due to financial investments and common technology sources. The court examined the relationship between the two companies and found that the investment in preference shares did not amount to a controlling interest. The court reiterated that the principle of lifting the corporate veil should not be applied in tender matters unless there is clear evidence of collusion or control that affects the integrity of the tender process.5. Rights of MSMEs under Tender Laws:Kumbhat argued that as an MSME, it should have been allowed to participate in the tender under the provisions of the MSMED Act and the Tender Act. The court noted that while MSMEs have certain protections and preferences, they must still meet the eligibility criteria set out in the tender. The court found that Kumbhat did not meet the criteria as it was a partnership firm and not an LLP or limited company, which were the required forms for participation.6. Costs and Consequences of Litigation:The court emphasized the need for costs to follow the cause, especially in commercial litigation, to deter frivolous and vexatious litigation. The court awarded costs to the appellants, Uflex and the State Government, to be paid by Kumbhat and Alpha. The court highlighted the importance of awarding realistic costs to reflect the actual expenses incurred and to discourage unnecessary litigation.Conclusion:The Supreme Court set aside the impugned order of the Division Bench, allowing the appeals by Uflex and the State Government. The court found that the tender conditions were justified, the technical specifications were appropriate, and there was no conflict of interest that affected the integrity of the tender process. The court also emphasized the importance of awarding costs to deter frivolous litigation in commercial matters.
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