award of contract by the State and its instrumentalities is
settled by a long line of decisions of this Court. While these
decisions clearly recognize that power exercised by the
Government and its instrumentalities in regard to allotment
of contract is subject to judicial review at the instance of an
aggrieved party, submission of a tender in response to a
notice inviting such tenders is no more than making an offer
which the State or its agencies are under no obligation to
accept. The bidders participating in the tender process
cannot, therefore, insist that their tenders should be
accepted simply because a given tender is the highest or
lowest depending upon whether the contract is for sale of
public property or for execution of works on behalf of the
Government. All that participating bidders are entitled to is
a fair, equal and non-discriminatory treatment in the matter
of evaluation of their tenders. It is also fairly well-settled
that award of a contract is essentially a commercial
transaction which must be determined on the basis of
consideration that are relevant to such commercial decision.
This implies that terms subject to which tenders are invited
are not open to the judicial scrutiny unless it is found that
the same have been tailor made to benefit any particular
tenderer or class of tenderers. So also the authority inviting
tenders can enter into negotiations or grant relaxation for
bona fide and cogent reasons provided such relaxation is
permissible under the terms governing the tender process.
9. Suffice it to say that in the matter of award of contracts
the Government and its agencies have to act reasonably and
fairly at all points of time. To that extent the tenderer has an
enforceable right in the Court who is competent to examine
whether the aggrieved party has been treated unfairly or
discriminated against to the detriment of public interest.
(See: Meerut Development Authority v. Association of
Management Studies and Anr. etc. (2009) 6 SCC 171
and Air India Ltd. v. Cochin International Airport Ltd.
(2000) 1 SCR 505).
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10751 OF 2013
(Arising out of S.L.P. (C) No.18405 of 2012)
Maa Binda Express Carrier and Anr
V
Northeast Frontier Railway and Ors.
Citation : (2014) 3 SCC 760.
Dated:November 29, 2013
2. This appeal arises out of a judgment and order dated
6
th June, 2012 passed by a Division Bench of the Gauhati
High Court whereby Writ Appeal (C) No.79 of 2012 has been
allowed; judgment and order dated 4th February, 2012
passed by a Single Bench of that Court set aside and Writ
Petition (C) No.4668 of 2011 filed by the appellants
dismissed.
3. In terms of a notice dated 12th July, 2011 Divisional
Commercial Manager, Tinsukia invited tenders for the grant
of a three year lease of 23 tonnes of space in VPH (Parcel
Van) on train No.15960/15959 Kamrup Express. Among
those who responded to the tender notice was the appellant
herein who offered a sum of Rs.1,46,872/- per trip for the
proposed lease. The tender process was discharged by the
railway administration on account of technical and
administrative reasons no matter the appellant’s offer was
the highest. A communication dated 6th September, 2011,
addressed to the appellant was in that regard issued to the
appellant who assailed the same in W.P. (C) No.4668 of
2011 before the High Court of Gauhati.
4. In their counter affidavit the railways defended the
cancellation/discharge of the tender not only on the ground
that the appellant had acquired no vested right for allotment
of the contract in its favour merely because its bid was
found to be the highest, but also on the ground that the
power to cancel/withdraw the tender notice had been
specifically reserved by the railway administration in its
favour. That apart, the cancellation of the tender process
was sought to be justified also on the ground that the
railway administration had discovered a serious deficiency in
the same in as much as the tender forms had been issued
without enclosing therewith the terms and conditions subject
to which the contract could be allotted or awarded. It was
also contended that an all important penalty clause had not
been incorporated in the tender documents. These omissions
and deficiencies were according to the respondent sufficient
for cancellation of the tender process to be followed by a
fresh process in due course.
5. A learned Single Judge of the High Court of Gauhati
before whom the matter was argued took the view that the
discharge of the tender process had caused prejudice to the
appellant by reason of his rates having become public. It
was also held by the learned Single Judge that every public
authority was required to act fairly while granting contracts
and that reasons for cancellation of the tender process
should have been set out in the communication sent to the
appellant instead of being disclosed subsequently in the
affidavit filed in opposition to the writ petition. The learned
Single Judge accordingly allowed the writ petition with a
direction that so long as the appellant undertook to accept
the penalty clause as a part of the contract between the
parties the railway administration would consider its bid for
acceptance and resultant allotment of the contract within 15
days of receipt of the undertaking.
6. Aggrieved by the judgment and order abovementioned,
the railway administration preferred Writ Appeal (C) No.79
of 2012 before the Division Bench of the High Court of
Gauhati. Relying upon the decision of this Court in Raunaq
International Ltd. v. I.V.R. Construction Ltd. and Ors.
(1999) 1 SCC 492 the Division Bench held that the
appellant acquired no right to claim the award of the
contract merely by reason of its bid being the highest. It
further held that the scope of judicial review being limited in
tender matters, the Court had to restrain itself from
interfering with the process so long as the decision of the
competent authority was not against public interest,
irrational, mala fide or illegal. It was also held that merely
because the order discharging tender process was silent as
to the reasons for the decision the same did not prevent the
Court from looking into the records to find out the basis on
which the cancellation was ordered. So also the argument
that exposure of rates offered by the appellant would result
in prejudice to the appellant was rejected as a ground to
justify interference with the decision of the railway
administration which was otherwise held to be legal and
bona fide. The present appeal assails the said decision as
seen earlier.
7. We have heard learned counsel for the parties at some
length. The material facts are not in dispute. It is not in
dispute that tender documents were not accompanied by the
terms and conditions applicable to the proposed contract.
That being so, award of a contract without specifying the
terms subject to which the same had to be worked was
bound to result in serious administrative and legal
complications. It is also not in dispute that no tender Box
Opening Committee had been nominated with the approval
of the Controlling Officer nor was any verification of tender
documents conducted by the Division concerned for their
genuineness. The absence of a penalty clause from the
tender documents was similarly a serious deficiency in the
entire tender process. Cancellation of the tender process
could not, in that view, be said to be mala fide to call for
interference by the High Court. The respondents have, in
their written submissions filed before us, referred to Circular
No.12 of 2006 by which guidelines for leasing out existing
space in trains for the purposes of operating parcel services
have been issued. These guidelines, inter alia, stipulate that
a tender Committee shall be put together which requirement
was also not complied with while issuing the tender notice in
the instant case. That apart, the Ministry of Railways has, by
Circular No.13 dated 31st May, 2012, revised the rate
structure for booking of parcel and luggage services. The
revised rate for Kamrup Express is Rs.4756/- per ton. The
reserve price calculated on that basis comes to
Rs.1,84,100/-. The offer made by the appellant was much
below that amount. Besides, a market survey conducted in
terms of an interim order passed by the High Court had
revealed that the contract could fetch Rs.2,25,000/- per trip
which was substantially higher than Rs.1,46,872/- quoted by
the appellant. Suffice it to say that not only is the reserve
price applicable as on date higher than the amount offered
by the appellant but even the market survey has brought
forth rates higher than what was offered by the appellant.
Allotment of any contract at the rate offered by the
appellant would, therefore, result in a substantial financial
loss to the railways which is neither in the public interest nor
necessitated by any legal compulsion. Time lag in such
matters plays an important role as it indeed has in the case
at hand.
8. The scope of judicial review in matters relating to
award of contract by the State and its instrumentalities is
settled by a long line of decisions of this Court. While these
decisions clearly recognize that power exercised by the
Government and its instrumentalities in regard to allotment
of contract is subject to judicial review at the instance of an
aggrieved party, submission of a tender in response to a
notice inviting such tenders is no more than making an offer
which the State or its agencies are under no obligation to
accept. The bidders participating in the tender process
cannot, therefore, insist that their tenders should be
accepted simply because a given tender is the highest or
lowest depending upon whether the contract is for sale of
public property or for execution of works on behalf of the
Government. All that participating bidders are entitled to is
a fair, equal and non-discriminatory treatment in the matter
of evaluation of their tenders. It is also fairly well-settled
that award of a contract is essentially a commercial
transaction which must be determined on the basis of
consideration that are relevant to such commercial decision.
This implies that terms subject to which tenders are invited
are not open to the judicial scrutiny unless it is found that
the same have been tailor made to benefit any particular
tenderer or class of tenderers. So also the authority inviting
tenders can enter into negotiations or grant relaxation for
bona fide and cogent reasons provided such relaxation is
permissible under the terms governing the tender process.
9. Suffice it to say that in the matter of award of contracts
the Government and its agencies have to act reasonably and
fairly at all points of time. To that extent the tenderer has an
enforceable right in the Court who is competent to examine
whether the aggrieved party has been treated unfairly or
discriminated against to the detriment of public interest.
(See: Meerut Development Authority v. Association of
Management Studies and Anr. etc. (2009) 6 SCC 171
and Air India Ltd. v. Cochin International Airport Ltd.
(2000) 1 SCR 505).
10. The scope of judicial review in contractual matters was
further examined by this Court in Tata Cellular v. Union of
India (1994) 6 SCC 651, Raunaq International Ltd.’s
case (supra) and in Jagdish Mandal v. State of Orissa
and Ors. (2007) 14 SCC 517 besides several other
decisions to which we need not refer. In Michigan Rubber
(India) Ltd. v. State of Karnataka and Ors. (2012) 8
SCC 216 the legal position on the subject was summed up
after a comprehensive review and principles of law
applicable to the process for judicial review identified in the
following words:
“19. From the above decisions, the following
principles emerge:
(a) the basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence
and substance is the heartbeat of fair play. These
actions are amenable to the judicial review only to
the extent that the State must act validly for a
9Page 10
discernible reason and not whimsically for any
ulterior purpose. If the State acts within the bounds
of reasonableness, it would be legitimate to take into
consideration the national priorities;
(b) fixation of a value of the tender is entirely within
the purview of the executive and courts hardly have
any role to play in this process except for striking
down such action of the executive as is proved to be
arbitrary or unreasonable. 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;
(c) In the matter of formulating conditions of a
tender document and awarding a contract, greater
latitude is required to be conceded to the 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;
(d) Certain preconditions or qualifications for tenders
have to be laid down to ensure that the contractor
has the capacity and the resources to successfully
execute the work; and
(e) 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.
20. Therefore, a Court before interfering in tender or
contractual matters, in exercise of power of judicial
review, should pose to 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 the public interest is affected. If the
answers to the above questions are in negative, then
there should be no interference under Article 226.”
10Page 11
(emphasis supplied)
11. As pointed out in the earlier part of this order the
decision to cancel the tender process was in no way
discriminatory or mala fide. On the contrary, if a contract
had been awarded despite the deficiencies in the tender
process serious questions touching the legality and propriety
affecting the validity of the tender process would have
arisen. In as much as the competent authority decided to
cancel the tender process, it did not violate any fundamental
right of the appellant nor could the action of the respondent
be termed unreasonable so as to warrant any interference
from this Court. The Division Bench of the High Court was,
in that view, perfectly justified in setting aside the order
passed by the Single Judge and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed
with costs assessed at Rs.25,000/-
.……………….……….…..…J.
(T.S. THAKUR)
.…..…………………..…..…J.
11Page 12
(VIKRAMAJIT SEN)
New Delhi
November 29, 2013
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