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The Supreme Court again underlines the limited scope of the “competence in the field of tenders”

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The reality on the ground today is that almost no tender goes unchallenged, noted the Supreme Court in a judgment delivered on Friday (September 17, 2021).

The bench of Judges Sanjay Kishan Kaul and Hrishikesh Roy observed that the increased role of government in economic activity and its corresponding ability to give economic “largesse” was the foundation for the creation of what is commonly referred to as “jurisdiction. tender “.

The aim was to have greater transparency and the right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India, the court said.

The judiciary observed that judicial review of these contractual matters has its own limits. The judiciary cited the following principles set out in Tata Cellular v. Indian union 1994 SCC (6) 651:

(1) The modern trend points towards judicial restraint in administrative action.

(2) The tribunal does not sit as a court of appeal but simply examines how the decision was made.

(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is allowed, it will substitute its own decision, without the necessary expertise which itself may be fallible.

(4) The terms of the call for tenders cannot be subject to judicial review because the call for tenders falls within the contractual domain. Typically, the decision to accept the offer or award the contract is made after a multi-level negotiation process. Most often, these decisions are made qualitatively by experts.

(5) The government must have the freedom to contract. In other words, a fair play in the articulations is a necessary concomitance for an administrative organ to function in an administrative or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury’s principle of reasonableness (including its other facts highlighted above), but must be free from arbitrariness unaffected by bias or motivated by bad faith.

(6) Cancellation decisions can impose a heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

In this case, the government of Tamil Nadu had issued a tender for the production and turnkey supply of holographic polyester-based excise labels. The stickers were to be stuck on the caps of alcohol bottles sold by the state government through one of its agencies, the Tamil Nadu State Marketing Corporation. Two of the potential bidders, namely, M / s. Kumbhat Holographics and M / s. Alpha Lasertek India LLP (abbreviated as “Alpha”) has filed lawsuits in this case. Although the Single Bench dismissed the motion in brief, the Division Bench allowed it. The Division bench noted that the tender conditions were tailor-made in favor of certain companies.

Allowing the appeal, the Supreme Court observed that the Bench Division erred in sitting almost as the technology and business opportunity appellate authority, which is not the role a Court should play.

The following important observations were made in the judgment:

The reality on the ground today is that almost no tender goes unchallenged.

1. The increased role of government in economic activity and its corresponding ability to give economic “largesse” was the foundation for the creation of what is commonly referred to as the “tender jurisdiction”. The objective was to have greater transparency and the resulting right for an injured party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India (hereinafter referred to as the “Constitution”), beyond the question of the strict application of contractual rights provisions falling under civil jurisdiction. However, the reality on the ground today is that almost no tender goes unchallenged. Unsuccessful parties or those who did not even participate in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. Jurisdiction in matters of public interest litigation (“PIL”) is also invoked for the same purpose, an aspect normally discouraged by the Court as this leads to litigation by proxy in purely contractual matters.

The principles of fairness and natural justice must be kept at bay

2. The judicial control of these contractual matters has its own limits. It is in this context of judicial review of administrative actions that this Court has held that it seeks to prevent arbitrariness, irrationality, unreasonableness, partiality and bad faith. The aim is to check if the choice of the decision is made legally and not to verify if the choice of the decision is judicious. When evaluating bids and awarding contracts, the parties should be governed by the principles of commercial prudence. To this extent, the principles of equity and natural justice must be kept at bay.

Unsuccessful bidders with imaginary grievances

3. We cannot lose sight of the fact that a bidder or contractor with a grievance can still seek damages in civil court and thus, “the attempts of unsuccessful bidders with imaginary grievances, hurt pride and commercial rivalry, to turn mountains into molehills of technical / procedural violation or self-harm, and to persuade the courts to intervene by exercising judicial review power, should be fought

Decision-Oriented Systematic Analysis

5. Another aspect considered by the Court is whether the terms and conditions of the tender were tailor-made to suit a person / entity. In fact, this is what the respondents who were the original applicants before the Court claim on the facts of this case. In order to award a contract to a particular party, a reverse engineering process is developed to achieve this goal by setting the terms of the tender so that only one party can do the job. case. One such undertaking has been classified under the “Systematic Decision-Oriented Analysis” (abbreviated “DOSA”) category.

The contracting authority knows best what is right for them in terms of technology and price

40. It should be started by noting that we examine the case, as already indicated above, on the parameters discussed at the outset. In terms of commercial calls for tenders, there is obviously an aspect of commercial competitiveness. For each party that gets an offer, there may be multiple parties that are not awarded the offer because there can only be one L-1. The question is whether it is necessary to have recourse to the judicial procedure in order to minimize the freedom available to a tenderer, simply because he is a State or a public authority, which further complicates said procedure. We have already noted that an element of transparency is always required in such tenders due to the nature of the economic activity carried out by the state, but the contours under which they must be examined are narrow, as indicated. in Tata Cellular and other cases. The aim is not to make the Court an appellate authority responsible for examining to whom the offer should be awarded. The economy must be able to play its role for which the contracting authority knows best what is suitable in terms of technology and price for them

Reference: LL 2021 SC 465

Business name: UFLEX Ltd. Vs. Govt. from Tamil Nadu

Case No | Date: CA 4862-4863 DE 2021 | September 17, 2021

Coram: Judges Sanjay Kishan Kaul and Hrishikesh Roy

Click here to read / download the judgment


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