The Supreme Court has suggested that High Courts should refrain from interfering in grant of tender by issuing writs, even if it is fully arbitrary or malafide in routine manner.
The Division-Bench of Justice Hemant Gupta and Justice V. Ramasubramanian observed that Courts should rather relegate the party to seek damages as injunction or interference in the tender leads to additional costs on the State and is also against public interest.
The Court was adjudicating upon an appeal against a High Court judgment whereby it allowed a writ petition challenging a grant of tender.
Article 226: High Court's Duty and Powers
The Court at the outset noted that the interference in contract awarded to the appellant is wholly unwarranted and has caused loss to public interest.
Construction of roads is an essential part of development of infrastructure in any State. The learned Single Bench and the Division Bench of the High Court were exercising power of judicial review to find out whether the decision of the State was manifestly arbitrary or unjust as laid down by this Court in Tata Cellular Vs. Union of India, 1994 Latest Caselaw 395 SC, the Court said.
The Court reflected on the duties of the High Courts and noted that to onfine itself to the question of legality, the concern should be:
1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have reached or,
5. abused its powers.
It is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken, the Court stressed.
The Court agreed that the extent of the duty to act fairly will vary from case to case but it briefly put the grounds upon which an administrative action is subject to control by judicial review:
(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
It added that grounds laid down in Rajan Vs. The Home Secretary, Home Department of Tamil Nadu, 2019 Latest Caselaw 425 SC should also be considered.
The Court pointed out the "principle of proportionality" specifically and went onto note that such cases the test to be adopted is that the court should, “consider whether something has gone wrong of a nature and degree which requires its intervention”.
Broadly, the principles to be considered are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which 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 permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
Supreme Court's Analysis in the Case-in-hand
The Court begin with examining the submissions by the Counsels and cases cited by them:
-Central Coalfields Limited through its Chairman and Managing Director Vs. Smt. Parden Oraon, 2021 Latest Caselaw 192 SC wherein it was held that it was not for the Court to substitute its opinion in respect of acceptance of bank guarantee. It was held that when a particular format for a bank guarantee is prescribed, then the bidder is required to stick to that particular format alone with the caveat that the State reserves the right to deviate from the terms of the bid document within the acceptable parameters.
- Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & ANR. [September 15, 2016] wherein the Court held that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents.
-Silppi Constructions Contractors v. Union of India wherein it was held that the Courts must realize their limitations and the havoc which needless interference in commercial matters could cause. In contracts involving technical issues, the Courts should be even more reluctant because most of us in judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain . As laid down in the judgments cited above, the Courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give "fair play in the joints" to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference would cause unnecessary loss to the public exchequer
-National High Speed Rail Corporation Ltd. Vs. Montecarlo Ltd., 2022 Latest Caselaw 106 SC wherein the Court noted that even while entertaining the writ petition and/or granting the stay which ultimately may delay the execution of the Mega projects, it must be remembered that it may seriously impede the execution of the projects of public importance and disables the State and/or its agencies/instrumentalities from discharging the constitutional and legal obligation towards the citizens. Therefore, the High Courts should be extremely careful and circumspect in exercise of its discretion while entertaining such petitions and/or while granting stay in such matters. Even in a case where the High Court is of the prima facie opinion that the decision is as such perverse and/or arbitrary and/or suffers from mala fides and/or favouritism, while entertaining such writ petition and/or pass any appropriate interim order, High Court may put to the writ petitioner's notice that in case the petitioner loses and there is a delay in execution of the project due to such proceedings initiated by him/it, he/they may be saddled with the damages caused for delay in execution of such projects, which may be due to such frivolous litigations initiated by him/it.
- Uflex Ltd. Vs. Government of Tamil Nadu, 2021 Latest Caselaw 403 SC Court stated that the enlarged role of the Government in economic activity and its corresponding ability to give economic “largesse” was the bedrock of creating what is commonly called the “tender jurisdiction”. The objective was to have greater transparency and the consequent right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India beyond the issue of strict enforcement of contractual rights under the civil jurisdiction. However, the ground reality today is that almost no tender remains unchallenged. Unsuccessful parties or parties not even participating in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution.
- M/s. Galaxy Transport Agencies, Contractors, Traders, Transports and Suppliers Vs. M/s. New J. K. Roadways, Fleet Owners and Transport Contractors, 2020 Latest Caselaw 673 SC wherein a three-judge bench again reiterated that the authority that authors the tender document is the best person to understand and appreciate its requirements, and thus, its interpretation should not be second-guessed by a court in judicial review proceedings.
In view of the above, it noted that the position of law with regard to the interpretation of terms of the contract is that the question as to whether a term of the contract is essential or not is to be viewed from the perspective of the employer and by the employer.
The Court also accepted the contention of the appellant that the format for bank guarantee was not followed strictly by the State and 12 that the relaxation given was not uniform, in that respondent No. 1 was singled out.
The Court noted that since the construction of road is an infrastructure project and keeping in view the intent of the legislature that infrastructure projects should not be stayed, the High Court would have been well advised to hold its hand to stay the construction of the infrastructure project. Such provision should be kept in view even by the Writ Court while exercising its jurisdiction under Article 226 of the Constitution of India.
The Court conclusively said that the Writ Court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer.
Commenting one other important aspect, the Court observed that multiple layers of exercise of jurisdiction also delay the final adjudication challenging the grant of tender and therefore, it would be open to the High Courts or the Hon’ble Chief Justice to entrust these petitions to a Division Bench of the High Court, which would avoid at least hearing by one of the forums.
The Court ruled that the action of the respondent in setting aside the letter of acceptance granted to the appellant suffers from manifest illegality and cannot be sustained.
Noting that the grant of interim injunction by the learned Single Bench of the High Court has helped no-one except a contractor who lost a contract bid and has only caused loss to the State with no corresponding gain to anyone, it also cautioned the High Courts that any contract of public service should not be interfered with lightly and in any case, there should not be any interim order derailing the entire process of the services meant for larger public good.
The appeal was disposed of with a direction to the respondent State to allow the appellant to resume and complete the work by excluding the period spent in the stay of execution of the contract.
Read Judgement Here:
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