Judicial Review of the process of Grant of Contract

The Supreme Court of India after considering several authorities elaborated the law of tender as under:

The Supreme Court of India after considering several authorities elaborated the law of tender as under: • Submission of a tender in response to a notice inviting such tenders means 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. • Award of a contract is essentially a commercial transaction which must be determined on the basis of consideration relevant to such commercial decision. • 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. • The basic requirement of Article 14 of the Constitution of India 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 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. • 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. • 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. • 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. • If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, interference by Court is very restrictive since no person can claim fundamental right to carry on business with the Government. • Court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions: o 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 o 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. [Maa Binda Express Carrier and Anr. vs. Northeast Frontier Railway and Ors.] (SC – 29.11.2013)