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Supreme Court (“SC”) advises restraint in scrutiny of tender conditions Download as PDF

20-05-2019

In a recent decision1, SC expressed concern that writ remedy is being invoked against Public Sector Enterprises in a routine manner in almost every big tender. It has emphasised the limitation of writ jurisdiction in a challenge to award of tender by Public Sector Enterprises, and in interpretation of the terms of the tender. The court has provided guidance on interpretation of terms of the tender and for implying unexpressed terms in it.

Brief Facts

Appellant, Caretel Infotech Ltd. (“Caretel” or “Appellant”), had participated in an e-public tender floated by Hindustan Petroleum Corporation Limited (“HPCL”) for setting up call centres for its LPG customers. At the time of submission of the bid by Caretel, it had been issued a notice to show cause as to why suitable action for blacklisting ‘should not be initiated’. This notice, therefore, did not by itself initiate the action for blacklisting. 

The tender required that along with the bid a declaration be submitted by the bidder stating that it has not been “…banned or black listed or delisted or holiday listed…”. It also required signing of an “integrity pact” under clause 20(iii). Since Caretel had not incurred any of the referred disqualification on the date of submission, it submitted such declaration. HPCL accepted Caretel’s bid as lowest bid (L-1) and issued letter of acceptance. The second lowest bidder (L-2), Respondent No. 3 in the appeal, filed a writ petition in Bombay High Court (“Bombay HC”). 

In the meanwhile, Caretel was blacklisted and it filed a writ petition before the Delhi High Court assailing the order of blacklisting. The petition was dismissed and a Letters Patent Appeal against the order is pending. 

The fact regarding the blacklisting of Caretel was brought to the notice of Bombay HC through amendment of the writ petition pending before it. Bombay HC found that Caretel had violated the duly signed ‘integrity pact’ ensuring transparency and fairness under clause 20(iii) of the tender, and defaulted in compliance of the ISO certificate required under clause 8 read with clause 10(g) of Section 4 of the tender. Based on these findings, Bombay HC allowed the writ petition. The matter was thereafter brought in appeal before the SC.

Issue

The issue before the SC was whether the Appellant has violated the terms of the e-public tender floated by HPCL, disentitling the Appellant to the contract?

Decision

The SC allowed the appeal and set aside the Impugned order. It highlighted the principles to be followed while considering a writ petition against award of tender: 

  • Constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute their view for that of the administrative authority. Mere disagreement with the decision-making process would not suffice;
  • Interference is permissible only if the decision-making process is arbitrary or irrational to an extent that no responsible authority, acting reasonably and in accordance with law, could have reached such a decision; 
  • The author of the document is the best person to understand and appreciate its requirements. It is possible that the author of the tender may give an interpretation that is not acceptable to the Constitutional Court, but that itself would not be a reason for interfering with the interpretation given

The SC expressed concern against routine challenge brought before the writ courts against award of tender by Public Sector Enterprises. It observed that this slows down the process of their decision making and impairs their ability to compete with the private sector. 

It observed that “An unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government and Public Sectors a cumbersome exercise, with long drawn out litigation at the threshold.” It concluded that this works to a great disadvantage to the Government and Public Sector.

Analysis

This judgment provides important guidance for the writ courts in dealing with the challenge proceeding (through writ remedy) against award of tender by Public Sector Enterprises. It discourages court from interfering in these matters unless it finds that decision making process is arbitrary or irrational and a decision has been made which no reasonable person could have made. This judgment is likely to discourage frivolous challenge to award of tender by unsuccessful bidder.


Last Updated on 31th May 2019

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