Supreme Court: Judicial review justified when tender decision is patently arbitrary or contrary to NIT
THE JHARKHAND STORY NETWORK New Delhi, September 22: The Supreme Court has held that courts should ordinarily defer to the commercial wisdom…
THE JHARKHAND STORY NETWORK
New Delhi, September 22: The Supreme Court has held that courts should ordinarily defer to the commercial wisdom of tendering authorities, but judicial review is justified when a tender decision is patently arbitrary or contrary to the terms of the Notice Inviting Tender (NIT).
A bench of Justice KV Viswanathan and Justice Alok Aradhe, while deciding Micky Traders vs L.R.Y. Labour Contractor & Ors., upheld the Punjab and Haryana High Court’s decision to quash a Letter of Acceptance (LoA) issued in favour of the highest bidder after finding that the bidder did not satisfy the eligibility conditions prescribed in the tender.
SC draws line on judicial deference in tender matters
The case concerned a tender for collection of user charges from a large number of vehicles entering a Mandi premises under a contract valued at more than ₹16 crore.
The NIT required bidders to have experience in the successful execution of annual collection of User Charges/Parking Fees for Government, Semi-Government or PSU organisations during the preceding two years.
The appellant emerged as the highest bidder (H1). However, its experience was in organising cattle fairs. The tendering authority treated that experience as sufficient to satisfy the eligibility requirement and issued the LoA in its favour.
The second-highest bidder (H2) challenged the decision before the Punjab and Haryana High Court.
Cattle fair experience not equivalent to user-charge collection
The High Court found that the H1 bidder did not meet the technical eligibility criteria and quashed the LoA, directing the tendering authority to proceed in accordance with law.
The Supreme Court affirmed the High Court’s decision, holding that experience in organising cattle fairs could not be treated as interchangeable with experience in collecting user charges or parking fees for a Government, Semi-Government or PSU organisation.
The Court noted that the appellant’s experience was as a fair contractor or lessee and did not involve collection of user charges or parking fees as a contractual duty owed to a public authority.
When can courts interfere?
The bench reiterated that the tendering authority is ordinarily the best judge of its requirements and that courts should exercise restraint in commercial matters, particularly where more than one reasonable interpretation of a tender condition is possible.
However, this deference is not unlimited.
The Court held that judicial review can be exercised where the decision is “dehors the terms of the NIT or is patently arbitrary.”
Referring to its earlier ruling in Kimberley Club (P) Ltd. v. Krishi Utpadan Mandi Parishad & Ors., the Court observed that a tendering authority cannot claim ordinary judicial deference for an interpretation that disregards the eligibility conditions it had itself prescribed.
Applying this principle, the Court found that no reasonable authority applying the language of the NIT could have concluded that the H1 bidder possessed the required experience.
Revenue cannot override eligibility
The Supreme Court also rejected the argument that the appellant’s higher bid should be preferred because it was about ₹1.5 crore more and would therefore benefit the public exchequer.
The Court held that revenue considerations cannot cure ineligibility.
Bids can be compared only among bidders who are eligible in the first place, it said. Otherwise, every eligibility condition could effectively be overridden by the highest financial offer, rendering the tender conditions meaningless.
The Supreme Court accordingly dismissed the appeal and upheld the High Court’s decision.
