When rejection of tender bid is not permissible?

In the present case, taking note of the observations and the
purpose for which the EMD has to be deposited, we find that it cannot be

said that failure to upload the scanned copy is an essential term of the
tender process especially considering that there is nothing on record to show
that at any point of time, the Petitioners who were otherwise holding a draft
in favour of the concerned Department had failed to produce the proof of the
scanned copy when demanded. In such circumstances, the action of the
concerned Department in refusing to open the bid of the Petitioners is
arbitrary, unreasonable and cannot be sustained.
 IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 479 OF 2015
 Bharat Conductors Pvt. Ltd.,

V 
The Executive Engineer,

 CORAM :- F.M. REIS &
 NUTAN D. SARDESSAI, JJ.
 Date : 7/8th September, 2016.
Citation: 2016(6) MHLJ 408

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Whether payment of earnest money can be considered to be an essential term of tender process?

Apart from that, the payment of earnest money cannot be
considered to be an essential term of the tender process. The Apex
Court, in a Judgment reported in (1991) 3 SCC 273 in the case of
Poddar Steel Corporation vs. Ganesh Engineering Works and others,
has observed at paras 6 and 8, thus :
“6. It is true that in submitting its tender accompanied
by a cheque of the Union Bank of India and not of the
State Bank clause 6 of the tender notice was not
obeyed literally, but the question is as to whether the
said non-compliance deprived the Diesel Locomotive
Works of the authority to accept the bid. As a matter of
general proposition it cannot be held that an authority
inviting tenders is bound to give effect to every term
mentioned in the notice in meticulous detail, and is not
entitled to waive even a technical irregularity of little
or no significance. The requirements in a tender notice
can be classified into two categories — those which
lay down the essential conditions of eligibility and the
others which are merely ancillary or subsidiary with
the main object to be achieved by the condition. In the
first case the authority issuing the tender may be 
required to enforce them rigidly. In the other cases it
must be open to the authority to deviate from and not
to insist upon the strict literal compliance of the
condition in appropriate cases. This aspect was
examined by this Court in C.J. Fernandez v. State of
Karnataka (1990) 2 SCC 488, a case dealing with
tenders. Although not in an entirely identical situation
as the present one, the observations in the judgment
support our view. The High Court has, in the impugned
decision, relied upon Ramana Dayaram Shetty v.
International Airport Authority of India (1979) 3 SCC
489, but has failed to appreciate that the reported case
belonged to the first category where the strict
compliance of the condition could be insisted upon.
The authority in that case, by not insisting upon the
requirement in the tender notice which was an
essential condition of eligibility, bestowed a favour on
one of the bidders, which amounted to illegal
discrimination. The judgment indicates that the court
closely examined the nature of the condition which
had been relaxed and its impact before answering the
question whether it could have validly condoned the
shortcoming in the tender in question. This part of the
judgment demonstrates the difference between the two
categories of the conditions discussed above. However
it remains to be seen as to which of the two clauses,
the present case belongs.
8. In the present case the certified cheque of the Union 
Bank of India drawn on its own branch must be treated
as sufficient for the purpose of achieving the object of
the condition and the Tender Committee took the
abundant caution by a further verification from the
bank. In this situation it is not correct to hold that the
Diesel Locomotive Works had no authority to waive
the technical literal compliance of clause 6, specially
when it was in its interest not to reject the said bid
which was the highest. We, therefore, set aside the
impugned judgment and dismiss the writ petition of
respondent 1 filed before the High Court. The appeal is
accordingly allowed with costs throughout.”
In the present case, considering the purpose for which the earnest
money is being deposited, we find that it is not an essential term of the
tender process. On going through the terms of the tender, it appears
that the earnest money would be adjusted as security deposit if the bid
of the tenderer is accepted. Hence, once the tender documents, along
with the demand draft, were accepted by the respondent-Corporation, it
was not open to the respondent-Corporation to unilaterally reject the
bid of the petitioner. In such circumstances, we find that the rejection
of the bid of the petitioner cannot be sustained and deserves to be
quashed and set aside. 
 IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 79/2016
Sudha Facility Management Service,

V/s.
 The Managing Director,
Citation: 2016(6) MHLJ 96

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When court should interefere in tender process?

 Recently, in Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium)[2] it was held by this Court, relying on a host of decisions that the decision making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decision making process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one which no responsible authority acting reasonably and in accordance with law could have reached. In other words, the decision making process or the decision should be perverse and not merely faulty or incorrect or erroneous. No such extreme case was made out by GYT-TPL JV in the High Court or before us.

12. In Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay[3] it was held that the constitutional Courts are concerned with the decision making process. Tata Cellular v. Union of India[4] went a step further and held that a decision if challenged (the decision having been arrived at through a valid process), the constitutional Courts can interfere if the decision is perverse. However, the constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute its view for that of the administrative authority. This was confirmed in Jagdish Mandal v. State of Orissa[5] as mentioned in Central Coalfields.

13. In other words, a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.

SUPREME COURT OF INDIA

Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & ANR.

[Civil Appeal No. 9078 of 2016]

[Civil Appeal No. 9079 of 2016]

[Civil Appeal Nos. 9080-9081 of 2016]

Madan B. Lokur, J.

Dated:September 15, 2016

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Leading judgment on government contract and tender proces

In Reliance Airport Developers (P) Ltd. vs. Airports
Authority of India & Ors., (2006) 10 SCC 1, this Court held
that while judicial review cannot be denied in contractual
matters or matters in which the Government exercises its
contractual powers, such review is intended to prevent
arbitrariness and must be exercised in larger public interest.

17) In Jagdish Mandal vs. State of Orissa and Others,
(2007) 14 SCC 517, the following conclusion is relevant:
“22. Judicial review of administrative action is intended to
prevent arbitrariness, irrationality, unreasonableness, bias
and mala fides. Its purpose is to check whether choice or
decision is made “lawfully” and not to check whether choice
or decision is “sound”. When the power of judicial review is
invoked in matters relating to tenders or award of contracts,
certain special features should be borne in mind. A contract
is a commercial transaction. Evaluating tenders and
awarding contracts are essentially commercial functions.
Principles of equity and natural justice stay at a distance. If
the decision relating to award of contract is bona fide and is
in public interest, courts will not, in exercise of power of
judicial review, interfere even if a procedural aberration or
error in assessment or prejudice to a tenderer, is made out.
The power of judicial review will not be permitted to be
invoked to protect private interest at the cost of public
interest, or to decide contractual disputes. The tenderer or
contractor with a grievance can always seek damages in a
civil court. Attempts by unsuccessful tenderers with
imaginary grievances, wounded pride and business rivalry,
to make mountains out of molehills of some
technical/procedural violation or some prejudice to self, and
persuade courts to interfere by exercising power of judicial
review, should be resisted. Such interferences, either interim
or final, may hold up public works for years, or delay relief
and succour to thousands and millions and may increase
the project cost manifold. Therefore, a court before
interfering in tender or contractual matters in exercise of
power of judicial review, should pose to itself the following
questions:
(i) 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”;

(ii) Whether public interest is affected.
If the answers are in the negative, there should be no
interference under Article 226. Cases involving blacklisting
or imposition of penal consequences on a
tenderer/contractor or distribution of State largesse
(allotment of sites/shops, grant of licences, dealerships and
franchises) stand on a different footing as they may require a
higher degree of fairness in action.”
18) The same principles have been reiterated in a recent
decision of this Court in Tejas Constructions &
Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa &
Anr., (2012) 6 SCC 464.
19) From the above decisions, the following principles
emerge:
(a) the basic requirement of Article 14 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;
(b) 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;
(c) 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;
(d) 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; and
(e) If the State or its instrumentalities act reasonably, fairly
and in public interest in awarding contract, here again,
interference by Court is very restrictive since no person can
claim fundamental right to carry on business with the
Government.

20) Therefore, a Court before interfering in tender or
contractual matters, in exercise of power of judicial review,
should pose to itself the following questions:
(i) 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 (ii)
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.

REPORTABLE

 IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
 CIVIL APPEAL NO. 5898 OF 2012
(Arising out of SLP (C) No. 25802 of 2008
M/s Michigan Rubber (India) Ltd. .... Appellant (s)
Versus
The State of Karnataka & Ors. .... Respondent(s)
 Dated:AUGUST 17, 2012.

 P. Sathasivam, J.

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When high court is not justified in interfering with tender process?

We find force in the aforesaid argument of the learned counsel for
the appellants. In the first instance, it is to be noted that BEC is
only a recommendatory authority. It is the Competent Authority
which is to ultimately decide as to whether the recommendation of
BEC is to be accepted or not. We are not entering into the
discussion as to whether this Competent Authority is the State
Government or the Municipal Corporation. Fact remains that
there is no approval by either of them. Matter has not even
reached the Competent Authority and no final decision was taken
to accept the bid of respondent No.1 herein. Much before that,
when the BEC was informed that there were only two valid bids
before it when it made its recommendation on September 08,
2010 and as per the Financial Rules there must be three or more
bids to ensure that bidding process becomes competitive, the
BEC realised its mistake and recalled its recommendation dated
September 08, 2010. It cannot be said that such a decision was

unfair, mala fide or based on irrelevant considerations. This,
coupled with the fact that the authority has right to accept or reject
any bid and even to annul the whole bidding process, the High
Court was not justified in interfering with such a decision of the
BEC.
 The High Court has also gone wrong in finding fault with the
decision of the BEC by holding that such a subsequent decision
could not have been taken by the BEC without notice to or in the
absence of the appellant. When the decision making process had
not reached any finality and was still in embryo and there was no
acceptance of the bid of respondent No.1 by the Competent
Authority, no right (much less enforceable right) accrued to
respondent No.1. In such a situation, there was no question of
giving any notice or hearing to respondent No.1.
NON – REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1437 OF 2016
(ARISING OUT OF SLP (C) NO. 9170 OF 2012)
STATE OF UTTAR PRADESH & ANR. 
VERSUS
M/S. AL FAHEEM MEETEX PRIVATE LTD. & ANR. 
A.K. SIKRI, J.
Citation:(2016) 4 SCC716

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