M/s Mintu Prasad Gupta vs State Of Jharkhand & Ors.

Per M.S. Sonak, C.J.

Heard Mr Pratyush Shounikya for the petitioner and Mr Vibhor Mayank, learned AC to AG for the State.

The petitioner seeks the following substantive relief in this petition: -

In the context of Clause 2, Mr Pratyush Shounikya submitted that for the annual supplies as well as the first three quarters, a bidder is required to bid for individual items. However, for the 4^th quarter, the tender conditions require a bidder to bid compositely for all the items. He submits that this is in stark variance with the earlier tender conditions. He submits that this change is arbitrary and there is no rational nexus shown between this changed condition and the object, if any, that is sought to be achieved. Accordingly, he submits that clause (2) of the tender condition must be struck down as arbitrary and unconstitutional.

Mr Pratyush Shounikya, in the context of Clause 9(viii), submitted that the requirement of a turnover of Rs.43,37,000/- is arbitrary because even the previous year’s contractors were unable to achieve the same. He submits that by imposing such a high turnover as a condition of eligibility, small contractors are sought to be eased out and rendered ineligible. He submits that this also constitutes arbitrariness and therefore Clause 9(viii) of the tender conditions must be struck down.

Finally, in the context of Clause 13 of the tender conditions, Mr Pratyush Shounikya submits that the requirement to bid for each of the food/grocery items is arbitrary. He points out that this is also a change from the previous tenders. Without any rational nexus to the object, if any, that is sought to be achieved, such a change is arbitrary. Accordingly, he submits that even Clause 13 of the tender conditions must be struck down.

Mr Shounikya submitted that the principle of legitimate expectations would require the State to act predictably. He conceded that the State is free to change its earlier position. However, such a change would be valid if backed by material showing a rational nexus between the proposed change and the object, if any, intended to be achieved. Accordingly, he submits that the changes brought about by the impugned tender conditions defy the doctrine of legitimate expectations.

Mr Vibhor Mayank, learned A.C. to A.G., contested Mr Pratyush Shounikya’s contentions. He submitted that the impugned conditions are not arbitrary and that the doctrine of legitimate expectations does not apply. He submitted that, based on its previous experience, the State formulated the tender conditions, or even changed some of them, to plug the loopholes discovered in the contract for supply of provisions to the Hazaribag jail.

Mr Mayank submitted that, even otherwise, the scope for interference with the terms of a tender is extremely limited, and unless the case of manifest arbitrariness is made out, this Court should be slow to interfere in such matters. He pointed out that the rationale for the changed terms is set out in Clause 31 of the tender conditions. Accordingly, he submitted that this petition may be dismissed.

On considering the rival contentions, perusing the material on record, and in view of the law laid down by the Hon’ble Supreme Court in such matters, we are afraid we cannot grant the relief prayed for in this petition.

At the outset, we refer to certain decisions of the Hon’ble Supreme Court dealing with the scope of judicial review of tender conditions or the terms of invitation to tender.

In the case of Tata Cellular Vs. Union of India, (1994) 6 SCC 651, the Hon’ble Supreme Court, while cautioning against interfering with tender matters, held that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender falls within the realm of contract. Further, the government must have freedom of contract, which, in other words, implies fair play in the joints as a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere.

The Hon’ble Supreme Court held that the court lacks the expertise to correct an administrative decision. If the court is permitted to review an administrative decision, it would amount to the court substituting its own decision without the necessary expertise, which itself may be fallible. Therefore, the terms of invitation to tender are generally not open to judicial scrutiny because invitation to tender is essentially in the realm of the contract.

In Directorate of Education & Others. Vs. Educomp Datamatics Ltd. and Others, (2004) 4 SCC 19, the Hon’ble Supreme Court held that the terms of the invitation to tender are generally not open to judicial scrutiny, as they fall within the realm of contract. Further, the government must have a free hand in setting tender terms. It must have reasonable play in its joints, a necessary concomitant for an administrative body in an administrative sphere. The authority sets the terms of the tender, and courts would not interfere with the terms of the tender notice unless they were shown to be arbitrary, discriminatory, or actuated by malice.

In the case of Michigan Rubber (India) Limited Vs. State of Karnataka and Others, (2012) 8 SCC 216, the Hon’ble Supreme Court held that the tendering authority has wide discretion to set the tender conditions/eligibility criteria. If claiming some other term would have been fairer, wiser, or more logical, the court should not interfere.

The above legal position was reiterated in the case of Maa Binda Express Carrier and Another Vs. North-East Frontier Railway and Others, (2014) 3 SCC 760, where it was held that the award of a contract is essentially a commercial transaction that must be determined on the basis of considerations relevant to that commercial decision. This implies that the terms on which tenders are invited are not open to judicial scrutiny unless it is found that they have been tailor-made to benefit any particular tenderer or class of tenderers.

In Uflex Limited v. Government of Tamil Nadu and Others (2022) 1 SCC 165, one issue concerned the status of participating entities. In that context, the Hon’ble Supreme Court held that not everyone must be permitted to participate in tenders. In fact, every tender has certain qualifying parameters, whether in technology or turnover. The Court cannot sit in judgment on what turnover should be required for an entity to participate.

In Airport Authority of India Vs. Centre for Aviation Policy, Safety & Research (CAPSR) & Others, 2022 SCC OnLine SC 1334, the Hon’ble Supreme Court reiterated that the terms and conditions of the invitation to tender fall within the tenderer’s or tender-making authority’s domain and are not open to judicial scrutiny, as they are in the realm of contract, unless they are arbitrary, discriminatory or mala fide.

In Airport Authority of India (supra), the challenge was, inter alia, to the minimum annual turnover and experience criteria. In that context, the Hon’ble Supreme Court held that AAI could determine its own terms and set the eligibility criteria. The Hon’ble Supreme Court reaffirmed the law laid down in Michigan Rubber (India) Limited (supra), in which it was observed that the Government and its undertakings must have a free hand in setting the terms of the tender, and that the courts would interfere only if the terms were arbitrary, discriminatory, mala fide, or actuated by bias. The courts cannot interfere with the terms of the tender prescribed by the Government merely because they feel other terms in the tender would have been fairer, wiser, or more logical.

The Court must examine the petitioner’s challenges considering the limited scope for interfering with the tender conditions formulated by the Government or its agencies.

As to the challenge to Clauses 2 and 13, we cannot detect any arbitrariness in the conditions imposed by those clauses. It is not for the Court to second-guess the State’s policy or even commercial decision that the bids must be submitted for individual items during the annual tender as well as the first three quarters and the consolidated bid must be submitted for the fourth quarter.

Clause 31 of the tender conditions provides the rationale for the changes brought about by the impugned Clauses. Clause 31 provides that some bidders tend to offer very low quotes to secure the contract and then default on the quality of the provisions they are required to supply. Therefore, to balance the quote and the quality, such conditions have been introduced. This explanation appears reasonable and acceptable.

Merely because such conditions may not have been imposed in previous years’ tenders, we cannot hold that any arbitrariness or defiance of the doctrine of legitimate expectations is involved. Ultimately, these are commercial matters in which the State has considerable leeway and can play to its advantage. Besides, the State is not precluded from changing the tender conditions based on past experience. In any event, these are administrative, commercial, and policy decisions where, as pointed out by the Hon’ble Supreme Court, the scope of judicial interference is extremely limited, and no interference is called for.

Insofar as Clause 9(viii) is concerned, we are again afraid we cannot interfere with the tender condition requiring an annual turnover of Rs.43,37,000/-. Such a Clause can hardly be called arbitrary or unreasonable. The fact that the petitioner or other contractors may not be able to fulfil this requirement is not a good ground to stigmatise it as arbitrary and strike it down.

In Educomp Datamatics Ltd. (supra), the requirement for a minimum turnover of Rs.20 crores for a contract for the supply of hardware valued at Rs.40-50 crores was rejected by the Hon’ble Supreme Court, establishing the principle that the turnover criterion is generally calibrated to actual operational capacity, not merely to government payments.

Accordingly, we are satisfied that no case is made out to sustain the petitioner’s challenge to the above tender conditions, whether on the ground of arbitrariness or by invoking the doctrine of legitimate expectations.

For all the above reasons, we dismiss this petition without any order for costs.