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Judgment
Harish Tandon, CJ
The instant writ petition involves a pertinent issue relating to fixation of eligibility criteria of a turnover perceived by the petitioner to be arbitrary, whimsical and offends the core values of the constitutional rights encapsulated under Part III of the Constitution of India and is eroding the concept of “level playing field” in a commercial transaction. The turnover as imbibed into an eligibility criteria and assigned the marks, according to the petitioner, the same is discriminatory, arbitrary and tailored to favour a class of the selected suppliers/service providers and, therefore, actuated by malice and disturbs the core fabric of Articles 14, 19 (1)(g) and 21 of the Constitution of India.
The narration of the facts would bring clarity in determining the point so raised and the fixation of the turnover criteria in eligibility clause is inevitable. The petitioner claimed itself to be a supplier of dietary services / supply of cooked food with ancillary activities having possessed the relevant requisites statutory licences and engaged in providing such services in several medical colleges and hospitals in different corners of the State of Odisha. A tender was floated vide Request for Proposal (RFP) on 10th June, 2025 by Veer Surendra Sai Institute of Medical Sciences and Research (VIMSAR), Burla, Sambalpur for Outsourcing of Diet Services (Dry, Liquid, Cooked) for Indoor Patients at Government Health Institution. The said RFP contains an exhaustive mechanism in the form of schedule of events in processing the tender, which includes a Pre-bid meeting with all the intending participants, which in fact was held on 25th June, 2025 in the office of the Superintendent of VIMSAR, Burla. The last date of submission of the bid was fixed on 10th June, 2025 and all such bids submitted by the intending participants shall be opened on 21st July, 2025.
2.1. The Pre-bid meeting was invited for suggestions and/or objections to the terms and conditions embodied in the said RFP and it appears that several intending participants including the petitioner were raising a concern on Clause 5.2 relating to the Annual Average Turnover and the marks to be assigned with the maximum cap of 20. It is indicated therein that the participants having a turnover of less than Rs.9 crores shall not be awarded any mark, whereas the turnover ranging between Rs.9 crores to Rs.18 crores shall be awarded 10 marks and the turnover over Rs.18 crores shall be awarded 20 marks. The minutes of the proceeding of Pre-bid meeting in relation to the said RFP was discussed by the Committee in presence of the participating bidders and a clarification was made that since the said VIMSAR, Burla is a 1134 bedded referral hospital and, therefore, it is decided to select one experienced and financially sound firm, who can supply diet to the patients for 2 to 3 months without payment in emergency i.e. non-availability of funds. However, to give an opportunity to the aspiring bidders, the suggestions and request was further invited on or before 30th June, 2025 so that the same may be discussed in a further meeting to be held on 1st July, 2025.
2.2. The suggestions and/or request received from the different aspiring bidders including the petitioner was mainly focused on awarding the marks on the basis of an Annual Average Turnover of more than Rs.18 crores to be improper and discriminatory including the guidelines issued by the Health and Family Welfare Department, Government of Odisha dated 22nd February, 2021. The Committee took a resolution that so far as the turnover is concerned, it does not require any modification but so far as Clause 5.2(3) is concerned, the experience certificate of private nursing homes and private schools/hostels shall not be taken into consideration. It was further clarified that all the health institutions having a bed strength of more than 100 (private or Government) will be taken into consideration and the experience certificate of other Government institutions having acquired a great reputation as a distinct institution shall be taken into consideration. Since the objections relating to the fixation of turnover has not been clarified nor modified, the instant writ petition came to be filed assailing the fixation of turnover criteria to be arbitrary, whimsical, actuated with malice and offending the “level playing field” in order to facilitate the selected bidders, which violates Articles 14, 19 (1)(g) and 21 of the Constitution of India.
Mr. Sudarshan Nanda, learned counsel appearing for the petitioner submits that fixing a minimum turnover at Rs.9 crores is not only arbitrary, but intended to favour the selected bidders, which corrodes the concept of “level playing field” and, therefore, the Court must interfere in striking down such conditions incorporated in the RFP. It is vociferously submitted that fixation of an eligibility criteria, which is vague and lack of subjectivity, is always perceived as violative of the doctrine of “level playing field” and the Writ Court may interfere with such policy as held by the apex Court in Reliance Energy Ltd. v. Maharashtra State Road Development Corporation Ltd., reported in (2007) 8 SCC 1. It is emphatically urged that any condition, which is per se arbitrary and has no nexus with the object and the purpose, is liable to be struck down. In support thereof, reliance is placed upon unreported judgment of the Division Bench of Bombay High Court in case of Watergrace Products v. Nashik Municipal Corporation (Writ Petition No.701 of 2025, decided on 20th February, 2025). The learned counsel would further urge that even though the Government is free to impose any condition in the tender, but such condition shall be tested upon the arbitrariness and favouritism and in the event, it is found that such condition is too harsh and designed to facilitate the free passage to a selected bidder, the Court shall struck down the same as held by the Division Bench of Madhya Pradesh High Court in an unreported decision rendered in Vishal Pharmaceutical Laboratories v. State of Madhya Pradesh (Writ Petition No.612 of 2025, decided on 2nd May, 2025). The scope of judicial review of the Court can be exercised in a contractual matter as well, if the basic requirement of Article 14 or the other facets of the fundamental rights are infringed and to buttress the aforesaid submission, the reliance is placed upon the judgment of the Supreme Court in Subodh Kumar Singh Rathour v. Chief Executive Officer, reported in AIR 2024 SC 3784. It is, thus, submitted that the said turnover clause being arbitrary, actuated by malice and offending the basic tenet of the “level playing field” is required to be struck down.
Per contra, Mr. Saswat Das, learned Additional Government Advocate appearing for the State-opposite parties submits that the Court should not readily interfere in an administrative decision taken by the body of experts on taking stock of the overall necessity. It is further submitted that the Court should not substitute its own finding / decision taken by the administrative authorities, if the same is free from arbitrariness and not tainted with any malice. In support of the aforesaid contention, the reliance is placed upon the judgment of the apex Court in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd., reported in (2005) 6 SCC 138. It is vehemently submitted that the power of judicial review in a contractual field more particularly in tender matters should not ordinarily be invoked unless the Court finds the decision to be arbitrary and irrational that no responsible authority is expected to take or such decision affects the public interest as held in Michigan Rubber (India) Limited v. State of Karnataka, reported in (2012) 8 SCC 216. It is ardently submitted that if any clause incorporated in the tender does not create any impression that it is tailored to favour any particular bidder, the interference under Article 226 of the Constitution of India should not be made and in support thereof, the reliance is placed upon the judgment of the apex Court in Balaji Ventures Pvt. Ltd., v. Maharashtra State Power Generation Company Ltd. reported in 2022 SCC OnLine SC 1967. It is, thus, submitted that the committee of expert in a Pre-bid meeting took a conscious decision on a well-reasoned parameters and, therefore, the interference under Article 226 is unwarranted.
On the conspectus of the aforesaid factual matrix and the submissions advanced by the respective counsels, the solitary point involved in the instant writ petition is whether fixation of turnover criteria in a tender document can be said to be arbitrary, violative of Articles 14, 19 (1)(g) and 21 of the Constitution of India.
The fact unfurled would reveal that the challenge is basically founded upon Clause 5.2 of the RFP / Tender Call Notice (TCN) dated 10th June, 2025 in relation to awarding of marks on the basis of a turnover to be arbitrary and to favour a particular supplier or a service provider and, therefore, disturbs the core fabric of the “level playing field”. The record would further reveal that a Pre-bid meeting was also contemplated before the participation of the intending bidders inviting suggestions/ objections to any of the terms and conditions embodied in the said RFP so as to ensure the fairness, transparency and the reasons for incorporation of any of the terms and conditions therein. The Pre- bid meeting was held on 1st July, 2025 and the minutes of the proceeding vividly records the suggestions and/or objections put forth by the intending participants including the petitioner and ultimately, it was decided not to modify Clause 5.2 of the RFP. The reason for incorporation of the turnover clause is succinctly and explicitly recorded in the minutes of the proceeding held on 25th June, 2025 as the said hospital having 1134 bed and, therefore, selection of an experienced and financially sound service provider is felt necessary in order to ensure seamless services of providing the foods and the sustainability in this regard so that in the event the payments are not released within 2 or 3 months, there would not be any disruption of such services and/or supply. It admits no ambiguity that in a public health sector, which is primarily aimed to give the treatment of an ailment, but also to provide the foods, which is essence of a life. The supply of quality foods to the indoor patients, who have been admitted in the hospital for treatment, is indispensible and in the event, there is any delay in releasing the payment for the services, the financially unsound service provider may not be in a position at times continue seamless providing of foods to such patients. It is no gainsaying that the clauses in the tender have to be tested not only on the legal parameters but also on the ground of reasonableness. When the object is laudable and manifested on the ground realities, the freedom to incorporate any conditions in the TCN is to be ensured. It is no doubt true that Article 14 and Article 21 are the integral part of Part III of the Constitution as right to life engulfs a “level playing field” envisaged under Article 19(1)(g) of the Constitution. The aforesaid Articles recognize the fundamental right to carry on a business, which is embodied in the doctrine of “level playing field” ensuring the space to the equally placed competitors to sub-serve the larger public interest. Equality is the hallmark of the constitutional ethos, which has its remote link with Article 21 as several aspects of life are embodied therein. The unequal treatment amongst the equals is always eschewed and if a decision of the administrative authority is manifestly arbitrary or actuated with mala fide or devoid of any subjectivity, it violates the doctrine of “level playing field”. In Reliance Energy Ltd. (supra), the apex Court held that the terms and conditions incorporated in the TCN should be clear, certain and set a bench mark in consonance with the object and purpose for which it is so invited. Any vagueness or uncertainty, which inculcates the discrimination or tailored to suit a particular person, is violative of the “level playing field”. It is further held that the dissent or difference in opinion may be there, but the clarity in exercise of the contractual powers must be founded upon the specified norms in the following:
“39. In Reliance Airport Developers (P) Ltd. v. Airports Authority of India and others - (2006) 10 SCC 1, the Division Bench of this Court has held that in matters of judicial review the basic test is to see whether there is any infirmity in the decision-making process and not in the decision itself. This means that the decision-maker must understand correctly the law that regulates his decision- making power and he must give effect to it otherwise it may result in illegality. The principle of "judicial review" cannot be denied even in contractual matters or matters in which the Government exercises its contractual powers, but judicial review is intended to prevent arbitrariness and it must be exercised in larger public interest. Expression of different views and opinions in exercise of contractual powers may be there, however, such difference of opinion must be based on specified norms. Those norms may be legal norms or accounting norms. As long as the norms are clear and properly understood by the decision-maker and the bidders and other stakeholders, uncertainty and thereby breach of rule of law will not arise. The grounds upon which administrative action is subjected to control by judicial review are classifiable broadly under three heads, namely, illegality, irrationality and procedural impropriety. In the said judgment it has been held that all errors of law are jurisdictional errors. One of the important principles laid down in the aforesaid judgment is that whenever a norm/benchmark is prescribed in the tender process in order to provide certainty that norm/standard should be clear. As stated above "certainty" is an important aspect of rule of law. In the case of Reliance Airport Developers (supra), the scoring system formed part of the evaluation process. The object of that system was to provide identification of factors, allocation of marks of each of the said factors and giving of marks had different stages. Objectivity was thus provided.”
In Watergrace Products (supra), the Division Bench of the Bombay High Court was considering a case where the tender was invited for solid waste management and biomedical waste management to various Municipal Corporations and public bodies, fixing a criteria for minimum networth (the “Financial Capacity”) and the experience of one year in doing the similar nature of work in any one year within the preceding three years. The challenge was made on the ground of arbitrariness and lack of subjectivity in contradiction with the Model Tender Document. It is held that there is no rational or reasonability in prescribing minimum networth vis-a-vis the estimated cost of the tender work in the following:
“20. The estimated cost of tender work is 176 crores over a period of five years is. approximately 35 Crores annually. Therefore, the prescription of minimum net worth of 100 Crores as on 31st March 2024 instead of prescription of networth stipulation is arbitrary. Similarly, an experienced contractor is likely to execute the work successfully. Therefore, reducing the requirement of having the work experience from three years to one year cannot but be said to be arbitrary, and is violative of mandate contained in Article 14 of the Constitution. The first issue is, therefore, answered in the affirmative.”
A Division Bench of Madhya Pradesh High Court in Vishal Pharmaceutical Laboratories (supra) was dealing with the case where the tender was invited for procurement of medical kits comprising of the surgical items as well, was restricted amongst the manufacturers, thereby ousting the distributors, suppliers and other agents to participate therein. In the backdrop of the aforesaid factual matrix, it is held:
“22. It is correct that the government is free to impose any condition in the tender but the law is that it should not be an arbitrary or favoring special class of persons. For the supply and installation of certain Items, there could be justification for inviting the original manufacturer to participate in the tender process for obvious reasons like that they are required to maintain the same or they can easily arrange the parts of the big machine, or provide annual maintenance services etc. But for these small items like medicines, bandages, sanitizer & soap etc. there is no justification for procuring these items by original manufacturers. If only the original manufacturers are permitted to participate, then small traders, suppliers and agents will not get any work of the supplies in the Government departments, and this would amount to "big fish eat the small fish.”
However, the Apex Court in Master Marine Services (P) Ltd. (supra) has highlighted caution to the Courts in interfering with the terms and conditions embodied in the tender floated for procurement of any work, items or the services by experts in the field and should not substitute its own decision in such administrative fields unless such well informed decision in the administrative action withstand on the test of reasonability in the following:
“12. After an exhaustive consideration of a large number of decisions and standard books on Administrative Law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principles of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (See para 113 of the report SCC para 94.)”
In Michigan Rubber (India) Ltd. (supra), the Apex Court laid down the broad principles pertaining to the interference by the Writ Court in exercise of power of judicial review in tender or contractual matters in the following:
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.”
The aforesaid principle is reiterated in a subsequent decision rendered by the Apex Court in Balaji Ventures Pvt. Ltd. (supra) upholding the freedom in contractual field in fixing the eligibility criteria and the terms and conditions of the bid and the interference of the Writ Court only when the same appears to be arbitrary, mala fide and designed to suit a particular person or a class of persons in the following:
“9. Now so far as the impugned Judgment and order passed by the High Court dismissing the writ petitions is concerned, what was challenged before the High Court was one of the tender conditions/clauses. The High Court has specifically observed and noted the justification for providing clause 1.12(V). The said clause was to be applied to all the tenderers/bidders. It cannot be said that such clause was a tailor made to suit a particular bidder. It was applicable to all. Owner should always have the freedom to provide the eligibility criteria and/or the terms and conditions of the bid unless it is found to be arbitrary, mala fide and/or tailor made. The bidder/tenderer cannot be permitted to challenge the bid condition/clause which might not suit him and/or convenient to him. As per the settled proposition of law as such it is an offer to the prospective bidder/tenderer to compete and submit the tender considering the terms and conditions mentioned in the tender document.”
In a recent decision delivered in the case of Subodh Kumar Singh Rathour (supra), the Apex Court elaborately enunciated the scope of judicial review in a contractual field; more particularly, when the terms and conditions embodied in the tender is challenged on the ground of arbitrariness, vagueness and/or discrimination. It is held that the Courts are not denuded with the power to interfere with contractual matters, but if it is violative of Article 14 of the Constitution of India and the discrimination is apparent and patent on the face of the said document, there is no fetter on the part of the Writ Court to exercise such jurisdiction.
12.1 There must be a real demarcation between private law element and public law in a contractual field and must be tested on the parameters of the fairness, certainty and equal opportunity to be given to all the intending participants as any restriction, which is unfair and/or arbitrary, it would be open to a judicial review.
The Apex Court succinctly elaborated the test of arbitrariness in the following:
“65. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned action is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness.
Where a mode is prescribed for doing an act and there is no impediment in following that procedure, the performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you.”
What could be culled out from the aforementioned reports that the administrative action of the authorities in a contractual field is amenable to be tested in exercise of powers of judicial review, provided such action is arbitrary, unfair, unreasonable, irrational and violates the core fabric of Article 14 of the Constitution of India. The discriminatory action manifested from the administrative action is opposed to the doctrine of “level playing field”. Any terms and conditions incorporated in the tender to restrict its participation amongst the particular class of persons without any discernible rationality in it disturbs the “level playing field” and may be termed as arbitrary. The test of arbitrariness can also be decided when such act betrays, caprice or a mere exhibition of the will of the authority.
Thus, the safest course to ascertain the arbitrariness in the action of the administrative authorities is whether the condition imposed in the tender document has any nexus to the object sought to be achieved eradicating the vice of arbitrariness or an unfair treatment amongst the eligible candidates.
In the instant case, before the finalization of the terms and conditions to be incorporated in the proposed tender document, Pre-bid meeting was held inviting the suggestions and/or objections. Several intending participants including the petitioner gave their suggestions and the main focus was on the marks allotted on the basis of the turnover. The authority, which is the expert body, justified the fixation of the turnover giving a reason that the nature of the services ordained the seamless supply of the foods to the indoor patients for two or three months in the event the payments are not made, which cannot be said irrational and/or arbitrary. The financial capacity for uninterrupted services to be rendered to the patients is clearly discernible from the decision of the administrative authorities, who are well versed with the realities gained from the past experience, which cannot be said to be arbitrary or disturbs the fabric of “level playing field”.
We, thus, do not find any infirmity in the action of the authorities, inviting the interference under the power of judicial review.
The writ petition is, thus, dismissed. No costs.
I agree.