MUNICIPAL CORPORATION & Ors. v. Nair Coal Services Ltd. (2006) 11 SCC 548 : [2006] 8 Suppl & Ors.

respondent no.1 had left the said column blank. Once there is a specific clause requiring the mentioning of the show-cause notices for the breach of contract, it was incumbent upon the tenderer to provide accurate information. The respondent no.1 had suppressed 73 show cause notices issued against it by BBMP and District Panchayat, Dadra and Nagar Haveli, Silvasa in respect of the work relating to solid waste management. Despite suppression by the respondent no.1, the technical expert from its own sources gathered information and found that 73 show cause notices were issued by the BBMP and others against respondent no.1, which reveal that respondent no.1 had not shown due diligence in the work of door to door collection of solid waste. Hence, the conclusion reached by the High Court that it was not open for the technical committee to suo motu take into consideration the afore-mentioned 73 show cause notices issued against the respondent no.1 while evaluating the technical bid is not correct. The due diligence and experience of the expert consultant ought to have been appreciated by the High Court keeping in mind the object to which bids were invited. 73 show cause notices issued to respondent no.1 establish that respondent no.1 did not have a good track record and therefore such notices were necessarily taken into consideration by the technical expert. In all fairness, respondent no.1 ought to have disclosed these factors in its bid. In view of the same, the High Court was not justified in increasing the marks for responsiveness from 5 to 10. [Para 44] [894-D-E; 895-A-E]

#6. The authority concerned is in the best position to find out the best person or the best quotation depending on the work to be entrusted under the contract. If a bidder had faced a number of show-cause notices from various municipal corporations in the matter of non-performance of door to door collection of garbage etc., the Court cannot compel the authority to choose such undeserving person/company to carry out the work. Ultimately, the public interest must be safeguarded. The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously and effectively. The public would also be interested in the quality of work undertaken. Poor quality of work A B C D E F G H 866 SUPREME COURT REPORTS [2018] 6 S.C.R. or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in re-doing the entire work. Lethargy or tardiness in collecting door to door garbage on a day-to-day basis would definitely lead to increase collection of garbage on the roads and public properties, which leads to health hazards and also reduces the cleanliness of the city. Since the public is directly interested and would be affected if the work entrusted is not carried out appropriately, and as the technical expert has found that respondent no.1 would not be a suitable company to be entrusted the work inasmuch as it had faced 73 show-cause notices from different Municipal Corporations, the High Court could not have interfered with the decision taken by the authority. The High Court has ignored the element of public interest involved in the matter. [Para 48] [896-G-H; 897-A-D] Karnataka State Industrial Investment & Development Corporation Limited v. Cavalet India Ltd. & Ors. (2005) 4 SCC 456 : [2005] 2 SCR 1183 ; B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548 : [2006] 8 Suppl. SCR 11 ; Delhi Science Forum v. Union of India (1996) 2 SCC 405 : [1996] 2 SCR 767; Montecarlo Ltd. v. NTPC Ltd. (2016) 15 SCC 272 : [2016] 8 SCR 224 – relied on. Tata Cellular v. Union of India (1994) 6 SCC 651 : [1994] 2 Suppl. SCR 122; Master Merin Services (P) Ltd. v. Metcalfe & Hodgkinson (2005) 6 SCC 138 : [2005] 3 SCR 666 ; Sterling Computers Ltd. v. M & N Publications Ltd. (1993) 1 SCC 445 : [1993] 1 SCR 81 ; Raunaq International Limited v. I.V.R. Construction Limited (1999) 1 SCC 492 : [1998] 3 Suppl. SCR 421 ; Air India Limited v. Cochin International Airport Limited (2000) 2 SCC 617 : [2000] 1 SCR 505 ; U.P. Financial Corporation. v. Naini Oxygen & Acetylene Gas Ltd. (1995) 2 SCC 754 : [1993] 2 SCR 149 ; U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. & Ors. (1993) 2 SCC 299 : [1993] 2 SCR 149 ; Karnataka State Financial Corporation v. Micro Cast Rubber & Allied A B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED 867 Products (P) Ltd. & Ors. (1996) 5 SCC 65 : [1996] 3 Suppl. SCR 40 ; Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016) 8 SCC 622 : [2016] 4 SCR 890 ; Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Ors. (2016) 16 SCC 818 ; Jagdish Mandal v. State of Orissa and Ors. (2007) 14 SCC 517 : [2006] 10 Suppl. SCR 606; Meerut Development Authority v. Assn. of Management Studies (2009) 6 SCC 171 ; Trilochan Mishra Etc v. State of Orissa & Ors (1971) 3 SCC 153 ; Ramana Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC 489 : [1979] 3 SCR 1014 – referred to. Case Law Reference [1994] 2 Suppl. SCR 122 referred to [2005] 3 SCR 666 [1993] 1 SCR 81 referred to referred to [1998] 3 Suppl. SCR 421 referred to [2000] 1 SCR 505 [1993] 2 SCR 149 referred to referred to [1996] 3 Suppl. SCR 40 referred to [2005] 2 SCR 1183 relied on [2006] 8 Suppl. SCR 11 relied on Para 6 Para 7 Para 8 Para 11 Para 12 Para 13 Para 14 Para 15 Para 16 [1996] 2 SCR 767 relied on Para 18 [2016] 4 SCR 890 (2016) 16 SCC 818 referred to referred to [2006] 10 Suppl. SCR 606 referred to (2009) 6 SCC 171 (1971) 3 SCC 153 [1979] 3 SCR 1014 [2016] 8 SCR 224 referred to referred to referred to relied on Para 19 Para 20 Para 20 Para 20 Para 27 Para 28 Para 29 A B C D E F G H 868 SUPREME COURT REPORTS [2018] 6 S.C.R. A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3330 of 2018. From the Impugned Judgment and order dated 07.04.2016 of the High Court of Madhya Pradesh, Bench at Indore in Writ Petition No.4676 of 2015 Civil Appeal Nos.3331 and 3332 of 2018. WITH Vikash Singh, Shyam Divan, Guru Krishnakumar, Gourab Banerji, Kailash Vasdev, Sr. Advs., Mishra Saurabh, Ankit Kr. Lal, Devadatt Kamat, Rajesh Inamdar, Aditya Bhat, Javedur Rahman, Gautam Talukdar, Nitin S. Tambwekar, Seshatalpa Sai Bandaru, Sahil Tagotra, Ms. R. Chattarjee, Sanjay K. Shandilya, Apoorva Agrawal, Umrao Singh, Mushtaq Ahmad, Advs. for the appearing parties. The Judgment of the Court was delivered by MOHAN M. SHANTANAGOUDAR, J. 1. Leave granted.

#2. The Order dated 07.04.2016 passed by the High Court of Madhya Pradesh, Bench at Indore, allowing the Writ Petition No. 4676 of 2015 filed by B.V.G. India Limited, Pune (respondent no.1 in the civil appeal arising out of SLP(C) No. 11967 of 2016), consequently setting aside the contract awarded in favour of Global Waste Management Cell Private Limited (respondent no. 3 in the civil appeal arising out of SLP(C) No. 11967 of 2016) by Ujjain Municipal Corporation for door to door collection and transportation of Municipal Solid Waste, is the subject matter of these appeals.

#3. Heard Shri Vikas Singh, learned senior counsel appearing for Municipal Corporation, Shri Shyam Divan and Shri Guru Krishnakumar, learned senior counsel representing Global Waste Management Cell Private Limited, Shri Kailash Vasdev, learned senior counsel for M/s Eco Save Systems Private Limited (Technical Expert) and Shri Gourab Banerji, learned senior counsel for BVG India Limited.

#4. Brief facts leading to these appeals are as under: Ujjain Municipal Corporation (Appellant in civil appeal arising out of SLP(C) No. 11967 of 2016) had issued Notice Inviting Tender (for short, “NIT”) dated 01.05.2015 for the appointment of an agency to B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 869 carry out “Municipal Solid Waste Door to Door Collection and Transportation” for a period of 10 years in the city of Ujjain. The tender notice was for inviting online bids from the eligible bidders following a two envelope system i.e. one for technical bid and another for financial bid. The Municipal Corporation had appointed a technical expert in Waste Management Solution viz. M/s Eco Save System Pvt. Ltd. (respondent no. 2 in the civil appeal arising out of SLP(C) No. 11967 of 2016) for scrutinising and evaluating the technical & financial bids. The last date of submission of tender was 21.05.2015. However, a corrigendum was issued and the date of submitting online tenders was extended up to 01.06.2015. The opening of the technical bid was fixed for 02.06.2015 and the opening of the financial bid on 04.06.2015. Three bidders remained for consideration of the award of tender by the Municipal Corporation. The technical bids of the parties were analysed thoroughly by the technical expert and marks were awarded as per the specifications of the NIT. Clause 1 of the eligibility criteria of the NIT provided that the company must have been registered five years prior to 01.05.2010. Clause 9 of the eligibility criteria of the NIT permitted a consortium of two members, but with the distinct experience requirement on the subject matter. Article III of the NIT specified that technical eligibility would have a weightage of 80% and weightage for financial score was 20%. The marks obtained in the technical evaluation would contribute to 80% and financial evaluation would contribute to 20% of the final marks for deciding the L1 bidder. The technical parameters which were required to be measured were also indicated in Article III of the NIT. The financial bids of only those bidders who secured at least 60% marks in the technical evaluations would be opened. The tender was to be awarded based on the final score arrived at by taking the total of the weighted scores of technical and financial evaluations as per the criteria mentioned in the NIT at Article III. Respondent no.1 scored low on technical evaluation inasmuch as it got 58.94 in the weighted score, whereas the successful bidder i.e. respondent no. 3 got a weighted technical score of 67.36. On a final analysis based on technical and financial weighted scores, Global Waste Management Cell Pvt. Ltd. got first rank (L1 bidder) amongst the three bidders by getting the highest score. Hence, it was awarded the contract. Such award of contract was questioned by the unsuccessful bidder (B.V.G. A B C D E F G H 870 SUPREME COURT REPORTS [2018] 6 S.C.R. A India Limited, L2 bidder) before the High Court by filing the Writ Petition, which came to be allowed by the impugned judgment. During the pendency of these matters, on 26.04.2016, this Court granted an interim order in favour of the successful bidder, namely respondent no. 3, staying the operation of the impugned order of the High Court, consequent upon which the successful bidder was awarded the contract and is discharging the duties assigned.

#5. The questions involved in these appeals are: (a) Whether under the scope of judicial review, the High Court could ordinarily question the judgment of the expert consultant on the issue of technical qualifications of a bidder when the consultant takes into consideration various factors including the basis of non-performance of the bidder; (b) Whether a bidder who submits a bid expressly declaring that it is submitting the same independently and without any partners, consortium or joint venture can rely upon the technical qualifications of any third party for its qualification; (c) Whether the High Court is justified in independently evaluating the technical bids and financial bids of the parties, as an appellate authority, for coming to the conclusion?

#6. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by this Court in Tata Cellular v. Union of India, (1994) 6 SCC 651, wherein this Court observed that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose, the exercise of that power will be struck down. B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 871

#7. 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 fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or a quasi-administrative sphere. However, the decision must not only be tested by the application of the Wednesbury principle of reasonableness, but must also be free from arbitrariness and not affected by bias or actuated by mala fides. (See the judgment in the case of Master Merin Services (P) Ltd. v. Metcalfe & Hodgkinson (2005) 6 SCC 138).

#8. In Sterling Computers Ltd. v. M & N Publications Ltd. (1993) 1 SCC 445, this Court held as under: “18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the “decision making process”. In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans [(1982) 3 All ER 141] where it was said that: (p. 144a) “The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court.” By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans [(1982) 3 All ER 141] the courts can certainly examine whether “decision-making process” was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution”. A B C D E F G H 872 SUPREME COURT REPORTS [2018] 6 S.C.R.

#19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by court amounts to encroachment on the exclusive right of the executive to take such decision.”

#9. In Raunaq International Limited v. I.V.R. Construction Limited, (1999) 1 SCC 492, this Court dealt with the matter in some detail and held in (para 9) as under: “9…..In arriving at a commercial decision considerations which are of paramount importance are commercial considerations. These would be : (1) the price at which the other side is willing to do the work; (2) whether the goods or services offered are of the requisite specifications; (3) whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important; (4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (5) past experience of the tenderer and whether he has successfully completed similar work earlier; (6) time which will be taken to deliver the goods or services; and (7) the ability of the tenderer to take follow up action, rectify defects or to give post contract services.” A B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 873 Whenever the State or public body or the Agency of the State enters into such contract, an element of public law or public interest may be involved even in such a commercial transaction. In that very judgment, i.e., Raunaq International Limited (supra), the elements of public interest are also noted. It is held thus: “10. What are these elements of public interest? (1) Public money would be expended for the purposes of the contract; (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work - thus involving larger outlays or public money and delaying the availability of services, facilities or goods, e.g. a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation. 11. When a writ petition is filed in the High court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court A B C D E F G H 874 SUPREME COURT REPORTS [2018] 6 S.C.R. should not intervene under Article 226 in disputes between two rival tenderers.”

#10. The judicial review of administrative action is intended to prevent arbitrariness. The purpose of judicial review of administrative action is to check whether the choice or decision is made lawfully and not to check whether the choice or decision is sound. If the process adopted or decision made by the authority is not mala fide and not intended to favour someone; if the process adopted or decision made is neither so arbitrary nor irrational that under the facts of the case it can be concluded that no responsible authority acting reasonably and in accordance with relevant law could have reached such a decision; and if the public interest is not affected, there should be no interference under Article 226.

#11. It is well settled that the award of contract, whether it is by a private party or by a public body or by the State, is essentially a commercial transaction. In arriving at a commercial decision, the considerations which are of paramount importance are commercial considerations. These would include, inter alia, the price at which the party is willing to work; whether the goods or services offered are of the requisite specifications; and whether the person tendering the bid has the ability to deliver the goods or services as per the specifications. It is also by now well settled that the authorities/State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. The State, its corporations, instrumentalities and agencies have a public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the Court must exercise its discretionary power under Article 226 with great caution and should exercise them only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should interfere. (See the judgment in the case of Air India Limited v. Cochin International Airport Limited (2000) 2 SCC 617).

#12. In U.P. Financial Corporation. v. Naini Oxygen & Acetylene Gas Ltd. (1995) 2 SCC 754, this Court held that it was not a A B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 875 matter for the courts to decide as to whether the Financial Corporation should invest in the defaulting unit, to revive or to rehabilitate it and whether even after such investment the unit would be viable or whether the Financial Corporation should realise its loan from the sale of the assets of the Company. The Court observed that a Corporation being an independent autonomous statutory body having its own constitution and rules to abide by, and functions and obligations to discharge, it is free to act according to its own right in the discharge of its functions. The views it forms and the decisions it takes would be on the basis of the information in its possession and the advice it receives and according to its own perspective and calculations. In such a situation, more so in commercial matters, the Courts should not risk their judgment for the judgments of the bodies to which that task is assigned. The Court further held that: “Unless its action is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however more prudent, commercial or businesslike it may be, for the decision of the Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable.”

#13. In U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. & Ors. (1993) 2 SCC 299, it was observed that the High Court while exercising its jurisdiction under Article 226 of the Constitution cannot sit as an appellate authority over the acts and deeds of the corporation and seek to correct them, and that the doctrine of fairness, evolved in administrative law, was not supposed to convert the writ Courts into appellate authorities over administrative authorities. It is further observed by this Court that fairness is not a one way street, and fairness required of the corporation cannot be carried to the extent of disabling it from recovering what is due to it.

#14. In Karnataka State Financial Corporation v. Micro Cast Rubber & Allied Products (P) Ltd. & Ors. (1996) 5 SCC 65 the issue was whether the financial corporation was wrong in rejecting the offer given by the borrower which, after proper evaluation, was considered lower than the offer made by the purchasers. This Court, while upholding the action of the financial corporation, held that the action of the said A B C D E F G H 876 SUPREME COURT REPORTS [2018] 6 S.C.R. A financial corporation should not be interfered with if it has acted broadly in consonance with the guidelines.

#15. In Karnataka State Industrial Investment & Development Corporation Limited v. Cavalet India Ltd. & Ors. (2005) 4 SCC 456, this court after taking into consideration various questions on various subjects laid down the following legal principles, viz.- “(i) The High Court while exercising its jurisdiction under Article 226 of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities. (ii) In a matter between the Corporation and its debtor, a writ court has no say except in two situations: (a)There is a statutory violation on the part of the Corporation, or (b) Where the Corporation acts unfairly i.e. unreasonably. (iii) In commercial matters, the courts should not risk their judgments for the judgments of the bodies to which that task is assigned. (iv) Unless the action of the Financial Corporation is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Financial Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable. (v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. (vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted. B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 877 (vii) The Financial Corporation is always expected to try and realise the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action under Section 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out. (viii) Fairness cannot be a one-way street. The fairness required of the Financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness. (ix) Reasonableness is to be tested against the dominant consideration to secure the best price.

#16. Likewise, in B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548, this Court while summarising the scope of judicial review and the interference of superior courts in the matter of award of contracts, observed thus: A B C D “65. We are not oblivious of the expansive role of the superior courts in judicial review. E

#66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarised as under: (i) if there are essential conditions, the same must be adhered to; (ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully; (iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing; F G H 878 SUPREME COURT REPORTS [2018] 6 S.C.R. (iv) the parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction; (v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with; (vi) the contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority; (vii) where a decision has been taken purely on public interest, the court ordinarily should exercise judicial restraint.”

#17. In Tata Cellular (supra), this Court referred to the limitations relating to the scope of judicial review of administrative decisions and exercise of powers in awarding contracts, by observing in para 94 thus: “(1) The modern trend points to judicial restraint in administrative action. (2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) 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. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or A B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 879 award the contract is reached by process of negotiation through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play 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 principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” In that very judgment, this Court proceeded to observe that there are inherent limitations in the exercise of the power of judicial review of contractual powers. This Court observed that the duty to act fairly will vary in extent, depending upon the nature of the cases to which the said principle is sought to be applied. The State has the right to refuse the lowest or any other tender, provided that it tries to get the best person or the best quotation.

#18. This Court in Delhi Science Forum v. Union of India (1996) 2 SCC 405 observed in para 13 as follows: “13…..While exercising the power of judicial review even in respect of contracts entered on behalf of the Government or authority, which can be held to be State within meaning of Article 12 of the Constitution courts, have to address while examining the grievance of any petitioner as to whether the decision has been vitiated on one ground or the other. It is well-settled that the onus to demonstrate that such decision has been vitiated because of adopting a procedure not sanctioned by law, or because of bad faith or taking into consideration factors which are irrelevant, is on the person who questions the validity thereof. This onus is not discharged only by raising a doubt in the mind of the court, but by satisfying the court that the authority or the body which had been A B C D E F G H 880 SUPREME COURT REPORTS [2018] 6 S.C.R. vested with the power to take decision has adopted a procedure which does not satisfy the test of Article 14 of the Constitution or which is against the provisions of the statute in question or has acted with oblique motive or has failed in its function to examine each claim on its own merit on relevant considerations. Under the changed scenarios and circumstances prevailing in the society, courts are not following the rule of judicial self-restraint. But at the same time all decisions which are to be taken by an authority vested with such power cannot be tested and examined by the court. The situation is all the more difficult so far as the commercial contracts are concerned. Parliament has adopted and resolved a national policy towards liberalisation and opening of the national gates for foreign investors…….” (emphasis supplied)

#19. In Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016) 8 SCC 622, it was observed as follows: “38. In G.J. Fernandez v. State of Karnataka [(1990) 2 SCC 488] both the principles laid down in Ramana Dayaram Shetty (1979) 3 SCC 489 were reaffirmed. It was reaffirmed that the party issuing the tender (the employer) “has the right to punctiliously and rigidly” enforce the terms of the tender. If a party approaches a court for an order restraining the employer from strict enforcement of the terms of the tender, the court would decline to do so. It was also reaffirmed that the employer could deviate from the terms and conditions of the tender if the “changes affected all intending applicants alike and were not objectionable”. Therefore, deviation from the terms and conditions is permissible so long as the level playing field is maintained and it does not result in any arbitrariness or discrimination in Ramana Dayaram Shetty sense.

#47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. As held in Ramana Dayaram Shetty the terms of NIT cannot be ignored as being redundant or superfluous. They must be given a meaning and the necessary significance. As pointed out in Tata Cellular there must be judicial restraint in A B C D E F G H MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED [MOHAN M. SHANTANAGOUDAR, J.] 881 interfering with administrative action. Ordinarily, the soundness of the decision taken by the employer ought not to be questioned but the decision-making process can certainly be subject to judicial review. The soundness of the decision may be questioned if it is irrational or mala fide or intended to favour someone or a decision “that no responsible authority acting reasonably and in accordance with relevant law could have reached” as held in Jagdish Mandal followed in Michigan Rubber.” (emphasis supplied)

#20. This Court also made an observation on judicial interference in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Ors. (2016) 16 SCC 818, as hereunder: “15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given.”