Supreme Court of India
STATE OF JHARKHAND & ORS.versusM/S CWE-SOMA CONSORTIUM
- Citation
- 2016 INSC 516
- Decided
- 12 July 2016
- Disposal
- Appeal(s) allowed
- Bench
- T S THAKUR
Holding
The State’s cancellation of the tender and decision to re‑invite bids, based on lack of adequate competition, was within its statutory and constitutional authority and not arbitrary, so the High Court’s order was set aside.
Summary
The State of Jharkhand issued a Notice Inviting Tender (NIT) for the construction of the Kharkai Dam. After a pre‑bid meeting ten firms participated, but stringent clauses reduced the field to three bidders, of whom only M/s CWE‑SOMA was responsive. The tender committee, invoking clause 4.18(d) of the Central Vigilance Commission (CVC) Guidelines, cancelled the tender to obtain greater competition and re‑invited bids. The respondent challenged the cancellation, arguing that clause 4.17 of the CVC Guidelines should have applied and that re‑tendering would increase project cost, harming the public exchequer. The Supreme Court held that under clause 24 of the NIT and clause 32.1 of the Standard Bidding Documents, the government may refuse or cancel any tender without assigning a reason, and the State’s rationale of lack of adequate competition was cogent, non‑arbitrary and consistent with Article 14 and Article 298 of the Constitution. Consequently, the High Court’s interference was unwarranted and its order was set aside.
Issues considered
- The legality of cancelling a tender and re‑inviting bids under clause 24 of the NIT and clause 32.1 of the Standard Bidding Documents.
- Whether the cancellation on the ground of lack of competition was arbitrary, mala fide or violative of Article 14.
- Which provision of the CVC Guidelines – clause 4.17 or clause 4.18 – governs a situation with a single responsive bidder.
- The propriety of the High Court’s interference with the tender committee’s decision.
- Whether the anticipated increase in project cost due to re‑tendering constitutes a loss to the public exchequer affecting public interest.
Legislation cited
Subjects
government contractstender cancellationlack of competitionjudicial reviewprocurement guidelinesfreedom of contractArticle 14Article 298CVC Guidelinesre‑tenderingpublic procurement
Judgment
[2016] 4 S.C.R. 157
STATE OF JHARKHAND & ORS. A
v.
MIS CWE-SOMA CONSORTIUM
(Civil Appeal No. 6125of2016)
JULY12,2016
B
[T. S. THAKUR, CJI AND R. BANUMATHI, JJ.)
Government contracts - Notice inviting tender (NIT) for
construction of dam as per Standard Bidding Documents (SBD) -
Pre-bid meeting - Participation by ten bidders - Thereafter, only
three bidders left - Respondent found responsive and other two
found unresponsive - Cancellation of tender by the tender Committee c
as per the Central Vigilance Commission Guidelines, and decision
taken for retender to make tender process more competitive -
Challenge to, by the respondent - High Court allowed the writ
petition holding that there existed competition as three companies
participated and respondent turned out to be single bidder and re- D
tendering would lead to increase in value of tender, causing loss to
State exchequer - On appeal, held: Right to refuse the lowest or
any other tender is always available to the government - While
exercising judicial review in the matter of government contracts,
the primary concern of the court is to see whether there is any
infirmity in the decision-making process or whether it is vitiated by E
ma/a fide, unreasonableness or arbitrariness - In terms of the clause
24 of NIT and clause 32.1 of SBD, though the Government has the
right to cancel the tender without assigning any reason, the
appellant-State assigned cogent and acceptable reason of lack of
adequate competition to cancel the tender and invite a fresh tender F
- In view of lack of real competition, the State found it advisable
not to proceed with the tender with only one re~ponsive bid available
before it and invited a fresh tender and the decision of the appellant
did not suffer from any arbitrariness or unreasonableness - High
Court did not keep in view the said clauses and right of the
government to cancel the tender - High Court was not justified to G
sit in judgment over the decision of tender Committee and substitute
its opinion - Thus, the order passed by the High Court is set aside.
Allowing the appeal, the Court
HELD: 1.1 In case of a tender, there is no obligation on the
part of the person issuing tender notice to accept any of the H
157
158 SUPREME COURT REPORTS [2016] 4 S.C.R.
A tenders or even the lowest tender. After a tender is called for
and on seeing the rates or the status of the contractors who have
given tenders that there is no competition, the person issuing
tender may decide not to enter into any contract and thereby
cancel the tender. So long as the bid has not been accepted, the
highest bidder acquires no vested right to have the auction
B
concluded in his favour. The appellant-state was well within its
rights to reject the bid without assigning any reason thereof. In
terms of the clause 24 of NIT and clause 32.1 of SBD, though
Government has the right to cancel the tender without assigning
any reason, appellant-state did assign a cogent and acceptable
c reason of lack of adequate competition to cancel the tender and
invite a fresh tender. The High Court, did not keep in view the
said clauses and right of the government to cancel the tender.
[Paras 12, 13] [164-F, H; 165-C]
1.2 The State derives its power to enter into a contract under
D Article 298 of the Constitution oflndia and has the right to decide
whether to enter into a contract with a person or not subject only
to the requirement of reasonableness under Article 14 of the
Constitution of India. In the instant case, in view of lack of real
competition, the State found it advisable not to proceed with the
tender with only one responsive bid available before it. When
E there was only one tenderer, in order to make the tender more
competitive, the tender committee decided to cancel the tender
and invited a fresh tender and the decision of the appellant did
not suffer from any arbit.rariness or unreasonableness. [Para 14)
[165-D-E]
F 1.3 In the pre-bid meeting held on 24.03.2014, ten tenderers
have participated. After conclusion of the pre-bid meeting on
24.03.2014, as a result of stringent conditions prescribed in clause
4.5(A)(a) and 4.5(A)(c), only three tenderers could participate in
the bidding process and submit their bids. Upon scrutiny two
G were found non-responsive. The High Court erred in presuming
that there was adequate competition. In order to make the tender
more competitive, tender committee -in its collective wisdom has
taken the decision to cancel and re-invite tenders in the light of
SBD norms. The same was reiterated in a subsequent meeting
held on 09.07.2014. While so, the High Court was not justified to
H
STATE OF JHARKHAND & ORS. v. MIS CWE-SOMA 159
CONSORTIUM
sit in judgment over the decision of tender Committee and A
substitute its opinion on the canc~llation of tender. Decision of
the State issuing tender notice to cancel the tender and invite
fresh tenders could not have been interfered with by the High
Court unless found to be mala fide or arbitrary. When the authority
took a decision to cancel the tender due to lack of adequate
B
competition and in order to make it more competitive, it decided
to invite fresh tenders, it cannot be said that there is any mala
fide or want of bona fide in such decision. While ·exercising judicial
review in the matter of government contracts, the primary concern
of the court is to see whether there is any infirmity in the decision-
making process or whether it is vitiated -by mala fide, c
unreasonableness or arbitrariness. [Para 18) [167-E-H; 168-A)
1.4 The right to refuse the lowest or any other tender is
always available to the government. In the instant case, the
respondent neither pleaded nor established mala fide exercise
of power by the appellant. While so, the decision of tender D
committee ought not to have been interfered with by the High
Court. The High Court erred in sitting in appeal over the decision
of the appellant to cancel the tender and float a fresh tender.
Equally, the High Court was not right in going into the financial
implication of a fresh tender. Thus, the impugned judgment of
the High Court is set aside. [Paras· 21, 23) [169-C-D; 170-B] E
Laxmikant and Or.1. v. Satyawan and Ors.1996 (3) SCR
532 : (1996) 4 SCC 208; Rajasthan Housing Board
and Am: v. GS. Investments and Anr. 2006 (7) Suppl.
SCR 868 : (2007) I SCC 477 and Uttar Pradesh Avas
Evam Vikash Parishad and Ors. v. Om Prakash Sharma F
2013 (6) SCR 199 : (2013) 5 SCC 182 - relied on.
Tata Cellular v. Union of India 1994 (2) Suppl. SCR
122 : (1994) 6 SCC 651; aster Marine Services (P)
Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and Am: 2005
(3) SCR 666 : (2005) 6 SCC 138; Laxmikant and Ors. G
v. Satyawan and Ors.1996 (3) SCR 532 : (1996) 4 SCC
208 - referred to.
Case Law Reference
1996 (3) SCR 532 relied on Para 12
2006 (7) Suppl. SCR 868 relied on Para 12 H
160 SUPREME COURT REPORTS [2016] 4 S.C.R.
A 2013 (6) SCR199 relied on Para 12
1994 (2) Suppl. SCR122 referred to Para 19
200.5 (3) SCR 666 referred to Para 20
11.)9_6 (3) SCR 532 referred to Para 20
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6125
8
of2016.
From the Judgment and Order dated 13.03.2015 of the High Court
of Jharkhand at Ranchi in Letter Patent Appeal No. 309 of 2014.
Mukul Rohatgi, AG, Devashish Bharuka, Ravi Bharuka, Vaibhav
c Niti, Anil C. Nishani, Parsona Kumar, A. C. Philip, Mathews J.
Nedumpara, Advs. for the Appellants.
P. P. Rao, Dushyant Dave, Sr. Advs., Imtiaz Ahmed, Ms. Naghma
Imtiaz (For Mis. Equity Lex Associates), Advs. for the Respondent.
The Judgment of the Court was delivered by
D
R. BANUMATHI, J. I. Leave granted.
2. This appeal has been filed assailing the judgment dated
I3.03.2015 of the High Court of Jharkhand dismissing the appellant's
Letters Patent Appeal No.309 of 2014, in and by which, the Division
Bench affirmed the order of Single Judge directing opening of technical
E
and financial bid of the respondent.
3. The matter in dispute relates to construction of a dam in the
State of Jharkhand. The facts leading to filing of this appeal are as follows:
The proposed project, Kharkai Dam at !cha is a part of Subernarekha
Multipurpose Project, a Central Government Aided Scheme funded
F through the Accelerated Irrigation Benefits Programme (AIBP).
Subernarekha Multipurpose Project is an Inter State project'that was
sanctioned in the year 1978 with the objective of providing irrigation in
Jharkhand, Orissa and West Bengal. It will also provide water for drinking
and industrial purpose as also for production of hydel power. The Water
G Resources Department, Government of Jharkhand, through its Executive
Engineer issued a Notice Inviting Tender (NIT) for the construction of
the Dam as per the Standard Bidding Documents (SBD) dated
28.02.2014. On 24.03.2014, a pre-bid meeting was held where ten
tenderers participated and during its course, it was observed that in the
H
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 161
CONSORTIUM [R. BANUMATHI, J.]
clauses of the NIT, there were certain departures from the SBD. After A
the pre-bid meeting, in total, only three bidders namely, M/s CWE-SOMA
Consortium, Hyderabad (respondent herein), M/s. IL & FS Engineering
and Construction Co. Ltd., Hyderabad and Mis. Navyuga Engineering·
Co. Ltd., Hyderabad participated in the tender process and submitted
their bids. In meetings of the Departmental Tender Committee held on
B
02.06.2014 and 06.06.2014, it was found that among the three tenderers,
only the respondent was found responsive and other two bidders were
found unresponsive. Therefore the tender committee took a decision
under clause 4. I 8(d) of the Central Vigilance Commission Guidelines
('CVC Guidelines') to cancel the tender and go for retender to make
the tender process more competitive. The tender committee re-affirmed c
this decision in a meeting held on 09.07.2014 after the Chief Minister
referred an application of the respondent to them. Aggrieved thereof,
respondent filed a writ petition before the High Court.
4. The learned Single Judge after examining clauses 4.17 and
4.18 of the CVC Guidelines which provide for procedure in case of a D
single quote/single valid acceptable quote and in case of lack of
competition due to restrictive specifications respectively, came to the
conclusion that in the absence of the decision of the tender committee
that the specifications were stringent, clause 4. I 8 could not have been
resorted to and tender committee should have resorted to clause 4. I 7.
The Single Judge allowed the writ petition, holding the action of the · E
appellants as arbitrary and against pub Iic interest. The matter was then
carried in appeal filed by the appellants before the Division Bench by
way of Letters Patent Appeal. The Division Bench upon perusal of the
rationale for the decision of the tender committee, was of the view that
there indeed existed competition as three companies, including the f
respondent had participated and respondent turned out to be the single
bidder. Thus, the Division Bench concurred with the conclusion of the
Single Judge that only clause 4. I 7 should have been invoked. The Division
Bench also noted that the initial tender value was estimated as Rs.698
crores for the tender floated in February 2014, and when second tender
was floated in July 20 I 4 within the short span of few months, the estimated G
value of the project had increased to Rs.738 crores. Thus, Division Bench
dismissed the appeal holding that re-tendering at later stage would further
enhance the estimated value, causing excessive loss to the state exchequer
which may not be in the public interest. Being aggrieved, the State of
Jharkhand has preferred the present appeal. H
162 SUPREME COURT REPORTS (20 I 6] 4 S.C.R.
A 5. On behalf of the appellants, Mr. Mukul Rohatgi, the learned
Attorney General submitted that the impugned judgment is contrary to
clause 24 of the NIT as also the settled position of law that it is the
prerogative of the government to award the tender. Placing reliance
upon Rajasthan Housing Board and Am: v. GS. !11vestme11ts and
Anr. (2007) I SCC 4 77 and Uuar Pradesh Avas Evam Vikus Paris had
B
& Ors. v. Om Prakash Sharma (2013) 5 SCC 182, it was submitted
that so long as the bid has not been accepted, the highest bidder acquired
no vested right to have the auction confirmed in his favour. It was
further submitted that clauses 4.5 (A) (a) and 4.5 (A) (c) which were
restrictive have led to other two bidders becoming unresponsive. It was
c contended that these restrictions have not garnered the approval of the
Cabinet which is mandatory and was consequential in reducing the number
of participants from ten to three in which SOMA alone was found to be
responsive and the tender committee rightly decided to cancel the tender
which is in consonance with clause 4.18 (d) ofCVC Guidelines. It was
urged that the impugned judgment directing the appellant to open the
D
technical as well as the price bid of the respondent is erroneous and
against well settled principles laid down by this Court.
6. Per contra, Mr. P.P. Rao learned Senior Counsel for the
respondent appearing along with Senior Counsel, Mr. Dushyant Dave
submitted that cancellation of respondent's tender was arbitrary and
E
against public interest. By refeITing to clause 4.17 of the CVC Guidelines,
learned Senior Counsel submitted that in a case where a single quote or
a single valid acceptable quote is received against limited tender or where
a tender has resulted in a single vendor situation, it needs to be processed
further. It was submitted that the learned Single Judge and the Division
F Bench rightly held that clause 4. I 7 of CVC Guidelines ought to have
been resorted to and not clause 4. l 8(d) of CVC Guidelines. Drawing
our attention to the financial implications of the project, learned Senior
Counsel submitted that by issuance of a fresh tender, the value of the
project will go up by about Rs.100 crores and the same will be detrimental
to the public interest causing huge loss to the public exchequer.
G
7. We have carefully considered the rival contentions, perused
the impugned judgment and the material on record including the additional
documents filed by the appellant-State.
8. Every tender above the estimated value of Rs.250/- lakhs has
H to be in consonance with Standard Bidding Documents (SBD) which
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 163
CONSORTIUM [R. BANUMATHI, J.]
has got its approval from the Cabinet. The entire exercise of complying A
with the general conditions of SBD is to ensure that the tender is not
stringent and restrictive in nature so that it can enable many tenderers to
participate and facilitate a wider fair play competition. Any variation
from SBD needs prior approval from the depaiiment which is done after
considering the viability of inserting that clause and whether or not the
B
same is restrictive and stringent in nature.
9. During the pre-bid meeting held on 24.03.2014 that was attended
by ten tenderers, there were unapproved departures in clauses 4.5 (A)
(b) and 4.5 (A) (c) from the clauses of the SBD. As these departures in
the clauses of the tender document had not been approved, the Chief
Engineer was requested vide letter dated 26.03.2014 to issue appropriate
c
corrigendum to the tender notice so that the tenders could be published
in accordance with the SBD and reminder of the said request was sent
to the Chief Engineer vide letter dated 31.03.2014. In reply to the
afore-mentioned letters, the Chief Engineer responded vide letter
02.04.2014 stating that the departures were for the reason that the work D
was of a specific and urgent nature and the clauses were inserted to
ensure smooth implementation of the work on time.
I 0. Even though there were ten participants in the meeting on
24.03.2014 of pre-qualification bid, in view of stringent clauses in the
tender document, only three bidders namely: (i) M/s. CWE-SOMA E
Consortium, Hyderabad; (ii) M/s. IL & FS Engineering and Construction
Co. Ltd., Hyderabad and (iii) M/s. Navyuga Engineering Co. Ltd.,
Hyderabad submitted their bids. Upon scrutiny of the three bids, only
respondent's company bid was found responsive; the other two bids
were found non-responsive in the light of provisions of clauses 4.5(A)(b)
and 4.5(A)(c). The tender committee therefore decided to cancel the F
tender in order to make the tender more competitive and decided to re-
invite tenders in the light of SBD norms on the basis of which tenders
are invited by the department. The minutes of the Departmental Tender
Committee held on 02.06.2014 reads as under:-
"ln light of special conditions prescribed for the invited tender for G
the work, only one tenderer is found responsive in tech11ically-
cu111-pre-qualificatio11 bid.
In view of the above, in order to make the tender under subject
more competitive, the departmental tender committee after due
consideration while cancelling the tender has decided to re-invite H
164 SUPREME COURT REPORTS [2016] 4 S.C.R.
A tenders in light ofSBD norms on the basis of which tenders are
invited by the department.
Chief Engineer, lcha-Galudeeh Complex, Adityapur, Jamshedpur
shall, accordingly, ensure action inviting tenders according to the
prescribed SBD norms without any delay."
B It was later realised that the typographical error had been made in
the above minutes and therefore 'technically-cum-pre-qualification
bid' was later modified to "pre-qualification bid" in the meeting held
Oil 06.06.2014.
11. Against the decision of tender committee cancelling the tender,
c SOMA Consortium filed a complaint before the Chief Minister of
Jharkhand and in furtherance of order of the Chief Minister, the
Departmental Tender Committee held meeting on 09.07.2014. In the
said meeting, tender committee decided that the decision taken by the
committee in its meetings dated 02.06.2014 and 06.06.2014 was correct
and the same was affirmed in the light of clause 4.18(d) of eve
D Guidelines, clause 32 of ITB, clause 24 of IFB and the letter of CVC
dated 07 .05 .2004. Tender committee reiterated its earlier decision to
invite fresh tenders to make the tender under subject more competitive.
Pursuant to the decision taken on 09 .07.2014, appellant proceeded for
fresh tender and NIT was published in the newspapers as per the norms
E on 13 .07.2014.
12. In case of a tender, there is no obligation on the part of the
person issuing tender notice to accept any of the tenders or even the
lowest tender. After a tender is called for and on seeing the rates or the
status of the contractors who have given tenders that there is no
F competition, the person issuing tender may decide not to enter into any
contract and thereby cancel the tender. It is well-settled that so long as
the bid has not been accepted, the highest bidder acquires no vested
right to have the auction concluded in his favour (vi de Laxmikant and
Ors. v. Satyawan and Ors. (1996) 4 SCC 208; Rajasthan Housing
Board and Am: v. GS. Investments and Am: (2007) I SCC 477 and
G Uttar Pradesh Avas Evam Vikash Parishad and Ors. v. Om Prakash
Sharma (2013) 5 SCC 182).
13. The appellant-state was well within its rights to reject the bid
without assigning any reason thereof. This is apparent from clause 24
of NIT and clause 32. I of SBD which reads as under:-
H
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 165
CONSORTIUM [R. BANUMATHI, J.]
"Clause 24 of NIT: "Authority reserves the right to reject any or A
all of the tender(s) received without assigning any reason thereof."
Clause 32.1 of SBD: " ... the Employer reserves the right to accept
or reject any Bid to cancel the bidding process and reject all bids,
at any time prior to award of Contract, without thereby incurring
any liability to the affected Bidder or Bidders or any obligation to B
inform the affected Bidder or Bidders of the grounds for the
Employer's action."
In terms of the above clause 24 ofNIT and clause 32. I ofSBD, though
Government has the right to cancel the tender without assigning any
reason, appellant-state did assign a cogent and acceptable reason of
lack of adequate competition to cancel the tender and invite a fresh
c
tender. The High Court, in our view, did not keep in view the above
clauses and right of the government to cancel the tender.
14. The State derives its power to enter into a contract under
Article 298 of the Constitution oflndia and has the right to decide whether
to enter into a contract with a person or not subject only to the requirement
D
ofreasonableness under Article 14 of the Constitution of India. In the
case in hand, in view of lack of real competition, the state found it
advisable not to proceed with the tender with only one responsive bid
available before it. When there was only one tenderer, in order to make
the tender more competitive, the tender committee decided to cancel E
the tender and invited a fresh tender and the decision of the appellant did
not suffer from any arbitrariness or unreasonableness.
15. The appellant claims that the decision ofre-tendering was in
the light of the restrictive nature of the conditions introduced in the NIT
in departure from the SBD and was in consonance with clause 4. I 8(d) F
of CVC Guidelines. Clause 4.18 ofCVC Guidelines reads as under:-
"4.18. Re-tendering- Retendering may be considered by the TPC/
CFA with utmost caution, under the following circumstances:
(a) Offer do not confirm to essential specification
(b) Wherever there are major changes in specification and quantity, G
which may have considerable impact on the price.
(c) Prices quoted are unreasonably high with reference to assessed
price or there is evidence of a sudden slump in prices.
( d) There may be cases when the lack of competition is due to
restrictive specification, which do not permit many vendors to H
166 SUPREME COURT REPORTS [2016] 4 S.C.R.
A participate. The CFA must consider ifthere are reasons for
review of specification of the item to facilitate wider
competition. Re-tendering will be done only after approval of
!FA and CFA in all cases."
Respondent, on the other hand, submits that the present case is not guided
B by clause 4. l 8(d) of CVC Guidelines rather it is guided by clause 4.17
and therefore cancellation of tender invoking clause 4. l 8(d) is arbitrary
and erroneous. Clause 4.17 of the CVC Guidelines reads as under:-
"4.17. There are cases when only a single quote or a single valid
acceptable quote is received even against LTE or OTE, this results
c in a single vendor situation indicating lack of competition. These
cases will not be treated as procurement against Single Tender
Enquiry and shall be progressed as an LTE or OTE case as
applicable."
16. In order to consider the question whether the respondent's
D case is to be appreciated under clause 4.17 or clause 4.18 of the eve
Guidelines, in the impugned judgment, the Division Bench examined the
clauses that have been inserted in the NIT in departure from SBD i.e.
clause 4.5(A) (a) and clause 4.5 (A)(c). The said clauses read as
under:-
"4.5 (A) To qualify for award of the contract, each bidder in its
E
name should have in the last five years as referred to in Appendix.
(a) Achieved a minimum annual turnover (in all classes of civil
engineering construction works only) amount indicated in Appendix
in any one year, (usually not less than one & half times the
estimated cost of the project may be kept. However, for Turn-
F key & other projects where completion period is two years or
more, the annual turnover may be kept as per the requirement
upto 1.50 x Estimated cost/years of completion of project).
(b ..... .
( c) Executed in any one year, the minimum quantities of the
G following items of work as indicated Appendix.
- cement concrete (including RCC and PSC) ...... cum
-earthwork 111 both excavation and embankment(combined
quantities) .............. cum
.............. cum
H .............. cum
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 167
CONSORTIUM [R. BANUMATHI, J.]
(usually 50% of estimated quantity. However, for Turn-key & A
other projects where completion period is two years or more as
per the requirement may be kept as estimated quantity/years of
completion of project.)"
17. Clauses 4.S(A)(a) and 4.S(A)(c) have been found stringent
resulting in request to the Chief Engineer for issuing corrigendum as the B
above clauses added an additional qualification of showing of quantity
of work done in one project. The Division Bench thereafter examined
clauses 4.17 and 4.18 ofCVC Guidelines and came to the conclusion as
under:-
" ... there was certainly a competition within three companies c
including SOMA in which SOMA turned out to be a single vendor
and therefore it cannot be said to be a case for retendering on
account of lack of competition due to restrictive specification.
Lack of competition has to be construed in that manner only. In
this eventuality, it is only clause 4.17 of eve guidelines which
ought to have been invoked and not clause 4.18 ofCVC guidelines D
as rightly held by learned Single Judge."
18. Admittedly, in the pre-bid meeting held on 24.03.2014, ten
tenderers have participated. After conclusion of the pre-bid meeting on
24.03.2014, as a result of stringent conditions prescribed in clause
4.S(A)(a) and 4.S(A)(c), only three tenderers could participate in the E
bidding process and submit their bids. As noticed earlier, upon scrutiny
two were found non-responsive. In our considered view, High Court
erred in presuming that there was adequate competition. In order to
make the tender more competitive, tender committee in its collective
wisdom has taken the decision to cancel and re-invite tenders in the light
ofSBD norms. As noticed earlier, the same was reiterated in a subsequent
F
meeting held on 09.07.2014. While so, the High Court was not justified
to sit in judgment over the decision of tender Committee and substitute
its opinion on the cancellation of tender. Decision of the state issuing
tender notice to cancel the tender and invite fresh tenders could not
have been interfered with by the High Com1 unless found to be ma/a G
fide ot arbitrary. When the authority took a decision to cancel the tender
due to lack of adequate competition and in order to make it more
competitive, it decided to invite fresh tenders, it cannot be said that there
is any ma/a fide or want of bona fide in such decision. While exercising
judicial review in the matter of government contracts, the primary concern
H
168 SUPREME COURT REPORTS [2016] 4 S.C.R.
A of the court is to see whether there is any infirmity in the decision-
making process or whether it is vitiated by malafide, unreasonableness
or arbitrariness.
19. Observing that while exercising power ofjudicial review, court
does not sit as appellate court over the decision of the government but
R merely reviews the manner in which the decision was made, in Tata
Cellular v. Union of India ( 1994) 6 SCC 651, in para (70) it was held
as under:-
"70. It cannot be denied that the principles ofjudicial review would
apply to the exercise of contractual powers by Government bodies
c in order to prevent arbitrariness or favouritism, However, it must
be clearly stated that there are inherent limitations in exercise of
that power of judicial review. 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
D 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 ifthe Government tries to get the best
person or the best quotation. The right to choose cannot be
considered to be an arbitrary power. Ofcourse, ifthe said power
E is exercised for any collateral purpose the exercise of that power
will be struck down."
20. The government must have freedom of contract. In Master
Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and
Anr. (2005) 6 SCC 138, in para ( 12) this Court held as under:-
F "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
G 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, fair play in the
joints is a necessary concomitant for an administrative body
H functioning in an administrative sphere or quasi-administrative
STATE OF JHARKHAND & ORS. v. MIS CWE-SOMA 169
CONSORTIUM [R. BANUMATHI, J.]
sphere. However, the decision must not only be tested by the A
application ofWednesbnry principles ofreasonableness but also
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
B
Report, SCC para 94.)"
The court does not have the expertise to correct the administrative
decision as held in Laxmikant and Ors. v. Satymvan and Ors. ( 1996)
4 sec 208, the government must have freedom of contract.
21. The right fo refuse the lowest or any other tender is always c
available to the government. In the case in hand, the respondent has .
neither pleaded nor established mala fide exercise of power by the
appellant. While so, the decision of tender committee ought not to have
been interfered with by the High Court. In our considered view, the
High Court erred in sitting in appeal over the decision of the appellant to
cancel the tender and float a fresh tender. Equally, the High Court was D
not right in going into the financial implication of a fresh tender.
22. Having addressed the correctness of reasonings recorded by
the High Court, it is important to note one further aspect. When the SLP
came up for hearing, by an order dated I 0.08.2015, while granting interim
stay on the operation of the impugned judgment, this Court directed that E
the appellants shall be free to invite fresh tenders and process the same,
but no allotment shall be made without permission of this Court. The
appellant-state has filed an additional document stating that about
20,421.43 acre of land is to be acquired under the "Right to Fair
Compensation and Transparency in Land Acquisition Rehabilitation and
F
Resettlement Act, 2013" which came into force on 01.01.2014. Section
41 of the said Act states that no acquisition of land as far as possible
could be made in the Scheduled Area. If it is necessary, it should be
done only as per last resort. It also states that land in Scheduled Areas
can only be acquired with the prior consent of Gram Sabha or Panchayats
or the autonomous District Councils. The learned Attorney General G
submitted that the entire sub-mergence area of the proposed lcha Dam
is in the scheduled area and the remaining land for Icha Dam can be
acquired only with the prior consent of the Gram Sabha of the affected
villages. It is further stated that the issue was discussed in the meeting
of Tribal Advisory Council held on 27 .09.2014 and that Tribal Advisory
H
170 SUPREME COURT REPORTS [2016] 4 S.C.R.
A Council and the sub-committee opined that the construction of lcha-
Kharkai Dam may be cancelled. Learned Attorney General therefore
submitted that there are some issues which need to be resolved before
floating a fresh tender oflcha dam. The impugned judgment of the High
Court is liable to be set aside.
B 23. In the result, the impugned judgment of the High Court of
Jharkhand is set aside and this appeal is allowed. No costs.
Nidhi Jain Appeal allowed.
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