Case: STATE OF PUNJAB &amp; OTHERS Vs. MEHAR DIN

may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (emphasis in original) 21. The exposition of law on the subject has been consistently followed by this Court even in the later decisions holding that superior Courts should not interfere in the matters of tenders, unless substantial public interest was involved or the transaction was malafide. It was consistently stressed by this Court that the need for overwhelming public interest should always be kept in mind to justify judicial intervention in contracts involving the State and its instrumentalities and while exercising power of judicial review in relation to contracts, the Courts should consider primarily the question whether there has been any infirmity in the decision-making process. 22. This view has been further considered by this Court in Jagdish Mandal v. State of Orissa and Others (2007) 14 SCC 517, wherein it was observed as under:- 22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made lawfully and not to check whether choice or decision is sound. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold….. 23. This Court in a recent judgment in Silppi Constructions Contractors v. Union of India and another (2020) 16 SCC 489 held as under: 20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the courts interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case. 24. The law on the subject is settled that the Courts being the custodian of fundamental rights are under an obligation to interfere where there is arbitrariness, irrationality, unreasonableness, malafides and bias, if any, but at the same time, the Courts should exercise the power of judicial review with a lot of restraint, particularly in contractual and commercial matters. 25. Undisputedly, the provisional bid, in the instant case, was not confirmed by the competent authority (Sales Commissioner) and not being accepted after recording its due satisfaction by an order dated 2nd July, 1993 and the decision of the authority in passing the order of cancellation of the auction bid was scrutinized/examined by the appellate/revisional authority and the discretion exercised by the competent authority in taking decision of cancellation was upheld at later stages. 26. This being a settled law that the highest bidder has no vested right to have the auction concluded in his favour and in the given circumstances under the limited scope of judicial review under Article 226 of the Constitution, the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable, and it was not open for the High Court to sit like a Court of Appeal over the decision of the competent authority and particularly in the matters where the authority competent of floating the tender is the best judge of its requirements, therefore, the interference otherwise has to be very minimal. 27. To the contrary, the limited scope of judicial review for which interference could have been permissible to prevent arbitrariness, irrationality, bias, malafides or perversity, if any, in the approach of the authority while dealing with the auction proceedings, was never the case of the respondent at any stage. The High Court has recorded a finding to the contrary that the appellants have failed to show any irregularity or illegality in the auction proceedings and in the absence whereof, the auction proceedings could not be held to be vitiated. The premise on which the High Court has proceeded in recording a finding, particularly, in the matters of auction of public properties is unsustainable in law and that apart, it is also not in conformity with the Scheme of auction of public properties as defined under Chapter III of Rules 1976. 28. In our considered view, the finding recorded by the High Court in the impugned judgment is unsustainable and deserves to be set aside.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]15. It is not disputed that the auction sale conducted by the Tehsildar Sales on 4th June, 1993 was provisionally accepted in favour of the respondent being the highest bidder. Pursuant thereto, 1/5th of the bid amount as earnest money was deposited, but that acceptance being provisional, was subject to confirmation by the Sales Commissioner. When the proceedings of auction were placed for confirmation before the competent authority (Sales Commissioner), the competent authority after perusing the record of auction observed that the provisional bid is quite on the lower side and looking to the location of the property in question, it needs a good publicity to fetch the better sale price of the subject land and while cancelling the auction sale, directed to initiate the process of re-auction and further observed that he should be informed in advance and intended to remain present at the time of auction by order dated 2nd July, 1993. That apart, it is not disputed that total applicants were fourteen but only three bidders had participated in the bidding process.17. From the Scheme of Chapter III of Rules 1976, it is apparent and explicit that even if the public auction has been completed to the highest bidder, no right is accrued till the confirmation letter is issued to him as the acceptance of the highest bid is provisional, subject to its confirmation by the competent authority. Undisputedly, the competent authority (Sales Commissioner) has failed to confirm the bidding process and after recording its satisfaction cancelled the auction bid under its order dated 2nd July, 1993.18. This Court has examined right of the highest bidder at public auctions in umpteen number of cases and it was repeatedly pointed out that the State or authority which can be held to be State within the meaning of Article 12 of the Constitution, is not bound to accept the highest tender of bid. The acceptance of the highest bid or highest bidder is always subject to conditions of holding public auction and the right of the highest bidder is always provisional to be examined in the context in different conditions in which the auction has been held. In the present case, no right had accrued to the respondent even on the basis of statutory provisions as being contemplated under Rule 8(1)(h) of Chapter III of the Scheme of Rules, 1976 and in terms of the conditions of auction notice notified for public auction.20. In Tata Cellular v. Union of India(1994) 6 SCC 651  it was held that judicial review of government contracts is permissible in order to prevent arbitrariness or favouritism. It was fearlessly opined in this case as under:-94. The principles deducible from the above are:(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 award the contract is reached by process of negotiations 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.(emphasis in original)23. This Court in a recent judgment in Silppi Constructions Contractors v. Union of India and another (2020) 16 SCC 489  held as under:20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the courts interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case.24. The law on the subject is settled that the Courts being the custodian of fundamental rights are under an obligation to interfere where there is arbitrariness, irrationality, unreasonableness, malafides and bias, if any, but at the same time, the Courts should exercise the power of judicial review with a lot of restraint, particularly in contractual and commercial matters.25. Undisputedly, the provisional bid, in the instant case, was not confirmed by the competent authority (Sales Commissioner) and not being accepted after recording its due satisfaction by an order dated 2nd July, 1993 and the decision of the authority in passing the order of cancellation of the auction bid was scrutinized/examined by the appellate/revisional authority and the discretion exercised by the competent authority in taking decision of cancellation was upheld at later stages.26. This being a settled law that the highest bidder has no vested right to have the auction concluded in his favour and in the given circumstances under the limited scope of judicial review under Article 226 of the Constitution, the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable, and it was not open for the High Court to sit like a Court of Appeal over the decision of the competent authority and particularly in the matters where the authority competent of floating the tender is the best judge of its requirements, therefore, the interference otherwise has to be very minimal.27. To the contrary, the limited scope of judicial review for which interference could have been permissible to prevent arbitrariness, irrationality, bias, malafides or perversity, if any, in the approach of the authority while dealing with the auction proceedings, was never the case of the respondent at any stage. The High Court has recorded a finding to the contrary that the appellants have failed to show any irregularity or illegality in the auction proceedings and in the absence whereof, the auction proceedings could not be held to be vitiated. The premise on which the High Court has proceeded in recording a finding, particularly, in the matters of auction of public properties is unsustainable in law and that apart, it is also not in conformity with the Scheme of auction of public properties as defined under Chapter III of Rules 1976.28. In our considered view, the finding recorded by the High Court in the impugned judgment is unsustainable and deserves to be set aside.