STATE OF JHARKHAND & ORS. versus M/S CWE-SOMA CONSORTIUM
[2016] 4 S.C.R. 157, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2016] 4 S.C.R. 157 
STATE OF JHARKHAND & ORS. 
v. 
MIS CWE-SOMA CONSORTIUM 
(Civil Appeal No. 6125of2016) 
JULY12,2016 
[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 
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-
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 
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 
- 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 
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 
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SUPREME COURT REPORTS 
[2016] 4 S.C.R. 
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 
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 
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 
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 
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] 
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 
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
STATE OF JHARKHAND & ORS. v. MIS CWE-SOMA 
CONSORTIUM 
sit in judgment over the decision of tender Committee and 
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 
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, 
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 
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] 
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 
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. 
v. Satyawan and Ors.1996 (3) SCR 532 : (1996) 4 SCC 
208 - referred to. 
Case Law Reference 
1996 (3) SCR 532 
2006 (7) Suppl. SCR 868 
relied on 
relied on 
Para 12 
Para 12 
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[2016] 4 S.C.R. 
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 
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 
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Niti, Anil C. Nishani, Parsona Kumar, A. C. Philip, Mathews J. 
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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 
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 
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 
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 
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
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 
CONSORTIUM [R. BANUMATHI, J.] 
clauses of the NIT, there were certain departures from the SBD. After 
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 
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 
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 
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. 
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The Single Judge allowed the writ petition, holding the action of the · E 
appellants as arbitrary and against pub I ic 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 
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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 
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was floated in July 20 I 4 within the short span of few months, the estimated 
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. 
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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 
& 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 
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 
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 
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 
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. 
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 
to be in consonance with Standard Bidding Documents (SBD) which
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 
CONSORTIUM [R. BANUMATHI, J.] 
has got its approval from the Cabinet. The entire exercise of complying 
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 
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 
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 
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 
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 
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 
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 
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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." 
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, 
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 
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 
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 
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 
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:-
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 
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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 
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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 
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 
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 
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) 
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 
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(b) Wherever there are major changes in specification and quantity, 
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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 
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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 
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 
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 
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 
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-
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 
following items of work as indicated Appendix. 
- cement concrete (including RCC and PSC) ...... cum 
-earthwork 111 both excavation and embankment(combined 
quantities) 
.............. cum 
.............. cum 
.............. cum
STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA 
167 
CONSORTIUM [R. BANUMATHI, J.] 
(usually 50% of estimated quantity. However, for Turn-key & 
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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 
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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 
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 
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 
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 
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 
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 
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[2016] 4 S.C.R. 
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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 of judicial review, court 
does not sit as appellate court over the decision of the government but 
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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:-
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"70. It cannot be denied 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, 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 
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 
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:-
"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, fair play in the 
joints is a necessary concomitant for an administrative body 
functioning in an administrative sphere or quasi-administrative
STATE OF JHARKHAND & ORS. v. MIS CWE-SOMA 
CONSORTIUM [R. BANUMATHI, J.] 
sphere. However, the decision must not only be tested by the 
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 
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 
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 
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 
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 
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 
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 
169 
A 
B 
c 
D 
E 
F 
G 
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.