Government is free to set terms of tender unless it is arbitrary, malafide or discriminatory: High Court of Jammu and Kashmir

HIGH COURT OF JAMMU & KASHMIR AND LADAKH AT SRINAGAR WP(C) No. 1602 2021 CM No. 5391 2021 Serial No. 124 Supplementary 1 List Dated: 17th of August 2021. … Petitioner(s) Rural Contractors Welfare Association & Ors. Mr Mohammad Ashraf Wani Advocate. Union Territory of JK & Ors. Through: Mr M. A. Chashoo AAG. … Respondent(s) Hon’ble Mr Justice Ali Mohammad Magrey Judge. By medium of the instant Petition the Petitioners have challenged the NIT No. 59 of R&B 4727 321 22 dated 28th of July 2021 and NIT No. 60 of R&B 4899 49021 22 dated 29th of July 2021. A direction is also sought in the name of the Respondents to allow all the Contractors to participate in the bidding process for the works which have been put to tender in terms of the aforesaid tender notices. Learned Counsel for the Petitioners submitted Respondents by incorporating the condition in the impugned NITs to the effect that all the Contractors shall upload card verification certificate has deprived most of the Contractors in participating in the process thereby WP(C) No. 1602 2021 CM No. 5391 2021 resulting in reduction of competition. It is further submitted that the aforesaid condition has seriously prejudiced the rights and interests of the Petitioners and that the same has been done only with a view to give benefit to some blue eyed Contractors. Heard the learned counsel for the parties perused the pleadings on record and considered the matter. At the very outset what requires to be stated is that as per settled legal position the tender issuing authority is the best judge of its interests needs and that it is always open to the said authority to suitably prescribe the eligibility criteria so as to best serve its purposes. Whenever a term condition is prescribed in the eligibility criteria it might hurt the interests of someone or the other but for that reason the said term condition in the eligibility criteria cannot be labelled as malafide or arbitrary. Besides the Courts are expected to exercise judicial restraint in interfering with the administrative action particularly in the matter of tender or contract. Ordinarily the soundness of the decision taken by the tender issuing authority 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 firstly if the decision made is so arbitrary and irrational that the Court can say that the decision is such that no responsible authority acting WP(C) No. 1602 2021 CM No. 5391 2021 reasonably and in accordance with relevant law could have reached or second if the process adopted or decision made by the authority is malafide or intended to favour someone or third if the public interest is affected. In the case on hand the decision of the Respondents in fixing the terms and conditions in the impugned NITs cannot be said to be one where they have acted in a manner in which no responsible authority acting reasonably and in accordance with the relevant law would have acted. Furthermore a bare perusal of the pleadings on record does not indicate that the decision made by the authority is malafide or intended to favour someone. Likewise the third ground of public interest is also not affected in the present case because while it may be in public interest to have greater competition it is also in public interest that all the tender conditions are complied with as prescribed by the tender issuing authority and that there is no uncertainty in that area. Law on the subject of scope of judicial review in the matters of Contract is no more res integra. In case titled ‘Tata Cellular V. Union of India: 6 Supreme Court Cases 651’ at Paragraph No.94 Hon’ble the Supreme Court of the country while dealing with the issue similar to the one subject matter of the instant Petition evolved the following principles: 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 WP(C) No. 1602 2021 CM No. 5391 2021 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 expe4rtise 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 but must be free from arbitrariness not affected by bias or actuated by mala fides and 6. Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” In case ‘Sterling Computers Limited V. M&N Publications Ltd:1 SCC 445’ the Apex Court at Paragraph No.12 has laid down as under: “In contracts having commercial element some more discretion has to be conceded to the authorities so that they may enter into contracts with persons keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognized by courts while dealing with public property. It is not possible for courts to question and adjudicate every decision taken by an authority because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts such decisions are upheld on the principle laid down by Justice Holmes that courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of play in the joints to the executive." WP(C) No. 1602 2021 CM No. 5391 2021 Again the Apex Court in case titled ‘Directorate of Education Ors. V. Educomp Datamatics Ltd. And Ors: 4 SCC 19’ while applying the principles enunciated in Tata Cellular’s case at Paragraph No.12 observed thus: “12. It has been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The Courts would interfere with the administrative policy decision only if it is arbitrary discriminatory malafide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The Courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair wise or logical. The Courts can interfere only if the policy decision is arbitrary discretionary or malafide.” On an appreciation of the law laid down above what comes to limelight is that the modern trend points to judicial restraint in administrative action and that the Court does not sit as a ‘Court of Appeal’ but merely reviews the manner in which the decision was made. It has also been declared that Court does not have the expertise to correct the administrative decision and that 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. Furthermore fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere and quashing administrative decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. WP(C) No. 1602 2021 CM No. 5391 2021 It is thus settled that public authorities must be left with the same liberty as they have in framing the policies even while entering into contracts because many contracts amount to implementation or projection of policies of the Government. But it cannot be overlooked that unlike policies contracts are legally binding commitments and they commit the authority which may be held to be a State within the meaning of Article 12 of the Constitution of India in many cases for years. It is for this reason that the Courts have impressed that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element some more discretion has to be conceded to the authorities so that they may enter into contracts with persons keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognized by Courts while dealing with public property. It is not possible for the Courts to question and adjudicate every decision taken by an authority because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract by giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bonafide manner although not WP(C) No. 1602 2021 CM No. 5391 2021 strictly following the norms laid down by the Courts such decisions are upheld on the principle laid down by Justice Holmes that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of ‘play in the joints’ to the executive. Looking at the instant case in the above perspective the Petitioners have not been able to establish before the Court that the decision taken by the Respondents in fixing the terms and conditions of the impugned NITs is an arbitrary exercise of power or that the same was is malafide in nature. In ‘Jagdish Mandal v. State of Orissa: 14 SCC 517’ at Paragraph No.22 the Hon’ble Supreme Court held thus: “22. …. Therefore a Court before interfering in tender or contractual matters in exercise of power of judicial review should pose to itself the following questions: i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone Whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached” ii) Whether public interest is affected. If the answers are in the negative there should be no interference under Article 226.” From a bare perusal of the pleadings placed on record it is more than apparent that the decision taken by the Respondents in fixing the terms WP(C) No. 1602 2021 CM No. 5391 2021 and conditions with respect to the impugned NITs was certainly not irrational in any manner whatsoever or intended to favour anyone. For all that has been said and done hereinabove I do not find any merit in this Petition. It entails dismissal and is accordingly dismissed along with the connected CM(s). No order as to costs. August 17th 2021 Judge Whether the Judgment is reportable Yes No. Yes No. Whether the Judgment is speaking 

Summary: The court will not interfere in the matter of terms and conditions of a tender issued by the government unless, they are blatantly discriminatory, arbitrary or of malafide nature. This was held in the judgement passed by a single member bench of the High Court of Jammu and Kashmir consisting of Justice Ali Mohammad Magrey in the case of Rural Contractors Welfare Association &amp; Others v Union Territory of Jammu &amp; Kashmir [WP(C) No. 1602/2021; CM No. 5391/2021] pronounced on 17th August 2021. The petitioner, Rural Contractors Welfare Association filed the present petition challenging the validity of Notice Inviting Tenders No. 59 of R&amp;B/4727-37 dated 28th July 2021 and No. 60 of R&amp;B/4899-4908 dated 29th July 2021. According to the petitioner, the impugned NITs had the condition that any interested contractor would need to upload card verification certificate and such a condition would allegedly deprive many contractors from participating in the process which lead to a reduction in competition. The petitioner further contended that allowing these NITs would be against the spirit of justice and fairness as it seriously prejudiced the rights and interests of the petitioners and would only benefit a few contractors. The counsel representing the respondent stated that the authority issuing a tender prescribes eligibility criteria to serve the best purposes; someone or the other’s interests are likely to be hurt, but this cannot be labelled as discriminatory or malafide in nature. The case of Tata Cellular V. Union of India [(1994)6 Supreme Court Case 651] was cited, where the Supreme Court of India stated that “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 but must be free from arbitrariness not affected by bias or actuated by mala fides;”. The High Court observed that matters like the terms and conditions of tenders issued by the government came under administrative action and this court does not sit as the Court of Appeal in such a case.