Case BriefsHigh Courts

Bombay High Court: The Division Bench of Dipankar Datta, CJ and G.S. Kulkarni, J., addressed an issue in light of the principles of judicial review explained that the Government must have freedom of contract.

 “…fair play in the joints is a necessary concomitant for an administrative body, functioning in an administrative sphere or quasi-administrative sphere.”

Factual Matrix

Petitioner was awarded a contract by the respondent – Navi Mumbai Municipal Corporation for a period of 5 years of the work of mechanized housekeeping and multi-purpose services in its health centres, which came to be terminated in 2017 due to non-satisfactory performance.

Issue in the Writ Petitions 

  • Fresh Tender issued for the same work but with a pre-qualification criterion that an eligibility condition providing that “the contractors whose work contract is terminated due to unsatisfactory services or are blacklisted would not be eligible to participate in the tender”

Arbitration Proceedings

On being aggrieved with the termination of contract, arbitration proceedings by the petitioner were initiated against the Corporation.

Petitioner’s Case

Petitioner’s case that if the petitioner is held to be ineligible by application of the said note in Clause 4(g) of the pre-qualification criteria, it would lead to a consequence that the petitioner cannot participate in such contracts of the Corporation although the petitioner is not blacklisted or debarred and yet is being prohibited to participate in such re-tender.

Discussion and Conclusion

Question that falls for determination in the present matter are:

(I) Whether the Municipal Corporation is entitled in law to impose a pre-qualification criterion as contained in Condition 4(g) (supra) to the effect that ‘the contractors whose work contract is terminated due to unsatisfactory services are not eligible to participate in the tender’?

(II) Whether imposing such impugned condition would amount to blacklisting of the petitioner?

In the present matter, while considering the facts and circumstances of the case, Bench discusses some vital points with respect to:

  • legal principles on the authority of the State and its instrumentalities to enter into contracts and
  • Principles of Judicial Review.

Power of Judicial Review is exercised to rein in unbridled executive functioning.

It is not the function of the Court to act as a super board, or with the zeal of a pedantic school master substituting its judgment for that of the administration. The duty of the court is to confine itself to the question of legality of the tender process on the touchstone of Article 14 of the Constitution.

It is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. The only concern should be with the manner in which such decision have been taken.

On what grounds is the Judicial Review classified:

Firstly, Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it;

Secondly Irrationality, namely, Wednusbury unreasonableness, that is when a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at. The decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.;

Thirdly Procedural impropriety. The Court does not sit as an appellate authority over the tendering authority, but merely reviews the manner in which the decision was made.

Bench in view of the above-stated expressed that the terms of the invitation to tender cannot be open to judicial scrutiny as an invitation to tender is in the realm of contract.

Further, it was added that the Government must have freedom of contract. Principles laid above are enunciated in the Supreme Court decision of Tata Cellular v. Union of India, (1994) 6 SCC 651.

With respect to taking a review of the authorities and more particularly on the prescription and adherence of essential conditions has laid down principles of judicial review in the Supreme Court decision of BSN Joshi &. Sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548.

High Court elaborating more, added that the freedom to arrive at legitimate terms and conditions in inviting public offers cannot in any manner be taken away.

Cherished principles of free play in the joints and the liberty to choose a contractor, on terms and conditions fixed by the tendering authority in public interest, cannot be taken away.

Court would not have any expertise to sit in appeal over the tender conditions, the role of the Court is triggered only qua the decision-making process.

Moving forward, Bench examined whether Corporation acted either malafide or arbitrarily with material illegality in having a condition to restrict participation of a bidder whose contract is terminated due to unsatisfactory services?

 It was noted that the said condition was applicable to all the bidders and not just to the petitioner. The corporation made it clear with its condition that it did not desire a party whose work was unsatisfactory in the past to get onboard again, hence in Court’s opinion, the said condition became imperative, considering the nature of the contract.

Hence, Corporation’s condition was in no manner arbitrary and illegal. Therefore, Corporation was entitled in law to impose pre-qualification criteria as it did.

Second Question

 Imposing of impugned condition resulted in blacklisting the petitioner from participating in the tender in question?

Bench in light of the above question noted that a contractor cannot be blacklisted for having breached the terms and conditions of the contract unless a fair hearing was accorded to the party being blacklisted in due adherence to the principles of natural justice.

In Court’s Opinion, the present case is not the one wherein the petitioner can be said to be blacklisted by the Corporation.

In fact, the petitioner’s case is of an implied blacklisting by the Corporation by prescribing of a pre-bid criteria that a contractor whose work contract is terminated due to unsatisfactory performance is not eligible to participate in the tender.

Hence, present case is not of blacklisting.

It is also fallacious for the petitioner to label such condition as a condition of an implied blacklisting of the petitioner in future tenders to be issued by the Corporation. This is only a presumption of the petitioner. 

Concluding with the decision, High Court held that the petitions failed and were accordingly rejected. [BVG India Ltd. v. State of Maharashtra, 2021 SCC OnLine Bom 412, decided on 19-03-2021]


Advocates before the Court:

Mr. V. A. Thorat, Senior Advocate with Mr. Ashutosh M. Kulkarni and Mr. Sarthak S. Diwan for the Petitioner.

Mr. Sandeep Marne, for the Respondents.

Mr. P. P. Kakade, Government Pleader with Ms .R.A. Salukhe, AGP for State.

Case BriefsForeign Courts

Pakistan Supreme Court: The bidders who were successful in winning the bid challenged the impugned order passed by High Court, Lahore before a 5-Judge Bench of Supreme Court comprising of Mian Saqib Nisar, HCJ., SH. Azmat Saeed, Umar Ata Bandial, Ijaz Ul Ahsan, and Sajjad Ali Shah, JJ., whereby Rules 13 (3) and (4) of Pakistan Electronic Media Regulatory Authority Rules, 2009 were declared ultra vires of the parent Act, i.e., Pakistan Electronic Media Regulatory Authority Ordinance 2002 (PEMRA Ordinance) due to which the entire bidding process was in question.

The brief process involved with broadcasting is that the producers of program sell the program to DTH distributors who then directly beam these programs to the consumers. So, the question before Court was whether the producers/broadcasters of these programs can be excluded from bidding for the DTH licenses by virtue of PEMRA ordinance. Petitioner submitted that High Court erred while interpreting Section 23(2) of the PREMRA Ordinance on the basis of which Rules 13 (3) and (4) was declared ultra vires as nowhere broadcasters/producers participation is stopped from bidding for DTH licences and to the contrary it promotes objectives of Ordinance by enlarging the choice given to people. It was contended that in accordance with this purpose if broadcasters are also involved in distribution, the purpose will be destroyed.

Perusing the contentions, the Court was of the view that the interpretation of the proviso of Section 23 cannot be sustained as the approach used by the courts is not literal interpretation of the law but its purposive interpretation. It would be healthy for the competition if a broadcaster is having both licenses of broadcasting and distribution. Therefore, impugned judgment was set aside. [MAG Entertainment (P) Ltd. v. Independent Newspapers Corporation (P) Ltd., C.A.700 of 2017, 08-05-2018]

Hot Off The PressNews

Supreme Court: Coming down heavily upon Haryana Government for auctioning 558.53 hectares of land for mining purposes, though the available area was only 141.76 hectares, the bench of Madan B. Lokur and Deepak Gupta, JJ said:

“”You cannot go on making fool of the citizens like this. You are the state and it is your responsibility to ensure that what was advertised should be given.”

Observing that the petitioner firm was entitled to a refund of the deposited amount, the Court directed the state to refund the money the firm along with 9 per cent interest per annum from the date of deposit till the date of payment, keeping in view the “vast discrepancy” of area mentioned in the advertisement and area of land made available.

When the counsel for Haryana said it was the duty of the company to ascertain whether the land was actually 558.53 hectares, an annoyed bench said “it is very easy to blame the citizens for everything just because you are in power”. The bench said:

“The public notice was for 558.53 hectares. How can you give only 141.76 hectres and say it is the duty of applicant to verify this.”

Source: PTI

Case BriefsSupreme Court

Supreme Court: Stating that in a complex fiscal evaluation the Court has to apply the doctrine of restraint, the Court held that the courts cannot really enter into the said realm in exercise of power of judicial review as several aspects, clauses, contingencies, etc. have to be factored and these calculations are best left to experts and those who have knowledge and skills in the field.

In the present case, before finalization of the financial bid submitted series of representations and seeing the silence of the owner it knocked at the doors of the Madras High court which directed for consideration of the representations. Stating that the High Court at that stage should have exercised caution, the Court said that if the courts would exercise power of judicial review in such a manner it is most likely to cause confusion and also bring jeopardy in public interest. An aggrieved party can approach the Court at the appropriate stage, not when the bids are being considered. Once the price bid was opened, a bidder could not have submitted representations on his own and seek a mandamus from the Court to take certain aspects into consideration. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently.

The Court also noticed that the issue pertaining to correctness of Consultant’s report has to be adjudged and scrutinized within the scope of limited power of judicial review in the obtaining factual score and in the present case the Consultant had analysed the offers regard being had to the tender conditions. Be it ingeminated that the analysis and determination made by the financial consultant has been carried out before receipt of any additional document from either side. The documents were called for by the owner from both the qualifying bidders in a transparent manner and the same have been considered at the time of evaluation by the Consultant.

The Bench of Dipak Misra and Shiva Kirti Singh, JJ held that Courts cannot sit in appeal over the financial consultant’s assessment. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. [Tamil Nadu Generation and Distribution Corporation Ltd. v. CSEPDI – Trishe Consortium, 2016 SCC OnLine SC 1150, decided on 18.10.2016]