Meeting the vast infrastructural needs of the country often involves the invitation of high-value tenders by public authorities. Given the special focus on infrastructure by the government, the magnitude of these tenders has increased manifold. One of the most challenging tasks for the authorities is to establish eligibility criteria for bidders and other terms and conditions of the tender. Frequently, questions are raised regarding the eligibility criteria and terms & conditions set out by the authorities, with allegations that these criteria have been tailored to suit a specific person or entity. Furthermore, the interpretation of these terms and conditions is often questioned. There are instances where it is alleged that a reverse engineering process is employed to achieve this objective by crafting tender conditions in such a manner that only one party fits the bill. This endeavour is often categorized as “Decision Oriented Systematic Analysis”.

Disputes regarding the eligibility or ineligibility of bidders frequently reach the High Court and eventually the Supreme Court. In a recent judgment by the Supreme Court, a Hon’ble Justice noted that almost no tender remains unchallenged today. Unsuccessful parties or those who did not even participate in the tender often seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. Complaints are sometimes raised before investigating authorities, leading to extensive investigations. This cycle of investigation can jeopardize the reputation and career of those involved in the tender process, despite their genuine, sincere, and judicious approach to their responsibilities. Authorities involved in the tender process breathe a sigh of relief if there are no allegations or litigations during the awarding process.

It is pertinent to mention that every public authority has a robust and multi-layered system for setting out eligibility criteria, terms, and conditions of the tender, and for evaluating the bids. Despite the well-established system for the entire tendering process, authorities always operate in a critical mode. There is a system in place to remove inconsistencies in the tender document and address bidders' queries in well-structured pre-bid meetings and pre-bid queries before the final submission of bids. However, sometimes, tender authorities take the safe route by annulling the tendering process due to trivial issues and initiating a fresh tender process, as nobody wants to suffer from any allegations or litigation.

There is a general perception that Hon’ble Courts will intervene, scrutinize the terms & conditions, interpret the tender, and review bidders’ eligibility or ineligibility. This article highlights the jurisdiction of public authorities and Hon’ble Courts in tender matters, as elaborated in various judgments by the Hon’ble Supreme Court of India.

1. Caretel Infotech Ltd. Vs Hindustan Petroleum Corporation Limited : 2019 (6) SCALE 70 : 2019 Legal Eagle (SC) 426

The Court observed, “Normally parties would be governed by their contracts and the tender terms, and really no writ would be maintainable under Article 226 of the Constitution of India. Given that Government and public sector enterprises venture into economic activities, the Court found it appropriate to build in certain checks and balances of fairness in procedure. However, the window for scrutiny of tenders in writ proceedings under Article 226 has been opened too wide, resulting in almost every tender, big or small, being challenged. This affects the efficacy of commercial activities of public sectors, making the awarding of contracts a cumbersome exercise with long litigation processes. The private sector, often competing in the same field, enjoys promptness and efficiency levels that make public sector tenders non-competitive. This outcome could hardly have been the intended objective.”

2. Tata Cellular Vs Union of India : 1994 6 SCC 651 : 1994 Legal Eagle (SC) 653

 The Court elucidated several principles:

-        The modern trend points to judicial restraint in administrative actions.

-        The Court does not sit as a court of appeal but merely reviews the decision-making process.

-        The Court lacks the expertise to correct administrative decisions. If a review is permitted, it would be substituting its decision, which may be fallible.

-        The terms of the invitation to tender cannot be open to judicial scrutiny as they are in the realm of contract. Decisions to accept or award contracts are reached through several tiers and are qualitative, often made by experts.

-        The Government must have the freedom of contract. Fair play in administrative actions is necessary, but decisions must be free from arbitrariness, bias, or mala fides.

-        Quashing decisions can impose heavy administrative burdens and unbudgeted expenditures on the administration.

3. Jagdish Mandal vs State of Orissa: 2007 14 SCC 517 : 2006 Legal Eagle (SC) 1145

The Court noted, “Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias, and mala fides. Its purpose is to check whether decisions are made lawfully, not to assess the soundness of decisions. When reviewing tenders or contracts, certain special features must be considered. Contracts are commercial transactions. Evaluating tenders and awarding contracts are commercial functions, where principles of equity and natural justice are distant. Courts will not interfere if the decision is bona fide and in public interest, even if procedural aberrations or assessment errors are made. Judicial review should not protect private interests at public expense or resolve contractual disputes. Unsuccessful bidders with grievances can seek damages in civil courts. Courts should resist interference motivated by unsuccessful bidders’ grievances or rivalry, as it may delay public works and increase costs. Courts should ask whether the authority’s decision is mala fide or intended to favor someone or is so arbitrary that no reasonable authority could have reached it, and whether public interest is affected.”

4. Michigan Rubber Vs State of Karnataka : 2012 (8) SCC 216 : 2012 Legal Eagle (SC) 389

 The Court laid down principles:

-         Fairness and non-arbitrariness are essential in state actions, and judicial review is limited to ensuring the state acts validly and reasonably.

-        Fixing the value of a tender is within the executive’s purview, with limited court interference unless the action is arbitrary or unreasonable.

-        Courts should concede greater latitude to state authorities in formulating tender conditions and awarding contracts, unless actions are malicious or misuse statutory powers.

-        Preconditions for tenders ensure contractors have the capacity and resources to execute the work successfully.

-        Reasonable, fair, and public interest actions by the state in awarding contracts should face minimal court interference, as no one has a fundamental right to conduct business with the government.

5. Bharat Coking Coal Ltd. vs. AMR Dev Prabha & Ors : 2020 Legal Eagle (SC) 295

The Court stated, “Judicial interpretation of commercial contracts differs from statutory interpretation.”

6. Afcons Infrastructure Ltd. Vs Nagpur Metro Rail Corporation Ltd.: 2016 (16) SCC 818 : 2016 Legal Eagle (SC) 666

The Court held, “The owner or employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret the documents. Courts must defer to this understanding unless there is mala fide or perversity. A different interpretation by the courts is not a reason for interference.”

7. Silppi Constructions Contractors Vs Union of India: AIR online 2019 SC 2430 : 2019 Legal Eagle (SC) 883

The Court emphasized the need for restraint and caution in judicial intervention in state contracts. Courts should defer to expert opinions unless decisions are arbitrary or unreasonable. The authority floating the tender is the best judge of its requirements, and minimal court interference is warranted. Courts should only interfere to prevent arbitrariness, irrationality, bias, mala fides, or perversity.

8. Montecarlo Ltd. Vs NTPC Ltd. : AIR 2016 SC 4946 : 2016 Legal Eagle (SC) 1181

The Court noted, “Tenders involve highly complex technical subjects, requiring expertise in evaluation. The private sector’s competitive commercial field necessitates objective scrutiny of technical and financial bids. Judicial review is warranted only if the process is arbitrary, mala fide, or favors one party. Courts should follow the principle of restraint in technical evaluations or comparisons.”

9. M/s Agmatel India Pvt. Ltd. Vs M/s Resoursys Telecom: 2022 Legal Eagle (SC) 98

The Court reiterated that the tender document author is the best person to understand its requirements. Courts should exercise restraint unless the interpretation is arbitrary, unreasonable, or against public interest.

10. Balaji Ventures Pvt. Ltd. Vs Maharashtra State Power Generation Company Ltd. : 2022 Legal Eagle (SC) 642

The Court observed, “The eligibility criteria in the tender document applied to all bidders. The owner has the freedom to set criteria unless they are arbitrary or mala fide. Bidders cannot challenge criteria that do not suit them. Courts have limited roles in reviewing tender conditions, as it is an offer to compete.”

11. M/s. N.G. Projects Limited Vs M/s. Vinod Kumar Jain : 2022 Legal Eagle (SC) 308

The Court held, “Satisfaction of tender conditions is primarily upon the authority inviting bids. Courts should not impose their decisions over the employer’s. Courts lack expertise in examining tender terms and conditions. Interference should be minimal unless decisions are arbitrary or mala fide. Interference leads to additional costs and delays in public interest projects.”

12. Airport Authority of India Vs Centre for Aviation Policy, Safety & Research (CAPSR): 2022 SCC online SC 1334 : 2022 Legal Eagle (SC) 1130

The Court noted, “Tender terms are within the domain of the tenderer and not open to judicial scrutiny unless arbitrary, discriminatory, or mala fide. The government must have a free hand in setting terms.”

In summary, the following principles can be drawn from the decisions of the Hon’ble Supreme Court:

1.    The tender inviting authority is free to set eligibility criteria and conditions unless they are arbitrary, discriminatory, or mala fide.

2.    The author of the tender document is best suited to understand and interpret its requirements.

3.    If two interpretations are possible, the author’s interpretation must be accepted.

4.    If the tender authority follows healthy standards and norms, court interference is limited.

5.    Courts review the decision-making process, not act as courts of appeal.

6.    There should be no cancellation of awards due to procedural errors or wrongful exclusion; unsuccessful bidders can seek damages in civil court.

7.    Courts have no role in imposing fair, wiser, or logical decisions on tender authorities.

8.    In most cases, the Supreme Court upholds the views of the tender inviting authority unless the terms are arbitrary, discriminatory, or mala fide.

The judgments have broadened the concept of Article 14 of the Constitution of India and provided a wider scope to public authorities while inviting and awarding tenders.