Scope Of Judicial Review In Tender Related Contracts

Judicial Review is often construed as “remedy of last resort”. The article discusses the scope of judicial intervention in tender related matters and decisions of tendering Authority. The Article further discusses the equilibrium between the two pillar of government i.e executing authority and judicial authority and its harmonious interplay. The judicial authority plays a pivotal role in order to strike a balance in the governmental structure and to restrain itself from taking executive action under the cloak of judicial decision.

Doctrine of Separation of Powers

Montesquieu’s “Separation” took the form, not of impassable barriers and unalterable frontiers, but of mutual restraints, or of what afterwards came to be known as “checks and balances”¹. The three organs much act in concert, not that their respective functions should not ever touch one another. If this limitation is respected and preserved, “it is impossible for that situation to arise which Locke and Monstequieu regarded as the eclipse of liberty – the monopoly, or disproportionate accumulation of power in one sphere.”². In other words, each pillar of Government should have a distinct sphere and shall restrain from transgressing the province of each other (imaginary boundary).

The Indian Constitution grundnorm provides to create a harmonious governmental structure instead of a conflicting trinity. Creating a strict circumference around the organs of the Government will only lead to ripples between them. In Kesavananda Bharti v. State of Kerala³, Hon’ble Chief Justice Sikri observed that “Separation of powers between the legislature, the executive and the judiciary is a part of the basic structure of the Constitution; this structure cannot be destroyed by any form of amendment.”

Hon’ble Chief Justice B.K. Mukherjea in Rai Sahib Ram Jawaya v. State of Punjab⁴ observed that “The Indian Constitution has not indeed recognised the doctrine of separation of powers in the absolute rigidity but the functions of the different parts or branches of the Government have been sufficiently differentiated and consequently it can very well be said that our Constitution does not contemplate assumption by one organ or part of the State of the functions that essentially belong to another.”

Thus, it is an interesting take to analyze the administrative actions of the Executive body, when the same is challenged before the Legislative body. The Courts, after years of tussle have now laid down a very clear view to the scope of interpretation to government contract/tender relation documents under judicial scrutiny.

Judicial Review in Tender Decisions

It is surprising to note that the Courts have limited/ restricted their scope in tender related matters. The scope is primarily to review any arbitrariness, irrationality, or unreasonableness during the process of awarding tender. Anything beyond has been left to the technical expertise of the Tendering Authority.

The Apex Court laid down a series of principles in Tata Cellular v. Union of India⁵, highlighting judicial restraint in administrative decisions. It was clarified by the Court that a mere disagreement with the decision-making process or decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favor someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision-making process or the tendering authority decision must be perverse and not faulty or erroneous.

In Air India Ltd. v. Cochin International Airport Ltd⁶., the Apex Court has given a clear view that the Court must only interfere in such tender decisions under public interest and with great caution. It was further held that the State is entitled to choose its own method to arrive at a commercial decision and that the terms of a tender are not open to scrutiny.

In Michigan Rubber v. State of Karnataka⁷, the Apex Court further limited the scope of judicial review. The Apex court laid down a certain test for a writ court to interfere in the tender decision, firstly, the question arises whether the process adopted is mala fide or intentionally in favour of a specific party or the decision is such that prima facie, the Court can arrive at a conclusion that no prudent authority acting reasonably shall come to such decision in accordance with relevant law. Secondly whether the public interest at law is affected. The Court upon testing these two question answers negative, then no interference under Article 226.

The Hon’ble Supreme Court in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd⁸., further observed that owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that employer of a project might arrive at an interpretation to the tender conditions that is not acceptable to the constitutional courts, however that by itself is not a reason for interfering with the interpretation given. This was also confirmed in Jagdish Mandal v. State of Orissa⁹.

The Hon’ble Apex Court in Nabha Power Limited v. Punjab State Power Corporation¹⁰, sought to provide certain boundaries within which review of the decision-making process in tenders may occur. Tender condition should be read as per its express terms and judicial review should only be restricted to analyzing the reasonableness of the procedure specified in those express terms.

In Municipal Corpn., Ujjain v. BVG India Ltd¹¹., the Hon’ble Supreme Court discussed the impact of judicial review in tendering authority and the role of public interest. It was observed that the public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously and effectively. The public would also be interested in the quality of work undertaken. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in re-doing the entire work. Therefore, in light of public interest, the tendering authority is empowered to take actions and decisions in the tender process which includes tender conditions and terms.

In a number of other decisions, including Silppi Constructions Contractors v. Union of India & Ors¹², National High-Speed Rail Corpn. Ltd. v. Montecarlo Ltd¹³, Uflex Ltd. v. Government of Tamil Nadu¹⁴, Galaxy Transport Agencies v. New J.K. Roadways¹⁵, and more recently, in M/s. N.G. Projects Limited v. M/s Vinod Kumar Jain & Ors¹⁶. and Airport Authority of India vs. Centre for Aviation Policy Ors¹⁷., the Hon’ble Supreme Court has refrained from interfering with the decision-making process in relation to Tenders.

The Hon’ble Supreme Court has laid down a clear principle pertaining to tender related contracts and decisions made by tendering authority and routinely emphasized the importance of leaving such decisions to the technical and commercial wisdom of the Tendering Authority.

The tender jurisdiction of the courts, exists in a small corner of Article 14 of the Constitution of India. Practically, the Hon’ble Supreme Court primarily follows a two-step process. The first question that the Hon’ble Supreme Court looks at, is the nature and impact of the tender in question, the impact of quashing the decision of the concerned authority, and the overarching public interest involved in the decision. If it is found that there is an overarching public interest at large, the Hon’ble Supreme Court has disapproved of any interference. However, where it is found that public interest is not necessarily being served by the actions of the concerned authority, the Hon’ble Supreme Court may be more inclined to consider the facts from the perspective of Article 14 of the Constitution of India and decide.

Conclusion

The Writ Jurisdiction in relation to Tenders is particularly restrictive. A higher burden is placed the ones impugning the tendering process, and the person is expected to show a failure to achieve the public interest in the process, over and above, the relevant tests under Article 14 of the Constitution of India. The test is to establish a prima facie arbitrariness, unreasonableness, or blatant disregard to the principles of Natural Justice by the Tendering Authority during a tender process.

Such action of the courts makes it clear that the executive authority has been granted power to decide the terms and conditions of the tender as per their own requirement, as every tendering authority has its own requirement for the goods and services to be availed. If every decision of the tendering authority is challenged, and every condition is brought before the Court to decide the correctness of the same, no work shall ever be undertaken by the executing Authority. Thus, the courts have placed a high threshold for interfering with tender decisions. This has helped in striking the right balance between the three pillars of the Government and consequently helps in the execution of role of each organ effectively with appropriate checks and balances.