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  IN THE SUPREME COURT OF INDIA    CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.8314 OF 2015      (Arising out of S.L.P. (C) NO. 23038 of 2013)

SOUTH DELHI MUNICIPAL CORPORATION   …… APPELLANT

VERSUS

RAVINDER KUMAR & ANR.              …… RESPONDENTS

J U D G M E N T

V. GOPALA GOWDA, J.

   Leave granted.

2.This  Civil  Appeal  is  directed  against  the  impugned  

judgment and order dated 14.02.2013 passed by the High  

Court of Delhi at New Delhi in Writ Petition (C) No.  

NON-REPORTABLE

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7993/2012 whereby it has set aside the decision of the  

appellant-Corporation,  dated  30.11.2012,  regarding  

cancellation of the earlier tender notice whereunder  

both the respondents were declared successful and it  

has also quashed the appellant-Corporation’s subsequent  

e-tender process carried out in pursuance of tender  

notice No. 24 dated 13.12.2012. Further, the High Court  

has directed the appellant-Corporation to process the  

bids submitted by both the respondents in accordance  

with law in pursuance of the Notice Inviting Tender No.  

21  dated  15.11.2012.  The  correctness  of  impugned  

judgment and order is challenged in this appeal as the  

appellant-Corporation is aggrieved of the said judgment  

and order of the High Court.

3.The  necessary  brief  facts  are  stated  hereunder  to  

appreciate the rival legal contentions urged on behalf  

of the parties:

The appellant is South Delhi Municipal Corporation  

and respondents are registered civil contractors with  

the appellant authorities and stated to have executed

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several  works  of  the  Corporation  in  the  past.  The  

appellant-Corporation  in  its  area  invited  tenders  

relating to 26 works to be executed against NIT No.  

21/EE(MZ-WZ)-II/TC/2012-2013 dated 15.11.2012. The last  

date  for  bid  preparation  and  its  submission  was  

26.11.2012  upto  3.00  PM  and  the  opening  of  the  

financial bids was scheduled on 28.11.2012, but the  

date  was  extended  to  29.11.2012  as  28.11.2012  was  

declared holiday on account of ‘Guru Nanak Birthday’.

 4.On 29.11.2012, when the financial bids were opened,  

both the respondents were declared successful being the  

lowest bidder in respect of 16 works. There were only  

five bidders who participated in the tender process.  

Both  the  respondents  being  successful  bidders  

approached  the appellant-Corporation  for issuance  of  

work  order  against  the  works  for  which  they  were  

declared  successful.  The  Executive  Engineer  of  the  

appellant-Corporation orally informed the respondents  

about the cancellation of entire tender due to non-

submission of draft by some of the bidders (containing

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the tender cost and earnest money) required to be filed  

along  with  the  tender.  Dissatisfied  with  the  oral  

information  about  the  cancellation  process  the  

respondents insisted for written intimation regarding  

the same.

5.On  respondents’  insistence  the  appellant-Corporation  

issued a corrigendum dated 30.11.2012 which stated that  

the tender was being cancelled due to Administrative  

Reasons.

6.The  respondents  then  sent  a  legal  notice  dated  

13.12.2012 to the appellant-Corporation but they did  

not receive any reply to the same. However, on the same  

day appellant-Corporation issued a fresh NIT No. 24 EE-

(M-WZ)- U/TC/2012-2013 dated 13.12.2012 inviting fresh  

bids from the eligible persons.  

7.Being aggrieved by the cancellation of earlier tender  

i.e.,  NIT  No.  21  dated  15.11.2012  vide  corrigendum  

dated 30.11.2012, both the respondents filed a writ  

petition before the High Court of Delhi.

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8.The High Court allowed the respondents’ writ petition  

holding  that  the  process  adopted  by  the  appellant-

Corporation in coming to the conclusion that the rates  

offered were high was faulty. The High Court on that  

basis  set  aside  and  quashed  the  decision  of  the  

appellant-Corporation  dated  30.11.2012,  regarding  

cancellation of its earlier tender and directed the  

appellant-Corporation to process the bids submitted by  

both  the  respondents  in  accordance  with  law  in  

pursuance of the NIT No. 21 dated 15.11.2012. It also  

quashed the subsequent tender process pursuant to NIT  

No. 24 dated 13.12.2012. Hence, this appeal is filed by  

the appellant-Corporation challenging the said order on  

several grounds.

9.Mr. Gaurang Kanth, learned counsel for the appellant-

Corporation contended that the High Court has erred in  

quashing  the  decision  of  the  appellant-Corporation  

regarding cancellation of earlier tender even when it  

did not find any malafide intention on the part of the  

appellant to favour someone. He urged that the High

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Court has failed to appreciate the fact that the said  

decision  was  taken  by  the  appellant-Corporation  to  

serve  the  best  interest  of  the  Corporation  with  a  

bonafide intention.

10. He  further  contended  that  the  High  Court  has  

erroneously ignored the fact that in the same financial  

year i.e. 2012-2013, the appellant-Corporation issued  

72 other work orders for similar works in the adjacent  

areas of the Corporation and all of them were issued at  

much lower rates than the rates quoted by both the  

respondents. He urged that before the issuance of a  

particular contract, the internal system for financial  

check by the concerned department of the appellant-

Corporation has to justify the reasonableness of the  

rates quoted by the bidders by comparing the same with  

rates of other similar works awarded in the recent past  

by the appellant-Corporation.  

11. He further submitted that CVC Guidelines on the  

subject ensure that the Corporation gets the best price  

for  execution  of  works  at  the  same  time  ensuring

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transparency  in  awarding  contracts  in  favour  of  

successful bidders. It was further urged by him that  

the appellant-Corporation had acted bonafide to get the  

best price for execution of works and to protect the  

public money, by cancelling the entire tender process  

and inviting fresh bids by another tender notice dated  

13.12.2012.

 12. It  was  further  contended  by  him  that  the  High  

Court has proceeded on the wrong assumption that the  

appellant-Corporation had prepared a justification of  

rates in connection with the said tender. As no such  

justification of rates was prepared by the appellant-

Corporation reason being the rates received from both  

the  respondents  were  much  higher  than  the  rates  at  

which  similar  works  were  awarded  in  favour  of  

successful bidders by the appellant-Corporation in the  

recent past. The High Court has thus proceeded on a  

wrong basis to quash the decision of the appellant-

Corporation regarding the cancellation of its earlier  

tender and also the subsequent tender dated 13.12.2012

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issued afresh for the same works. This decision of the  

High Court is erroneous in law and is liable to be set  

aside in this Appeal.

 13. It was further argued by him that the High Court  

while passing the judgment and order has erroneously  

ignored  the  fact  that  the  State  Government  is  the  

guardian of public finance and the right to refuse the  

lowest or any other tender submitted to it is vested  

with the State Government, provided Article 14 of the  

Constitution of India is not violated in that process.  

He  urged  that  the  appellant-Corporation  had  not  

violated  the  said  provision  of  the  Constitution  of  

India by cancelling its earlier tender vide corrigendum  

dated  30.11.2012  and  issuing  tender  notice  dated  

13.12.2012 for the same works in the public interest.  

The  appellant-Corporation  had  taken  the  decision  

regarding  cancellation  of  the  tender  in  the  best  

interest of the Corporation to get the best price and  

also to save public money. Therefore, the same could

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not  be  termed  as  an  arbitrary  decision  of  the  

appellant-Corporation.  

14. It was further contended by the learned counsel  

that the High Court has failed to appreciate the fact  

that  the  Courts  do  not  sit  in  appeal  over  the  

commercial decisions taken by the statutory local self  

government in the best interest of public.

 15. On  the  other  hand,  Ms.  Anusuya  Salwan,  learned  

counsel appearing on behalf of both the respondents  

contended that the appellant-Corporation’s stand that  

the earlier tender was cancelled as the rates received  

by them pursuant to the said tender were found to be  

higher  than  the  rates  at  which  similar  works  were  

awarded  by  appellant-Corporation  in  the  Corporation  

Area  in  the  recent  past  is  absolutely  false  and  

misleading. In this regard, she submitted that bids  

were invited by the appellant-Corporation on the basis  

of tender rates fixed and the contractors are required  

to  quote  their  rates  below  or  above  on  percentage  

basis.  After  a  bid  is  made  by  the  contractor,  the

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tender accepting Authority satisfies itself about the  

reasonableness of the rates offered by the contractor  

in his bid before acceptance of the tender in his name.  

At  this  stage  the  reasonableness  of  the  rates  are  

assessed on the basis of justified rates. Justification  

of rates offered by the bidders is prepared by the  

appellant-Corporation on the basis of  Delhi Schedule  

of Rates, 2007 and  Delhi Schedule of Rates, 2012. In  

connection with the above she pointed out that  Delhi  

Schedule of Rates, for each item of work prepared on  

the basis of CPWD rates on the basis of which works can  

be executed by the contractor and in case the rates on  

which works are allotted are very much below the said  

Delhi  Schedule  of  Rates,  there  are  chances  of  the  

quality of the work to be executed by the contractor  

getting  compromised.  She  further  submitted  that  the  

appellant-Corporation itself has issued two circulars  

dated  30.08.2012  and  02.01.2013.  The  first  circular  

dated 30.08.2012 provides for adoption of an escalation  

@ 61% qua 2007 rates and 8% qua 2012 rates, whereas the  

second  circular  dated  02.01.2013  provides  for  the

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adoption of escalation @ 70% qua 2007 rates and 14% qua  

2012 rates. She further urged that the rates quoted by  

both the respondents were much below the rates in the  

said circulars and therefore, the contention of the  

appellant-Corporation  that  they  cancelled  the  said  

tender  on  the  ground  of  rates  offered  by  both  the  

respondents being high is absolutely misconceived and  

liable to be outrightly rejected.

16. She  further  contended  that  the  plea  of  the  

appellant-Corporation  that  the  rates  quoted  by  the  

respondents were much higher than the rates at which  

similar  works  were  awarded  in  favour  of  successful  

bidders in the recent past is also not tenable in law  

as the tenders issued for similar works were issued at  

abnormally low rates and the same could not be a bench  

mark for comparison with the rates offered by both the  

respondents in relation to the tender for the works  

which have been cancelled by the appellant-Corporation.  

She urged that the High Court was right in passing the  

judgment in favour of the respondents for reasons that

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were  valid  and  cogent.  Hence,  this  Court  need  not  

exercise  its  appellate  jurisdiction  to  annul  the  

impugned order as there is no miscarriage of justice in  

the case on hand. She therefore, prayed for dismissal  

of this appeal.

17. With  reference  to  the  above  rival  legal  

contentions urged on behalf of the parties, this Court  

has carefully examined the correctness of the findings  

and reasons recorded in the impugned judgment and order  

passed by the High Court. The High Court has quashed  

the  decision  of  the  appellant-Corporation  dated  

30.11.2012,  regarding  cancellation  of  its  earlier  

tender without there being any finding to the effect of  

any malafide intention on the part of the appellant  in  

taking decision to cancel its earlier tender notice  

with a view to favour someone.  

18. By a careful examination of the impugned judgment  

and order of the High Court and the facts of the case  

on hand, the following aspects would emerge:

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a)The High Court has failed to appreciate that the  

appellant-Corporation’s decision of cancelling its  

earlier  tender  notice  vide  corrigendum  dated  

30.11.2012 was taken with a bonafide intention to  

serve  the  best  interest  of  the  Corporation  

ensuring that only a reasonable price is paid to  

the successful contractors for the works executed  

in  the  area  as  the  money  which  it  spends  on  

getting such works done is public money.  

b)The High Court has not appreciated the fact that  

for  the  same  financial  year  i.e.  2012-2013  the  

concerned department of the appellant-Corporation  

has issued 72 other work orders for similar works  

in the adjacent areas of the Corporation and all  

of them were issued for much lower rates than the  

rates offered by both the respondents.  

c)Further, the High Court has conveniently ignored  

the very relevant aspect of the case namely, that  

the  appellant-Corporation,  before  issuance  of  a  

particular tender notice, is required to satisfy  

itself  about  the  reasonableness  of  the  rates

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quoted  by  the  bidders  keeping  in  view  the  

prevalent  market  rates  in  the  Corporation  Area.  

The  internal  system  for  financial  check  by  the  

concerned department of the appellant-Corporation  

justifies the reasonableness of the rates offered  

by the bidders by comparing them with the rates at  

which  other  similar  works  were  awarded  by  the  

appellant-Corporation in the recent past in favour  

of  successful  bidders.  For  the  aforesaid  valid  

reason,  the  appellant-Corporation  being  the  

custodian of public money, with bonafide intention  

to get the best price, has cancelled its earlier  

tender notice referred to supra and invited fresh  

bids  by  issuing  another  tender  notice  dated  

13.12.2012.

d)Further, the High Court has not noticed another  

important aspect of the case namely, that there  

are CVC guidelines to ensure that the Corporation  

gets the best price for the execution of the works  

as  per  the  said  guidelines  and  to  ensure  the  

transparency in awarding the contracts in favour

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of successful bidders in the tender process the  

appellant-Corporation  decided  to  cancel  its  

earlier  tender  notice  and  a  subsequent  tender  

notice dated 13.12.2012 was issued afresh by it  

for getting the same works done through successful  

contractors.  

e)The  High  Court  has  erroneously  quashed  the  

Corporation’s decision of cancelling its earlier  

tender notice vide corrigendum dated 30.11.2012 on  

the wrong assumption that the concerned department  

of  the  appellant-Corporation  has  prepared  the  

justification  of  rates  but  in  reality  the  same  

were never prepared by the concerned department of  

the  appellant-Corporation  as  the  rates  received  

from both the respondents were much higher than  

the rates at which similar works were awarded in  

favour  of  the  successful  bidders  by  it  in  the  

recent past.  

f)Further,  the  High  Court  has  failed  to  consider  

another important fact that the Government being  

guardian of public finance it has right to refuse

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the  lowest  or  any  other  tender  bid  or  bids  

submitted  by  the  bidders  to  it  provided  its  

decision is neither arbitrary nor unreasonable as  

it  amounts  to  violation  of  Article  14  of  the  

Constitution of India. The appellant-Corporation’s  

decision in cancelling its earlier tender is not  

in violation of Article 14 of the Constitution of  

India, as the High Court did not find any malafide  

intention on the part of the appellant-Corporation  

to  favour  someone  in  taking  such  decision.  The  

appellant-Corporation’s decision in cancelling the  

earlier  tender  notice  vide  corrigendum  dated  

30.11.2012  and  then  issuing  a  subsequent  tender  

notice dated 13.12.2012 inviting fresh bids from  

eligible persons for the same works was with a  

bonafide intention  to  get  better  and  reasonable  

rates from the bidders for the execution of the  

works and not to show favouritism in favour of any  

bidder.

g)The High Court has also failed to appreciate the  

relevant   fact  that  the  officials  of  the

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appellant-Corporation  made  proper  analysis  about  

the rates quoted by both the respondents as the  

same were higher than the usual market tendency  

and accordingly, they decided to cancel the entire  

tender process.   

19. A  careful  reading  of  the  impugned  judgment  and  

order would show that none of the aforesaid aspects  

have been borne in mind by the High Court and it has  

failed to appreciate the same in a proper perspective  

while exercising its judicial review power. The High  

Court  has  erred  in  quashing  the  decision  of  the  

appellant-Corporation regarding the cancellation of its  

earlier tender notice and also the subsequent tender  

notice issued afresh by it on 13.12.2012 for the same  

works.

 20. For the reasons stated above, the High Court has  

failed to see that the appellant-Corporation adopted a  

fair and transparent method by inviting the bids for  

the re-tender notice issued by it. The High Court has  

not  found  any  malafide  intention  on  the  part  of

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appellant-Corporation in inviting the fresh bids after  

taking  the  decision  to  cancel  its  earlier  tender  

notice. The appellant-Corporation, being the custodian  

of public finance, took its decision objectively with a  

bonafide intention to serve the best interest of the  

public in general. Thus, for the foregoing reasons, the  

appellant-Corporation has not committed any wrong in  

cancelling  its  earlier  tender  notice  and  issuing  

subsequent tender notice afresh inviting bids from the  

eligible contractors.

21.  The decision of the High Court in quashing the  

appellant-Corporation’s  decision  of  cancelling  the  

earlier tender vide corrigendum dated 30.11.2012 and  

also the subsequent e-tender process carried out by it  

pursuant to notice No. 24 dated 13.12.2012 is vitiated  

in law and therefore, the same is liable to be set  

aside.

22. For the reasons stated supra, the submissions made  

on behalf of the appellant-Corporation are well founded  

and the same must be accepted by this Court. This Civil

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Appeal of the appellant-Corporation must succeed and  

deserves  to  be  allowed.  Accordingly,  we  pass  the  

following        order :-

a)The Civil Appeal is allowed.   

b)We set aside the impugned judgment and  order of the High Court passed in W.P.

(C)  No.  7993  of  2012  quashing  the  

decision  of the  Corporation to  cancel  

its  earlier  tender  notice  vide  

corrigendum  dated  30.11.2012  and  re-

tender  notification  dated  13.12.2012  

issued  by  the  appellant-Corporation  

inviting  bids  afresh  for  the  works  

notified therein. We restore the above  

re-tender  notice  and  opportunity  is  

given to both the respondents to submit  

their  tender  and  the  tender  inviting  

Authority of the Corporation can proceed  

further  in  processing  the  bids  after

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proper  evaluation of  the same  without  

any further delay. No order as to costs.

                            …………………………………………………………J.                              [T.S. THAKUR]     

                            …………………………………………………………J.                   [V. GOPALA GOWDA]

New Delhi, October 7, 2015

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ITEM NO.1A-For Judgment       COURT NO.11               SECTION XIV                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS C.A. No. 8314/2015 arising from Petition(s) for Special Leave to  Appeal (C)  No(s). 23038/2013 SOUTH DELHI MUNICIPAL CORP                         Petitioner(s)                                 VERSUS RAVINDER KUMAR & ORS                               Respondent(s) Date : 07/10/2015 This appeal was called on for pronouncement of  JUDGMENT today.

For Petitioner(s)                      Mr. P. Parmeswaran,Adv.                       For Respondent(s)                      Ms. S. Janani,Adv.                                

Hon'ble  Mr.  Justice  V.Gopala  Gowda  pronounced  the  judgment  of  the  Bench  comprising  Hon'ble  Mr.  Justice T.S. Thakur and His Lordship.

Leave granted. The appeal is allowed in terms of the signed  

Non-Reportable Judgment.          (VINOD KR.JHA)           (CHANDER BALA)

  COURT MASTER       COURT MASTER      (Signed Non-Reportable Judgment is placed on the file)