Page 1

REPORTABLE        

 IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL     APPEAL     NO.       5898               OF     2012   (Arising out of SLP (C) No. 25802 of 2008

M/s Michigan Rubber (India) Ltd.                 .... Appellant (s)

Versus

The State of Karnataka & Ors.                  .... Respondent(s)

J     U     D     G     M     E     N     T      

P.     Sathasivam,     J.   

1) Leave granted.

2) This appeal is directed against the final judgment and  

order dated 02.07.2008 passed by the High Court of  

Karnataka at Bangalore in Writ Appeal No. 1928 of 2007  

whereby the High Court dismissed the appeal filed by the  

appellant-Company  herein.

3) Brief facts:

(a) On 04.08.2005, the Karnataka State Road Transport  

Corporation (KSRTC) - Respondent No.2 herein floated a  

1

Page 2

Tender being No. G30-05 for supply of Tyres, Tubes and Flaps  

specifying certain pre-qualification criteria.   

(b) Challenging the said pre-qualification criteria, the  

appellant-Company, which is engaged in the manufacture and  

supply of tyres, tubes and flaps filed a Writ Petition being No.  

20543 of 2005 before the High Court.  After filing of the writ  

petition, the said criterion was withdrawn by the KSRTC.  

Thereafter, the KSRTC modified the pre-qualification criteria  

and issued a Tender being No. G-23-07 dated 05.07.2007  

wherein, a new pre-qualification criterion was specified.   

(c) Being aggrieved by the said pre-qualification criteria, the  

appellant-Company preferred a Writ Petition being No. 11951  

of 2007 before the High Court.  By judgment dated  

13.09.2007, the learned Single Judge of the High Court  

dismissed their writ petition.   

(d) Challenging the said judgment, the appellant filed a Writ  

Appeal being No. 1928 of 2007 before the Division Bench of  

the High Court.  By impugned judgment dated 02.07.2008,  

the Division Bench of the High Court dismissed the same.   

2

Page 3

(e) Being aggrieved by the said judgment, the appellant-

Company has preferred this appeal by way of special leave  

before this Court.    

4) Heard Ms. Madhurima Tatia, learned counsel for the  

appellant-Company and Mr. S.N. Bhat, learned counsel for  

respondent Nos. 2 & 3 and Mr. V.N. Raghupathy, learned  

counsel for the State.

5) Ms. Madhurima Tatia, learned counsel for the appellant-

Company, after taking us through the tender pre-qualification  

criteria and their performance, raised the following  

submissions:

(i) The pre-qualification criteria as specified in Condition  

Nos. 2(a) and 2(b) (amended Condition Nos. 4(a) and 4(b)) of  

the Tender in question, viz., G-23-07 dated 05.07.2007 is  

unreasonable, arbitrary, discriminatory and opposed to public  

interest in general.   

(ii) The said conditions were incorporated to exclude the  

appellant-Company and other similarly situated companies  

from the tender process on wholly extraneous grounds which  

are unsustainable in law.   

3

Page 4

(iii) The appellant-Company was successful in previous three  

contracts and supplied their products to the KSRTC.  There  

was no complaint pertaining to short supply and quality.  The  

financial capacity of the appellant-Company was never  

doubted by the KSRTC at any point of time, hence, the  

impugned pre-qualification criteria was included to exclude  

the appellant-Company from the tender bidding process with  

an ulterior motive.

6) Per contra, Mr. S.N. Bhat and Mr. V.N. Raghupathy,  

learned counsel for the respondents, after taking us through  

the relevant materials including the constitution of high level  

Committee i.e. Contract Management Group (CMG), its  

deliberations and decisions etc., submitted that:

(i) To have the best of the equipment for the vehicles, which  

ply on road carrying passengers, the respondents, in the  

circumstances, thought it fit that the criteria for applying for  

tender for procuring tyres should be at a high standard and  

hence only those manufacturers, who satisfy the eligibility  

criteria, should be permitted to participate in the tender.   

4

Page 5

(ii) The said two conditions were imposed in order to ensure  

the supply of good quality tyres.

(iii) The two conditions were incorporated in the tender notice  

pursuant to the decision of the Contract Management Group  

(CMG) of the KSRTC which consists of higher level officials  

having technical knowledge.

(iv) The corrigendum was issued to minimize the confusion,  

which might have occurred due to condition No. 2(a).

Discussion:

7) We have carefully considered the rival submissions and  

perused all the materials placed before us.  It is not in dispute  

that the KSRTC has issued tender No. G-23-07 dated  

05.07.2007.  The pre-qualification criteria as specified in  

Condition No.2 of the tender dated 05.07.2007 reads as  

under:-

“2  Pre-qualification criteria for procurement of TTF Sets:

(a) Only the tyre manufacturers who have supplied a  minimum average of 5000 sets of Tyres, Tubes and  Flaps set per annum, in the preceding three years out  of 2003-04, 2004-05, 2005-06 and 2006-07 to any one  of the OE chassis manufacturer, i.e. Ashok Leyland,  Tata Motors, Eicher, Swaraj Mazda and Volvo are  eligible to participate, for supply of  respective size/type  of Tyres, Tubes and Flaps set.  They should produce  

5

Page 6

purchase order copies and invoice supplies in support  of the same.

(b) The firm should have minimum average annual  turnover of Rs.500 crores in the preceding three years  out of 2003-04, 2004-05, 2005-06 and 2006-07 from  the sale of tyres, Tubes and Flaps.”

8) Being aggrieved by the above-mentioned conditions, viz.,  

2(a) and 2(b) of the tender dated 05.07.2007, the appellant-

Company preferred W.P No. 11951 of 2007 before the High  

Court.  After filing of the said writ petition, before opening of  

the tender bids, the KSRTC amended the tender conditions as  

were incorporated in the earlier tender document replacing  

Condition Nos. 2(a) and 2(b) with Condition Nos. 4(a) and 4(b).  

Condition Nos. 4(a) and 4(b) read as under:

“4.  Pre-qualification criteria for procurement of TTF sets:

(a) Only the tyre manufacturers who have supplied a  minimum average of 5000 sets of Tyres, Tubes and  Flaps set per annum, in the preceding three years out  of 2003-04, 2004-05, 2005-06 and 2006-07 to  any of the heavy goods/passenger vehicles/chassis  manufacturers in the country are eligible to participate.  They should produce purchase order copies and invoice  supplies in support of the same.

(b) The firm should have minimum average annual  turnover of Rs.500 crores in the preceding three years  out of 2003-04, 2004-05, 2005-06 and 2006-07 from  the sale of Tyres, Tubes and Flaps.”

6

Page 7

Under the said amendment, only Condition No. 2(a) was  

replaced by Condition No 4(a).  In Condition No. 4(a), the  

classification of the vehicles was maintained but the names of  

the manufacturers were deleted.  It is the grievance of the  

appellant-Company that the pre-qualification criteria as  

specified in Condition Nos. 2(a) and 2(b) (amended Condition  

Nos. 4(a) and 4(b)) of the tender in question is unreasonable,  

arbitrary, discriminatory and opposed to public interest in  

general.  It is also their grievance that the said conditions were  

incorporated to exclude the appellant-Company and other  

similarly situated companies from the tender process on  

wholly extraneous grounds which is unsustainable in law.  In  

other words, according to the appellant-Company, the decision  

of the KSRTC in restricting their participation in the tender to  

Original Equipment Manufacturer (OEM) suppliers is totally  

unfair and discriminatory.  

9) This Court, in a series of decisions, considered similar  

conditions incorporated in the tender documents and also the  

scope and judicial review of administrative actions.  The scope  

and the approach to be adopted in the process of such review  

7

Page 8

have been settled by a long line of decisions of this Court.  

Since the principle of law is settled and well recognized by  

now, we may refer some of the decisions only to recapitulate  

the relevant tests applicable and approach of this Court in  

such matters.   

10) In Tata Cellular vs. Union of India, (1994) 6 SCC 651,  

this Court emphasised the need to find a right balance  

between administrative discretion to decide the matters on the  

one hand, and the need to remedy any unfairness on the  

other, and observed:

“94. (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.

(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 expertise, 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. …

(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  

8

Page 9

must not only be tested by the application of Wednesbury  principle of reasonableness (including its other facts pointed  out above) but must be free from arbitrariness not affected  by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative  burden on the administration and lead to increased and  unbudgeted expenditure.”

11) In Raunaq International Ltd. vs. I.V.R. Construction  

Ltd. & Ors. (1999) 1 SCC 492, this Court reiterated the  

principle governing the process of judicial review and held that  

the writ court would not be justified in interfering with  

commercial transactions in which the State is one of the  

parties except where there is substantial public interest  

involved and in cases where the transaction is mala fide.   

12) In Union of India & Anr. vs. International Trading  

Co. & Anr., (2003) 5 SCC 437, this Court, in similar  

circumstances, held as under:

“15. While the discretion to change the policy in exercise of  the executive power, when not trammelled by any statute or  rule is wide enough, what is imperative and implicit in terms  of Article 14 is that a change in policy must be made fairly  and should not give the impression that it was so done  arbitrarily or by any ulterior criteria. The wide sweep of  Article 14 and the requirement of every State action  qualifying for its validity on this touchstone irrespective of  the field of activity of the State is an accepted tenet. The  basic requirement of Article 14 is fairness in action by the  

9

Page 10

State, and non-arbitrariness in essence and substance is the  heartbeat of fair play. Actions are amenable, in the  panorama of judicial review only to the extent that the State  must act validly for a discernible reason, not whimsically for  any ulterior purpose. The meaning and true import and  concept of arbitrariness is more easily visualized than  precisely defined. A question whether the impugned action is  arbitrary or not is to be ultimately answered on the facts and  circumstances of a given case. A basic and obvious test to  apply in such cases is to see whether there is any discernible  principle emerging from the impugned action and if so, does  it really satisfy the test of reasonableness.

16. Where a particular mode is prescribed for doing an act  and there is no impediment in adopting the procedure, the  deviation to act in a different manner which does not  disclose any discernible principle which is reasonable itself  shall be labelled as arbitrary. Every State action must be  informed by reason and it follows that an act uninformed by  reason is per se arbitrary.

22. If the State acts within the bounds of reasonableness, it  would be legitimate to take into consideration the national  priorities and adopt trade policies. As noted above, the  ultimate test is whether on the touchstone of reasonableness  the policy decision comes out unscathed.

23. Reasonableness of restriction is to be determined in an  objective manner and from the standpoint of interests of the  general public and not from the standpoint of the interests of  persons upon whom the restrictions have been imposed or  upon abstract consideration. A restriction cannot be said to  be unreasonable merely because in a given case, it operates  harshly. In determining whether there is any unfairness  involved; the nature of the right alleged to have been  infringed, the underlying purpose of the restriction imposed,  the extent and urgency of the evil sought to be remedied  thereby, the disproportion of the imposition, the prevailing  condition at the relevant time, enter into judicial verdict. The  reasonableness of the legitimate expectation has to be  determined with respect to the circumstances relating to the  trade or business in question. Canalisation of a particular  business in favour of even a specified individual is  reasonable where the interests of the country are concerned  or where the business affects the economy of the country.  

10

Page 11

(See Parbhani Transport Coop. Society Ltd. v. Regional  Transport Authority, Shree Meenakshi Mills Ltd. v. Union of  India, Hari Chand Sarda v. Mizo District Council and  Krishnan Kakkanth v. Govt. of Kerala.)”

13) In Jespar I. Slong vs. State of Meghalaya & Ors.,  

(2004) 11 SCC 485, this Court, in paragraph 17, held as  

under:

“17……fixation of a value of the tender is entirely within the  purview of the executive and courts hardly have any role to  play in this process except for striking down such action of  the executive as is proved to be arbitrary or  unreasonable……”

14) In Association of Registration Plates vs Union of  

India & Ors., (2005) 1 SCC 679, similar issue was considered  

by a bench of three Judges.  In that case, the dispute was  

about the terms and conditions of notices inviting tenders  

(NITs) for supply of high security registration plates for motor  

vehicles.  The tenders have been issued by various State  

Governments on the guidelines circulated by the Central  

Government for implementing the provisions of the Motor  

Vehicles Act, 1988 and the newly amended Central Motor  

Vehicles Rules, 1989.  The main grievance of the appellant  

therein was that all notices inviting tenders (NITs) which were  

issued by various State Governments, contained  

11

Page 12

conditions which were tailored to favour companies having  

foreign collaboration. Their further grievance was that the  

tender conditions were discriminatory as per Article 14 of the  

Constitution and were being aimed at excluding indigenous  

manufacturers from the tender process.  It was also contended  

that in all the cases, the work of supply of high security  

registration plates for all existing vehicles and new vehicles  

was being entrusted to a single licence plates manufacturer in  

a State or a region and for a long period of 15 years thus  

creating monopoly in favour of selected bidders to the  

complete exclusion of all others in the field.  The further  

contention advanced therein was that creation of monopoly in  

favour of a few parties having connection with foreign  

concerns is violative of the fundamental right of trade under  

Article 19(1)(g) and discriminatory under Article 14 of the  

Constitution.  It was also pointed out that in the name of  

implementing the amended Rule 50 of the Motor Vehicles  

Rules, 1989, the States are imposing conditions in the tender  

that would take away the existing rights of the manufacturers  

of plates in India.  On the condition laid down for  

12

Page 13

prescribed minimum turnover of business, the challenge made  

on behalf of the petitioners therein was that fixing such high  

turnover for such a new business is only for the purpose of  

advancing the business interests of a group of companies  

having foreign links and support.  It is impossible for any  

indigenous manufacturer of security plates to have a turnover  

of approximately 12.5 crores from the high security  

registration plates which were sought to be introduced in India  

for the first time and the implementation of the project has not  

yet started in any of the States.  On behalf of the Union of  

India, the State authorities and counsel appearing for the  

contesting manufacturers, in their replies, have tried to justify  

the manner and implementation of the policy contained in  

Rule 50 of the Motor Vehicles Rules.  On behalf of the Union of  

India, learned ASG submitted that Rule 50 read with Statutory  

Order of 2001 issued under Section 109(3) of the Motor  

Vehicles Act, the State Governments are legally competent to  

formulate an appropriate policy for choosing a sole or more  

manufacturers in order to fulfil the object of affixation of  

security plates.  The Scheme contained in Rule 50 read with  

13

Page 14

the Statutory Order of 2001 leaves it to the discretion of the  

State concerned to even choose a single manufacturer for the  

entire State or more than one manufacturer regionwise.  It was  

pointed out that such a selection cannot be said to confer any  

monopoly right by the State on any private individual or  

concern.  He further pointed out that the tender conditions  

were formulated taking into account the public interest  

consideration and aspects of high security.   

15) While considering the above submissions, the three-  

Judge Bench held as under:

 “38. In the matter of formulating conditions of a tender  document and awarding a contract of the nature of ensuring  supply of high security registration plates, greater latitude is  required to be conceded to the State authorities. Unless the  action of tendering authority is found to be malicious and a  misuse of its statutory powers, tender conditions are  unassailable. On intensive examination of tender conditions,  we do not find that they violate the equality clause under  Article 14 or encroach on fundamental rights of the class of  intending tenderers under Article 19 of the Constitution. On  the basis of the submissions made on behalf of the Union  and State authorities and the justification shown for the  terms of the impugned tender conditions, we do not find that  the clauses requiring experience in the field of supplying  registration plates in foreign countries and the quantum of  business turnover are intended only to keep indigenous  manufacturers out of the field. It is explained that on the  date of formulation of scheme in Rule 50 and issuance of  guidelines thereunder by the Central Government, there  were not many indigenous manufacturers in India with  technical and financial capability to undertake the job of  supply of such high dimension, on a long-term basis and in  

14

Page 15

a manner to ensure safety and security which is the prime  object to be achieved by the introduction of new  sophisticated registration plates. 39. The notice inviting tender is open to response by all and  even if one single manufacturer is ultimately selected for a  region or State, it cannot be said that the State has created a  monopoly of business in favour of a private party. Rule 50  permits the RTOs concerned themselves to implement the  policy or to get it implemented through a selected approved  manufacturer.

40. Selecting one manufacturer through a process of open  competition is not creation of any monopoly, as contended,  in violation of Article 19(1)(g) of the Constitution read with  clause (6) of the said article. As is sought to be pointed out,  the implementation involves large network of operations of  highly sophisticated materials. The manufacturer has to  have embossing stations within the premises of the RTO. He  has to maintain the data of each plate which he would be  getting from his main unit. It has to be cross-checked by the  RTO data. There has to be a server in the RTO's office which  is linked with all RTOs in each State and thereon linked to  the whole nation. Maintenance of the record by one and  supervision over its activity would be simpler for the State if  there is one manufacturer instead of multi-manufacturers as  suppliers. The actual operation of the scheme through the  RTOs in their premises would get complicated and confused  if multi-manufacturers are involved. That would also  seriously impair the high security concept in affixation of  new plates on the vehicles. If there is a single manufacturer  he can be forced to go and serve rural areas with thin  vehicular population and less volume of business. Multi- manufacturers might concentrate only on urban areas with  higher vehicular population.

43. Certain preconditions or qualifications for tenders have  to be laid down to ensure that the contractor has the  capacity and the resources to successfully execute the work.  Article 14 of the Constitution prohibits the Government from  arbitrarily choosing a contractor at its will and pleasure. It  has to act reasonably, fairly and in public interest in  awarding contract. At the same time, no person can claim a  fundamental right to carry on business with the  Government. All that he can claim is that in competing for  the contract, he should not be unfairly treated and  discriminated, to the detriment of public interest.  

15

Page 16

Undisputedly, the legal position which has been firmly  established from various decisions of this Court, cited at the  Bar (supra) is that government contracts are highly valuable  assets and the court should be prepared to enforce  standards of fairness on the Government in its dealings with  tenderers and contractors.

44. The grievance that the terms of notice inviting tenders in  the present case virtually create a monopoly in favour of  parties having foreign collaborations, is without substance.  Selection of a competent contractor for assigning job of  supply of a sophisticated article through an open-tender  procedure, is not an act of creating monopoly, as is sought to  be suggested on behalf of the petitioners. What has been  argued is that the terms of the notices inviting tenders  deliberately exclude domestic manufacturers and new  entrepreneurs in the field. In the absence of any indication  from the record that the terms and conditions were tailor- made to promote parties with foreign collaborations and to  exclude indigenous manufacturers, judicial interference is  uncalled for.”

After observing so, this Court dismissed all the writ petitions  

directly filed in this Court and transferred to this Court from  

the High Courts.   

16) In Reliance Airport Developers (P) Ltd. vs. Airports  

Authority of India & Ors., (2006) 10 SCC 1, this Court held  

that while judicial review cannot be denied in contractual  

matters or matters in which the Government exercises its  

contractual powers, such review is intended to prevent  

arbitrariness and must be exercised in larger public interest.  

16

Page 17

17) In Jagdish Mandal vs. State of Orissa and Others,  

(2007) 14 SCC 517, the following conclusion is relevant:  

“22. Judicial review of administrative action is intended to  prevent arbitrariness, irrationality, unreasonableness, bias  and mala fides. Its purpose is to check whether choice or  decision is made “lawfully” and not to check whether choice  or decision is “sound”. When the power of judicial review is  invoked in matters relating to tenders or award of contracts,  certain special features should be borne in mind. A contract  is a commercial transaction. Evaluating tenders and  awarding contracts are essentially commercial functions.  Principles of equity and natural justice stay at a distance. If  the decision relating to award of contract is bona fide and is  in public interest, courts will not, in exercise of power of  judicial review, interfere even if a procedural aberration or  error in assessment or prejudice to a tenderer, is made out.  The power of judicial review will not be permitted to be  invoked to protect private interest at the cost of public  interest, or to decide contractual disputes. The tenderer or  contractor with a grievance can always seek damages in a  civil court. Attempts by unsuccessful tenderers with  imaginary grievances, wounded pride and business rivalry,  to make mountains out of molehills of some  technical/procedural violation or some prejudice to self, and  persuade courts to interfere by exercising power of judicial  review, should be resisted. Such interferences, either interim  or final, may hold up public works for years, or delay relief  and succour to thousands and millions and may increase  the project cost manifold. 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;

OR  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”;

17

Page 18

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no  interference under Article 226. Cases involving blacklisting  or imposition of penal consequences on a  tenderer/contractor or distribution of State largesse  (allotment of sites/shops, grant of licences, dealerships and  franchises) stand on a different footing as they may require a  higher degree of fairness in action.”

18) The same principles have been reiterated in a recent  

decision of this Court in Tejas Constructions &  

Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa &  

Anr., (2012) 6 SCC 464.    

19) From the above decisions, the following principles  

emerge:   

(a) the basic requirement of Article 14 is fairness in action  

by the State, and non-arbitrariness in essence and substance  

is the heartbeat of fair play.  These actions are amenable to  

the judicial review only to the extent that the State must act  

validly for a discernible reason and not whimsically for any  

ulterior purpose.  If the State acts within the bounds of  

reasonableness, it would be legitimate to take into  

consideration the national priorities;   

(b) fixation of a value of the tender is entirely within the  

purview of the executive and courts hardly have any role to  

18

Page 19

play in this process except for striking down such action of the  

executive as is proved to be arbitrary or unreasonable.  If the  

Government acts in conformity with certain healthy standards  

and norms such as awarding of contracts by inviting tenders,  

in those circumstances, the interference by Courts is very  

limited;

(c) In the matter of formulating conditions of a tender  

document and awarding a contract, greater latitude is  

required to be conceded to the State authorities unless the  

action of tendering authority is found to be malicious and a  

misuse of its statutory powers, interference by Courts is not  

warranted;   

(d) Certain preconditions or qualifications for tenders have  

to be laid down to ensure that the contractor has the capacity  

and the resources to successfully execute the work; and  

(e) If the State or its instrumentalities act reasonably, fairly  

and in public interest in awarding contract, here again,  

interference by Court is very restrictive since no person can  

claim fundamental right to carry on business with the  

Government.   

19

Page 20

20) 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; or  

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”; and (ii)  

Whether the public interest is affected.  If the answers to the  

above questions are in negative, then there should be no  

interference under Article 226.

21) Respondent No. 1-the State, in their counter affidavit,  

highlighted that tyre is very critical and a high value item  

being procured by the KSRTC and it procured 900x20 14 Ply  

Nylon tyres along with the tubes and flaps in sets and these  

types of tyres are being used only by the State Transport Units  

and not in the domestic market extensively.  It is highlighted  

that the quality of the tyre plays a major role in providing safe  

and comfort transportation facility to the commuters.

20

Page 21

22) It is also pointed out by the Respondent-State that in  

order to ensure procurement of tyres, tubes and flaps from  

reliable sources, the manufacturers of the same with an  

annual average turnover of Rs. 200 crores during the  

preceding three years, were made eligible to participate in the  

tenders.  In the tender issued for procurement of these sets  

during October, 2004, the appellant participated and based on  

the L1 rates, the orders for supply for 16,000 sets of tyres  

were placed on the firm.  It is also pointed out that the  

appellant supplied 10,240 sets of tyres and remaining quantity  

was cancelled due to quality problems.   

23) Materials has also been placed to show that the appellant  

participated in subsequent tenders and orders were released  

for supply of 900 x 20 14 PR tyres, tubes and flaps from  

October 2006 to September, 2007.  It is also explained that  

after going into various complaints, in order to achieve good  

results, new tyre mileage and safety of the public etc., and  

after noting that vehicle/chassis manufacturers such as M/s  

Ashok Leyland, M/s Tata Motors etc. have strict quality  

21

Page 22

control system, it was thought fit to incorporate similar  

criteria as a pre-qualification for procurement of tyres.

24) It is also highlighted by the State as well as by the  

KSRTC that the tender conditions were stipulated by way of  

policy decision after due deliberation by the KSRTC.  Both the  

respondents highlighted that the said conditions were imposed  

with a view to obtain good quality materials from reliable and  

experienced suppliers.  In other words, according to them, the  

conditions were aimed at the sole purpose of obtaining good  

quality and reliable supply of materials and there was no  

ulterior motive in stipulating the said conditions.   

25)  Both the counsel for the respondents have brought to  

our notice that the two impugned conditions were  

incorporated in the tender notice pursuant to a decision of the  

Contract Management Group (CMG) of the KSRTC, which is an  

institutional mechanism for the purpose of devising proper  

method in the matter, inter alia, of procurement of materials to  

the KSRTC.  The said Group consists of various high level  

officials representing different departments of KSRTC.  The  

CMG constitutes of the following officials:

22

Page 23

a) Managing Director, Bangalore Metropolitan Transport Corporation

b) Managing Directors of four sister Corporations c) Director, Security & Vigilance d) Director, Personnel and Environment e) Chief Accounts Officer f) Chief Engineer (Production) g) Chief Engineer(Maintenance) h) Chief Accounts Officer(Internal Audit) i) Controller of Stores and Purchase

Thus it is clear that the said CMG is a widely represented body  

within the Respondent No. 2-KSRTC.

26) Further materials placed by KSRTC show that the CMG  

met on 17.05.2007 and deliberated on the question of  

conditions to be incorporated in the matter of calling of  

tenders for supply of tyres, tubes and flaps.  It is pointed out  

that in view of the experience gained over the years, it was felt  

by the said Group that the impugned two conditions should be  

essential qualifications of any tenderer.  The said policy  

decision was taken in the best interest of the KSRTC and the  

members of the traveling public to whom it is committed to  

provide the best possible service.  In the course of hearing,  

learned counsel for the respondents have also brought to our  

notice the Minutes of Meeting of the CMG held on 17.05.2007.  

23

Page 24

The said recommendation of the CMG was ultimately approved  

by the Vice Chairman of KSRTC.  In the circumstances, the  

said impugned two conditions were incorporated in the tender  

notice dated 05.07.2007.   

27) It is also brought to our notice that the KSRTC is  

governed by the provisions of the Karnataka Transparency in  

Public Procurements Act, 1999 and the Rules made  

thereunder, viz., Karnataka Transparency in Public  

Procurements Rules, 2000.  Though in Condition No 2(a) in  

the tender notice dated 05.07.2007, the names of certain  

vehicle manufacturers were mentioned, after finding that it  

was inappropriate to mention the names of specific  

manufacturers in the said condition, it was decided to delete  

their names.  Accordingly, a corrigendum was put up before  

the CMG and by decision dated 04.08.2007, CMG decided to  

revise the pre-qualification criteria by deleting the names of  

those manufacturers.  Learned counsel for the respondents  

have also placed the Minutes of Meeting of the CMG held on  

04.08.2007.  It is also brought to our notice that the said  

corrigendum was also approved by the competent authority.   

24

Page 25

28) In addition to the same, it was not in dispute that the  

appellant-Company was well aware of both the original tender  

notices and the corrigendum issued.  It is also brought to our  

notice that the appellant wrote a letter making certain queries  

with regard to the corrigendum issued by the KSRTC and the  

said queries were suitably replied by the letter dated  

11.08.2007.    

29) It is also seen from the records that pursuant to the  

tender notice dated 05.07.2007, seven bids were received  

including that of the appellant-Company.  They are:

i)     M/s Apollo Tyres

ii)     M/s Birla Tyres

iii) M/s Ceat Ltd

iv) M/s Good Year India

v) M/s JK Industries

vi) M/s MRF Ltd

vii) M/s Michigan Rubber (Former Betul Tyres)

It is brought to our notice that successful bidders were CEAT  

and JK Tyres.  Accordingly, contracts were entered into with  

the said two companies by the KSRTC and the purchase  

25

Page 26

orders were placed and they have also effected supplies and  

completed the contract and the KSRTC also made payments to  

the said suppliers.   

30) It is pertinent to point out that the second respondent  

has also issued 4 (four) more tender notices after the tender  

notice dated 05.07.2007.  The said tender notices were dated  

04.03.2008, 22.08.2008, 24.10.2008 and 19.03.2009.  

Pursuant to the tender notices dated 04.03.2008, 22.08.2008  

and 24.10.2008, contracts have been awarded and have been  

substantially performed.  It is also brought to our notice that  

all the said four subsequent tender notices also contained  

identical conditions as that of the impugned conditions  

contained in tender notice dated 05.07.2007.

31) As observed earlier, the Court would not normally  

interfere with the policy decision and in matters challenging  

the award of contract by the State or public authorities.  In  

view of the above, the appellant has failed to establish that the  

same was contrary to public interest and beyond the pale of  

discrimination or unreasonable.    We are satisfied that to  

have the best of the equipment for the vehicles, which ply on  

26

Page 27

road carrying passengers, the 2nd respondent thought it fit that  

the criteria for applying for tender for procuring tyres should  

be at a high standard and thought it fit that only those  

manufacturers who satisfy the eligibility criteria should be  

permitted to participate in the tender.  As noted in various  

decisions, the Government and their undertakings must have  

a free hand in setting terms of the tender and only if it is  

arbitrary, discriminatory, mala fide or actuated by bias, the  

Courts would interfere.  The Courts cannot interfere with the  

terms of the tender prescribed by the Government because it  

feels that some other terms in the tender would have been fair,  

wiser or logical.  In the case on hand, we have already noted  

that taking into account various aspects including the safety  

of the passengers and public interest, the CMG consisting of  

experienced persons, revised the tender conditions.  We are  

satisfied that the said Committee had discussed the subject in  

detail and for specifying these two conditions regarding pre-

qualification criteria and the evaluation criteria.  On perusal of  

all the materials, we are satisfied that the impugned  

27

Page 28

conditions do not, in any way, could be classified as arbitrary,  

discriminatory or mala fide.   

32) The learned single Judge considered all these aspects in  

detail and after finding that those two conditions cannot be  

said to be discriminatory and unreasonable refused to  

interfere exercising jurisdiction under Article 226 of the  

Constitution and dismissed the writ petition.  The well  

reasoned judgment of the learned single Judge was affirmed  

by the Division Bench of the High Court.  

33) In the light of what is stated above, we fully agree with  

the reasoning of the High Court and do not find any valid  

ground for interference.  Consequently, the appeal fails and  

the same is dismissed with no order as to costs.

...…………….…………………………J.            (P. SATHASIVAM)                                  

 .…....…………………………………J.    (RANJAN GOGOI)  

NEW DELHI; AUGUST 17, 2012.  

28