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        REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  10751   OF 2013 (Arising out of S.L.P. (C) No.18405 of 2012)

Maa Binda Express Carrier and Anr. …Appellants

Versus

Northeast Frontier Railway and Ors.      …

Respondents

J U D G M E N T

T.S. THAKUR, J.

1. Leave granted.

2. This appeal arises out of a judgment and order dated  

6th June, 2012 passed by a Division Bench of the Gauhati  

High Court whereby Writ Appeal (C) No.79 of 2012 has been  

allowed;  judgment  and  order  dated  4th February,  2012  

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passed by a Single Bench of that Court set aside and Writ  

Petition  (C)  No.4668  of  2011  filed  by  the  appellants  

dismissed.   

3. In terms of a notice dated 12th July,  2011 Divisional  

Commercial Manager, Tinsukia invited tenders for the grant  

of a three year lease of 23 tonnes of space in VPH (Parcel  

Van)  on  train  No.15960/15959  Kamrup  Express.  Among  

those who responded to the tender notice was the appellant  

herein who offered a sum of Rs.1,46,872/- per trip for the  

proposed lease. The tender process was discharged by the  

railway  administration  on  account  of  technical  and  

administrative reasons no matter the appellant’s offer was  

the highest. A communication dated 6th September,  2011,  

addressed to the appellant was in that regard issued to the  

appellant  who  assailed  the  same in  W.P.  (C)  No.4668 of  

2011 before the High Court of Gauhati.   

4. In  their  counter  affidavit  the  railways  defended  the  

cancellation/discharge of the tender not only on the ground  

that the appellant had acquired no vested right for allotment  

of  the  contract  in  its  favour  merely  because  its  bid  was  

found to be the highest, but also on the ground that the  

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power  to  cancel/withdraw  the  tender  notice  had  been  

specifically  reserved  by  the  railway  administration  in  its  

favour.  That apart, the cancellation of the tender process  

was  sought  to  be  justified  also  on  the  ground  that  the  

railway administration had discovered a serious deficiency in  

the same in as much as the tender forms had been issued  

without enclosing therewith the terms and conditions subject  

to which the contract could be allotted or awarded. It was  

also contended that an all important penalty clause had not  

been incorporated in the tender documents. These omissions  

and deficiencies were according to the respondent sufficient  

for cancellation of the tender process to be followed by a  

fresh process in due course.  

5. A learned Single Judge of the High Court  of  Gauhati  

before whom the matter was argued took the view that the  

discharge of the tender process had caused prejudice to the  

appellant by reason of his rates having become public.  It  

was also held by the learned Single Judge that every public  

authority was required to act fairly while granting contracts  

and  that  reasons  for  cancellation  of  the  tender  process  

should have been set out in the communication sent to the  

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appellant  instead  of  being  disclosed  subsequently  in  the  

affidavit filed in opposition to the writ petition.  The learned  

Single  Judge  accordingly  allowed  the  writ  petition  with  a  

direction that so long as the appellant undertook to accept  

the penalty  clause as a part  of  the contract between the  

parties the railway administration would consider its bid for  

acceptance and resultant allotment of the contract within 15  

days of receipt of the undertaking.  

6. Aggrieved by the judgment and order abovementioned,  

the railway administration preferred Writ Appeal (C) No.79  

of  2012  before  the  Division  Bench  of  the  High  Court  of  

Gauhati. Relying upon the decision of this Court in Raunaq  

International Ltd. v. I.V.R. Construction Ltd. and Ors.   

(1999)  1  SCC  492 the  Division  Bench  held  that  the  

appellant  acquired  no  right  to  claim  the  award  of  the  

contract merely by reason of its bid being the highest.  It  

further held that the scope of judicial review being limited in  

tender  matters,  the  Court  had  to  restrain  itself  from  

interfering with the process so long as the decision of the  

competent  authority  was  not  against  public  interest,  

irrational, mala fide or illegal.  It was also held that merely  

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because the order discharging tender process was silent as  

to the reasons for the decision the same did not prevent the  

Court from looking into the records to find out the basis on  

which the cancellation was ordered.  So also the argument  

that exposure of rates offered by the appellant would result  

in prejudice to the appellant was rejected as a ground to  

justify  interference  with  the  decision  of  the  railway  

administration  which  was  otherwise  held  to  be  legal  and  

bona fide.  The present appeal assails the said decision as  

seen earlier.      

7. We have heard learned counsel for the parties at some  

length.  The material  facts  are not in  dispute.  It  is  not  in  

dispute that tender documents were not accompanied by the  

terms and conditions applicable  to  the proposed contract.  

That being so, award of a contract without specifying the  

terms  subject  to  which  the  same had  to  be  worked  was  

bound  to  result  in  serious  administrative  and  legal  

complications.  It is also not in dispute that no tender Box  

Opening Committee had been nominated with the approval  

of the Controlling Officer nor was any verification of tender  

documents  conducted  by  the  Division  concerned  for  their  

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genuineness.  The  absence  of  a  penalty  clause  from  the  

tender documents was similarly a serious deficiency in the  

entire  tender  process.  Cancellation  of  the  tender  process  

could not, in that view, be said to be  mala fide  to call for  

interference by the High Court.  The respondents have,  in  

their written submissions filed before us, referred to Circular  

No.12 of 2006 by which guidelines for leasing out existing  

space in trains for the purposes of operating parcel services  

have been issued. These guidelines, inter alia, stipulate that  

a tender Committee shall be put together which requirement  

was also not complied with while issuing the tender notice in  

the instant case. That apart, the Ministry of Railways has, by  

Circular  No.13  dated  31st May,  2012,  revised  the  rate  

structure for  booking of  parcel  and luggage services.  The  

revised rate for Kamrup Express is Rs.4756/- per ton.  The  

reserve  price  calculated  on  that  basis  comes  to  

Rs.1,84,100/-. The offer made by the appellant was much  

below that amount. Besides, a market survey conducted in  

terms of  an  interim order  passed by the High Court  had  

revealed that the contract could fetch Rs.2,25,000/- per trip  

which was substantially higher than Rs.1,46,872/- quoted by  

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the appellant. Suffice it to say that not only is the reserve  

price applicable as on date higher than the amount offered  

by the appellant but even the market survey has brought  

forth rates higher than what was offered by the appellant.  

Allotment  of  any  contract  at  the  rate  offered  by  the  

appellant would, therefore, result in a substantial financial  

loss to the railways which is neither in the public interest nor  

necessitated  by  any  legal  compulsion.  Time  lag  in  such  

matters plays an important role as it indeed has in the case  

at hand.

8. The  scope  of  judicial  review  in  matters  relating  to  

award of contract by the State and its instrumentalities is  

settled by a long line of decisions of this Court.  While these  

decisions  clearly  recognize  that  power  exercised  by  the  

Government and its instrumentalities in regard to allotment  

of contract is subject to judicial review at the instance of an  

aggrieved party,  submission of  a  tender  in response to a  

notice inviting such tenders is no more than making an offer  

which the State or its agencies are under no obligation to  

accept.  The  bidders  participating  in  the  tender  process  

cannot,  therefore,  insist  that  their  tenders  should  be  

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accepted simply because a given tender is  the highest or  

lowest depending upon whether the contract is for sale of  

public property or for execution of works on behalf of the  

Government.  All that participating bidders are entitled to is  

a fair, equal and non-discriminatory treatment in the matter  

of  evaluation of their  tenders.  It  is  also fairly well-settled  

that  award  of  a  contract  is  essentially  a  commercial  

transaction  which  must  be  determined  on  the  basis  of  

consideration that are relevant to such commercial decision.  

This implies that terms subject to which tenders are invited  

are not open to the judicial scrutiny unless it is found that  

the same have been tailor made to benefit  any particular  

tenderer or class of tenderers. So also the authority inviting  

tenders can enter into negotiations or grant relaxation for  

bona fide and cogent  reasons provided such relaxation  is  

permissible under the terms governing the tender process.

9. Suffice it to say that in the matter of award of contracts  

the Government and its agencies have to act reasonably and  

fairly at all points of time. To that extent the tenderer has an  

enforceable right in the Court who is competent to examine  

whether  the aggrieved party has been treated  unfairly  or  

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discriminated  against  to  the  detriment  of  public  interest.  

(See: Meerut Development Authority v. Association of   

Management Studies and Anr. etc. (2009) 6 SCC 171  

and Air India Ltd. v. Cochin International Airport Ltd.   

(2000) 1 SCR 505).

10. The scope of judicial review in contractual matters was  

further examined by this Court in Tata Cellular v. Union of  

India (1994) 6 SCC 651, Raunaq International Ltd.’s  

case (supra) and in  Jagdish Mandal v. State of Orissa  

and  Ors. (2007)  14  SCC  517 besides  several  other  

decisions to which we need not refer.  In Michigan Rubber  

(India) Ltd. v. State of Karnataka and Ors. (2012) 8   

SCC 216 the legal position on the subject was summed up  

after  a  comprehensive  review  and  principles  of  law  

applicable to the process for judicial review identified in the  

following words:

“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   

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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 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.

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.”

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(emphasis supplied)         

11. As  pointed  out  in  the  earlier  part  of  this  order  the  

decision  to  cancel  the  tender  process  was  in  no  way  

discriminatory or  mala fide. On the contrary, if  a contract  

had  been  awarded  despite  the  deficiencies  in  the  tender  

process serious questions touching the legality and propriety  

affecting  the  validity  of  the  tender  process  would  have  

arisen.  In as much as the competent authority decided to  

cancel the tender process, it did not violate any fundamental  

right of the appellant nor could the action of the respondent  

be termed unreasonable so as to warrant any interference  

from this Court. The Division Bench of the High Court was,  

in  that  view,  perfectly  justified  in  setting  aside  the  order  

passed by the Single Judge and dismissing the writ petition.  

12. In the result this appeal fails and is hereby dismissed  

with costs assessed at Rs.25,000/-            

.……………….……….…..…J.         (T.S. THAKUR)

    .…..…………………..…..…J.

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            (VIKRAMAJIT SEN) New Delhi November 29, 2013

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