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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NO.    6125             OF 2016 (Arising out of SLP (C) No.19285 of 2015)

STATE OF JHARKHAND & ORS.                           ...Appellants

Versus

M/S  CWE-SOMA CONSORTIUM                       ...Respondent

J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. This appeal has been filed assailing the judgment dated

13.03.2015  of  the  High  Court  of  Jharkhand  dismissing  the

appellant’s Letters Patent Appeal No.309 of 2014, in and by which,

the  Division  Bench affirmed  the  order  of  Single  Judge  directing

opening of technical and financial bid of the respondent.  

3. The matter in dispute relates to construction of a dam

in the State of Jharkhand. The facts leading to filing of this appeal

are as follows: The proposed project, Kharkai Dam at Icha is a part

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of  Subernarekha  Multipurpose  Project,  a  Central  Government

Aided Scheme funded through the Accelerated Irrigation Benefits

Programme (AIBP).  Subernarekha Multipurpose Project is an Inter

State  project  that  was  sanctioned  in  the  year  1978  with  the

objective  of  providing  irrigation  in  Jharkhand,  Orissa  and  West

Bengal.  It  will  also  provide  water  for  drinking  and  industrial

purpose  as  also  for  production  of  hydel  power.  The  Water

Resources  Department,  Government  of  Jharkhand,  through  its

Executive  Engineer  issued a Notice  Inviting Tender (NIT)  for  the

construction of the Dam as per the Standard Bidding Documents

(SBD) dated 28.02.2014.  On 24.03.2014, a pre-bid meeting was

held where ten tenderers participated and during its course, it was

observed  that  in  the  clauses  of  the  NIT,  there  were  certain

departures from the SBD.  After the pre-bid meeting, in total, only

three  bidders  namely,  M/s  CWE-SOMA  Consortium,  Hyderabad

(respondent herein),  M/s. IL & FS Engineering and Construction

Co.  Ltd.,  Hyderabad  and  M/s.  Navyuga  Engineering  Co.  Ltd.,

Hyderabad participated in the tender process and submitted their

bids.  In meetings of the Departmental Tender Committee held on

02.06.2014 and 06.06.2014,  it  was found that  among the three

tenderers, only the respondent was found responsive and other two

bidders were found unresponsive.  Therefore the tender committee 2

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took  a  decision  under  clause  4.18(d)  of  the  Central  Vigilance

Commission Guidelines (‘CVC Guidelines’) to cancel the tender and

go for retender to make the tender process more competitive.  The

tender committee re-affirmed this decision in a meeting held on

09.07.2014 after the Chief Minister referred an application of the

respondent  to  them.  Aggrieved  thereof,  respondent  filed  a  writ

petition before the High Court.

4. The learned Single Judge after examining clauses 4.17

and 4.18 of  the CVC Guidelines which provide for procedure in

case of a single quote/single valid acceptable quote and in case of

lack  of  competition  due  to  restrictive  specifications  respectively,

came to the conclusion that in the absence of the decision of the

tender committee that the specifications were stringent, clause 4.18

could not have been resorted to and tender committee should have

resorted to clause 4.17.  The Single Judge allowed the writ petition,

holding the action of the appellants as arbitrary and against public

interest.   The  matter  was  then  carried  in  appeal  filed  by  the

appellants  before  the  Division  Bench  by  way  of  Letters  Patent

Appeal.  The Division Bench upon perusal of the rationale for the

decision of the tender committee, was of the view that there indeed

existed competition as three companies, including the respondent

had participated and respondent turned out to be the single bidder. 3

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Thus,  the  Division  Bench concurred  with  the  conclusion  of  the

Single Judge that only clause 4.17 should have been invoked. The

Division  Bench  also  noted  that  the  initial  tender  value  was

estimated as Rs.698 crores for the tender floated in February 2014,

and when second tender was floated in July 2014 within the short

span  of  few  months,  the  estimated  value  of  the  project  had

increased to  Rs.738 crores.  Thus,  Division Bench dismissed the

appeal  holding  that  re-tendering  at  later  stage  would  further

enhance the estimated value, causing excessive loss to the state

exchequer which may not be in the public interest. Being aggrieved,

the State of Jharkhand has preferred the present appeal.

5. On  behalf  of  the  appellants,  Mr.  Mukul  Rohatgi,  the

learned Attorney General submitted that the impugned judgment is

contrary to clause 24 of the NIT as also the settled position of law

that it is the prerogative of the government to award the tender.

Placing reliance upon  Rajasthan Housing Board and Anr.  v. G.S.

Investments and Anr.  (2007) 1 SCC 477 and  Uttar Pradesh Avas

Evam Vikas Parishad & Ors.  v. Om Prakash Sharma (2013) 5 SCC

182,  it  was  submitted  that  so  long  as  the  bid  has  not  been

accepted, the highest bidder acquired no vested right to have the

auction confirmed in  his  favour.   It  was  further  submitted  that

clauses 4.5 (A) (a) and 4.5 (A) (c) which were restrictive have led to 4

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other two bidders becoming unresponsive. It was contended that

these restrictions have not garnered the approval of  the Cabinet

which is mandatory and was consequential in reducing the number

of participants from ten to three in which SOMA alone was found to

be responsive and the tender committee rightly decided to cancel

the  tender  which is  in  consonance with  clause 4.18 (d)  of  CVC

Guidelines.  It was urged that the impugned judgment directing the

appellant  to  open  the  technical  as  well  as  the  price  bid  of  the

respondent  is  erroneous  and  against  well  settled  principles  laid

down by this Court.  

6. Per contra, Mr. P.P. Rao learned Senior Counsel for the

respondent  appearing  along  with  Senior  Counsel,  Mr.  Dushyant

Dave  submitted  that  cancellation  of  respondent’s  tender  was

arbitrary and against public interest.  By referring to clause 4.17 of

the CVC Guidelines, learned Senior Counsel submitted that in a

case  where  a  single  quote  or  a  single  valid  acceptable  quote  is

received against limited tender or where a tender has resulted in a

single vendor situation, it needs to be processed further.  It was

submitted that the learned Single Judge and the Division Bench

rightly held that clause 4.17 of CVC Guidelines ought to have been

resorted to and not clause 4.18(d) of CVC Guidelines. Drawing our

attention to the financial implications of the project, learned Senior 5

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Counsel submitted that by issuance of a fresh tender, the value of

the project will go up by about Rs.100 crores and the same will be

detrimental to the public interest causing huge loss to the public

exchequer.

7. We  have  carefully  considered  the  rival  contentions,

perused  the  impugned  judgment  and  the  material  on  record

including the additional documents filed by the appellant-State.

8. Every  tender  above  the  estimated  value  of  Rs.250/-

lakhs has to be in consonance with Standard Bidding Documents

(SBD) which has got  its  approval  from the Cabinet.   The entire

exercise  of  complying  with  the  general  conditions  of  SBD is  to

ensure that the tender is not stringent and restrictive in nature so

that it  can enable many tenderers to participate and facilitate a

wider fair  play competition.  Any variation from SBD needs prior

approval from the department which is done after considering the

viability of inserting that clause and whether or not the same is

restrictive and stringent in nature.

9. During  the  pre-bid  meeting  held  on  24.03.2014  that

was attended by ten tenderers, there were unapproved departures

in clauses 4.5 (A) (b) and 4.5 (A) (c) from the clauses of the SBD.  As

these departures in the clauses of the tender document had not

been approved, the Chief Engineer was requested vide letter dated 6

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26.03.2014 to issue appropriate corrigendum to the tender notice

so that the tenders could be published in accordance with the SBD

and reminder of the said request was sent to the Chief Engineer

vide  letter  dated  31.03.2014.  In  reply  to  the  afore-mentioned

letters, the Chief Engineer responded vide letter 02.04.2014 stating

that the departures were for the reason that the work was of  a

specific and urgent nature and the clauses were inserted to ensure

smooth implementation of the work on time.

10. Even though there were ten participants in the meeting

on 24.03.2014 of pre-qualification bid, in view of stringent clauses

in  the  tender  document,  only  three  bidders  namely:  (i)  M/s.

CWE-SOMA Consortium, Hyderabad; (ii) M/s. IL & FS Engineering

and  Construction  Co.  Ltd.,  Hyderabad  and  (iii)  M/s.  Navyuga

Engineering  Co.  Ltd.,  Hyderabad  submitted  their  bids.  Upon

scrutiny  of  the  three  bids,  only  respondent’s  company  bid  was

found responsive; the other two bids were found non-responsive in

the light of provisions of clauses 4.5(A)(b) and 4.5(A)(c).   The tender

committee therefore decided to cancel the tender in order to make

the tender more competitive and decided to re-invite tenders in the

light of SBD norms on the basis of which tenders are invited by the

department.  The minutes of the Departmental Tender Committee

held on 02.06.2014 reads as under:- 7

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“In light of special conditions prescribed for the invited tender for  the  work,  only  one  tenderer  is  found  responsive  in technically-cum-pre-qualification bid.

In  view  of  the  above,  in  order  to  make  the  tender  under subject more competitive, the departmental tender committee after due  consideration  while  cancelling  the  tender  has  decided  to re-invite  tenders  in  light  of  SBD  norms  on  the  basis  of  which tenders are invited by the department.

Chief  Engineer,  Icha-Galudeeh  Complex,  Adityapur, Jamshedpur  shall,  accordingly,  ensure  action  inviting  tenders according to the prescribed SBD norms without any delay.”

It was later realised that the typographical error had been made in

the  above  minutes  and therefore  ‘technically-cum-pre-qualification

bid’ was later modified to “pre-qualification bid” in the meeting held

on 06.06.2014.

11. Against the decision of tender committee cancelling the

tender,  SOMA  Consortium  filed  a  complaint  before  the  Chief

Minister  of  Jharkhand and  in  furtherance  of  order  of  the  Chief

Minister,  the  Departmental  Tender  Committee  held  meeting  on

09.07.2014.  In the said meeting, tender committee decided that

the  decision  taken  by  the  committee  in  its  meetings  dated

02.06.2014  and  06.06.2014  was  correct  and  the  same  was

affirmed in the light of clause 4.18(d) of CVC Guidelines, clause 32

of ITB, clause 24 of IFB and the letter of CVC dated 07.05.2004.

Tender  committee  reiterated  its  earlier  decision  to  invite  fresh

tenders  to  make  the  tender  under  subject  more  competitive.

Pursuant to the decision taken on 09.07.2014, appellant proceeded

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for fresh tender and NIT was published in the newspapers as per

the norms on 13.07.2014.

12. In case of a tender, there is no obligation on the part of

the person issuing tender notice to accept any of the tenders or

even the lowest tender.  After a tender is called for and on seeing

the rates or the status of the contractors who have given tenders

that there is no competition, the person issuing tender may decide

not to enter into any contract and thereby cancel the tender.  It is

well-settled  that  so  long  as  the  bid  has  not  been  accepted,  the

highest  bidder  acquires  no  vested  right  to  have  the  auction

concluded in his favour (vide Laxmikant and Ors. v. Satyawan and

Ors.  (1996) 4 SCC 208; Rajasthan Housing Board and Anr. v. G.S.

Investments and Anr.  (2007) 1 SCC 477 and  Uttar Pradesh Avas

Evam Vikash Parishad and Ors.  v. Om Prakash Sharma  (2013) 5

SCC 182).

13. The appellant-state was well within its rights to reject

the bid without  assigning any reason thereof.   This  is  apparent

from clause  24 of  NIT  and clause  32.1  of  SBD which reads  as

under:-

“Clause 24 of NIT: “Authority reserves the right to reject any or all of the tender(s) received without assigning any reason thereof.”

Clause 32.1 of SBD: “…the Employer reserves the right to accept or reject any Bid to cancel the bidding process and reject all bids, at

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any time prior to award of Contract, without thereby incurring any liability to the affected Bidder or Bidders or any obligation to inform the affected Bidder or Bidders of  the grounds for the Employer’s action.”

In terms of the above clause 24 of NIT and clause 32.1 of SBD,

though  Government  has  the  right  to  cancel  the  tender  without

assigning  any  reason,  appellant-state  did  assign  a  cogent  and

acceptable  reason of  lack of  adequate  competition to  cancel  the

tender and invite a fresh tender.  The High Court, in our view, did

not keep in view the above clauses and right of the government to

cancel the tender.

14. The  State  derives  its  power  to  enter  into  a  contract

under Article 298 of the Constitution of India and has the right to

decide whether to enter into a contract with a person or not subject

only to the requirement of reasonableness under Article 14 of the

Constitution of India.  In the case in hand, in view of lack of real

competition, the state found it advisable not to proceed with the

tender with only one responsive bid available before it.  When there

was  only  one  tenderer,  in  order  to  make  the  tender  more

competitive, the tender committee decided to cancel the tender and

invited a fresh tender and the decision of  the appellant  did  not

suffer from any arbitrariness or unreasonableness.   

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15. The appellant claims that the decision of re-tendering

was  in  the  light  of  the  restrictive  nature  of  the  conditions

introduced  in  the  NIT  in  departure  from  the  SBD  and  was  in

consonance with clause 4.18(d) of CVC Guidelines.  Clause 4.18 of

CVC Guidelines reads as under:-

“4.18. Re-tendering- Retendering may be considered by the TPC/CFA with utmost caution, under the following circumstances: (a)  Offer do not confirm to essential specification  (b)Wherever there are major changes in specification and quantity,

which may have considerable impact on the price. (c) Prices quoted are unreasonably high with reference to assessed

price or there is evidence of a sudden slump in prices. (d)There  may  be  cases  when  the  lack  of  competition  is  due  to

restrictive  specification,  which  do  not  permit  many  vendors  to participate.  The CFA must consider if there are reasons for review of  specification  of  the  item  to  facilitate  wider  competition. Re-tendering will be done only after approval of IFA and CFA in all cases.”

Respondent, on the other hand, submits that the present case is

not guided by clause 4.18(d) of CVC Guidelines rather it is guided

by clause 4.17 and therefore cancellation of tender invoking clause

4.18(d)  is  arbitrary  and  erroneous.  Clause  4.17  of  the  CVC

Guidelines reads as under:-   

“4.17.  There are cases when only a single quote or a single valid acceptable quote is received even against LTE or OTE, this results in a single vendor situation indicating lack of competition. These cases will not be treated as procurement against Single Tender Enquiry and shall be progressed as an LTE or OTE case as applicable.”

16. In  order  to  consider  the  question  whether  the

respondent’s  case  is  to  be   appreciated  under  clause  4.17   or

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clause 4.18 of the CVC Guidelines, in the impugned judgment, the

Division Bench examined the clauses that have been inserted in

the NIT in departure  from SBD i.e.  clause 4.5(A)  (a)  and clause

4.5 (A)(c).  The said clauses read as under:-  

“4.5 (A) To qualify for award of the contract,  each bidder in its name should have in the last five years as referred to in Appendix.

(a) Achieved a minimum annual turnover (in all classes of civil engineering construction  works  only)  amount  indicated  in  Appendix  in  any  one year, (usually not less than one & half times the estimated cost of the project may be kept.  However, for Turn-key & other projects where completion period is two years or more, the annual turnover may be kept  as  per  the  requirement  upto  1.50  x  Estimated  cost/years  of completion of project).

(b       …… (c) Executed  in  any  one  year,  the  minimum  quantities  of  the

following items of work as indicated Appendix. – cement concrete (including RCC and PSC).…..cum -earthwork  in  both  excavation  and  embankment(combined quantities) …………..cum - ………………… …………..cum - ………………… …………..cum (usually 50% of estimated quantity. However, for Turn-key & other projects where completion period is two years or more as per the requirement may be kept as estimated quantity/years of completion of project.)”

17. Clauses  4.5(A)(a)  and  4.5(A)(c)  have  been  found

stringent  resulting  in  request  to  the  Chief  Engineer  for  issuing

corrigendum as the above clauses added an additional qualification

of showing of quantity of work done in one project.  The Division

Bench  thereafter  examined  clauses  4.17  and  4.18  of  CVC

Guidelines and came to the conclusion as under:-

“...there  was  certainly  a  competition  within  three  companies including SOMA in which SOMA turned out to be a single vendor and therefore  it  cannot  be  said  to  be  a  case  for  retendering  on account of lack of competition due to restrictive specification. Lack

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of competition has to be construed in that manner only.  In this eventuality, it is only clause 4.17 of CVC guidelines which ought to have been invoked and not clause 4.18 of CVC guidelines as rightly held by learned Single Judge.”   

18. Admittedly, in the pre-bid meeting held on 24.03.2014,

ten  tenderers  have  participated.  After  conclusion  of  the  pre-bid

meeting  on  24.03.2014,  as  a  result  of  stringent  conditions

prescribed  in  clause  4.5(A)(a)  and 4.5(A)(c),  only  three  tenderers

could participate in the bidding process and submit their bids.  As

noticed earlier, upon scrutiny two were found non-responsive.  In

our considered view, High Court erred in presuming that there was

adequate  competition.  In  order  to  make  the  tender  more

competitive,  tender committee in its collective wisdom has taken

the decision to  cancel  and re-invite  tenders  in the light  of  SBD

norms.  As noticed earlier, the same was reiterated in a subsequent

meeting held on 09.07.2014.  While so, the High Court was not

justified to sit in judgment over the decision of tender Committee

and substitute its opinion on the cancellation of tender. Decision of

the state issuing tender notice to cancel the tender and invite fresh

tenders  could  not  have  been  interfered  with  by  the  High  Court

unless found to be mala fide or arbitrary. When the authority took

a decision to cancel the tender due to lack of adequate competition

and in order to make it more competitive, it decided to invite fresh

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tenders, it cannot be said that there is any  mala fide or want of

bona fide in such decision.  While exercising judicial review in the

matter of government contracts, the primary concern of the court is

to see whether there is any infirmity in the decision-making process

or  whether  it  is  vitiated  by  mala  fide, unreasonableness  or

arbitrariness.     

19. Observing that while exercising power of judicial review,

court  does  not  sit  as  appellate  court  over  the  decision  of  the

government but merely reviews the manner in which the decision

was made, in Tata Cellular v. Union of India (1994) 6 SCC 651, in

para (70) it was held as under:-

“70. It  cannot  be  denied  that  the  principles  of  judicial  review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism,  However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review.  Government is the guardian of the finances of the State.  It is expected to protect the financial interest of the  State.  The  right  to  refuse  the  lowest  or  any  other  tender  is always available to the Government.  But, the principles laid down in  Article  14  of  the  Constitution  have  to  be  kept  in  view  while accepting  or  refusing  a  tender.   There  can  be  no  question  of infringement of Article 14 if the Government tries to get the best person  or  the  best  quotation.   The  right  to  choose  cannot  be considered to be an arbitrary power.  Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.”

20. The  government  must  have  freedom  of  contract.  In

Master Marine Services (P)  Ltd.  v.  Metcalfe & Hodgkinson (P)  Ltd.

and Anr. (2005) 6 SCC 138, in para (12) this Court held as under:-

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“12. After  an  exhaustive  consideration  of  a  large  number  of decisions  and  standard  books  on  administrative  law,  the  Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.  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. The Government must have freedom of contract. In other words, 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 must not only be tested by the application of Wednesbury principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also  pointed  out  that  quashing  decisions  may  impose  heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (See para 113 of the Report, SCC para 94.)”

The court does not have the expertise to correct the administrative

decision  as  held  in  Laxmikant  and  Ors.  v.  Satyawan  and  Ors.

(1996) 4 SCC 208, the government must have freedom of contract.   

21. The right  to  refuse the lowest  or  any other  tender is

always  available  to  the  government.  In  the  case  in  hand,  the

respondent has neither pleaded nor established mala fide exercise

of  power  by  the  appellant.  While  so,  the  decision  of  tender

committee  ought  not  to  have  been  interfered  with  by  the  High

Court.  In our considered view, the High Court erred in sitting in

appeal over the decision of the appellant to cancel the tender and

float a fresh tender.  Equally, the High Court was not right in going

into the financial implication of a fresh tender.   

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22. Having  addressed  the  correctness  of  reasonings

recorded by the High Court,  it  is  important to  note  one further

aspect.  When the  SLP  came up  for  hearing,  by  an  order  dated

10.08.2015,  while  granting  interim stay  on the  operation of  the

impugned judgment, this Court directed that the appellants shall

be  free  to  invite  fresh  tenders  and  process  the  same,  but  no

allotment shall  be  made without permission of  this  Court.   The

appellant-state has filed an additional document stating that about

20,421.43 acre of land is to be acquired under the “Right to Fair

Compensation  and  Transparency  in  Land  Acquisition

Rehabilitation and Resettlement Act, 2013” which came into force

on  01.01.2014.  Section  41  of  the  said  Act  states  that  no

acquisition  of  land  as  far  as  possible  could  be  made  in  the

Scheduled Area.  If it is necessary, it should be done only as per

last resort.  It also states that land in Scheduled Areas can only be

acquired with the prior consent of Gram Sabha or Panchayats or

the autonomous District Councils.  The learned Attorney General

submitted that the entire sub-mergence area of the proposed Icha

Dam is in the scheduled area and the remaining land for Icha Dam

can be acquired only with the prior consent of the Gram Sabha of

the  affected  villages.   It  is  further  stated  that  the  issue  was

discussed  in  the  meeting  of  Tribal  Advisory  Council  held  on 16

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27.09.2014  and  that  Tribal  Advisory  Council  and  the

sub-committee opined that the construction of Icha-Kharkai Dam

may be cancelled.  Learned Attorney General therefore submitted

that there are some issues which need to be resolved before floating

a fresh tender of Icha dam. The impugned judgment of the High

Court is liable to be set aside.   

23. In the result, the impugned judgment of the High Court

of Jharkhand is set aside and this appeal is allowed.  No costs.

…………………….CJI.     (T.S. THAKUR)

……………………….J.        (R. BANUMATHI)

New Delhi; July 12, 2016     

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