Corruption Charges Against Officers Of Tender Scrutiny Committee Cannot Result In Cancellation Of Valid Tender: Karnataka High Court

Justice M Nagaprasanna allowed the petition filed by M/s Allengers Medical Systems Limited and directed Karnataka State Medical Supplies Corporation Limited to issue purchase order for portable X-ray machines in favour of the company pursuant to the Tender Notification dated 27-10-2021 and award of tender in its favour, within 2 weeks.

The bench said,

“Once the award is notified and contract is executed it becomes a concluded process of tender. The tender then can be cancelled only on violation of conditions of agreement or award by the tenderer. Any unilateral cancellation of tender in the midstream or after execution of the contract cannot be countenanced, more particularly, when the contracting authority is a State under Article 12 of the Constitution of India.”

In 2021, the Corporation issued a notice inviting tenders for procurement of 100mA Portable X-ray machines. The petitioner submitted the tender along with other bidders.

After scrutiny by the Tender Scrutiny Committee, the petitioner was declared to be technically qualified and later emerged as the successful bidder. Later, a notification was issued by the Corporation notifying the award of contract in favour of the petitioner on 02-03-2022.

Pursuant to the notification of award, an agreement was signed between the parties and thereafter, a demand draft for supply of 165 Portable X-ray machines of 100mA was submitted by the petitioner for issuance of purchase order and a separate agreement for such purchase was also entered into between the parties. In spite of all these, no purchase order was issued as was required, in terms of the tender notification and the agreement entered into between the parties.

The petitioner approached the court and on issuance of notice. the corporation issued a communication dated November 3, 2022, informing about cancellation of tender order. It argued that that in the hope of getting a purchase order, it has procured all the machines and kept ready for them distribution and has spent several lakhs in the process.

The government defended its action by saying that if there is fraud involved in a tender, the tender can be cancelled at any time. It claimed there are certain charges of corruption in the declaration of the petitioner to be the successful bidder, which came to light later and owing to the complaint, a decision was taken to cancel the tender.

However, it was admitted that the petitioner was declared to be the successful bidder and a contract was also entered into for the purpose of distribution of portable x-ray machines with the petitioner.

The bench said if there are corruption charges against officers of the Tender Scrutiny Committee, it is for the appropriate authority to take action. It cannot result in cancellation of a valid tender, it added

“A notice inviting tender can be withdrawn or cancelled only upto a particular stage. Once it crosses the said stage, any unilateral cancellation would be an arbitrary muexercise of power," said the court.

Observing that Article 14 of the Constitution of India mandates that every action of the State should pass through the golden thread of non-arbitrariness, the court said the Corporation is a State under Article 12 of the Constitution of India.

“Being a State it would not behove of the 2nd respondent to act arbitrarily," said the court. 

The court said the cancelling of the tender — after the tender process was concluded, award was notified and contract was signed with the petitioner — "would amount to arbitrary exercise of power and violative of tenets of Article 14 of the Constitution of India.”

Case Title: M/s Allengers Medical Systems Ltd And State of Karnataka

Case No: WRIT PETITION No.17634 OF 2022

Citation: 2023 LiveLaw (Kar) 33

Date of Order: 25--01-2023

Appearance: Advocate K Satish for petitioner.

AGA M.Vinod Kumar for R-1, R-3 TO R-5.

Advocate Sumana Baliga for R2.