Lowest Bidder Doesn't Enjoy Indefeasible Right To Be Awarded Contract, Can't Approach Court Against Tender Cancellation For Valid Reasons: Kerala HC

The Kerala High Court on Wednesday held that even if a tender process had been validly initiated, the Municipality is vested with the authority to cancel the said process for valid reasons, and call for fresh tenders. It added that there can be no cause for illegality or impropriety being imputed to the same, if the said decision is taken after considering the various complaints before it. 

The Single Bench of Justice T.R. Ravi observed,

"When the law does not recognise any indefeasible right in a lowest bidder to be awarded a contract, the petitioners cannot be heard to contend that they being the lowest bidders in a tender which was cancelled for specific reasons, are entitled to approach the Court under Article 226 of the Constitution for annulling the decision to cancel and request for directions to award the contract in their favour". 

The petitioners herein were contractors who had participated in a tender floated on behalf of the Mukkam Municipality (1st respondent herein). The bids of the petitioners were decided to be accepted after conducting appropriate negotiations and the 3rd respondent was authorized to negotiate with the contractors. 

However, the Mukkam Municipality (2nd respondent) cancelled the approval of 7 of the 29 works, on perusing certain complaints in this regard.

The petitioners represented by Advocates Abu Joseph Kuruvathazha, K.S. Archana, Mohammed Shafi, and M.G. Sreejith, submitted that the reasons for cancellation was baseless and on getting to know that the respondents would be retendering the cancelled works, the petitioners filed a writ before the High Court challenging the cancellation of tenders.

Respondents contended that the instant writ petition was not maintainable since there was no violation of any statutory right of the petitioners nor any infraction of any vested right in relation to a contract. It was submitted that the tender was cancelled due to valid reasons and no formal agreements had been entered into with the petitioners, and hence no indefeasible right had been vested in the petitioners.

It was submitted that the Council had approved the entire work subject to negotiation, without taking note of the manipulation and foul play that had been involved. Thereafter, the manipulation came to the notice of the Council upon receipt of complaints from other contractors, and it was in these circumstances that the 7 items from 23 to 29 was decided to be canceled. It was added that the Municipality was indeed vested with the authority to cancel the tender and that no contractor could have any right merely because he was the lowest bidder.

The Court in the instant case, proceeded to peruse various decisions in which the scope of judicial review in tenders had been elucidated. In Bharat Coking Coal Ltd. v. AMR Dev Prabha (2020), the Apex Court had noted that constitutional courts were only concerned with the lawfulness of a decision and not its soundness and that the courts ought not to sit in appeal over decisions of executive authorities or instrumentalities.

In State of Punjab v. Mehar Din (2022), the Apex Court had observed that the superior courts ought not to interfere in matters of tenders unless substantial public interest was involved, or the transaction was mala fide. It was held that the courts should consider primarily the question whether there has been any infirmity in the decision-making process. Further, in Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016), it was held by the Apex Court that interference in matters relating to tender was permissible only if the decision-making process was mala fide or intended to favour someone. It was also held that the decision should not be interfered with unless it was so arbitrary or irrational that the Court could say that the decision was one which no responsible authority acting reasonably and in accordance with law could have reached.

The Court thus found in the instant case that although the tender process had been initiated validly, the authority of the Municipality to cancel the process for valid reasons could not be disputed. 

"It is after considering the complaints that the 1st respondent took the decision to cancel the tender process with regard to 7 items. The said decision can never be said to be arbitrary or without any material on record. So also, it cannot be said to be perverse or intended to favour some persons. There is no irrationality, illegality, unreasonableness or impropriety in cancelling the tender process and deciding to call for fresh tenders. The petitioners are not in any way prejudiced since they can participate in the fresh tender process", the Court noted in this regard. 

On these grounds, the Court found that going by the precedents in this light as well, the petitioners could not contend that they were entitled to approach the Court under Article 226 of the Constitution for annulling the decision to cancel the tender and request for directions to award the contract in their favour, and the instant petition was thus dismissed. 

Case Title: Omassery Labour Contract Co-Operative Society & Ors v. Mukkam Municipality & Ors. 

Citation: 2022 LiveLaw (Ker) 594 

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