"Court Is Not A Pedantic School Master" – Bombay High Court Dismisses BVG's Plea Challenging Civic Body's 'No-Blacklister' Condition In Hospital Tender

A division bench of Chief Justice Dipankar Datta and Justice GS Kulkarni ruled that the Navi Mumbai Municipal Corporation (NMMC) was entitled to impose such a condition as the "terms of invitation to tender" were not open to judicial scrutiny and the condition is neither illegal nor arbitrary.

To provide for such condition as a pre-qualification criterion is a commercial decision taken by the Corporation… The Court would not have any expertise either to question the commercial efficacy or the commercial wisdom vested with the Corporation to stipulate such condition qua the tender in question.

The bench held that it was fallacious on BVG's part to hold such a condition as implied blacklisting, as, the condition was neither applicable only to them nor were they debarred from participating in other tenders of the Corporation.

The condition is applicable to any prospective bidder who may have been awarded such a contract by any other entity and who has suffered a termination on account of unsatisfactory services.

The bench observed that blacklisting is a method/phenomenon by which the tendering authority intends not to enter into a contractual relationship with a party which has civil consequences. Moreover, a contractor cannot be blacklisted without giving him a chance to be heard in adherence to the principles of natural justice.

The bench referred to the following judgements to explain the concept of blacklisting:-

Erusian Equipment and Chemicals Ltd. Vs. State of West Bengal 1975 (1) SCC 70; Southern Painters Vs. Fertilisers and Chemicals Travancore Ltd., 1994 Suppl (2) SCC 699, and Gorkha Security Services. Vs. Government (NCT OF DELHI) & Ors., (2014) 9 SCC 105

Facts of the case

BVG was awarded a contract for "Mechanised Housekeeping & Multipurpose (Patient Care) Services" for its health centres – three general hospitals and three maternity and child health centres – in 2016, for a period of five years. However, a show cause notice was issued within ten months and after a detailed hearing the contract was terminated.

BVG, however, challenged the pre-qualification criteria/eligibility condition in the fresh tender issued for the same work, in two petitions.

Criteria

"The contractors whose work contract is terminated due to unsatisfactory services or are black listed would not be eligible to participate in the tender".

BVG, represented by Senior Advocate VA Thorat, argued that the qualification criterion must be declared illegal, as, by virtue of such a condition, the petitioner stood prohibited from participating in the tender in question issued by the Corporation. He argued that the "real effect" of the condition is that the petitioner stands blacklisted, without being heard.

Advocate Sandeep Marne, on behalf of the Corporation, submitted that the Corporation being the tendering authority, had the freedom to insert a tender condition which is in the best interest of the Corporation, hence there is nothing arbitrary and/or illegal to impose such a condition.

Observations

The bench held that the power of judicial review in contractual matters concerning the State, is limited. The concern of the Court in exercising such powers would be to prevent any arbitrariness, discrimination, malafides in the tender process, so as to ensure adherence of fairness in the State action.

It is not the function of the Court to act as a super board, or with the zeal of a pedantic school master substituting its judgment for that of the administration. The duty of the court is to confine itself to the question of legality of the tender process on the touchstone of Article 14 of the Constitution.

The bench said that 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 must not only be tested by the application of Wednesbury principle of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. Quashing decisions may impose heavy administrative burden on the administration and would lead to increased and unbudgeted expenditure.

The bench held that the Court does not sit as an appellate authority over the tendering authority, but merely reviews the manner in which the decision was made.

The court further held that It is also settled that the "terms of the invitation to tender" cannot be open to judicial scrutiny as an invitation to tender is in the realm of contract.

The bench therefore dismissed both of BVG's contentions; first challenging such a condition, second that it resulted in implied blacklisting.