If Tender Conditions/ Award Of Contract Is In Public Interest, Court Can't Interfere Even If Procedural Aberration/ Error In Assessment Made Out: Delhi HC

"If the decision relating to terms or award of contract is bona fide and in public interest, Courts shall not exercise its power of judicial review to interfere, even if a procedural aberration or error in assessment or prejudice to a tender is made out," a division bench comprising Chief Justice SC Sharma and Justice Subramonium Prasad held.

The observation comes in a writ petition filed by the Delhi Electrical Contractor Welfare Association seeking to quash the Notice Inviting Tenders (NITs) issued by BSES Yamuna Power Limited and BSES Rajdhani Power Limited for award of Electricity Distribution Network.

The case of the Petitioner is that the NITs between 2017 to 2021 imposed commercial requirement that the bidders must have a minimum average annual turnover ranging from Rs.2 to 6 Crores in the last three financial years.

However, the Impugned NITs imposed a more onerous commercial requirement on bidders by increasing the minimum annual average turnover to Rs.70 Crores or above in the preceding three financial years.

Senior Advocate Jayant Mehta appearing for the Petitioner-Association argued that the Respondents have failed to provide any rational justification for this multi-fold increase in the qualification criterion and the same was alleged to be arbitrary and violative of Article 14 of the Constitution.

Senior Advocate Sandeep Sethi appearing for the Respondent submitted that the previously floated tenders were based on division wise requirements. Previously, the Respondent No. 2 had 26 divisions for which it entered into 41 contracts with 34 vendors and Respondent No. 1 had 14 divisions for which it entered into 38 contracts with 25 vendors.

He submitted that in the Impugned NITs, the contract would be awarded based on applicable Circles of the Respondents. In this regard, there are three circles in Respondent No. 1 and four circles in Respondent No. 2.

Findings

At the outset, the Court observed that the jurisdiction of Courts to interfere with conditions restricting the tender to the contractors/vendors having a higher turnover only comes into play when the condition is completely arbitrary and reasonable.

"It is well settled that while exercising the jurisdiction under Article 226 of the Constitution of India, Courts are slow in interfering in the tender issuance process. A narrow scope for interference has been carved out to prevent arbitrariness, irrationality, unreasonableness and favouritism in the administrative actions of the State."

Coming to the merits of the case, the Court observed that the object sought to be achieved by the impugned Condition is to ensure that organisations with the requisite financial wherewithal and technological know-how are chosen in the Impugned NITs, in order to provide better services to consumers.

It noted that vendors, with whom contracts had been entered into by the Respondents, prior to the issuance of the present Impugned NITs, had limited financial resources, and experience, lacked exposure to the latest trends in the industry and their engineers were inadequately trained. Due to this, the Respondents themselves had to train the manpower provided by such vendors.

Further, it noted that restricting the tender to the contractors/vendors having a higher turnover would encourage technological advancements, deployment of well-trained workforce, skill upgradation.

Thus, it held that the Respondents have appropriately justified and explained the rationale and need for the said condition, which increases the financial qualifying criteria of a bidder to an annual average turnover of Rs. 70 Crores, in the preceding three financial years.

Reliance was placed on Directorate of Education v. Educomp Datamatics Ltd., (2004) 4 SCC 19, where the Supreme Court dealt with a similar scenario in which the government took a policy decision to deal with one company having the requisite financial capacity to take up the entire project, as opposed to dealing with a number of small companies.

Accordingly, the High Court held that Judicial review should not be invoked to protect private interest at the cost of public good or to decide contractual disputes, and dismissed the petition.

Case Title: Delhi Electrical Contractor Welfare Association v. BSES Yamuna Power Limited & Anr.