Authority Must Have Valid Reasons For Accepting/ Rejecting Bids Even If Tender Clause Stipulates Otherwise: Delhi High Court

The Delhi High Court recently observed that merely because a clause in the tender stipulates that the bids may be accepted or rejected without assigning any reasons, does not mean that the tender authority can act arbitrarily. It must have valid reasons for exercising its discretion.

The division bench comprising of Justices Vipin Sanghi and Jasmeet Singh said,

"No doubt, the tender-inviting authority cannot act arbitrarily or whimsically, or out of mala fides in the matter of awarding or cancelling the tendering process. Even the clause which stipulates that they may not assign reasons for not accepting any bid, or rejecting the bids, does not mean that they should not have any valid reasons to justify their conduct."

The petitioner had preferred the present writ petition being aggrieved by the cancellation of the tender in question, issued by the respondent-Airports Economic Regulatory Authority of India.

In this case, the petitioners had placed a bid in relation to tendering of consultancy services for the Sardar Vallabhai Patel International Airport, Ahmedabad. The petitioner emerged as the L-1 bidder and even offered a 5% discount on the tender price but the respondent went on to cancel the tender notice. The petitioner alleged that the cancellation is arbitrary, whimsical and mala fide.

Its grievance was that by cancelling the tender and re-inviting the bids, the respondent had put the petitioner to disadvantage, in as much, as, the petitioner's earlier bid became public, leading to unhealthy competition. it was submitted that the bidder, who has been found to be the L-1 bidder in the fresh tendering process, did not even participate in the tender in question. This enhances the possibility of back-door entry.

At the outset, the Court noted that the tender in question clearly stipulates that the respondent is not bound to accept any bid, and it may reject bids without assigning any reason

It expressly reserves the right of the respondent not to select any bidder; not to appoint a selected bidder, and; to reject all or any of the proposals/ bids without assigning any reasons.

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