Courts Should Not Ordinarily Interfere In Matters Relating To Tender Or Contract: Supreme Court

The Supreme Court has held that the Court should not ordinarily interfere in matters relating to tender or contract. A writ court should refrain from imposing its decision over the employer with respect to whether or not to accept the bid of a tenderer, unless something very gross or palpable is pointed out.

The Bench comprising of Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice Pamidighantam Sri Narasimha and Justice J. B. Pardiwala, while adjudicating the appeal Tata Motors Limited v The Brihan Mumbai Electric Supply & Transport Undertaking (Best) And Ors., has observed that when the Court initiates fresh tender at a stage when the contract is underway, the same consumes time and incurs losses to the public exchequer. “The financial burden/implications on the public exchequer that the State may have to meet with if the Court directs issue of a fresh tender notice, should be one of the guiding factors that the Court should keep in mind.”

BACKGROUND FACTS

In 2022, BEST floated a tender for the supply, operation and maintenance of 1400 (+50% variation) Single Decker AC Electric Buses with driver, for public transport service within Mumbai.

The Tender specified that the bidders were required to provide Single Decker Buses which can run 200 Kms in single charge without interruption in ‘actual conditions’, alongwith other specifications. TATA Motors Ltd. (“Appellant”) submitted its bid in deviation from the tender specifications. EVEY also submitted its bid in compliance with the tender specifications.

On 06.05.2022, BEST in its technical suitability evaluation held TATA Motors, to be “technically non-responsive”. TATA Motor’s bid was rejected on account of technical deviation with respect to the operating range. The bid offered by EVEY was declared to be “technically responsive” and accordingly EVEY was declared the L1 bidder.

Tata Motors filed a writ petition before the High Court, seeking quashing of the decision taken by BEST on 06.05.2022 and a direction to BEST to re-consider the bid of Tata Motors.

The High Court vide an order dated 05.07.2022 opined that the requirement for the operating range to be more than 200 Kms in a single charge in “actual conditions” was unambiguous. The High Court upheld the disqualification of TATA Motors since they failed to comply with the technical requirements of the Tender. Further, the High Court set aside the acceptance of tender of EVEY by BEST and directed BEST to proceed with fresh auction if desired.

Tata Motors and EVEY filed appeals before the Supreme Court against the order of High Court.

SUPREME COURT VERDICT

No judicial review in commercial matters unless a case of arbitrariness, mala fide, bias or irrationality is made out

The Bench opined that the Court may exercise its power of judicial review in commercial matters unless a clear-cut case of arbitrariness, mala fide, bias or irrationality is made out. While observing that many a times public sector undertakings enter into contract with private parties and the latter is not subject to writ jurisdiction, the Bench observed as under:

“One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution.”

Courts not to needlessly interfere in contracts involving technical issues

The Bench noted that the judges do not possess the necessary expertise to adjudicate technical issues beyond their domain. Restraint must be practiced in cases where the Courts are aware that their interference in technical commercial matters would incur loss to the Public Exchequer.

“The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. The courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer”, the Court held.

Court should not ordinarily interfere in matters relating to tender or contract

The Bench held that a writ court should refrain from imposing its decision over the employer with respect to whether or not to accept the bid of a tenderer, unless something very gross or palpable is pointed out. The Bench held as under:

“The court ordinarily should not interfere in matters relating to tender or contract. To set at naught the entire tender process at the stage when the contract is well underway, would not be in public interest. Initiating a fresh tender process at this stage may consume lot of time and also loss to the public exchequer to the tune of crores of rupees. The financial burden/implications on the public exchequer that the State may have to meet with if the Court directs issue of a fresh tender notice, should be one of the guiding factors that the Court should keep in mind.”

The Bench has dismissed the appeal filed by Tata Motors. The appeal filed by EVEY has been allowed. The High Court order has been partly set aside. The finding of the High Court whereby the decision of BEST to accept the tender of EVEY was set aside and directions were given to undertake fresh tender process, have been reversed by the Bench.

Case Title: Tata Motors Limited v The Brihan Mumbai Electric Supply & Transport Undertaking (Best) And Ors

Citation:  2023 LiveLaw (SC) 467

Counsel for Appellant: Dr. Abhishek Manu Singhvi (Sr. Adv.)

Counsel for Respondent: Mr. Mukul Rohatgi (Sr. Adv.)

Counsel for BEST: Mr. Tushar Mehta (Solicitor General)

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