of Education & Ors Vs. Educomp Datamatics Ltd. & Ors  Insc 149 (10 March 2004)
Lahoti & Ashok Bhan Bhan, J.
core point which calls for determination in these appeals is the extent of
judicial review permissible in exercise of jurisdiction under Article 226 of
the Constitution to the terms of tender prescribing eligibility criteria.
the High Court could change the terms incorporated in the tender notice on the
ground of its being inappropriate and that the objective would be better served
by adopting a different eligibility criteria? Directorate of Education,
Government of National Capital Territory of Delhi, appellants herein, took a
decision to establish computer labs in the National Capital Territory area in all government schools by the year 2003 in
collaboration with private sector. Under the scheme evolved (computer education
project), the education department is to provide functional literacy to the
students from class VIth to Xth and teaching of computer science and
informatics practices subjects to plus two stage, as per CBSE syllabus.
first phase for the year 2000-2001, 115 schools were taken up for imparting
computer education. Tenders were called from the firms having a turnover of Rs.
2 crores. As per terms of tender notice the firm was to provide hardware to
establish the lab in the concerned schools. The total contract was for a sum of
Rs.14.62 crores. Since the lowest tenderer was not in a position to carry out
the project in 115 schools, the contract was divided amongst four parties. In
the year 2001-2002 the turn over clause was amended, instead Rs. 2 crores the
turn over of Rs. 5 crores was prescribed.
of the several representations filed the tender was cancelled and fresh tenders
were invited from the firms having a turnover of Rs. 2 crores or above. The
tender was for 275 schools, the total cost of the project being approximately Rs.
30 crores. The lowest tenderer was again not in a position to take up the
entire project. The other seven tenderers agreed to lower their prices to bring
it at par with the rate of the lowest tenderer.
the contract had to be distributed amongst eight parties, i.e., 35 schools each
to seven parties and 28 to one party. For the final phase of 2002-2003 the tenders
were called for all the 748 schools. The cost of project was approximately Rs.
100 crores. Because of the difficulty faced in the earlier years that the
lowest tenderers were not able to implement the entire project, the government
took a policy decision to deal with one company having financial capacity to
take up such a project instead of dealing with a number of small companies
which were unable to take up the entire project individually. Accordingly,
Government took a decision to invite tenders from firms having a turnover of Rs.
20 crores or more for the last three financial years ending with 31.3.2002. The
decision was taken to provide quality education which was the top priority of
the department as it was felt that it would be easier for the department to
deal with one company which is well managed and not seven or eight who
individually are not in a position to take up the whole project compelling the
Government to distribute the contract amongst bidders at the lowest rate having
no scope to negotiate the rates any further.
by the term of clause inviting tenders from firms having a turnover of Rs. 20 crores
or more, the respondents filed writ petitions in the High Court of Judicature
petitions were heard by a Division Bench. The Bench came to the conclusion that
neither the increase in number of schools nor the quality of education to be
provided appeared to have nexus with the financial turnover of the bidder
inasmuch as the financial turnover had nothing whatsoever to do with the
computer education. It was held that the term was arbitrary and it had nothing
to do with the objective sought to be achieved, namely, the quality of
education to be imparted. That the impugned condition appeared to have been
incorporated solely with an intent to deprive a large number of companies
imparting computer education from bidding and to monopolize the same for big
companies. Accordingly, the writ petitions were allowed and the offending
clause was struck down being arbitrary and irrational.
against the aforesaid judgment of the High Court, the present appeals by way of
special leave petitions were filed. On 24th March, 2003 leave was granted and as an interim
measure, the appellants were permitted to go ahead with the processing of the
tender applications but no contract was to be awarded without taking further
orders from this court.
order was modified on 14th
April, 2003. It was
directed that the tender bids of all the respondents be considered without
reference to the financial qualification of the turnover of Rs. 20 crores.
However, the acceptance of the bid was kept in abeyance till the passing of the
final order in the appeals.
compliance with the aforesaid directions letters were sent to all the 13
bidders/parties for opening of the commercial bids on 30th July, 2003 at 3.30 P.M.. Technical bids of four companies, i.e., Tata Infotech
Ltd., Educomp Datamatics Ltd., UPTEC Computer Consultancy Ltd., Sterlite
Foundations were rejected after scrutiny by the tender opening committee as
these firms did not fulfill the criteria laid in the tender notice. The
financial bids of other 9 companies were opened and the bid given by M/s SSI
Limited was found to be the lowest. Interlocutory Application Nos. 1 to 5 of
2003 were filed for placing these facts on record. Facts which emerged from the
opening of the bids were that the four companies having a turnover of Rs. 20 crores
or above participated in the tender and M/s SSI Limited with a turnover of more
than Rs. 20 crores was the lowest amongst them.
N Raval, learned Solicitor General of India appearing for the appellants
contended that the terms of tender prescribing the eligibility criteria are not
subject to judicial review in view of a number of decisions of this Court. That
the High Court while exercising jurisdiction under Article 226 of the
Constitution does not sit as a Court of Appeal, it merely reviews the manner in
which the decision has been taken. It was well settled that the Courts in
exercise of jurisdiction under Article 226 do not transgress into the field of
policy decisions taken by the government. As against this, the learned counsel
appearing for the respondents supported the impugned judgment and the reasons
recorded therein. Faced with the situation that SSI Ltd. having a turnover of
more than 20 crores was the lowest tenderer and capable of taking up the entire
project on its own, it was argued that fresh tenders should be invited because
of the fall in price in the computer hardware and lowering of duty on the
imports of the computers or its components.
well settled now that the courts can scrutinise the award of the contracts by
the government or its agencies in exercise of its powers of judicial review to
prevent arbitrariness or favoritism. However, there are inherent limitations in
the exercise of the power of judicial review in such matters. The point as to
the extent of judicial review permissible in contractual matters while inviting
bids by issuing tenders has been examined in depth by this Court in Tata
Cellular vs. Union of India [1994 (6) SCC 651]. After examining the entire case
law the following principles have been deduced.
The principles deducible from the above are:
The modern trend points to judicial restraint in administrative action.
The court does not sit as a court of appeal but merely reviews the manner in
which the decision was made.
The court does not have the expertise to correct the administrative decision.
If a review of the administrative decision is permitted it will be substituting
its own decision, without the necessary expertise which itself may be fallible.
The terms of the invitation to tender cannot be open to judicial scrutiny
because the invitation to tender is in the realm of contract. Normally
speaking, the decision to accept the tender or award the contract is reached by
process of negotiations through several tiers. More often than not, such
decisions are made qualitatively by experts.
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 (including its other facts pointed out above) 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 lead to increased and unbudgeted expenditure.
supplied] In Air India Limited vs. Cochin International Airport Limited [2000
(2) SCC 617], this Court observed:
award of a contract, whether it is by a private party or by a public body or
the State, is essentially a commercial transaction. In arriving at a commercial
decision considerations which are paramount are commercial considerations. The
State can choose its own method to arrive at a decision. It can fix its own
terms of invitation to tender and that is not open to judicial scrutiny. It can
enter into negotiations before finally deciding to accept one of the offers
made to it. Price need not always be the sole criterion for awarding a
contract. It is free to grant any relaxation, for bona fide reasons, if the
tender conditions permit such a relaxation. It may not accept the offer even
though it happens to be the highest or the lowest. But the State, its
corporations, instrumentalities and agencies are bound to adhere to the norms,
standards and procedures laid down by them and cannot depart from them
arbitrarily. Though that decision is not amenable to judicial review, the court
can examine the decision-making process and interfere if it is found vitiated
by mala fides, unreasonableness and arbitrariness." [Emphasis supplied]
This principle was again re-stated by this Court in Monarch Infrastructure (P)
Ltd. vs. Commissioner, Ulhasnagar Municipal Corporation and Others [2000 (5)
SCC 287]. It was held that the terms and conditions in the tender are
prescribed by the government bearing in mind the nature of contract and in such
matters the authority calling for the tender is the best judge to prescribe the
terms and conditions of the tender. It is not for the courts to say whether the
conditions prescribed in the tender under consideration were better than the
one prescribed in the earlier tender invitations.
clearly been held in these decisions that the terms of the invitation to tender
are not open to judicial scrutiny the same being in the realm of contract. That
the government must have a free hand in setting the terms of the tender. It
must have reasonable play in its joints as a necessary concomitant for an
administrative body in an administrative sphere. The courts would interfere
with the administrative policy decision only if it is arbitrary,
discriminatory, mala fide or actuated by bias. It is entitled to pragmatic
adjustments which may be called for by the particular circumstances. The courts
cannot strike down the terms of the tender prescribed by the government because
it feels that some other terms in the tender would have been fair, wiser or
logical. The courts can interfere only if the policy decision is arbitrary,
discriminatory or mala fide.
of Education, Government of NCT of Delhi had invited open tender with
prescribed eligibility criteria in general terms and conditions under tender
document for leasing of supply, installation and commissioning of computer
systems, peripherals and provision of computer education services in various
government/ government aided senior secondary, secondary and middle schools
under the Directorate of Education, Delhi. In the year 2002-2003, 748 schools were to be covered.
the expenditure involved per annum was to the tune of Rs. 100 crores the
competent authority took a decision after consulting the technical advisory
committee for finalisation of the terms and conditions of the tender documents
providing therein that tenders be invited from firms having a turnover of more
than Rs. 20 crores over the last three years. The hardware cost itself was to
be Rs.40-45 crores. The government introduced the criteria of turnover of Rs.
20 crores to enable the companies with real competence having financial
stability and capacity to participate in the tender particularly in view of the
past experience. We do not agree with the view taken by the High Court that the
term providing a turnover of at least Rs. 20 crores did not have a nexus with
either the increase in the number of schools or the quality of education to be
provided. Because of the increase in the number of schools the hardware cost
itself went upto Rs. 40-50 crores.
total cost of the project was more than 100 crores. A company having a turnover
of Rs. 2 crores may not have the financial viability to implement such a
project. As a matter of policy government took a conscious decision to deal
with one firm having financial capacity to take up such a big project instead
of dealing with multiple small companies which is a relevant consideration
while awarding such a big project. Moreover, it was for the authority to set
the terms of the tender. The courts would not interfere with the terms of the
tender notice unless it was shown to be either arbitrary or discriminatory or
actuated by malice. While exercising the power of judicial review of the terms
of the tender notice the court cannot say that the terms of the earlier tender
notice would serve the purpose sought to be achieved better than the terms of
tender notice under consideration and order change in them, unless it is of the
opinion that the terms were either arbitrary or discriminatory or actuated by
malice. The provision of the terms inviting tenders from firms having a
turnover of more than Rs. 20 crores has not been shown to be either arbitrary
or discriminatory or actuated by malice.
SSI having a turnover of more than Rs. 20 crores was the lowest bidder. Faced
with the situation that the bids given by the respondents were not competitive
with the bid given by SSI Limited, learned counsel for the respondents
contended that because of the fall in price in the computer hardware and
lowering of duty on the imports of the computers or its components the
government should invite fresh bids. It is not for us to comment as to what
course is to be adopted by the appellants, in the changed circumstances
attributable to lapse of time. It is for them to decide whether to continue
with the tenders already floated, if necessary be making negotiations so as to
bring down the rates quoted or to invite fresh tenders.
the reasons stated above, the appeals are accepted. The judgment of the High
Court is set aside and the writ petitions filed by the respondents are
dismissed with no order as to costs.