Supreme Court of India· 25 November 2024

In exercising judicial review over a decision annulling a tender process, may a court sit in appeal over the government's decision where mala fide exercise of power is neither pleaded nor established?

INDORE VIKAS PRAADHIKARAN (IDA) & ANR v. SHRI HUMUD JAIN SAMAJ TRUST & ANR

SLP (Civil) No. 9940 of 2022 · SLP (Civil) No. 9940 of 2022
Coram: Bela M. Trivedi; Satish Chandra Sharma

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Answer

No. While exercising power of judicial review, the Court does not sit as an appellate Court over the decision of the government but merely reviews the manner in which the decision was made. Where mala fide exercise of power has neither been pleaded nor established, the decision of the Tender Committee ought not to have been interfered with, and the High Court errs in sitting in appeal over the decision to cancel the tender and float a fresh tender.

Headnote

Judicial review of tender process — Notice Inviting Tender — Highest bidder — No vested right — Concluded contract — Cancellation of bid — Fair treatment — Freedom of contract — Judicial review of tender — Highest bidder — no vested right without allotment letter — Held: The highest bidder has no vested right to have the auction concluded in his favour; in the absence of an allotment letter and acceptance of the highest bid there is no concluded contract, and no relief could have been granted. (¶12, 14) Judicial review of tender — Annulment of tender — no interference absent mala fide exercise of power — Held further: While exercising the power of judicial review the Court does not sit as an appellate Court over the decision of the government but merely reviews the manner in which the decision was made; absent mala fide exercise of power, the Tender Committee's decision stands. (¶13) Judicial review of tender — Writ court fixing base price — beyond the function of the High Court — Held further: A writ court cannot fix the base price or modify the offer and direct allotment; that virtually amounts to confirmation of the auction in favour of the bidder, which is not the function of the High Court. (¶13, 14) Judicial review of tender — Bidder's rights — fair treatment, no further negotiation — Held further: A bidder has no right in the matter of bid except of fair treatment and cannot insist for further negotiation; where the bid was rejected for valid and cogent reasons the interference was unwarranted. Appeal allowed. (¶14, 17)

In the Court's own words

Paragraph 12In the present case, the undisputed facts reveal that first NIT was issued on 17.07.2020 and respondent No. 1 was certainly the highest bidder by offering a bid of Rs. 25,671.90/- per square meter. The Tender Evaluation Committee after examining the bid arrived at a conclusion to cancel the tender as it came to its notice that an outstanding property tax demand amounting to Rs. 1,25,82,262/- was not taken into account while fixing the base price. It was resolved to issue a fresh NIT and, therefore, a fresh NIT was issued on 17.11.2021 and for the reasons best known to the respondent No. 1, it did not participate in the second NIT and instead preferred a writ petition on 24.11.2021 before the High Court of Madhya Pradesh. Learned Single Judge was justified in dismissing the writ petition on the ground that merely by offering highest bid, the respondent No.1 did not acquire any vested right for the execution of the contract in its favour. The Division Bench of the High Court, however, allowed the writ appeal and has gone to the extent in directing the IDA to accept the offer of respondent No. 1 which was made before the Court for an amount of Rs. 26,000/- per square meter in respect of the land in question, and further directing IDA to allot the land in question to respondent No.1. This Court in the case of State of Jharkhand and others Vs. CWE-SOMA Consortium (supra) while dealing with the similar issue of annulment of tender process, in paras 21, 22 and 23 has held as under:

Paragraph 13This Court in the aforesaid case has held that while exercising power of judicial review, the Court does not sit as an appellate Court over the decision of the government but merely reviews the manner in which the decision was made [Tata Cellular v. Union of India, (1994) 6 SCC 651]. In the considered opinion of this Court, the Division Bench should not have interfered in the matter and could not have gone to the extent of fixing the base price/modifying the offer made by respondent and, therefore, in light of the aforesaid judgment as the High Court has virtually passed an order sitting in appeal over the decision of the government in absence of any mala fide exercise of power by the IDA, the judgment passed by the Division Bench of the High Court deserves to be set aside and is, accordingly set aside. This Court in the case of Haryana Urban Development Authority Vs. Orchid Infrastructure Developers Pvt. Ltd. (supra) again dealing with the cancellation of a bid of the highest bidder, in paragraphs 12,13,14,15, 16 and 30 has held as under:

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Also decided in this judgment

Does the highest bidder in a tender process acquire a vested right to have the auction concluded in his favour where no allotment letter has been issued and the bid has not been accepted?Can a High Court, hearing a writ appeal, fix the base price of the land and direct the authority to allot it to the erstwhile highest bidder?Where a Notice Inviting Tender empowers the authority to accept or reject any or all bids, can a bidder insist on further negotiation of his bid?Is the cancellation of an auction after a bidder has been declared the highest bidder manifestly arbitrary, or does it depend on the reasons for cancellation?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections