ELEKTRON LIGHTING SYSTEMS PVT. LTD. AND ANR. versus SHAH INVESTMENTS FINANCIAL DEVELOPMENTS AND CONSULTANTS PVT.LTD AND ORS. ETC.

Citation: [2015] 14 S.C.R. 91 · Decided: 20-11-2015 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Case Partly allowed

Judgment (excerpt)

[2015] 14 S.C.R. 91 
ELEKTRON LIGHTING SYSTEMS PVT. LTD. AND ANR. 
A 
v . 
. SHAH INVESTMENTS FINANCIAL DEVELOPMENTS 
AND CONSULTANTS PVT.LTD AND ORS. ETC. 
(Civil Appeal Nos. 9151-9152 of 2015) 
NOVEMBER 20, 2015 
[DIPAK MISRA AND PRAFULLA C. PANT, JJ.] 
B 
Contract - Online tenders invited by Municipal c 
Corporation for replacement of existing street lights by LED 
fittings with refurbishment of street light infrastructure on Build, 
Operate and Transfer (BOT) basis- Thereafter the appellant 
(one of the bidders) offered to reduce its price bid if exclusive 
advertising rights were given to it - Technical bid of the D 
appellant accepted while that of the other bidder rejected -
Price bid of the appellant was negotiated - Work order issued 
to the appellant - Unsuccessful bidder challenged the grant 
of work order by filing writ petition - High Court quashed the 
work order - On appeal, held: The power u!Art. 226 of the E 
constitution should be cautiously exercised in the matters 
of awarding contracts keeping in mind the public interest- In 
the facts of the case, High Court erred in holding that work 
order was illegally given to the appellants - However, the 
Municipal Corporation was not justified in giving the F 
advertisement rights to the appellants without inviting tender 
for it- The grant of advertising rights was not part of the work 
for which tender was floated and was severable applying the 
doctrine of severability contained in s. 57 of Contract Act -
Therefore, advertising rights given in the work contract shall G 
stand quashed while rest of the work contract is upheld ~ 
Constitution of India, 1950 -Article 226 - Judicia(Review-
Scope of - Contract Act, 1872 - s, 57 -
Doctrine of 
· severability. 
H 
91 
92 
SUPREME COURT REPORTS 
[2015] 14 S.C.R. 
A 
Judicial Review- Scope of- Jn administrative decisions 
B 
and exercise of powers in awarding contracts - Discussed. 
Doctrines/Principles - Doctrine of severability -
Applicability of. 
Partly allowing the appeals, the Court 
HELD: 1. The scope of judicial review of 
administrative decisions and exercise of powers 
awarding contracts are: (1) The modern trend points to 
c judicial restraint in administrative action. (2) The Court 
does not sit as a court of appeal but merely reviews the 
manner in which the decision was made. (3) The Court 
does not have the expertise to correct the administrative 
decision. If a review of the administrative decision is 
D permitted, it will be substituting its own decision, without 
the necessary expertise which itself may be fallible. (4) 
The terms of the invitation to tender cannot be open to 
judicial scrutiny. (5) The Government must have freedom 
of contract. However, the decision must not only be 
E tested by the application of Wednesbury principle of 
·reasonableness but must be free from arbitrariness not 
affected by bias or actuated by ma/a tides. (6) Quashing 
decisions may impose heavy administrative burden on 
the administration and lead to increased and 
F unbudgeted expenditure." The discretionary power 
under Article 226 of the Constitution of India should be 
cautiously exercised in the matters of awarding 
contracts keeping in mind the public interest. [Paras 12, 
G 13] [ 107-G; 108-A-H] 
Tata Cellular v. Union of India (1994) 6 SCC 651 
: 1994(2)Suppl. SCR122;AirlndiaLtd. v. Cochin 
International Airport Ltd. And Ors. (2000) 2 SCC 
617: 2000 (1) SCR 505; Jagdish Manda/ v. State 
H 
ofOrissa and Ors. (2007) 14 SCC 517: 2006 (10) 
ELEKTRON LIGHTING SYSTEMS v. SHAH INVESTMENTS 
93 
FINANCIAL DEVELOPMENTS & CONSULTANTS 
Suppl. SCR 606 - relied on. 
Sanjay Kumar Shukla v. Bharat Petroleum 
Corporation Limited (2014) 3 SCC 493 : 2014 
(1) SCR 959 - referred to. 
A 
2.1 The High Court has erred in law in holding that B 
the work order was illegally given to the appellants In 
respect of replacement of street lights by LED fittings 
and refurbishment of street light infrastructure on BOT 
basis. [Para 19] [113-A-B] 
c 
2.2 The High Court took adverse view against the 
appellant on the ground that the MOU between the 
appellants and LED manufacturer was not placed on the 
record. The High Court failed to notice that none of writ 
petitioners had challenged acceptance of appellants' bid · D 
on that ground, and the appellants had no opportunity 
to place the same on the record of the court. The MOU 
was part of tender bid, and finds its mention in "Tender 
. Committee Evaluation Report". [Para 16] [111~

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