LexM/S. MICHIGAN RUBBER (INDIA) LTD. versus THE STATE OF KARNATAKA & ORS.
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A B [2012) 8 S.C.R. 128 M/S. MICHIGAN RUBBER (INDIA) LTD. v. THE STATE OF KARNATAKA & ORS. (Civil Appeal No. 5898 of 2012) AUGUST 17, 2012 [P. SATHASIVAM AND RANJAN GOGOi, JJ.] Contract - Tender by State Road Transport Corporation - For procuring tyres, tubes and flaps - Tender specifying pre- C qualification criteria - The criteria challenged by appel/ant- company (manufacturer and supplier of the goods) in writ petition - Petition dismissed by Single Judge of High Court - The order affirmed by Division Bench of High Court - On appeal, held: Government and Public Undertakings must have o tree hand in setting terms of the tender - Court can interfere with it only if they are arbitrary discriminatory, ma/a fide or actuated by bias - The impugned conditions cannot be classified as arbitrary, discriminatory and ma/a fide - Judicial Review. E Respondent No. 2 (State Road Transport Corporation) floated a tender for supply of tyres, tubes and flaps specifying certain pre-qualification criteria. Appellant-Company, which was engaged in the manufacture and supply of tyres, tubes and flaps, filed a F writ petition challenging the pre-qualification criteria. Single Judge of the High Court dismissed the petition. Writ Appeal against the same was further dismissed by Division Bench of High Court. G In appeal to this Court, appellant-Company contended that the pre-condition criteria was unreasonable, arbitracy, discriminatory and opposed to public interest in general as the said conditions were incorporated to exclude the appellant-company and other H 128 MICHIGAN RUBBER (!NOIA) LTD. v. STATE OF 129 KARNATAKA similarly situated companies from the tender process on A extraneous grounds and with ulterior motive. Dismissing the appeal, the Court HELD: 1.1. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in B essence and substance is the heartbeat of fair play. The actions of the State are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of c reasonableness, it would be legitimate to take into consideration the national priorities. [Para 19) [145-G-H; 146-A] 1.2. Fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any D role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, E the interference by courts is very limited. [Para 19] [146- 8-C] 1.3,ln the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless F the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted. [Para 19) [146-DJ 1.4. Certain pre-conditions or qualifications for G tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and if the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim fundamental right H 130 SUPREME COURT REPORTS [2012] 8 S.C.R. A to carry on business with the Government. [Para 19] [146- E-F] 1.5. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial B review, should pose to itself the following questions: 1) Whether the process adopted or decision made by the authority is ma/a fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the C decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; and (it) Whether the public interest is affected. If the answers to the above questions are in negative, then there should be no interference under Article 226. [Para 20] [146-G-H; 147-A] D Tata Cellular vs. Union of India (1994) 6 SCC 651: 1994 (2) Suppl.SCR 122; Raunaq International Ltd. vs. I. V.R. Construction Ltd.and Ors. (1999) 1
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