# MUNICIPAL CORPORATION, UJJAIN & ANR v. BVG INDIA LIMITED AND ORS

- **Citation:** [2018] 6 S.C.R. 861
- **Court:** Supreme Court of India
- **Decided:** 2018-03-27
- **Case number:** Civil Appeal No. 3330 of 2018
- **Bench:** Ranjan Gogoi, R. Banumathi, Mohan M. Shantanagoudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/municipal-corporation-ujjain-anr-v-bvg-india-limited-and-ors-32826
- **Pages:** 38

## Headnote

Tenders - Appellant-Corporation issued NIT for appointment
of agency to carry out "Municipal Solid Waste Door to Door
Collection and Transportation" - Bids were invited following a two
envelope system i.e. a technical bid and a financial bid - Technical
bids of the parties were analysed thoroughly by a technical expert
and marks were awarded as per specifications of the NIT -
Global Waste Management Cell Private Limited (GWMC) scored
highest marks based on technical and financial weighted scores
and hence was awarded the contract - Aggrieved, the unsuccessful
bidder (respondent no.1) filed writ petition - High Court allowed
the same and set aside the contract awarded in favour of GWMC -
On appeal, held: As a decision was qualitatively arrived at by the
technical expert respondent no.2, the High Court need not have
gone into the merits of such decision as an appellate authority,
especially when there was no bias or malafide - There was no
illegality, arbitrariness, irrationality or unreasonableness on the
part of the expert body while in action - Moreover, the decision
was taken keeping in mind the public interest and work experience
of the successful bidder - In absence of any document evidencing
the experience in the field in question in favour of respondent no.1,
the High Court was not right in increasing the marks under the
head of number of years of experience and expertise - High Court
was also not justified in increasing the marks for responsiveness,
as respondent no.1 had suppressed the fact that it had received
show cause notices from various municipal corporations and thus,
High Court ignored the element of public interest involved in the
matter - Further, the method for evaluation of the financial bid as
applied by the High Court was also not proper and was illogical,
which led to unreasonableness and travesty of justice - Solid Waste
Management Rules, 2016 - r.22.
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Tenders - Judicial review of administrative decisions - Held:
The judicial review of administrative action is intended to prevent
arbitrariness - The purpose of judicial review of administrative
action is to check whether the choice or decision is made lawfully
and not to check whether the choice or decision is sound - If the
process adopted or decision made by the authority is not mala fide
and not intended to favour someone; if the process adopted or
decision made is neither so arbitrary nor irrational that under the
facts of the case it can be concluded that no responsible authority
acting reasonably and in accordance with relevant law could have
reached such a decision; and if the public interest is not affected,
there should be no interference u/Art.226 - Constitution of India -
Art.226.
Tenders - Whether under the scope of judicial review, the
High Court could ordinarily question the judgment of the expert
consultant on the issue of technical qualifications of a bidder when
the consultant takes into consideration various factors including
the basis of non-performance of the bidder - Held: Under the scope
of judicial review, the High Court could not ordinarily interfere
with the judgment of the expert consultant on the issues of
technical qualifications of a bidder when the consultant takes into
consideration various factors including the basis of nonperformance of the bidder - The power of judicial review can be
exercised only if there is unreasonableness, irrationality or
arbitrariness and in order to avoid bias and mala fides.
Tenders - Whether a bidder who submits a bid expressly
declaring that it is submitting the same independently and without
any partners, consortium or joint venture can rely upon the
technical qualifications of any third party for its qualification -
Held: No.
Tenders - Whether the High Court can independently
evaluate the technical bids and financial bids of the parties, as an
appellate authority, for coming to the conclusion - Held: It

## Text

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MUNICIPAL CORPORATION, UJJAIN & ANR.
 v.
BVG INDIA LIMITED AND ORS.
(Civil Appeal No. 3330 of 2018)
MARCH 27, 2018
[RANJAN GOGOI, R. BANUMATHI AND
MOHAN M. SHANTANAGOUDAR, JJ.]
Tenders - Appellant-Corporation issued NIT for appointment
of agency to carry out "Municipal Solid Waste Door to Door
Collection and Transportation" - Bids were invited following a two
envelope system i.e. a technical bid and a financial bid - Technical
bids of the parties were analysed thoroughly by a technical expert
and marks were awarded as per specifications of the NIT -
Global Waste Management Cell Private Limited (GWMC) scored
highest marks based on technical and financial weighted scores
and hence was awarded the contract - Aggrieved, the unsuccessful
bidder (respondent no.1) filed writ petition - High Court allowed
the same and set aside the contract awarded in favour of GWMC -
On appeal, held: As a decision was qualitatively arrived at by the
technical expert respondent no.2, the High Court need not have
gone into the merits of such decision as an appellate authority,
especially when there was no bias or malafide - There was no
illegality, arbitrariness, irrationality or unreasonableness on the
part of the expert body while in action - Moreover, the decision
was taken keeping in mind the public interest and work experience
of the successful bidder - In absence of any document evidencing
the experience in the field in question in favour of respondent no.1,
the High Court was not right in increasing the marks under the
head of number of years of experience and expertise - High Court
was also not justified in increasing the marks for responsiveness,
as respondent no.1 had suppressed the fact that it had received
show cause notices from various municipal corporations and thus,
High Court ignored the element of public interest involved in the
matter - Further, the method for evaluation of the financial bid as
applied by the High Court was also not proper and was illogical,
which led to unreasonableness and travesty of justice - Solid Waste
Management Rules, 2016 - r.22.
 [2018] 6 S.C.R. 861
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Tenders - Judicial review of administrative decisions - Held:
The judicial review of administrative action is intended to prevent
arbitrariness - The purpose of judicial review of administrative
action is to check whether the choice or decision is made lawfully
and not to check whether the choice or decision is sound - If the
process adopted or decision made by the authority is not mala fide
and not intended to favour someone; if the process adopted or
decision made is neither so arbitrary nor irrational that under the
facts of the case it can be concluded that no responsible authority
acting reasonably and in accordance with relevant law could have
reached such a decision; and if the public interest is not affected,
there should be no interference u/Art.226 - Constitution of India -
Art.226.
Tenders - Whether under the scope of judicial review, the
High Court could ordinarily question the judgment of the expert
consultant on the issue of technical qualifications of a bidder when
the consultant takes into consideration various factors including
the basis of non-performance of the bidder - Held: Under the scope
of judicial review, the High Court could not ordinarily interfere
with the judgment of the expert consultant on the issues of
technical qualifications of a bidder when the consultant takes into
consideration various factors including the basis of nonperformance of the bidder - The power of judicial review can be
exercised only if there is unreasonableness, irrationality or
arbitrariness and in order to avoid bias and mala fides.
Tenders - Whether a bidder who submits a bid expressly
declaring that it is submitting the same independently and without
any partners, consortium or joint venture can rely upon the
technical qualifications of any third party for its qualification -
Held: No.
Tenders - Whether the High Court can independently
evaluate the technical bids and financial bids of the parties, as an
appellate authority, for coming to the conclusion - Held: It is not
open to the Court to independently evaluate the technical bids and
financial bids of the parties as an appellate authority for coming to
its conclusion inasmuch as unless the thresholds of mala fides,
intention to favour someone or bias, arbitrariness, irrationality or
perversity are met, where a decision is taken purely on public
interest, the Court ordinarily should exercise judicial restraint.
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Allowing the appeals, the Court
HELD: 1. Evaluating tenders and awarding contracts are
essentially commercial transactions/contracts. If the decision
relating to award of contract is in public interest, the Courts will
not, in exercise of the power of judicial review, interfere even if a
procedural aberration or error in awarding the contract is made
out. The power of judicial review will not be permitted to be
invoked to protect private interest by ignoring public interest.
Attempts by unsuccessful bidders with an artificial grievance and
to get the purpose defeated by approaching the Court on some
technical and procedural lapses, should be handled by Courts
with firmness. The exercise of the power of judicial review should
be avoided if there is no irrationality or arbitrariness. In the
matter on hand, there is no illegality, arbitrariness, irrationality
or unreasonableness on the part of the expert body while in action.
So also, there is no bias or mala fides either on the part of the
corporation or on the part of the technical expert while taking
the decision. Moreover, the decision is taken keeping in mind
the public interest and the work experience of the successful
bidder. [Para 35] [889-C-F]
2. Global Waste Management Cell Private Limited
(GWMC) secured the highest score, i.e., 84.36, it emerged as
the overall eligible bidder for awarding the project as per the
terms of NIT. Consequently, it was declared L 1 as per the terms
of the NIT. As a decision was qualitatively arrived at by the
technical expert respondent no. 2, the High Court need not have
gone into the merits of such decision as an appellate authority,
especially when there was no bias or mala fide. [Para 39] [892-AC]
3. The bidder was required to set out details of any other
company/firm involved as a consortium member to which
respondent no.1 replied in the negative, which means no other
company/firm was involved as a consortium member with
respondent no.1 in the process in question. In other words,
respondent no.1 submitted the bid on its own unaccompanied by
any of the consortium member. Despite the same, respondent
no.1 furnished the experience certificate of a third party.
Therefore, reliance placed by the respondent no.1 on the
purported experience certificate issued in the name of third party
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would not come to the help of the respondent no.1 to show its
work experience. The PCMC Certificate neither shows three
years' experience of respondent no.1 nor that respondent no.1
was carrying out garbage/waste collection of more than 300 MT
per day. Since respondent no.1 has categorically mentioned in
its bid under the column "basic information about tenderer" that
no other company (either joint venture or consortium) is involved
with it, respondent no.1 could not have relied upon the purported
experience certificate issued in the name of third party. Other
certificates submitted by the respondent no.1 also did not satisfy
the eligibility requirement. [Para 40] [892-C-H]
4. Moreover, the certificate dated 21.4.2015 relied upon
by the High Court in the impugned judgment was not part of the
original bid document submitted by respondent no.1 and it was
submitted before the High Court for the first time in the writ
petition. Since such certificate was not part of the original bid
document, the High Court was not correct in relying upon such
certificate produced by respondent no.1 for the first time before
it. The Courts will not permit any of the participants in the tender
process to alter or supplement the bid document. In the absence
of any document evidencing the experience in the field in question
in favour of respondent no.1, the appellants are justified in
contending that the High Court is not correct in increasing the
marks from 5 to 7 under the head of number of years of
experience and expertise. So also, the High Court was not correct
in increasing the marks from 10 to 15 so far as the quantity of
municipal solid waste handled per day through door to door
collection is concerned. [Para 41] [893-A-C]
5.1 The High Court was also not justified in increasing the
marks for responsiveness from 5 to 10. The High Court could
not have increased the marks for responsiveness as respondent
no.1 had suppressed the fact that it had received show cause
notices from BBMP and other municipal corporations.
[Para 42][893-F-G]
5.2 It was clearly stated in the NIT that the tenderer was
required to reveal the show-cause notices against it. Despite the
specific column pertaining to the same in the bid document,
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respondent no.1 had left the said column blank. Once there is a
specific clause requiring the mentioning of the show-cause notices
for the breach of contract, it was incumbent upon the tenderer to
provide accurate information. The respondent no.1 had
suppressed 73 show cause notices issued against it by BBMP
and District Panchayat, Dadra and Nagar Haveli, Silvasa in respect
of the work relating to solid waste management. Despite
suppression by the respondent no.1, the technical expert from
its own sources gathered information and found that 73 show cause
notices were issued by the BBMP and others against respondent
no.1, which reveal that respondent no.1 had not shown due
diligence in the work of door to door collection of solid waste.
Hence, the conclusion reached by the High Court that it was not
open for the technical committee to suo motu take into
consideration the afore-mentioned 73 show cause notices issued
against the respondent no.1 while evaluating the technical bid is
not correct. The due diligence and experience of the expert
consultant ought to have been appreciated by the High Court
keeping in mind the object to which bids were invited. 73 show
cause notices issued to respondent no.1 establish that respondent
no.1 did not have a good track record and therefore such notices
were necessarily taken into consideration by the technical expert.
In all fairness, respondent no.1 ought to have disclosed these
factors in its bid. In view of the same, the High Court was not
justified in increasing the marks for responsiveness from 5 to
10. [Para 44] [894-D-E; 895-A-E]
6. The authority concerned is in the best position to find
out the best person or the best quotation depending on the work
to be entrusted under the contract. If a bidder had faced a
number of show-cause notices from various municipal
corporations in the matter of non-performance of door to door
collection of garbage etc., the Court cannot compel the authority
to choose such undeserving person/company to carry out the
work. Ultimately, the public interest must be safeguarded. The
public would be directly interested in the timely fulfilment of the
contract so that the services become available to the public
expeditiously and effectively. The public would also be
interested in the quality of work undertaken. Poor quality of work
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or goods can lead to tremendous public hardship and substantial
financial outlay either in correcting mistakes or in rectifying
defects or even at times in re-doing the entire work. Lethargy or
tardiness in collecting door to door garbage on a day-to-day
basis would definitely lead to increase collection of garbage on
the roads and public properties, which leads to health hazards
and also reduces the cleanliness of the city. Since the public is
directly interested and would be affected if the work entrusted is
not carried out appropriately, and as the technical expert has found
that respondent no.1 would not be a suitable company to be
entrusted the work inasmuch as it had faced 73 show-cause
notices from different Municipal Corporations, the High Court
could not have interfered with the decision taken by the
authority. The High Court has ignored the element of public
interest involved in the matter. [Para 48] [896-G-H; 897-A-D]
Karnataka State Industrial Investment & Development
Corporation Limited v. Cavalet India Ltd. & Ors. (2005)
4 SCC 456 : [2005] 2 SCR 1183 ; B.S.N. Joshi and
Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC
548 : [2006] 8 Suppl. SCR 11 ; Delhi Science Forum v.
Union of India (1996) 2 SCC 405 : [1996] 2 SCR 767;
Montecarlo Ltd. v. NTPC Ltd. (2016) 15 SCC 272 :
[2016] 8 SCR 224 - relied on.
Tata Cellular v. Union of India (1994) 6 SCC
651 : [1994] 2 Suppl. SCR 122; Master Merin Services
(P) Ltd. v. Metcalfe & Hodgkinson (2005) 6 SCC 138 :
[2005] 3 SCR 666 ; Sterling Computers Ltd. v. M & N
Publications Ltd. (1993) 1 SCC 445 : [1993] 1 SCR
81 ; Raunaq International Limited v. I.V.R. Construction
Limited (1999) 1 SCC 492 : [1998] 3 Suppl. SCR 421 ;
Air India Limited v. Cochin International Airport Limited
(2000) 2 SCC 617 : [2000] 1 SCR 505 ; U.P. Financial
Corporation. v. Naini Oxygen & Acetylene Gas Ltd.
(1995) 2 SCC 754 : [1993] 2 SCR 149 ; U.P. Financial
Corporation v. Gem Cap (India) Pvt. Ltd. & Ors. (1993)
2 SCC 299 : [1993] 2 SCR 149 ; Karnataka State
Financial Corporation v. Micro Cast Rubber & Allied
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Products (P) Ltd. & Ors. (1996) 5 SCC 65 : [1996] 3
Suppl. SCR 40 ; Central Coalfields Ltd. v. SLL-SML
(Joint Venture Consortium) (2016) 8 SCC 622 :
[2016] 4 SCR 890 ; Afcons Infrastructure Ltd. v. Nagpur
Metro Rail Corporation Ltd. and Ors. (2016) 16 SCC
818 ; Jagdish Mandal v. State of Orissa and Ors. (2007)
14 SCC 517 : [2006] 10 Suppl. SCR 606; Meerut
Development Authority v. Assn. of Management Studies
(2009) 6 SCC 171 ; Trilochan Mishra Etc v. State of
Orissa & Ors (1971) 3 SCC 153 ; Ramana Dayaram
Shetty v. International Airport Authority of India
(1979) 3 SCC 489 : [1979] 3 SCR 1014 - referred to.
Case Law Reference
[1994] 2 Suppl. SCR 122
 referred to
Para 6
[2005] 3 SCR 666
 referred to
Para 7
[1993] 1 SCR 81
 referred to
Para 8
[1998] 3 Suppl. SCR 421
 referred to
Para 11
[2000] 1 SCR 505
 referred to
Para 12
[1993] 2 SCR 149
 referred to
Para 13
[1996] 3 Suppl. SCR 40
 referred to
Para 14
[2005] 2 SCR 1183
 relied on
Para 15
[2006] 8 Suppl. SCR 11
 relied on
Para 16
[1996] 2 SCR 767
 relied on
 Para 18
[2016] 4 SCR 890
 referred to
Para 19
(2016) 16 SCC 818
 referred to
Para 20
[2006] 10 Suppl. SCR 606
 referred to
Para 20
(2009) 6 SCC 171
 referred to
Para 20
(1971) 3 SCC 153
 referred to
Para 27
[1979] 3 SCR 1014
 referred to
Para 28
[2016] 8 SCR 224
 relied on
Para 29
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3330
of 2018.
From the Impugned Judgment and order dated 07.04.2016 of the
High Court of Madhya Pradesh, Bench at Indore in Writ Petition No.4676
of 2015
WITH
Civil Appeal Nos.3331 and 3332 of 2018.
Vikash Singh, Shyam Divan, Guru Krishnakumar, Gourab Banerji,
Kailash Vasdev, Sr. Advs., Mishra Saurabh, Ankit Kr. Lal, Devadatt
Kamat, Rajesh Inamdar, Aditya Bhat, Javedur Rahman, Gautam Talukdar,
Nitin S. Tambwekar, Seshatalpa Sai Bandaru, Sahil Tagotra,
Ms. R. Chattarjee, Sanjay K. Shandilya, Apoorva Agrawal, Umrao Singh,
Mushtaq Ahmad, Advs. for the appearing parties.
The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J. 1. Leave granted.
2. The Order dated 07.04.2016 passed by the High Court of
Madhya Pradesh, Bench at Indore, allowing the Writ Petition No. 4676
of 2015 filed by B.V.G. India Limited, Pune (respondent no.1 in the civil
appeal arising out of SLP(C) No. 11967 of 2016), consequently setting
aside the contract awarded in favour of Global Waste Management Cell
Private Limited (respondent no. 3 in the civil appeal arising out of SLP(C)
No. 11967 of 2016) by Ujjain Municipal Corporation for door to door
collection and transportation of Municipal Solid Waste, is the subject
matter of these appeals.
3. Heard Shri Vikas Singh, learned senior counsel appearing for
Municipal Corporation, Shri Shyam Divan and Shri Guru Krishnakumar,
learned senior counsel representing Global Waste Management Cell
Private Limited, Shri Kailash Vasdev, learned senior counsel for M/s
Eco Save Systems Private Limited (Technical Expert) and Shri Gourab
Banerji, learned senior counsel for BVG India Limited.
4. Brief facts leading to these appeals are as under:
Ujjain Municipal Corporation (Appellant in civil appeal arising out
of SLP(C) No. 11967 of 2016) had issued Notice Inviting Tender (for
short, "NIT") dated 01.05.2015 for the appointment of an agency to
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carry out "Municipal Solid Waste Door to Door Collection and
Transportation" for a period of 10 years in the city of Ujjain. The tender
notice was for inviting online bids from the eligible bidders following a
two envelope system i.e. one for technical bid and another for financial
bid. The Municipal Corporation had appointed a technical expert in Waste
Management Solution viz. M/s Eco Save System Pvt. Ltd. (respondent
no. 2 in the civil appeal arising out of SLP(C) No. 11967 of 2016) for
scrutinising and evaluating the technical & financial bids. The last date
of submission of tender was 21.05.2015. However, a corrigendum was
issued and the date of submitting online tenders was extended up to
01.06.2015. The opening of the technical bid was fixed for 02.06.2015
and the opening of the financial bid on 04.06.2015. Three bidders
remained for consideration of the award of tender by the Municipal
Corporation. The technical bids of the parties were analysed thoroughly
by the technical expert and marks were awarded as per the specifications
of the NIT.
Clause 1 of the eligibility criteria of the NIT provided that the
company must have been registered five years prior to 01.05.2010.
Clause 9 of the eligibility criteria of the NIT permitted a consortium of
two members, but with the distinct experience requirement on the subject
matter. Article III of the NIT specified that technical eligibility would
have a weightage of 80% and weightage for financial score was 20%.
The marks obtained in the technical evaluation would contribute to 80%
and financial evaluation would contribute to 20% of the final marks for
deciding the L1 bidder. The technical parameters which were required
to be measured were also indicated in Article III of the NIT. The financial
bids of only those bidders who secured at least 60% marks in the technical
evaluations would be opened.
The tender was to be awarded based on the final score arrived at
by taking the total of the weighted scores of technical and financial
evaluations as per the criteria mentioned in the NIT at Article III.
Respondent no.1 scored low on technical evaluation inasmuch as it got
58.94 in the weighted score, whereas the successful bidder i.e. respondent
no. 3 got a weighted technical score of 67.36. On a final analysis based
on technical and financial weighted scores, Global Waste Management
Cell Pvt. Ltd. got first rank (L1 bidder) amongst the three bidders by
getting the highest score. Hence, it was awarded the contract. Such
award of contract was questioned by the unsuccessful bidder (B.V.G.
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India Limited, L2 bidder) before the High Court by filing the Writ Petition,
which came to be allowed by the impugned judgment.
During the pendency of these matters, on 26.04.2016, this Court
granted an interim order in favour of the successful bidder, namely
respondent no. 3, staying the operation of the impugned order of the
High Court, consequent upon which the successful bidder was awarded
the contract and is discharging the duties assigned.
5. The questions involved in these appeals are:
(a) Whether under the scope of judicial review, the High Court
could ordinarily question the judgment of the expert consultant
on the issue of technical qualifications of a bidder when the
consultant takes into consideration various factors including the
basis of non-performance of the bidder;
(b) Whether a bidder who submits a bid expressly declaring that it
is submitting the same independently and without any partners,
consortium or joint venture can rely upon the technical
qualifications of any third party for its qualification;
(c) Whether the High Court is justified in independently evaluating
the technical bids and financial bids of the parties, as an appellate
authority, for coming to the conclusion?
6. The principles which have to be applied in judicial review of
administrative decisions, especially those relating to acceptance of tender
and award of contract, have been considered in great detail by this Court
in Tata Cellular v. Union of India, (1994) 6 SCC 651, wherein this
Court observed that the principles of judicial review would apply to the
exercise of contractual powers by Government bodies in order to prevent
arbitrariness or favouritism. However, there are inherent limitations in
exercise of that power of judicial review. The Government is the guardian
of the finances of the State. It is expected to protect the financial interest
of the State. The right to refuse the lowest or any other tender is always
available to the Government. But, the principles laid down in Article 14
of the Constitution have to be kept in view while accepting or refusing a
tender. There can be no question of infringement of Article 14 if the
Government tries to get the best person or the best quotation. The right
to choose cannot be considered to be an arbitrary power. Of course, if
the said power is exercised for any collateral purpose, the exercise of
that power will be struck down.
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7. 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
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 a quasi-administrative sphere.
However, the decision must not only be tested by the application of the
Wednesbury principle of reasonableness, but must also be free from
arbitrariness and not affected by bias or actuated by mala fides. (See
the judgment in the case of Master Merin Services (P) Ltd. v. Metcalfe
& Hodgkinson (2005) 6 SCC 138).
8. In Sterling Computers Ltd. v. M & N Publications Ltd. (1993)
1 SCC 445, this Court held as under:
"18. While exercising the power of judicial review, in respect of
contracts entered into on behalf of the State, the Court is
concerned primarily as to whether there has been any infirmity in
the "decision making process". In this connection reference may
be made to the case of Chief Constable of the North Wales
Police v. Evans [(1982) 3 All ER 141] where it was said that:
(p. 144a)
"The purpose of judicial review is to ensure that the individual
receives fair treatment, and not to ensure that the authority,
after according fair treatment, reaches on a matter which it is
authorised or enjoined by law to decide for itself a conclusion
which is correct in the eyes of the court."
By way of judicial review the court cannot examine the details of
the terms of the contract which have been entered into by the
public bodies or the State. Courts have inherent limitations on the
scope of any such enquiry. But at the same time as was said by
the House of Lords in the aforesaid case, Chief Constable of
the North Wales Police v. Evans [(1982) 3 All ER 141] the courts
can certainly examine whether "decision-making process" was
reasonable, rational, not arbitrary and violative of Article 14 of the
Constitution".
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19. If the contract has been entered into without ignoring the
procedure which can be said to be basic in nature and after an
objective consideration of different options available taking into
account the interest of the State and the public, then Court cannot
act as an appellate authority by substituting its opinion in respect
of selection made for entering into such contract. But, once the
procedure adopted by an authority for purpose of entering into a
contract is held to be against the mandate of Article 14 of the
Constitution, the courts cannot ignore such action saying that the
authorities concerned must have some latitude or liberty in
contractual matters and any interference by court amounts to
encroachment on the exclusive right of the executive to take such
decision."
9. In Raunaq International Limited v. I.V.R. Construction
Limited, (1999) 1 SCC 492, this Court dealt with the matter in some
detail and held in (para 9) as under:
"9.....In arriving at a commercial decision considerations which
are of paramount importance are commercial considerations.
These would be :
(1) the price at which the other side is willing to do the work;
(2) whether the goods or services offered are of the requisite
specifications;
(3) whether the person tendering has the ability to deliver the
goods or services as per specifications. When large works
contracts involving engagement of substantial manpower or
requiring specific skills are to be offered, the financial ability of
the tenderer to fulfil the requirements of the job is also important;
(4) the ability of the tenderer to deliver goods or services or to do
the work of the requisite standard and quality;
(5) past experience of the tenderer and whether he has
successfully completed similar work earlier;
(6) time which will be taken to deliver the goods or services; and
often
(7) the ability of the tenderer to take follow up action, rectify
defects or to give post contract services."
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Whenever the State or public body or the Agency of the State
enters into such contract, an element of public law or public interest may
be involved even in such a commercial transaction. In that very judgment,
i.e., Raunaq International Limited (supra), the elements of public
interest are also noted. It is held thus:
"10. What are these elements of public interest? (1) Public money
would be expended for the purposes of the contract; (2) The goods
or services which are being commissioned could be for a public
purpose, such as, construction of roads, public buildings, power
plants or other public utilities. (3) The public would be directly
interested in the timely fulfilment of the contract so that the
services become available to the public expeditiously. (4) The public
would also be interested in the quality of the work undertaken or
goods supplied by the tenderer. Poor quality of work or goods can
lead to tremendous public hardship and substantial financial
outlay either in correcting mistakes or in rectifying defects or even
at times in redoing the entire work - thus involving larger outlays
or public money and delaying the availability of services, facilities
or goods, e.g. a delay in commissioning a power project, as in the
present case, could lead to power shortages, retardation of
industrial development, hardship to the general public and
substantial cost escalation.
11. When a writ petition is filed in the High court challenging the
award of a contract by a public authority or the State, the court
must be satisfied that there is some element of public interest
involved in entertaining such a petition. If, for example, the
dispute is purely between two tenderers, the court must be very
careful to see if there is any element of public interest involved in
the litigation. A mere difference in the prices offered by the two
tenderers may or may not be decisive in deciding whether any
public interest is involved in intervening in such a commercial
transaction. It is important to bear in mind that by court
intervention, the proposed project may be considerably delayed
thus escalating the cost far more than any saving which the court
would ultimately effect in public money by deciding the dispute in
favour of one tenderer or the other tenderer. Therefore, unless
the court is satisfied that there is a substantial amount of public
interest, or the transaction is entered into mala fide, the court
MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED
[MOHAN M. SHANTANAGOUDAR, J.]
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should not intervene under Article 226 in disputes between two
rival tenderers."
10. The judicial review of administrative action is intended to
prevent arbitrariness. The purpose of judicial review of administrative
action is to check whether the choice or decision is made lawfully and
not to check whether the choice or decision is sound. If the process
adopted or decision made by the authority is not mala fide and not
intended to favour someone; if the process adopted or decision made is
neither so arbitrary nor irrational that under the facts of the case it can
be concluded that no responsible authority acting reasonably and in
accordance with relevant law could have reached such a decision; and
if the public interest is not affected, there should be no interference
under Article 226.
11. It is well settled that the award of contract, whether it is by a
private party or by a public body or by the State, is essentially a
commercial transaction. In arriving at a commercial decision, the
considerations which are of paramount importance are commercial
considerations. These would include, inter alia, the price at which the
party is willing to work; whether the goods or services offered are of the
requisite specifications; and whether the person tendering the bid has
the ability to deliver the goods or services as per the specifications. It is
also by now well settled that the authorities/State can choose its own
method to arrive at a decision and it is free to grant any relaxation for
bona fide reasons, if the tender conditions permit such a relaxation. The
State, its corporations, instrumentalities and agencies have a public duty
to be fair to all concerned. Even when some defect is found in the
decision-making process, the Court must exercise its discretionary power
under Article 226 with great caution and should exercise them only in
furtherance of public interest and not merely on the making out of a
legal point. The court should always keep the larger public interest in
mind in order to decide whether its intervention is called for or not. Only
when it comes to a conclusion that overwhelming public interest
requires interference, the Court should interfere. (See the judgment in
the case of Air India Limited v. Cochin International Airport
Limited (2000) 2 SCC 617).
12. In U.P. Financial Corporation. v. Naini Oxygen &
Acetylene Gas Ltd. (1995) 2 SCC 754, this Court held that it was not a
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matter for the courts to decide as to whether the Financial Corporation
should invest in the defaulting unit, to revive or to rehabilitate it and
whether even after such investment the unit would be viable or whether
the Financial Corporation should realise its loan from the sale of the
assets of the Company. The Court observed that a Corporation being an
independent autonomous statutory body having its own constitution and
rules to abide by, and functions and obligations to discharge, it is free to
act according to its own right in the discharge of its functions. The views
it forms and the decisions it takes would be on the basis of the information
in its possession and the advice it receives and according to its own
perspective and calculations. In such a situation, more so in commercial
matters, the Courts should not risk their judgment for the judgments of
the bodies to which that task is assigned. The Court further held that:
"Unless its action is mala fide, even a wrong decision taken by it
is not open to challenge. It is not for the courts or a third party to
substitute its decision, however more prudent, commercial or
businesslike it may be, for the decision of the Corporation. Hence,
whatever the wisdom (or the lack of it) of the conduct of the
Corporation, the same cannot be assailed for making the
Corporation liable."
13. In U.P. Financial Corporation v. Gem Cap (India) Pvt.
Ltd. & Ors. (1993) 2 SCC 299, it was observed that the High Court
while exercising its jurisdiction under Article 226 of the Constitution cannot
sit as an appellate authority over the acts and deeds of the corporation
and seek to correct them, and that the doctrine of fairness, evolved in
administrative law, was not supposed to convert the writ Courts into
appellate authorities over administrative authorities. It is further observed
by this Court that fairness is not a one way street, and fairness required
of the corporation cannot be carried to the extent of disabling it from
recovering what is due to it.
14. In Karnataka State Financial Corporation v. Micro Cast
Rubber & Allied Products (P) Ltd. & Ors. (1996) 5 SCC 65 the issue
was whether the financial corporation was wrong in rejecting the offer
given by the borrower which, after proper evaluation, was considered
lower than the offer made by the purchasers. This Court, while upholding
the action of the financial corporation, held that the action of the said
MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED
[MOHAN M. SHANTANAGOUDAR, J.]
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financial corporation should not be interfered with if it has acted broadly
in consonance with the guidelines.
15. In Karnataka State Industrial Investment & Development
Corporation Limited v. Cavalet India Ltd. & Ors. (2005) 4 SCC 456,
this court after taking into consideration various questions on various
subjects laid down the following legal principles, viz.-
 "(i) The High Court while exercising its jurisdiction under Article
226 of the Constitution does not sit as an appellate authority over
the acts and deeds of the Financial Corporation and seek to correct
them. The doctrine of fairness does not convert the writ courts
into appellate authorities over administrative authorities.
 (ii) In a matter between the Corporation and its debtor, a
writ court has no say except in two situations:
 (a)There is a statutory violation on the part of the
Corporation, or
 (b) Where the Corporation acts unfairly i.e. unreasonably.
 (iii) In commercial matters, the courts should not risk their
judgments for the judgments of the bodies to which that task is
assigned.
 (iv) Unless the action of the Financial Corporation is mala
fide, even a wrong decision taken by it is not open to challenge. It
is not for the courts or a third party to substitute its decision,
however, more prudent, commercial or businesslike it may be, for
the decision of the Financial Corporation. Hence, whatever the
wisdom (or the lack of it) of the conduct of the Corporation, the
same cannot be assailed for making the Corporation liable.
 (v) In the matter of sale of public property, the dominant
consideration is to secure the best price for the property to be
sold and this could be achieved only when there is maximum public
participation in the process of sale and everybody has an
opportunity of making an offer.
 (vi) Public auction is not the only mode to secure the best
price by inviting maximum public participation, tender and
negotiation could also be adopted.
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 (vii) The Financial Corporation is always expected to try and
realise the maximum sale price by selling the assets by following
a procedure which is transparent and acceptable, after due
publicity, wherever possible and if any reason is indicated or cause
shown for the default, the same has to be considered in its proper
perspective and a conscious decision has to be taken as to whether
action under Section 29 of the Act is called for. Thereafter, the
modalities for disposal of the seized unit have to be worked out.
 (viii) Fairness cannot be a one-way street. The fairness
required of the Financial Corporations cannot be carried to the
extent of disabling them from recovering what is due to them.
While not insisting upon the borrower to honour the commitments
undertaken by him, the Financial Corporation alone cannot be
shackled hand and foot in the name of fairness.
 (ix) Reasonableness is to be tested against the dominant
consideration to secure the best price.
16. Likewise, in B.S.N. Joshi and Sons Ltd. v. Nair Coal Services
Ltd. (2006) 11 SCC 548, this Court while summarising the scope of
judicial review and the interference of superior courts in the matter of
award of contracts, observed thus:
 "65. We are not oblivious of the expansive role of the superior
courts in judicial review.
 66. We are also not shutting our eyes towards the new
principles of judicial review which are being developed; but the
law as it stands now having regard to the principles laid down in
the aforementioned decisions may be summarised as under:
 (i) if there are essential conditions, the same must be
adhered to;
 (ii) if there is no power of general relaxation, ordinarily
the same shall not be exercised and the principle of strict
compliance would be applied where it is possible for all the
parties to comply with all such conditions fully;
 (iii) if, however, a deviation is made in relation to all the
parties in regard to any of such conditions, ordinarily again a
power of relaxation may be held to be existing;
MUNICIPAL CORPORATION, UJJAIN v. BVG INDIA LIMITED
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 (iv) the parties who have taken the benefit of such relaxation
should not ordinarily be allowed to take a different stand in
relation to compliance with another part of tender contract,
particularly when he was also not in a position to comply with
all the conditions of tender fully, unless the court otherwise
finds relaxation of a condition which being essential in nature
could not be relaxed and thus the same was wholly illegal and
without jurisdiction;
 (v) when a decision is taken by the appropriate authority
upon due consideration of the tender document submitted by
all the tenderers on their own merits and if it is ultimately found
that successful bidders had in fact substantially complied with
the purport and object for which essential conditions were laid
down, the same may not ordinarily be interfered with;
 (vi) the contractors cannot form a cartel. If despite the same,
their bids are considered and they are given an offer to match
with the rates quoted by the lowest tenderer, public interest
would be given priority;
 (vii) where a decision has been taken purely on public interest,
the court ordinarily should exercise judicial restraint."
17.