Paragraph numbers below are the court’s original numbering, recovered from the source text.
16. In Reliance Airport Developers (P) Ltd. vs. Airports B Authority oflndia & Ors., (2006) 10 SCC 1, this Court held that while judicial review cannot be denied in contractual matters or matters in which the Government exercises its contractual powers, such review is intended to prevent arbitrariness and must be exercised in larger public interest. c
17. In Jag dish Manda/ vs. State of Orissa and Others, (2007) 14 sec 517, the following conclusion is relevant: "22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, – MICHIGAN RUBBER (INDIA) LTD. v. STATE OF KARNATAKA [P. SATHASIVAM, J.] either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR c Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; (ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/ contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."
18. The same principles have been reiterated in a recent decision of this Court in Tejas Constructions & Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa & Anr., (2012) 6 sec 464.
19. From the above decisions, the following principles emerge: (a) the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly A for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any 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 C and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited; (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required D to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted; (d) Certain preconditions or qualifications for tenders have E to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) 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 F claim fundamental right to carry on business with the Government.
20. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial review, G should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala 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 decision is such that MICHIGAN RUBBER (INDIA) LTD. v. STATE OF KARNATAKA [P. SATHASIVAM, J.] no responsible authority acting reasonably and in accordance A with relevant law could have reached"; and (ii) 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.
21. Respondent No. 1-the State, in their counter affidavit, B highlighted that tyre is very critical and a high value item being procured by the KSRTC and it procured 900×20 14 Ply Nylon tyres along with the tubes and flaps in sets and these types of tyres are being used only by the State Transport Units and not in the domestic market extensively. It is highlighted that the C quality of the tyre plays a major role in providing safe and comfort transportation facility to the commuters.
22. It is also pointed out by the Respondent-State that in order to ensure procurement of tyres, tubes and flaps from reliable sources, the manufacturers of the same with an annual average turnover of Rs. 200 crores during the preceding three years, were made eligible to participate in the tenders. In the tender issued for procurement of these sets during October, 2004, the appellant participated and based on the L 1 rates, the orders for supply for 16,000 sets of tyres were placed on the firm. It is also pointed out that the appellant supplied 10,240 sets of tyres and remaining quantity was cancelled due to quality problems.
23. Materials has also been placed to show that the appellant participated in subsequent tenders and orders were released for supply of 900 x 20 14 PR tyres, tubes and flaps from October 2006 to September, 2007. It is also explained that after going into various complaints, in order to achieve good results, new tyre mileage and safety of the public etc., and G after noting that vehicle/chassis manufacturers such as M/s Ashok Leyland, M/s Tata Motors etc. have strict quality control system, it was thought fit to incorporate similar criteria as a pre- qualification for procurement of tyres.
24. It is also highlighted by the State as well as by the KSRTC that the tender conditions were stipulated by way of policy decision after due deliberation by the KSRTC. Both the respondents highlighted that the said conditions were imposed with a view to obtain good quality materials from reliable and experienced suppliers. In other words, according to them, the conditions were aimed at the sole purpose of obtaining good quality and reliable supply of materials and there was no ulterior motive in stipulating the said conditions.
25. Both the counsel for the respondents have brought to C our notice that the two impugned conditions were incorporated in the tender notice pursuant to a decision of the Contract Management Group (CMG) of the KSRTC, which is an institutional mechanism for the purpose of devising proper method in the matter, inter alia, of procurement of materials to the KSRTC. The said Group consists of various high level officials representing different departments of KSRTC. The CMG constitutes of the following officials: (a) Managing Director, Bangalore Metropolitan Transport Corporation (b) Managing Directors of four sister Corporations (c) Director, Security & Vigilance (d) Director, Personnel and Environment (e) Chief Accounts Officer (f) Chief Engineer (Production) (g) Chief Engineer(Maintenance) (h) Chief Accounts Officer(lnternal Audit) (i) Controller of Stores and Purchase MICHIGAN RUBBER (INDIA) LTD. v. STATE OF KARNATAKA [P. SATHASIVAM, J.] Thus it is clear that the said CMG is a widely represented body within the Respondent No. 2-KSRTC.
26. Further materials placed by KSRTC show that the CMG met on 17.05.2007 and deliberated on the question of conditions to be incorporated in the matter of calling of tenders for supply of tyres, tubes and flaps. It is pointed out that in view of the experience gained over the years, it was felt by the said Group that the impugned two conditions should be essential qualifications of any tenderer. The said policy decision was taken in the best interest of the KSRTC and the members of the traveling public to whom it is committed to provide the best possible service. In the course of hearing, learned counsel for the respondents have also brought to our notice the Minutes of Meeting of the CMG held on 17.05.2007. The said recommendation of the CMG was ultimately approved by the Vice Chairman of KSRTC. In the circumstances, the said impugned two conditions were incorporated in the tender notice dated 05.07.2007.
27. It is also brought to our notice that the KSRTC is governed by the provisions of the Karnataka Transparency in Public Procurements Act, 1999 and the Rules made thereunder, viz., Karnataka Transparency in Public Procurements Rules, 2000. Though in Condition No 2(a) in the tender notice dated 05.07.2007, the names of certain vehicle manufacturers were mentioned, after finding that it was inappropriate to mention the names of specific manufacturers in the said condition, it was decided to delete their names. Accordingly, a corrigendum was put up before the CMG and by decision dated 04.08.2007, CMG decided to revise the pre-qualification criteria by deleting the names of those manufacturers. Learned counsel for the respondents have also placed the Minutes of Meeting of the CMG held on 04.08.2007. It is also brought to our notice that the said corrigendum was also approved by the competent authority.
28. In addition to the same, it was not in dispute that the A appellant-Company was well aware of both the original tender notices and the corrigendum issued. It is also brought to our notice that the appellant wrote a letter making certain queries with regard to the corrigendum issued by the KSRTC and the said queries were suitably replied by the letter dated B 11.08.2007. c
29. It is also seen from the records that pursuant to the tender notice dated 05.07.2007, seven bids were received including that of the appellant-Company. They are: (i) Mis Apollo Tyres (ii) M/s Birla Tyres (iii) M/s Cea! Ltd (iv) Mis Good Year India (v) M/s JK Industries (vi) M/s MRF Ltd (vii) M/s Michigan Rubber (Former Betul Tyres) It is brought to our notice that successful bidders were CEAT and JK Tyres. Accordingly, contracts were entered into with the said two companies by the KSRTC and the purchase F orders were placed and they have also effected supplies and completed the contract and the KSRTC also made payments to the said suppliers.
30. It is pertinent to point out that the second respondent has also issued 4 (four) more tender notices after the tender G notice dated 05.07.2007. The said tender notices were dated 04.03.2008, 22.08.2008, 24.10.2008 and 19.03.2009. Pursuant to the tender notices dated 04.03.2008, 22.08.2008 and 24.10.2008, contracts have been awarded and have been substantially performed. It is also brought to our notice that all H the said four subsequent tender notices also contained identical MICHIGAN RUBBER (INDIA) LTD. v. STATE OF KARNATAKA [P. SATHASIVAM, J.] conditions as that of the impugned conditions contained in tender notice dated 05.07.2007.
31. As observed earlier, the Court would not normally interfere with the policy decision and in matters challenging the award of contract by the State or public authorities. In view of the above, the appellant has failed to establish that the same was contrary to public interest and beyond the pale of discrimination or unreasonable. We are satisfied that to have the best of the equipment for the vehicles, which ply on road carrying passengers, the 2nd respondent thought it fit that the criteria for applying for tender for procuring tyres should be at a high standard and thought it fit that only those manufacturers who satisfy the eligibility criteria should be permitted to participate in the tender. As noted in various decisions, the Government and their undertakings must have a free hand in setting terms of the tender and only if it is arbitrary, discriminatory, mala fide or actuated by bias, the Courts would interfere. The Courts cannot interfere with 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. In the case on hand, we have already noted that taking into account various aspects including the safety of the passengers and public interest, the CMG consisting of experienced persons, revised the tender conditions. We are satisfied that the said Committee had discussed the subject in detail and for specifying these two conditions regarding pre-qualification criteria and the evaluation criteria. On perusal of all the materials, we are satisfied that the impugned conditions do not, in any way, could be classified as arbitrary, discriminatory or mala fide.
32. The learned single Judge considered all these aspects in detail and after finding that those two conditions cannot be said to be discriminatory and unreasonable refused to interfere exercising jurisdiction under Article 226 of the Constitution and dismissed the writ petition. The well reasoned judgment of the A learned single Judge was affirmed by the Division Bench of the High Court.
33. In the light of what is stated above, we fully agree with the reasoning of the High Court and do not find any valid ground for interference. Consequently, the appeal fails and the same is dismissed with no order as to costs. K.K.T. Appeal dismissed.