10 June 2024


High Court of Bombay

Perfect Alloys and Steel Limited and Ors. Vs. Union of India and Ors.




Terms of invitation to tender cannot be open to judicial scrutiny because it is in the realm of contract

Present Petition under Article 226 of the Constitution of India takes exception to the tender conditions in the Notice inviting tender dated November 8, 2019. Petitioner - Company has prayed for further consequential reliefs.

Petitioner No. 1 - Company is engaged in the business of manufacturing of different types of Liquid Processed Gas (LPG) Cylinders. Respondent No. 2 - Hindustan Petroleum Corporation Limited ('HPCL' for short) is a Government of India Enterprise engaged in refining and marketing of petroleum products throughout the country.

The Petitioner is aggrieved by the decision of HPCL in extending the period of contract for further period of 12 months in favour of the successful bidder without floating a fresh tender. It is the submission of learned Counsel for the Petitioners that, though pursuant to NIT, the Petitioner participated in the tender process and duly submitted its bid, however, due to inadvertence and/or oversight and/or clerical mistake, Petitioner No. 1 submitted a bid restricting the same for nine States.

It is thus seen that, Notice inviting tenders contains a specific provision for extension of the contract by a further period of up to 12 months at sole discretion of the Corporation. The Petitioners had submitted their bid pursuant to the notice inviting tender and the bid was rejected on the ground that the Petitioners did not fulfill the eligibility condition. The Petitioners thus, participated in the tender process with full knowledge that, the tender document did provide for a clause for extension of contract in favour of the successful bidder for a further period of upto 12 months. The Petitioners did not raise any objection as regards Clause 3 while submitting the bid or even thereafter when the Petitioners' bid was declared unsuccessful. It is only at the stage, when the period of contract of 1 year was to expire that the Petition is filed challenging the clause empowering Respondent Nos. 2 and 3 to grant 12 months extension.

The Hon'ble Supreme Court in the case of Tata Cellular vs. Union of India has held that, the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. There are inherent limitations in exercise of that power of judicial review. 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.

The challenge to tender condition regarding extension cannot be entertained at this belated stage at the instance of the Petitioner who participated in the tender process and was the unsuccessful bidder. It was always open for the Petitioner to challenge the rejection of its bid on the grounds available of judicial review of the decision as spelt out by the Hon'ble Supreme Court. The Petitioner however, decided to abide by the decision of HPCL rejecting his bid. It is trite that even in contractual matters, public authority should not have unfettered discretion. The decision in the present case to extend the contract has been taken in terms and conditions of the tender document. It is not as if Respondent No. 2 unilaterally at its discretion granted extension sans any clause in terms of the notice inviting tenders.

It is well settled that, the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. The extension is in terms of the tender conditions. It is not the case that the condition was incorporated to favour a particular bidder. It cannot be said that, the tender condition is unreasonable or affected by bias or actuated by malafide. It is not possible for present Court to sit in appeal over the decision of HPCL incorporating the condition of extension of contract upto 12 months in the 'NIT'. This is a matter purely within the domain of HPCL and in the realm of contract. As long as the decision in bonafide and not actuated with any malafides, it is not open for this Court to interfere with the tender conditions.

Present is not a fit case where the judicial intervention is necessary in the decision of the authority granting an extension, as the impugned decision cannot be said to be capricious, unreasonable, irrational or arbitrary. There is no reason to interfere with the decision of Respondent No. 2 in granting extension of the contract by a further period of 12 months in favour of the successful bidder. Petition dismissed.

Tags : Contract Extension Legality

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