A recent crime happened in the case of The Principal and Chief Conservator of the Forest and Ors. Suresh Mathew & Ors. Versus. The judgment handed down by the court in (Civil Appeal No(s). 12353-12355 of 2021), issued on April 25, 2025, offers valuable information about the role of the judiciary in the case of examination of issues of contract on the government side. In this decision which emphatically quashed the orders passed by the Kerala High Court, it is seen that public interests take primacy and judicial interference in the tendering procedure remains minimal when no mala fides are made out.
The Hoof of Contention: A Canceled Tender and Legal Problems
The case was based on an order of the Divisional Forest Officer (DFO), Konni to withdraw an e-tender notice on the 25th May 2020, pertaining to final tree felling works in the Nellidappara area. Thereafter, the DFO has levied to issue a new tender on October 12, 2020. Such cancellation lit up legal controversies by writ petitioners who had taken part in the initial e-tender. They argued that cancelling and re-issuing was unwarranted and unlawful.
To make the matters more confusing, the Principal Conservator of Forests had issued a circular dated February 29, 2020 according to which: A registered contractor classified as A who has not taken part in any timber extraction tender in the last financial year will not be granted extension of registration. This circular was the cause of the petitioners having their registration expired by the authorities and so they went on to appeal against the circular.
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These petitioners were at first permitted by interim orders granted by a Single Judge of the Kerala High Court, to provisionally partake in the e-tender of May 25, 2020. Later on, on September 28, 2020, the Single Judge quashed the impugned orders of the department wherein they denied renewal of the registration and instructed the administrators to revisit the applications without considering the circular of February 29, 2020. High Court explained that the rules of contractor registration were only administrative instructions, not statutory rules and although contractor registration was not a fundamental right, the imposition of new conditions on application consideration after the specified deadline would be arbitrary and contrary to Article 14 of the Constitution.
It is in light of the foregoing developments that the DFO went ahead and cancelled the e-tender tender tender on May 25, 2020, and initiated a new one on October 31, 2020. Such cancellation was once more contested by the respondents. November 16, 2020 – A Single Judge of the High Court allowed the writ petition, quashing the re-tender notification and instructing the authorities to revert to the original e-tender, considering the whose licenses were renewed on good terms. The Single Judge pointed out that the delay in the process was due to re-tendering, the price offered by the lowest tenderer was reasonable (12.67 percent below the calculated rate), and there was no serious complaint about the original e-tender exercise.
This was then appealed against by the State to the Division Bench of the High Court, which dismissed the writ of appeal on January 19, 2021, affirming an order passed by the Single Judge. This made the appellant ( The Principal and Chief Conservator of Forest & Ors.) move to the Supreme Court.
The Fundamental Legal Query: A Judicial Look at Cancellations of Tenders
The underlying legal issue around which the deliberations of the Supreme Court revolved was the scope of judicial review which tender processes can have and the authority that tendering authorities have to annul the tenders. Here, the High Court which overruled the writ appeals had dismissed them after considering that though the words arbitrary and unreasonable were not expressly stated by the Single Judge in his findings it was quite obvious that this cancellation order was arbitrary. The High Court also rejected the reasons cited by the DFO for cancellation as it said that eligible contractors could not participate in an e-tender process because of transportation restrictions that existed during COVID-19. The High Court also pointed out that even the likelihood of lower rates in subsequent tenders cannot be a reasonable cause of cancellation as this will result in a never-ending tender invitation. In addition, the High Court wondered how cancellation and issuance of new tenders would fast track the project bearing in mind that it only leads to delay. It however recognized that judicial review in such matters must proceed with moderation but that a writ court ought not to interfere where there is patent arbitrariness particularly after bids have been opened.
In the order dated October 12, 2020, the DFO expressly gave the reasons that some of the contractors had complained that they were unable to participate due to COVID-19 transportation restrictions and their complaints should be redressed, and that was the reason for re-tendering. The respondents are though still permitted to participate. The Supreme Court was of the notion that the re-tender did not prejudice the respondents.
The position of the Supreme Court: Reinforcing discretion and the interest of the public
In its judgment, the Supreme Court was very much guided by the precedent ruling which had been set on the consent of judicial deference to administrative action in the context of contract. It was called the object and it was called the object of the bar.
Jagdish Mandal vs. State of Orissa and Others, precipitated that judicial review is intended to ensure arbitrariness, irrationality, unreasonableness, bias and mala fide, and the question of whether it was arrived at lawfully and not whether it was sound. The Court again confirmed that the assessment of tenders and the grant of contracts are purely commercial processes and the principles of equity and natural justice play second fiddle. The malafide decision or an arbitrarily and irrational decision or one that no responsible authority could have gone through should warrant interference; the interests of the person are of adverse impact on the public The Court warned that it would not interfere to negate the interests of the many as voiced by the few whose claims are imaginary or a technical breach/violation of procedure. These interferences may cause project delays and cost-increases.
Even the Supreme Court quoted
State of Orissa and others vs Harinarayan Jaiswal and others – Indian form of state is the keeper of state funds and it can take a call on whether the prices tendered in the auction are adequate to avoid leakage in revenue. Similarly, in
In the case of M/s Michigan Rubber (I) Ltd. vs. State of Karnataka and ors., the Court has pointed out that albeit Article 14 requires fairness, judicial review cannot be in situations where the State has acted with perceptible reasons and in a not whimsical manner. There is more freedom granted to tendering authorities in drafting conditions and granting contracts without there being ethically malicious conduct or the appropriation of statutory powers. The actions of the government must be in good reason, good faith and in the best interests of the government and neither of them has a right to carry out business transactions with the government.
In the Supreme Court in Tata Cellular vs. Union of India, the modern trend of judicial restraint before administrative action was reiterated again. The essence of the Court is to offer advisory proceedings on how decisions are made but not by offering secondary appeals or even effectively substituting the decision that it has no expertise to frame. A tender invitation is governed by terms and as such this area belongs to the domain of the contract, and the terms are normally not subject to judgment. The government, which enjoys the freedom of contract, cannot make decisions that are arbitrary, biased or in bad faith, which should be subject to the test of reasonableness on the Wednesbury basis.
The Supreme Court held the Single Judge in error as far as he/she had allowed the order of the DFO to be quashed without coming to any conclusion regarding mala fides on the part of DFO. The Court thought that the re-tender as ordered by the DFO would give enough opportunity to all the bidders and this will bring about fair play and the end result will be satisfaction of the government.
More importantly, the Supreme Court had pointed out that the right of the bidding authority to alter or cancel any and all bids was expressly reserved in the tender notice itself, to that wit, in Clause 3 of the e-tender notice and Clause 27 of the e-Government procurement notice. This clause in the contract also reinforced the action of the DFO.
The Supreme Court strongly objected to the observation that the High Court arrived at that there should not be any likelihood of lower rates as a reason to cancel, on the basis that such a view would run counter to the established principle that the government being the custodian of the monetary resources of the state is well within its right to cancel and invite fresh tenders in case it is in the financial interest of the state. Using the test of Jagdish Mandal, the Supreme Court held that the decision of the authorities was not mala fide and not trying to give favor to someone, rather a new window was opened for all interested bidders and this will help in promoting the maxim of public interest and fair play.
An Unmistakable Need to Stay Hands Off
Finally, without any hesitation, the Supreme Court dismissed the judgments and orders of the High Court of Kerala and permitted appeals. This decision restates the extent of judicial control of government contractual affairs, and that despite the fact that the courts are principally allowed under the common law and by legislation to assume that the government as a contract maker acts reasonably and legally, they are not allowed to make their own commercial adjudication in place of the government. This ruling is an important reminder that tendering authorities can first exercise their discretion to cancel and re- tender works, in the good faith and acting in the best interest of citizens of the State, most of whom may also be workers. It highlights the fact that where mala fides or patent arbitrariness is absent, the judiciary must give executive commercial judgment in tendering procedures.
