Essential points for determination by Courts while exercising power of Judicial Review of awarding of contract

What does an award of contract means? The question was considered by the Apex Court in Raunaq International Ltd. vs. I.V.R. Construction Ltd. & Ors., decided on 9.12.1998 where it was held that the award of a contract, whether by a private party or by a public body or the State is essentially a commercial transaction and while arriving at a commercial decision following considerations are of paramount importance:

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. 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. Ability of the tenderer to take follow up action, rectify defects or to give post contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.

Court further explained as to what are the elements of public interest as under:

1. Public money would be expended for the purposes of the contract;
2. Goods or services commissioned for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities.
3. Public to be directly interested in the timely fulfillment of the contract so that the services become available to them expeditiously.
4. Public to also be interested in the quality of the work undertaken or goods supplied by the tenderer as poor quality could 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.

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. 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. Unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the Court should not intervene in exercise of writ jurisdiction to decide on disputes between two rival tenderers.

When a petition is filed as a public interest litigation challenging the award of a contract by the State or any public body to a particular tenderer, the Court must satisfy itself that party which has brought the litigation is litigating bona fide for public good. The public interest litigation should not be merely a cloak for attaining private ends of a third party or of the party bringing the petition. The Court can examine the previous record of public service rendered by the organisation bringing public interest litigation. Even when public interest litigation is entertained the court must be careful to weigh conflicting public interests before intervening.

Where there is an allegation of mala fides or an allegation that the contract has been entered into for collateral purposes, and the court is satisfied on the material before it, that the allegation needs further examination, the court would be entitled to entertain the petition. But even here, the court must weigh the consequences in balance before granting interim orders.

Where the decision-making process has been structured and the tender conditions set out the requirements, the court is entitled to examine whether these requirements have been considered. However, if any relaxation is granted for bona fide reasons, the tender conditions permit such relaxation and the decisions is arrived at for legitimate reasons after a fair consideration of all offers, the court should hesitate to intervene.

Further, price may not always be the sole criterion for awarding a contract but only one of the criteria. The past record of the tenderers, the quality of the goods or services which are offered, assessing such quality on the basis of the past performance of the tenderer, its market reputation and so on, all play an important role in deciding to whom the contract should be awarded. At times, a higher price for a much better quality of work, can be legitimately paid in order to secure proper performance of the contract and good quality of work-which is as much in public interest as a low price.

The court should not substitute its own decision for the decision of an expert evaluation committee. If there is a good reason why the project should not be undertaken, then the time to object is at the time when the same is under consideration and before a final decision is taken to undertake the project. If breach of law in the execution of the project is apprehended, then it is at the stage when the viability of the project is being considered that the objection before the appropriate authorities including the Court must be raised.

A somewhat different approach may be required in the cases of award of a contract by the Government for the purchase of times for its use. Judicial review would be permissible only on the established grounds for such review including mala fides, arbitrariness or unreasonableness. Balance of convenience would play a major role in moulded interim relief.

Again, principles of judicial review are no different in cases where Government grants licences or permissions for a fee or consideration to private parties, enabling them to commercially exploit such a licence or permission. However, grant of stay or injunction in such cases may or may not result in prejudice to the public revenue, depending on the facts of the case. At times granting of a licence or permission may cause public harm e.g. in the case of damage to the ecology. Interim orders would have to be mouled in such cases on a consideration of all relevant factors, providing for restitution where required in public interest.

The court cannot usurp or abdicate, and the parameters of judicial review must be clearly defined and never exceeded.