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M/S Utkal Suppliers v. M/S Maa Kanak Durga Enterprises & Ors.

Civil Appeal · 2021 INSC 242Decided 9 Apr 2021
Civil Appeal Nos. 1517-1518 of 2021
Justice Rohinton Fali Nariman · Justice B.R. Gavai

Background

A government hospital (SCB Medical College and Hospital, Cuttack) invited tenders for supplying diet/catering services to patients, requiring bidders to hold a valid "labour licence" and three years' relevant experience. One bidder (Respondent No. 1) was disqualified for lacking a proper labour licence under the Contract Labour Act, while the appellant, Utkal Suppliers, was found to be the lowest bidder and awarded the contract. The disqualified bidder went to the Orissa High Court, which held that a registration under the Odisha Shops and Commercial Establishments Act was good enough, found the hospital's rejection of its bid to be mala fide, quashed the work order given to Utkal Suppliers, and directed that the contract instead go to the disqualified bidder.

Decision Breakdown

The Supreme Court held that the High Court had wrongly substituted its own interpretation of the tender conditions for that of the tendering authority. Relying on a long line of precedent (including Tata Cellular, Afcons, Silppi Constructions), the Court reiterated that courts must show restraint in reviewing tender decisions: they only check whether the decision-making process was arbitrary, perverse, or mala fide, not re-decide the merits like an appellate body. The Court found that a shops-registration certificate under the Odisha Act could not substitute for a proper labour licence under the Contract Labour Act, as the hospital itself had understood its own tender condition, and that no genuine mala fide had been shown against the hospital authorities beyond a bare allegation. The High Court's judgment was set aside, the appeals were allowed, and Utkal Suppliers was restored to the contract.

Lesson Learnt

Courts will generally defer to a government body's own reasonable interpretation of its tender conditions, and will only step in where the decision is shown to be arbitrary, irrational, or made in bad faith: merely alleging "mala fide" without concrete facts will not succeed.

Official source (sci.gov.in)View Judgment (PDF)

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