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State of Jharkhand & Ors. v. M/S CWE-SOMA Consortium

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 6125 of 2016)Decided 12 Jul 2016
Civil Appeal No. 6125 of 2016
Chief Justice T.S. Thakur · Justice R. Banumathi

Background

The Jharkhand government floated a tender for building the Kharkai Dam at Icha, part of a large inter-state irrigation project. After a pre-bid meeting attended by ten contractors, only three ultimately submitted bids, and only CWE-SOMA Consortium's bid was found technically responsive: the other two were rejected for not meeting certain qualification clauses. Finding there was effectively only one real bidder, the government's tender committee cancelled the tender and decided to invite fresh bids to generate genuine competition. CWE-SOMA challenged this cancellation in the High Court, which ruled in its favour and ordered the state to open and consider its bid.

Decision Breakdown

The Supreme Court held that the High Court was wrong to treat this as a case of adequate competition under CVC Guideline clause 4.17 (single-vendor situations); because the restrictive qualification clauses had shrunk the field from ten tenderers to effectively one responsive bidder, this was genuinely a "lack of competition due to restrictive specification" situation under clause 4.18(d), justifying retendering. The Court reaffirmed that the government has the right to reject any or all tenders without giving reasons (per the tender notice's own clause 24 and the Standard Bidding Document's clause 32.1), that courts exercising judicial review of government contracts do not sit as an appellate authority over commercial decisions, and that such decisions can only be struck down for mala fides or clear unreasonableness/arbitrariness: neither of which was shown here. The High Court's judgment was set aside and the appeal allowed.

Lesson Learnt

The government is not obligated to accept any bid, even the only technically qualifying one, and can cancel and re-float a tender to secure genuine competition, so long as the decision is made in good faith and is not arbitrary: courts will not second-guess a reasonable commercial judgment by a tendering authority.

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

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