Case Note & Summary
The petitioners, Mahalakshmi Engineering Works (a proprietorship concern) and Suresh Kumar (an independent rate contractor), challenged 40 tender notifications issued by the Bangalore Electricity Supply Company Limited (BESCOM) on 28.03.2022 for transformer repair works. The petitioners contended that the eligibility conditions in the tenders were arbitrary and unreasonable, specifically the requirement that bidders must have a minimum average annual turnover of Rs. 10 crores over the last three years and experience of having executed similar works worth at least Rs. 40 crores. They argued that these conditions were disproportionate to the value of the works and effectively excluded small and medium contractors, stifling competition. BESCOM defended the conditions as necessary to ensure the quality and timely completion of works. The court analyzed the tender documents and found that the estimated value of each tender was around Rs. 50 lakhs, and the total value of all 40 tenders was about Rs. 20 crores. The court held that requiring a turnover of Rs. 10 crores and experience of Rs. 40 crores for works worth Rs. 50 lakhs each was arbitrary and unreasonable, as it bore no rational nexus to the object sought to be achieved. The court emphasized that while the authority has discretion to set eligibility criteria, such criteria must be reasonable and non-discriminatory. The court quashed the 40 tender notifications and directed BESCOM to issue fresh tenders with reasonable conditions within eight weeks. The court also clarified that this order does not prevent BESCOM from imposing conditions that are proportionate and necessary.
Headnote
A) Constitutional Law - Article 14 - Reasonableness of Tender Conditions - The court examined whether the eligibility criteria in tender notifications were arbitrary and unreasonable. The court held that the conditions requiring a minimum average annual turnover of Rs. 10 crores and experience of similar works worth Rs. 40 crores were disproportionate to the nature and value of the works, thereby stifling competition and violating Article 14. (Paras 10-25) B) Administrative Law - Judicial Review of Tender Conditions - Scope of Judicial Review - The court reiterated that while courts should not interfere in policy decisions of tenders, they can strike down conditions that are arbitrary, discriminatory, or mala fide. The impugned conditions were found to be arbitrary and hence liable to be quashed. (Paras 15-30) C) Contract Law - Legitimate Expectation - Right to Participate in Tenders - The petitioners, being eligible contractors, had a legitimate expectation to participate in the tenders. The arbitrary conditions deprived them of this right. (Paras 8-12)
Issue of Consideration
Whether the tender conditions imposed by BESCOM in the impugned tender notifications are arbitrary, unreasonable, and violative of Article 14 of the Constitution of India, and whether the petitioners have a legitimate expectation to participate in the tenders.
Final Decision
The court allowed the writ petition, quashed the 40 tender notifications dated 28.03.2022, and directed BESCOM to issue fresh tender notifications with reasonable conditions within eight weeks from the date of the order.
Law Points
- Tender conditions must be reasonable and non-arbitrary
- Article 14 of the Constitution of India
- proportionality in tender conditions
- judicial review of administrative actions
- legitimate expectation of bidders
