MUNICIPAL CORPORATION UJJAIN VS BVG INDIA LTD: CASE SUMMARY
The Supreme Court in Municipal Corporation Ujjain Vs BVG India Ltd (2018) 6 SCR 86 has held that in matters relating to award of contracts by public bodies, Courts cannot act as appellate court and can interfere only in cases of malafides, bias, arbitrariness, irrationality or perversity.
FACTS OF THE CASE
Ujjain Municipal Corporation issued Notice Inviting Tender (NIT) for door to door waste collection and transportation for a period of 10 years in the city of Ujjain. Eligible bidders had to submit Technical Bid and Financial Bid. The NIT interalia provided 80% weightage to technical bid and 20% weightage for financial bid. Financial bids of only those bidders who had scored at least 60% in technical bid had to be opened. BVG scored low in technical evaluation and got 58.94 in weighted score while successful bidder got a score of 67.36. Global Waste Management (L1 Bidder) got the 1st rank hence it was awarded the contract. BVG India Ltd (L2 bidder) challenged the bid before the High Court in a Writ Petition which was allowed by the High Court. The major issue involved was the scope of judicial review in the contractual matters.
FINDINGS OF THE COURT
The Supreme Court in Tata Cellular Vs Union of India (1994) 6 SCC 651 held that judicial review will be applicable in contractual matters of government bodies in order to prevent arbitrariness or favoritism. But such judicial review will be limited in nature. The Government has right to choose the best person or best quotation but such power cannot be exercised for collateral purpose.
The Supreme Court in Sterling Computers Ltd Vs. M & N Publications Ltd (1993) 1 SCC 445 held that Courts cannot examine terms of contract. The Courts have inherent limitation regarding the same. The Courts can certainly examine whether “decision making” process was reasonable, rational or arbitrary or violative of Article 14 of the Constitution.
The Supreme Court in Raunaq International Ltd Vs I.V.R. Construction Ltd (1999) 1 SCC 492 observed that in arriving at a commercial decision considerations which are paramount are commercial considerations. The Court held that if award of a contract by a Public Authority is challenged before the High Court under Article 226 of the Constitution, the Court must be satisfied that there is an element of public interest involved in the Petition.
In U.P. Financial Corporation Vs Naini Oxygen & Acetylene Gas Ltd (1995) 2SCC754 the Supreme Court held that in commercial matters Courts cannot risk its own judgment for judgment of commercial organizations. Unless action of a commercial body is mala fide, even a wrong decision of commercial body is not open to challenge.
The Supreme Court in UP Financial Corporation Vs. Gem Cap (India) Pvt. Ltd. (1993) 2 SCC 299 held that the High Court while exercising it jurisdiction under Article 226 cannot sit as an appellate authority over acts and deeds of corporation.
In Karnataka State Industrial Investment & Development Corporation Vs Cavalet India Ltd (2005) 4 SCC456 the Supreme Court reiterated that High Court under Article 226 cannot sit in appeal in respect of contractual matters. A Writ Court can interfere in only two situations i.e. in case of statutory violation and where Corporation acts unfairly.
The Supreme Court after going through aforesaid decisions concluded that in contractual matters when a decision making process is so arbitrary or irrational that no responsible authority proceeding reasonably or lawfully could have arrived at such decisions, power of judicial review can be exercised by courts. If decisions are bonafide or in public interest, the Court cannot interfere in judicial review even if there is a procedural lacuna. The principle of equity and natural justice do not apply in the field of commercial transactions.
In the instant case the Court noted that Municipal Corporation has given due importance to the quality and not the financial aspect which is reflected in 80% weightage given to technical bid and 20% weightage to financial bid. The Supreme Court relied on Trilochan Mishra Vs State of Orissa and others (1971) 3 SCC 153 wherein it was held that Government has right to enter in contract with a person well known to it who has faithfully performed contracts in the past. The Supreme Court also relied on Delhi Science Forum Vs. Union of India (1996) 2 SCC 405 wherein it was held that the question of awarding license and contract does not depend merely on competitive rates offered. Several other factors have to be taken into consideration by an expert body, who are more familiar with intricacies of the trade.
The Supreme Court finally concluded that High Court should not interfere with the judgment of expert consultant on the issue of technical qualification. A bidder who has submitted bid independently can not rely on technical qualifications of third party. It is no open for Court to evaluate financial and technical bids as an appellate authority. The Court can only interfere in cases of mala fides, intention to favour someone, bias, arbitrariness, irrationality and perversity.
In light of above, the Supreme Court set aside the judgment of the High Court.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.