Judicial Review of Government Contracts and Tenders: The Two Questions, Eligibility Conditions and Restraint

Tender litigation is among the commonest business of the writ courts, and among the least successful. Every unsuccessful bidder believes the process was flawed, and some are right; but the law has narrowed the enquiry to a point where a disappointed tenderer rarely wins unless he can show that the process was arbitrary rather than merely adverse to him. The reasons are structural. The authority framing the tender knows what it needs; the evaluation of offers is a commercial judgment; public works have to be executed and delay is itself a public harm. The courts have therefore reduced the enquiry to two questions, and have insisted repeatedly that the author of a tender document is the best judge of its terms. This topic sets out that framework.

1. The Foundation: Article 14 and its Limits

The State's freedom of contract is real but not unqualified. Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489 established that the State cannot act arbitrarily in giving contracts and must conform to standards that are not arbitrary, irrational or irrelevant. Tata Cellular v. Union of India, (1994) 6 SCC 651 supplied the counterweight: judicial review is concerned with the decision-making process and not the merits, the Government must have freedom of contract and fair play in the joints, and the terms of the invitation to tender are not open to judicial scrutiny, being in the realm of contract.

The two together define the field. Article 14 secures a fair and transparent process; it does not entitle a bidder to have his offer preferred, nor a court to evaluate offers.

2. The Two Questions

📖 Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216

Facts: A State transport undertaking issued a tender for the supply of tyres containing eligibility conditions relating to past supply experience and turnover. An excluded manufacturer challenged the conditions as tailored to favour particular suppliers and as unrelated to the requirement.

Held: The Supreme Court dismissed the challenge and reduced the enquiry to two questions. First, whether the process adopted or the decision made by the authority is mala fide or intended to favour someone, or whether the process adopted or decision made is so arbitrary and irrational that the court can say the decision is one which no responsible authority acting reasonably and in accordance with relevant law could have reached. Secondly, whether the public interest is affected. If the answer to both is in the negative, there should be no interference. The Court added that the terms of the invitation to tender are not open to judicial scrutiny, that the authority is the best judge of its own requirements, and that a condition is not bad merely because it excludes some bidders, since every eligibility condition does.

Ratio: The working test for tender review. Interference is confined to mala fides or favouritism, irrationality of a kind no responsible authority could display, and prejudice to the public interest.

3. The Author of the Tender Is the Best Judge

📖 Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC 818

Facts: A bid for metro rail construction work was accepted after the employer construed a requirement of the tender document in a particular way, holding that the successful bidder's experience satisfied it. The High Court took a different view of the requirement and set the award aside.

Held: The Supreme Court restored the award. It held that the author of the tender document is the best person to understand and appreciate its requirements, and that if the interpretation placed by the author is not perverse or mala fide, or intended to favour someone, the court should not interfere; the court cannot substitute its own understanding of a tender condition for that of the employer. The Court also emphasised that constitutional courts must exercise restraint in interfering with the tender process, since delay in the execution of public projects is itself a matter of public concern, and observed that the threshold for interference has been set deliberately high.

Ratio: The interpretation of a tender condition belongs to the authority that framed it, and is accepted unless perverse, mala fide or designed to favour a particular bidder. Restraint is required because judicial interference delays public works.

4. Stage by Stage

Stage	Position on review
Decision to invite tenders at all, or to procure by nomination	Policy; reviewed for arbitrariness and want of transparency where public resources are allocated
Framing eligibility and technical conditions	For the authority; not open to scrutiny unless mala fide or arbitrary, and exclusion of some bidders is not by itself a vice (Michigan Rubber)
Interpretation of a tender condition	For the author of the document, unless perverse or mala fide (Afcons)
Evaluation of bids and comparative merit	Not reappreciated; the commercial and technical judgment is the authority's
Rejection of a bid as non-responsive	Reviewed for consistency with the tender terms and for reasons where an imputation is involved
Relaxation of a condition for one bidder	Closely examined; selective relaxation is the classic indicator of favouritism
Negotiation after bids are opened	Permissible where all bidders are treated alike; a single-bidder negotiation invites scrutiny
Cancellation of the whole process	Permissible on relevant grounds in the public interest; no individual hearing, but it must not be a device
Blacklisting arising out of the contract	Full natural justice: show cause notice proposing blacklisting, hearing, reasons, proportionate period

5. When Interference Does Occur

Conditions tailored to a single bidder. A specification that only one supplier can meet, with no functional justification, indicates favouritism rather than requirement.
Selective relaxation. A condition waived for one participant and enforced against others is arbitrary on its face.
Changing the criteria after bids are opened. Evaluation on a basis not disclosed in the tender defeats the equality the process is meant to secure.
An opaque or manipulable method of allocation. Where public resources are distributed by a process incapable of serving the stated object, as in the 2G spectrum case, Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1.
Award to an ineligible bidder. Acceptance of an offer that does not meet an essential condition, as distinct from a deviation the authority was entitled to waive.
Mala fides. Demonstrated interest of an official, or a pattern of awards to a connected party.

6. The Discretionary Considerations

Locus standi. A participant in the process has standing; a stranger who did not bid ordinarily does not, except in a genuine public interest challenge to the allocation of public resources.
Delay. A challenge brought after the contract is awarded, or after work has begun, is weak; the objection should be taken at the earliest stage.
Estoppel by participation. A bidder who participated without objecting to a condition is ordinarily precluded from attacking it after losing.
Stage of execution. Where the work is substantially complete, the court may decline to unsettle it even on finding a flaw, and may confine relief to a declaration.
Public interest in completion. Delay in infrastructure and public projects is a harm the court weighs against the flaw complained of.
Relief moulded. Rather than setting aside an award, the court may direct a fresh process for the future, or leave the parties to damages.

⚠ The complaint must be about the process, not about losing

Almost every unsuccessful tender challenge fails on the same point. The petition establishes that the petitioner was better qualified, offered a lower price or would have performed better, and asks the court to say so. None of that is a ground of review, because the comparative judgment belongs to the authority. The challenges that succeed establish something different: that a condition existed only to admit one bidder, that it was relaxed for him alone, that the criteria changed after the bids were opened, or that the award went to someone who did not meet an essential requirement. The first kind of complaint is about the result; the second is about the integrity of the process, and only the second engages Article 14.

7. The Position in Summary

The State cannot award contracts arbitrarily, but review is confined to the decision-making process and the terms of the invitation to tender are not open to scrutiny (Ramana Dayaram Shetty; Tata Cellular).
The enquiry reduces to two questions: whether the process or decision was mala fide, intended to favour someone or so irrational that no responsible authority could have reached it, and whether the public interest is affected (Michigan Rubber).
The author of the tender document is the best judge of its requirements, and its interpretation is accepted unless perverse, mala fide or designed to favour a bidder (Afcons).
Interference occurs where conditions are tailored, relaxed selectively, changed after bids are opened, where the allocation method is opaque, where an ineligible bidder is awarded, or where mala fides are shown.
Locus standi, delay, participation without objection, the stage of execution and the public interest in completion all bear on relief, which is frequently moulded rather than granted in full.

8. Related Topics and Provisions

Natural Justice in Government Contracts (Topic 85): the procedural side, including termination and discontinuance.
Natural Justice in Blacklisting (Topic 83): the sanction that most often follows a contractual default.
Public Interest and Administrative Discretion (Topic 57): allocation of public resources and the method chosen.
Judicial Restraint (Topic 93) and Intensity of Review (Topic 92): the disciplines applied in commercial matters.
Doctrine of Legitimate Expectation (Topic 54): the expectation of fair consideration of a tender.
Constitution of India: Articles 12, 14, 19(1)(g), 226 and 299.