The Supreme Court has asserted that it would not examine the technicalities of government tenders.
While tender documents and contracts are getting heavier and more complex, the case law on them is not getting lighter either. Technical bids these days are thick with scientific data which have to be explained by experts to legal draftsmen who are more comfortable with commercial proposals. Despite all these tedious efforts, disputes arise which have to be sorted out by the courts. Though the Supreme Court has reiterated several times that it does not have the technical expertise to deal with such disputes and its power of judicial review is limited in commercial matters, it is dragged into such controversies more often than it likes.
The reluctance of the court to deal with contractual matters was once again shown in last month’s judgment in Siemens Public Communication Networks Ltd vs Union of India. The Defence Ministry nominated Bharat Electronics Ltd as the prime contractor for the army’s modernisation plan for the technical communication system. BEL then invited tenders to make technical and commercial proposals for the supply of transfer of technology. Siemens, Selex Communications and Thales Land & Joint Systems were short-listed. Though Siemens’ offer was the lowest, the contract was not given to it. It moved the Delhi high court against the government decision, which dismissed its writ petition. It was not successful in its appeal before the Supreme Court either.
The court relied on some ten of its earlier judgements in which it had justified its reluctance to exercise its power of judicial review in commercial matters. It cited one telling passage from the judgement, Jagdish Mandal vs State of Orissa, delivered two years ago. “Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising the power of judicial review, should be resisted,” the judgment said, and added: “Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold.”
The power of judicial review is being stretched dramatically these days in public interest cases and the court is the object of severe criticism from the executive and politicians for this expansive role. But in commercial matters it is in a withdrawal mood. This trend is emphasised in a series of cases since 1993 when the Supreme Court delivered the judgement in Sterling Computers Ltd vs M N Publications. The time was when the economy was experiencing a liberal wind.
In the Sterling judgment, the court struck the first note. It said: “While exercising the power of judicial review in respect of contracts entered into on behalf of the state, the court is concerned primarily as to whether there has been any infirmity in the decision-making process. By way of judicial review, the court cannot examine the details of the terms of the contract. But at the same time, the courts can certainly examine whether the process was reasonable, rational, not arbitrary and violative of Article 14 (equality) of the Constitution.”
In the following year, the court decided the case, Tata Cellular vs Union of India, in which it said that subject to certain exceptions like arbitrariness, bias, mala fides or favouritism, the government should be presumed to be the guardian of the financial interest of the state. It must get the best person or the best quotation for its job. The right to choose cannot be considered as an arbitrary power. Moreover, the court does not have the expertise to correct the administrative decision. If a review of the administrative is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. The government must have freedom of contract, the court conceded.
In Air India vs Cochin International Airport Ltd (2000), the court ruled that the government could select its own method to choose the bidder and it is free to grant any relaxation for bona fide reasons. The court must exercise great caution in disputes of commercial nature and it should exercise its power in furtherance of public interest and not merely on the making out of a legal point.
As the law stands now, the court can intervene only if there was an illegality, gross irrationality or procedural impropriety. It cannot go into the fairness of a policy. It can only examine the manner in which the decision has been taken. These norms leave little scope for future litigation over award of government contracts, though ingenious lawyers may still invent another occasion for resurrecting their arguments in the “special facts and circumstances” of their clients.