Suspension Order Subject To Inquiry Isn't Blacklisting; State Free To Reject Bid Over Quality Concerns: Allahabad High Court

However, the Court upheld the rejection of a technical bid as it noted that poor past performance is a valid ground for rejection in the public interest.

The bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary held:

"In our view, the order of suspension that is subject to inquiry does not amount to a blacklisting order, keeping in mind the long chain of precedents, which have held that any blacklisting order carries grave and serious consequences and at times has been even termed to be a civil death of an entity by the constitutional courts. Thus, any order of suspension, of the kind in the present matter, cannot be casually & liberally interpreted to also mean a blacklisting order, as is being sought to be done in the present case".

Briefly put, the Petitioner's technical bid for the procurement of various wireless equipment, viz., digital VHF Base/Mobile Transceiver sets, digital handheld VHF transceivers, etc., for the Uttar Pradesh Police Department was rejected. Petitioner's representation was also rejected.

Before the petitioner could apply for the tender, the State of Maharashtra passed a suspension order against the petitioner regarding the quality of equipment on a similar nature of work. Based on this suspension order, the petitioner's technical bid was rejected.

Challenging the same, the petitioner approached the High Court.

The HC noted that after the rejection order was passed, the petitioner first approached the Bombay High Court seeking interim relief against the suspension order, which was refused.

In the SLP, the Supreme Court declined to interfere with the Bombay High Court's order but clarified that the suspension order should not have a bearing on tenders issued by other states.

It also noted that in the present writ petition before the Allahabad High Court, the petitioner had obtained an interim stay against the State entering into a contract with the successful bidder.

The division bench noted that the State of Maharashtra's suspension order recorded good cause for the petitioner's suspension with immediate effect.

However, without going into the merits of the suspension order and observing that the suspension is a step before blacklisting, the Court held:

“…this court has no hesitation in holding that any suspension order by itself may not amount to an order of blacklisting as normally the process of blacklisting has the principles of natural justice ingrained in it as held in a catena of Judgments passed by the Hon'ble Supreme Court and the High Courts.”

Observing that the principles of natural justice were not followed before passing the suspension order, the Court held that it cannot be equated with a blacklisting order, and that such an order would not necessarily mean blacklisting of the suspended party.

"Thus, the action of the respondent-State in rejecting the technical bid of the petitioner is based on a bonafide assumption that the suspension order amounted to a blacklisting order and as such cannot be treated to be an arbitrary order or having been passed with any malafide intention".

The Court, however, noted that the apprehension of the authorities in UP regarding the quality of the petitioner's work based on the suspension order by the State of Maharashtra is not irrational.

Highlighting the State's freedom to choose, the Court observed that the equipment is intended for police operations, which is a significant component in maintaining law and order in a large area like the State of Uttar Pradesh.

The bench held that "the quality of the equipments and after supply service maintenance standard cannot be tweaked and/or compromised with in any circumstances". The Court added that there is a certain degree of latitude and freedom granted to the tenderer or owner in choosing its equipment and its supplier.

Relying on the Supreme Court's ruling in Municipal Corporation, Ujjain vs. BVG India Limited, the Court emphasized that a technical expert can validly take into consideration the non-performance of a bidder.

Poor quality of work or goods can lead to tremendous public hardship, justifying the rejection of the bid to safeguard the public interest.

The Court also refused to substitute its view with the technical expertise of the evaluation committee, noting that it lacks the necessary expertise to examine the specific needs and requirements of the tender

"The Courts have always taken a consistent stand that tender process should not be interfered with until and unless specific grounds of malafide, arbitrariness and irrationality has been pleaded and/or displayed by the party effected. We do not find any such grounds having been pleaded or demonstrated by the petitioner in the present petition".

Accordingly, the rejection of the petitioner's bid was upheld and the writ petition was disposed of.