No Fundamental Right To Do Business With State: High Court Dismisses Contractors' Plea Against Karnataka Govt's Call For Tenders Above ₹1 Crore

The Karnataka High Court has refused to interfere with the government's decision to issue tenders under the Amrutha Nagarothana Scheme, wherein various works are clubbed together and the value of each tender was allotted to be more than Rs.1 crore.

A single-judge bench of Justice M I Arun dismissed a batch of petitions filed by the Hangal Taluka Civil Contractors Association and Others.

It said “the State Government taking into consideration the works required is always at liberty to prescribe qualification of tenderers to ensure that contractors have the capacity and resources to successfully execute the work. No person can claim a fundamental right to carry on business with the Government.”

The petitioners had claimed that they were small-time civil contractors who were not in a position to compete for tender works for more than Rs.1 crore, contending that the said issuance of tender work valued more than Rs.1 crore violates the Government circular dated 11.05.2022.

Reference was made to the Government circular dated 11.05.2022 wherein a decision had been taken that tender works at the taluk level should be packaged in such a manner that the work should not exceed a sum of Rs.1 crore.

The said circular was issued after discussions between the Chief Minister and office bearers of the Karnataka State Contractors' Association to help small-time contractors.

However, the government submitted that there was an earlier Government Order dated 14.01.2022 which was specifically applicable to works under Amrutha Nagarothana Scheme and it stipulated that the tender work should be packaged in such a manner that the value of work should be over and above the sum of Rs.1 crore.

Further, it was argued that the circular dated 11.05.2022 was a general circular applicable to all the works and not specifically to the works executed under the Amrutha Nagarothana Scheme and the Government order overrides any circular in case there was a conflict.

In hearing the arguments, the bench observed that the fixation of the value of the tender was entirely within the purview of the executive and the courts did not have any role to play in the process except for striking down such actions which are proved to be arbitrary or unreasonable and in violation of any law.

It held “The Government order dated 14.01.2022 is issued by the State under Article 162 of the Constitution of India and in the name of the Governor. The circular dated 11.05.2022 is issued by the Finance Department of the State Government and this circular cannot take away the effect of the Government order issued under Article 162 of the Constitution of India in case of any conflict."

Noting that an earlier undertaking was given by the state government stating that in future while inviting the tenders, the circular dated 11.05.2022 would be strictly adhered to, the Court said that such an assurance cannot operate as an estoppel against the said Government order.

However, in expressing displeasure at the conflicting stances taken by the State, the court said, “At one instance, they issued a Government order dated 14.01.2022 wherein they have fixed the minimum value of tenders should be at a sum of Rs.1 crore and subsequently, the Finance Department has issued a circular dated 11.05.2022 wherein it is decided that all the contractual works shall be below a sum of Rs.1 crore on the ground that it will benefit small-time contractors. Thereafter, no proper clarification is given and required Government order is not issued, resulting in several writ petitions being filed before the court, which had the effect of stalling the works.”

The Bench thus held that while taking policy decisions and implementing them was the prerogative of the executive, it was required to make policies in such a manner that there was no confusion, and for the benefit of society. The Court thus advised the state to come up with policies that do not conflict with each other.

However, in noting that the tenders, in this case, were floated in conformity with the Govt order dated 11.05.2022, the Court dismissed the writ petition. 

Appearance: Advocates R.H.Angadi and S G Soudatti for Petitioners.

AAG Gangadhar J M for AGA Praveen Uppar for Respondents.

Citation No: 462

Case Title: Hangal Taluka Civil Contractors Association AND State of Karnataka & Others

Case No: WRIT PETITION NO. 104062 OF 2022 (GM-TEN) C/W WRIT PETITION NO. 103437 OF 2022 WRIT PETITION NO. 103745 OF 2022 WRIT PETITION NO. 103755 OF 2022 WRIT PETITION NO. 104013 OF 2022.

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