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Authority Must Have Valid Reasons For Accepting/ Rejecting Bids Even If Tender Clause Stipulates Otherwise: Delhi High Court

Suhavi Arya
9 Feb 2022 11:15 AM GMT
Authority Must Have Valid Reasons For Accepting/ Rejecting Bids Even If Tender Clause Stipulates Otherwise: Delhi High Court
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The Delhi High Court recently observed that merely because a clause in the tender stipulates that the bids may be accepted or rejected without assigning any reasons, does not mean that the tender authority can act arbitrarily. It must have valid reasons for exercising its discretion.The division bench comprising of Justices Vipin Sanghi and Jasmeet Singh said,"No doubt, the...

The Delhi High Court recently observed that merely because a clause in the tender stipulates that the bids may be accepted or rejected without assigning any reasons, does not mean that the tender authority can act arbitrarily. It must have valid reasons for exercising its discretion.

The division bench comprising of Justices Vipin Sanghi and Jasmeet Singh said,

"No doubt, the tender-inviting authority cannot act arbitrarily or whimsically, or out of mala fides in the matter of awarding or cancelling the tendering process. Even the clause which stipulates that they may not assign reasons for not accepting any bid, or rejecting the bids, does not mean that they should not have any valid reasons to justify their conduct."

The petitioner had preferred the present writ petition being aggrieved by the cancellation of the tender in question, issued by the respondent-Airports Economic Regulatory Authority of India.

In this case, the petitioners had placed a bid in relation to tendering of consultancy services for the Sardar Vallabhai Patel International Airport, Ahmedabad. The petitioner emerged as the L-1 bidder and even offered a 5% discount on the tender price but the respondent went on to cancel the tender notice. The petitioner alleged that the cancellation is arbitrary, whimsical and mala fide.

Its grievance was that by cancelling the tender and re-inviting the bids, the respondent had put the petitioner to disadvantage, in as much, as, the petitioner's earlier bid became public, leading to unhealthy competition. it was submitted that the bidder, who has been found to be the L-1 bidder in the fresh tendering process, did not even participate in the tender in question. This enhances the possibility of back-door entry.

At the outset, the Court noted that the tender in question clearly stipulates that the respondent is not bound to accept any bid, and it may reject bids without assigning any reason

It expressly reserves the right of the respondent not to select any bidder; not to appoint a selected bidder, and; to reject all or any of the proposals/ bids without assigning any reasons.

However, this, the Court said, does not mean that the respondent-authority is not obligated to consider the bids in a reasonable and transparent manner, free from discrimination, arbitrariness and malafides.
Moving further, the petitioner had argued that stipulation in Clause 1.5 of the RFP vests the lowest bidder with the right to be awarded the contract, and it was no longer open to the respondent to withdraw from the tendering process and re-tender the same.
Rejecting this contention, the Court observed that when an authority invites a tender, it does not make an offer. It merely invites offers. The issuance of a tender is nothing more than an invitation to offer. The bidders make their offers in response to the tender (NIT), and the mere making of the offer in response to the tender, or emergence as the highest/ lowest qualified bidder, does not vest any enforceable right on such a bidder to be awarded the contract.
"The only right that such a bidder – and for that matter, all bidders have, is that their bids be considered in a reasonable and transparent manner, free from discrimination, arbitrariness and malafides."
It added that every public authority dealing with public funds discharges a public trust, and is bound to act with financial prudence. Thus, to construe the language of Clause 1.5 to mean that the respondent is bound to accept the L-1 bidder, can lead to disastrous results in a situation where the lowest quoted prices are also found to be uncompetitive or very high.
Finally, after perusing the original record of the case, the Court despite the petitioner having offered the discount of 5% on its quoted rates, the respondent found the net price "unreasonable and unjustified" for the assignment in question, when compared to other similar or bigger airports.
This was the respondent had decided to cancel the tender.
Thus, the High Court the decision taken by the respondent in cancelling the tendering process in question, wherein the petitioner emerged as the L-1 bidder cannot be said to be unreasonable or arbitrary.
"The respondent could not be expected to accept high rates, which are not commensurate with the rates prevailing in the industry," observed the bench.
Accordingly, the petition was dismissed.
Case Title: PKF Sridhar and Santhanam v. Airports Economic Regulatory Authority of India. WP (C ) 12385/2021
Citation: 2022 LiveLaw (Del) 105

Click Here To Read/Download Judgment 


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