Facts of the Case

The petitioners, M/s Verve Human Care Laboratories and M/s Maan Pharmaceuticals Ltd., challenged the cancellation of Tender No. CMSS/PROC/2021-22/NACO/011 floated by the Central Medical Services Society (CMSS) for procurement of Buprenorphine 2 mg and 0.4 mg tablets, and also challenged the issuance of a fresh Tender No. CMSS/PROC/2021-22/NACO/034.

Earlier procurement processes had witnessed cancellation after allegations that certain bidders had submitted forged and fabricated documents. Thereafter, Tender No. 3 was floated, in which the petitioners emerged as L-1 and L-2 bidders. Negotiations were also conducted, and the petitioners agreed to reduce their quoted prices by 1.5%.

Before awarding the contract, CMSS cancelled Tender No. 3 and issued a fresh tender by relaxing the eligibility criteria relating to prior supply experience from 50% to 25% of the quoted quantity. Aggrieved by this action, the petitioners approached the Delhi High Court seeking quashing of the fresh tender and finalisation of Tender No. 3 in their favour.

Issues Involved

  1. Whether CMSS was justified in cancelling the earlier tender without assigning reasons.
  2. Whether issuance of a fresh tender with relaxed eligibility conditions was arbitrary or mala fide.
  3. Whether the petitioners acquired any enforceable or vested right merely because they were declared successful bidders.
  4. Whether the High Court should exercise judicial review under Article 226 to interfere with the tender process.
  5. Whether public interest justified re-tendering to secure wider competition and better pricing.

Petitioner’s Arguments

  • The petitioners contended that they had already been declared successful bidders and negotiations had been concluded with agreed price reductions.
  • They argued that cancellation of Tender No. 3 without notice or reasons was arbitrary, illegal and contrary to the Manual for Procurement of Goods, 2017.
  • It was submitted that relaxation of eligibility criteria from 50% to 25% was intended to accommodate previously ineligible or disqualified bidders.
  • According to the petitioners, CMSS failed to act against bidders who had allegedly submitted forged documents in earlier tenders while unfairly cancelling the existing tender.
  • They further argued that disclosure of their quoted prices in the previous tender placed them at a commercial disadvantage in the fresh bidding process.
  • The petitioners asserted that they had a legitimate expectation that the contract would be awarded to them after being declared L-1 and L-2 bidders.

Respondent’s Arguments

  • CMSS submitted that judicial review in tender matters is extremely limited and courts should interfere only where there is arbitrariness, mala fides or illegality.
  • It was argued that despite negotiations, the petitioners' quoted prices remained substantially higher than prevailing procurement prices obtained by other Government agencies.
  • CMSS explained that the eligibility criteria were relaxed solely to increase competition, encourage wider participation and obtain more competitive prices for public procurement.
  • The respondents relied upon the tender conditions, particularly the clause reserving the authority's right to cancel the tender process without assigning any reason before award of contract.
  • They contended that the decision was taken purely in public interest and not to favour any particular bidder.
  • Regarding allegations against previous bidders, CMSS submitted that appropriate inquiries had been initiated and necessary action would be taken in accordance with the tender conditions wherever required.

Court Order / Findings

The Delhi High Court dismissed the writ petitions and upheld the action of CMSS.

The Court observed that:

  • Judicial review in government tenders is confined to examining the legality of the decision-making process and not the commercial wisdom of the authority.
  • A successful bidder does not acquire any vested right to receive the contract merely because it is declared L-1 or L-2 before the contract is awarded.
  • The tender conditions expressly permitted CMSS to cancel the tender process before award of contract without assigning any reason.
  • The decision to issue a fresh tender was supported by the objective of securing greater competition and obtaining better prices in public interest.
  • Relaxation of eligibility criteria was introduced to widen participation and was not shown to be arbitrary or actuated by mala fides.
  • Courts should not substitute their commercial judgment for that of the tendering authority unless the decision-making process is shown to be illegal, irrational or arbitrary.
  • Public interest must prevail over private commercial interests in matters relating to government procurement.
  • The Court reiterated that contractual disputes should ordinarily not be entertained under Article 226 where no public law violation is established.

Important Clarification

  • Mere declaration as the lowest or successful bidder does not create an enforceable legal right to award of contract.
  • Tendering authorities retain the power to cancel the tender before award where the tender conditions permit such cancellation.
  • Government agencies may modify or relax eligibility conditions if such changes are made bona fide to increase competition and serve public interest.
  • Judicial review in tender matters is confined to examining arbitrariness, mala fides, illegality or procedural impropriety and not the merits of commercial decisions.
  • Public procurement decisions aimed at securing better value for public funds deserve substantial judicial deference.

Sections 

  • Article 226 of the Constitution of India
  • Manual for Procurement of Goods, 2017
  • Narcotic Drugs and Psychotropic Substances Act, 1985
  • Tender Conditions governing cancellation of bids and procurement process.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785401977_2361compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.