Supreme Court Rules on Tender Disqualification: Utkal Suppliers vs. Maa Kanak Durga Enterprises
The Supreme Court of India recently delivered a judgment in the case of M/S Utkal Suppliers v. M/S Maa Kanak Durga Enterprises & Ors., addressing key legal issues related to government tenders, eligibility criteria, and judicial review in administrative matters. This case revolved around the rejection of a bid due to non-compliance with tender conditions and the subsequent intervention by the High Court.
Background of the Case
The dispute arose from a Tender Call Notice (TCN) dated December 30, 2019, issued by the Office of the Superintendent, SCB Medical College and Hospital, Cuttack, inviting bids for the preparation and supply of therapeutic and non-therapeutic diets for hospital patients. The tender required bidders to have:
- At least three years of experience in diet preparation and supply to hospitals with a minimum of 200 beds.
- A valid labor license from the relevant authority.
The bids submitted were evaluated by a tender committee, and only two bidders—M/S Utkal Suppliers and another bidder—were found eligible, while M/S Maa Kanak Durga Enterprises was disqualified for failing to provide a valid labor license.
Petitioner’s Arguments (Maa Kanak Durga Enterprises)
- “The requirement of a labor license did not specify that it had to be under the Contract Labour (Regulation and Abolition) Act, 1970. The license provided under the Odisha Shops and Commercial Establishments Act should be accepted as valid.”
- “The rejection of our bid was arbitrary, as our experience certificate from AIIMS Bhubaneswar was unfairly disregarded due to a gap period, despite meeting the three-year requirement.”
- “The contract was unfairly awarded to Utkal Suppliers, indicating possible bias by the tendering authority.”
Respondent’s Arguments (Utkal Suppliers & SCB Medical College)
- “The tender document clearly required a valid labor license, which refers to the Contract Labour Act. The petitioner failed to comply with this essential condition.”
- “The experience certificate submitted by the petitioner was not continuous and had a significant gap period, making it invalid.”
- “The tender process was conducted fairly, and the petitioner’s disqualification was based on clear, objective criteria.”
High Court’s Ruling
The Odisha High Court ruled in favor of Maa Kanak Durga Enterprises, finding that:
- The tender conditions did not explicitly specify that the labor license had to be issued under the Contract Labour Act, so the license under the Odisha Shops and Commercial Establishments Act was acceptable.
- The rejection of the petitioner’s experience certificate was improper since the total duration exceeded three years, even if there was a gap.
- The tender committee’s decision appeared to be biased in favor of Utkal Suppliers, making the process mala fide.
- The High Court quashed the contract awarded to Utkal Suppliers and directed the contract to be given to Maa Kanak Durga Enterprises.
Supreme Court’s Observations
The Supreme Court overturned the High Court’s decision, emphasizing the following points:
- “The authority issuing the tender has the final say in interpreting its own tender conditions, provided the interpretation is reasonable and not arbitrary.”
- “The requirement of a labor license was clearly meant to be under the Contract Labour Act, as the tender document referred to staff recruitment and employment regulations.”
- “The courts must exercise judicial restraint and should not interfere with administrative decisions unless they are arbitrary, perverse, or mala fide.”
Judgment of the Supreme Court
The Supreme Court ruled in favor of Utkal Suppliers and set aside the High Court’s order:
- The tender committee acted within its rights to reject the petitioner’s bid based on non-compliance with the eligibility criteria.
- The labor license requirement was unambiguous and could not be substituted with a different type of registration.
- There was no evidence of mala fide intent or bias in the tender evaluation process.
- Judicial intervention in such matters must be minimal unless there is clear illegality or arbitrariness.
Key Takeaways from the Judgment
- Authorities have discretion in interpreting tender terms: The Supreme Court emphasized that courts should not substitute their interpretation over that of the tendering authority unless it is patently unreasonable.
- Strict adherence to tender conditions is required: Bidders must comply with all conditions explicitly stated in the tender document.
- Judicial restraint in contractual matters: Courts should avoid interfering in administrative decisions unless there is evidence of arbitrariness or illegality.
- Mala fide claims require strong evidence: The burden of proving bias or unfair advantage lies on the petitioner, and mere allegations are insufficient.
Conclusion
The Supreme Court’s judgment in Utkal Suppliers v. Maa Kanak Durga Enterprises reinforces the importance of judicial non-interference in tender processes unless there is a clear case of arbitrariness or illegality. The ruling clarifies that bidders must strictly adhere to tender requirements and that the tendering authority’s interpretation of its own conditions will be given deference unless found to be unreasonable. This decision sets a precedent for future cases involving public procurement and tender disputes.
Petitioner Name: M/S Utkal Suppliers.Respondent Name: M/S Maa Kanak Durga Enterprises & Ors..Judgment By: Justice R.F. Nariman, Justice B.R. Gavai.Place Of Incident: Cuttack, Odisha.Judgment Date: 09-04-2021.
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