Tata Cellular vs Union Of India on 26 July, 1994
"7. The law relating to award of a contract by the State,
its corporations and bodies acting as instrumentalities
and agencies of the Government has been settled by the
decision of this Court in Ramana Dayaram Shetty v.
International Airport Authority of India [(1979) 3 SCC
489], Fertilizer Corpn. Kamgar Union (Regd.) v. Union of
India [(1981) 1 SCC 568], CCE v. Dunlop India Ltd.
[(1985) 1 SCC 260, Tata Cellular v. Union of India
[(1994) 6 SCC 651] , Ramniklal N. Bhutta v. State of
Maharashtra [(1997) 1 SCC 134] and Raunaq
International Ltd. v. I.V.R. Construction Ltd. [(1999) 1
SCC 492] The award of a contract, whether it is by a
private party or by a public body or the State, is
essentially a commercial transaction. In arriving at a
commercial decision considerations which are paramount
are commercial considerations. The State can choose its
own method to arrive at a decision. It can fix its own
terms of invitation to tender and that is not open to
judicial scrutiny. It can enter into negotiations before
finally deciding to accept one of the offers made to it.
Price need not always be the sole criterion for awarding
a contract. It is free to grant any relaxation, for bona
fide reasons, if the tender conditions permit such a
relaxation. It may not accept the offer even though it
happens to be the highest or the lowest. But the State,
its corporations, instrumentalities and agencies are
bound to adhere to the norms, standards and
procedures laid down by them and cannot depart from
them arbitrarily. Though that decision is not amenable to
6
judicial review, the court can examine the decision-
making process and interfere if it is found vitiated by
mala fides, unreasonableness and arbitrariness. The
State, its corporations, instrumentalities and agencies
have the public duty to be fair to all concerned. Even
when some defect is found in the decision-making
process the court must exercise its discretionary power
under Article 226 with great caution and should exercise
it only in furtherance of public interest and not merely on
the making out of a legal point. The court should always
keep the larger public interest in mind in order to decide
whether its intervention is called for or not. Only when it
comes to a conclusion that overwhelming public interest
requires interference, the court should intervene."