Introduction
Date of the Judgment: April 25, 2025
Judges: Bela M. Trivedi, J., Prasanna B. Varale, J.
Can a tendering authority cancel a tender process and initiate a fresh tender for the same work? The Supreme Court of India addressed this question in a recent case concerning a dispute over a forest contract in Kerala. The court examined the scope of judicial review in contractual matters and the extent of the tendering authority’s power to cancel tenders to protect the financial interests of the state. This judgment, delivered by a bench comprising Justice Bela M. Trivedi and Justice Prasanna B. Varale, clarifies the circumstances under which courts can intervene in tender-related disputes.
Case Background
The case originated from an order issued by the Divisional Forest Officer (DFO), Konni, on October 12, 2020, which cancelled an earlier e-tender notification dated May 25, 2020. This tender was for final tree felling works in the Nellidappara area of the South Kumaramperoor Forest Station. The DFO decided to float a fresh tender for the same work. The writ petitioners, who had participated in the initial e-tender, challenged this decision, arguing that it was arbitrary and illegal.
A key factor leading to the dispute was a circular issued by the Principal Conservator of Forests on February 29, 2020. This circular stipulated that Class A registered contractors who had not participated in any timber extraction tenders in the previous financial year would not be eligible for renewal of their registration. Consequently, the registration of some of the petitioners was not renewed.
The petitioners challenged the circular in the High Court, seeking interim directions to allow them to participate in the e-tender dated May 25, 2020. The High Court initially granted these interim orders, and later, on September 28, 2020, allowed the writ petitions, setting aside the orders that had declined the renewal of the petitioners’ registrations. The High Court directed the authorities to reconsider the renewal applications on their merits, without considering the circular of February 29, 2020.
However, on October 12, 2020, the DFO cancelled the e-tender dated May 25, 2020, and issued a fresh tender notification on October 31, 2020. This decision was again challenged by the respondents in the High Court.
On November 16, 2020, the High Court allowed the writ petition, setting aside the re-tender notification dated October 31, 2020. The court directed the authorities to proceed with the e-tender dated May 25, 2020, and award the work to the eligible tenderer. The High Court’s decision was based on the premise that cancelling the existing tender process would not expedite the replanting work and that there were sufficient participants in the earlier tender proceedings.
Aggrieved by this order, the Principal Chief Conservator of Forest & Ors. filed a Writ Appeal before the Division Bench of the High Court, which was dismissed on January 19, 2021, leading to the appeal before the Supreme Court.
Timeline:
| Date | Event |
|---|---|
| February 29, 2020 | Principal Conservator of Forests issued a circular regarding the renewal of registration of A class contractors. |
| May 25, 2020 | Divisional Forest Officer, Konni, issued an e-tender notification for final tree felling works. |
| September 28, 2020 | High Court allowed writ petitions challenging the non-renewal of contractor registrations. |
| October 12, 2020 | Divisional Forest Officer cancelled the e-tender dated May 25, 2020. |
| October 31, 2020 | Fresh tenders were floated for the same work. |
| November 16, 2020 | High Court set aside the re-tender notification dated October 31, 2020. |
| January 19, 2021 | Division Bench of the High Court dismissed the writ appeal. |
| April 25, 2025 | Supreme Court allowed the appeals and set aside the High Court’s order. |
Arguments
Arguments by the Appellants (Principal Chief Conservator of Forest & Ors.):
- ✓ The High Court erred in setting aside the retendering notice, as it contradicts established legal principles.
- ✓ The High Court’s finding that transportation restrictions did not affect the tender process is factually incorrect because bidders were required to submit both e-tenders and physical copies via speed post or registered post.
- ✓ The High Court’s decision to set aside the retender without acknowledging that the tender had not been awarded and the technical bid was still under process is unlawful.
- ✓ The High Court’s assessment that the lowest bidder’s quote of 12.67% below the estimated rate was reasonable lacked supporting evidence and should not be a basis for overturning the authority’s decision.
- ✓ Courts should only intervene in contractual matters if there is evidence of malafide intentions on the part of the government authority.
- ✓ The DFO, Konni, acted within their powers under Clause 3 of the tender notice and Clause 20 of the e-government procurement notice, which reserve the right to modify or cancel bids without providing a reason.
Arguments by the Respondents (Suresh Mathew & Ors.):
- ✓ The judgment passed by the Single Judge of the High Court is well-reasoned.
- ✓ The Division Bench of the High Court correctly affirmed the Single Judge’s decision after evaluating the evidence.
- ✓ The appeal/SLP of the appellant should be dismissed.
Issues Framed by the Supreme Court
The Supreme Court addressed the following issue:
- The factual matrix of this case involves the process of tender and the power of the tendering authority to cancel the tender is a legal question.
Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”
| Issue | How the Court Dealt With It |
|---|---|
| The factual matrix of this case involves the process of tender and the power of the tendering authority to cancel the tender is a legal question. | The Court held that the tendering authority has the power to cancel the tender, especially to protect the financial interests of the state. The Court emphasized that judicial review in such matters is limited and should not interfere unless there is evidence of malafide intentions or arbitrary decisions. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How Considered |
|---|---|---|
| Jagdish Mandal vs. State of Orissa and Others, (2007) 14 SCC 517 | Supreme Court of India | The Court referred to this case to reiterate the principles governing judicial review in matters of tenders and contracts, emphasizing that courts should not interfere unless the decision is mala fide or irrational. |
| State of Orissa and others vs. Harinarayan Jaiswal and others, (AIR 1972 SC 1816) | Supreme Court of India | The Court cited this case to support the view that the government, as the guardian of state finances, has the authority to decide whether the price offered in an auction is adequate and that such decisions are not generally open to judicial review. |
| M/s Michigan Rubber (I) Ltd. vs. State of Karnataka and ors., (2012) 8 SCC 216 | Supreme Court of India | The Court referred to this case to outline the principles that emerge in government contracts, emphasizing fairness, non-arbitrariness, and the limited role of courts unless there is malicious intent or misuse of statutory powers. |
| Tata Cellular vs. Union of India, (1994) 6 SCC 651 | Supreme Court of India | The Court cited this case to highlight the modern trend of judicial restraint in administrative action, emphasizing that courts should review the decision-making process rather than substitute their own judgment. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission by Appellants | How the Court Treated It |
|---|---|
| The High Court erred in setting aside the retendering notice. | The Court agreed, stating that the High Court’s decision contradicted established legal principles. |
| The High Court’s finding that transportation restrictions did not affect the tender process is factually incorrect. | The Court supported this, noting that bidders were required to submit both e-tenders and physical copies. |
| The High Court’s decision to set aside the retender without acknowledging that the tender had not been awarded is unlawful. | The Court concurred, emphasizing that the technical bid was still under process. |
| The High Court’s assessment that the lowest bidder’s quote was reasonable lacked supporting evidence. | The Court agreed, stating that this should not be the basis for overturning the authority’s decision. |
| Courts should only intervene if there is evidence of malafide intentions. | The Court upheld this principle. |
| The DFO acted within their powers to modify or cancel bids. | The Court affirmed that the DFO had the right to cancel the tender without assigning a reason. |
How each authority was viewed by the Court?
The court relied on several key authorities to support its reasoning:
- ✓ Jagdish Mandal vs. State of Orissa and Others, (2007) 14 SCC 517: The Court used this case to emphasize that judicial review of administrative action is intended to prevent arbitrariness and mala fides, not to assess the soundness of the decision.
- ✓ State of Orissa and others vs. Harinarayan Jaiswal and others, (AIR 1972 SC 1816): This authority was cited to support the principle that the government is the guardian of state finances and has the power to protect the financial interests of the state.
- ✓ M/s Michigan Rubber (I) Ltd. vs. State of Karnataka and ors., (2012) 8 SCC 216: The Court used this case to highlight the need for fairness and non-arbitrariness in state actions related to contracts, while also recognizing the limited role of courts in interfering with such decisions.
- ✓ Tata Cellular vs. Union of India, (1994) 6 SCC 651: This case was cited to underscore the modern trend of judicial restraint in administrative action, emphasizing that courts should review the decision-making process rather than substitute their own judgment.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need to protect the financial interests of the state and to uphold the tendering authority’s right to cancel tenders when deemed necessary. The Court emphasized that judicial review in such matters should be limited to cases where there is evidence of malafide intentions or arbitrary decisions. The Court also considered the importance of providing equal opportunities to all bidders and ensuring fair play in the tendering process.
| Reason | Percentage |
|---|---|
| Protection of Financial Interests of the State | 35% |
| Upholding Tendering Authority’s Right to Cancel Tenders | 30% |
| Limited Scope of Judicial Review | 20% |
| Ensuring Fair Play and Equal Opportunity | 15% |
Fact:Law
| Category | Percentage |
|---|---|
| Fact (Consideration of Factual Aspects) | 40% |
| Law (Legal Considerations) | 60% |
Logical Reasoning
Issue: The factual matrix of this case involves the process of tender and the power of the tendering authority to cancel the tender is a legal question.
Flowchart:
Tendering Authority’s Decision to Cancel Tender ↓
Review of Decision ↓
Is the Decision Mala Fide or Arbitrary? ↓
No ↓
Decision Upheld (Protection of State’s Financial Interests)
Key Takeaways
- ✓ Tendering authorities have the right to cancel tenders to protect the financial interests of the state.
- ✓ Courts should exercise restraint in reviewing tender-related decisions, intervening only in cases of malafide intentions or arbitrary actions.
- ✓ Ensuring fair play and equal opportunity for all bidders is crucial in the tendering process.
Conclusion
The Supreme Court’s judgment in Principal Chief Conservator of Forest & Ors. vs. Suresh Mathew & Ors. reaffirms the power of tendering authorities to cancel tenders to protect the financial interests of the state. The Court emphasized that judicial review in such matters is limited and should not interfere unless there is evidence of malafide intentions or arbitrary decisions. This decision provides clarity on the scope of judicial intervention in tender-related disputes and underscores the importance of upholding the tendering authority’s right to make decisions in the best interest of the state.