Ashraya Associates vs. State Of Karnataka

Facts

The petitioners, who are traders and merchants, filed writ petitions challenging the eligibility criteria in a tender notification issued by the Karnataka Residential Educational Institutions Society (KREIS) for the supply of food and vegetable items. The petitioners contended that certain conditions, specifically at Sl.Nos. 2, 3, and 4 of the eligibility criteria, were arbitrary, unreasonable, and impossible to comply with. They sought to quash these conditions. The tender notification was for the supply of food and vegetable items to children residing in KREIS schools across various districts. The KREIS had invited similar tenders for other districts with comparable eligibility criteria. The petitioners argued that these criteria unfairly excluded genuine bidders. The respondents, including the State of Karnataka and KREIS, defended the tender conditions, stating they were designed to ensure the quality and timely supply of essential items to a large student population.

Held

The Court held that the writ petitions lacked merit. It found that the impugned eligibility criteria were not arbitrary, unreasonable, or impossible to comply with. The Court reasoned that these conditions were uniformly applied across all districts and were not designed to favor a select few tenderers. It acknowledged that if the COVID-19 pandemic caused business disruptions, it would have affected all bidders equally. The Court noted that over 92 bids were received, indicating that the conditions were not impossible to meet. Furthermore, the Court emphasized the critical need for timely procurement of food grains and vegetables for the 821 KREIS schools, stating that any further delay would seriously impact the students. The Court reiterated the principle that merely because petitioners face some difficulty in complying with conditions does not warrant interference or amendment of tender conditions. The Court also referred to the judgment in Subodh Kumar (supra), acknowledging that while writ actions can lie against procedural impropriety or arbitrariness before contract award, the conditions here did not meet that threshold. The Court declined to substitute its own decision for that of the tender inviting authority.

Key Issues

1. Whether the eligibility criteria at Sl.Nos. 2, 3, and 4 of the tender notification, concerning average annual turnover, average annual work value, and past supply performance, are arbitrary, unreasonable, and impossible to comply with, thereby vitiating the tender process under Article 226 of the Constitution of India? 2. Whether the note appended to the eligibility criteria, which aggregates financial and performance criteria for bidders quoting for multiple districts, is arbitrary and unreasonable? Petitioner's Arguments: The petitioners argued that the eligibility criteria, particularly the requirement for a high average annual turnover and work value (equal to the bid amount and 70% of the bid amount respectively) over the preceding three financial years (2021-22, 2022-23, 2023-24), were excessively stringent and impossible to meet, especially in light of potential business disruptions. They contended that the aggregation of criteria for multiple districts, as per the note, further exacerbated this impossibility. They relied on the principle that tender conditions should not be arbitrary or unreasonable, citing the judgment in Subodh Kumar (supra). Revenue/State's Arguments: The respondents contended that the tender inviting authority has discretion to impose conditions to suit the objectives of the tender. They argued that the conditions were not designed to favor specific bidders or exclude genuine ones, and were uniformly applied across all districts. They highlighted that the conditions were modified from previous Government Orders, reducing the turnover requirement to one year and the work value to 70%, indicating a considered approach. They also pointed out that the large student population (2,40,000) in KREIS residential schools necessitates stringent conditions for quality and reliability, differentiating them from smaller institutions. They further argued that the Court should not substitute its own decision for that of the tender inviting authority in matters of public tenders.