M/S Sree Lakshmi Janardhana Swamy Enterprises vs. State Of Karnataka

Facts

The petitioners, M/s Sree Lakshmi Janardhana Swamy Enterprises and others, challenged two tender notifications dated 04.11.2023 and 08.11.2023 issued by the Department of Sericulture, represented by the Additional Director and Tender Inviting Authority. The petitioners had previously been awarded contracts in tenders issued on 16.02.2022 and 30.08.2023, where multiple bidders were declared as the lowest bidders (L1). The current challenge arises because the impugned tender notifications removed the clause allowing for the selection of multiple L1 bidders, which was present in earlier tenders. The petitioners argued that this change would be detrimental to farmers who benefit from the smooth distribution of materials facilitated by multiple L1 bidders.

Held

The Court held that the removal of the clause allowing for the selection of multiple lowest bidders (L1) in the impugned tender notification was not arbitrary. The Court noted that in the earlier tenders, the clause stated that multiple vendors 'may be selected,' not 'should be selected,' indicating discretion. The present tender's clause 1.1 omitted this provision, which the Court found acceptable, aligning with the Revenue's submission that there should ideally be only one L1 bidder per tender process. The Court reasoned that it is within the domain of the tender inviting authority to frame tender conditions according to its needs, and it would not substitute its judgment for that of the authority unless the decision was palpably arbitrary. The Court found that the petitioners' rights were not taken away, as they could still be declared L1 in different schedules if eligible. Petitioners 1 to 3 were indeed selected in different schedules, while petitioner 4 was found ineligible. Therefore, the petition was dismissed.

Key Issues

1. Whether the removal of the clause permitting the selection of multiple lowest bidders (L1) in the tender notification dated 08.11.2023, as opposed to earlier tenders, is arbitrary and prejudicial to the petitioners' rights, thereby violating principles of fairness and consistency in tender processes? (Question of law and mixed fact). Petitioner's Argument: The petitioners contended that in previous tenders, multiple L1 bidders were declared, ensuring smooth distribution of essential materials like pesticides and disinfectants to farmers. They argued that the removal of this clause in the current tender, which specifies a short completion period, would restrict supply and be detrimental to farmers. They relied on the divergence between the earlier tender clauses and the impugned ones to demonstrate this point. Revenue's Argument: The State argued that the need of the tender inviting authority dictates the terms of the tender. They justified the removal of the multiple L1 clause by stating that the Finance Department had directed adherence to declaring only a single L1 bidder, as previous declarations of multiple L1s had led to chaos. They asserted that no prejudice was caused to petitioners 1 to 3, and petitioner 4 was found ineligible.