M/S Allengers Medical Systems LTD vs. State Of Karnataka

Facts

M/s. Allengers Medical Systems Ltd. (Petitioner) participated in a re-tender process initiated by Karnataka State Medical Supplies Corporation Ltd. (Respondent No. 2) for the procurement of 100mA Portable X-ray machines. The Petitioner was declared the successful bidder after technical and financial scrutiny, and subsequent price negotiations led to a reduced unit price. A Notification of Award was issued on March 2, 2022, followed by the signing of an agreement and submission of a demand draft by the Petitioner for the supply of 165 machines. Despite these steps, the Respondent No. 2 failed to issue a purchase order. Subsequently, the Petitioner filed a writ petition. The Respondent No. 2 then communicated a cancellation of the tender via email dated November 3, 2022. The Court had previously restrained the respondents from re-tendering and permitted them to issue the purchase order to the Petitioner.

Held

The Court held that the cancellation of the tender by the 2nd respondent was arbitrary and violative of Article 14 of the Constitution of India. The Court reasoned that a tender inviting authority can only cancel a tender prior to the notification of award and execution of the contract. Once the award is notified and the contract is executed, the tender process is concluded. Any unilateral cancellation thereafter, especially by a State under Article 12 of the Constitution, is an arbitrary exercise of power. The Court found that the Petitioner had fulfilled all conditions, including executing the agreement and submitting the demand draft, with only the purchase order remaining. The Court also referred to Rule 14 of the Rules, stating it empowers changes only up to the stage of award notification. Therefore, the communication dated November 3, 2022, cancelling the tender, was quashed. The Court issued a mandamus directing the 2nd respondent to issue the purchase order to the Petitioner within two weeks.

Key Issues

1. Whether the cancellation of the tender by the 2nd respondent, after the Notification of Award and execution of the contract, is arbitrary and violative of Article 14 of the Constitution of India, particularly in light of Rule 14 of the Karnataka Transparency in Public Procurement Rules, 2000? Petitioner's Contention: The Petitioner argued that the tender process had concluded with the Notification of Award and the signing of the contract. They contended that the subsequent cancellation was contrary to law and arbitrary, especially as they had procured the machines in anticipation of the purchase order. They relied on Rule 14 of the Rules, asserting that cancellation after the award notification is impermissible. Respondents' Contention: The Respondents (State of Karnataka and Karnataka State Medical Supplies Corporation Ltd.) argued that a tender can be cancelled at any time if fraud or corruption is involved. They claimed that allegations of corruption against officers involved in the Tender Scrutiny Committee came to light, leading to the decision to cancel the tender. They asserted the Government's right to cancel a tender at any time if tender conditions are violated.