M/S Kothari Associates vs. State Of Uttarakhand And Others

Held

The Court held that while Article 14 strikes against arbitrary state action, considerable latitude is allowed to the State in matters of contract awards, which involve distribution of largesse. The Court must balance conflicting interests and interfere only if a clear transgression of Article 14 is made out or the action is palpably unfair. Regarding the appellant being L-1, the Court affirmed that being the lowest tenderer does not create a legal right to demand a contract. Clause 35.1 of the Standard Bidding Documents, which the appellant accepted, clearly empowers the employer to reject any bid or annul the process without liability. The Court also clarified that while the Uttarakhand Procurement Rules, 2008, permit negotiation with the L-1 bidder under exceptional circumstances, it is not a mandatory duty. The Court found that the respondents' decision to re-tender was based on a rationale that the appellant's bid, after adding GST, exceeded the technical estimate. The Court declined to interfere, considering the principles of judicial review and the fact that the new tender's value was also within a reasonable range. Therefore, the appeal was dismissed.

Facts

M/s Kothari Associates (the appellant) participated in an e-tender floated by the State of Uttarakhand for construction of buildings. The appellant was found to be the lowest bidder (L-1) after their financial bid was opened. However, the respondents decided to cancel the tender and go for a re-tender. The appellant filed a writ petition challenging this decision, which was dismissed by the learned Single Judge. The appellant then filed this special appeal. The State, in its affidavit, explained that the initial tender was floated without clarity on GST rates, requiring bidders to submit rates excluding GST. Subsequent clarifications indicated that GST should be included in calculations. After adding 12% GST to the appellant's bid, the total amount exceeded the departmental technical estimate, leading to the decision for a re-tender. The appellant argued their bid was lower than the tender value and that the respondents acted arbitrarily.

Key Issues

1. Whether the respondents' action of cancelling the tender and issuing a fresh tender notice, despite the appellant being the lowest bidder (L-1), is arbitrary and violative of Article 14 of the Constitution of India, considering the appellant's bid was lower than the tender value? Petitioner's arguments: The appellant contended that their bid, even after adding GST, was below the tender value, and the respondents' action was arbitrary. They argued that the respondents should have negotiated with them as the L-1 bidder, citing the Uttarakhand Procurement Rules, 2008. They also pointed to the fact that the initial tender value was higher than their bid. Revenue/State's arguments: The respondents supported their action based on the affidavit filed. They explained that the initial tender was floated without clarity on GST, and bidders were asked to quote excluding GST. After adding GST, the appellant's bid exceeded the departmental technical estimate. They relied on Clause 35.1 of the Standard Bidding Documents, which grants the employer the right to reject any bid or annul the bidding process without incurring liability. They also argued that being L-1 does not confer a legal right to a contract and that negotiation with the L-1 bidder is not mandatory.