M/S Cp Bhatia (A Partnership Firm Registered Under Indian Partnership Act) vs. State Of Chhattisgarh

Facts

The petitioner, M/s CP Bhatia and Associates, a partnership firm, filed a writ petition challenging the eligibility criteria in a tender floated by the Chhattisgarh State Marketing Corporation Limited (CSMCL) for the appointment of Chartered Accountants firms for the internal audit of retail vending liquor shops. The tender notification was issued on October 24, 2019, with a submission deadline of November 5, 2019. The petitioner argued that Clause 2.1 of the tender, which prescribed experience criteria, was designed to favor firms previously engaged by CSMCL and was arbitrary, violating Articles 14 and 19 of the Constitution. The petitioner also alleged foul play in the cancellation of previous tenders and the timing of the current tender's publication during Diwali. CSMCL defended the criteria, stating it was necessary due to past financial losses incurred from inexperienced auditors and the introduction of the Central Goods and Services Tax Act, 2017.

Held

The Court held that the eligibility criteria prescribed in Clause 2.1 of the tender notification was not arbitrary or unreasonable. The Court noted that the reason provided by CSMCL for inserting the clause – past financial losses due to inexperienced auditors and the introduction of the new tax system under the Central Goods and Services Tax Act, 2017 – could not be ignored. The Court found the petitioner's argument that the clause was designed to benefit existing firms to be unsubstantiated, especially since CSMCL's submission that new firms, including one from outside Chhattisgarh, had participated in the tender was not controverted. The Court relied on Supreme Court judgments in Global Energy Ltd. and Michigan Rubber (India) Limited, which emphasize that courts should not interfere with tender conditions unless the action is malicious, arbitrary, or unreasonable. The Court found that the decision-making process of CSMCL was proper and did not suffer from any infirmity. Therefore, the writ petition was dismissed.

Key Issues

1. Whether Clause 2.1 of the tender notification, prescribing that the Chartered Accountants firm must have experience of audit for at least 2 years in the last 3 financial years in Government Organizations/Govt. PSUs in the liquor business, is arbitrary and designed to extend undue benefit to specific firms? Petitioner's arguments: The petitioner contended that the eligibility criteria in Clause 2.1 was framed to benefit firms already engaged by CSMCL, citing previous cancelled tenders as evidence of a deliberate attempt to achieve hidden objectives. They argued this action violated Articles 14 and 19 of the Constitution and was contrary to Central Vigilance Commission guidelines. The timing of the tender publication during Diwali was also cited as arbitrary. Respondent-CSMCL's arguments: CSMCL argued that the experience clause was necessitated by financial losses suffered due to inexperienced auditors in the past and the complexities introduced by the Central Goods and Services Tax Act, 2017. They asserted that fixing eligibility criteria is within the employer's domain based on their needs and that the action was transparent, not arbitrary or mala fide. They also pointed out that new firms participated in the tender, including one from outside the state, contradicting the petitioner's claim of favoritism.