The award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount are commercial considerations. The State can choose Its own method to arrive at a decision. It can fix its own terms of Invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, If the tender conditions permit such a relaxation. It may not accept the offer even though It happens to be the highest or the lowest. But the State, Its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and Interfere. If It is found vitiated by mala fides, unreasonableness and arbitrariness. The State, Its corporations, Instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found In the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public Interest and not merely on the making out of a legal point. The Court should always keep the larger public Interest in mind in order to decide whether its Intervention is called for or not. Only when it comes to a conclusion that overwhelming public Interest requires Interference, the Court should Intervene.”
In Tata Cellular v. Union of India (AIR 1996 SC 11)= [(1994) 6
SCC 651], It was held as under: –
“85. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, It must be clearly stated that there are Inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial Interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept In view while accepting or refusing a tender. There can be no question of Infringement of Article 14 If the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, If the said power is exercised for any collateral purpose the exercise of that power will be struck down. 86. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or Issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such an unfairness is set right by Judicial review.
89. Observance of judicial restraint is currently the mood In England. The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of the court’s ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action.
90. Judicial review is concerned with reviewing not
the merits of the decision in support of which the
application for judicial review is made, but the
decision-making process itself.”
In Sterling Computers Ltd. v. M/s. M. & N. Publications Ltd. (AIR
1996 SC 51), It was held as under: –
19. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any Infirmity In the “decision making process”. In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans,  3 All ER 141, where it was said that “The purpose of judicial review.”
“… is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorized or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court.”
By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the state. Courts have Inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans (supra), the Courts
can certainly examine whether decision making process’ was reasonable, rational not arbitrary and violative of Article 14 of the Constitution.
20. If the contract has been entered into without Ignoring the procedure which can be said to be basic In nature and after an objective consideration of different options available taking into account the Interest of the State and the public, then Court cannot act as an appellate authority by substituting Its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering Into a contract is held to be against the mandate of Article 14 of the Constitution, the Courts cannot Ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any Interference by court amounts to encroachment on the exclusive right of the executive to take such decision.
26. The cases aforesaid on which rellance was placed on behalf of the appellants, have also relterated that once the State decides to grant any right or privilege to others, then there is no escape from the rigour of Article 14; the executive does not have an absolute discretion, certain precepts and principles have to be followed, the public interest being the paramount consideration. It has also been pointed out that for securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner. However, there may be cases where in the special facts and circumstances and due to compelling reasons which must stand the test of Article 14 of the Constitution, departure of the aforesaid rule can be made. This Court while upholding the contracts by negotiation in the cases referred to above has Impressed as to how In the facts and circumstances of those cases the decisions taken by the State and the authorities concerned were reasonable, rational and In the public interest.
To be Continued…