Judicial review of government contracts is limited and can only be exercised if there is illegality in the decision-making process putting the public interest at risk: Delhi HC

The Delhi High Court has observed that the scope of judicial review in public procurement is limited and can only be exercised if there is a patently unreasonable, irregular, irrational or unlawful character in the decision-making process of the placing authority. the broader public interest at risk.

A dividing bench made up of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad added that absent such circumstances, courts would normally exercise judicial restraint when deliberating on contractual matters so as not to generate “problematic ramifications” affecting the state’s ability to enter into contracts and to trade with private entities.

The Court made these observations in connection with two applications challenging a tender issued by the Central Medical Services Society, an arm’s length corporation of the Department of Health and Family Welfare, for the purchase of buprenorphine 2mg and 0.4mg. The means also aimed at finalizing the call for tenders in favor of the two companies M/S Verve Human Care Laboratories and M/S Maan Pharmaceuticals Limited.

In February 2022, the applicant companies were informed that the tender had been cancelled, without notice to qualified bidders, and that a new tender had been issued. The documents submitted by the two entities were found to be forged and fabricated. In addition, it was reported that the eligibility criteria relating to bidders’ prior procurement experience has also been relaxed.

The Court did not accept the claimants’ argument that the eligibility criteria could not have been relaxed to indicate that the tenderers should have supplied beforehand 25% of the quoted quantity of identical or similar items during the of the last three fiscal years.

“It is well settled law that the authority who drafts the bidding document is the person best placed to understand and appreciate its requirements, and the Court should not sit as a court of appeal before the competent authority and must realize that the authority issuing the call for tenders is the best judge of its requirements”, said the Court.

The Court thus considered that it was only after having duly negotiated with the entities that the CMSS had come to the conclusion that the prices quoted by the applicants remained exorbitant.

“In view of this, a carefully considered decision was made to relax the eligibility criteria and relaunch the tender in order to maximize participation in promoting the public interest. This Court does not consider said decision as so unlawful, arbitrary or unreasonable that it can justify the interference by way of judicial review,“It said.

The Court stated that the doctrine of legitimate expectation is subsumed by Article 14 of the Constitution of India, as the State and all its organs are bound to ensure that their actions are fair and far from be arbitrary. However, whether the plaintiff’s expectation is reasonable or legitimate in the context is a question of the facts in each case.

“Whenever this question arises, it is incumbent on the courts to determine the same not in accordance with the plaintiff’s perception, but in the broader public interest, in which other more important considerations may outweigh this which would otherwise have been the claimant’s legitimate expectation. A bona fide decision of an authority can be said to satisfy the requirement of non-arbitrariness and withstand judicial review” the shoal watched further.

The pleas were therefore dismissed.

Case Title: M/S VERVE HUMAN CARE LABORATORIES v. INDIA UNION AND ORS.

Click here to read the order