Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5898 OF 2012

(Arising out of SLP (C) No. 25802 of 2008

M/s Michigan Rubber (India) Ltd. .... Appellant (s)

Versus

The State of Karnataka & Ors. .... Respondent(s)

J U D G M E N T

P. Sathasivam, J.

1)Leave granted.

2)This appeal is directed against the final judgment and

order dated 02.07.2008 passed by the High Court of

Karnataka at Bangalore in Writ Appeal No. 1928 of 2007

whereby the High Court dismissed the appeal filed by the

appellant-Company herein.

3)Brief facts:

(a)On 04.08.2005, the Karnataka State Road Transport

Corporation (KSRTC) - Respondent No.2 herein floated a

1

Page 2 Tender being No. G30-05 for supply of Tyres, Tubes and Flaps

specifying certain pre-qualification criteria.

(b)Challenging the said pre-qualification criteria, the

appellant-Company, which is engaged in the manufacture and

supply of tyres, tubes and flaps filed a Writ Petition being No.

20543 of 2005 before the High Court. After filing of the writ

petition, the said criterion was withdrawn by the KSRTC.

Thereafter, the KSRTC modified the pre-qualification criteria

and issued a Tender being No. G-23-07 dated 05.07.2007

wherein, a new pre-qualification criterion was specified.

(c)Being aggrieved by the said pre-qualification criteria, the

appellant-Company preferred a Writ Petition being No. 11951

of 2007 before the High Court. By judgment dated

13.09.2007, the learned Single Judge of the High Court

dismissed their writ petition.

(d)Challenging the said judgment, the appellant filed a Writ

Appeal being No. 1928 of 2007 before the Division Bench of

the High Court. By impugned judgment dated 02.07.2008,

the Division Bench of the High Court dismissed the same.

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Page 3 (e)Being aggrieved by the said judgment, the appellant-

Company has preferred this appeal by way of special leave

before this Court.

4)Heard Ms. Madhurima Tatia, learned counsel for the

appellant-Company and Mr. S.N. Bhat, learned counsel for

respondent Nos. 2 & 3 and Mr. V.N. Raghupathy, learned

counsel for the State.

5)Ms. Madhurima Tatia, learned counsel for the appellant-

Company, after taking us through the tender pre-qualification

criteria and their performance, raised the following

submissions:

(i)The pre-qualification criteria as specified in Condition

Nos. 2(a) and 2(b) (amended Condition Nos. 4(a) and 4(b)) of

the Tender in question, viz., G-23-07 dated 05.07.2007 is

unreasonable, arbitrary, discriminatory and opposed to public

interest in general.

(ii)The said conditions were incorporated to exclude the

appellant-Company and other similarly situated companies

from the tender process on wholly extraneous grounds which

are unsustainable in law.

3

Page 4 (iii)The appellant-Company was successful in previous three

contracts and supplied their products to the KSRTC. There

was no complaint pertaining to short supply and quality. The

financial capacity of the appellant-Company was never

doubted by the KSRTC at any point of time, hence, the

impugned pre-qualification criteria was included to exclude

the appellant-Company from the tender bidding process with

an ulterior motive.

6)Per contra, Mr. S.N. Bhat and Mr. V.N. Raghupathy,

learned counsel for the respondents, after taking us through

the relevant materials including the constitution of high level

Committee i.e. Contract Management Group (CMG), its

deliberations and decisions etc., submitted that:

(i)To have the best of the equipment for the vehicles, which

ply on road carrying passengers, the respondents, in the

circumstances, thought it fit that the criteria for applying for

tender for procuring tyres should be at a high standard and

hence only those manufacturers, who satisfy the eligibility

criteria, should be permitted to participate in the tender.

4

Page 5 (ii)The said two conditions were imposed in order to ensure

the supply of good quality tyres.

(iii)The two conditions were incorporated in the tender notice

pursuant to the decision of the Contract Management Group

(CMG) of the KSRTC which consists of higher level officials

having technical knowledge.

(iv)The corrigendum was issued to minimize the confusion,

which might have occurred due to condition No. 2(a).

Discussion:

7)We have carefully considered the rival submissions and

perused all the materials placed before us. It is not in dispute

that the KSRTC has issued tender No. G-23-07 dated

05.07.2007. The pre-qualification criteria as specified in

Condition No.2 of the tender dated 05.07.2007 reads as

under:-

“2 Pre-qualification criteria for procurement of TTF Sets:

(a)Only the tyre manufacturers who have supplied a

minimum average of 5000 sets of Tyres, Tubes and

Flaps set per annum, in the preceding three years out

of 2003-04, 2004-05, 2005-06 and 2006-07 to any one

of the OE chassis manufacturer, i.e. Ashok Leyland,

Tata Motors, Eicher, Swaraj Mazda and Volvo are

eligible to participate, for supply of respective size/type

of Tyres, Tubes and Flaps set. They should produce

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Page 6 purchase order copies and invoice supplies in support

of the same.

(b)The firm should have minimum average annual

turnover of Rs.500 crores in the preceding three years

out of 2003-04, 2004-05, 2005-06 and 2006-07 from

the sale of tyres, Tubes and Flaps.”

8)Being aggrieved by the above-mentioned conditions, viz.,

2(a) and 2(b) of the tender dated 05.07.2007, the appellant-

Company preferred W.P No. 11951 of 2007 before the High

Court. After filing of the said writ petition, before opening of

the tender bids, the KSRTC amended the tender conditions as

were incorporated in the earlier tender document replacing

Condition Nos. 2(a) and 2(b) with Condition Nos. 4(a) and 4(b).

Condition Nos. 4(a) and 4(b) read as under:

“4. Pre-qualification criteria for procurement of TTF sets:

(a)Only the tyre manufacturers who have supplied a

minimum average of 5000 sets of Tyres, Tubes and

Flaps set per annum, in the preceding three years out

of 2003-04, 2004-05, 2005-06 and 2006-07 to

any of the heavy goods/passenger vehicles/chassis

manufacturers in the country are eligible to participate.

They should produce purchase order copies and invoice

supplies in support of the same.

(b)The firm should have minimum average annual

turnover of Rs.500 crores in the preceding three years

out of 2003-04, 2004-05, 2005-06 and 2006-07 from

the sale of Tyres, Tubes and Flaps.”

6

Page 7 Under the said amendment, only Condition No. 2(a) was

replaced by Condition No 4(a). In Condition No. 4(a), the

classification of the vehicles was maintained but the names of

the manufacturers were deleted. It is the grievance of the

appellant-Company that the pre-qualification criteria as

specified in Condition Nos. 2(a) and 2(b) (amended Condition

Nos. 4(a) and 4(b)) of the tender in question is unreasonable,

arbitrary, discriminatory and opposed to public interest in

general. It is also their grievance that the said conditions were

incorporated to exclude the appellant-Company and other

similarly situated companies from the tender process on

wholly extraneous grounds which is unsustainable in law. In

other words, according to the appellant-Company, the decision

of the KSRTC in restricting their participation in the tender to

Original Equipment Manufacturer (OEM) suppliers is totally

unfair and discriminatory.

9)This Court, in a series of decisions, considered similar

conditions incorporated in the tender documents and also the

scope and judicial review of administrative actions. The scope

and the approach to be adopted in the process of such review

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Page 8 have been settled by a long line of decisions of this Court.

Since the principle of law is settled and well recognized by

now, we may refer some of the decisions only to recapitulate

the relevant tests applicable and approach of this Court in

such matters.

10) In Tata Cellular vs. Union of India, (1994) 6 SCC 651,

this Court emphasised the need to find a right balance

between administrative discretion to decide the matters on the

one hand, and the need to remedy any unfairness on the

other, and observed:

“94. (1) The modern trend points to judicial restraint in

administrative action.

(2) The court does not sit as a court of appeal but merely

reviews the manner in which the decision was made.

(3) The court does not have the expertise to correct the

administrative decision. If a review of the administrative

decision is permitted it will be substituting its own decision,

without the necessary expertise, which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to

judicial scrutiny because the invitation to tender is in the

realm of contract. …

(5) The Government must have freedom of contract. In other

words, a fair play in the joints is a necessary concomitant for

an administrative body functioning in an administrative

sphere or quasi-administrative sphere. However, the decision

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Page 9 must not only be tested by the application of Wednesbury

principle of reasonableness (including its other facts pointed

out above) but must be free from arbitrariness not affected

by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative

burden on the administration and lead to increased and

unbudgeted expenditure.”

11) In Raunaq International Ltd. vs. I.V.R. Construction

Ltd. & Ors. (1999) 1 SCC 492, this Court reiterated the

principle governing the process of judicial review and held that

the writ court would not be justified in interfering with

commercial transactions in which the State is one of the

parties except where there is substantial public interest

involved and in cases where the transaction is mala fide.

12)In Union of India & Anr. vs. International Trading

Co. & Anr., (2003) 5 SCC 437, this Court, in similar

circumstances, held as under:

“15. While the discretion to change the policy in exercise of

the executive power, when not trammelled by any statute or

rule is wide enough, what is imperative and implicit in terms

of Article 14 is that a change in policy must be made fairly

and should not give the impression that it was so done

arbitrarily or by any ulterior criteria. The wide sweep of

Article 14 and the requirement of every State action

qualifying for its validity on this touchstone irrespective of

the field of activity of the State is an accepted tenet. The

basic requirement of Article 14 is fairness in action by the

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Page 10 State, and non-arbitrariness in essence and substance is the

heartbeat of fair play. Actions are amenable, in the

panorama of judicial review only to the extent that the State

must act validly for a discernible reason, not whimsically for

any ulterior purpose. The meaning and true import and

concept of arbitrariness is more easily visualized than

precisely defined. A question whether the impugned action is

arbitrary or not is to be ultimately answered on the facts and

circumstances of a given case. A basic and obvious test to

apply in such cases is to see whether there is any discernible

principle emerging from the impugned action and if so, does

it really satisfy the test of reasonableness.

16. Where a particular mode is prescribed for doing an act

and there is no impediment in adopting the procedure, the

deviation to act in a different manner which does not

disclose any discernible principle which is reasonable itself

shall be labelled as arbitrary. Every State action must be

informed by reason and it follows that an act uninformed by

reason is per se arbitrary.

22. If the State acts within the bounds of reasonableness, it

would be legitimate to take into consideration the national

priorities and adopt trade policies. As noted above, the

ultimate test is whether on the touchstone of reasonableness

the policy decision comes out unscathed.

23. Reasonableness of restriction is to be determined in an

objective manner and from the standpoint of interests of the

general public and not from the standpoint of the interests of

persons upon whom the restrictions have been imposed or

upon abstract consideration. A restriction cannot be said to

be unreasonable merely because in a given case, it operates

harshly. In determining whether there is any unfairness

involved; the nature of the right alleged to have been

infringed, the underlying purpose of the restriction imposed,

the extent and urgency of the evil sought to be remedied

thereby, the disproportion of the imposition, the prevailing

condition at the relevant time, enter into judicial verdict. The

reasonableness of the legitimate expectation has to be

determined with respect to the circumstances relating to the

trade or business in question. Canalisation of a particular

business in favour of even a specified individual is

reasonable where the interests of the country are concerned

or where the business affects the economy of the country.

10

Page 11 (See Parbhani Transport Coop. Society Ltd. v. Regional

Transport Authority, Shree Meenakshi Mills Ltd. v. Union of

India, Hari Chand Sarda v. Mizo District Council and

Krishnan Kakkanth v. Govt. of Kerala.)”

13)In Jespar I. Slong vs. State of Meghalaya & Ors.,

(2004) 11 SCC 485, this Court, in paragraph 17, held as

under:

“17……fixation of a value of the tender is entirely within the

purview of the executive and courts hardly have any role to

play in this process except for striking down such action of

the executive as is proved to be arbitrary or

unreasonable……”

14)In Association of Registration Plates vs Union of

India & Ors., (2005) 1 SCC 679, similar issue was considered

by a bench of three Judges. In that case, the dispute was

about the terms and conditions of notices inviting tenders

(NITs) for supply of high security registration plates for motor

vehicles. The tenders have been issued by various State

Governments on the guidelines circulated by the Central

Government for implementing the provisions of the Motor

Vehicles Act, 1988 and the newly amended Central Motor

Vehicles Rules, 1989. The main grievance of the appellant

therein was that all notices inviting tenders (NITs) which were

issued by various State Governments, contained

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Page 12 conditions which were tailored to favour companies having

foreign collaboration. Their further grievance was that the

tender conditions were discriminatory as per Article 14 of the

Constitution and were being aimed at excluding indigenous

manufacturers from the tender process. It was also contended

that in all the cases, the work of supply of high security

registration plates for all existing vehicles and new vehicles

was being entrusted to a single licence plates manufacturer in

a State or a region and for a long period of 15 years thus

creating monopoly in favour of selected bidders to the

complete exclusion of all others in the field. The further

contention advanced therein was that creation of monopoly in

favour of a few parties having connection with foreign

concerns is violative of the fundamental right of trade under

Article 19(1)(g) and discriminatory under Article 14 of the

Constitution. It was also pointed out that in the name of

implementing the amended Rule 50 of the Motor Vehicles

Rules, 1989, the States are imposing conditions in the tender

that would take away the existing rights of the manufacturers

of plates in India. On the condition laid down for

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Page 13 prescribed minimum turnover of business, the challenge made

on behalf of the petitioners therein was that fixing such high

turnover for such a new business is only for the purpose of

advancing the business interests of a group of companies

having foreign links and support. It is impossible for any

indigenous manufacturer of security plates to have a turnover

of approximately 12.5 crores from the high security

registration plates which were sought to be introduced in India

for the first time and the implementation of the project has not

yet started in any of the States. On behalf of the Union of

India, the State authorities and counsel appearing for the

contesting manufacturers, in their replies, have tried to justify

the manner and implementation of the policy contained in

Rule 50 of the Motor Vehicles Rules. On behalf of the Union of

India, learned ASG submitted that Rule 50 read with Statutory

Order of 2001 issued under Section 109(3) of the Motor

Vehicles Act, the State Governments are legally competent to

formulate an appropriate policy for choosing a sole or more

manufacturers in order to fulfil the object of affixation of

security plates. The Scheme contained in Rule 50 read with

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Page 14 the Statutory Order of 2001 leaves it to the discretion of the

State concerned to even choose a single manufacturer for the

entire State or more than one manufacturer regionwise. It was

pointed out that such a selection cannot be said to confer any

monopoly right by the State on any private individual or

concern. He further pointed out that the tender conditions

were formulated taking into account the public interest

consideration and aspects of high security.

15)While considering the above submissions, the three-

Judge Bench held as under:

“38. In the matter of formulating conditions of a tender

document and awarding a contract of the nature of ensuring

supply of high security registration plates, greater latitude is

required to be conceded to the State authorities. Unless the

action of tendering authority is found to be malicious and a

misuse of its statutory powers, tender conditions are

unassailable. On intensive examination of tender conditions,

we do not find that they violate the equality clause under

Article 14 or encroach on fundamental rights of the class of

intending tenderers under Article 19 of the Constitution. On

the basis of the submissions made on behalf of the Union

and State authorities and the justification shown for the

terms of the impugned tender conditions, we do not find that

the clauses requiring experience in the field of supplying

registration plates in foreign countries and the quantum of

business turnover are intended only to keep indigenous

manufacturers out of the field. It is explained that on the

date of formulation of scheme in Rule 50 and issuance of

guidelines thereunder by the Central Government, there

were not many indigenous manufacturers in India with

technical and financial capability to undertake the job of

supply of such high dimension, on a long-term basis and in

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Page 15 a manner to ensure safety and security which is the prime

object to be achieved by the introduction of new

sophisticated registration plates.

39. The notice inviting tender is open to response by all and

even if one single manufacturer is ultimately selected for a

region or State, it cannot be said that the State has created a

monopoly of business in favour of a private party. Rule 50

permits the RTOs concerned themselves to implement the

policy or to get it implemented through a selected approved

manufacturer.

40. Selecting one manufacturer through a process of open

competition is not creation of any monopoly, as contended,

in violation of Article 19(1)(g) of the Constitution read with

clause (6) of the said article. As is sought to be pointed out,

the implementation involves large network of operations of

highly sophisticated materials. The manufacturer has to

have embossing stations within the premises of the RTO. He

has to maintain the data of each plate which he would be

getting from his main unit. It has to be cross-checked by the

RTO data. There has to be a server in the RTO's office which

is linked with all RTOs in each State and thereon linked to

the whole nation. Maintenance of the record by one and

supervision over its activity would be simpler for the State if

there is one manufacturer instead of multi-manufacturers as

suppliers. The actual operation of the scheme through the

RTOs in their premises would get complicated and confused

if multi-manufacturers are involved. That would also

seriously impair the high security concept in affixation of

new plates on the vehicles. If there is a single manufacturer

he can be forced to go and serve rural areas with thin

vehicular population and less volume of business. Multi-

manufacturers might concentrate only on urban areas with

higher vehicular population.

43. Certain preconditions or qualifications for tenders have

to be laid down to ensure that the contractor has the

capacity and the resources to successfully execute the work.

Article 14 of the Constitution prohibits the Government from

arbitrarily choosing a contractor at its will and pleasure. It

has to act reasonably, fairly and in public interest in

awarding contract. At the same time, no person can claim a

fundamental right to carry on business with the

Government. All that he can claim is that in competing for

the contract, he should not be unfairly treated and

discriminated, to the detriment of public interest.

15

Page 16 Undisputedly, the legal position which has been firmly

established from various decisions of this Court, cited at the

Bar (supra) is that government contracts are highly valuable

assets and the court should be prepared to enforce

standards of fairness on the Government in its dealings with

tenderers and contractors.

44. The grievance that the terms of notice inviting tenders in

the present case virtually create a monopoly in favour of

parties having foreign collaborations, is without substance.

Selection of a competent contractor for assigning job of

supply of a sophisticated article through an open-tender

procedure, is not an act of creating monopoly, as is sought to

be suggested on behalf of the petitioners. What has been

argued is that the terms of the notices inviting tenders

deliberately exclude domestic manufacturers and new

entrepreneurs in the field. In the absence of any indication

from the record that the terms and conditions were tailor-

made to promote parties with foreign collaborations and to

exclude indigenous manufacturers, judicial interference is

uncalled for.”

After observing so, this Court dismissed all the writ petitions

directly filed in this Court and transferred to this Court from

the High Courts.

16)In Reliance Airport Developers (P) Ltd. vs. Airports

Authority of India & Ors., (2006) 10 SCC 1, this Court held

that while judicial review cannot be denied in contractual

matters or matters in which the Government exercises its

contractual powers, such review is intended to prevent

arbitrariness and must be exercised in larger public interest.

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Page 17 17)In Jagdish Mandal vs. State of Orissa and Others,

(2007) 14 SCC 517, the following conclusion is relevant:

“22. Judicial review of administrative action is intended to

prevent arbitrariness, irrationality, unreasonableness, bias

and mala fides. Its purpose is to check whether choice or

decision is made “lawfully” and not to check whether choice

or decision is “sound”. When the power of judicial review is

invoked in matters relating to tenders or award of contracts,

certain special features should be borne in mind. A contract

is a commercial transaction. Evaluating tenders and

awarding contracts are essentially commercial functions.

Principles of equity and natural justice stay at a distance. If

the decision relating to award of contract is bona fide and is

in public interest, courts will not, in exercise of power of

judicial review, interfere even if a procedural aberration or

error in assessment or prejudice to a tenderer, is made out.

The power of judicial review will not be permitted to be

invoked to protect private interest at the cost of public

interest, or to decide contractual disputes. The tenderer or

contractor with a grievance can always seek damages in a

civil court. Attempts by unsuccessful tenderers with

imaginary grievances, wounded pride and business rivalry,

to make mountains out of molehills of some

technical/procedural violation or some prejudice to self, and

persuade courts to interfere by exercising power of judicial

review, should be resisted. Such interferences, either interim

or final, may hold up public works for years, or delay relief

and succour to thousands and millions and may increase

the project cost manifold. Therefore, a court before

interfering in tender or contractual matters in exercise of

power of judicial review, should pose to itself the following

questions:

(i) Whether the process adopted or decision made by the

authority is mala fide or intended to favour someone;

OR

Whether the process adopted or decision made is so

arbitrary and irrational that the court can say: “the decision

is such that no responsible authority acting reasonably and

in accordance with relevant law could have reached”;

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Page 18 (ii) Whether public interest is affected.

If the answers are in the negative, there should be no

interference under Article 226. Cases involving blacklisting

or imposition of penal consequences on a

tenderer/contractor or distribution of State largesse

(allotment of sites/shops, grant of licences, dealerships and

franchises) stand on a different footing as they may require a

higher degree of fairness in action.”

18)The same principles have been reiterated in a recent

decision of this Court in Tejas Constructions &

Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa &

Anr., (2012) 6 SCC 464.

19)From the above decisions, the following principles

emerge:

(a)the basic requirement of Article 14 is fairness in action

by the State, and non-arbitrariness in essence and substance

is the heartbeat of fair play. These actions are amenable to

the judicial review only to the extent that the State must act

validly for a discernible reason and not whimsically for any

ulterior purpose. If the State acts within the bounds of

reasonableness, it would be legitimate to take into

consideration the national priorities;

(b)fixation of a value of the tender is entirely within the

purview of the executive and courts hardly have any role to

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Page 19 play in this process except for striking down such action of the

executive as is proved to be arbitrary or unreasonable. If the

Government acts in conformity with certain healthy standards

and norms such as awarding of contracts by inviting tenders,

in those circumstances, the interference by Courts is very

limited;

(c)In the matter of formulating conditions of a tender

document and awarding a contract, greater latitude is

required to be conceded to the State authorities unless the

action of tendering authority is found to be malicious and a

misuse of its statutory powers, interference by Courts is not

warranted;

(d)Certain preconditions or qualifications for tenders have

to be laid down to ensure that the contractor has the capacity

and the resources to successfully execute the work; and

(e)If the State or its instrumentalities act reasonably, fairly

and in public interest in awarding contract, here again,

interference by Court is very restrictive since no person can

claim fundamental right to carry on business with the

Government.

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Page 20 20)Therefore, a Court before interfering in tender or

contractual matters, in exercise of power of judicial review,

should pose to itself the following questions:

(i) Whether the process adopted or decision made by the

authority is mala fide or intended to favour someone; or

whether the process adopted or decision made is so arbitrary

and irrational that the court can say: “the decision is such

that no responsible authority acting reasonably and in

accordance with relevant law could have reached”; and (ii)

Whether the public interest is affected. If the answers to the

above questions are in negative, then there should be no

interference under Article 226.

21)Respondent No. 1-the State, in their counter affidavit,

highlighted that tyre is very critical and a high value item

being procured by the KSRTC and it procured 900x20 14 Ply

Nylon tyres along with the tubes and flaps in sets and these

types of tyres are being used only by the State Transport Units

and not in the domestic market extensively. It is highlighted

that the quality of the tyre plays a major role in providing safe

and comfort transportation facility to the commuters.

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Page 21 22)It is also pointed out by the Respondent-State that in

order to ensure procurement of tyres, tubes and flaps from

reliable sources, the manufacturers of the same with an

annual average turnover of Rs. 200 crores during the

preceding three years, were made eligible to participate in the

tenders. In the tender issued for procurement of these sets

during October, 2004, the appellant participated and based on

the L1 rates, the orders for supply for 16,000 sets of tyres

were placed on the firm. It is also pointed out that the

appellant supplied 10,240 sets of tyres and remaining quantity

was cancelled due to quality problems.

23)Materials has also been placed to show that the appellant

participated in subsequent tenders and orders were released

for supply of 900 x 20 14 PR tyres, tubes and flaps from

October 2006 to September, 2007. It is also explained that

after going into various complaints, in order to achieve good

results, new tyre mileage and safety of the public etc., and

after noting that vehicle/chassis manufacturers such as M/s

Ashok Leyland, M/s Tata Motors etc. have strict quality

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Page 22 control system, it was thought fit to incorporate similar

criteria as a pre-qualification for procurement of tyres.

24)It is also highlighted by the State as well as by the

KSRTC that the tender conditions were stipulated by way of

policy decision after due deliberation by the KSRTC. Both the

respondents highlighted that the said conditions were imposed

with a view to obtain good quality materials from reliable and

experienced suppliers. In other words, according to them, the

conditions were aimed at the sole purpose of obtaining good

quality and reliable supply of materials and there was no

ulterior motive in stipulating the said conditions.

25) Both the counsel for the respondents have brought to

our notice that the two impugned conditions were

incorporated in the tender notice pursuant to a decision of the

Contract Management Group (CMG) of the KSRTC, which is an

institutional mechanism for the purpose of devising proper

method in the matter, inter alia, of procurement of materials to

the KSRTC. The said Group consists of various high level

officials representing different departments of KSRTC. The

CMG constitutes of the following officials:

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Page 23 a)Managing Director,

Bangalore Metropolitan Transport Corporation

b)Managing Directors of four sister Corporations

c)Director, Security & Vigilance

d)Director, Personnel and Environment

e)Chief Accounts Officer

f)Chief Engineer (Production)

g)Chief Engineer(Maintenance)

h)Chief Accounts Officer(Internal Audit)

i)Controller of Stores and Purchase

Thus it is clear that the said CMG is a widely represented body

within the Respondent No. 2-KSRTC.

26)Further materials placed by KSRTC show that the CMG

met on 17.05.2007 and deliberated on the question of

conditions to be incorporated in the matter of calling of

tenders for supply of tyres, tubes and flaps. It is pointed out

that in view of the experience gained over the years, it was felt

by the said Group that the impugned two conditions should be

essential qualifications of any tenderer. The said policy

decision was taken in the best interest of the KSRTC and the

members of the traveling public to whom it is committed to

provide the best possible service. In the course of hearing,

learned counsel for the respondents have also brought to our

notice the Minutes of Meeting of the CMG held on 17.05.2007.

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Page 24 The said recommendation of the CMG was ultimately approved

by the Vice Chairman of KSRTC. In the circumstances, the

said impugned two conditions were incorporated in the tender

notice dated 05.07.2007.

27)It is also brought to our notice that the KSRTC is

governed by the provisions of the Karnataka Transparency in

Public Procurements Act, 1999 and the Rules made

thereunder, viz., Karnataka Transparency in Public

Procurements Rules, 2000. Though in Condition No 2(a) in

the tender notice dated 05.07.2007, the names of certain

vehicle manufacturers were mentioned, after finding that it

was inappropriate to mention the names of specific

manufacturers in the said condition, it was decided to delete

their names. Accordingly, a corrigendum was put up before

the CMG and by decision dated 04.08.2007, CMG decided to

revise the pre-qualification criteria by deleting the names of

those manufacturers. Learned counsel for the respondents

have also placed the Minutes of Meeting of the CMG held on

04.08.2007. It is also brought to our notice that the said

corrigendum was also approved by the competent authority.

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Page 25 28)In addition to the same, it was not in dispute that the

appellant-Company was well aware of both the original tender

notices and the corrigendum issued. It is also brought to our

notice that the appellant wrote a letter making certain queries

with regard to the corrigendum issued by the KSRTC and the

said queries were suitably replied by the letter dated

11.08.2007.

29)It is also seen from the records that pursuant to the

tender notice dated 05.07.2007, seven bids were received

including that of the appellant-Company. They are:

i) M/s Apollo Tyres

ii) M/s Birla Tyres

iii)M/s Ceat Ltd

iv)M/s Good Year India

v)M/s JK Industries

vi)M/s MRF Ltd

vii)M/s Michigan Rubber (Former Betul Tyres)

It is brought to our notice that successful bidders were CEAT

and JK Tyres. Accordingly, contracts were entered into with

the said two companies by the KSRTC and the purchase

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Page 26 orders were placed and they have also effected supplies and

completed the contract and the KSRTC also made payments to

the said suppliers.

30)It is pertinent to point out that the second respondent

has also issued 4 (four) more tender notices after the tender

notice dated 05.07.2007. The said tender notices were dated

04.03.2008, 22.08.2008, 24.10.2008 and 19.03.2009.

Pursuant to the tender notices dated 04.03.2008, 22.08.2008

and 24.10.2008, contracts have been awarded and have been

substantially performed. It is also brought to our notice that

all the said four subsequent tender notices also contained

identical conditions as that of the impugned conditions

contained in tender notice dated 05.07.2007.

31)As observed earlier, the Court would not normally

interfere with the policy decision and in matters challenging

the award of contract by the State or public authorities. In

view of the above, the appellant has failed to establish that the

same was contrary to public interest and beyond the pale of

discrimination or unreasonable. We are satisfied that to

have the best of the equipment for the vehicles, which ply on

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Page 27 road carrying passengers, the 2

nd

respondent thought it fit that

the criteria for applying for tender for procuring tyres should

be at a high standard and thought it fit that only those

manufacturers who satisfy the eligibility criteria should be

permitted to participate in the tender. As noted in various

decisions, the Government and their undertakings must have

a free hand in setting terms of the tender and only if it is

arbitrary, discriminatory, mala fide or actuated by bias, the

Courts would interfere. The Courts cannot interfere with the

terms of the tender prescribed by the Government because it

feels that some other terms in the tender would have been fair,

wiser or logical. In the case on hand, we have already noted

that taking into account various aspects including the safety

of the passengers and public interest, the CMG consisting of

experienced persons, revised the tender conditions. We are

satisfied that the said Committee had discussed the subject in

detail and for specifying these two conditions regarding pre-

qualification criteria and the evaluation criteria. On perusal of

all the materials, we are satisfied that the impugned

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Page 28 conditions do not, in any way, could be classified as arbitrary,

discriminatory or mala fide.

32) The learned single Judge considered all these aspects in

detail and after finding that those two conditions cannot be

said to be discriminatory and unreasonable refused to

interfere exercising jurisdiction under Article 226 of the

Constitution and dismissed the writ petition. The well

reasoned judgment of the learned single Judge was affirmed

by the Division Bench of the High Court.

33)In the light of what is stated above, we fully agree with

the reasoning of the High Court and do not find any valid

ground for interference. Consequently, the appeal fails and

the same is dismissed with no order as to costs.

...…………… .………………………… J.

(P. SATHASIVAM)

.…....………………………………… J.

(RANJAN GOGOI)

NEW DELHI;

AUGUST 17, 2012.

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