2025 INSC 569 1

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO (s). ____________OF 2025

(@ Special Leave Petition (C) No (s). 12353-12355 of 2021)

The Principal Chief Conservator

of Forest & Ors. Appellant(s)……

VERSUS

Suresh Mathew & Ors. Respondent(s)…….

J U D G M E N T

PRASANNA B. VARALE, J:-

1. Leave granted.

2. The present civil appeals arises out of the common judgement

and order dated 19.01.2021 passed by the Hon’ble High Court of

Kerala at Ernakulam in writ appeals nos. 1568 of 2020, 1577 of

2020 and 1589 of 2020 whereby the High Court of Kerala

2

dismissed the Writ Appeals by confirming the judgement passed

by learned Single Judge.

BRIEF FACTS:

3. The factual matrix of the case is that the Divisional Forest

Officer, Konni issued an order dated 12.10.2020 cancelling an

earlier e-tender notification dated 25.05.2020 for final tree felling

works of 1954 Nellidappara in South Kumaramperoor Forest

Station under Konni Range in Konni Forest Division and decided

to float a tender afresh. The writ petitioners were participants in

the earlier e-tender notification dated 25.05.2020 and according to

them, the action of the appellants; to retender the work after

cancelling the earlier tender was an arbitrary and illegal action. In

fact, the Principal Conservator of Forests issued a circular dated

29.02.2020 in regard to the renewal of registration of A class

contractors, wherein it was stipulated that A class registered

contractors, who have not participated in any of the tenders

notified by the Department for timber extraction during the last

financial year, are not eligible to get renewal of the A class

registration.

3

4. On the basis of the said circular, the registration of the

petitioners in W.P.(C) Nos. 24075 and 24241 of 2020 were not

renewed. However, the appellants had floated the e-tender dated

25.05.2020 for the work in question. The said petitioners, being

aggrieved by the said action, have approached Hon’ble High Court

by filing W.P.(C) Nos. 11854 and 12389 of 2020 respectively

challenging the aforesaid circular dated 29.02.2020, in which

interim directions were sought to permit them to participate in the

e-tender dated 25.05.2020. Learned Single Judge of the Hon'ble

High Court granted interim orders permitting the said petitioners

to participate in the tender proceedings provisionally. Learned

Single Judge of Hon'ble High Court vide common judgment dated

28.09.2020 allowed the said writ petitions and set aside the

impugned orders declining renewal of registration of the

petitioners. The Court directed the authority to reconsider their

applications for renewal of registration on merits dehors the

circular dated 29.02.2020. The reasons given by the High Court

for allowing the writ petitions have been reproduced as below:

“…11. The rules

1 would indicate that the registering

authority may refuse renewal of registration for reasons

1

Rules 6 to 8 of the rules for Registration of Contractors for Working Down Timber Firewood

from Timber Depots (Supply Coupe Contracts).

4

stated as (i) to (iv) in Rule 6. The 4th reason namely, "or any

other reason which in the opinion of the registering authority

makes the applicant unsuitable for such registration", need

not be confined to reasons of the nature indicated in Clauses

(i) to(iii)…

…Firstly, the rules of registration of contractors are not

statutory rules but are part of the Kerala Forest Code which

is only a compilation of administrative/executive

instructions…

12. …Registration or renewal of registration as Contractors

is not a fundamental or statutory right. The Government can

very well right-size the panel of registered Contractors for the

purpose of administrative convenience…

14…. Petitioners as registered Contractors do not hold

vested right for renewal of their license…”

However, the Learned Judge allowed the writ petition on the sole

ground that the authorities cannot put a new condition for

consideration of applications after the last date prescribed for

submission of the applications as it would be highly arbitrary

offending Article 14 of the Constitution of India. Thus, it was

observed that the refusal of renewal of registration based on

circular dated 29.02.2020 is illegal and unsustainable.

5. However, vide order dated 12.10.2020, the Divisional Forest

Officer (hereinafter ‘DFO’) cancelled the e-tender dated 25.05.2020

and floated fresh tenders for the same work on 31.10.2020. This

order was further challenged by the Respondent before the High

Court in Writ Petition No. 24241 of 2020.

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6. Vide order dated 16.11.2020, Single Judge of the Hon'ble High

Court allowed the writ petition and set aside the re-tender

notification dated 31.10.2020. The Court observed that the writ

petitioners who had been granted renewal of license should be

treated as qualified to participate in the earlier tender pursuant to

the renewal of their A Class license. Accordingly, the Court directed

the authority to proceed with the e-tender dated 25.05.2020 and

award the work to the eligible tenderer at the earliest. The reasons

given by the High Court have been reproduced as under:

“12. ...One fails to understand as to how a re-tendering

abandoning the existing tender process would not expedite the

re-planting work. If anything, it would only cause further

delay…

13… When already the tender proceedings were in place, the

DFO ought not have cancelled the same without concrete

reasons, ostensibly to beat the model code of conduct.

16… the lowest tenderer has quoted an amount of 12.67%

below the estimated rate, which should be treated as a

reasonably good offer for the respondents. There is no

guarantee that in the re-tendering process tenderers would

quote lesser amounts.

17. There were sufficient participants in the earlier tender

proceedings. There is nothing on record to show that there have

been any serious complaints regarding the e-tender

proceedings initiated earlier. In the earlier tender proceedings,

offers have been received to do the work at lesser than the

estimated rate. Even according to the tendering authority,

expeditious implementation of the project is imperative.”

6

7. Aggrieved by the aforementioned order, the Petitioner filed Writ

Appeal before Division Bench of the Hon'ble High Court.

8. The High Court vide its impugned judgment dated

19.01.2021dismissed the writ appeal being devoid of merit and

upheld the order passed by the Learned Single Judge.

9. Aggrieved by the said judgement of the High Court, the

appellant is before us.

CONTENTIONS:

10. The Ld. Counsel for the appellant vehemently submitted that

the judgment of the Hon’ble High Court setting aside the order of

the Petitioner No. 3 as well as the retendering notice dated

31.10.2020 is against the settled principles of law. It was

submitted that the finding of the High Court that the

transportation restrictions cannot affect the tender proceedings on

account of the fact that the e-tender is also against the facts on

record as the bidder has to submit both the e-tender by speed post

or registered post simultaneously within the time limit stipulated

in the notice inviting tender. The Ld. Counsel for the appellant also

submitted that the judgment of the learned Single Judge allowing

the writ petition setting aside the retender without even adverting

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to the fact that the tender has not been finally awarded to any

person and that the technical bid is under process is illegal. The

Ld. Counsel for the appellant further submitted that the finding of

the Ld. Single Judge that the lowest bidder has quoted an amount

of 12.67% below the estimate rate which would be treated as

reasonable for the Respondent and there is no guarantee that in

the retendering process, the tender would cost lesser amount is a

finding without any material on record and the same cannot be

ground for setting aside the bona fide order issued by the

competent authority. It was further submitted that as per

principles laid down by this Hon’ble Court in contractual matters,

the Court should interfere only if the Petitioner proves that there

is malafides on the part of the government authority. The Hon’ble

High Court had failed to appreciate that the DFO, Konni has rightly

exercised the power conferred on him under Clause 3 of the tender

notice read with Clause 20 of e-government procurement notice of

the retender wherein it reserves the right to modify/cancel all bids

without assigning any reason.

11. As the respondents failed to file a counter affidavit despite

sufficient opportunities granted to them and required further time,

this Court via order dated 29.02.2024 declined to grant further

8

opportunity to them, as such there is no affidavit in reply by the

respondents. Ld. counsel for the respondents orally argued that

the judgement passed by the Ld. Single Judge of High Court is a

very well-reasoned judgement. The division bench of High Court

has rightly affirmed it on appreciation of evidence and the

appeal/SLP of the appellant needs to be set aside.

ANALYSIS:

12. We have heard Ld. counsel for the Appellant as well as Ld.

Counsel for the Respondent. We have also perused relevant

documents on record and judgment passed by the High Court.

13. The High Court while dismissing the writ appeals observed as

under:

“13. In our considered opinion, on an analysis of the findings

made by the learned single Judge, we see that even though the

expressions 'arbitrary' and 'unreasonable are not employed by

the learned single Judge in the judgment, it is clear that it was

after entering into the requisite findings leading to arbitrariness,

the writ petitions were allowed and the impugned cancellation

order was quashed. We also find force in the argument

advanced by the learned counsel for the writ petitioners that one

of the reasons shown in the cancellation order that there were

complaints from eligible contractors on their failure to participate

in the e-tender is a baseless contention, since it was an e-tender.

In order to substantiate the said contention, there should have

been participation in the e-tendering process by any other

eligible contractors.

14. We also do not find any basis in the arguments of the

learned Special Government Pleader that the bid documents had

9

to be submitted physically, in view of the stipulation contained

in the notice inviting tender, and it was not possible due Covid

19 restrictions, for the reason that such a requirement arises

only if any eligible contractor participated in the e-tendering

process. In order to establish as to whether any eligible

contractor participated in the e-tender, no documents were

produced, and if such a situation had arisen, there would have

been substantive documents available with the tender inviting

authority and having not produced any such evidence, it can

only be legally presumed that there were no such incident to

support the stand adopted by the appellants. Therefore, we are

of the clear opinion that the fundamental reason assigned in the

cancellation order that there were complaints from the eligible

contractors expressing their inability to participate in the e-

tender, has no factual and legal foundation and cannot be

sustained under law, and thus it can only be termed as an

arbitrary and illegal act. If there is no conclusive proof for

participation of any other eligible contractors in the e-tendering

process, the contention advanced by the appellants that many

contractors could not participate due to restriction in

transportation facilities is a hollow and baseless argument.

Which thus means, without submitting e-tender, nobody can

submit the tender documents physically before the tender

inviting authorities, which is quite clear and evident from the

notice inviting tender, which specifies that the tender documents

should reach the Department on or before the bid opening time

and date, failing which the bid is liable to be rejected. Therefore,

such a requirement can only be understood as an additional

requirement to the submission of the e-tender by the willing and

eligible contractors.

15. Circumstances being so, the prime reason assigned for the

cancellation of contract as extracted above becomes an

arbitrary, unreasonable and illegal act on the part of the tender

inviting authority. Merely because there is a likelihood of the

rates being lowered, if successive tenders are invited, it cannot

be a justifiable ground at all for cancellation of the contract,

since we are of the firm opinion that, if that is to be taken as a

valid reason, then there would not be any end to the tender

inviting procedure…

… we are at a loss to understand as to how the situation of

emergency pointed out by the appellants could be achieved by

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cancelling the e-tender and inviting fresh tenders, which in our

opinion, undoubtedly protracts and retards and elongates the

finalisation of the proceedings to a future date. To put it

otherwise, the reason so assigned is not at all a conducive and

compatible one to justify the said reasoning of the tender inviting

authority in the order impugned…

17. We have no doubt in our mind that in a writ petition seeking

judicial review, certain restraints have to be followed by the

court, bearing in mind the public interest, the commercial

functions of the Government, the feasibility of the contract and

the viability etc. However, we cannot forget the fact that if there

is any patent arbitrariness in the .matter of cancellation of a

contract and that too after opening the bids submitted by the

participants, a writ court shall step in to undo such arbitrariness

and unreasonableness. ”

14. The factual matrix of this case involve the process of tender

and the power of the tendering authority to cancel the tender is a

legal question.

15. A perusal of the record shows that the order dated 12.10.2020

passed by the DFO categorically states as under:

“Some other contractors had complained that they

could not participate in the e-tender due to Covid-19

transportation restrictions. Their grievances need

proper redressal.”

It is thus clear that the DFO, being the tendering authority,

found that some contractors could not participate due to Covid

restrictions and thus, proceeded to retender the work. The

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respondents, being still allowed to participate, were not prejudiced

by the retender.

16. The question of scope of judicial review in the cases of award

of contracts has already been dealt with by the Hon'ble Supreme

Court in the case of Jagdish Mandal vs. State of Orissa and

Others

2 wherein the Court observed as under:

“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 bonafide 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

2

(2007) 14 SCC 517

12

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.

(ii) Weather 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 licenses, dealerships

and franchises) stand on a different footing as they may

require a higher degree of fairness in action.”

We are of the opinion that the High Court has committed a gross

error while observing the facts in the case of Jagdish Mandal

(supra) were entirely different in regard to a defective tender

submitted by a participant.

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17. In the case of State of Orissa and others vs. Harinarayan

Jaiswal and others

3 ,in relation to excise revenue, the Supreme

Court observed as under:

“13. … The Government is the guardian of the finances of the

State. It is expected to protect the financial interest of the

State. Hence quite naturally, the Legislature has empowered

the Government to see that there is no leakage in its revenue.

It is for the Government to decide whether the price offered

in an auction sale is adequate. While accepting or rejecting a

bid, it is merely performing an executive function. The

correctness of its conclusion is not open to judicial review.

We fail to see how the plea of contravention of Article 19 (1)

(g) and Article 14 can arise in these cases…”

18. The law regarding government contracts or auctions and the

nature and scope of its judicial review is well settled. In the case of

M/s Michigan Rubber (I) Ltd. vs. State of Karnataka and ors.

4,

the Supreme Court observed as under:

“23. 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 the 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. If the Government

3

(AIR 1972 SC 1816)

4

(2012) 8 SCC 216

14

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 the

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 a

fundamental right to carry on business with the Government.”

19. In the case of Tata Cellular vs. Union of India

5, the Supreme

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

(1994) 6 SCC 651

15

(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 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.”

20. It is noteworthy that the order dated 12.10.2020 is an order

issued by the DFO who is the competent authority. The setting

aside of this order of the DFO by the Ld. Single Judge is erroneous

since it does not record any finding that the order of the DFO is

mala fide. We are of the opinion that the order of DFO would give

an equal opportunity to all the bidders and thus, there would be a

fair play between them, ultimately benefitting the Government.

21. A perusal of the order of the DFO reveals that as per clause 3

of the e-tender notice in English, the bidding authority reserves

the right to modify/ cancel, any all bids without assigning any

reason. Clause 27 of e-Government procurement notice inviting

tender for works puts it in explicit items that the tender inviting

authority or other sanctioning authority reserves the right to reject

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any tender or all the tenders without assigning any reason

therefore.

22. The Division Bench of the High Court, which upheld the

judgment of the Ld. Single Judge, was of the opinion that merely

because there was a likelihood of the rates being lowered if

successive tenders are invited, the same cannot be a justifiable

ground at all for cancellation of the contract since it would lead to

a situation of an unending tender inviting procedure. However, we

are of the opinion that the said observations by the High Court are

contrary to the settled principles of law laid down by the Supreme

Court that the Government is the protector of financial resources

of the state and thus, it has every right to cancel and call for fresh

tender if it is in the nature of protecting the financial interests of

the State.

23. We may state here that if our observations are seen qua the

touchstone of questions framed by this Court in the judgment of

Jagdish Mandal (supra) the answer would be in negative,

therefore the decision taken by the authorities cannot be termed

as a mala fide decision or a decision to favour someone. At the

cost of repetition, we may state that the decision of the authority

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is giving a fresh opportunity to all interested bidders to compete

with each other in the process of the fresh selection. In our

opinion, the decision taken by the authority is not affecting the

public interest, on the contrary it furthers the cause of the public

interest and fair play.

24. For reasons stated above, the present appeals deserves to be

allowed and are allowed accordingly. The judgment and order

dated 19.01.2021 passed by the High Cout of Kerala at Ernakulam

in writ appeals nos. 1568 of 2020, 1577 of 2020 and 1589 of 2020

is set aside.

..................................J.

[BELA M. TRIVEDI]

..................................J.

[PRASANNA B. VARALE]

NEW DELHI;

APRIL 25, 2025.