Madhya Pradesh High Court Mandates Fairness in Tender Process

Court Overturns Arbitrary Cancellation of Tender; Orders Re-evaluation by Business Committee

In a significant ruling, the Madhya Pradesh High Court at Gwalior has overturned a decision by the Madhya Pradesh Housing and Infrastructure Development Board to annul a tender process for a major construction project, citing procedural impropriety and arbitrariness. The project, valued at Rs. 65.73 crores, was for the construction of the Atal Kunj Tower, a residential cum commercial complex in Gwalior.

The writ petition was filed by Pragmatic Infrastructure Pvt. Ltd., which had emerged as the lowest bidder (L-1) after a competitive tender process. The petitioner challenged the Board’s decision to cancel the finalized tender process and initiate a fresh bidding process, alleging unfairness and malice in the decision-making process.

The court, presided over by Justices Anand Pathak and Hirdesh, held that the tender process must adhere to prescribed regulations and statutory provisions to ensure fairness and transparency. It emphasized that any deviation or procedural impropriety could lead to arbitrary decisions that prejudice public interest and potentially increase project costs.

The judgment reiterated the principles laid down in Tata Cellular v. Union of India, asserting that judicial review is permissible in tender matters to prevent arbitrariness, irrationality, unreasonableness, procedural impropriety, and malice. The court found that the decision to annul the tender process was illegal, as it bypassed the authority of the Business Committee, which is mandated by Regulation 11(c)(iii) of the M.P. Grah Nirman Mandal Adhiniyam, 1972, to make decisions on tenders exceeding Rs. 50 crores.

Highlighting the procedural lapses, the court noted that the tender process was marred by intermittent changes in tender conditions through corrigenda without proper justification. The court observed that the process was mismanaged by officials, leading to suspicion and arbitrariness. It emphasized the necessity of fairness and transparency in tender processes to prevent corruption, nepotism, and crony capitalism.

In its directions, the court set aside the impugned order annulling the tender process and remanded the case to the Business Committee for reconsideration of the petitioner’s proposal as the L-1 bidder. The court ordered the Board to pass a reasoned decision within two months, ensuring that Respondent No. 2 is not involved in further discussions to maintain the integrity of the process.

This ruling underscores the judiciary's role in ensuring that public authorities adhere to legal and procedural standards in tender processes, safeguarding public interest and promoting transparency.

Bottom Line:

Tender process must be conducted fairly and transparently by adhering to prescribed regulations and statutory provisions - The Business Committee is the competent authority to accept or reject tenders for contracts exceeding a certain monetary value, and its decision must be confirmed by the Board as per the applicable regulations.

Statutory provision(s): Article 226 of the Constitution of India, Section 23 of M.P. Grah Nirman Mandal Adhiniyam, 1972, Regulation 11 of Conduct of Business and Delegation of Powers Regulations 2015.

Pragmatic Infrastructure Pvt. Ltd. v. Madhya Pradesh Housing and Infrastructure Developmet Board, (Madhya Pradesh)(Gwalior)(DB) : Law Finder Doc Id # 2796715