Supreme Court Stresses Limited Judicial Review in Tender Disputes, Cautions Against Unwarranted Challenges

New Delhi, August 23, 2023 - The Supreme Court of India, comprising Justices K.V. Viswanathan and J.K. Maheshwari, delivered a groundbreaking judgement today that underlines the importance of judicious judicial review in tender disputes. The verdict cautions against excessive interference in such matters, particularly by unsuccessful bidders who may seek to exaggerate minor procedural infractions or subjective concerns. The court cited previous rulings that provide guidance on the scope of judicial review in contractual and tender issues. Emphasizing the need to consider factors like arbitrariness, irrationality, and public interest, the judgement lays down clear guidelines for the judiciary's role in tender disputes.

The case in question, titled M/s Om Gurusai Construction Company vs. M/s V.N. Reddy & Ors., revolves around the interpretation of tender conditions and compliance with a specific performance security clause. In addition to addressing the judicial review aspect, the judgement also examined the submission of performance security within a stipulated timeframe and the deference due to an employer's understanding of tender documents.

This decision is poised to set a crucial precedent in the realm of tender-related legal disputes, providing clarity on the limits of judicial interference in tender matters. It is anticipated that the judgement will have a far-reaching impact on the legal landscape surrounding tenders and contractual disputes in India.

The judgement, delivered on August 23, 2023, focused on the interpretation of Clause 2.22.0 (ix) of the tender conditions, which required the submission of additional performance security within a stipulated timeframe. The court considered the effect of bank holidays and employee strikes on compliance and concluded that the appellant had made reasonable efforts to submit the security within the given timeframe. The court cited the legal maxim "Lex non cogit ad impossibilia" (the law does not compel the performance of impossible tasks) in support of its reasoning, emphasizing that compliance with the clause was not feasible due to circumstances beyond the appellant's control.

The court also highlighted the principle of deference to the employer's understanding of tender documents, asserting that courts should generally respect the employer's interpretation unless there is evidence of mala fide or perversity. The judgement emphasized that decision-making authorities, including tendering authorities, are best equipped to understand the requirements of tender documents and the specific circumstances at play.

The Supreme Court's decision set aside the High Court's order that had questioned the acceptance of the appellant's tender and the issuance of the work order. The court directed the dismissal of the writ petition and upheld the appellant's compliance with the tender conditions, asserting that no breach had occurred. The judgement signifies a crucial precedent in the realm of tender-related legal disputes and underscores the necessity of reasonable interpretation and compliance with tender conditions.

The case drew upon legal principles from previous judgements, including Raj Kumar Dey vs. Tarapada Dey, Rosali V. vs. TAICO Bank, and Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited, among others.

Date of Decision: August 23, 2023

M/s Om Gurusai Construction Company  vs M/s V.N. Reddy & Ors.       

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