The Supreme Court has cautioned High Courts against interfering with policy decisions and in matters challenging the award of contracts by the state or public authorities unless it is contrary to the public interest, discriminatory or unreasonable.

Giving this ruling, a Bench of Justices P. Sathasivam and Ranjan Gogoi said: “The basic requirement of Article 14 of the Constitution 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 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.”

Upholding the pre-qualification criteria for award of tenders prescribed by the Karnataka State Road Transport Corporation, the Bench said: “The courts cannot interfere with the terms of the tender prescribed by the government because it feels that some other terms would have been fair, wiser or logical.”

Writing the judgment, Justice Sathasivam said: “Fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play except 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.”

The Bench said: “A court before interfering in tender or contractual matters, in exercise of the 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 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 are in the negative, then there should be no interference under Article 226.”

The Bench dismissed an appeal filed by Michigan Rubber (India) Ltd against a Karnataka High Court judgment rejecting its plea for interference.

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