Supreme Court upholds tendering authority's power to cancel and retender, sets aside Kerala HC order

A bench of Justices Bela M. Trivedi and Prasanna B. Varale heard appeals against a Division Bench judgment of the Kerala High Court which had dismissed writ appeals and affirmed a Single Judge’s orders directing reopening of an e-tender process and setting aside a re-tender notification. The appeals raised the question whether the Divisional Forest Officer (DFO) acted arbitrarily in cancelling an earlier e-tender and inviting fresh bids for tree-felling works at Nellidappara in Konni Forest Division after issuing an order dated 12.10.2020.

The Court allowed the appeals and set aside the High Court judgment dated 19.01.2021, holding that the DFO’s decision to cancel and retender fell within the bounds of lawful administrative discretion and was not shown to be mala fide. The Court observed that protection of the State’s financial interest and the tendering authority’s reserved powers justified interference only where there was patent arbitrariness or mala fide conduct. The Court, in its reasoning, observed: “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 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.” The Court also noted the tender documents expressly reserved the right to modify or cancel bids and that the power to protect public finances was a legitimate executive function.

Background

The dispute arose after the DFO, Konni cancelled an earlier e-tender dated 25.05.2020 for final tree-felling works and decided to float the tender afresh by order dated 12.10.2020, citing complaints that some contractors “could not participate in the e-tender due to Covid-19 transportation restrictions.” Earlier, a Principal Conservator circular dated 29.02.2020 had provided that A-class registrations would not be renewed for contractors who had not participated in tenders in the previous financial year; some petitioners challenged non-renewal and the circular in writ petitions. A Single Judge granted interim permission to participate in the tender and later set aside the non-renewal orders, directing reconsideration of registration applications. When the DFO retendered on 31.10.2020, the Single Judge in a separate order set aside the re-tender notification and directed the authority to proceed with the original e-tender, finding the cancellation arbitrary and likely to cause delay. The Division Bench of the Kerala High Court affirmed that decision on 19.01.2021.

The appellants argued before the Supreme Court that the High Court erred in substituting its view for that of the tendering authority, that the DFO had power under the tender clauses (including Clause 3 and Clause 27/e-Government procurement provisions) to modify or cancel bids, and that no mala fide or bias had been established. The respondents did not file a counter-affidavit despite opportunities and the Supreme Court declined further time on 29.02.2024. The Supreme Court considered precedents including Jagdish Mandal v. State of Orissa, Harinarayan Jaiswal, Michigan Rubber (I) Ltd., and Tata Cellular and applied the established principles limiting judicial interference in bona fide administrative decisions in tender matters unless arbitrariness, mala fides or public-interest injury was shown. Concluding that the DFO’s order gave all bidders a fair opportunity and protected state interest, the Court allowed the appeals and set aside the High Court’s judgment of 19.01.2021. No further interim directions were issued by the Supreme Court in the judgment.

Case Details: Case No.: 2025 INSC 569 Case Title: The Principal Chief Conservator of Forest & Ors. v. Suresh Mathew & Ors. Appearances: For the Petitioner(s): Counsel not specified in the reported text For the Respondent(s): Counsel not specified in the reported text