Government tenders: India
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The Rafale agreement
Court Applies Wednesbury Test, Finds No Irregularities
The Supreme Court said it would not employ standard tests applied to tenders for construction of roads and bridges to examine deals for procurement of sensitive defence equipment, for which judicial parameters of scrutiny would give “far more leeway” to the government.
Reflecting on increasing number of court cases alleging wrongdoing on part of governments in awarding tenders, a bench of Chief Justice Ranjan Gogoi and Justices S K Kaul and K M Joseph said the apex court had consciously confined its scrutiny to reasonableness of the decisionmaking process, absence of mala fides or favouritism, popularly referred to as ‘Wednesbury Principle’. After applying this test to the Rafale deal, the SC found no substance in allegations of irregularities levelled in four PILs.
“In fact, this court has held that it was not to exercise the power of judicial review even if a procedural error was committed to the prejudice of the tenderer since private interests cannot be protected while exercising such judicial review. The award of contract, being essentially a commercial transaction, has to be determined on the basis of considerations that are relevant to such commercial decisions,” the SC said.
This implies that terms on which tenders are invited are not open to judicial scrutiny unless it is found that the same have been tailor-made to benefit a particular tenderer or a class of tenderers, the bench said quoting a 2014 judgment.
“Various judicial pronouncements commencing from Tata Cellular case judgment (1994), all emphasise the aspect that scrutiny should be limited to the Wednesbury Principle of Reasonableness and absence of mala fides or favouritism,” it said.
CJI Gogoi, writing the judgment for the bench, said, “We also cannot lose sight of the tender in issue. The tender is not for construction of roads, bridges etc. It is a defence tender for procurement of aircraft. The parameters of scrutiny would give far more leeway to the government, keeping in mind the nature of the procurement itself.”
On the PILs challenging Rafale deal, the SC said, “The scrutiny of challenges before us, therefore, will have to be made keeping in mind the confines of national security, the subject of the procurement being crucial to the nation’s sovereignty.”
The SC quoted its 2008 judgment in Siemens Public Communication Network case and said, “Triple ground on which such judicial scrutiny is permissible has been consistently held to be ‘illegality’, ‘irrationality’ and ‘procedural impropriety’.”
However, the SC was quick to clarify that extent of permissible judicial review in matters of contracts and procurements would vary from case to case and there could not be a uniform standard.
Government tenders: India