In a recent decision, Kovvuru & Co v Superintending Engineer, Government of Andhra Prodesh, the Andhra Pradesh High Court followed the lead of the Supreme Court of India in determining whether government tender guidelines were reasonable.
The petitioner was a contractor who had undertaken several contracts for the state government of Andhra Pradesh. The first respondent was the state government who had on October 14 1997 issued a notice calling for tenders for earthwork excavation. The petitioner's tender was the lowest. The first respondent then cancelled the tenders and invited fresh tenders for the same job on August 20 1999. The petitioner applied for the tender and was informed by the first respondent that his application was rejected as it had quoted higher rates, for the same work, in 1997.
The petitioner filed a petition in the High Court, alleging that the guidelines were unreasonable and arbitrary. The first respondent argued that funding for the project was received from the World Bank, which stipulated certain guidelines. The effect of the guidelines was to exclude non-serious contenders who had earlier quoted a price that was considered exorbitant.
The Andhra Pradesh High Court held that the principles guiding the courts in scrutinizing these matters were already laid down by the Supreme Court of India. One of the principles is that the government must have freedom of contract. The decision must also be tested by the application of the principle of reasonableness, and must not be arbitrary nor biased, nor motivated by bad faith.
On these principles, the court held that the condition laid down by the respondent in the contract was not unreasonable.
For further information on this topic please contact Shubhada S Bhave at Advani & Co by telephone (+91 22 281 8380) or by fax (+91 22 286 5040) or by e-mail ([email protected]).
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