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A CURIOUS CASE OF SINGLE BID

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The Lex-Warrier: Online Law Journal ISSN (O): 2319 – 8338 Impact Factor: 3.737

A CURIOUS CASE OF SINGLE BID

Raj Kumar
Assistant Professor, Department of Law, University of Jammu, Jammu
Citation: LW (2013) January 16

In India the tending process or bidding is the most preferred route of public procurement.
However, only under exceptional circumstances direct negotiation is used in public
procurements. ‘Public Procurement ‘or ‘Bids’ can be defined as the procurement of goods,
works and services through tender process or bidding process by all Government Ministries,
Departments, Agencies, Statutory Corporations and Public Sector Undertakings in the Centre
and the States, Municipal Corporations and other local bodies. A tender is an offer to do works,
services or supply goods at a price arrived through tender process for a fixed period. Generally,
Government reserves the right to accept or reject any application at any stage of the selection
process subject to the terms of the tender document. Once government accepts a tender, it is
binding on both parties i.e. it results into a binding contract.

The law of contract is considered to be as parties’ paradise, parties to the contract are free to
choose terms and conditions of the contract subject to the provisions of the law. The rules and
principles governing contracts were governed by the Indian Contract Act, 1872. However, it may
be worthwhile to mention here that the Government does not stand on the same footing as a
private person who is free to enter into a contract with any person he likes or wishes. The State
or Government, in exercise of its various functions, is bound by the mandate of Article 14 of the
Constitution of India which excludes arbitrariness in State action and requires the State to act
fairly and reasonably and consequently the discretion in the matter of selection of the person for
award of the contract has to be exercised keeping in view the public interest involved in such
selection.1

It is a settled law that a public authority cannot act arbitrarily2 in the matter of awarding
contracts. There is a public element in all its activities and it must confirm to the mandate of
Article 14 of the Constitution and observes the tenets of equality and the principle of fair action3.

In this article an attempt has been made to analyse nature and scope of tenders4 issued by
Government and Government instrumentalities and their power to cancel tender/bid process

1 Piyush Joshi and Anuradha R.V, Study on Competition concerns in Concession Agreements in Infrastructure
Sectors, June 2009, available at www.cci.gov.in.
2 Article 14 prohibits the Government and Government instrumentalities from arbitrarily choosing a contractor at

its will and pleasure; it has to act reasonably, fairly, and in public interest in awarding contract.
3 T.R Desai, Law relating to Tenders and Government Contracts (Universal Law Publishing Co. 2nd Edition, 2009)

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 Raj Kumar, A Curious case of single bid

where only single bid has been received in the light of guidelines issued by the Central Vigilance
Commission5 and rulings of various High Courts and Supreme Court of India.

A CURIOUS CASE OF SINGLE BID

Whether a Sole bidder can be granted the tender in an open bid or not?

Legislation and Guidelines involved:

i. The Constitution of India.

ii. The Indian Contract Act, 1872.
iii. Central Vigilance Commission Circular No. 4/3/07, Tendering process-
Negotiations with L-1 - dated 03.03.2007.
iv. Central Vigilance Commission Circular No. 31/11/08, Time bound processing
of procurement dated 06.11.2008.
v. Ministry of Shipping, Road Transport and Highways, Department of Road
Transport and Highways Circular No. NH 14019/4/2008-P&M, Acceptance of
single tenders for National Highway works.
First we deal with the Central Vigilance Commission (Hereinafter referred to as “CVC”)
guidelines dealing with single bid:

CVC GUIDELINES ON SINGLE BID

The CVC guidelines on single bid can be summarised as follows:

• In general, single bid or tenders are not acceptable in the first instance.
• If there is only one bid even after re-tendering, there is need for detailed
justification to accept the single tenderer or single bid with the approval from the
competent authority.
• There should be no negotiations with the bidder at all. However, In cases where
a decision is taken to go for re-tendering due to the unreasonableness of the

4Tenders for procurement of goods, services or works etc.

5The Central Vigilance Commission is a body established by the Government of India in 1964 in order to guide and
advise the Government of India and government agencies in the field of vigilance in order to prevent corruption in
government activities. The Central Vigilance Commission acquired a statutory status with the promulgation of an
ordinance with effect from 25th August 1998 and began to be governed by its own statute, namely the Central
Vigilance Commission Act, 2003, which was enacted and came into effect on September 11, 2003. Vide GOI
Resolution on "Public Interest Disclosure and Protection of Informer" dated April 2004, the Government of India
has authorized the Central Vigilance Commission as the "Designated Agency" to receive written complaints for
disclosure on any allegation of corruption or misuse of office and recommend appropriate action against erring
officials.

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The Lex-Warrier: Online Law Journal ISSN (O): 2319 – 8338 Impact Factor: 3.737

quoted rates, but the requirements are urgent and a re-tender for the entire
requirement would delay the availability of the item, thus jeopardizing the
essential operations, maintenance and safety, negotiations would be permitted
with L-1 bidder(s)6 for the supply of a bare minimum quantity. The balance
quantity should however be procured expeditiously through a re-tender,
following the normal tendering process.7

JURISPRIDENTIAL ANALYSIS

In Tata Cellular v. Union of India8 the Hon’ble Supreme Court observed that the principles
of judicial review would apply to the exercise of contractual powers by Government bodies in
order to prevent arbitrariness or favouritism. Further, the Court clearly stated that there are
inherent limitations in exercise of that power of judicial review. Government is the guardian of
the finances of the State. It is expected to protect the financial interest of the State. The right to
refuse the lowest or any other tender is always available to the Government. But, the principles
laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a
tender. There can be no question of infringement of Article 14 if the Government tries to get the
best person or the best quotation. The right to choose cannot be considered to be an arbitrary
power. However, if the said power is exercised for any collateral purpose the exercise of that
power will be subject to judicial review and could be struck down by the Court.

The Hon’ble Supreme Court of India in Rajasthan Housing Board and Anr v. G.S
Investment and Anr9 held that in case of Government tenders the highest bidder has not
acquired any vested right to have auction concluded in his favour and auction proceedings could
always be cancelled.

Further, Hon’ble Supreme Court of India has decided in Ramchandra Murarilal Bhattad and
Ors v. State of Maharastra and Ors10, held that the Power has been exercised by the Authority
in cancelling tenders so as to enable it to have a re-look of entire project, for the Some reasons

6 L-1 means lowest bidder, where tender is based on grant or lowest price, and H-1 means highest bidder, where

tender is based on payment of premium to the Government, discovered or selected through tendering process or
bidding process.
7 Central Vigilance Commission Circular No. 4/3/07, Tendering process- Negotiation with L-1 - dated 03.03.2007
8 AIR 1996 SC 11
9 (2007) 1 SCC 477
10 AIR 2007 SC 401

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 Raj Kumar, A Curious case of single bid

may be required to be assigned for rejecting the bid, but in instant case, no reason was required
to be assigned as there has been a change in the policy decision.

In State of Orissa and Ors. v. Harinarayan11, Hon’ble Supreme Court held that there is no
concluded contract till the bid was accepted. By merely giving bids, the bidders had not acquired
any vested rights.

Scope and Extent of Judicial Review

In few leading cases12 the Supreme Court has examined contractual powers of the Government
through bidding process and the extent of power of judicial review; following broad principles
were culled out:

(1) Public auctions are held to obtain the best possible price.
(2) An invitation to tender is not an offer, but an attempt to ascertain whether an
offer can be obtained with a margin.
(3) The right to refuse the lowest or any other tender is always available to the
Government. That there is no concluded contract until the bid is accepted by a
communication13.
(4) The court does not sit as a court of appeal but merely reviews the manner in
which the decision was made.
(5) The principles laid down in Article 14 of the Constitution have to be kept in
mind. However, the modern trend points to judicial restraint in administrative
action.
(6) The court does not have the expertise to correct the administrative decision. If a
review of the administrative decision is permitted it will be substituting its own
decision, without the necessary expertise which itself may be fallible.
(7) The terms of the invitation to tender (tender document) cannot be open to
judicial scrutiny because the invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the tender or award the contract is
11AIR 1972 SC 1816
12 Tata Cellular v. Union of India (1994) 6 SCC 651, Shimnit Utsch India Pvt. Ltd. and Anr. v. West Bengal
Transport Infrastructure Development Corporation Ltd. and Ors. MANU/SC/0382/2010, Meerut Development
Authority v. Association of Management Studies and Anr. (2009) 6 SCC 171, Villianur Iyarkkai Padukappu Maiyam
v. Union of India and Ors. (2009) 7 SCC 561, Reliance Airport Developers Pvt. Ltd. v. Airports Authority of India
and Ors. (2006)10SCC1, Master Marine Services (P) Ltd. v. Metcalfe and Hodgkinson (P) Ltd. and Another (2005) 6
SCC 138, Global Energy Ltd. and Anr. v. Adani Exports Ltd. AIR 2005 SC 2653, Directorate of Education and
Others v. Educomp Datamatics Ltd. and Others AIR 2004 SC 1962, Ramana Dayaram Shetty v. The International
Airport Authority of India and Ors. AIR 1979 SC 1628.
13 Under section 5 of the Indian Contract Act, 1872, a proposal may be revoked at any time before the

communication of its acceptance is complete against the proposer, but not afterwards.

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The Lex-Warrier: Online Law Journal ISSN (O): 2319 – 8338 Impact Factor: 3.737

reached by process of negotiations through several tiers. More often than not,
such decisions are made qualitatively by experts.
(8) The Government must have freedom of contract. In other words, a fair play in
the joints is a necessary concomitant for an administrative body functioning in an
administrative sphere or quasi-administrative sphere. However, the decision must
not only be tested by the application of Wednesbury principles of
reasonableness14 but must be free from arbitrariness not affected by bias or
actuated by mala fides.
(9) Quashing decisions may impose heavy administrative burden on the
administration and lead to increased and un-budgeted expenditure.
(10) If the power to accept or reject a tender is exercised for a collateral purpose it is
always open to judicial review and can be struck down.
(11) The power of judicial review in the matters relating to tenders is very limited and
unless special features are placed, the Court shall not interfere and the power of
judicial review cannot be stretched to protect the private interest of contractor15.

The Hon’ble Supreme Court in Air India Ltd. v. Cochin International Airport Ltd.16
suggested that ‘even when some defect is found in the decision-making process, the court must
exercise its discretionary powers under Article 226 with great caution and should exercise it only
in furtherance of public interest and not merely on the making out of a legal point. The court
should always keep the larger public interest in mind in order to decide whether its intervention
is called for or not. Only when it comes to a conclusion that overwhelming public interest
requires interference, the court should interfere.’

The High Court of Patna in Umesh Kumar Paswan and etc. v.Union of India and Ors17
while deciding on the issue of single bid held that the whole purpose of issuing tenders and
having open bid is for the sole purpose of getting the best competitive price and if on the face of
bids received, it is apparent that the aforesaid purpose is not satisfied then the bids are not
bonafide and must not be accepted by the authorities.

14 Lord Diplock in Council of Civil Services Unions v. Minister for the Civil Service [1985 (1) AC, 374] held that If
the decision impugned is so outrageous in its defiance of logic or accepted norms of moral standards that no
sensible person who had applied his mind to the question to be decided could have arrived at it, then it may be said
that the decision is unreasonable. This is known as test of "Wednesbury unreasonableness". Also see, Hughes v.
Deptt. of Health and Social Security 1985 AC 776, R. v. Secretary of State for Transport, Ex parte Richmond upon
Thames London Borough Council and Ors. (1994) 1 All E.R. 577.
15 Jagdish mandal v. State of Orissa, (2007) 14 SCC 517.
16 (2000) 2 SCC 617.
17 MANU/BH/0527/2009.

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 Raj Kumar, A Curious case of single bid

The High Court of Karnataka in Mahendra Labs Pvt. Ltd. v. The Appellate Authority/Principal
Secretary to Government Animal Husbandry and Fisheries Department, Government of
Karnataka18 held that if the tender accepting authority feels that the rates quoted by the lowest
tenderer, which is also a sole tenderer, is also on the higher side, it is open for the authority to
reject the same. Further, the Court would interfere with the administrative policy decision only if
it is arbitrary, discriminatory, malafide or actuated by bias.

Legitimate Expectation of Single Bidder

The Hon’ble Supreme Court in Union of India v. Hindustan Development Corporation19 held
that the principle of legitimate expectation does not create any crystallized right in the favour of
bidder.

The Hon’ble Delhi High Court in TDI International India Ltd. v. Airports Authority of
India and Anr20 on the question of Legitimate Expectation of single bidder held that the
protection of legitimate expectation is not available to a single bidder where an overriding public
interest required otherwise.

Acceptance of Single Bid

The Hon’ble Delhi High Court in Virendra Kapoor v. Airport Authority of India21 held that
while deciding on the issue of acceptance of single bid has laid down following principle:

a. It would generally not be advisable to cancel a tender merely because only one offer
has been received (as long as it is a valid offer).
b. The single bid should not be financially depressed.
c. There should not be real prospect of getting a much higher bid. (If there are
prospects of getting much higher bid, then the administrative authority can set aside
the tendering process and call for a fresh tender).
d. The decision taken by the authority should not be arbitrary and must not be designed
to achieve any collateral purpose.

Therefore the complementary view of this principle would be the authority with detailed
justification can accept the tender of a single bidder only in some exceptional circumstances.
Furthermore, under Section 5 of the Indian Contract Act, 1872, a proposal may be revoked at

18 MANU/KA/0618/2009.
19 AIR 1994 SC 988.
20 MANU/DE/1083/2004, 115 (2004) DLT 139.
21 Writ Petition (Civil) No.8529 of 2008.

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any time before the communication of its acceptance is complete against the proposer, but not
afterwards.

CONCLUSION

In view of above, keeping in mind objectives behind CVC Guidelines and rulings of the
Supreme Court and various High Courts, it is submitted that it is an acceptable norm to
accept single bidder/tender. However, subject to detailed justification in the support of
acceptance of single bid

SELECTED BIBLIOGRAPHY

BOOKS

1. T.R Desai, Law relating to Tenders and Government Contracts (Universal Law
Publishing Co. 2nd Edition, 2009).

2. Piyush Joshi, Law Relating to Infrastructure Projects (LexisNexis Butterworth’s Wadhwa,

Nagpur, 2nd Edition, 2003).

3. Jeffery Delmon, Private Sector Investment in Infrastructure- Project Finance, PPP

Projects, and Risk (Kluwer Law International, Wolters Kluwer, Law and Business,
Netherlands, 2nd Edition, 2009).

4. E. R. Yescombe, Public-Private Partnerships: Principles of Policy and Finance

(Butterworth-Heinemann, Eslevier, Oxford, U.K, 1st Edition, 2007)
5. Jeffery Delmon, Project Finance, BOT Projects and Risks (Kluwer Law International,
Wolters Kluwer, Law and Business, Netherlands, 2009).
6. Darrin Grimsey, and Mervyn K. Lewis, Public Private Partnerships: The Worldwide
Revolution in Infrastructure (Edward Elger Publishing Limited, U.K, 2004).
7. Akintola Akintoye, Matthias Beck, and Cliff Hardcastle, Public-Private Partnerships:
Managing Risks and Opportunities (Blackwell Publishing Company, Oxford, U.K, 1st
Edition, 2003)

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