The Court says the government can skip floating tenders or auctions to speed up urgent modernisation projects.
Award of tenders for infrastructure development and modernisation of existing facilities is, more often than not, followed by allegations of mala fide and frustrating litigation. Environmentalists and public-interest groups also join the fray. The Supreme Court has dealt with several such cases in recent times. The latest in the series comes with a twist, and the court has gone ahead and granted more freedom to the government to deal with development projects, by further diluting the court’s right to judicial review.
The issue in this case was of the modernisation of the Pondicherry port. It was facing competition due to rapid changes in transport technology. The government lacked funds and modernisation was long overdue. Therefore, the government selected a developer, skipping the normal routine of appointing consultants and inviting tenders. After examining several proposals volunteered by some 30 firms, the government selected a consortium consisting of M/s Subhash Project and Marketing Ltd and Om Metals Ltd and their affiliates. This was challenged in the Madras High Court by a public interest group. Its writ petitions were dismissed, leading to this appeal, Villanur Iyarkkai Padukappu Maiyam vs Union of India.
While dismissing the appeal, the Supreme Court not only cited the Balco judgment of 2002, but seemed to withdraw further from exercising its power of judicial review. One of the main challenges to the government’s decision was that it had switched the whole public tender process into a system of personal selection and, therefore, it was arbitrary and unreasonable. While rejecting this contention, the court emphasised that “non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of exercise of executive power in an arbitrary manner.”
The court distinguished the sale of state land or assets for industrial projects and modernisation of existing facilities. “Generally, when any state land is intended to be transferred or the state largesse decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people,” the judgment said. But development of the port is not a case where the state asset is sought to be sold or the state is out to buy goods. The port is already there. The attempt is to make the existing port meet the challenge of rapid changes in the transport sector. Therefore, the method of sale of public assets should be distinguished from development of an existing structure on a build-operate-transfer (BOT) basis.
Granting further liberty to governments in the matter of development of existing facilities, the court said that in cases like these, the state was not bound to advertise and tell people that it wanted the development in a particular manner and invite proposals from interested parties. The state is at liberty to do so. In a given case, it may be of advantage to the state. “But if any private party comes before the state and offers to develop the port, the state would not be committing breach of any constitutional obligation if it negotiates with such a party and agrees to provide resources for the project,” the judgment underlined.
If such an offer comes, the party cannot be told to wait for advertisement for tender or auction and evaluation by consultants. According to the court, the state must, in such cases, be free to negotiate with the private entrepreneur. “Though public auction or inviting tenders is the ordinary rule in cases where the state proposes to dispose of a property, it is not an invariable rule.” When the project has to be implemented urgently, the government can bypass the usual route and shortlist the developer. This would be pragmatic and in the best interest of the state.
The court further reiterated that the state should be presumed to act reasonably and in public interest, unless the contrary is proved with cogent evidence. Another principle, well accepted now, is that the court would not substitute its judgement in place of that of the government and its experts. The court cannot examine the relative merits of different economic policies and strike them down merely on the ground that another policy would have been fairer and better.
“Often, a change of government may result in the shift in focus or change in economic policies,” the judgment said. “Any such change may result in adversely affecting some vested interests. Unless any illegality is committed, a decision bringing about change cannot per se be interfered with by the court.”
This pronouncement of the court bestows more freedom to the governments to speed up development projects. As a matter of caution, there have also been instances recently when the court has struck down suspect tenders for want of bona fide and reasonableness.