Tenders, public auctions preferred way for awarding govt contracts: SC

New Delhi, January 7

The Supreme Court has said that inviting tenders and conducting public auctions are preferred methods for awarding government contracts as it involves expenditure of public money, and any departure from the tender route must be reasonable, justified and non-discriminatory.

It involves state exchequer

Government contracts involve expenditure out of the public exchequer. All government actions, including contracts awarded by the state, must be tested on the touchstone of Article 14. Supreme court bench

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“Government contracts involve expenditure out of the public exchequer. Since they involve payment out of the public exchequer, the money expended must not be spent arbitrarily. The state does not have absolute discretion while spending public money. All government actions including government contracts awarded by the state must be tested on the touchstone of Article 14,” a Bench led by Chief Justice of India DY Chandrachud said in its January 3 verdict.

The Bench, which also included Justice Hima Kohli, however said if the purpose of allocation by the state was not revenue maximisation, it could award contracts through other methods, provided it was non-arbitrary and met the requirements of Article 14.

The preference for public auctions and tenders existed to ensure that procurement could be made at the best price in a transparent manner, the Bench said.

The verdict came in a matter relating to a UP Government’s decision to purchase ayurvedic medicines from Indian Medicines Pharmaceuticals Corporation Limited (IMPCL) on a nomination basis without floating tenders.

The UP Government’s decision was challenged by Kerala Ayurvedic Co-operative Society Limited before the Allahabad HC which on October 18, 2019, declared the practice adopted by the state government to purchase ayurvedic drugs only from IMPCL as illegal and directed it to invite tenders for competitive rates and quality of drugs for the remaining supplies.

The IMPCL challenged the HC verdict. Dismissing the appeal, the Supreme Court said, “The appellant has been unable to discharge the burden placed on it by producing cogent material demonstrating that the procurement of medicines through nomination is warranted because of the existence of exceptional circumstances bearing on need for quality. The action of the appellants of procuring medicines only from IMPCL to the exclusion of the other establishments mentioned in paragraph 4(vi)(c) (of Operating Guidelines of the National AYSUH Mission) is arbitrary and violative of Article 14 of the Constitution.”