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Contracts awarded by govt open to judicial review: SC
September, 17th 2007
The Supreme Court has said the judiciary can review a contract awarded by the government so as to ensure healthy competition - a ruling that may help corporates who feel wronged in a bidding process.

Justice S H Kapadia said the essence of the doctrine of level playing field was to promote competition between bidders "so as to subserve the larger public interest."

"Decisions or acts, which result in unequal and discriminatory treatment, would violate the doctrine of 'level playing field' embodied in the Constitution," he said, while ruling in favour of Reliance Energy which moved the court after its disqualification from bidding for the Mumbai Trans- Harbour Sea Link project.

The apex court said: "When Article 19 (of the Constitution) confers the fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of level playing field... however, subject to public interest."
On earlier occasions, losing bidders had knocked the court's doors in cases relating to the modernisation of Delhi and Mumbai airports and privatisation of aluminium maker Balco and Hotel Ashok.

Underlining the importance of clarity in the terms and conditions for inviting tenders, the apex court said: "If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate the doctrine of level playing field."

Citing the case of Reliance Airport Developers' petition against the Airports Authority of India, the court said it has been held that in matters of judicial review the basic test is to see whether there is any infirmity in the decision-making process and not in the decision itself.

"This means that the decision-maker must understand correctly the law that regulates his decision-making power and he must give effect to it, otherwise it may result in illegality."

The principle of judicial review cannot be denied even in contractual matters or matters in which the government exercises its contractual powers, but judicial review is intended to prevent arbitrariness and it must be exercised in larger public interest, Justice Kapadia said.

Stressing the need for ensuring level playing field for promoting competition among bidders, the court said: "If the policy or act of the government, even in contractual matters, fails to satisfy the test of reasonableness, then such an act or decision would be unconstitutional."
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