Principal Chief Conservator of Forest v. Suresh Mathew

Citation: 2025 INSC 569
Court: Supreme Court of India
Bench: Bela M. Trivedi, J., Prasanna B. Varale, J.
Date of Judgment: April 25, 2025
Appeal From: High Court of Kerala, Writ Appeals Nos. 1568, 1577, and 1589 of 2020, Judgment dated 19.01.2021

High Court of Kerala’s dismissal of writ appeals set aside – Divisional Forest Officer’s cancellation of e-tender notification dated 25.05.2020 and issuance of fresh tender upheld – Tendering authority’s right to cancel bids without assigning reasons, as per tender clauses, affirmed – Judicial review in contractual matters limited to cases of mala fides, arbitrariness, or irrationality – Decision to re-tender due to Covid-19 restrictions affecting contractor participation held bona fide and in public interest – No fundamental right to renewal of contractor registration – Government’s discretion to protect financial interests by inviting fresh tenders upheld.

Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517 and Tata Cellular vs. Union of India (1994) 6 SCC 651 relied upon.

Background

The case arose from the cancellation of an e-tender notification dated 25.05.2020 by the Divisional Forest Officer (DFO), Konni, for tree felling works in Nellidappara, South Kumaramperoor Forest Station. The respondents, participants in the e-tender, challenged the cancellation and subsequent re-tendering on 31.10.2020 as arbitrary. The respondents also contested a circular dated 29.02.2020, which denied renewal of their A-class contractor registration for not participating in tenders during the previous financial year. The High Court of Kerala, through a Single Judge and later a Division Bench, ruled in favor of the respondents, setting aside the circular and the re-tendering. The appellants appealed to the Supreme Court.

Issues

1. Whether the DFO’s cancellation of the e-tender and issuance of a fresh tender was arbitrary or illegal.
2. Whether the High Court erred in setting aside the re-tendering notification and the circular on contractor registration renewal.
3. What is the scope of judicial review in matters of tender cancellation and government contracts?

Arguments

Appellants

• The DFO’s decision to cancel the e-tender was bona fide, prompted by complaints from contractors unable to participate due to Covid-19 transportation restrictions.
• The tender notice reserved the right to cancel bids without assigning reasons, as per Clauses 3 and 27 of the e-tender and e-government procurement notice.
• The High Court’s interference was unjustified, as there was no evidence of mala fides or irrationality, and judicial review in contractual matters should be limited.
• The respondents were not prejudiced, as they could participate in the fresh tender.

Respondents

• The cancellation was arbitrary, lacking concrete reasons, and aimed at bypassing the earlier tender process, which had competitive bids (e.g., 12.67% below the estimated rate).
• The circular denying registration renewal was illegal, as it imposed new conditions post-application, violating Article 14 of the Constitution.
• The High Court’s rulings were well-reasoned, and re-tendering would delay the project without guaranteeing better bids.

Decision

The Supreme Court allowed the appeals, setting aside the High Court’s judgment dated 19.01.2021. Key findings:

• Tender Cancellation: The DFO’s decision to cancel the e-tender was within its authority, supported by Clauses 3 and 27, which allowed cancellation without reasons. The stated reason—Covid-19 restrictions preventing contractor participation—was bona fide and aimed at ensuring fair competition.
• Judicial Review: Citing Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517 and Tata Cellular vs. Union of India (1994) 6 SCC 651, the Court held that judicial review in contractual matters is limited to cases of mala fides, arbitrariness, or irrationality. The High Court erred in interfering without evidence of such factors.
• Public Interest: The re-tendering promoted public interest by allowing broader participation and protecting the state’s financial interests, as reaffirmed in State of Orissa vs. Harinarayan Jaiswal (AIR 1972 SC 1816).
• Registration Circular: While the High Court found the circular arbitrary for imposing new conditions post-application, the Supreme Court focused on the tender cancellation, implicitly upholding the state’s discretion in administrative rules like the Kerala Forest Code.
• Outcome: The DFO’s order dated 12.10.2020 was upheld, and the re-tendering process was validated. The respondents’ participation rights in the fresh tender mitigated any prejudice.

Ratio Decidendi

• A tendering authority has the discretion to cancel a tender without assigning reasons if the tender conditions permit, provided the decision is bona fide and in public interest.
• Judicial review in tender matters is restricted to examining mala fides, arbitrariness, or irrationality, not the soundness of the decision.
• The government, as guardian of public finances, can cancel and re-tender to maximize competition and financial benefits, absent any fundamental right to contract with the state.

Obiter Dicta

• The High Court’s observation that re-tendering for lower rates leads to an “unending tender process” was contrary to settled law, as the state can prioritize financial interests.
• Administrative rules, like those in the Kerala Forest Code, are executive instructions, not statutory, and do not confer vested rights to registration renewal.

Precedents Relied Upon

• Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517: Defined limited scope of judicial review in tenders.
• Tata Cellular vs. Union of India (1994) 6 SCC 651: Emphasized judicial restraint and administrative discretion in contracts.
• State of Orissa vs. Harinarayan Jaiswal (AIR 1972 SC 1816): Upheld government’s authority to protect financial interests in auctions.
• M/s Michigan Rubber (I) Ltd. vs. State of Karnataka (2012) 8 SCC 216: Affirmed state’s latitude in tender conditions unless malicious.

Significance

This judgment reinforces the principle of minimal judicial interference in government contracts, prioritizing administrative discretion and public interest. It clarifies that tender cancellations, even after bid openings, are permissible if supported by tender conditions and lack mala fides, especially in extraordinary circumstances like Covid-19 restrictions.

Multiple Choice Questions (MCQs)

1. What was the primary reason given by the Divisional Forest Officer (DFO) for cancelling the e-tender notification dated 25.05.2020?
   a) Lack of sufficient bidders
   b) Complaints from contractors about Covid-19 transportation restrictions
   c) Allegations of mala fides in the tender process
   d) Higher bids than expected
   Answer: b) Complaints from contractors about Covid-19 transportation restrictions
2. Which clause(s) in the tender notice allowed the DFO to cancel the e-tender without assigning reasons?
   a) Clause 1 and Clause 10
   b) Clause 3 and Clause 27
   c) Clause 5 and Clause 15
   d) Clause 20 and Clause 25
   Answer: b) Clause 3 and Clause 27
3. What was the Supreme Court’s primary reason for setting aside the High Court’s judgment?
   a) The High Court lacked jurisdiction to hear writ appeals
   b) The High Court failed to find mala fides or arbitrariness in the DFO’s decision
   c) The respondents did not file a counter affidavit
   d) The tender was already awarded to a third party
   Answer: b) The High Court failed to find mala fides or arbitrariness in the DFO’s decision
4. Which precedent did the Supreme Court heavily rely on to define the scope of judicial review in tender matters?
   a) State of Orissa vs. Harinarayan Jaiswal (AIR 1972 SC 1816)
   b) Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517
   c) M/s Michigan Rubber (I) Ltd. vs. State of Karnataka (2012) 8 SCC 216
   d) Tata Cellular vs. Union of India (1994) 6 SCC 651
   Answer: b) Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517
5. According to the Supreme Court, what is the role of the government in managing tenders?
   a) To ensure all bidders are awarded contracts
   b) To protect the financial interests of the state
   c) To avoid judicial review at all costs
   d) To prioritize the lowest bidder regardless of circumstances
   Answer: b) To protect the financial interests of the state
6. What did the Supreme Court say about the respondents’ participation in the re-tender process?
   a) They were barred from participating
   b) They were not prejudiced as they could participate
   c) They were guaranteed the contract
   d) Their bids were automatically accepted
   Answer: b) They were not prejudiced as they could participate
7. What was the High Court’s reasoning for setting aside the circular dated 29.02.2020?
   a) It was statutory and violated fundamental rights
   b) It imposed new conditions after the application deadline, violating Article 14
   c) It was issued without public consultation
   d) It favored certain contractors
   Answer: b) It imposed new conditions after the application deadline, violating Article 14
8. What principle did the Supreme Court emphasize regarding judicial review in contractual matters?
   a) Courts should substitute their own decisions for administrative ones
   b) Courts should only intervene in cases of mala fides, arbitrariness, or irrationality
   c) Courts should ensure all tenders are awarded to the lowest bidder
   d) Courts should prioritize private interests over public interests
   Answer: b) Courts should only intervene in cases of mala fides, arbitrariness, or irrationality

Frequently Asked Questions (FAQs)

1. What was the main issue in the case of Principal Chief Conservator of Forest & Ors. vs. Suresh Mathew & Ors.?
   The main issue was whether the Divisional Forest Officer’s cancellation of an e-tender notification dated 25.05.2020 and subsequent re-tendering was arbitrary or illegal. Additionally, the case addressed the validity of a circular denying renewal of A-class contractor registration and the scope of judicial review in tender matters.
2. Why did the Divisional Forest Officer cancel the original e-tender?
   The DFO cancelled the e-tender due to complaints from contractors who could not participate because of transportation restrictions imposed during the Covid-19 pandemic. The decision aimed to ensure broader participation and fairness.
3. What was the High Court’s ruling, and why did the Supreme Court overturn it?
   The High Court of Kerala set aside the e-tender cancellation and the circular on contractor registration, finding them arbitrary. The Supreme Court overturned this, holding that the DFO’s decision was bona fide, supported by tender clauses allowing cancellation without reasons, and not arbitrary or mala fide. The High Court’s interference exceeded the limited scope of judicial review in contractual matters.
4. What legal principles did the Supreme Court apply regarding judicial review in tenders?
   The Court applied principles from Jagdish Mandal vs. State of Orissa and Tata Cellular vs. Union of India, stating that judicial review is limited to examining mala fides, arbitrariness, or irrationality. Courts cannot substitute their judgment for the administrative authority’s unless the decision is unlawful or against public interest.
5. Did the respondents have a fundamental right to participate in the tender or renew their registration?
   No, the Supreme Court clarified that there is no fundamental or statutory right to participate in government tenders or renew contractor registration. The government has discretion to set conditions for tenders and registration, as long as they are reasonable and not arbitrary.
6. How did the Supreme Court address the impact of Covid-19 restrictions in this case?
   The Court accepted the DFO’s reasoning that Covid-19 transportation restrictions prevented some contractors from participating, justifying the cancellation to ensure fair competition. The Court found no evidence to contradict this, dismissing the High Court’s view that the restrictions were irrelevant.
7. What role did the tender clauses play in the Supreme Court’s decision?
   Clauses 3 and 27 of the tender notice, which reserved the right to cancel bids without assigning reasons, were pivotal. The Court held that these clauses gave the DFO legal authority to cancel the e-tender, and the decision was not arbitrary since it aimed to benefit the public interest.
8. What was the significance of this judgment for government contracts?
   The judgment reinforced the government’s discretion in managing tenders and contracts, emphasizing minimal judicial interference unless there is clear evidence of mala fides or irrationality. It underscored the state’s role in protecting financial interests and ensuring fair competition, particularly in exceptional circumstances like a pandemic.