RAUNAQ INTERN A TI ON AL LTD.

A
v.
1.V.R. CONSTRUCTION LTD. AND ORS .

..... DECEMBER 9, 1998

[MRS. SUJATA V. MANOHAR AND B.N. KIRPAL, JJ.] B

1" . Constitution of India, 1950:

Article 226-lnterim stay in writ petition-Grant of-Power Project-

Tenders-Award of Contract to a party whose offer was lowest by relaxing C
the qualijj;ing criteria- Challenge by rival party, not fulfilling the qualijj;ing
criteria-No allegation of malafides or collateral reasons in awarding
contract-Grant of interim stay by High Court-Validity of-Held, High
Court not justified in granting interim stay-Court should not interfere
unless there is overwhelming public interest involved or the contract is D
entered into for malafide or collateral reasons-Relaxation if granted for
bonafide reasons within the permissible limits of tender contracts, Courts
should hesitate to intervene-Award of contract cannot be stayed at the
instance of a party who does not faljil the requisite criteria and whose offer
is higher-Party obtaining interim orders must be made accountable for the
consequences and liable to compensate the public. E

Articles 226 and 32-Public Interest Litigation-Scope and object of

The Maharashtra State Electricity Board issued a Tender for design,

engineering, manufacture, supply, erection and commissioning of large
diameter piping system for its power project. In response, the Board received F
tenders from several bidders including those of appellant and respondent
companies. After screening, the Technical Director of the Board submitted
a note for consideration of the Board of Directors stating that out of the
offers received, four tenderers qualified as per the qualifying criteria, which
included the respondent company. Two offerers including the appellant though G
not meeting the qualifying requirements had dbne CW piping for 210 MW
units. The respondent company though recommended by Technical Director
fell short of the requisite experience by one year. The note also stated that
the offer of appellant was Lowest .. The Board of Directors after considering
the above note decided to accept the offer of appellant company and awarded
421 H
 422 SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

A contract to it. On challenge, the High Court by interim order stayed the
award of contract to the appellant. Hence the present appeals.

B
Allowing the appeals, this Court

HELD : 1. Court should not interfere under Article 226 of the

Constitution in dispute between two rival tenderers unless it is satisfied that
-
there is a substantial amount of public interest involved or the contract is
entered iiito for malafide or collateral reasons. In the instant case there is
neither an overwhelming public interest in stopping the project nor there is
any allegation of any malafides against any member of the Board . Thus, the
C High Court was not justified in granting interim order of stay.
[428-A; 434-B) •
2. The relaxation which the Board has granted to appellant is on valid
principles looking to the expertise of the tenderer and his past experience.
The respondent has challenged the contract only on the ground that the
D appellant did not fulfil the qualifying criterion. But the challenger also does
not fulfil the qualifying criterion. Therefore, any judicial relief at the instance
of a party which does not fulfil the requisite criteria seems to be misplaced.
Even if criteria can be relaxed for both, it is clear that the offer of appellant
is lower and it is on this ground that the Board has accepted the offer of
appellant. Thus, the award of tender cannot be stayed at the instance of a
E party w!iich does not fulfil the requisite criteria itself and whose offer is
higher than the offer which has been accepted. (433-F-H; 434-A)

3. Where there is an allegation of malafides or an allegation that the

contract has been entered into for collateral purposes, and the court is
satisfied on the material before it, that the allegation. needs further
F examination, the court would be entitled to entertain the petition. But even
here, the court must weigh the consequences in balance before granting
interim orders. Where the decision-making process has been structured
and the tender conditions set out the requirements, the court is entitled to
examine whether these requirements have been considered. However, if any
G relaxation is granted for bonafide reasons, the tender conditions permit
such relaxation and the d~cision is arrived at for legitimate reasons after
a fair consideration of all offers, the court should hesitate to intervene.
[428-H; 429-A-B)

Ramana Dayaram Shetty v. International Airport Authority of India

H and Ors., [1979) SCC 489 and Premium Granites and Anr. v. State of TN.
 RAUNAQ INTERNATIONAL LTD. v. I.V.R. CONST. LTD. 423

and Ors., (1994] 2 SCC 691, held inapplicable. A

4. When a petition is filed as a public interest litigation challenging
the award of a contract by the State or any public body to a particular
,, tenderer, the court must satisfy itself that the party which has brought the
litigation is litigating honafide for public good. The public interest litigation
should not be merely a cloak for attaining private ends of a third party or B
of the party bringing the petition. The court can examine the previous record
4 , of public service rendered by the organisation bringing public interest
litigation. Even when a public interest litigation is entertained the court
must be careful to weigh conflicting public interests before intervening.
Intervention by the court may ultimately result in delay in the execution of C
the project. The obvious consequence of such delay is price escalation. If any
re-tendering is prescribed, cost of the project can escalate substantially.
What is more important, ultimately the public would have to pay a much
higher price in the form of delay in the commissioning of the project and
the consequent delay in the contemplated public service becoming available
to the public. Where the decision has been taken bonafide and a choice has D
been exercised on legitimate consideration and not arbitrarily, there is no
reason why the court should entertain a petition under Article 226. Hence
before entertaining a writ petition and passing any i.1terim orders in such
petitions, the court must carefully weigh conflicting public interests. Only
when it comes to a conclusion that there is an overwhelming public interest E
in entertaining the petition, the court should intervene. (428-B-F; G]

Fertiliser Corporation Kamgar Union (Regd.). Sindri and Ors. v. Union

of India and Or~.. (1981] 1 SCC 568; Tata Cellular v. Union of India, (1994]
6 SCC 651; Delhi Science Forum and Ors. v. Union of India and Anr.,
[1996] 2 SCC 405; New Horizons Limited and Anr. v. Union of India and F
Ors., [1995] l SCC 478 and Asia Foundation & Construction Ltd. v. Trafalgar
House Construction (I) Ltd. and Ors., 119971 l SCC 738, referred to.

5. The party at whose instance interim orders are obtained has to be

made accountable for the consequences of the interim order. The interim G
order could delay the project, jettison finely worked financial arrangements
and escalate co~ts. Hence the petitioner asking for interim orders, in
appropriate cases should be asked to _provide security for any increase in
cost as a result of such delay or any damages suffered by the opposite party
in consequence of an interim order, otherwise public detriment may outweigh
public benefit in granting such interim 01 ders. Stay order or injunction H
 424 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A order, if issued, must be moulded to provide for restitution. Therefore, when

such a Stay order is obtained at the instance of a private party or even at
the instance of a body litigating in public interest, any interim order which
stops the project from proceeding further, must provide for the reimbursement
of costs to the public in case ultimately the litigation started by such an
B individual or body fails. The public must be compensated both for the delay
!n implementation of the project and the cost escalation resulting from such
delay. Unless an adequate provision is made for this in the interim order, the
interim order may prove counter-productive. [430-B-C; 433-A-BJ

Assistant Collector of Central Excise, Chandan Nagar, West Bengal v.

C Dunlop India Ltd. and Ors., [1985) 2 SCR 190. and Ramniklal N. Bhutta and
Anr. v. State of Maharashtra and Ors., [19''Q J SCC 134, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4892 of
1998.

From the Judgment and Order dated 12.8.98 of the Bombay High Court
D in W.P. No. 1474of1998.

WITH

C.A. No. 4893of1998.

V.A. Mohta and S.B. Upadhyay for the Appellant in C.A. No. 4892/98.
E
T.R. Andhyarujina, Subrat Birla and A.S. Bhasme for the Appellant in
C.A. No. 4893/98.

Sudhir ·Chandra, P. Niroop and Pavan Kumar for the Respondent.

F The Judgment of the Court was delivered by

MRS. SUJAT A V. MANO HAR, J. The Maharashtra State Electricity

Board, the appellant in Civil Appeal No. 4893 of 1998 floated a tender dated
20.12.1997 for design, engineering, manufacture, supply, erection and
commissioning oflarge diameter pipes and steel tanks with all accessories and
G auxiliaries as prescribed in the bid documents for units 3 and 4 ofKhaperkheda
Thermal Power Station, Maharashtra, each unit being of 210 MW. The
qualifying requirements of bidders as specified in the tender were, that the
bidder should have designed fabricated/manufactured, supplied, erected and
successfully commissioned large diameter piping system comprising the supply
of M.S. pipes not less than 2000 mm diameter and laid/buried for a minimum
H total length of 3 kms. in a thermal power station and the same should be in
 RAUNAQ INTERNATIONAL LTD. v. I.V.R. CONST. LTD. [SUJATA V. MANOHAR, J.) 425

successful operation for the past two years as reckoned on the date set for A
opening of the bid. Further, the bidder should have minimum turnover of Rs.
7.5 crores per annum for the last 3 consecutive years.

Under clause I .4 of the qualifying criteria, it was provided :

'Notwithstanding anything stated above the Owner reserves the right B

to assess the Bidders' capability and capacity to perfonn, should the

-· circumstances warrant such an assessment in the overall interest of

the owner.'

Pursuant to the invitation, the appellant-Maharashtra State Electricity Board

received tenders from eleven bidders including Mis. IVR Construction Ltd. C
and Mis Raunaq International Ltd., who are the two contestants before us.
After screening of the bids a note was submitted by the Technical Director
of the Maharashtra State Electricity Board for the consideration of the Board
of Directors. The note stated that out of the offers received, four offers were
from tenderers who qualified as per the qualifying criteria Mis IVR Construction D
Ltd., Hyderabad was stated to be one of the four such offerers. The note also
mentioned that two offerers which included Mis Raunaq International Ltd.,
though not meeting the qualifying requirements, had done CW piping for 2 I 0
MW units. Mis IVR Construction Ltd. were recommended by the Technical
Director for the placement of the order. The said company, however, fell, short
of the requisite experience by one year. The note also stated that the offer E
of Mis Raunaq International Ltd. was the most competitive, being Rs. 43,28,316
less than the price quoted by Mis IVR Construction Ltd.

In this connection, it is pointed out by the Maharashtra State Electricity

Board that Mis Raunaq International Ltd. have designed, fabricated and
commissioned M.S. pipes of2000 mm diameter buried underground but for a F
distance less than 3 kms. They also have the requisite experience of doing
such work for thermal power units of 210 MWs .. They have more than 2
years' experience in this work.

The Board of Directors of the Maharashtra State Electricity Board, at its G

meeting held on 29.6.1998, after considering the note submitted by the Technical
Director, decided to accept the offer of Mis Raunaq International Ltd. in view
of the price advantage to the Board and adequate experience of Mis Raunaq
International Ltd. of having completed similar type of work for 2 I 0 MW units.
The offer of Mis Raunaq International Ltd. was accordingly accepted and the
tender was awarded to it. H
 426 SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A Mis IVR Construction Ltd. challenged the decision of the Board in a

writ petition filed in the High Court of Bombay. The High Court has passed
the impugned interim order under which the High Court stayed the operation
of the Letter of Intent dated 20th of July, 1998 issued to Mis Raunaq
International Ltd. Hence the present appeal.

B In these proceedings the Maharashtra State Electricity Board has filed

an affidavit of its Technical Director. It is stated in this affidavit that the offer
of Mis Raunaq International Ltd. was accepted on account of the price . 11
advantage to the Board, its offer being the lowest; and also in view of the
adequate experience which Mis Raunaq International Ltd. possessed, having
C completed similar work in other 210 MW thermal power stations. This was
done by relaxing the qualifying criterion which the Board said, it had the right
to do, in view of clause 1.4 set out above. The Maharashtra State Electricity
Board has also pointed out that Mis IVR Construction Ltd. also do not satisfy
all the qualifying criteria because they do not have two years experience of
such work which is prescribed under the qualifying criteria. Their total
D experien~~ is of less than a year.

Therefore, looking to the fact that relaxation of criteria would have been I
required in respect of Mis IVR Construction Ltd. also and in view of the fact
that the offer of Mis Raunaq International Ltd. is the lowest, if the Board has ~
accepted the offer of Mis Raunaq International Ltd. after weighing their
E requirements against the qualifications of the two competing bidders, we fail
to see how the High Court could have intervened and stayed the operation
of the award of contract to Mis Raunaq International Ltd.

This is not a case where any mala fides have been alleged against any
F member of the Board. Nor is there any allegation of any collateral motive for
awarding the contract to Mis Raunaq International Ltd. The only ground of
challenge in the writ petition filed by Mis IVR Construction Ltd. is that
Mis. Raunaq International did not fulfil the qualifying criterion of having laid
such pipeline for a distance of 3 kms. But the challenger- Mis IVR Construction
Ltd. also does not fulfil the qualifying criterion. In these circumstances, we
G fail to see any basis for passing the impugned order.

TI1e award of a contract, whether it is by a private party or by a public

..
body or the State, is essentially a commercial transaction. In arriving at a
commercial decision considerations which are of paramount importance are
commercial considerations. These would be:(!) The price at which the other
H side is willing to do the work; (2) Whether the goods or services offered are
RAUNAQ INTERNATIONAL LTD. v. I. V.R. CONST.LTD. [SUJATA V. MANOHAR, J.] 427
of the requisite specifications; (3) Whether the person tendering has the A
ability to deliver the goods or services as per specifications. When large
works contracts involving engagement of substantial manpower or requiring
specific skills are to be offered, the financial ability of the tenderer to fulfil
the requirements of the job is also important; (4) the ability of the tenderer
to deliver goods or services or to do the work of the requisite standard and
quality; (5) past experience of the tenderer, and whether he has successfully B
completed similar work earlier; (6) time which will be taken to deliver the
goods or services; and often (7) the ability of the tenderer to take follow up
action, rectify defects or to give post contract services. Even when the State
or a public body enters into a commercial transaction, considerations which
would prevail in its decision to award the contract to a given party would be C
the same. However, because the State or a public body or an agency of the
State enters into such a contract, there could be, in a given case, an element
of public law or public interest involved even in such a commercial transaction.

What are these elements of public interest? (I) Public money would be
expended for the purposes of the contract; (2) The goods or services which D
are being commissioned could be for a public purpose; such as, construction
ofroads, public buildings, power plants or other public utilities. (3) The public
would be directly interested in the timely fulfilment of the contract so that
the services become available to the public expeditiously. (4) The public
would also be interested in the quality of the work undertaken or goods E
supplied by the tenderer. Poor quality of work or goods can lead to tremendous
public hardship and substantial financial outlay either in correcting mistakes
or in rectifying defects or even at times in re-doing the entire work - thus
involving larger outlays or public money and delaying the availability of
services, facilities or goods. e.g. A delay in commissioning a power project,
as in the present case, could lead to power shortages, retardation of industrial F
development, hardship to the general public and substantial cost escalation.

When a writ petition is filed in the High court challenging the award of
a contract by a public authority or the State, the court must be satisfied that
there is some element of public interest involved in entertaining such a G
petition. If, for example, the dispute is purely between two tenderers, the court
must be very careful to see if there is any element of public interest involved
in the litigation. A mere difference in the prices offered by the two tenderers
may or may not be decisive in deciding whether any public interest is involved
in intervening in ~uch a commercial transaction. It is important to bear in mind
that by court intervention, the proposed project may be considerably delayed H
 428 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A thus escalating the cost far more than any saving which the court would
ultimately effect in public money by deciding the dispute in favour of one
tenderer or the other tenderer. Therefore, unless the court is satisfied that
there is a substantial amount of public interest, or the transaction is entered
into ma/a fide, the court should not intervene under Article 226 in disputes
between two rival tenderers.
B
When a petition is filed as a public interest litigation challenging the
award of a contract by the State or any public body to a particular tenderer,
the court must satisfy itself that party which has brought the litigation is
litigating bona fide for public good. The public interest litigation should not
C be merely a cloak for attaining private ends of a third party or of the party
bringing the petition. The court can examine the previous record of public
service rendered by the organisation bringing public interest litigation. Even
when a public interest litigation is entertained the court must be careful to
weigh conflicting public interests before intervening. Intervention by the
court may ultimately result in delay in the execution of the project. The
D obviou: consequence of such delay is price escalation. If any re-tendering
is prescribed, cost of the project can escalate substantially. What is more
important, ultimately the public would have to pay a much higher price in the
form of delay in the commissioning of the project and the consequent delay
in the contemplated public service becoming available to the public. If it is
E a power project which is thus delayed, the public may lose substantially
because of shortage in electric supply and the consequent obstruction in
industrial development. If the project is for the construction of a road, or an
irrigation canal, the delay in transportation facility becoming available or the
qelay in water supply for agriculture being available, can be a substantial set
back to the country's economic development. Where the decision has been
F taken bona fide and a choice has been exercised on legitimate considerations
and not arbitrarily; there is no reason why the court should entertain a petition
under Article 226.

Hence before entertaining a writ petition and passing any interim orders
G in such petitions, the court must carefully weigh conflicting public interests.
Only when it comes to a conclusion that there is an overwhelming public
interest in entertaining the petition, the court should intervene.

Where there is an allegation of ma/a fides or an allegation that the

contract has been entered into for collateral purposes, and the court is
H satisfied on the material before it, that the allegation needs further examination,
RAUNAQ INTERN ATI ON AL LTD. v. I. V.R. CONST.LTD. [SUJA TA V. MANOHAR, J.] 429
the court would be entitled to entertain the petition. But even here, the court A
must weigh the consequences in balance before granting interim ord'!rs.

Where the decision-making process has been structured and the tender
conditions set out the requirements, the court is entitled to examine whether
these requirements have been considered. However, if any relaxation is granted
for bona fide reasons, the tender conditions permit such relaxation and the B
decisions is arrived at for legitimate reasons after a fair consideration of all
offers, the court should hesitate to intervene.

It is also necessary to remember that price may not always be the sole
criterion for awarding a contract. Often When an evaluation committee of C
experts is appointed to evaluate offers, the expert committee's special
knowledge plays a decisive role in deciding which is the best ·offer. Price
offered is only one of the criteria. The past record of the tenderers, the
quality of the goods or services which are offered, assessing such quality on
the basis of the past performance of the tenderer, its market reputation and
so on, all play an important role in deciding to whom the contract should be D
awarded. At times, a higher price for a much better quality of work, can be
legitimately paid in order to secure proper performance of the contract and
good quality of work-which is as much in public interest as a low price. The
court should not substitute its own decision for the decision of an expert
evaluation committee.
E
Normally before such a project is undertaken, a detailed consideration
of the need, viability, financing and cost, effectiveness of the proposed
project and offers received takes place at various levels in the Government.
If there is a good reason why the project should not be undertaken, then the
time to object is at the time when the same is under consideration and before F
a final decision is taken to undertake the project. If breach of law in the
execution of the project is apprehended, then it is at the stage when the
viability of the proj\:ct is being considered that the objection before the
appropriate authorities including the Court must be raised. We would expect
that if such objection or material is placed before the Government the same G
would be considered before a final decision is taken. It is common experience
that considerable time is spent by the authorities concerned before a final
decision is taken regarding the execution of a public project. This is the
appropriate time when all aspects and all objections should be considered. It
is only when valid objections are not taken into account or ignored that the
court may intervene. Even so, the Court should be moved at the earliest H
 430 SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

A possible opportunity. Belated petitions should not be entertained.

The same considerations must weigh with the court when interim orders
are passed in such petitions. The party at whose instance interim orders are
obtained has to be made accountable for the consequences of the interim
order. The interim order could delay the project, jettison finely worked financial
B arrangements and escalate costs. Hence the petitioner asking for interim
orders, in appropriate cases should be asked to provide security for any
increase in cost as a result of such delay, or any damages suffered by the
opposite party in consequence of an interim order. Otherwise public detriment
may outweigh public benefit in granting such interim orders. Stay order or
C injunction order, if issued, must be moulded to provide for restitution.

A somewhat different approach may be required in the cases of award

of a contract by the Government for the purchase of times for its use. Judicial
review would be permissible only on the established grounds for such review
including ma/a fides, arbitrariness or unreasonableness of the Wendensbury
D variety. Balance of convenience would play a major role in moulding interim
relief.

There is a third variety of transactions entered into by the Government

which come up for consideration before the courts. This is where the
Government grants licences or permissions for a fee or consideration to
E private parties, enabling them to commercially exploit such a licence or
permission. The principles of judicial review are r.o different in such a case.
However, grant of stay or injunction in such cases may or may not result in
prejudice to the public revenue, depending on the facts of the case. At times
granting of a licence or permission may cause public harm e.g. in the case of
F damage to the ecology. Interim orders will have to be mouled in such cases
on a consideration of all relevant factors, providing for restitution where
required in public interest.

It is unfortunate that despite repeated observations of this court in a

number of cases, such petitions are being readily entertained by the High
G Courts without weighing the consequences. In the case of Fertiliser
Corporation Kamgar Union (Regd), Sindri and Ors. v. Union of India and
Ors., [1981] 1 SCC 568, this court observed that ifthe Government acts fairly,
though falters in wisdom, the court should not interfere. "A pragmatic approach
to social justice compels us to interpret constitutional provisions, including
tho::e like Articles 32 and 226, with a view to see that effective policing of
H the :orridors of power is carried out by the court until other ombudsman
 RAUNAQINTERNATIONAL LTD. v. I.V.R. CONST. LTD. [SUJATA V. MANOHAR,J.] 431
arrangement ............... emerges............... The court cannot usurp or abdicate, A
and the parameters of judicial review must be clearly defined and never
exceeded. If the Directorate of a Government company has acted fairly, even
if it has faltered in its wisdom, the court cannot, as a super auditor, take the
Board of Directors to task. This function is limited to testing whether the
administrative action has been fair and free from the taint of unreasonableness
and has substantially complied with norms of procedure set for it by rules of B
public administration."

In Tata Cellular v. Union of India, [1994] 6 SCC 651, this Court again
examined the scope of judicial review in the case of a tender awarded by a
public authority for carrying out certain work. This Court acknowledged that C
the principles of judicial review can apply to the exercise of contractual
powers by Government bodies in order to prevent arbitrariness or favouritism.
However, there are inherent limitations in the exercise of that power of judicial
review. The Court also observed that the right to choose cannot be considered
as an arbitrary power. Of course, if this power is exercised for any collateral
purpose, the exercise of that power will be struck down. "Judicial quest in D
administrative matters has been to find the right balance between the
administrative discretion to decide matters and the need to remedy any
unfairness. Such an unfairness is set right by judicial review." After examining
a number of authorities, the Court concluded (at page 687) as follows :-

(1) The modern trend points to judicial restraint in administrative action. E

(2) The court does not sit as a court of appeal but merely reviews the
manner in which the decision was made.

(3) The court does not have the expertise to correct the administrative F
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.

(4) The terms of the invitation to tender cannot be open to judicial

scrutiny because the invitation to tender is in the realm of contract. G
(5) 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 or quasi-administrative sphere. However, the
decision can be tested by the application of the "Wednesbury principle" of
reasonableness and the decision should be free from arbitrariness, not affected H

'
\
 432 SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

_,A by bias or actuated by ma/a jides.

(6) Quashing decisions may impose heavy administrative burden on the
administration and lead to increased and unbudgeted expenditure.

The same view has been reiterated in Asia Foundation & Construction
B Ltd. v. Trafalgar House Construction (I) Ltd and Ors., (1997] l SCC 738, the
court observing that judicial review of contractual transactions by Government
bodies is permissible to prevent arbitrariness, favouritism or use of power for
collateral purposes. This Court added a further dimension to the undesirability
of intervention by pointing out that where the project is a high cost project
C for which loans from the World Bank or other international bodies have been
obtained after following the specjfications and procedure of such a body, it
would be detrimental to public interest to interfere. The same principles have
been also reaffirmed in New Horizons Limited and Anr. v. Union ofIndia and
Ors., (1995] 1 SCC 478 with this Court again emphasising the need to allow
for certain flexibility in administrative decision-making, observing that the
D decision can be challenged only on the Wednesbury principle of
unreasonableness i.e. unless the decision is so unreasonable that no sensible
person would have arrived at such a decision, it should not be upset. In Delhi
Science Forum and Ors. v. Union of India and Anr., [ 1996] 2 SCC 405, this
Court once again observed that if a reasonable procedure has been followed,
E the decision should not be challenged except on the Wednesbury principle
of unreasonableness.

Dealing with interim orders, this Court observed in Assistant Collector

of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd and
Ors., (1985] 2 SCR 190 at page 196 that an interim order should not be granted
F without considering balance of convenience, the public interest involved and
the financial impact of an interim order. Similarly, in Ramniklal N. Bhutta and
Anr. v. State of Maharashtra and Ors., [1997] 1SCC134, the Court said that
while granting a Stay the court should arrive at a proper balancing of competing
interests and grant a Stay only when there is an overwhelming public interest
G in granting it, as against the public detriment which may be caused by
granting a Stay. Therefore, in granting an Injunction or Stay order against the )

award of a contract by the Government or a Government agency, the court

has to satisfy itself that the public interest in holding up the project far out-
weighs the public interest in carrying it out within a reasonable time. The
court must also take into account the cost involved in staying the project and
H whether the public would stand to benefit by incurring such cost.
 RAUNAQ INTERNATIONAL LTD. v. I.V.R. CONST. LTD. [SUJATA V. MANOHAR, J.] 433
Therefore, when such a Stay order is obtained at the instance of a A
private party or even at the instance of a body litigating in public interest,
any interim order which stops the project from proceeding further, must
provide for the reimbursement of costs to the public in case ultimately the
litigation started by such an individual or body fails. The public must be
compensated both for the delay in implementation of the project and the cost B
escalation resulting from such delay. Unless an adequate provision is made
for this in the interim order, the interim order may prove counter-productive.

In the present case it was submitted that the terms and conditions of
the tender specified the requisite qualifying criteria before a person could
offer a tender. The criteria which were so laid down could not have been C
relaxed because such a relaxation results in a denial of opportunity to others.
In support, the respondents relied upon Ramana Dayaram Shetty v.
International Airport Authority of India and Ors., [1997] 3 SCC 489. In that
case the Court had held judicial review as a check on the exercise of arbitrary
powers by the State and as a check on its power to grant largess. The Court
also observed that when the exercise of discretion is structured in terms of D
the tenders which have been invited the discretion must be exercised in
accordance with the norms so laid down. The same view has been taken by
this Court in Premium Granites and Anr. v. State of T.N. and Ors., [1994] 2
SCC 691, where this Court observed that where rational non-discriminatory
norms have been laid down for granting of tenders, a departure from such E
norms can only be made on valid principles. These principles enunciated by
this Court are unexceptional.

In the present case, however, the relaxation was permissible under the
terms of the tender. The relaxation which the Board has granted to Mis
Raunaq International Ltd. is on valid principles looking to the expertise of the F
tenderer and his past experience although it does not exactly tally with the
prescribed criteria. What is more relevant, M/s IVR Construction Ltd. who
have challenged this award of tender themselves do not fulfil the requisite
criteria. They do not possess the prescribed experience qualification. Therefore,
any judicial relief at the instance of a party which does not fulfil the requisite G
criteria, seems to be misplaced. Even if criteria can be relaxed both for M/s
Raunaq International Ltd. and M/s IVR Construction Ltd., it is clear that the
offer of M/s Raunaq International Ltd. is lower and it is on this ground that
the Board has accepted the offer of M/s Raunaq International Ltd. We fail to
see how the award of tender can be stayed at the instance of a party which
does not fulfil the requisite criteria itself and whose offer is higher than the H
 434 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A offer ·Which has been accepted. It is also obvious that by stopping the
performar.ce of the contract so awarded, there is a major detriment to the
public because the construction of two thermal power units, each of 210
MWs., is held up on account of this dispute. Shortages of power have
become notorious. They also seriously affect industrial development and the
B resulting job opportunities for a large number of people. In the present case
there is no overwhelming public interest in stopping the project. There is no
allegation whatsoever of any ma/a jides or collateral reasons for granting the
contract to Mis. Raunaq International Ltd.

In our view the High Court has seriously erred in granting the interim
C order. The appeals are, therefore, allowed and the impugned order is set aside.
Mis IVR Construction Ltd. shall pay to the appellants herein the costs of the
appeals.

S.V.K. Appeals allowed.