Memorial on behalf of respondent

 No obligation to accept tender or lowest tender

A party inviting tender is not bound to accept any tender ,nor it is bound to accept the lowest
tender.

There is no liability on government for not accepting any tender.

 A clause of such Gazette Notification is as follows:

“Normally, the lowest quotation or tender as the case may be, for the work, material
or service indented for shall be accepted. However, on evaluation of antecedents
and past records of the organisation concerned, its experience, standard and quality
of earlier job performed, financial status of the tenderer, quality and specification of
the materials or service offered and reasonability of rates quoted, even the lowest
tender (or any other tender) may be rejected and the lowest along the available
tenders may be accepted. However, this must necessarily be accompanied by
written notes explaining in clear terms why certain tenders are rejected — specially if
the lowest one is rejected and why some other tender is accepted. Such a note must
be signed by the members of the Tender Committee”.
Dipak Kumar Sarkar vs state of west bengal
 Dipak Kumar Sarkar v. State of W.B., 2003 SCC OnLine C Dipak Kumar Sarkar v. State of W.B., 2003 SCC
OnLine C✔ Dipak Kumar Sarkar v. State of W.B., 2003 SCC OnLine Cal 586 : AIR 2004 Cal 182 : (2004)
3The law relating to award of contract by the State and public sector corporations was
reviewed in Air India Ltd. v. Cochin International Airport Ltd.4 and it was held that the
award of a contract, whether by a private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at a decision and it is free to grant any
relaxation for bona fide reasons, if the tender conditions permit such a relaxation. 
ION Exchange Waterleau Ltd. vs. The Commissioner, Madurai Municipal Corporation,
Madurai) "
In the decision in Tata Cellular case, the Constitution Bench of the Supreme Court has
authoritatively held that the principle of judicial review in the matter of contract would
apply to the exercise of contractual powers by Government bodies in order to prevent
arbitrariness or favouritism. However, it must be clearly stated that there are inherent
limitations in exercise of that power of judicial review. The Government is the guardian of
the finances of the State. It is expected to protect the financial interest of the State and the
power to refuse the lowest or any other tender is always available to the Government. The
right to choose cannot be considered to be an arbitrary power. Of course, if the said power
is exercised for any collateral purpose, the exercise of that power will be struck down. In a
commercial transaction, the State can choose its own method to arrive at a decision and it
is free to grant any relaxation for bona fide reasons, provided the tender conditions permit
such a relaxation. Even when some defect is found in the decision-making process, the
Court has to necessarily exercise its discretionary powers under Article 226 with great
caution and should exercise it only in furtherance of public interest and not merely on the
making out of a legal point. The Court should always keep the larger public interest in mind
in order to decide whether its intervention is called for or not. Only when it comes to a
conclusion and is satisfied that overwhelming public interest requires interference, the
Court should interfere. Otherwise, the larger public interest will prevail upon the
individual's interest.

Risks related to choosing an abnormally low tender Awarding a contract to an economic operator that
offers an abnormally low tender is hazardous for the contracting authority (and in general for the public
interest) for a number of reasons, as follows. Default risk: An abnormally low tender entails a risk of
default, particularly in the case of an economic operator that has misunderstood the complexity of the
procurement or has not taken into account all of the risks related to the delivery of the object of the
procurement. The result could be that the economic operator would be unable to fulfil the contract or
would even become insolvent. The contracting authority would then need to re-tender the services or
works that the economic operator has failed to deliver. The outcome would be lost time as well as
additional administration and costs incurred by the contracting authority. Additional charges or price
increases: An economic operator that was chosen on the basis of a very low tender might, in the course
of the execution of the contract, seek to charge the contracting authority for extra costs and request
increased remuneration. During the execution phase, the economic operator’s bargaining position is
often strong. For example, an economic operator may demand additional payments that were not
included in the contract

and threaten to opt out of the contract if the contracting authority does not agree to those additional
payments. Quality risk: Another risk is that the goods or services provided will be of a lower quality than
they should be according to the terms of the contract. For example, an economic operator that had
proposed a very low tender could try to cheat the contracting authority by replacing materials of high
quality with less expensive substitutes or by not performing all of the required services. Avoidance of
social, labour and environmental obligations: With an abnormally low tender there is also a risk that
binding social, labour and environmental regulations will not be correctly applied. For example, the
economic operator will try to avoid paying due taxes, minimum wages or social charges. In consequence,
the market will be distorted and honest, law-abiding companies will be discouraged from applying for
public contracts. In the long term, competition is lowered, as a smaller number of firms take part in
procurement procedures, and in turn, prices are inflated.
n permanent debarment from future contracts for all times to come would be too harsh and heavy 

In the landmark judgment of Eurasian Equipment & Chemicals Ltd. vs State of West Bengal 
The State Government further submitted that the rights granted under Articles 14, 19 and 21 of
the Constitution cannot be used to compel the Government to negotiate or enter into a contract
and the Government was free to contract with companies in whom it had “trust for integrity”. 

Referring to the BMC stand, a full bench of Chief Justice Mohit Shah, Justice Ranjit More
and Justice A A Sayed said, "While awarding contracts for construction of roads, the
municipal corporation has been proceeding on the erroneous basis that a public authority
has no option but accept the lowest bid, even if the bid is 20-25 per cent less than the
estimated cost of the project."

The judges referred to section 72 (2) of the Mumbai Municipal Corporation Act, which
states, "The Commissioner shall not be bound to accept any tender, which may be made in
pursuance of such notice, but may accept...any of the tenders so made which appears to
him, upon a view of all the circumstances, to be the most advantageous."

The court in its order said, "It appears to us that the municipal corporation is entitled and
empowered to reject a bid, which may be the lowest, for awarding a contract, if the bidder
with the lowest bid is not able to satisfy the municipal corporation about its ability and
competence to execute work of the required quality and standards."

The judges said the corporation can look into the past performance of a contractor both in
terms of quality of work and the time taken to complete it.