Unreasonable Tender Conditions – High Court Invalidates Nashik Municipal Corporation’s Qualification Requirements for Sweeping and Cleaning Services

Constitution of India, 1950 – Article 14: Ensures fairness in government contracts, prohibiting arbitrary and discriminatory actions by public authorities. Central Vigilance Commission (CVC) Guidelines: Establishes procurement norms mandating fair, transparent, and rational criteria in government tenders. Manual for Procurement of Consultancy and Other Services, Ministry of Finance: Prescribes a three-year experience requirement and financial capacity proportional to contract value for bidders. (Para 16-20)

Tender conditions must align with established procurement norms – Any deviation must be rationally justified. Arbitrary or discriminatory eligibility criteria violate Article 14 and cannot be upheld under judicial review. Financial conditions must be proportionate to the contract value and should not unfairly restrict competition. (Para 15-20)

The Court held that the one-year experience clause was arbitrary, as CVC guidelines require three years. The ₹100 Crore net worth requirement was excessive, given the ₹176 Crore project cost over five years. The Kumbh Mela justification was unsupported by tender documents, and the Corporation itself planned a separate tender for that event. Tender conditions were struck down, and the Corporation was directed to reframe eligibility criteria as per CVC guidelines. (Para 21-23)

Acts and Sections Discussed:

• Constitution of India, 1950 – Article 14 (Right to Equality)
• Central Vigilance Commission (CVC) Guidelines – Procurement norms and qualification criteria
• Manual for Procurement of Consultancy and Other Services, Ministry of Finance – Qualification and financial criteria for bidders

Subjects:

Judicial Review – Tender Conditions – Arbitrariness – Discriminatory Criteria – Net Worth Requirement – Experience Clause – Public Procurement – Wednesbury Principle – Legitimate Expectation

Facts:

a) The petitioner, M/s. Watergrace Products, engaged in solid waste management and biomedical waste management, challenged Nashik Municipal Corporation’s tender conditions for sweeping and cleaning services.
b) The impugned tender conditions included: (Para 1-7)

• Clause 3.2.2 – Required only one year of experience in manual sweeping projects instead of the standard three years as per CVC guidelines.
• Clause 3.4.2 – Mandated a minimum net worth of ₹100 Crores as of 31st March 2024, disproportionate to the estimated ₹176 Crore contract over five years.
  c) The petitioner argued that these conditions were arbitrary, favoring large financial entities over experienced firms.
  d) The Corporation justified the conditions, citing long-term contract requirements and the upcoming Kumbh Mela (2027), which would increase sanitation demands.

Issues: (Para 8-10)

1. Whether the reduced experience requirement (one year instead of three years) and the ₹100 Crore net worth condition were arbitrary and violative of Article 14?
2. Whether the tender conditions adhered to CVC guidelines and procurement norms prescribed by the State and Central Government?

Submissions/Arguments:

• Petitioner: (Para 11-12)

  • The one-year experience clause was arbitrary, violating CVC norms, which require three years of relevant experience.
  • The ₹100 Crore net worth requirement was disproportionate to the contract value, creating an unjustified barrier for bidders.
  • Tender conditions should comply with procurement guidelines, ensuring fair competition.

• Respondent (Nashik Municipal Corporation): (Para 13-14)

  • The contract spans five years, requiring financially stable bidders.
  • The Kumbh Mela (2027) would increase sanitation responsibilities, necessitating a higher financial threshold.
  • Courts should not interfere in commercial tender decisions unless conditions are irrational.