Court Rules Against High Court's Directive: State Instrumentality Retains Contract Decision Authority

In a recent legal development, the Supreme Court has rejected the Rajasthan High Court’s directive to the Jaipur Vidyut Vitran Nigam Ltd, ordering it to enter into a power purchasing agreement with a specific party. The Supreme Court, composed of Justices BR Gavai and PS Narasimha, criticized the High Court’s decision, emphasizing that such mandates should be cautiously issued, considering public interest.

The case unfolded when the Respondent No. 1 submitted a bid to supply electricity at a tariff of Rs. 5.517 per unit. Despite being among the top seven bidders, the Bid Evaluation Committee deemed the prices quoted by L-4 and L-5 bidders unreasonably high, posing a significant financial burden on the state’s consumers. Consequently, the appellant decided against purchasing electricity from the respondent.

Following an interim order from the Supreme Court, the Respondent No. 1 sought relief from the Rajasthan High Court under Article 226, urging the issuance of a mandamus for the immediate issuance of a Letter of Intent and the signing of a power purchase agreement. The High Court granted the relief, prompting the appeal.

The Supreme Court, overturning the High Court’s decision, underscored that the state has the autonomy to determine its decision-making processes in matters like tender invitations. The court clarified that while judicial review is not applicable to the state’s decision, it can intervene if the decision-making process is tainted by malice, unreasonableness, or arbitrariness.

The Court stated, “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 that overwhelming public interest requires interference, the court should intervene.”

Ultimately, the Supreme Court held that the High Court’s issuance of a mandamus failed to consider the broader consumer and public interest. The judgment declared the High Court’s decision unsustainable in law and was consequently quashed and set aside.

This legal precedent reinforces the principle that the judiciary should exercise caution in intervening in state decisions unless clear evidence of arbitrariness, malice, or irrationality exists.