Distinction between administrative and contractual law

The distinction between administrative and contractual law. In Puravankara Projects Ltd. vs. Hotel Venus International and Others, reported in (2007) 10 SCC 33, in which one of us, namely, Justice Arijit Pasayat was a party, it was held as follows :

“tender terms are contractual and it is the privilege of the Government which invites its tenders and courts do not have jurisdiction to judge as to how the tender terms should be framed. By observing that there was an implied term which was not there in the tender, and postponing the time by which the bank guarantee had to be furnished, in essence the High Court directed modification of a vital term of the contract”.

It further held that

“the statutory parameters have to be kept in view and the High Court can never alter or amend a contract entered into between the parties”.

In Raunaq International Ltd. vs. I. V.R. Construction Ltd. and Others, reported in (1999) 1 SCC 492, this Court had occasion to dispose of a case of paramount importance of Government contract. In the said decision this Court has observed as follows :

“where rational non-discriminatory norms have been laid down for granting of tenders, a departure from such norms can only be made on valid principles. The award of contract cannot be by stopping the performance of the contract so awarded, there is a major detriment to the public because the construction of two thermal power units is held up on account of the dispute”.

The court further held :

“the award of a contract, whether it 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, and the same would be :

(1) The price at which the other side is willing to do the work;

(2) Whether the goods or services offered are of the requisite specifications;

(3) Whether the person tendering has the 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 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”.

It was also held in the said decision :

“the public would also be interested in the quality of the work undertaken or goods Suppl lied by the tenderer for poor quality of 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 of public money and delaying the availability of services, facilities or goods”.


Ref: AIR 2009 SCW 2274 : (2009) 4 SCALE 1 : (2009) 11 SCC 9

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