Supreme Court Reinforces 'Doctrine of Fairness' in State Commercial Contracts and Public Auctions
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The Supreme Court has ruled that the State must act with objectivity and non-arbitrariness in commercial matters, extending the mandate of Article 14 to public auctions. This judgment emphasizes that public authorities must maintain probity and fairness in the utilization of public resources.
The Supreme Court of India, in a significant ruling, has underscored that the State and its instrumentalities are constitutionally mandated to act with fairness, transparency, and non-arbitrariness, even when engaged in commercial transactions or public auctions. The Court clarified that the 'Doctrine of Fairness' and the 'Duty to Act Reasonably'—derived from Article 14 of the Constitution—are not suspended simply because the State is entering into a contract.
The judgment addresses a critical intersection of administrative law and commercial practice. Traditionally, private contracts allow for a high degree of discretion. However, the Court noted that the State, as a custodian of public resources, does not enjoy the same unfettered freedom as a private individual. Every action of the State must be informed by public interest and must withstand the test of objectivity. In the context of public auctions, this means that the process must be competitive, transparent, and free from any bias or hidden agendas that could favor specific parties.
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