Summary: India’s legal position on judicial review of the public procurement process has been shaped primarily through constitutional principles, statutory frameworks, and consistent Supreme Court jurisprudence. Public procurement by the State or its instrumentalities is regarded as an exercise of executive power under Article 298, and hence subject to judicial scrutiny to safeguard principles of fairness, transparency, and non-arbitrariness.
Articles 298 and 299 of the Indian Constitution empower the Union and the States to engage in trade or business, enter into contracts, and outline procedures for executing such contracts. These provisions form the constitutional basis for the government to undertake public procurement and award contracts to entities for commercial activities. Unlike other jurisdictions, India does not have a comprehensive central legislation governing public procurement yet. Instead, Chapter 6 of the General Financial Rules, 2017, regulates the procurement of goods and services undertaken by all central ministries and departments. On the other hand, certain states, including Tamil Nadu[1] and Rajasthan[2], have enacted their own public procurement laws.
Given the complexity of the procurement process, judicial scrutiny has been sought at several stages of the process in the past. In this blog, we discuss the Supreme Court’s stance on four of the most litigated stages in relation to judicial review of public procurement.
Stage Zero: Process to be adopted for public procurement
The method of allotting natural resources, which precedes the commencement of the public procurement process, has frequently been the subject of litigation. The Supreme Court has previously held that public procurement processes must ordinarily occur via public auction to promote healthy competition, ensure fair and equitable treatment to all bidders, and eliminate irregularities and corrupt practices.[3] This position was further refined following the 2G spectrum allocation on a first-come, first-served basis, when the Supreme Court underscored the State’s obligation to conduct auctions for the transfer or alienation of natural resources.[4] A presidential reference to the Supreme Court under Article 143 of the Constitution led the Court to affirm later that the executive may select any resource allotment method, as long as it follows the principles underlying Article 14 of the Constitution.[5]
Stage One: Issuance of invitation to tender
The first stage of review is when the invitation to tender is issued, and its terms are made available to prospective bidders. The Supreme Court, in its landmark judgment in Tata Cellular v. Union of India, held that an invitation to tender generally falls within the realm of contract and is, therefore, not subject to judicial review.[6] This view has been consistently reaffirmed and is now considered settled law.[7] Nonetheless, the Court has carved out an important exception where the terms of the tender are tailor-made to favour a particular bidder or to effectively exclude all others from the bidding process.[8] This exception arises because such conduct is contrary to the essence of Article 14 of the Constitution and violates the principle of equality before law.
Stage Two: Selection of successful bidder and tender award
The second stage concerns the award of the tender and the process of selecting a successful bidder. In Tata Cellular, the Supreme Court observed that in awarding a contract, the government is performing a public duty and is, therefore, amenable to judicial review. Such review applies principles governing scrutiny of administrative action requiring that decisions are unbiased, non-arbitrary and free from mala fides. The decision is also tested against the Wednesbury principles of reasonableness. The Court, however, emphasised that it does not sit in appeal over the government’s decisions, and it cannot substitute its own judgment for that of the executive, particularly in matters requiring technical and commercial expertise.[9]
Over the last three decades, the principles laid down in Tata Cellular v. Union of India have been followed and refined in multiple judgments. The courts have repeatedly clarified that a constitutional court will exhibit restraint from interfering in contractual matters unless a clear-cut case of arbitrariness, mala fides, bias, or irrationality is made out.[10] Overall, the scope for judicial review remains narrow and confined to the classical grounds available against administrative actions.
N.G. Projects – an outlier
In contrast to a line of decisions following Tata Cellular, a two-judge bench of the Supreme Court in N.G. Projects Ltd. v. Vinod Kumar Jain adopted an approach of absolute judicial restraint. The Court held that even if arbitrariness and mala fides are proven, writ courts should refrain from interfering in tender awards. They should instead relegate the aggrieved party to claim damages for wrongful exclusion.[11] The rationale behind this approach was that granting an injunction against such contracts may be contrary to public interest and could impose additional costs on the exchequer. The Court further relied on Section 41(ha) of the Specific Relief Act, 1963, which prohibits the grant of an injunction where it impedes or delays the progress or completion of an infrastructure project.[12]
There are three key concerns with the N.G. Projects judgment, when viewed in light of the catena of decisions supporting Tata Cellular.
First, the Court relegated the parties to seek damages for exclusion without clarifying which forum would adjudicate such claims. Further, the Court referred to prior decisions that directed parties to approach the civil court for damages.[13] In any case, no court, including a civil court, other than the writ court has the competence to decide on issues relating to violation of Article 14 of the Constitution. This, in turn, implies that it would be practically impossible for the aggrieved bidder to seek damages for wrongful exclusion or any other breach of its fundamental rights.
Second, assuming that there is a competent court that can award damages to the aggrieved bidder for wrongful exclusion, damages for such exclusion are rarely quantifiable, and are often inadequate, even if quantifiable. The traditional remedy of quashing the process and providing the aggrieved bidder another chance to participate in a fair process would arguably be more effective in upholding the fundamental rights of the aggrieved bidder.
Third, the judgment assumes that public interest is best served by avoiding intervention in the tender award process as it expedites completion of projects. However, given the prevalence of irregularities, corruption, and unfair practices in public procurement, a purely non-interventionist stance may undermine rather than advance public interest. N.G. Projects creates a false dichotomy between protecting public interest and upholding the bidders’ fundamental rights, when in fact, public trust may be best preserved by ensuring that public procurement processes are free from arbitrariness, mala fides and corruption. In Tata Cellular, a balance was struck by limiting judicial review and permitting intervention in exceptional cases. In contrast, N.G. Projects prioritises expeditious completion over upholding fundamental rights, overlooking the fact that contracts awarded through a tainted process may harm public interest. Moreover, the obligation to compensate aggrieved bidders through damages, as proposed by the N.G. Projects judgment, may further strain the public exchequer.
Stage Three: Post award of the tender
The third stage of judicial scrutiny concerns the state’s conduct post awarding a tender, particularly in cases of cancellation of the contract executed pursuant to the tender. In Subodh Kumar Singh Rathour v. Chief Executive Officer, the Supreme Court held that preserving the sanctity of the tender process is a matter of public interest and that capricious or arbitrary state action must be checked by judicial oversight.[14] Previous judgments have established that the State has an obligation to uphold public interest by ensuring fairness in contractual matters, even after execution of a contract, and have restricted the State’s power to cancel contracts solely for economic reasons.[15] Thus, the state’s obligation to act fairly and in a non-arbitrary manner continues even post award of the tender. In turn, the courts can intervene even post award of the tender to check the State’s conduct.
Conclusion
While the law governing stages zero (process to be adopted), one (issue of tender invitation) and three (post-award cancellations) is fairly settled, there is uncertainty surrounding stage two — selection of the successful bidder. The decision in N.G. Projects departs from the ratio in Tata Cellular, however, since the latter was delivered by a larger bench, the Tata Cellular decision would prevail. While several High Court decisions, in line with Tata Cellular, have maintained a balanced approach, a few others – including those of the Bombay High Court[16] and Madras High Court[17] – have relied on N.G. Projects to adopt an approach of absolute restraint. To resolve the uncertainty and bring coherence, the Supreme Court should revisit the issue, clarify the scope of the writ court to review and intervene in public procurements, and set out the “law of the land” on this issue.
[1] The Tamil Nadu Transparency in Tenders Act, 1998.
[2] The Rajasthan Transparency in Public Procurement Act, 2012
[3] Ram and Shyam Co. v. State of Haryana, (1985) 3 SCC 267, para 11.
[4] Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1, para 96.
[5] Natural Resources Allocation, In Re, (2012) 10 SCC 1, para 199.
[6] Tata Cellular v. Union of India, 1994 (6) SCC 651, para 94.
[7] Directorate of Education v. Educomp Datamatics, (2004) 4 SCC 19, para 10, 12; Airport Authority of India v. Centre for Aviation Policy, Safety and Research (CAPSR), 2022 SCC OnLine SC 1334, para 14.
[8] Meerut Development Authority v. Association of Management Studies, (2009) 6 SCC 171, para 26; Maa Binda Express Carrier v. North East Frontier Railway, (2014) 3 SCC 760, para 8.
[9] Tata Cellular, para 94.
[10] Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489, para 19,
[11] N.G. Projects Ltd. v. Vinod Kumar Jain, (2022) 6 SCC 127, para 23.
[12] N.G. Projects, para 21.
[13] Uflex Ltd. v. Government of Tamil Nadu, (2022) 1 SCC 165, para 3; Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, para 22.
[14] Subodh Kumar Singh Rathour v. Chief Executive Officer, 2024 SCC OnLine SC 1682, para 128.
[15] M.P. Power Management Co. Ltd., Jabalpur v. Sky Power Southeast Solar India Pvt. Ltd., (2023) 2 SCC 703, para 88.
[16] Maharudra Systems, Ahmednagar v. State of Maharashtra, 2022 SCC OnLine Bom 10901, para 5.
[17] RT ETI Environtech Pvt. Ltd. v. Govt. of Tamil Nadu, 2022 SCC OnLine Mad 5835, para 81, 82.
