States Cannot Prescribe Tender Conditions That Infringe Upon Constitutional Guarantees: Supreme Court Quashes Chhattisgarh’s Restrictive Procurement Criteria

The Apex Court was hearing a batch of appeals filed by a private company engaged in the supply of sports kits to government departments across different States, challenging the tender conditions that required bidders to have prior experience of supplying goods to State departments within Chhattisgarh.

A Bench comprising Justice Sanjay Kumar and Justice Alok Aradhe, while adjudicating the matter, remarked: “The State, while it enjoys the freedom to prescribe the conditions in the tender, cannot exercise that power in a manner that infringes upon constitutional guarantees, by closing the market to outsiders without just cause.”

Senior Advocate M. Dutt represented the appellants, while Praphulla Kumar Bharat, AG, appeared on behalf of the respondents.

Background

The appellant, a company engaged in the supply of sports kits to government departments in various States, had participated in tenders issued by the Department of School Education, Chhattisgarh, through the Samagra Shiksha State Project Office for the supply of sports kits to students of government schools across the districts of the State.

The tender notices contained an eligibility condition requiring that bidders must have supplied sports kits worth a specified minimum amount to the State Government departments or agencies of Chhattisgarh during the preceding three financial years.

The appellant filed representations to the authorities requesting relaxation or modification of the eligibility condition, which were not accepted. It then approached the High Court of Chhattisgarh by filing writ petitions, which were dismissed. The High Court held that the eligibility condition was justified as it ensured reliability and familiarity with local conditions.

The appellant thereafter approached the Supreme Court, contending that the restriction imposed by the tender condition was unconstitutional.

Court’s Observations

The Supreme Court, while examining the scope of judicial review over tender conditions and the constitutional limitations on the State’s discretion in framing eligibility criteria, observed that while the State possesses the power to prescribe conditions to ensure efficiency and reliability in public contracts, such power must be exercised in conformity with Articles 14 and 19(1)(g) of the Constitution.

The Apex Court referred to several precedents, including Ramana Dayaram Shetty v. International Airport Authority of India, Global Energy Ltd. v. Adani Exports Ltd., and Uflex Ltd. v. Government of Tamil Nadu, reiterating that any condition in a tender must have a rational nexus with the object sought to be achieved and must not be arbitrary or unreasonable.

The Bench, while stating that restricting eligibility only to suppliers who had previously executed contracts for the State Government of Chhattisgarh lacked any reasonable justification, observed that “the State by linking the eligibility criteria with past local supplies has created an artificial barrier, against the suppliers who had no past dealing with the State of Chhattisgarh” and that “the impugned condition curtails the fundamental rights of the bidders, who have been ineligible to participate in the tenders.”

Emphasising that public procurement must ensure fair competition and uphold the "doctrine of level playing field", the Bench stated that “the eligibility criteria in impugned notices,  therefore, should be framed in a manner which encourages wider participation and secures the best prize for the State, which in turn safeguards the public exchequer.”

Furthermore, highlighting that Article 19(1) (g) confers a Fundamental Right to carry out business to a company, the Bench observed that “the doctrine of level playing field requires that gates of competition be opened to all who are equally placed”, and that “the impugned tender condition excludes competent and experienced suppliers, who may have executed contracts of far greater magnitude in other States or for the Central Government departments, from participating in the tender and has the impact of promoting cartelisation.”

The justification advanced by the State that the restriction was necessary due to logistical concerns and certain districts being Naxal-affected was also rejected. The Court noted that only some districts of the State were affected by such conditions, and it was unreasonable to treat the entire State as a special zone for exclusion.

Conclusion

The Supreme Court, consequently, concluded that the eligibility condition imposed by the State of Chhattisgarh was "arbitrary, unreasonable and discriminatory", while ruling that "the same does not have any rational nexus to the object of ensuring effective supply of Sports Kits to the children in State", and that it therefore "offends the mandate of Article 14 and freedom of trade guaranteed by Article 19(1)(g) of the Constitution of India."

Accordingly, the Court allowed the appeals, quashed the orders of the High Court, set aside the impugned tender notices and directed the authorities to issue fresh tender notifications consistent with constitutional guarantees and the principles of fair competition.

Cause Title: Vinishma Technologies Private Limited v. The State of Chhattisgarh & Another (Neutral Citation: 2025 INSC 1182)

Appearances

Appellant: Senior Advocate M. Dutt, with Advocates Nitish Kumar Singh, Abhishek Raj, Amit Kumar Thakur, Harsh Abhishek, Anil Kumar Soni, Anand Kumar Soni, Niteen Kumar Sinha, AOR

Respondents: Senior Advocate Praphulla Kumar Bharat (A.G.) & Balbir Singh with Advocates Ankita Sharma, AOR, Arjun D. Singh, Ishika Neogi, Pallav Mongia, AOR, Anubhav Mishra, and Kashish Lalwani.

Click here to read/download Judgment