Scope Of Judicial Review In Contractual Matters Involving State Or Its Instrumentality With Private Participation Is Limited: Supreme Court
The Supreme Court partly allowed Civil Appeals against the Madras High Court's Order, disposing of PILs against the conduct of Formula 4 Racing in Chennai.
The Supreme Court held that the scope of judicial review in matters concerning contractual relationship of the State or its instrumentality with private participation, particularly as regards the scope and ambit of work and finances, is limited.
The Court held thus in Civil Appeals filed by a private company against the Order of the Madras High Court by which it disposed of various Writ Petitions filed as Public Interest Litigations (PILs) against the conduct of Formula 4 Racing in Chennai, Tamil Nadu, in which certain directions were issued.
The two-Judge Bench of Justice P.S. Narasimha and Justice Manoj Misra observed, “The Sports Development Authority is an instrumentality of the State and acts as a nodal Governmental Authority for promoting sports and the welfare of sports persons. It is nobody’s case that the State through SDAT is distributing largesse or that public funds are being frittered away or that there is any defalcation of funds. The scope of judicial review in matters concerning contractual relationship of the State or its instrumentality with private participation, particularly as regards the scope and ambit of work and finances, are limited. This aspect is clear from a large number of decisions of this Court, which need not be dealt with in detail.”
The Bench said that once the High Court was satisfied that the decision to hold the sports event is a matter of policy, it could not have proceeded to interfere with the specific terms of the MoU (Memorandum of Understanding) entered into between the authority and the company.
AOR Gaurav Singh represented the Appellant while AOR D. Kumanan represented the Respondents.
Facts of the Case
The Appellant-company namely Racing Promotions Private Limited was involved in sponsoring and conducting the Formula 4 championship, which is a motorsport series of races. It entered into a MoU with the Sports Development Authority of Tamil Nadu (SDAT) in 2023 for a term of 3 years for organising the said event. The MoU set out the obligations of both parties, and the relevant clauses were that while the Appellant was under an obligation to spend Rs. 202 crores as part of its responsibility, the SDAT was required to spend Rs. 42 crores towards license and operations fee, roads, and miscellaneous expenditures including road beautification and painting. Pursuant to a decision to conduct the fifth round of the races in the city of Chennai, the Tamil Nadu Government issued a Press Release regarding the conduct of the event. At this stage, various Writ Petitions were instituted in form of PILs before the High Court, raising multiple objections.
Broadly, the grounds raised in the PILs pertained to public inconvenience, lack of safety measures, noise pollution, environmental, and ecological damage, and the lack of transparency in the use of public funds for the event in a manner that benefits a private party, i.e., the Appellant. The High Court refused to interfere with the policy decision of the Government to promote and encourage motor racing as a sport. However, it observed that the event was being conducted by the Appellant, which is a private party, and the role of the State Government was limited to facilitating the event. It said that the revenue and profits would accrue only to the Appellant, and the State Government would not have any share in the same as per the MoU. In this light, the High Court issued some directions that were challenged before the Apex Court.
Reasoning
The Supreme Court in view of the above facts, noted, “To ensure equitable distribution of goods and services and to be assured that they subserve the common good, the State has the authority to formulate a suitable policy. Initially, such policy is focussed on the government identifying resources and expanding them to subserve common good. At one stage, to increase their capacity, governments had even nationalised private resources to subserve the public interest. However, experience has shown that the resources generated by the government were inadequate and also that the management of these resources was inefficient and ineffective.”
The Court said that the case involves the conduct of the sports event through the collaborative effort of the instrumentalities of the State of Tamil Nadu, being the SDAT, and the Appellant, a private enterprise.
“Issues such as the mutual obligations, including the apportionment of expenditure that the contracting parties must bear, are beyond the scrutiny of the High Court in a public interest litigation”, it observed.
The Court added that calling upon the State itself to take up the responsibility of conducting such sports events, ignores the principle of public-private partnership adopted by Governments across the globe as a matter of good governance, which takes into account the limited resources of the State coupled with issues of efficiency and expertise.
“We are of the opinion that the High Court committed an error in issuing directions (iv), (v), (vi) and (vii), which cannot be sustained in law”, it concluded.
Accordingly, the Apex Court partly allowed the Appeals and set aside some of the impugned directions of the High Court.
Cause Title- Racing Promotions Private Limited v. Dr. Harish & Ors. (Neutral Citation: 2025 INSC 252)
Appearance:
Appellant: AOR Gaurav Singh, Advocates Theepa Murugesan, and Sanya Bhatia.
Respondents: AORs D. Kumanan, Preetika Dwivedi, Rakesh K. Sharma, Advocates C. Paramasivam, and Adviteeya.
