Public Tenders Cannot Presumptively Favour Foreign Firms Over Domestic Ones Without Objective Basis: Supreme Court - 2025-08-14

SC Cautions GMC Against Excluding Indian Firms from Tenders, Calls Practice 'Untenable'

New Delhi: The Supreme Court has strongly disapproved of public authorities creating exclusionary tender conditions that presumptively favour foreign companies over domestic manufacturers without any objective or scientific basis. While dismissing an appeal by Omega Elevators as infructuous, a bench comprising Justices Surya Kant and Nongmeikapam Kotiswar Singh cautioned the Gwalior Municipal Corporation (GMC) against such discriminatory practices in the future, emphasizing the need for transparency and fair competition.

Case Background: An Exclusive Tender

The case originated from a Notice Inviting Tender (NIT) issued by the Gwalior Municipal Corporation on December 17, 2019. The tender, valued at approximately ₹14.6 crore, was for the supply, installation, and maintenance of lifts for a housing project under the Pradhan Mantri Awas Yojana.

Crucially, the GMC annexed a list of 10 pre-selected companies to the NIT, stating that only these firms were eligible to bid. The appellant, Omega Elevators, an Indian manufacturer, was barred from participating. When its representation to the GMC went unanswered, the company challenged the restrictive tender condition in the Madhya Pradesh High Court.

Arguments and High Court's Decision

The GMC defended its decision by claiming that the 10 selected firms were the most reputed in the elevator business and their selection was necessary to ensure quality and avoid a cumbersome, time-consuming open tender process.

The High Court dismissed Omega Elevators' writ petition, relying on the Supreme Court's precedent in Global Energy Ltd. (2005) , which holds that courts should not interfere with the terms of a tender unless they are wholly arbitrary, discriminatory, or malicious. Omega Elevators subsequently appealed this decision to the Supreme Court.

Supreme Court's Legal Analysis and Observations

While the Supreme Court noted that the appeal was now infructuous—as the work had already been completed by the successful bidder—it addressed the substantive legal question of whether the GMC's exclusionary condition was justified.

The bench acknowledged the legal principle that judicial review of government contracts is limited. However, it held that this principle does not grant authorities a license for arbitrary action. The Court made several critical observations:

"It appears to us that the assertion that an open tender would render the allotment process cumbersome and time-consuming, or the claim that permitting bidders beyond the designated 10 would result in the installation of inferior quality lifts, is seemingly conjectural — and a mere presumption based on surmises."

The Court pointed out that all 10 pre-approved companies were multinational corporations based outside India. This, the bench noted, indicated a flawed presumption by the GMC that only global entities possess the necessary repute and expertise.

In a strong rebuke of this mindset, the Court stated:

"In our considered opinion, it is wholly untenable to argue that Indian manufacturers (such as the present appellant) are inherently incapable of competing with international products, or that any service tendered by them would be of an inferior nature. We, in no uncertain terms, disapprove of such presumptive practices."

The judgment clarified that such restrictions could only be justified if the authority, after an objective analysis by an expert team, arrived at a "well-reasoned, non-discriminatory, and scientifically supported conclusion." The GMC had failed to provide any such evidence.

Final Decision and Implications

Although no relief could be granted to Omega Elevators, the Supreme Court modified the High Court's judgment. The Court disposed of the appeal with a stern caution for the Gwalior Municipal Corporation.

"…we caution and expect the GMC to act in a more transparent manner keeping the observations made hereinabove in the future."

This ruling serves as a significant precedent, reinforcing the principle that government bodies cannot create tender conditions that arbitrarily exclude domestic players in favour of foreign companies based on mere presumptions of quality. Public authorities are now expected to ensure a level playing field and can only impose restrictive eligibility criteria if they are backed by objective, non-discriminatory, and reasoned analysis.