Safiya Malik

The Bombay High Court has ruled against specific conditions set by the Nashik Municipal Corporation in a recent tender, declaring them arbitrary and discriminatory. The court's judgment ensures a fair bidding process by invalidating the financial net worth and work experience criteria that were perceived to favour larger entities while restricting competition.

The case stemmed from a writ petition filed by M/s. Watergrace Products, a proprietorship firm engaged in solid and biomedical waste management services. The petitioner contested specific conditions outlined in the Request for Qualification (RFQ) issued by Nashik Municipal Corporation (NMC) for a public cleaning and waste management contract valued at ₹176 crores over a five-year period.

The petitioner challenged the following conditions in the RFQ:

• Clause 3.2.2: Required bidders to have experience in two solid waste collection and transportation projects within one year of the last three years. Initially, this clause specified "Solid Waste Collection and Transportation" experience but was amended to "Manual Sweeping Projects" following pre-bid queries. The petitioner contended that this requirement significantly lowered the prior experience benchmark from three years to one, deviating from established procurement norms.

• Clause 3.4.2: Mandated a minimum net worth of ₹100 crores as of March 31, 2024, to qualify for the bidding process. The petitioner argued that this financial requirement was arbitrary and disproportionate, as the contract primarily involved providing manpower for sweeping and cleaning services, which did not necessitate such a high capital base.

The petitioner contended that these conditions were tailored to exclude smaller firms while favouring larger corporate entities that may not have relevant work experience but possessed substantial financial resources. Additionally, it was argued that these stipulations violated the principles of fair competition under Article 14 of the Constitution of India.

The matter was heard by a division bench comprising Chief Justice Alok Aradhe and Justice Bharati Dangre. The court examined whether the impugned conditions were legally tenable and whether they conformed to procurement norms set by the Central Vigilance Commission (CVC) and state government regulations.

The court noted that the NMC had previously issued tenders in compliance with CVC guidelines, which recommend a minimum of three years' experience in similar services. It observed:

• "The reduction of the experience requirement from three years to one year is inconsistent with standard procurement practices and is arbitrary in nature."

• "A net worth criterion of ₹100 crores is not justified for a contract that primarily involves supplying manpower for cleaning and sweeping services."

• "Municipal bodies have the authority to set eligibility conditions, but these must not be framed in a manner that unjustly restricts competition or provides an undue advantage to specific entities."

The court further referenced precedents set in cases such as ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and Tata Cellular v. Union of India, reiterating that judicial review in tender processes is permissible if the conditions are unreasonable, arbitrary, or violate principles of fairness and transparency.

The court examined various procurement guidelines issued by the Government of India and Maharashtra, including:

• Manual for Procurement of Consultancy and Other Services (Ministry of Finance, Government of India): Specifies that bidders must have at least three years of experience in similar services and does not mandate a specific net worth requirement.

• Model Tender Document for Procurement of Non-Consultancy Services (Government of India): Requires that bidders must not have a negative net worth and should not have suffered an erosion of more than 30% in the last three years. It does not prescribe a fixed net worth limit.

• Central Vigilance Commission (CVC) Guidelines: Recommend that tender conditions should not create entry barriers and must ensure wider participation of qualified bidders.

Based on these references, the court found that Nashik Municipal Corporation’s tender conditions did not conform to established guidelines, making them legally untenable.

The Corporation defended its tender conditions, stating that:

1. The contract in question was for an extended period of five years and involved critical public hygiene maintenance, necessitating financially stable contractors.

2. The experience requirement was designed to ensure that only capable service providers with a track record in handling large-scale cleaning and waste management projects could qualify.

3. The high-net-worth requirement was imposed considering the potential responsibilities during the Kumbh Mela event in 2027, which would witness an influx of approximately 15 lakh people per day in Nashik.

The court, however, noted that the Kumbh Mela was not explicitly included as part of the tender scope and that the Corporation had already proposed issuing a separate tender for sanitation during the event. It held that the financial eligibility criteria should align with the actual contract requirements rather than speculative future obligations.

After examining the submissions from both sides, the court following the dictum in the celebrated case of Tata Cellular Vs. Union of India (1994(6) SCC 651), where it was held that, even though terms of invitation to tender are not open to judicial scrutiny because invitation to tender is in the realm of contract, however, it has been held that decision taken by a body functioning in an administrative or quasi administrative sphere can be tested on the application of Wednesbury principle of reasonableness and has to be free from arbitrariness, not effectuated by bias or mala fide.

The Bombay High Court thus ruled that the impugned tender conditions were unjustified and needed revision. The key directives issued were:

1. Striking down Clauses 3.2.2 and 3.4.2: The experience requirement was restored to the standard three-year period, and the net worth requirement of ₹100 crores was removed.

2. Mandating Reframing of Eligibility Criteria: The Corporation was directed to issue revised tender conditions ensuring compliance with applicable procurement regulations and maintaining fairness in bidder qualification.

3. Reaffirming the Principles of Transparent Public Procurement: The court stated that municipal bodies must ensure competitive bidding without imposing restrictive or arbitrary conditions that could discourage qualified service providers.

Case Title: M/s. Watergrace Products v. Nashik Municipal Corporation & Ors.
Case Number: Writ Petition No. 701 of 2025
Bench: Chief Justice Alok Aradhe and Justice Bharati Dangre

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