Kiran Raj

The Supreme Court of India has disposed of an appeal filed by Omega Elevators against the State of Madhya Pradesh and the Gwalior Municipal Corporation (GMC) concerning the latter’s decision to restrict a public tender to ten pre-selected multinational companies. While ruling that no effective relief could be granted to the appellant, as the project had already been completed, the court observed that the GMC’s practice of limiting the bidding process lacked a well-reasoned and non-discriminatory basis. The court modified the High Court's ruling and cautioned GMC to ensure greater transparency in future tendering processes.

The case pertains to a Notice Inviting Tender (NIT) issued by the GMC on December 17, 2019, for the supply, installation, testing, commissioning, and maintenance of lifts under the Pradhan Mantri Awas Yojana at Mahal Gaon Ki Pahadi and Manpur, Gwalior. The tender was valued at approximately ₹1460.60 lakhs and required completion within six months. Omega Elevators submitted a representation seeking permission to participate in the bidding process. After receiving no response, it submitted an online bid on January 10, 2020.

The appellant was subsequently disqualified from participating, as GMC had annexed a list of ten pre-approved companies to the NIT, allowing only those firms to submit bids. The municipal body justified this restriction by arguing that these ten firms were the most reputed in the field of lift manufacturing and were selected to ensure quality services.

Challenging this exclusion, Omega Elevators approached the Madhya Pradesh High Court at Gwalior by filing a writ petition. The High Court dismissed the petition, relying on the Supreme Court’s ruling in Global Energy Ltd. & Anr. vs. Adani Exports Ltd. & Ors., (2005) 4 SCC 435. The High Court held that the terms of a tender issued by a statutory authority should not be interfered with unless they were found to be wholly arbitrary, discriminatory, or malicious. The appellant’s review petition was also declined by the High Court on October 12, 2020.

The Supreme Court, comprising Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh, heard the petittion challenging the judgment of the High Court. The court recorded: “As noticed earlier, the lift installation work was to be executed within six months, and since no interim stay was granted either by the High Court or by this Court, it is not in dispute that the work has since been completed by the successful bidder, who, incidentally, has not been arrayed as one of the respondents. No effective relief, therefore, can be granted to the appellant.”

The court nonetheless examined the broader legal question of whether GMC’s decision to restrict the bidding process to only ten companies could be justified. It stated: “The legal principle that the terms of a public tender notice are not generally open to judicial scrutiny and interference, unless found to be per se arbitrary—is well known. It is trite law that judicial review would apply to the exercise of contractual powers by the Government, to the limited extent of preventing arbitrariness or favouritism.” The court referred to Tata Cellular v. Union of India, (1994) 6 SCC 651 and Union of India v. International Trading Co., (2003) 5 SCC 437, reinforcing the principle that government contract decisions must not be arbitrary or discriminatory.

The court found GMC’s justifications unconvincing. It observed: “The assertion that an open tender would render the allotment process cumbersome and time-consuming, or the claim that permitting bidders beyond the designated ten would result in the installation of inferior quality lifts, is seemingly conjectural — and a mere presumption based on surmises.”

The judgment further noted that all ten selected companies were multinational corporations based outside India. The court stated: “This fact clearly indicates that the GMC ostensibly believes that a company’s status as a global entity ipso facto confers on it the requisite repute and expertise necessary to undertake the specified works. 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.”

The court concluded that restrictive tendering practices must be backed by objective analysis and expert assessment. It recorded: “Save and except in a case where the competent authority, after following an objective analysis by an expert team, arrives at a well-reasoned, non-discriminatory, and scientifically supported conclusion, such exclusionary practices cannot be justified.” The court noted that GMC had not presented any such analysis before either the High Court or the Supreme Court.

The court also suggested alternative means to maintain service quality while allowing broader participation. It stated: “There are several other remedial measures which could have been taken by the GMC, including the prescription of stricter standards and criterions in the NIT, to ensure that there is no compromise with the quality or post-installation services.”

Although the appeal was ultimately dismissed as infructuous, the Supreme Court modified the High Court's ruling and directed GMC to act more transparently in future tenders. The court concluded: “That being so, while we dispose of these appeals as infructuous, we caution and expect the GMC to act in a more transparent manner keeping the observations made hereinabove in the future. The impugned judgment and orders of the High Court stand modified/explained to the extent above.”

Case Title: Omega Elevators vs. State of Madhya Pradesh & Anr.
Case Number: SLP(C) Nos.13716-13717/2020
Bench: Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh

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