Chennai F4 Race: SC Upholds Limited Judicial Intervention in PPP Contracts

The Hon’ble Supreme Court of India, in the case of Racing Promotions Private Limited v. Dr. Harish & Ors. (2025 SCC OnLine SC 375), dated February 20, 2025, ruled that judicial intervention in public-private partnership (PPP) agreements should be limited, upholding the legitimacy of contractual arrangements between the State and private entities. It emphasised the increasing importance of PPPs, recognising the State’s limited resources and the private sector’s specialised expertise.

The case arose from Public Interest Litigations (PILs) challenging the conduct of Formula 4 racing in Chennai, citing concerns regarding public inconvenience, noise pollution, safety risks, and alleged mismanagement of public funds. Racing Promotions Private Limited (RPPL), a private entity, had entered into a Memorandum of Understanding (MoU) with the Sports Development Authority of Tamil Nadu (SDAT) in August 2023, establishing a three-year partnership for organising the event. As per the MoU, RPPL was responsible for an investment of ₹202 crore, while SDAT contributed ₹42 crore towards licensing, operational costs, and infrastructure improvements. Despite allowing the race to proceed, the Hon’ble Madras High Court, in its order dated February 19, 2024, imposed additional financial conditions, directing RPPL to reimburse the ₹42 crore spent by SDAT, deposit ₹15 crore in advance for future events, and limiting RPPL’s role in subsequent races while instructing the Tamil Nadu government to take over the event’s organisation. RPPL challenged these directives before the Hon’ble Supreme Court, contending that they constituted judicial overreach into a contractual agreement freely entered into by both parties.

The Hon’ble Supreme Court found that the High Court had exceeded its judicial review powers by interfering in the financial and operational terms of a PPP arrangement, which was a policy decision of the State. It emphasised that PPPs are widely recognised as an effective governance model, facilitating private sector participation in infrastructure and service delivery and allowing governments to leverage private expertise and funding while optimising their limited resources. The Hon’ble Court held that issues related to contractual obligations, financial liabilities, and revenue-sharing mechanisms under a legally executed MoU fall outside the purview of judicial scrutiny in a PIL, and such agreements cannot be unilaterally altered by the judiciary in the absence of arbitrariness, fraud, or illegality. Additionally, the Hon’ble Court held that SDAT, as a state instrumentality, was not mismanaging funds or granting undue benefits, as the MoU was a legitimate policy for sports development and infrastructure. It found that RPPL’s ₹202 crore investment exceeded SDAT’s contribution, and the financial arrangement did not amount to fund misallocation.

Addressing the High Court’s directive requiring the Tamil Nadu government to organise future races independently, the Hon’ble Supreme Court held that this order ignored established governance models and the fundamental purpose of PPPs. The Hon’ble Court reiterated that governments lack the flexibility and specialised knowledge that private entities bring to such ventures, and compelling the State to assume sole responsibility for the event was impractical and economically unsound. Additionally, the Supreme Court examined the State’s long-term policy objective of positioning Chennai as a global sports hub, which necessitated collaboration with private enterprises to host international sporting events. It noted that SDAT had submitted a counter-affidavit highlighting the economic and infrastructural benefits of hosting such events, including boosting tourism, generating employment, and promoting sports culture in Tamil Nadu. The Hon’ble Court acknowledged these considerations and found that the High Court’s decision undermined the State’s broader policy goals by restricting private sector involvement.

Accordingly, the Hon’ble Supreme Court of India partly allowed RPPL’s appeal, setting aside the Madras High Court’s financial directives, advance deposit requirement, and order mandating state-led organisation of future events. However, it upheld that public safety, noise control, and environmental compliance must be ensured in conducting such events.

This ruling reinforces the principle that judicial review in contractual matters involving PPP projects is limited and cannot extend to modifying valid agreements unless there is a clear violation of law or public interest.