Public Interest Justifies Geographic Limitations in Tenders

The Allahabad High Court, in the case of M/s Rajan Construction Company v. State of U.P. & Another (2025:AHC:57344-DB), dated April 18, 2025, upheld the validity of a tender condition restricting eligibility to manufacturers of biomass pellets located either within the National Capital Region (NCR) or within a 100-kilometre radius of the Harduaganj Thermal Power Station in Aligarh, holding that the impugned restriction was neither arbitrary nor discriminatory and served a legitimate public interest objective aligned with environmental policy imperatives.

The case arose from a writ petition filed under Article 226 of the Constitution of India, 1950, challenging the tender floated by the Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd. for the supply of agro-based non-torrefied biomass pellets. The petitioner, a registered supplier based in Ambedkar Nagar, Uttar Pradesh, was excluded from participating in the tender on account of Clause 3(i), which confined eligibility to manufacturers operating within the NCR or within a 100-kilometre radius from the designated thermal power station. The tender further required that fifty percent of the raw material used in manufacturing the pellets be sourced from crop residues originating in Punjab, Haryana, or the NCR.

In assessing the validity of the impugned condition, the court began by delineating the framework under which the tender was issued, noting the broader governmental mandate to promote biomass co-firing in coal-based thermal power plants to mitigate pollution from stubble burning in northern India. The court observed that successive advisories and notifications from the Ministry of Power and the Ministry of Environment, Forest and Climate Change emphasised the need to utilise crop residues from Punjab, Haryana, and NCR to curb air pollution in these regions. Given that Harduaganj Thermal Power Station falls within 300 kilometres of the NCR, the requirement to source raw material from those areas was consistent with the central policy.

The court noted that the pre-qualifying clause was tailored to serve an environmental objective by ensuring that manufacturing units are located in proximity to the target regions for stubble utilisation. Permitting participation by manufacturers located farther afield could dilute the objective of controlling stubble burning in NCR-adjacent states, as such suppliers might rely on local biomass rather than the intended crop residue. The court held that the geographical restriction in the tender ensured traceability and compliance with sourcing norms and thus had a rational nexus with the object sought to be achieved.

Citing judicial precedents such as Tata Cellular v. Union of India, [(1994) 6 SCC 651], dated July 26, 1994; and Silppi Constructions Contractors v. Union of India, [(2020) 16 SCC 489], dated June 21, 2019, the Court reiterated the limited scope of judicial review in contractual matters involving the State. It affirmed that the terms and conditions of a tender fall within the administrative discretion of the tendering authority and that courts ought not to interfere unless there is manifest arbitrariness, mala fide intent, or unreasonableness. The Court emphasised that tender conditions must be judged from the standpoint of public interest, not private inconvenience, and recognised the tendering authority as the best judge of its functional requirements.

The Court further held that the clause under challenge did not violate the doctrine of a level playing field under Article 19(1)(g) of the Constitution, as reasonable restrictions in the public interest are permissible. It was also observed that no evidence had been brought on record to show that the clause was designed to favour any particular bidder or to exclude others with mala fide intent. In the absence of any material indicating procedural impropriety or arbitrariness, the court declined to interfere with the tender process.

Accordingly, the writ petition was dismissed, with the court affirming that judicial review cannot be invoked to safeguard private interests at the expense of public welfare, particularly in matters involving environmental objectives and procurement policies shaped by expert considerations.