SC Invalidates Tender Clause Lacking Rational Nexus and Restricting Competition

The Hon’ble Supreme Court of India in the case of Vinishma Technologies Pvt. Ltd. v. State of Chhattisgarh & Anr., (2025 INSC 1182), dated October 6, 2025, reaffirmed that eligibility conditions in public tenders must have a rational nexus to the object sought to be achieved and cannot operate as artificial barriers that restrict competition or violate the constitutional guarantee of equality and freedom of trade under Articles 14 and 19(1)(g) of the Constitution of India, 1950.

The dispute arose when the Government of Chhattisgarh issued three tender notices dated July 21, 2025, for the supply of sports kits to students of government schools across the State. The tenders, collectively valued at over ₹40 crore, contained a contentious eligibility condition requiring bidders to have supplied sports goods worth at least ₹6 crore, cumulatively, to State Government agencies of Chhattisgarh in the preceding three financial years. Vinishma Technologies Pvt. Ltd., a company experienced in similar supplies across several States including Bihar, Karnataka, Gujarat, and Delhi, was rendered ineligible due to this condition. After its representation to the authorities elicited no response, the company approached the Hon’ble High Court of Chhattisgarh, challenging the condition as being arbitrary and exclusionary. The High Court, however, upheld the clause, observing that the State was entitled to prescribe such conditions to ensure reliability and efficiency, and held that it did not violate Articles 14 or 19(1)(g). Aggrieved, the appellant approached the Supreme Court.

The Supreme Court held that while the Government has broad discretion in framing tender terms, it is subject to judicial review if conditions are arbitrary, discriminatory, or mala fide. Relying on Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489], dated May 4, 1979, and subsequent cases, the Court emphasized that State actions in contracts must ensure fairness and equality. The Court further invoked the doctrine of level playing field under Article 19(1)(g) and stated that all competitors must receive an equal opportunity to participate in trade and commerce without artificial barriers.

Applying these principles, the Court held that the impugned tender condition had no rational nexus with the objective of ensuring timely supply or quality assurance. Restricting eligibility only to those who had prior experience supplying to Chhattisgarh Government agencies effectively excluded otherwise qualified and experienced bidders from other States who could perform the contract efficiently. Such a criterion, the Court noted, curtailed the fundamental right to carry on business, promoted cartelization, and narrowed competition, thereby defeating the very object of public procurement, which is to secure quality goods at competitive prices for the benefit of the public exchequer. The Court also rejected the State’s justification that the condition was necessitated by logistical challenges in Naxal-affected areas, observing that the supply of sports kits did not involve any security sensitivity and that local logistics could always be arranged by successful bidders irrespective of prior State-specific experience. Consequently, the Supreme Court held the tender condition arbitrary, unreasonable, and discriminatory, violating Articles 14 and 19(1)(g), and quashed the High Court orders and tender notices, and allowed the State to issue fresh tenders lawfully.

The judgment reinforces that public procurement must be fair, transparent, and proportionate to legitimate State objectives.