SC Quashes Chhattisgarh Tender Clause Favoring Local Bidders

Supreme Court Quashes Chhattisgarh Tender Clause Favouring Local Bidders

Court says restricting eligibility to firms with past local supply experience is arbitrary and discriminatory

Ruling reinforces equality, fair competition, and freedom of trade under the Constitution

By Our Legal Correspondent

New Delhi: October 11, 2025:

In a significant ruling with wide implications for public procurement across India, the Supreme Court of India has struck down a tender clause introduced by the Chhattisgarh government that restricted eligibility only to firms with prior supply experience in the state.

The apex court held that the clause was “arbitrary, unreasonable, and discriminatory”, violating the constitutional guarantees of equality (Article 14) and freedom of trade (Article 19(1)(g)).

The judgment, delivered by a bench of Justice Sanjay Kumar and Justice Alok Aradhe, came in response to an appeal filed by Vinishma Technologies Pvt Ltd, which had challenged the Chhattisgarh High Court’s decision upholding the controversial clause.

The Tender Clause at the Centre of the Dispute

In July 2025, the Samagra Shiksha Chhattisgarh State Project Office, under the Department of School Education, issued tenders worth nearly ₹39.8 crore for the supply of sports kits to students across 33 districts.

The tender contained a restrictive eligibility condition:

Bidders were required to have supplied sports goods worth at least ₹6 crore to Chhattisgarh government agencies in the past three financial years.

This effectively barred companies from outside the state, even if they had extensive experience supplying similar goods to other states or central government departments.

Supreme Court’s Key Observations

The Supreme Court quashed the clause, making several important observations:

Artificial Barrier: The court said the condition created an artificial barrier that unfairly excluded competent firms from other states.
No Rational Nexus: The restriction had no logical connection to the objective of ensuring effective supply of sports kits.
Naxal-Affected Argument Rejected: The state argued that Chhattisgarh was a Maoist-affected region, and local experience was necessary. The court rejected this, noting:
- Only some districts are affected, not the entire state.
- The tender was for sports kits, not security-sensitive equipment.
- Even new suppliers could establish local supply chains to ensure delivery.
Doctrine of Level Playing Field: The bench emphasized that the doctrine of level playing field, derived from Article 19(1)(g), ensures all equally placed competitors get an equal chance to participate in public tenders.
Public Interest: The court stressed that wider participation in tenders helps secure the best price for the state, protecting the public exchequer.

The bench concluded: “The impugned tender condition is arbitrary, unreasonable, and discriminatory. It does not have any rational nexus to the object of ensuring effective supply of sports kits to children in the state.”

High Court’s Earlier Stand

Earlier, the Chhattisgarh High Court had upheld the clause, reasoning that local experience ensured reliability and familiarity with conditions in the state.

However, the Supreme Court disagreed, holding that such reasoning was untenable and contrary to constitutional principles.

Wider Implications of the Ruling

The judgment has far-reaching consequences for public procurement policies across India:

For States: Governments cannot design tender conditions that favour local bidders without a valid and rational justification.
For Businesses: The ruling opens opportunities for out-of-state firms to compete fairly in tenders, promoting healthy competition.
For Citizens: By ensuring wider participation, the ruling helps secure better-quality goods at competitive prices, safeguarding taxpayer money.
For Law: The judgment strengthens the principle that economic nationalism cannot override constitutional guarantees of equality and free trade.

Expert Reactions

Legal experts and industry observers have welcomed the ruling:

On Equality: Lawyers noted that the judgment reinforces the constitutional principle of non-discrimination in economic activity.
On Procurement: Procurement specialists said the ruling will encourage transparent and competitive bidding, reducing the risk of cartelisation.
On Governance: Policy analysts observed that the judgment will push states to rethink restrictive procurement practices that limit competition.

Timeline of the Case

Year/Date	Event
July 2025	Chhattisgarh issues tender worth ₹39.8 crore for sports kits with restrictive clause
2025	Vinishma Technologies challenges the clause in Chhattisgarh High Court
2025	High Court upholds the clause
Oct 2025	Supreme Court quashes the clause, calling it arbitrary and discriminatory

The Doctrine of Level Playing Field

The ruling once again highlighted the importance of the “level playing field” doctrine in Indian constitutional law.

It ensures that all equally placed competitors have an equal opportunity to participate in trade and commerce.
It prevents the state from skewing the market in favour of a few by erecting artificial barriers.
It balances the state’s freedom to design tenders with the constitutional rights of businesses.

The court noted that while states have the power to prescribe tender conditions, such power cannot infringe upon constitutional guarantees or close the market to outsiders without just cause.

Lessons for Future Tenders

The judgment serves as a guideline for governments across India:

Eligibility criteria must be fair and transparent.
Local preference cannot override constitutional rights.
Tender conditions must have a rational nexus to the objective of the procurement.
Wider participation ensures better value for public money.

Conclusion

The Supreme Court’s decision to strike down the Chhattisgarh tender clause is a landmark ruling that reinforces the principles of equality, fairness, and free competition in public procurement.

By rejecting the state’s justification of being “Naxal-affected” and calling the clause arbitrary and discriminatory, the court has sent a clear message: public tenders must remain open, competitive, and constitutionally compliant.

For businesses, it opens the door to fairer opportunities across states. For citizens, it ensures that public funds are spent wisely. And for the judiciary, it reaffirms its role as the guardian of constitutional rights in economic governance.