The Supreme Court of India recently reprimanded the Gwalior Municipal Corporation (GMC) for its arbitrary decision to restrict a tender process to only multinational corporations. The Court highlighted that such a move unfairly excluded Indian manufacturers and suggested an unfounded belief that Indian firms are incapable of delivering quality services.
The Supreme Court observed that GMC had issued a Notice Inviting Tender (NIT) for the supply, installation, testing, commissioning, and maintenance of lifts under the Pradhan Mantri Awas Yojana. However, the tender was restricted to just 10 pre-selected multinational companies, excluding Indian firms from the bidding process.
The Court firmly rejected GMC's rationale that limiting bids to reputed global firms would ensure quality assurance.
"Admittedly, all 10 companies flagged by the GMC as eligible in the NIT are multinational corporations, and are all based outside India. 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 also made it clear that such assumptions are unacceptable and discriminatory.
"We, in no uncertain terms, disapprove of such presumptive practices."
The case arose when Omega Elevators, an Indian manufacturer, challenged the GMC’s tendering process in the Madhya Pradesh High Court (Gwalior Bench). The company argued that the restriction was arbitrary and violated fair competition principles.
However, the High Court dismissed Omega Elevators' petition, citing the Supreme Court's judgment in Global Energy Ltd. & Anr. vs. Adani Exports Ltd. & Ors. (2005) 4 SCC 435, which states that courts should generally not interfere in tender processes unless they are discriminatory or malicious.
Dissatisfied with this decision, Omega Elevators approached the Supreme Court. The apex court, after reviewing the matter, found GMC’s reasoning “conjectural” and based on mere presumption. It firmly rejected the assumption that Indian manufacturers cannot match the quality of foreign companies.
Citing the case of Union of India v. International Trading Co. (2003) 5 SCC 437, the Supreme Court emphasized that while courts usually avoid interference in tendering decisions, they must step in when the process is arbitrary or biased.
"Although courts exercise restraint in matters pertaining to the tendering process, when it suffers from arbitrariness or favoritism, judicial review is necessary to ensure fairness."
Since the contract work had already been completed by the winning bidder, the Supreme Court declared the appeal infructuous. However, it strongly criticized GMC’s discriminatory tendering policy, setting a precedent against similar unfair practices in government procurement.
Case Details
- Case Title: Omega Elevators vs. State of Madhya Pradesh & Anr.
- Bench: Justices Surya Kant and N. Kotiswar Singh
Legal Representatives:
- For Petitioner: Mr. Bhargav Hasurkar, Adv., Ms. Jesal Wahi, AOR, Mr. Kabir Hathi, Adv.
- For Respondents: Mr. Sandeep Singh, AOR
