Supreme Court stays fresh tender process approved by High Court's Acting Chief Justice led bench

In Medicare Environmental Management Pvt. Ltd.vs. State of Bihar & Ors. (2025), the Supreme Court's Division Bench of Justices Prashant Kumar Mishra and Augustine George Masih issued notice, returnable within eight weeks. Its order dated June 3, 2025 reads:"In the meanwhile, further tender process shall remain subject to the outcome of the present special leave petition." This implies that the judgement of the Patna High Court's Division Bench of Acting Chief Justice Ashutosh Kumar and Justice Partha Sarthy which approved the fresh tender process has been stayed. 

The Division Bench had heard both the writ petitions filed by Medicare Environmental Management Pvt. Ltd and Sangam Mediserve Pvt. Ltd. who had prayed for setting aside the order dated June 26, 2023 issued under the signature of the Member Secretary, Bihar State Pollution Control Board (BSPCB), Patna, whereby the entire tender dated December 22, 2022, for all the seven locations was cancelled despite the respondents/Board having issued the letter of selection for locations at Muzaffarpur and Bhagalpur in favour of Medicare Environmental Management Pvt. Ltd. and for locations Gopalganj and Purnia in favour of M/s Sangam Mediserve Pvt. Ltd.  The High Court had dismissed both the writ petitions by its 26-page long judgement dated May 7, 2025.

The tender was issued because the BSPCB was of the view that there was need for setting up seven Common Bio-Medical Waste Treatment Facility (CBWTF), one each in Patna, Gopalganj, Madhubani, Purnia, Sasaram, Muzaffarpur and Bhagalpur in accordance with the Bio-Medical Waste Management Rules, 2016. BSPCB took the decision to cancel the entire tender as it was a composite tender (one tender for all the seven locations) and issued fresh tender for each of the locations and not a composite tender. Both the petitioners have challenged the decision as being arbitrary, unreasonable and based on no logic. They have submitted that before cancelling the entire tender, the successful bidders ought to have been issued notice.

One of the two petitioners, Medicare Environmental Management Pvt.  Ltd.  submitted that for one of the
bidders, namely, M/s Sangam Mediserve Pvt. Ltd., the second petitioner having submitted an erroneous and wrongly filled-up financial bid, the entire tender ought not to have been cancelled. The BSPCB had some justification for cancelling the tender with respect to locations at Gopalganj and Purnia, but there would absolutely be no ground for cancelling the entire tender even if it be a composite tender of all the seven locations. 

BSPCB should have segregated the respective tenders and went ahead with the selection of the bidders in whose financial bids there was no problem and which selection was completely unaffected by the wrong bidding of M/s Sangam Mediserve Pvt. Ltd. 

It was submitted that in Government contracts, the authorities are expected to uphold fairness, equality and rule of law while dealing with contractual matters. The “Right to Equality” under Article 14 of the Constitution of India is breached whenever an arbitrary decision is taken. The Court's attention was drawn towards the the decision of the Supreme Court in Mihan India Ltd. vs. GMR Airports Ltd. & Ors. : (2022) 19 SCC 69. In this case, bids were invited for development of a Multi-Model International Passenger Cargo Hub Airport at Nagpur, but before the agreement could be executed with the highest bidder, the bidding process was annulled without any direction for fresh tender process.

The Supreme Court held the view that once the selection of the concessionaire had been declared, then raising objections at the stage of the execution of the concession agreement in the garb of asking clarification with respect to certain formalities, amounted to arbitrary exercise of powers by the authorities, which is not permissible under the law. The Supreme Court relied upon its own judgment in Union of India vs. Dinesh Engineering Corporation : (2001) 8 SCC 491, wherein while dealing with the rejection of the bid of the respondent therein by the Railways in a tender floated for procurement of certain items of spare parts for use in GE governors, the Supreme Court had held that the power to reject bids cannot be exercised arbitrarily; merely because the Railways had the power to do so. Any arbitrary exercise of power to reject bids was held to be violative of Article 14 of the Constitution of India. It was held that held that a public authority, even in contractual matters, should not have unfettered discretion and in contracts having commercial elements. Even though some extra discretion is to be conceded to such authorities. 

In Mihan India Ltd. case, the Supreme Court in para 64 of the decision took note of the decision in City & Industrial Development Corporation of Maharashtra Ltd. vs. Shishir Realty (P) Ltd. : (2002) 16 SCC 527. It reads:“75. Before we state the conclusions, this Court would like to reiterate certain well pertaining to Government contracts. When we speak of Government contracts, constitutional factors are also in play.
Government bodies being public authorities are expected to uphold fairness, equality and rule of law even while dealing with contractual matters. It is a settled principle that right to equality under Article 14 abhors arbitrariness. Public authorities have to ensure that no bias, favouritism or arbitrariness are shown during the bidding process. A transparent bidding process is much favoured by this Court to ensure that constitutional requirements are satisfied.
76. Fairness and the good faith standard ingrained in the contracts entered into by public authorities mandates such public authorities to conduct themselves in a non-arbitrary manner during the performance
of their contractual obligations.
77. The constitutional guarantee against arbitrariness as provided under Article 14, demands the State to act in a fair and reasonable manner unless public interest demands otherwise. However, the degree of
compromise of any private legitimate interest must correspond proportionately to the public interest, so claimed.
78. At this juncture, it is pertinent to remember that, by merely using grounds of public interest or loss to the treasury, the successor public authority cannot undo the work undertaken by the previous authority. Such a claim must be proven using material facts, evidence and figures. If it were otherwise, then there will remain no sanctity in the words and undertaking of the Government. Businessmen will be hesitant to enter Government contract or make any investment in furtherance of the same. Such a practice is counterproductive to the economy and the business environment in general.”

Drawing on this principle, the Supreme Court did not approve of such cancellation of tender in its entirety. 

Justice Kumar who authored the judgement of the Division Bench observed:"In the present set of facts in these two writ petitions, the situation is different." The judgement pointed out that the financial bid of M/s Sangam Mediserve Pvt. Ltd., which was found to be L-1 for two locations, namely, Gopalganj and Purnia, was erroneous. Although for the two locations, namely, Gopalganj and Purnia, there was an alternative of declaring the L-2 for those two locations as L-1 but "This could but have led to spate of litigation as many of the contenders/bidders had participated and offered their bids for number of locations."

The judgement reads:"Since it was a composite tender, any wrong assessment of any one of the bidders to be the lowest or the highest for a particular location would have had a cascading/waterfall effect on all the tenders. In the circumstances and in all fitness of things, it appears that the Bihar Pollution Control Board took a decision of cancelling the entire tender process and re-tendering it. To us, the decision does not appear to be arbitrary or fanciful or imbued with any mala fides." 

Referring to both the petitioners, Justice Kumar observed: "The parties never got an opportunity of any investment and it was only at the threshold stage when the agreement would have been entered into by the successful bidders, that this decision was taken." He concluded: "The reason for cancelling the tender, in its entirety, does not appear to us to be arbitrary or mala fide. Whether it is wise or unwise or that a better option could have been exercised by the respondents/Board has not been addressed by us for the reasons of our limitations of the jurisdiction."