The Delhi High Court has clarified that public procurement for nutritional welfare schemes may lawfully require ownership of local manufacturing units, while also affirming that invocation of arbitration does not automatically disqualify a bidder under tender conditions. The judgment reinforces the boundaries of judicial review in tender disputes and provides critical guidance on equitable application of eligibility criteria.
Background & Facts
The Dispute
The present writ petition challenges the disqualification of Interlink Foods Pvt Ltd from a tender floated by the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) for the supply of recipe-based supplementary nutrition food items under the Integrated Child Development Services (ICDS) Scheme in Uttar Pradesh for the financial year 2026-27. The tender, issued on 16.02.2026 under NIT No.NAFED/HO/ICDS/RECIPE/2025-2026/01, mandated two key eligibility conditions: Clause A1 requiring ownership of a manufacturing unit within Uttar Pradesh, and Clause A12 disqualifying bidders with pending disputes related to previous THR supplies.
Key Facts
- The Petitioner, Interlink Foods Pvt Ltd, submitted its technical bid on 10.03.2026.
- The Petitioner’s manufacturing unit is located on a privately leased industrial plot, owned by its sister concern.
- NAFED disqualified the Petitioner on 02.04.2026 on grounds of non-compliance with Clause A1 (lack of ownership) and Clause A12 (pending dispute).
- The Petitioner had previously initiated arbitration against NAFED for recovery of contractual dues, which culminated in an arbitral award dated 28.01.2026 in its favour.
- Respondent Nos. 4 to 8 were declared technically qualified, despite alleged non-compliance with Clause A1 (leasehold units), Clause A2 (turnover), and Clause A6 (production capacity).
- Respondent Nos. 5 and 6 operate manufacturing units on industrial plots allotted by statutory authorities: UPSIDA and GIDA respectively.
- The Petitioner filed a representation on 05.04.2026 challenging the disqualification, which remained unaddressed.
Procedural History
- 16.02.2026: NAFED issued the tender document (NIT No.NAFED/HO/ICDS/RECIPE/2025-2026/01).
- 10.03.2026: Petitioner submitted its technical bid.
- 11.03.2026: Technical bids were scheduled to be opened.
- 16.03.2026: Petitioner requested disclosure of bid evaluation status.
- 25.03.2026: W.P.(C) 3771/2026 dismissed as premature; liberty granted to challenge adverse decision.
- 02.04.2026: NAFED communicated disqualification of Petitioner’s bid.
- 05.04.2026: Petitioner submitted representation to NAFED.
- 04.05.2026: Present writ petition decided by Division Bench of Delhi High Court.
The Parties' Positions
Petitioner (Interlink Foods Pvt Ltd): Argued that its leasehold arrangement with a sister concern satisfies the policy intent of Clause A1, as operational control and regulatory compliance are intact. Contended that Clause A12 cannot apply to a dispute resolved in its favour by arbitral award. Alleged discriminatory treatment of Respondent Nos. 4 to 8, who allegedly failed to meet mandatory conditions.
Respondents (NAFED and others): Maintained that Clause A1 is a legitimate policy requirement to ensure supply continuity, regulatory oversight, and logistical feasibility under the National Food Security Act, 2013. Argued that Respondent Nos. 5 and 6 operate on state-allotted industrial plots under statutory frameworks, distinct from private leases. Asserted that Clause A12 is valid to exclude bidders with unresolved disputes affecting credibility. Denied allegations of collusion.
Relief Sought
The Petitioner sought: (i) quashing of the disqualification order dated 02.04.2026; (ii) declaration that its bid was technically qualified; (iii) direction to NAFED to proceed with evaluation of its bid; and (iv) in the alternative, invalidation of the entire tender process.
The Legal Issue
The central questions were: (1) Whether the ownership requirement under Clause A1 of the tender, previously upheld by a Coordinate Bench, can be challenged on grounds of discriminatory application; and (2) Whether the existence of an arbitral award in favour of a bidder constitutes a ‘pending dispute’ under Clause A12, thereby justifying disqualification.
Arguments Presented
For the Petitioner
The Petitioner relied on Shipra Devi v. State of Uttar Pradesh to argue that differential treatment of similarly placed bidders violates Article 14. It contended that Clause A1’s objective - ensuring supply continuity and regulatory oversight - is equally met by its leasehold arrangement with a sister concern, as both entities are under common control. Regarding Clause A12, it cited the Supreme Court’s observation in SLP (C) No.11159/2026 that such clauses must be applied with scrutiny and cannot be mechanically invoked. It emphasized that arbitration is a lawful remedy and that the arbitral award dated 28.01.2026 conclusively resolved the dispute in its favour, leaving no pending claim.
For the Respondent
The Respondents argued that Clause A1 is a reasonable condition grounded in the logistical imperatives of the ICDS scheme and the National Food Security Act, 2013. They distinguished state-allotted leasehold plots under UPSIDA and GIDA - regulated by public law and long-term policy - from private leases, which are inherently unstable. They maintained that Clause A12 is designed to safeguard public interest by excluding bidders with unresolved contractual disputes that may impair performance. They further contended that allegations of collusion fall outside judicial review under Article 226 and lie within the exclusive domain of the Competition Commission of India.
The Court's Analysis
The Court began by affirming the binding precedent set in Rasi Nutri Foods v. NAFED, wherein Clause A1 was upheld as a legitimate condition tied to the operational realities of delivering perishable nutrition supplies within Uttar Pradesh. The Supreme Court’s refusal to interfere in that matter rendered the validity of Clause A1 conclusive. This Court held that judicial discipline precluded re-litigating the clause’s validity.
"The distinction, therefore, is not merely formal but goes to the heart of the policy rationale underlying Clause A1, namely, ensuring permanence, operational certainty and uninterrupted supply under a welfare scheme of continuing public importance."
The Court then examined the Petitioner’s claim of discrimination. It found a material distinction between private leases and statutory allotments: Respondent Nos. 5 and 6 operated on industrial plots allotted by state authorities (UPSIDA and GIDA), under long-term, regulated frameworks with continuing state supervision. In contrast, the Petitioner’s unit was governed by a private contractual lease, susceptible to termination or restructuring. The Court held that Article 14 does not require equal treatment of unequals, and the tendering authority was entitled to prefer infrastructure with greater stability.
Regarding Clause A12, the Court observed that the arbitration proceedings were initiated by the Petitioner to recover dues, and the award dated 28.01.2026 was in its favour. The Court held that invoking arbitration to enforce contractual rights cannot be equated with a disqualifying ‘pending dispute’. The Supreme Court’s observation in Kota Dall Mill further supported this view: a bona fide dispute resolved in the bidder’s favour does not automatically trigger disqualification.
However, the Court emphasized that even if Clause A12 were found inapplicable, the Petitioner remained disqualified under Clause A1, an essential eligibility condition. The Court held that non-compliance with a mandatory condition is a complete bar to technical qualification, rendering any reconsideration under Clause A12 academic.
The Court declined to entertain allegations of collusion, noting they required economic analysis beyond the scope of Article 226 and fell within the jurisdiction of the Competition Commission of India.
The Verdict
The Petitioner’s writ petition was dismissed. The Court held that the disqualification under Clause A1 was lawful and non-discriminatory, as the Petitioner’s private lease arrangement did not satisfy the policy objective of operational permanence. While the application of Clause A12 was found legally flawed, the Petitioner’s failure to meet the mandatory ownership requirement under Clause A1 rendered reconsideration under Clause A12 irrelevant. No relief was granted. Pending applications were disposed of.
What This Means For Similar Cases
Ownership Must Be Statutorily Anchored, Not Contractually Arranged
- Practitioners must distinguish between private leases and state-allotted industrial plots when challenging or defending eligibility conditions in public tenders.
- Tendering authorities may lawfully require ownership or statutory tenure where supply continuity is critical, such as in food security, healthcare, or infrastructure projects.
- Leasehold arrangements with sister concerns will not satisfy ownership clauses unless backed by public law guarantees.
Arbitration Does Not Equal Disqualification
- Invoking arbitration to recover contractual dues cannot be treated as a ‘pending dispute’ under tender disqualification clauses if the award is in the bidder’s favour.
- Clause A12-type provisions must be interpreted narrowly: only unresolved, adverse disputes affecting credibility should trigger disqualification.
- Bidders should be permitted to participate in future tenders if they have successfully enforced their rights through arbitration, absent misconduct.
Judicial Review Is Limited to Legality, Not Merit
- Courts will not substitute their view on tender conditions if they are reasonable and tied to public interest.
- Allegations of collusion or cartelisation require specialized investigation and must be raised before the CCI, not in writ petitions.
- Non-compliance with a mandatory condition is a complete bar to relief, even if other conditions are later found to be improperly applied.
