The Supreme Court has reaffirmed the principle of judicial restraint in reviewing public sector tenders, holding that a marginal difference in total scores between competing bidders cannot justify setting aside a Letter of Award already executed and operational. The judgment underscores that courts must not substitute their own evaluation for that of the owner, particularly when the process adheres to the tender document and no mala fide or arbitrariness is established.
Background & Facts
The Dispute
GSPC PIPAVAV Power Company Limited (GPPC), a public sector entity, commissioned a 702.86 MW gas-based combined cycle power plant in 2013 - 2014. In January 2025, GPPC floated a public tender for the operation and maintenance (O&M) of the plant for a five-year term, using a Quality and Cost Based System (QCBS) for evaluation. The tender document specified a 70% weightage for technical evaluation and 30% for financial bid. The successful bidder was to be the one with the highest total score (S), calculated as S = (St × Tw) + (Sf × Fw), where St is the technical score and Sf is the financial score.
Key Facts
- The tender document, specifically Clause 20.2, required bidders to submit documentary evidence for technical experience, including Major Overhaul, HGPI, and CI of gas turbines with ISO rating above 100 MW.
- Four bids were submitted; three qualified for financial evaluation after technical screening.
- The appellant, M/s. Steag Energy Services (India) Pvt. Ltd., initially received 10 out of 10 marks under Clause 20.2(B)(3) for technical experience.
- The writ petitioner, O&M Solutions Pvt. Ltd. (OMS), received 8 out of 10 marks under the same criterion.
- The appellant’s total technical score (St) was 95 out of 100; OMS’s was 93.
- Financial scores were calculated based on the lowest bid (Fm) receiving 100 points, with others scored proportionally.
- The appellant’s financial score (Sf) was 95.4978453; OMS’s was 95.09989831.
- The appellant’s total score (S) was 95.0978453; OMS’s was 95.09989831.
- On 05.05.2025, GPPC’s Board resolved to award the contract to the appellant.
- Letter of Intent (LOI) was issued on 09.06.2025; the appellant accepted it and mobilized manpower.
- A formal contract was executed on 01.07.2025.
- OMS challenged the tender process in the Gujarat High Court, alleging arbitrariness and violation of Article 14.
- The High Court, upon re-evaluation by consultant Fichtner, found that the appellant’s technical score was reduced to 8 (from 10) due to one HGPI project falling outside the seven-year window (01.01.2018 - 31.12.2024).
- Post-re-evaluation, both bidders had identical technical scores of 93.
- The High Court, relying on Clause 20.2(vi), awarded the contract to OMS based on its marginally higher total score (95.09989831 vs. 95.0978453), a difference of 0.00205301.
Procedural History
- 23.01.2025: Pre-bid meeting held; OMS did not participate or raise queries.
- 04.04.2025: OMS submitted Declaration of Unconditional Offer (DUO).
- 05.05.2025: GPPC Board resolved to award contract to Steag.
- 09.06.2025: LOA issued to Steag; acceptance confirmed.
- 01.07.2025: Formal contract executed between GPPC and Steag.
- 10.07.2025: OMS filed Writ Petition (Special Civil Application No. 7289 of 2025) in Gujarat High Court.
- 14.08.2025: Consultant Fichtner submitted re-evaluation report reducing Steag’s technical score to 8.
- 20.01.2026: Gujarat High Court quashed LOA and directed award to OMS.
- 25.03.2026: Supreme Court delivered judgment on Civil Appeals arising from the High Court order.
The Parties' Positions
For the Appellant (Steag)
- Argued that the High Court exceeded its judicial review limits by substituting its own evaluation for that of GPPC and its expert consultant.
- Relied on Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd. and Montecarlo Ltd. v. NTPC Ltd. to assert that interference is permissible only if the process is mala fide, arbitrary, or perverse.
- Emphasized that the difference in scores was minuscule and that the tender process was transparent and compliant.
- Highlighted that the contract was already executed and operational, and setting it aside would cause significant public loss.
For the Respondent (OMS)
- Contended that the tender document mandated award to the highest total score, and the High Court merely enforced this contractual term.
- Argued that the reduction in Steag’s technical score created a tie, and the financial bid became the decisive factor.
- Asserted that the High Court’s intervention was necessary to uphold the integrity of the tender process.
- Cited the principle that public procurement must be conducted with mathematical precision to prevent manipulation.
Relief Sought
- OMS sought quashing of the LOA dated 09.06.2025 and the contract dated 01.07.2025.
- OMS sought direction to GPPC to award the contract to it as the highest-scoring bidder.
- Steag sought setting aside of the High Court’s order and restoration of the LOA and contract.
The Legal Issue
The central question was whether a constitutional court may set aside a Letter of Award and contract awarded under a public tender solely on the basis of a minuscule difference in total scores, when the evaluation process was transparent, followed the tender document, and no mala fide or arbitrariness was established.
Arguments Presented
For the Appellant
The appellant relied on Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd. and Montecarlo Ltd. v. NTPC Ltd. to argue that judicial review of tender evaluations must be confined to detecting mala fides, arbitrariness, or perversity. It emphasized that courts lack technical expertise to re-evaluate bids and must respect the owner’s discretion under the principle of "free play in the joints." The appellant highlighted that the contract was already executed, manpower mobilized, and public interest would be severely prejudiced by disruption.
For the Respondent
The respondent argued that Clause 20.2(vi) of the tender document mandated award to the highest total score, and the High Court merely applied this objective criterion. It contended that even marginal differences must be enforced to preserve the integrity of the tender process and prevent manipulation. It further argued that the re-evaluation was conducted with transparency and under court supervision, making the outcome legally binding.
The Court's Analysis
The Supreme Court conducted a rigorous analysis of the principles governing judicial review in public procurement. It observed that while the High Court correctly identified a technical scoring error, its remedy - setting aside an executed contract - was disproportionate and legally unsound.
"The decision-making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decision-making process is mala fide or is intended to favour someone."
The Court reiterated that courts must not act as appellate authorities over technical evaluations. The tender process, involving complex engineering and financial assessments, is entrusted to experts and the owner. The Court noted that the consultant’s re-evaluation was conducted with due process and the scoring error was corrected without bias.
The Court emphasized the doctrine of "free play in the joints," citing Montecarlo Ltd. v. NTPC Ltd., to underscore that public sector entities must be allowed flexibility in contractual decisions, particularly when the process is fair and compliant. The Court held:
"The final choice is of the owner, and it is for the owner to take the final decision with necessary flexibility and pragmatism."
It further observed that the High Court’s intervention ignored the public interest implications: the contract was already executed, the plant was being operated, and a fresh tender would cause significant delay and financial loss to the public exchequer. The Court referenced Silppi Constructions Contractors v. Union of India and Assn. of Registration Plates v. Union of India to affirm that courts must weigh public interest before disrupting ongoing contracts.
The Court also rejected the argument that mathematical precision alone justifies judicial interference. It held that in competitive bidding, marginal differences are inevitable and must be accepted as part of the commercial process. The owner’s right to accept or reject any bid under Clause 23.0 - 23.1 was deemed a legitimate contractual safeguard.
The Verdict
The Supreme Court allowed the appeal and set aside the High Court’s order. The Letter of Award dated 09.06.2025 and the contract executed on 01.07.2025 in favour of M/s. Steag Energy Services (India) Pvt. Ltd. are upheld. GPPC is directed to proceed with the performance of the contract without hindrance. There shall be no order as to costs.
What This Means For Similar Cases
Judicial Review Cannot Substitute Technical Evaluation
- Practitioners must argue that courts cannot re-evaluate technical bids or substitute their judgment for that of the owner’s experts.
- Any challenge must demonstrate mala fide, arbitrariness, or perversity - not mere disagreement with the outcome.
- Courts must defer to the owner’s assessment unless the process is fundamentally flawed.
Contract Execution Precludes Judicial Interference
- Once a contract is executed and operational, courts must be extremely reluctant to set it aside, even if a scoring error is identified.
- Public interest, including financial loss and operational disruption, must be a decisive factor in judicial review.
- Fresh tenders should be ordered only in cases of gross illegality, not marginal scoring discrepancies.
Tender Documents Must Be Interpreted as a Whole
- Clause 23.0 - 23.1 granting the owner the right to reject any bid is not a mere formality - it is a substantive contractual right.
- Courts must not treat tender conditions as rigid mathematical formulas but as frameworks for discretionary, pragmatic decision-making.
- Bidders who do not raise pre-bid queries cannot later challenge the evaluation methodology.
