Restricting Tender Participation To NCR-Based Pellet Manufacturers To Curb Stubble Burning, Pollution Not Arbitrary: Allahabad HC

On Friday, the Allahabad High Court observed that the condition restricting tender participation to pellet manufacturers in and around the National Capital Region (NCR) aims to reduce stubble burning by farmers, which is a major cause of air pollution in the area. The Court held that this tender condition is neither ‘arbitrary’ nor ‘discriminatory’, but framed in the larger public interest. It further noted that it is within the employer’s domain to determine the tender conditions best suited to serve the ‘public interest’.

The bench of Justice Shekhar B. Saraf and Justice Vipin Chandra Dixit observed that

“The respondents, in its counter-affidavit, has also averred that the purpose behind incorporating such stringent clause as a pre-qualifying condition of the tender is the distressing environmental condition in the NCR region. This indicates that the raison d’être of imposition of a stringent condition, that is, allowing only the existing pellet manufacturers having their plant location in NCR region or within 100 km from the truck gate of the power station to participate in the tender proces is to reduce stubble burning by farmers which is the persistent and root cause for air pollution in the NCR region.”

The Court held

“Ergo, the restrictive condition in the tender cannot be considered to be arbitrary and discriminatory. It is within the wisdom and discretion of the employer to determine the conditions/clauses that are best suited for the work to be performed in the public interest.”

Accordingly, the Court held that it could not interfere with a tender condition as the same was issued in the interest of the public at large.

Factual Background

In brief, the petitioner’s firm, based in Ambedkar Nagar, Uttar Pradesh, is involved in supplying non-torrefied biomass pellets to coal-handling plants.

On March 2, 2022, the Ministry of Power issued a Model Contract for the use of biomass in Thermal Power Plants (TPPs). Clause 2(b) of the Model Contract mandated that the power stations located within 300 km of the National Capital Region (NCR) must use at least 50% raw material comprising stubble, straw, or crop residue from rice paddy, sourced exclusively from Punjab, Haryana, or the NCR region.

Subsequently, in July 2023, the Environment (Utilisation of Crop Residue by Thermal Power Plants) Rules, 2023 were notified. These rules require all coal-based thermal power plants in the NCR to blend a minimum of 5% pellets or briquettes made from crop residue with coal.

Now, in 2024, Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd. issued a tender inviting supply of non-torrefied biomass pellets to promote cleaner energy and reduce pollution in thermal power generation. Clause 3(i) of the tender imposed a pre-qualifying condition that restricted participation to manufacturers located either within the NCR or within a 100 km radius of the material entry gate of Harduaganj Thermal Power Station in Kasimpur, Aligarh.

As the petitioner’s firm did not meet this geographical criterion, it was excluded from participating in the tender process. Challenging this very restriction, the petitioner approached the High Court wherein it alleged a violation of Articles 19 and 21 of the Constitution of India. It was their primary contention that the tender condition had unreasonably limited eligibility based on geographical location.

High Court Verdict

The Court observed that biomass pellets are better for the environment as they are more combustible but do not release too much greenhouse gas. It observed that biomass pellets are much better for the environment than directly burning stubble and biomass.

Inter alia, the Court relied on the decisions of the Apex Court in Tata Cellular v. Union of India, Reliance Energy Ltd. v. Maharashtra State Road Development Corpn. Ltd., Maa Binda Express Carrier v. North-East Frontier Railway, Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., and Silppi Constructions Contractors v. Union of India. The Supreme Court has uniformly held that conditions of tender are in the exclusive domain of the tendering authority and must not be subjected to judicial review unless constitutional provisions are violated, there is inherent bias or perversity in the tender conditions.

The bench headed by Justice Saraf held

“Emerging trend of globalisation and competition equates judicial review with judicial restraint in tender matters. The Writ Court does not act as a Court of appeal but merely reviews the modus operandi adopted by the tender making authority (either private or public) in arriving at a decision as it is not equipped with the expertise to correct the administrative decision. In arriving at a commercial decision considerations which are paramount are commercial consideration. The authority can choose its own method to arrive at a decision. If a review of administrative decision is permitted by Writ Court without necessary expertise, it will lead to manifest injustice.”

It held that principles of equity and natural justice can be applied in the tendering process where there is patent illegality. It added that the Court must be considerate of the fact that the tendering authority sets certain conditions to achieve specific goals for serving larger public interest. U

Unless these conditions are unreasonable or perverse, the same cannot be interfered with at the behest of an individual who might be aggrieved by such conditions, the bench noted.

“A term is essential or not is a decision taken by the employer, which should be respected and soundness of that decision cannot be questioned by Writ Court. Reasonableness of restriction is to be determined in an objective manner from the standpoint of interests of the general public and not from the standpoint of the interest of persons upon whom the restrictions have been imposed or upon abstract consideration,” the division bench observed.

Furthermore, holding that there is no fundamental right to enter into business with the State, the Court noted that the fundamental right to trade and business under Article 19(1)(g) of the Constitution of India also comes with reasonable restrictions which can be imposed in public interest.

Furthermore, the Court held that the condition for obtaining biomass pellets from plants situated in NCR and nearby areas is to reduce stubble burning which is the primary source of pollution in the region. It added that the condition was to achieve a specific environmental goal of reducing pollution caused by stubble burning in NCR and nearby areas.

Thus, holding that there was no malafide to specifically exclude the petitioner from participating in the tender process, the Court dismissed the writ petition.

Case Title: M/S Rajan Construction Company vs.State Of U.P. And Another 2025 LiveLaw (AB) 137 [WRIT-C NO. 34248 OF 2024]

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