Can a State Restrict Tenders to Local Suppliers? Supreme Court Says No

The Supreme Court, on October 6, 2025, held that while the State has the freedom to prescribe conditions in a tender, this power cannot be exercised in a manner that infringes upon constitutional guarantees by "closing the market to outsiders without just cause."

Court quashed a restrictive tender condition for the supply of sports kits in Chhattisgarh, finding it violative of Articles 14 and 19(1)(g) of the Constitution of India, a key legal issue in government contracting.

"The doctrine of level playing field requires that gates of competition be opened to all who are equally placed,'' a bench of Justices Sanjay Kumar and Alok Aradhe said.

Three tender notices were issued on July 21, 2025, for the supply of Sports Kits to students of Government Primary Schools, Government Upper Primary Schools, and Government High and Higher Secondary Schools in Chhattisgarh.

The notices contained a condition that bidders must have supplied sports goods worth at least Rs 6.00 crores (cumulative) to State Government agencies of Chhattisgarh in the last three financial years.

Having examined the matter, court held that the impugned tender condition was arbitrary, unreasonable, and discriminatory. "It does not have any rational nexus to the object of ensuring effective supply of Sports Kits to the children in State", the bench said.   

Court opined that the eligibility criteria in the impugned notices should be framed to encourage wider participation and secure the best price for the State, thereby safeguarding the public exchequer.

The bench emphasised that the principle of non-discrimination is embodied in Article 14 of the Constitution, which "has to be read in conjunction with rights conferred by other Articles like Article 21 of the Constitution of India". It noted that Article 21, which refers to the right to life, also includes ‘opportunity’.

Further, the court said, "The doctrine of level playing field is an important concept while construing Article 19 (1) (g) of the Constitution of India. Article 19(1) (g) confers fundamental right to carry out business to a company, it is entitled to invoke the doctrine of level playing field which is however, subject to public interest."

The observations were made in an appeal filed by Vinisha Technologies Pvt Ltd. Initially, the company approached the Chhattisgarh High Court against the validity of the tender conditions, which the high court repelled.

In its appeal before the Supreme Court, the company contended that the tender condition violated Articles 14 and 19(1)(g) of the Constitution of India, as it excluded competent suppliers from outside the State, discouraged wider participation, and fostered cartelisation.

The respondent authorities, conversely, submitted that the condition was incorporated to safeguard timely delivery, ensure quality compliance, and prevent supply chain disruptions, citing the geographic and social conditions of the State of Chhattisgarh. They also submitted that the impugned condition is prevalent in other States as well. The authorities further argued that it was to ensure that the successful bidder has the knowledge of the topography of the State of Chhattisgarh, a Naxal affected State, so that Sports Kits could be timely delivered to the children of Government Schools in the State.

The bench, however, held that "to confine the eligibility to participate in the tender, within one State is not only irrational but is also disproportionate to the goal of ensuring effective delivery of Sports Kits".

Court also held the justification advanced by the state that Chhattisgarh being a Maoist-affected area meant only those with past experience of supply in the State to State Government agencies of Chhattisgarh could be relied upon was untenable for several reasons. Firstly, court pointed out that the tender in question was not for security sensitive equipment but was for supply of Sports Kits, which did not involve any special risk or security repercussions. Secondly, it noted that only some districts of Chhattisgarh were affected by Maoist activities, and "it was incorrect to treat the entire State, as uniformly affected by Naxalites, for exclusion of other eligible bidders." Thirdly, it added that a successful bidder who may not be conversant with the topography could engage a local supply chain to supply the Sports Kits.

Accordingly, court set aside the high court's orders and quashed the tender condition. It clarified that the respondents are at liberty to issue fresh notices inviting tenders.

Case Title: Vinisha Technologies Pvt Ltd Vs State of Chhattisgarh & Anr

Judgment Date: October 6, 2025

Bench: Justices Sanjay Kumar and Alok Aradhe