'Can't Assume Indian Manufacturers Are Incapable' : Supreme Court Criticises Gwalior Municipality For Restricting Tender To Foreign Companies

The Supreme Court recently criticized the Gwalior Municipal Corporation (GMC) for its arbitrary tendering process, allowing only multinational brands to submit bids, purportedly to ensure quality assurance.

The Court noted that the GMC's action of excluding Indian firms from the tender process suggested a belief that they were inherently incapable of competing with multinational corporations or providing comparable services.

“Admittedly, all 10 companies flagged by the GMC as eligible in the NIT are multi-national corporations, and are all based outside India. This fact clearly indicates that the GMC ostensibly believes that a company's status as a global entity ipso facto confers on it the requisite repute and expertise necessary to undertake the specified works. In our considered opinion, it is wholly untenable to argue that Indian manufacturers (such as the present appellant) are inherently incapable of competing with international products, or that any service tendered by them would be of an inferior nature.”

“We, in no uncertain terms, disapprove of such presumptive practices.”, the court added.

A bench comprising Justices Surya Kant and N. Kotiswar Singh heard an appeal by Omega Elevators challenging the Madhya Pradesh High Court's Gwalior Bench decision, which had refused to entertain its writ petition against the tendering process conducted by the Gwalior Municipal Corporation (GMC).

The GMC had issued a Notice Inviting Tender (“NIT”) for the supply, installation, testing, commissioning, and maintenance of lifts under the Pradhan Mantri Awas Yojana. The Appellant-Omega Elevators was not permitted to participate in the tender because the GMC had pre-selected only 10 companies, all multinational corporations based outside India, to submit bids. The GMC's rationale was that these were the "10 most reputed firms" and this selection would ensure quality.

Challenging its exclusion by the GMC, the Appellant sought the High Court's interference. However, relying on the decision in Global Energy Ltd. and another vs. Adani Exports Ltd. and others, (2005) 4 SCC 435 that courts should not generally interfere with tender terms unless they are arbitrary, discriminatory, or malicious, the High Court dismissed the writ petition prompting the appeal to the Supreme Court.

At the outset, the Court found the GMC's reasoning for restricting the bidding to 10 foreign companies to be "conjectural" and based on "mere presumption." It rejected the idea that Indian manufacturers are inherently incapable of competing with international products or that their services would be inferior.

The Court called such presumptions "wholly untenable" and "disapproved of such presumptive practices."

Relying on the case of Union of India v. International Trading Co., (2003) 5 SCC 437, the Court said that although the Court's exercise restraint in matters pertaining to tendering process, but when the tendering process suffers from the vires of arbitrariness or favouritism, the Court's can exercise their power of judicial review to invalidate the tendering process.

Because the entire work was completed by the successful bidder, the Court disposed of the case as infructuous but strongly criticized the GMC's approach.

Case Title: Omega Elevators vs. State of M.P. & Anr.

Citation : 2025 LiveLaw (SC) 230

Click here to read/download the order

Appearance:

For Petitioner(s) :Mr. Bhargav Hasurkar, Adv. Ms. Jesal Wahi, AOR Mr. Kabir Hathi, Adv.

For Respondent(s) :Mr. Sandeep Singh, AOR