Courts Must Not Use A Magnifying Glass To Make Every Small Mistake Appear A Big Blunder — The Final Choice Is Of The Owner, Not The Court: Supreme Court

The Supreme Court of India on March 25, 2026 set aside a Gujarat High Court order that had cancelled a Letter of Award and an executed contract for operation and maintenance of a 702.86 MW gas-based power plant — solely because a competitor's combined score was higher by 0.00205301 points. A bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held that the High Court had "exceeded the first principle of judicial restraint in contractual matters" and restored the LOA and contract in favour of the appellant, M/s STEAG Energy Services (India) Pvt. Ltd.

In January 2025, GSPC Pipavav Power Company Limited (GPPC) floated a public tender for operation and maintenance of its combined cycle power plant for five years. The tender used a Quality and Cost Based System (QCBS), assigning 70% weightage to technical evaluation and 30% to price. Three bidders qualified. The appellant, STEAG, initially scored 95 out of 100 in technical evaluation against the writ petitioner's 93. After applying the QCBS formula, STEAG's combined score was 95.4978453 against the writ petitioner's 95.09989831. GPPC's Board awarded the contract to STEAG, and the LOA was issued on June 9, 2025. The formal contract followed on July 1, 2025, by which time STEAG had already mobilised its manpower, taken over the plant, and commenced work.

The unsuccessful bidder, O&M Solutions Pvt. Ltd., challenged the award before the High Court. The High Court directed re-evaluation of STEAG's technical marks by the consultant Fichtner. The consultant found that one of STEAG's claimed Gas Turbine maintenance jobs fell outside the seven-year evaluation window — reducing STEAG's technical score from 95 to 93, creating a tie in technical scores. On the basis of this tie, the High Court applied the QCBS formula, found the writ petitioner's combined score marginally higher by 0.00205301 points, and cancelled the LOA and contract — directing award to the writ petitioner.

The core question was whether a High Court exercising writ jurisdiction under Article 14 can cancel an executed contract and redirect award to a competitor solely on the basis of a minuscule mathematical difference in scores, where no mala fide or arbitrariness by the owner has been found.

High Court Itself Found No Arbitrariness — Yet Interfered Anyway

The Court noted a crucial contradiction in the High Court's own reasoning. The High Court had expressly recorded that "there is no arbitrariness or illegality in the actions taken by the owner GPPC or its consultant." Despite making this finding, it proceeded to cancel the contract on the basis of a score difference the High Court itself described as "minuscule."

"When the difference is marginal and no mala fide or arbitrariness is found, a constitutional court should not substitute its decision for that of the owner," the Supreme Court held.

The Owner Decides — Not the Court

The Supreme Court emphasised a fundamental principle that the High Court had lost sight of. The tender document itself — Clause 23 — expressly reserved with GPPC the right to accept any bid and reject any or all bids. The formula in Clause 20.2(vi) states that "the bidder with the highest total score shall be considered for award of job." The entity to "consider" is the owner, not a court.

"The final choice is of the owner, and it is for the owner to take the final decision with necessary flexibility and pragmatism. Constitutional courts do not exercise — should not exercise — ex-ante jurisdiction to pre-empt executive actions," the Court held.

Three-Stage Test Before Judicial Interference in Tender Matters

Drawing on a line of its own decisions — Afcons Infrastructure v. Nagpur Metro Rail, Montecarlo v. NTPC, and Central Coalfields v. SLL-SML — the Court restated the settled threshold for interfering in tender decisions. Interference is permissible only where the decision-making process is mala fide, intended to favour someone, or so arbitrary and irrational that "no responsible authority acting reasonably and in accordance with law could have reached it."

"A mere disagreement with the decision-making process or the decision of the administrative authority is no reason for a constitutional court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met," the Court reiterated.

None of these conditions existed here. The score difference was 0.00205301. There was no allegation of mala fide. The High Court had itself exonerated the owner of any irregularity.

Courts Forget the Owner's Needs in the Race to Pick the Winner

The Court also made a pointed observation about how tender litigation unfolds in courts. "It is not uncommon that when judicial review proceedings are invoked, the entire focus of the court is in choosing the most eligible party. This enquiry is necessary, however judicial review courts cannot ignore the needs of the owner."

GPPC had floated the tender in January 2025. The LOA was granted in June 2025. By the time the matter came before the Supreme Court, over a year had passed. The plant needed operational staff. STEAG had already mobilised, taken over the plant, and begun work. "Who is to account for the delay in the execution of the contract and commencement of the work?" the Court asked.

Cooperation of Government Counsel Cannot Justify Intensified Scrutiny

The Court also addressed an interesting procedural point. The High Court had directed re-evaluation by Fichtner partly because GPPC's counsel had cooperated with the direction. The Supreme Court held this could not be an additional ground for intensifying judicial scrutiny.

"Counsels appearing for the Government or its instrumentalities co-operate with the Court, which is an important facet of good practices at the bar. However, we believe that the burden is always on the court and the decision to interfere with the process must be based on settled principles."

Sea Water System Marks: High Court's Finding on Clause 4 Upheld

The appellant had also separately appealed against the High Court's finding that it was not entitled to 5 marks for sea water system experience under Clause 4 of 20.02(B). The Supreme Court found no reason to interfere with this finding, holding it was based on "true and correct facts and reasonable interpretation of the tender document." The connected appeal on this ground was dismissed.

Date of Decision: March 25, 2026