Eligibility Criteria Must Have Rational Nexus With Objective: Orissa High Court Upholds ₹9 Crore Turnover Requirement In Hospital Diet Tender

“The financial capacity for uninterrupted services to be rendered to the patients is clearly discernible from the decision of the administrative authorities... which cannot be said to be arbitrary or disturb the fabric of level playing field,” held Orissa High Court

On 18th December 2025, a Division Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman of the Orissa High Court delivered a significant judgment in M/s. Utkal Suppliers Berhampur Ganjam v. Veer Surendra Sai Institute of Medical Sciences and Research Burla Sambalpur & Anr., upholding the validity of a tender clause prescribing a minimum annual turnover of ₹9 crores for bidders in a public tender for outsourcing dietary services at a 1134-bedded government hospital.

Dismissing Writ Petition (Civil) No. 19004 of 2025, the Court held that the said eligibility condition did not violate Articles 14, 19(1)(g), or 21 of the Constitution and was not arbitrary, discriminatory, or tailored to benefit any particular class of bidders. It thus declined to interfere under Article 226 of the Constitution.

“Level Playing Field Does Not Mean Elimination Of All Entry Barriers”: Pre-Qualification Criteria Justified In Light Of Public Interest

The Court's judgment centered around Clause 5.2 of the Request for Proposal (RFP) issued by VIMSAR, Burla, which specified that only bidders with an average annual turnover of ₹9 crores or above would qualify for evaluation. Further, bidders with turnover between ₹9–18 crores would receive 10 marks and those above ₹18 crores would get 20 marks under financial evaluation criteria.

The petitioner, a diet service provider operating in various hospitals across Odisha, challenged the clause as being arbitrary, violative of constitutional rights, and an unfair barrier to competition. It argued that the clause was “tailored to favour a particular class of bidders” and eroded the constitutional guarantee of a “level playing field.”

However, the respondents, represented by Additional Government Advocate Mr. Saswat Das, defended the clause, pointing out the hospital's large capacity and the practical necessity for engaging a financially robust entity capable of continuing diet services for 2–3 months without payment in cases of fund unavailability.

Accepting this justification, the Court observed:“The supply of quality foods to the indoor patients, who have been admitted in the hospital for treatment, is indispensable and in the event, there is any delay in releasing the payment for the services, the financially unsound service provider may not be in a position at times continue seamless providing of foods to such patients.”

Judicial Review In Tender Matters: “Court Cannot Sit As Appellate Authority Over Expert Administrative Decisions”

The Court relied extensively on precedents, including Michigan Rubber (India) Ltd. v. State of Karnataka [(2012) 8 SCC 216], Master Marine Services v. Metcalfe & Hodgkinson [(2005) 6 SCC 138], and Reliance Energy Ltd. v. Maharashtra State Road Development Corporation Ltd. [(2007) 8 SCC 1] to emphasize the limited scope of judicial review in tender-related matters.

Reiterating this, the Bench held: “The safest course to ascertain the arbitrariness in the action of the administrative authorities is whether the condition imposed in the tender document has any nexus to the object sought to be achieved...”

The Court concluded that the financial threshold was not whimsical or actuated by malice, but was directly linked to ensuring continuity in essential public health services, particularly food for indoor patients. It also noted that suggestions and objections were invited in a pre-bid meeting, and the petitioner's concerns were duly considered, with transparency and procedural fairness observed throughout.

Notably, the judgment rejected the petitioner's reliance on Watergrace Products v. Nashik Municipal Corporation (Bombay High Court) and Vishal Pharmaceutical Laboratories v. State of Madhya Pradesh (MP High Court), distinguishing those cases based on the different nature of services and factual context.

The Court further cited the Supreme Court’s recent judgment in Subodh Kumar Singh Rathour v. CEO [AIR 2024 SC 3784], where it was held that arbitrariness in tender conditions must be “apparent and patent on the face of the document” to justify judicial intervention under Article 226.

“Fixing Eligibility Criteria Is Within Executive Domain Unless Proven Arbitrary”: High Court Respects Administrative Expertise

In light of the Pre-bid consultations, the clarity of the criteria, and the operational rationale behind the turnover condition, the Court found no basis for interfering with the RFP clause:

“We do not find any infirmity in the action of the authorities, inviting the interference under the power of judicial review.”

It affirmed that the State's right to set eligibility benchmarks in public procurement must be respected, particularly when the same are objectively justified and not designed to exclude competitors arbitrarily.

In a well-reasoned judgment, the Orissa High Court reaffirmed the principles that judicial review in contractual matters must remain restrained, and that eligibility conditions in tenders are not per se violative of constitutional rights if they are grounded in public interest, operational exigencies, and financial prudence. The decision is a significant precedent in balancing constitutional fairness with administrative discretion in public procurement.

Date of Decision: 18th December 2025