Manufacturing Unit Must Be in Uttar Pradesh to Bid for Child Nutrition Tender — Delhi High Court Upholds NAFED's Geographical Eligibility Condition for Rs. 2,768 Crore ICDS Supply Contract

"It Is Logistically Impossible, Economically Disastrous And Highly Prone To Pilferage To Permit An Out-Of-State Bidder To Transport Thousands Of Metric Tons Of Subsidised Wheat And Rice To An Alternate State", Delhi High Court.

In a significant ruling on the boundaries of judicial review in public procurement, the Delhi High Court on March 19, 2026 dismissed three writ petitions filed by out-of-state nutrition food manufacturers challenging tender conditions for the supply of Recipe Based Supplementary Nutrition (RBSN) food items to approximately 1.6 crore beneficiaries across Uttar Pradesh under the Integrated Child Development Services Scheme — upholding the requirement that bidders must own a manufacturing unit within Uttar Pradesh prior to the date of floating the tender, and refusing to strike down the annual turnover threshold of Rs. 75 crores from Take Home Ration supplies.

The Division Bench of Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora, deciding the consolidated petitions in Rasi Nutri Foods India Private Limited & Others v. National Agricultural Cooperative Marketing Federation of India & Ors., held that the challenged conditions were neither arbitrary nor discriminatory and fell squarely within the prerogative of the tendering authority to prescribe, especially where a welfare scheme under the National Food Security Act, 2013 was at stake.

NAFED (National Agricultural Cooperative Marketing Federation of India) issued a Notice Inviting Tender on February 16, 2026 for supply of RBSN food items in Uttar Pradesh for financial year 2026-27 under the ICDS Scheme — a programme covering children between 6 months and 6 years of age, pregnant women, lactating mothers, and adolescent girls in aspirational districts. The total estimated tender value was approximately Rs. 2,768 crores, with the State divided into 9 clusters.

Three writ petitions were filed by manufacturers based outside Uttar Pradesh — including companies with facilities in Tamil Nadu, Rajasthan, and Maharashtra — challenging principally two clauses: Clause A(1), requiring ownership of a manufacturing unit within Uttar Pradesh prior to the tender floating date; and Clause A(12), disqualifying bidders with pending legal or criminal cases associated with Take Home Ration supplies. One petition additionally challenged the Rs. 75 crore annual turnover requirement under Clause A(2).

The background to the tender was significant: an acute shortage in THR supply in Uttar Pradesh had been the subject of a Public Interest Litigation before the Allahabad High Court in Shipra Devi v. State of Uttar Pradesh (decided August 1, 2025), which had directed the State to ensure full compliance with the National Food Security Act, 2013 and the Saksham Anganwadi and Poshan 2.0 Rules, 2022, with strict adherence to GFR procurement norms.

Whether the Geographical Restriction Requiring a Manufacturing Unit in Uttar Pradesh Was Arbitrary

The petitioners mounted a multi-pronged constitutional attack on Clause A(1). They argued it violated Articles 14, 19(1)(g), and 21 of the Constitution by excluding all otherwise qualified out-of-state manufacturers at the threshold without rational nexus to the objective of ensuring quality and timely supply. They urged that a grace period of 2-3 months post-award to establish a manufacturing unit within the State would adequately serve the tender's purpose.

NAFED's justification for the clause was detailed and practical. The raw materials — wheat and rice — were allocated by the Government of India to the State of Uttar Pradesh at highly subsidised rates and were to be lifted on ex-godown basis from FCI depots within the State. Permitting an out-of-State manufacturer to transport thousands of metric tons of this State-quota subsidised grain to another state for processing would, in NAFED's submission, be "logistically impossible, economically disastrous and highly prone to pilferage." Moreover, RBSN food items carry a shelf life of only three months, requiring swift processing and distribution — the anganwadis themselves requiring a lead period of one month for household distribution.

The Court found these justifications entirely reasonable. It noted that following the Shipra Devi judgment, a perennial problem had been identified: limited-supply food items manufactured in other states and transported to Uttar Pradesh were found not fit for consumption due to inadequate supervision. Physical inspection of manufacturing units — feasible only if the units were within Uttar Pradesh — was essential to quality assurance.

The Court also rejected the petitioners' suggestion that they be allowed to bid on an undertaking to establish units within 2-3 months. "The contract contemplates that the supply should be made from the State of Uttar Pradesh… The supply is expected to be made within a period of 15 days from the date of the award of the tender/contract and no later than 01.04.2026," the Court noted, making clear that interim supply from out-of-state units during a grace period would directly contradict the tender conditions.

Articulating the governing principle of judicial restraint in tender matters, the Court quoted Directorate of Education v. Educomp Datamatics Ltd.: "The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias… The courts cannot strike down the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical."

On the Rs. 75 Crore Annual Turnover Requirement

The petitioners challenged Clause A(2) requiring a minimum annual turnover of Rs. 75 crores from THR supplies for each of the last three financial years as excessive and tailored to favour certain incumbents. The Court disagreed. Given that each successful bidder could potentially be awarded contracts worth approximately Rs. 600 crores across two clusters, the turnover threshold was held to be a rational and proportionate measure to ensure that bidders possessed both the experience and the financial capacity to sustain uninterrupted large-scale supply across the State.

On Clause A(12) — Disqualification for Pending Litigation

The Court's treatment of Clause A(12) — which disqualified bidders with any pending legal or criminal cases associated with THR supplies — was notably more nuanced. The petitioners argued forcefully that mere pendency of proceedings, without any adjudicated finding of guilt or deficiency, could not constitute a rational basis for disqualification, and that the clause effectively penalised parties for exercising their constitutional right to seek legal remedies.

The Court acknowledged the force of this argument. "Prima facie the submission of Mr. Nayar is appealing, as the above reveals that the petitioner in W.P.(C) 2839/2026 has an award in its favour and it would be unjust for the respondents to disqualify a bidder on the basis of pendency of a petition under Section 34 of the Act. Similarly, there is no finding of any competent authority against the petitioner in W.P.(C) 2761/2026 holding that the services rendered by it were indeed deficient," the bench observed.

However, the Court declined to rule on this question, holding that since all petitioners failed the mandatory threshold condition of Clause A(1) — none of them owned a manufacturing unit in Uttar Pradesh — the challenge to Clause A(12) had become academic and did not require adjudication.

On GFR Compliance Challenges

The petitioners also challenged the tender's alleged non-compliance with Rules 159, 160, and 161 of the General Financial Rules, 2017 regarding mandatory e-publishing on the Central Public Procurement Portal, Government e-Marketplace, and e-procurement requirement. The Court did not specifically adjudicate these challenges, as the petitions were dismissed on the grounds of failure to meet Clause A(1).

Date of Decision: March 19, 2026