WHEN CAN YOU CHALLENGE A TENDER?

The Limits of Judicial Review in Government and Commercial Procurement — Lessons from Steag Energy v. GPPC

By Dhanaram Ramachandran, Advocate |  Founder, D.R. Law Chambers  |  2026

EXECUTIVE SUMMARY

Every business that bids for a contract faces the same question when it loses: was the process fair, and can the award be challenged in court? The Supreme Court's recent decision in Steag Energy Services (India) Pvt. Ltd. v. GSPC Pipavav Power Company Ltd. (2026 INSC 295) is a powerful reaffirmation of a settled but frequently misunderstood principle — that courts exercise a narrow, restrained jurisdiction when reviewing tender awards and commercial decisions. A disappointed bidder cannot ask a court to re-score the bids, re-run the evaluation, or substitute its commercial judgment for that of the procuring authority. Judicial review tests the legality of the decision-making process, not the merits of the decision. This article examines the judgment, traces the constitutional foundation and the established line of precedent from Tata Cellular to Tata Motors, explains precisely when courts will and will not interfere, and offers practical guidance for both bidders and tendering authorities.

I. INTRODUCTION: THE QUESTION EVERY BIDDER FACES

Public procurement is one of the largest arenas of commercial activity in India. Governments, public sector undertakings, and large enterprises award contracts worth enormous sums through competitive tenders every year — for construction, supply, operation and maintenance, consultancy, and every kind of service. For the businesses that compete for this work, a single tender can determine the year's revenue.

So when a business bids and loses — particularly when it believes the evaluation was flawed, unfair, or tilted towards a competitor — the instinct is to challenge the award in court. The writ jurisdiction of the High Courts under Article 226 of the Constitution is the usual route. But how far will a court go? Will it re-examine the scoring? Will it second-guess the technical evaluation? Will it substitute its own view of who should have won?

The Supreme Court's decision in Steag Energy v. GPPC answers these questions with clarity. And the answer is one that every business — whether it bids for contracts or awards them — needs to understand before it rushes to litigation.

THE JUDGMENT: Steag Energy Services (India) Pvt. Ltd. v. GSPC Pipavav Power Company Ltd. (GPPC) & Ors.

Neutral Citation: 2026 INSC 295; 2026 SCC OnLine SC 478 — Supreme Court of India (Justices P.S. Narasimha and Alok Aradhe, decided 25 March 2026)

Facts: GSPC Pipavav Power Company Ltd. (GPPC), which operates a 702.86 MW gas-based combined cycle power plant, floated a public tender in January 2025 for the operation and maintenance of the plant for an initial five-year period. The tender followed the Quality and Cost Based Selection (QCBS) method, assigning 70% weightage to the technical evaluation and 30% to the financial bid. Steag Energy was declared the successful bidder, issued a Letter of Award on 9 June 2025, and executed the contract on 1 July 2025. An unsuccessful bidder challenged the evaluation before the High Court of Gujarat, alleging arbitrariness and violation of tender conditions. The High Court examined the scoring, found discrepancies, directed a re-evaluation of the technical scores, and set aside the award. Steag appealed to the Supreme Court.

Held: The Supreme Court set aside the Gujarat High Court's order and restored the contract to Steag. It held that the High Court had exceeded the permissible limits of judicial review by re-examining the technical evaluation and substituting its own assessment for that of the expert evaluators. The Court reaffirmed that marginal differences in scoring between bidders do not, by themselves, establish unfairness or illegality, and that constitutional courts must not exercise 'ex-ante' jurisdiction to pre-empt the commercial decisions of the procuring authority.

II. WHAT THE SUPREME COURT HELD

The Court's reasoning rested on a series of connected propositions, each of which is significant for businesses navigating the tender process.

A. The Owner's Right to Decide

The Court emphasised that in a tender process, the final choice belongs to the owner — the entity floating the tender. It is for the owner to take the final decision with the flexibility and pragmatism that commercial decision-making requires. The court's role is not to act as an appellate authority over that commercial choice. As the judgment put it, while exercising judicial review of contractual matters, constitutional courts do not, and should not, exercise 'ex-ante' jurisdiction to pre-empt executive actions.

B. Review of Process, Not Merits

The central principle of this entire area of law is the distinction between the decision and the decision-making process. A court exercising judicial review examines whether the process was fair, lawful, and free from arbitrariness or mala fide — not whether the decision itself was the best possible one. The High Court, by re-scoring the technical bids and directing a fresh evaluation, had crossed from reviewing the process into re-taking the decision. That, the Supreme Court held, was impermissible.

C. Marginal Differences Do Not Establish Illegality

A recurring feature of tender challenges is the argument that small scoring differences reveal unfairness. The Court rejected this. Marginal differences in the scoring between competing bidders do not, by themselves, establish unfairness, arbitrariness, or illegality. Competitive bidding will always produce close results; that closeness is not evidence of wrongdoing.

D. Special Reluctance in Technical Matters

The Court reiterated a point that has been made repeatedly in this line of authority — that where the subject matter is technical, courts should be even more reluctant to interfere, because judges do not possess the technical expertise of the evaluators. The evaluation of bids for the operation and maintenance of a power plant involves specialised engineering and commercial judgment that a constitutional court is not equipped to second-guess.

THE COURT'S CORE PRINCIPLE

"The final choice is of the owner, and it is for the owner to take the final decision with necessary flexibility and pragmatism. While exercising judicial review of contractual matters, constitutional courts do not exercise, should not exercise ex-ante jurisdiction to pre-empt executive actions." The judicial wisdom, the Court observed, must balance certainty in the market with fair play in action — maintaining the equilibrium between the need for order and the quest for justice.

III. THE CONSTITUTIONAL FOUNDATION: JUDICIAL REVIEW OF CONTRACTUAL ACTION

To understand why the Court decided as it did, one must understand the constitutional basis of judicial review in tender matters. When a State or a public body enters the commercial arena — floating tenders and awarding contracts — it does not shed its public character. Its actions remain subject to Article 14 of the Constitution, which guarantees equality and prohibits arbitrariness. That is why a disappointed bidder can invoke the writ jurisdiction of the High Court under Article 226 at all.

But the scope of that review is deliberately narrow. The State, when acting in the commercial field, must be allowed the same freedom to make business decisions that any commercial entity enjoys — subject only to the constitutional discipline against arbitrariness and unfairness. The courts have therefore developed a carefully calibrated standard: they will intervene to protect the integrity of the process, but they will not sit in appeal over the wisdom of the commercial choice.

This balance reflects a deeper truth about the separation of powers. Courts are institutionally suited to test legality, fairness, and rationality. They are not suited to make commercial or technical judgments about which bid offers the best value. To cross that line would be to substitute judicial preference for executive and commercial responsibility — and to introduce paralysing uncertainty into public procurement.

IV. THE ESTABLISHED LINE OF PRECEDENT

The Steag Energy judgment did not break new ground. It reaffirmed a body of law that the Supreme Court has developed consistently over three decades. Understanding this lineage is essential to understanding how settled the principle is.

A. Tata Cellular v. Union of India (1994)

The foundational authority. The Supreme Court laid down that the principles of judicial review apply to the exercise of contractual powers by government bodies, but that the court's role is confined to reviewing the decision-making process, not the decision itself. The Court identified the grounds of review as illegality, irrationality, and procedural impropriety, and cautioned that the court does not act as a court of appeal over administrative decisions.

B. Jagdish Mandal v. State of Orissa (2007)

The Court sharpened the test, holding that judicial review of tenders is intended to prevent arbitrariness, irrationality, bias, and mala fide — not to protect the private interests of disappointed bidders. It stressed that the court must ask whether the process was fair, and whether public interest is served, rather than whether a better decision could have been made.

C. Afcons Infrastructure v. Nagpur Metro (2016) and Michigan Rubber (2012)

These decisions reinforced that the author of a tender document is the best judge of its requirements, and that the court should not second-guess the interpretation placed on tender conditions by the tendering authority unless that interpretation is perverse or mala fide. The threshold for interference was set deliberately high.

D. Tata Motors v. BEST (2023)

The most recent major restatement before Steag Energy. The Court reiterated that in contracts involving technical issues, courts should be especially reluctant to interfere, because judges lack the necessary technical expertise. This is the principle the Steag Energy Court expressly relied upon.

THE THREAD RUNNING THROUGH THE CASES

For thirty years, the Supreme Court has said the same thing in different words: judicial review of tenders exists to police the fairness of the process, not to re-decide the outcome. A disappointed bidder who cannot point to arbitrariness, mala fide, irrationality, or a breach of the tender's own conditions has no case — however strongly it believes it should have won.

V. WHEN COURTS WILL INTERFERE — AND WHEN THEY WILL NOT

The practical value of this body of law lies in knowing which side of the line a given challenge falls on. The following table distils the position.

Courts WILL ordinarily interfere where:	Courts will NOT interfere merely because:
The process was tainted by mala fide, bias, or favouritism towards a particular bidder.	The disappointed bidder believes a different result would have been fairer or better.
The decision is so irrational or perverse that no reasonable authority could have reached it (Wednesbury unreasonableness).	There are marginal differences in scoring between the winning and losing bids.
The tendering authority breached the tender's own essential and mandatory conditions.	The court, on its own assessment, would have scored the technical bids differently.
There is demonstrable arbitrariness violating Article 14 — unequal treatment of similarly placed bidders.	The bidder disagrees with the authority's interpretation of a tender condition (absent perversity).
The process was procedurally unfair — e.g. undisclosed criteria or shifting goalposts.	The technical evaluation involved specialised judgment the court is not equipped to review.

The distinction is not always crisp at the margins, but the orientation is clear. The presumption is strongly against interference. The burden is on the challenger to demonstrate a genuine legal vice in the process — not merely a preferable alternative outcome.

VI. ‘EX-ANTE’ JUDICIAL REVIEW: THE SHARPENED EMPHASIS

One phrase in the Steag Energy judgment deserves particular attention, because it captures a sharpened emphasis in the Court's approach: the caution against 'ex-ante' judicial review.

Ex-ante review means intervening before the fact — stepping in to pre-empt or second-guess an executive or commercial decision at the threshold, rather than testing it, after the fact, against the established grounds of illegality. The Court's message is that constitutional courts should not position themselves as a preliminary checkpoint through which every commercial decision of a public authority must pass. To do so would convert the writ court into a super-evaluator, and would inject exactly the uncertainty and delay that the tender process is designed to avoid.

For businesses, this signals that the courts are increasingly protective of the finality and certainty of concluded tender processes. A challenge that asks the court to unpick a completed evaluation — particularly one on which a contract has already been awarded and executed — faces an even steeper climb than before.

VII. PRACTICAL GUIDANCE

A. For Businesses That Bid and Lose

If you have lost a tender and are considering a challenge, apply the following discipline before rushing to court:

•       Identify a genuine legal vice, not a grievance. Ask whether you can point to arbitrariness, mala fide, irrationality, or a breach of the tender's own mandatory conditions. Disappointment is not a ground; illegality is.

•       Focus on the process, not the score. A challenge that asks the court to re-evaluate the bids will fail. A challenge that shows the process was unfair, opaque, or discriminatory has a chance.

•       Act with urgency. Delay is fatal in tender litigation. Courts are reluctant to unsettle a concluded award, and even more so once the contract has been executed and performance has begun. Move before the award crystallises where possible.

•       Scrutinise the tender conditions. If the authority departed from its own essential and mandatory criteria, that is a legitimate ground. If it merely exercised judgment within those criteria, it is not.

•       Assess the commercial reality. Even a technically valid challenge may be futile if the contract is executed and performance is advanced. Weigh the cost and time of litigation against the realistic prospect of relief.

B. For Authorities and Enterprises That Float Tenders

If you issue tenders and award contracts, this judgment is a source of protection — but only if your process is sound:

•       Document the evaluation rigorously. The best defence to a challenge is a transparent, well-recorded evaluation that demonstrably followed the published criteria.

•       Follow your own tender conditions strictly. Most successful challenges arise from an authority departing from its own essential and mandatory conditions. Consistency is your shield.

•       Apply criteria equally to all bidders. Article 14 is violated by unequal treatment of similarly placed bidders. Ensure the same standard is applied across the board.

•       Preserve the technical rationale. Where evaluation involves technical judgment, record the reasoning. Courts defer to documented technical assessment; they are suspicious of unexplained conclusions.

VIII. CONCLUSION: CERTAINTY IN THE MARKET, FAIR PLAY IN ACTION

The Steag Energy judgment is not a dramatic departure. Its significance lies precisely in its continuity — in the Supreme Court's firm and repeated insistence that judicial review of commercial and tender decisions is a narrow, disciplined jurisdiction, not a general licence to re-open every award that a losing bidder dislikes.

For the business community, the lesson cuts both ways. If you bid and lose, understand that the courthouse door is open only to genuine illegality — arbitrariness, mala fide, irrationality, or a breach of the tender's own terms — and not to mere disappointment or a preferable alternative. If you float tenders, understand that a transparent, well-documented process that follows its own rules is your strongest protection against challenge.

The Court framed the balance memorably: the task is to maintain the equilibrium between certainty in the market and fair play in action — between the need for order and the quest for justice. Public procurement cannot function if every award is hostage to litigation. But it also cannot command confidence if the process is unfair. The law of judicial review, as reaffirmed in Steag Energy, is the instrument by which the courts hold that balance.

THE BOTTOM LINE FOR BUSINESS

Losing a tender is not, by itself, a legal wrong. Before you challenge an award, ask your counsel one question: can we show that the process — not merely the outcome — was tainted by illegality, arbitrariness, or a breach of the tender's own conditions? If the answer is yes, you may have a case. If the answer is that you simply believe you should have won, the courts will not help you. And if you are the one awarding contracts, a clean, documented, rule-following process is the best insurance policy you can buy.

IX. KEY PROVISIONS AND CASES CITED

Constitutional Provisions

•       Article 14 — Equality before the law and the prohibition on arbitrariness

•       Article 226 — Power of the High Courts to issue writs

Cases Cited

•       Steag Energy Services (India) Pvt. Ltd. v. GSPC Pipavav Power Company Ltd. (GPPC) & Ors., 2026 INSC 295; 2026 SCC OnLine SC 478

•       Tata Cellular v. Union of India, (1994) 6 SCC 651

•       Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517

•       Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216

•       Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation, (2016) 16 SCC 818

•       Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622

•       Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489

•       Tata Motors Ltd. v. Brihan Mumbai Electric Supply & Transport Undertaking (BEST), (2023) 19 SCC 1