Union of India & Others vs Bharat Forge Ltd. & Another
Background
The Diesel Locomotive Works (Railways) floated a global tender for a machine component. Bharat Forge Ltd., a local manufacturer, quoted the correct 18% GST rate for the product, while three competing bidders quoted a lower 5% GST rate, making their total bid prices appear cheaper and pushing Bharat Forge down to fourth rank (L4) instead of winning as the lowest bidder. Bharat Forge went to the Allahabad High Court, arguing that because the tender documents never specified the applicable HSN (tax classification) Code, bidders could game their GST quotes and destroy the "level playing field," and the High Court agreed, directing the Railways to clarify the correct HSN Code with tax authorities and mention it in future tender documents. The Union of India and the Railways appealed to the Supreme Court against this direction.
Decision Breakdown
The Supreme Court held that, absent any actual legal or contractual duty requiring the tendering authority to determine and declare the HSN Code upfront, courts exercising judicial review over commercial tenders cannot invent and impose such a duty: the tender conditions (which were not themselves under challenge) left it to bidders to correctly self-declare their GST rate and bear responsibility for any misclassification. The Court found there was no accessible mechanism (short of the cumbersome "advance ruling" procedure) by which the purchasing authority could itself verify the correct HSN Code before finalizing a tender, and forcing it to do so for every procurement would be impractical and unsupported by any statute or circular. However, to prevent bidders from evading tax through incorrect self-declared GST rates, the Court issued a fresh, forward-looking direction: whenever the Railways award a contract, a copy of the award document must be sent to the concerned tax officer of the successful bidder, and future tenders should require bidders to disclose their Assessing Officer's details. The appeal was allowed and the High Court's judgment was set aside.
Lesson Learnt
Courts will not use judicial review to impose a procurement duty on the government that isn't grounded in law, contract, or policy, even in the name of a "level playing field", but where a genuine public-interest gap exists (like potential tax evasion through mis-declared rates by bidders), courts can craft narrow, forward-looking safeguards instead of striking down the entire process.