Even Single Instance Of Award Of Public Work Through Tainted Process Violates Article 14 : Supreme Court

The Supreme Court today(April 6) ordered a preliminary enquiry by the Central Bureau of Investigation(CBI) into the allegations of favouritism and patterns of repeated departures from open and competitive tendering in the allotment of work contracts by the Chief Minister of Arunachal Pradesh, Pema Khandu, to his relatives and close associates.

The Court observed that the decisions on awarding public contracts are subject to Article 14 of the Constitution and the State is expected to act in a fair, transparent and non-arbitrary manner in order to secure public interest. One of the safest ways of doing that is by inviting competition through tenders. In cases where the allegation is of conflict of interest or related party benefit, the State can't argue that the overall percentage of work awarded is numerically small. 

"A constitutional violation in public contracting is not diluted by statistics. Even a single instance, if established, undermines equality, the rule of law and public confidence in fair administration."

The judgment was passed by a bench comprising Justice Vikram Nath, Justice Sandeep Mehta and Justice NV Anjaria.

The above observation holds significance in the context of the argument made by the State that the work awards are minuscule in terms of numbers. For instance, it said that only 0.32% of the tenders and 0.07 work orders were awarded for the Department of Power and so on.

Rejecting the same, the Court said that a breach of public trust doesn't depend on the percentage: "The Constitution does not tolerate a breach of public trust merely because the breach is numerically small when measured against the total universe of State expenditure. Even a single instance of award of public work through a process tainted by conflict of interest, or by a deliberate bypass of competition, constitutes an affront to Article 14. A low percentage cannot become a licence. It cannot be a defence to nepotism. It cannot neutralise the illegality that attaches to an award which is not supported by a transparent process and contemporaneous records."

To briefly state, the writ petition was filed by Save Mon Region Federation, alleging that the award and execution of public work contracts in the State of Arunachal Pradesh have been marked by arbitrariness, favouritism and serious departure from procurement norms, including allegations of preferential allotment of work to Respondents 4 to 6. 

In the connected matter, another petition filed by the Voluntary Arunachal Sena was also filed, but the Court had disposed of it with the direction that it can be examined by the Comptroller and Auditor General of India (CAG).

The Court considered the CAG's report, which records multiple instances of execution of works without a call for tender and non-availability of reasons recorded for the same, as having an evidentiary value. It rejected the argument made by the State that CAG's report was being scrutinised by the Governor and the State legislature. 

"The proceedings before this Court are not rendered infructuous merely because an audit report is also capable of being examined in the legislative domain." 

Relying on the audio report, it noted that the report identifies repeated gaps in the documentary trial, including the non-availability of vouchers and the non-availability of tender evaluation material. 

The judgment, authored by Justice Nath, further emphasised the legal significance of a departure from competitive tendering and the non-availability of core procurement records. It stated that a decision to depart from competition must be supported by reasons recorded by the competent authority, and those must be rational and capable of objective scrutiny.

However, in the present case, opting for non-competitive methods without a demonstrable record of reasons is evident.

It said: "The State is the custodian of public records, and it is expected to maintain them in a manner that makes public expenditure traceable and accountable. When material records that ought to exist are not produced, the Court is not required to treat that circumstance as innocuous. The law also permits a court to draw a presumption against a party that withholds evidence within its power, and that principle applies with greater force where the custodian is the State."

Considering that the allegation is made against an authority occupying a high constitutional and political office, the Court felt that leaving the investigation to the State would raise a serious and reasonable apprehension about institutional independence. Therefore, it ordered the CBI to register a preliminary enquiry and conduct the investigation in a time-bound manner.

The petitioners have alleged that contracts and tenders of the State have been awarded to firms associated with the Chief Minister, his spouse, mother, and nephew. Advocate Prashant Bhushan, for the petitioners, alleged that contracts worth Rs 1270 crores were illegally allotted to the CM's kin.

The petitioners approached the Court in 2024, alleging partiality in the giving away of key tenders to close associates of Khandu, including the construction company 'M/s Brand Eagles' (belonging to his spouse). It was further claimed that Pema's nephew, Tsering Tashi, an MLA from Tawang District owning M/s Alliance Trading Co., was awarded work contracts without following due procedure.

Headnote

Constitution of India – Article 14 and Article 32 – Public Procurement – Transparency and Accountability – Facts – Petitioners alleged systemic nepotism and corruption in Arunachal Pradesh, asserting that public works were awarded to firms related to the Chief Minister and other high officials without open tenders - CAG report identified missing vouchers worth crores and repeated execution of works without tenders - The State holds public resources as a trustee on behalf of the people - Award of public contracts and execution of works must be transparent, fair, and free from arbitrariness or undisclosed conflicts of interest – Extraordinary power under Article 32 to transfer investigation to the CBI must be exercised sparingly and in exceptional situations - Such transfer is justified where high officials are involved, where the investigation by State machinery lacks credibility, or to instil public confidence in the rule of law.

Administrative Law – Departure from Competitive Tendering – Requirement of Reasons – While competitive tendering is the ordinary method to secure public interest, any departure must be justified by rational and recorded reasons - Non production of core records like tender documents and vouchers by the State is a serious concern, as the State is the custodian of public records - Physical execution of work does not validate an unconstitutional or arbitrary procurement process - Held – Supreme Court directed the CBI to register a preliminary enquiry into the award of public works in Arunachal Pradesh from 01.01.2015 to 31.12.2025 - Observed that missing records and allegations against high constitutional functionaries warrant an investigation by an agency institutionally independent of the State executive. [Relied on State of W.B. v. Committee for Protection of Democratic Rights (2010) 3 SCC 571; Sachidanand Pandey v. State of W.B. (1987) 2 SCC 295; Akhil Bhartiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29; Centre for Public Interest Litigation v. Union of India (2012) 3 SCC 1; Paras 12-18, 25-30, 33-44]

Case Title: Save Mon Region Federation And Anr v. The State Of Arunachal Pradesh And Ors., W.P.(C) No. 54/2024

Citation  : 2026 LiveLaw (SC) 333