Bombay High Court upholds reservation for SC/ST bidders in PSU transport contracts

The Bombay High Court on Tuesday upheld the constitutional validity of a 1994 policy issued by the government of India that mandates reservation and concessions for Scheduled Caste (SC) and Scheduled Tribe (ST) entrepreneurs in transport contracts awarded by public sector oil companies [Patil Roadlines and Ors v BPCL].

A Division Bench of Chief Justice Alok Aradhe and Justice Sandeep Marne, dismissed a writ petition filed by existing petroleum transport contractors who had challenged the implementation of this policy in a 2024 tender issued by Bharat Petroleum Corporation Limited (BPCL).

“The provision for reservation for select class of entrepreneurs for their social and economic upliftment towards fulfillment of constitutional objectives is an affirmative action taken by the State,” the Court observed.

It noted that such measures were aimed at uplifting entrepreneurs who find it difficult to compete with open bidders on account of their socio-economic background.

“Apart from social reservations, provisions are made for giving economic impetus to various classes of entrepreneurs like micro, medium and small enterprises, women entrepreneurs, etc. All these measures are aimed at promoting commerce in select class of entrepreneurs who otherwise find it difficult to compete with open bidders on account of their socio-economic background, lack of resources, lack of opportunities, etc."

The Court added that such steps cannot be held as violative of the right to equality under Article 14 of the Constitution of India.

"Far from creating any inequality violating the provisions of Article 14 of the Constitution of India, such measures are towards affirmative action aimed at promoting the economic upliftment of select class of persons in the society. Such measures do not cause any violence to the equality clause enshrined in the Constitution of India," the July 15 ruling read.

The petition before the Court was filed by existing contractors engaged in transporting petroleum products for BPCL. They approached the Court after a new tender was issued in August 2024 for a five-year contract from BPCL's Manmad installation in Maharashtra.

The contractors objected to certain conditions in the tender that extended preferential treatment to SC/ST bidders and Micro and Small Enterprises (MSEs) in accordance with a 1994 policy issued by the Union Ministry of Petroleum and Natural Gas.

The petitioners argued that the reservations and relaxations, such as a lower security deposit for SC/ST bidders and reduced vehicle ownership requirements, were unconstitutional.

They claimed the 1994 guidelines had no force of law and violated their right to do business under Article 19(1)(g) of the Constitution. They also argued that reservations in government contracting are not permitted under Articles 15 and 16, which apply only to public employment.

BPCL, however, responded that the petitioners had participated in the tender process and accepted contracts under similar conditions in the past. They were therefore estopped from challenging the current tender, BPCL said.

The government defended the guidelines as a valid form of affirmative action under Article 46 of the Constitution, aimed at promoting the economic interests of weaker sections.

The Court rejected the petitioners’ claims, taking note of the policy's longstanding implementation without any challenge.

“Firstly, the impugned guidelines are issued on 18 August 1994 and Petitioners never bothered to challenge the same ... Secondly, similar reservation was also provided in the tender process implemented in the year 2018, in which Petitioners participated without any demur, secured work orders and are still working on extensions," the Court noted.

It concluded that the challenge to the 1994 guidelines was barred by delay and acquiescence. It further held that the petitioners’ participation in the 2024 tender process rendered their challenge untenable.

“The tendering authority has the necessary discretion to offer relaxation to a class of bidders and in absence of malafides, mere making of provision for relaxation would not render the act of tendering authority ipso facto arbitrary, discriminatory or irrational," the Court ruled.

Senior Advocate FT Mirza, with Advocates Anand Deshpande and Amita Chaware, appeared for the petitioners.

Senior Advocate Girish Godbole, with Advocates Roop Basu and Ahmed Padela, instructed by The Law Point, represented BPCL.

Advocate Vinit Jainm with Advocates AR Varma, appeared for the Union of India.

Advocates Akshay Lengare with Advocates Aniket Sangle, Sanket Garud, and Anis Shaikh, instructed by Advocate Ajinkya Gaikwad appeared for Patil Roadlines (contractors)

[Read Judgment]