Introduction

In M/S Shanti Construction Pvt. Ltd. v. State of Odisha & Ors., 2025 INSC 1295 (Supreme Court of India, 7 November 2025), the Court addressed a recurring and consequential question in public procurement: how should the term “previous financial year” be interpreted when a tender condition requires the submission of an income tax return for that period?

The dispute arose from a 11 July 2022 tender for a five-year sand quarry lease (Mahanadi Sand Quarry, Tangi Chowdwar, Cuttack, Odisha) under the Odisha Minor Mineral Concession Rules, 2016 (OMMCR 2016). Twenty bidders participated. The bidder that quoted the highest rate (the “unsuccessful bidder,” though later the appellant) was disqualified for not submitting an Income Tax Return (ITR) for FY 2021–22; instead, it had furnished the ITR for FY 2020–21 and a provisional balance sheet for FY 2021–22. The Tender Committee understood “previous financial year” in Rule 27(4)(iv) OMMCR 2016 to mean FY 2021–22. The High Court upheld the rejection, but, concerned with revenue loss due to a wide price gap with the successful bidder, directed the authority to ask the successful bidder to match the highest quoted price.

Before the Supreme Court were two cross-appeals: the highest (unsuccessful) bidder challenging the rejection; and the successful bidder contesting the High Court’s direction to match the highest price. The case thus squarely raised:

• How should “previous financial year” in Rule 27(4)(iv) be construed when the bid is submitted mid-year and the latest financial year’s ITR is not yet statutorily due?
• What is the scope of judicial review when a tender interpretation excludes the highest bidder and potentially diminishes public revenue?
• What is the appropriate remedy when a material misinterpretation vitiates the procurement process, especially in allocation of natural resources?

Summary of the Judgment

The Supreme Court (per Alok Aradhe, J.; Sanjay Kumar, J. concurring) allowed the appeals in part, laying down a controlling interpretive rule:

• “Previous financial year” in Rule 27(4)(iv) OMMCR 2016 must be construed harmoniously with the Income-tax Act, 1961. Where, on the bid submission date, the statutory deadline to file the return for the immediately concluded financial year has not expired, the bidder cannot be expected to produce that return. In such circumstances, “previous financial year” means the last financial year for which the ITR filing period had already expired. In this case, that was FY 2020–21, not FY 2021–22.
• The Tender Committee’s narrow construction was erroneous and exclusionary; it improperly disqualified the highest bidder and thereby acted contrary to the public interest of maximizing revenue in allocation of natural resources.
• The High Court’s order was set aside. Instead of directing the successful bidder to match the higher rate, the Supreme Court ordered a fresh auction, given the lapse of more than three years out of the five-year lease and likely market changes.
• The amount deposited by the successful bidder must be refunded with interest at 6% per annum (restitution principle), within 30 days.

Operative directions:

• Quashing of the High Court’s judgment dated 01.03.2023.
• Direction to the Tehsildar to issue a fresh auction notice for the Mahanadi Sand Quarry as per OMMCR 2016.
• All concerned, including both the earlier successful and unsuccessful bidders, may participate.
• Refund of the prior deposit to the erstwhile successful bidder with 6% interest.

Analysis

1) Precedents Cited and Their Influence

The Court anchored its approach in settled procurement jurisprudence that balances deference to administrative expertise with robust intervention against arbitrariness in matters affecting public interest and revenue:

• TATA Cellular v. Union of India (1994) 6 SCC 651: Established the principle of judicial restraint in contractual matters, while affirming intervention where decisions are irrational, perverse, or against public interest.
• Michigan Rubber (India) Ltd. v. State of Karnataka (2012) 8 SCC 216: Reaffirmed that the heartbeat of fair play in tenders is non-arbitrariness; courts intervene when the decision-making process is flawed.
• Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Ltd. (2024) 10 SCC 273: Reiterated Article 14 constraints—State decisions must be free from arbitrariness.
• Natural Resources Allocation, In Re, Special Reference No. 1 of 2012 (2012) 10 SCC 1: Emphasized the public trust doctrine—State is a trustee of natural resources and must secure best value through fair, transparent processes.
• Subodh Kumar Singh Rathour v. Chief Executive Officer (2024) 15 SCC 461: Reinforced the importance of competitive, transparent auctions as a cornerstone of public accountability.

Precedents cited by counsel but ultimately not determinative in the outcome:

• Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. (2016) 16 SCC 818: Recognizes deference to the procuring authority’s technical evaluation. The Supreme Court here emphasized that deference does not extend to interpretations that are demonstrably misconceived and deleterious to public interest.
• B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548; Jagdish Mandal v. State of Orissa (2007) 14 SCC 517; UFLEX Ltd. v. Government of Tamil Nadu (2022) 1 SCC 165: Generally on limits of judicial review and respect for tender conditions; the Court’s decision harmonizes with these by targeting process irrationality, not substituting its own views.
• Gujarat Pottery Works v. B.P. Sood 1966 SCC OnLine SC 126; Bhushan Power and Steel Ltd. v. S.L. Seal (2017) 2 SCC 125; and Aane Mines and Minerals v. State of Karnataka 2019 SCC OnLine Kar 3791: Invoked to argue vested rights upon acceptance, deposit, and issuance of Form-F. The Supreme Court effectively preferred the public trust and restitution route over specific performance, without affirming a vested rights claim.
• Doiwala Sehkari Shram Samvida Samiti Ltd. v. State of Uttaranchal (2007) 11 SCC 641: “Actus curiae neminem gravabit” (an act of court shall prejudice no one). The Court honored this via restitution with interest, while still correcting the tender’s legal error.
• Prakash Asphaltings and Toll Highways (India) Ltd. v. Mandeepa Enterprises 2025 SCC OnLine SC 1959: Cited to stress stability of concluded auctions absent mala fides; the Court here adjusted the remedy to current market reality and public interest, opting for re-auction over ex post price matching.

2) Legal Reasoning

The Court’s reasoning unfolds in three interlocking moves:

• Harmonious construction with the Income-tax Act: Rule 27(4)(iv) OMMCR 2016 requires an “Income Tax Return of previous financial year” as one of three alternatives (the others being deposit or bank guarantee). For companies, Section 139(1) of the Income-tax Act, 1961 allows filing of ITR for FY 2021–22 up to 31 October 2022. Since this tender’s bid-submission date was 18 July 2022—before that statutory deadline—insisting on the FY 2021–22 ITR was legally untenable. “Previous financial year” therefore meant the latest financial year for which the return was due and could reasonably be produced—viz., FY 2020–21.
• Purpose- and public-interest-oriented reading of tender conditions: A public tender is a governance instrument, not a private bargain. The State must interpret its tender terms consistently and in a manner that promotes competition and maximizes value to the public exchequer, especially in natural resource allocation. A misconstruction that excludes the highest bidder without legal warrant is antithetical to that purpose and warrants judicial correction.
• Appropriate remedy aligned with public trust: Given that more than three years and three months of the five-year lease term had elapsed due to litigation, and in light of probable upward price trends and market changes, an ex post direction to “match” the highest price would neither reflect current market value nor ensure competitive allocation. The Court therefore quashed the High Court’s “match-the-price” relief, ordered a fresh auction, and directed restitution of the deposited amount with 6% interest to avoid prejudice to the previously successful bidder.

3) Impact and Forward-Looking Significance

• Clear interpretive rule for “previous financial year” in tenders: Where tenders demand ITRs for the “previous financial year,” evaluation committees must:
  • Align with the statutory filing calendar under the Income-tax Act.
  • Accept the ITR of the most recent financial year for which the filing deadline had expired by the bid date.
  • Not insist on ITRs for a financial year whose statutory due date has not yet arrived as of the bid submission date.
• Reduction of exclusionary technical rejections: This judgment curbs mechanical or over-technical disqualifications that constrict competition and depress public revenue, particularly in auctions involving natural resources.
• Drafting guidance for procuring entities:
  • Expressly define “previous financial year” by reference to the latest FY for which the ITR filing deadline has expired at the bid submission date, or simply require “the latest filed ITR as of the bid date.”
  • Offer alternative financial capacity proofs (as Rule 27(4)(iv) does) and clarify sufficiency standards to avoid ambiguity.
  • Harmonize tender timelines with statutory filing calendars where tax-based documents are required.
• Remedial template for time-lapsed contracts: Where litigation delays consume a substantial portion of a concession period, courts may prefer re-auction over price matching or specific performance, to reflect current prices and preserve the integrity of competitive allocation. Restitution with interest protects bidders from prejudice caused by court-ordered interim arrangements.
• Reinforcement of the public trust doctrine: The decision reiterates that in natural resource allocation, the State’s overarching duty is to maximize public value through fair, transparent, and competitive processes. Judicial review will be triggered by interpretations that diminish competition or revenue absent legal justification.
• Standard of review calibrated: The Court reconfirms deference to tender authorities’ technical judgments while underscoring its duty to correct decisions that are arbitrary, irrational, or contrary to public interest—especially where misinterpretation sidelines the highest compliant offer.

Complex Concepts Simplified

• Financial Year (FY) vs Assessment Year (AY): In India, FY runs from 1 April to 31 March. AY is the year following the FY in which income is assessed (e.g., FY 2021–22 corresponds to AY 2022–23). For companies, the ITR for a given FY is typically due by 31 October of the following AY.
• “Previous Financial Year” in this context: Not a fixed label. As clarified by the Court, for tender compliance it means the most recent FY for which the ITR filing deadline had expired on the bid submission date—since that is the year for which an ITR could reasonably be expected to exist.
• Rule 27(4)(iv) OMMCR 2016: Offers three alternatives to establish financial capacity—(i) deposit of specified amounts, or (ii) a bank guarantee valid for 18 months for the equivalent amount, or (iii) the ITR of the previous financial year.
• MGQ (Minimum Guaranteed Quantity): A benchmark quantity used to calculate minimum royalty and other charges for a mining/quarrying lease; tender conditions often compute eligibility thresholds and securities with reference to MGQ.
• Form-F: The communication intimating success in the tender; while important, it does not immunize the award from judicial scrutiny if the decision-making process is vitiated.
• Public Trust Doctrine: The State is a trustee of natural resources and must allocate them to maximize public benefit via fair, transparent, competitive processes—auctions are a principal vehicle to discharge this duty.
• Actus curiae neminem gravabit: “An act of the court shall prejudice no one.” Here, the successful bidder, delayed by litigation and interim orders, receives restitution with interest.
• “Ministerial act” and “vested rights”: A bidder’s argument that post-acceptance, execution of the lease is a mere formality was not accepted as controlling. The Court prioritized correcting the tender misinterpretation and safeguarding public interest; the bidder was compensated via restitution rather than granted the remainder of the term.

Key Passages and Their Significance

• “The ‘heart beat of fair play’ in tender matters is non-arbitrariness and fairness in State action.”
  Significance: Positions non-arbitrariness as the central criterion for judicial intervention in procurement disputes.
• “A public tender is not a private bargain… [It should] maximise public value through a process i.e. fair, transparent and competitive.”
  Significance: Reorients tender interpretation towards public trust and revenue maximization, especially for natural resources.
• “‘Previous Financial Year’… has to be read in harmony with the provisions of the Income Tax Act, 1961.”
  Significance: Creates a harmonization principle that will govern tender conditions referencing statutory filings.
• “When an authority… misinterprets the tender condition that diminishes competition and deprives the State of its legitimate revenue, the constitutional duty of the court to interfere is beyond question.”
  Significance: Strengthens the mandate for judicial correction where tender interpretations undermine competition and public revenue.

Practical Guidance for Stakeholders

For Procuring Entities

• Define “previous financial year” explicitly: “the latest financial year for which the ITR filing due date has expired as of the bid submission date,” or require “the latest ITR filed as of bid date.”
• Where financial capacity is tested via ITRs, align bid calendars with tax calendars or provide flexible alternatives (bank guarantees, deposits), as Rule 27(4)(iv) commendably does.
• Train evaluation committees to avoid exclusionary interpretations that neither the law nor the tender text requires.

For Bidders

• When the most recent FY’s ITR is not yet due at bid date, furnish the ITR for the last FY whose due date has expired, and proactively cite the statutory due date to pre-empt objections.
• Consider using the bank guarantee or deposit alternatives to avoid disputes about statutory filing timelines, especially in mid-year tenders.
• Maintain provisional financials to evidence capacity, even where not strictly required.

For Courts

• Prefer remedies that restore competition and current market discovery (re-auction) where delay has eroded the original concession’s term or market conditions have significantly changed.
• Apply restitution with reasonable interest to avoid prejudice stemming from court-ordered interim arrangements.

Conclusion

The Supreme Court’s decision in Shanti Construction crystallizes an important doctrinal and practical rule in procurement law: when tender conditions require an ITR for the “previous financial year,” that phrase must be read in harmony with statutory filing timelines. A procuring authority cannot insist on an ITR for a year whose filing deadline has not yet arrived as of the bid date. Such insistence is both legally untenable and contrary to the public interest in maximizing competition and revenue, particularly in the allocation of natural resources.

Equally significant is the Court’s remedial stance. Recognizing the passage of time and market dynamism, the Court eschewed post hoc price matching and ordered a fresh auction, thereby reaffirming the centrality of competitive market discovery. The restitutionary order—with 6% interest—balances fairness to the erstwhile successful bidder with the imperative of correcting an exclusionary misinterpretation.

This judgment will likely influence tender drafting across sectors, prompting explicit definitions tied to statutory filing calendars, and it will guide evaluation committees toward interpretations that foster, rather than constrict, competition. By integrating tax law timelines into tender compliance and reasserting the State’s trustee role in natural resources, the Court fortifies the constitutional architecture of fairness, transparency, and public value in public procurement.

Citations Referenced

• TATA Cellular v. Union of India, (1994) 6 SCC 651
• Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216
• Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Ltd., (2024) 10 SCC 273
• Natural Resources Allocation, In Re, Special Reference No. 1 of 2012, (2012) 10 SCC 1
• Subodh Kumar Singh Rathour v. Chief Executive Officer, (2024) 15 SCC 461
• Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC 818
• B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548
• Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517
• UFLEX Ltd. v. Government of Tamil Nadu, (2022) 1 SCC 165
• Gujarat Pottery Works v. B.P. Sood, 1966 SCC OnLine SC 126
• Bhushan Power and Steel Ltd. v. S.L. Seal, (2017) 2 SCC 125
• Aane Mines and Minerals v. State of Karnataka, 2019 SCC OnLine Kar 3791
• Doiwala Sehkari Shram Samvida Samiti Ltd. v. State of Uttaranchal, (2007) 11 SCC 641
• Prakash Asphaltings and Toll Highways (India) Ltd. v. Mandeepa Enterprises, 2025 SCC OnLine SC 1959
• Income-tax Act, 1961, s. 139(1)
• Odisha Minor Mineral Concession Rules, 2016, r. 27(4)(iv)