L.G.Traders v. 'l . The State of Telangana

HON'BLE SRI JUSTICE NAGESH BHEEMAPAI(A WRIT PETITION No. 25983 OF 2025 ORDER: Petitioner states that impugned action of respondents in introducing a uniform procurement system for dietary and otler consumable items for all hostels and residential educational institutions in the State of Telangana through G.O.Ms.No.17 SCD (Edn.A2) Department, dated

08.O7.2025 and the consequential common guidelines issued by the Project Monitoring Unit (PMU) on 25.07.2025 is arbitrary, illegal, ultra uires and unconstitutional. It is stated, the said action resulted in abolition of long-standing and well- functioning institution-wise tender system and replaced it with a centralized and monopolistic structure that deprives small contractors of their right to livelihood and equal opportunity to participate in public procurement. The entire scheme, as lramed and implemented by respondents, violates Articles la, l9(1)(g), and 2 I of the Constitution of India.

2. The case of petitioner is that they have been engaged in the contract business for several years, supplying food provisions, fruits, vegetables, and other dietary items to various educational institutions, hostels, and hospitals across 2 the State, without a single complaint or irregularity..It is stated, under the earlier system, each school or residential institution was treated as an independent unit for the purpose of inviting tenders. The quantities required were identified in advalce and prospective tenderers were permitted to quote competitive prices for each item on a per-kilogram or per-unit basis. Tender evaluation u,as done transparently and the lowest bidder was awarded work, thereby ensuring fair competition, equal opportunity and sustenance for thousands of small contractors who depended solely upon such work for their livelihood.

2.1. It is also stated, this system functioned effectively for several decades, allowing equitable distribution of government ',r,ork among a wide pool of small contractors. The decentralized model also ensured localized monitoring, better accountability and uninterrupted supply of food materials to residential institutions across the State. However, this entire mechanism was unilaterally and abruptly dismantled by respondcnts through a series of Government Orders issued in July 2O25. The Scheduled Caste Development Department uide G.O.Ms.No.l6 dated 03.O7.2025, first introduced a new system for uniform procurement of eggs. The said G.O. authorized constitution of a District purchase Committee (DpC) under the 3 Chairmanship of the District Collector, with all coordinators of the five welfare departments as m€mhrs, to procure eggs for residential institutions across deparlments. The committee was stated to have 16 members. Subsequently, through G.O.Ms.No. 17 dated O8.O7.2025, Government extended the same principle to all dietary items, including provisions, vegetables, fruits, mutton and chicken and constituted a Project Monitoring Unit (PMU) to function as the nodal agency for framing uniform guidelines for procurement. The PMU was headed by the Secretary, Telangana Social Welfare Residential Educational Institutions Society (TGSWREIS) and comprised other officials from the remaining welfare departments.

2.2. Petitioner contends that G.O.Ms.No. 17 did not authorize the PMU to alter the fundamental structure of the procurement system. Its purpose was merely to coordinate uniform quality staldards and ensure administrative effrciency. However, the PMU, while purporting to implement the said G.O., overstepped its rnandate and introduced an entirely new system through its common guidelines dated 25.07 .2025. The said guidelines directed that all residential educational institutions and hostels functioning under the {ive welfare deparLments-SC, ST, BC, Minorify, and General shall follow a uniform 4 procurement system. lt was stipulated that District Collector would act as Chairman of the District Purchase Committee, which would serve as the single point of contact for all procurement within that district.

2.3. The guidelines further laid down a detailed schedule for the tender process for 2025 -2026, commencing with invitation of tende rs on 14.O8.2O25 and concluding with start of catering contracts on 12.09.2025. Petitioner states that these tender schedules were hxed mechanically without any public consultation or consideration of the hardships faced by existing small contractors who had neither financial capacitSr nor institutional infrastructure to compete under ttre newly-imposed conditions. Under the new guidelines, the District Purchase Committee (DPC) constituted earlier for egg procurement was made the competent authority for all dietary items. The said Committee consists of 16 members, including the District Collector as Chairman, Additional Collector as Vice-Chairman, and the District Rural Development Offrcer (DRDO) as Convener. A separate District Diet Committee (DDC) was also constituted to conduct market surveys and recommend prices for all items ro the DPC. The DPC, based on these recommendations, was empowered to lx rates for provisions, l I 5 r I mutton, chicken, fruits and vegetables, which would thereafter become binding on all suppliers.

2.4. Petitioner asserts that under Paragraph 5 of the guidelines, it has been specihcally provided that: i. The district shall be considered as ttre unit for supply of food provisions; ii. The mandal shall be the unit for supply of fruits and vegetables; and iii. The mandal shall also be the unit for supply of mutton and poultry. This classification has completely done away with the earlier institution-wise tendering system, whereby every school or hostel was treated as a separate unit. By aggregating all schools within a district or mandal und€r a single tender, respondents have drastically reduced the number of potential work units, thereby confining the entire tender process to a very small number of hnancially powerful contractors.

2.5. Petitioner further states that under sub-para (f) of Para 5 of the guidelines, DPC has been empowered to directly allot work to Girijan Cooperative Corporation (GCC) and Mandal Mahila Samakhyas / Zilla Mahila Samakhyas in respect of certain districts or mandals identified for supply of food provisions. DPC carr nominate these agencies without subjecting them to any competitive bidding process, solely at its discretion. This provision confers absolute and ungu.ided powers upon the \ ?,,, 6 DPC to nominate preferred agencies and such without prior reservation transparency IS nomination arbitrary, discriminatory and violative of Articles 14 and 19 of the Constitution of India.

2.6. It is stated further that the guidelines provide that all qualified agencies shall be empa.nelled under three categories: "Category 1 District l,evel (supply of provisions to all residential institutions in the district); Category U Mandal trvel (suppty of perishables like fruits and vegetables); and Category III- Mandal Level (supply of mutton and chicken)." From among these empanelled agencies, the DPC would identiry one agency per category through a lottery system. Petitioner contends that such a process of allotment by lottery has no legal basis in tender jurisprudence and defeats the entire purpose of competitive bidding. When rates are pre-fixed by the DPC and the selection is made by lottery, the element of price competition, an essential feature of tendering, is completely absent. This mechanism, therefore, cannot be considered a valid tender process in the eye of [aw.

2.7. It is contended that tender conditions imposed under the new guidetines are wholly arbitrary and unrealistic. 7 1 For instance, for food provisions, an agency must have an annual tumover of at least 23 crores, even if the value of the contract is less than 3 crores. The guidelines further require that each tenderer possess a valid trade license, GST registration, FSSAI certification, income tax returns and two years of experience in similar work. While such requirements may appear standard, combination of these conditions with an excessive turnover clause and high Earnest Money Deposits (EMDs) renders it impossible for small contractors to participate. It is further stated that under the tender schedule for Khammam District, Application cost was fixed at Rs.S,OOO/- for catering services, and though the guidelines claim that no EMD is required for certain categories, in practice, huge EMDs are being collected without any disclosure of actual value of work. According to petitioner, this is in stark violation of the principles of fairness and transparency as no bidder can be expected to furnish an EM D without knowing the estimated value of the contract.

2.8. Petitioner asserts that under the impugned system, the DPC, after empanelment, fixes uniform rates for all items based on the recommendations of the DDC. AII eligible agencies are bound to supply materials at those rates, with no \ \ 8 opportunity to quote higher or lower prices. Thus, the concept of competitive 'bidding' is entirely absent. The entire tender process, therefore, is merely mechanical, where price is pre- fixed, selection is by lottery and discretion is vested in the DPC to allot certain units to preferred agencies. This new system is, for the first time, being implemented in the State and is wholly illegal, arbitrary and violative of Articles la, l9(1)(g), and 21 of the Constitution.

2.9. Petitioner further contends that unless the PMU or DPC notilies in advance which districts or mandals are reserved for GCC or Mahila Samakhyas, the entire process lacks fairness and violates the doctrine of legitimate expectation. There is no Govemment Order or statutory notification granting any reservation or preference to Mahila Samakhyas or GCC in public procurement. Hence, allowing them to secure contracts through direct nomination is unconstitutional and without authority of law. Fixation of EMDs. and turnover limits without disclosing the total value of work is arbitrary and violative of Article 14. For example, in the case of egg suppty, EMD is hxed at lo/o of the work value and the security deposit at l.5o/o, whereas for provisions, EMD is fixed at 5% and security deposit at 2Oo/o. There is no rational basis or proportionality in such \ \ / I I : s E Ei IIE I 9 1- \ distinctions. The arbitrary fixation of higher percentages for provisions without any justification reflects discriminatory treatment and lack of application of mind.

2.1O. Introduction of a uniform procurement system ' under G.O.Ms.No.17 and PMU guidelines has created monopoly in favour of large contractors possessing financial strength while depriving small, long-serving contractors of their only source of livelihood. The entire exercise is contrary to the principles which mandate that the State, even in contractual matters, must act fa ny, reasonably and in accordance with Article 14 of the Constitution. Respondents' action has no nexus with the object of ensuring quality or transparency. If the intention was merely to standardize food quality and ensure uniform pricing, the same could have been achieved under the earlier decentralized tender system by introducing quality benchmarks and rate charts through DDCs, without abolishing inslitution-wise tendering. The impugned system, therefore, is not only arbitrary but also counterproductive, as it eliminates local competition, burdens the supply chain and endangers the continuit5r of supplies due to concentration of contracts in the hands of a few.

2.1L. In the light of the above, petitioner states that tender notification being Rc. No. SPL/Tender-2O2S dated / __- l0

15.O8.2O25 issued by the 86 respondent i.e. the District Purchase Committee (DPC), pursualt to G.O.Ms.No.l7 dated Oa.O7.2025, is illegal, arbitrary and violative of Articles 14, 19, and 2l of the Constitution. The impugned uniform procurement guidelines and tender process must therefore, be set aside and respondents be directed to restore the earlier institution-wise tender system, ensuring fair opportunity and livelihood to all small contractors.

3. Respondents did not file counter. It is reported that the counter filed by Respondents in Writ Petition No. 23933 of 2O25 is being adopted to this writ petition and for the said request, petitioner had reported no objection. Hence, counter hled in the said Writ Petition is being treated as part of the pleadings in this Writ Petition.

4. Heard Sri Sanjeev Reddy Gillela, learned counsel for petitioner as well as Sri T. Rajanikanth Reddy, learned Additional Advocate General on behalf of respondents.

5. Having considered pleadings, submissions and material placed on record and upon examination of the issues raised in this Writ Petition, this Court observes that grievance of petitioner is substantially identical to the one raised and a{judicated upon in Writ Petition No. 23983 of 2O25, which I \ involved a challenge to the sarne G.O.Ms.No,17, dated O8,O7.2O25 and the consequential Common Proturement Guidelines dated,25.O7.2O25 issued by tl.e Project Monitoring unit (PMU).

6. In the said Writ Petition, this Court, after a detailed consideration of the factual matrix, scope of PMU's authority and the policy intent behind the said G.O., has upheld the competence of the State to introduce a uniform procurement mechanism for ensuring uniformity, transparency and quality in supply of dietary items to residential educational institutions. However, this Court has simultaneously found certain procedural inlirmities and systemic deliciencies in the manner in which PMU Guidelines have been framed and implemented, particularly relating to transparency, fairness and equality. Accordingly, by a comprehensive judgment, this Court directed respondents to restructure, modify and republish procurement guidelines in order to ensure competitive fairness, accountability and protection of rights of small and medium contractors, while retaining the policy objective of quality and standardization.

7. In view of the same and having regard to the fact that the present Writ Petition raises identical questions of law Ed r"'2 12 and fact, this Writ Petition is also dlsposed of in terms of the order passed in Writ Petition No. 23933 of 2025 with a direction to respondents to strictly adhere to and implement the following guidelines issued by this Court for restructuring and reimplementation of procurement system under G.O.Ms.No. 17, dated 08.07.2025 and PMU Guidelines dated 25.07.2025.'f}:.e guidelines are as under: i. Respondents shall ensure that any reservation or I preference proposed in favour of Girij.ank Cooperative Corporation (GCC), Mandal Mahila Samalhyas or Zilla Mahila Samakhyas is clearly declared in advance in the tender notification itself along with percentage of such reservation, areas or categories of supply to which it applies and justihcation for such preferential treatment. No discretion shall be left to the District Purchase Committees to identifu or nominate such agencies after tender process has commenced, as such post- facto identihcation would defeat the transparency and fairness of public procurement. ii. The Earnest Money Deposit (EMD), Security Deposit and turnover conditions prescribed in ttre tender guidelines shall be fixed rationally, proportionately and in direct correlation to the total estimated value of work. Respondents -.- I t3 shall ensure that such finalcial requirements are not excessive or discriminatory so as to exclude small and medium contractors. In the case of contracts valued below 1 crore, EMD shall ordinarily not exceed two percent of the estimated value and tJle annual turnover requirement shall not exceed the value of the work proposed to be allotted. iii- Respondents shall ensure that every tender notilication clearly specifies the tota-l estimated value of work, item-wise quartities to be supplied and the approximate unit rates enabling all potential bidders to assess the scale and feasibility of the contract prior to participation. Omission of such details often leads to ambiguity and discourages genuine competition, therefore, this disclosure shall be made mandatory in all future notifications. iv. The Project Monitoring Unit (PMU) and the District Purchase Committees (DPCs) shall frame and adopt a uniform, objective and transparent evaluation matrix to assess tender bids based on measurable parameters such as technical competence, past performance, prior experience, financial capacit5r and price reasonableness. All evaluation reports, including comparative statements and reasons for acceptance or rejection of any bid, shall be recorded in writing and made / /rl I t4 publicly accessible through the oflicial websites of the respective welfare departments to ensure transparency and accountability in decision -making. v. Respondents shall forthwith discontinue the practice of allotting work by draw of lots among technically- qualified bidders. Such a system, being devoid of competitive evaluation, does not conform to the principles of fairness and reasonableness underlying pu.blic procurement. Selection of agencies shall instead be made strictly on comparative merit, objective assessment and documented evaluation so as to ensure that the best-qualified and the most suitable bidders are au,arded the r.r,ork- vi. Respondents shall make provision for reserving not less than twenty-{lve percent of procurement units, either at the mandal level or institutional level, for participation by small and local contractors possessing requisite experience and capacity, thereby safeguarding their right to hvelihood and ensuring equitable distribution of government contracts. This reservation shall be implemented through an open and transparent process without compromising on quality standards. vii. Respondents shall establish a centralized on line rr\echanism lor publication of tender notiees, issue of \'--- J \ 15 clarifications, corrigenda and results of evaluation and for receiving and resolving grievances related to tender processes' This on tilte platlorrr. shall include a timeline for response and resolution of complaints and shall remain accessible to all the registered contractors to maintain continuous transparency and accountability. viii. The Project Monitoring Unit (PMU) shall convene consultative meetings with representatives of recognized contractor associations at l,east once in every financial year to review the functioning of the procurement process, address genuine difficulties faced by stakeholders and consider recommendations for improvement, thereby ensuring participatory governance and regular review of the procurement system. ix. Respondents shall publish revised and restructured procurement guidelines incorporating the above directions within a period of two weeks from the date of receipt of a copy of this order and shall ensure that the sarne are uniformly apptied by all the welfare departments and their subordinate institutions across the State. ti. Respondents shall, in all future procurement exercises, adhere scrupulously to the principles of fairness, t6 I To, J transparency, equality of opportunity and reasonableness, ensuring that the objectives of uniform quality and accountabiliqz are achieved without compromising the livelihood and participation rights of small and medium contractors. Respondents are directecl to review, revise ald reissue the Guidelines dated 2S.OZ.2O2S in accordance with the principles and directions contained herein. Common procuremenr No costs.

9. Consequently, shall stand closed. Miscellaneous Applications, if any SD/- B.REKHA RANI ASSISTANT REGISTRAR //TRUE COPY// SECTION OFFICER \ '1. The Principal Secretary to Govemment,:Scheduled Caste Development (Ed n.A2 ) Department, Dr.B. R.Ambedkar Telangana Secretariat Hyderabad.

2. The Nodel Officer, Project Monitoring Unit, Secretary Telangana Social Welfare Residential Educational lnstitutions Society, D.S.S. tshavan, Masab Tank. Hyderabad

3. The Secretary.Telangana Social Welfare Residential Educational lnstitutions Society, D.S.S. Bhavan, N4asab Tank, Hyderabad

4. The Secretary, Mahatma Jyothiba Phule Telangana BC Welfare Residential Educational lnstitutions, D.S.S. Bhavan, Masab Tank, H$erabad.

5. The Secretary, Telangana Tribal Welfare Residential Educational lnstitution Society, D.S.S. Bhavan, Masab Tank, Hyderabad. - 6.TheSecretary'TelanganaMinoritiesResidentialEducationallnstitutional SocietY, NamPallY HYderabad

7. The Secretary,Telangana Residential Educational lnstitution Society, Near Nampally, Gagan Vihar, Gandhi Bhavan, Hyderabad.

8. The District Collector - Chairman, District Purchase Commlttee, Khammam district

9. One CC to SRI SANJEEV REDDY GILLELA, Advocate [OPUC] 10.Two CCs to ADDL ADVOCATE GENERAL, High Court for the State of Telangana at Hyderabad . [OUT] I 1 . Two CD Copies l PYK. -fKS NT +-- HIGH COURT DATED:31 11012025 : \ \ ORDER WP.No.25983 of 2025 i t',4 11ft8m * t t DISPOSING OF THE WRIT PETITION WITHOUT COSTS I I o ,.( P * ,N