Welfare delivery must be executed with greater accountability, SC tells states

The Supreme Court underlined that the public distribution system (PDS) remains the thin line between sustenance and deprivation for millions in India.

The public distribution system (PDS) remains the thin line between sustenance and deprivation for millions in India, the Supreme Court has underlined, imploring states and all other stakeholders to ensure that future exercises in public procurement, particularly those that underpin welfare delivery, must thus be executed with greater institutional coherence, foresight and accountability.

The court was hearing a dispute relating to procurement and deployment of ePoS (electronic point-of-sale) devices for fair price shops under the PDS. (HT Photo)

“When projects of such public importance are delayed or derailed by procedural lapses, the ultimate cost is borne not by the contracting parties but by those at the last mile of governance… It is therefore incumbent upon every stakeholder — the Government, its technical partners and private participants — to treat such undertakings with the seriousness their human impact demands,” held a bench led by Chief Justice of India Surya Kant.

The bench, also comprising justices Ujjal Bhuyan and N Kotiswar Singh, emphasised that administrative caution and technological innovation must work hand in hand to ensure that reform does not lose sight of its moral anchor — service to the poorest.

Hearing a dispute relating to procurement and deployment of ePoS (electronic point-of-sale) devices for fair price shops under the PDS, the court on Monday lamented that nearly six years had passed but the tender process was yet to be finalised.

“The tender pertains to the deployment of ePoS devices integral to the functioning of the PDS — an exercise that directly touches the lives of economically weaker citizens. To prolong uncertainty through further procedural cycles would defeat the very public purpose underlying the tender,” noted the bench.

The appeal arose from a dispute concerning government tenders for supply, installation and maintenance of ePoS devices for fair price shops. The Supreme Court noted that the matter brought into sharp focus “the delicate balance between considerations of public interest and the constitutional prohibition on arbitrariness in State action.” The Himachal Pradesh government challenged a May 30, 2024 judgment of the state’s high court, which had set aside the cancellation of the Letter of Intent (LoI) issued to M/s OASYS Cybernetics Pvt Ltd and restored contractual obligations.

The judgment traced a series of tendering exercises initiated by the state from 2021 to 2022, multiple cancellations due to technical deficiencies, and eventual issuance of an LoI to the respondent company on in September 2022. The LoI was cancelled in June 2023, followed by a fresh Expression of Interest. The high court quashed the cancellation as arbitrary and directed continuation of the LoI, prompting the state’s appeal.

The bench held that the LoI “did not give rise to any binding or enforceable rights” and that its acceptance was contingent on fulfilment of technical and procedural conditions. The court found no arbitrariness or mala fides in the cancellation, holding that the state had “tangible grounds for dissatisfaction” and acted within contractual liberty. The cancellation, it ruled, “does not suffer from arbitrariness, mala fides, or breach of natural justice.”

The court also found that substantial passage of time, involving nearly two years since cancellation and over four years since inception of the process, rendered remand impracticable. Given the public interest involved, it assessed the state’s justification for cancellation and held that continuation of uncertainty would undermine the purpose of the tender.

Allowing the appeal and setting aside the high court’s judgment, the bench ordered that a fresh tender may be issued forthwith, with the respondent free to participate. It added that a fact-finding enquiry shall be conducted jointly to ascertain deployment of machines, components and services under the cancelled LoI and reimburse verified expenses on the principle of quantum meruit within three months. All machinery, devices and software implemented in pilot stages, the court said, will vest in the state for using at the fair price shops and no further claim for loss of profit or consequential damages shall survive.