Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
Supreme Court: In a petition alleging nepotism in the allotment of public works contracts to individuals close to the Arunachal CM, the three-Judge Bench of Vikram Nath*, Sandeep Mehta and N.V. Anjaria, JJ., held that in view of the lack of records substantiating the transparency in the allotment of tenders/contracts and the Comptroller and Auditor General of India (CAG) report, the Central Bureau Of Investigation (CBI) would be the appropriate agency to investigate, without casting a doubt on fairness of the investigation. The Court emphasised that:
“In such circumstances, leaving the matter to be investigated by agencies that function under the administrative control of the State would raise a serious and reasonable apprehension, in the public mind, about institutional independence. The credibility of the process is as important as its eventual outcome.”
Background
The present petition was instituted by the Save Mon Region Federation, a civil society organisation working for the residents of the Mon region in the State of Arunachal Pradesh. The petitioners alleged systemic illegality and arbitrariness in public procurement and award of public works in Arunachal Pradesh. The petitioners asserted that the pattern reflected in the listed works indicated nepotism, conflict of interest and abuse of official position, resulting in diversion of public contracts to a narrow set of beneficiaries. The list of said beneficiaries included firms or individuals stated to be related to Respondent 4-CM of Arunachal Pradesh, and Respondents 5 and 6, and their close political associates.
Issue
Whether the allegations warrant the exercise of the extraordinary jurisdiction to entrust investigation to the CBI, or the constitution of an SIT, and, if so, the scope of such investigation and the consequential directions required to secure the integrity of the process?
Analysis and Decision
1. Prerequisites for Invoking Extraordinary Jurisdiction to Transfer Investigation to CBI
The Court acknowledged that it possessed the constitutional authority to direct the CBI to investigate, where required; however, the said power has been used sparingly. The Court referred the judgment of the Constitutional Bench in State of W.B. v. Committee for Protection of Democratic Rights, (2010) 3 SCC 571, which held that:
“…a direction by a constitutional court to the CBI to investigate a cognizable offence within the territory of a State is not barred merely for want of State consent, and such a direction does not violate the federal structure or the doctrine of separation of powers”.
The Court noted that the governing principle is that transfer of investigation to the CBI is justified only in rare and exceptional cases where the accused may influence the course of investigation, or where the investigation is prima facie found to be tainted or biased. To invoke the extraordinary jurisdiction, the Court examines whether the material discloses:
(i) a prima facie case raising serious legal issues,
(ii) involvement of high public functionaries suggesting doubt in the fairness of the State investigation, and
(iii) the need for an independent inquiry to preserve public confidence in the Rule of Law.
2. Constitutional Requirements for a Fair Public Tender
The Court stated that it has been repeatedly recognised that public interest is the paramount consideration in the allocation of State-owned or public resources. One of the ordinary and safest methods of securing the public interest is through competitive tendering. The scope of secrecy and discretion in public contracting is limited as it gives an appearance of bias, jobbery or nepotism.
“Public procurement has two distinct dimensions. One is the physical execution of work. The other is the integrity of the process by which public money is committed and paid out.”
The Court stated that mere completion of work and utilisation of funds is not a benchmark for fair public tendering. A project may be visible at the site and yet the procurement decision may still be unconstitutional if it was arrived at through an arbitrary, opaque or conflicted process. The Court referred to Akhil Bhartiya Upbhokta Congress v. State of M.P., (2011) 5 SCC 29, and Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1, to state that the constitutional concern is not limited to whether the State obtained value for money. The concern is whether public power was used to confer private advantage or whether the process was structured to exclude competition and favour a particular set of beneficiaries.
“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.”
However, the Court pointed out that judicial review in such cases does not convert the Court into a tender approving authority. Where the complaint raises issues of systemic opacity, departures from competitive processes, missing records, and conflicts of interest, it transforms from a mere contractual dispute into a matter of constitutional accountability. Judicial review in contract matters focuses on the decision-making process and tests it for legality and absence of arbitrariness, bias and mala fides.
3. Lack of Records Major Red Flag
The non-production of core records, including tender documents, evaluation material, approvals, and financial records, raises serious concerns. As custodian of public records, the State is obligated to maintain them to ensure accountability. Failure to produce such records permits the Court to draw an adverse presumption, particularly where the State withholds material within its control.
The Court stated that the decision to depart from competitive processes must be supported by reasons recorded by the competent authority, as it prevents arbitrariness, ensures transparency, and enables effective judicial review. Such a requirement cannot be satisfied by post facto justifications; even if the order is brief, it must be recorded why the ordinary rule was departed from and what safeguards were adopted to prevent favouritism.
The Court reiterated that the mere existence of completed works cannot substitute compliance with lawful procurement processes, and the legality of the process remains subject to judicial scrutiny.
4. Appreciation of Material on Record in Present Case
The Court observed that the petitioner’s allegations raise issues that go to the integrity of public procurement and the traceability of public expenditure. Further, the material on record, including the CAG report, showed repeated resort to non-tender methods, absence of recorded reasons for such departures, and non-production of vouchers and tender-related records in respect of high-value public projects. Accordingly, the Court held that these matters required a structured investigation to determine whether any cognizable offences or other legal breaches took place.
5. Necessity of Independent CBI investigation
The Court observed that the circumstances disclose concerns extending beyond administrative irregularity to possible abuse of public office, manipulation of procurement processes, and concealment or destruction of official records, warranting investigation by an independent statutory agency. Entrusting the matter to agencies under the administrative control of the State would give rise to serious and reasonable doubts in the public mind related to the independent investigation into the matter. The Court emphasised that the credibility of the process is as important as its eventual outcome. Thus, CBI is the appropriate agency for this purpose instead of an SIT under the supervision of the State.
Conclusion
The Court directed the CBI to investigate the award and execution of public works contracts in the State of Arunachal Pradesh for the period from 2015 to 2025, including works placed on record in the proceedings. The investigation was to, in particular, examine contracts awarded to entities related to the Chief Minister of Arunachal Pradesh and other respondents, the procurement process, the reasons for dispensing with open tender, compliance with statutory requirements, availability of records, and the flow of funds to determine whether any illegality or cognizable offence was disclosed. The CBI was also permitted to examine transactions beyond the specified period to the extent necessary to trace ownership, related-party links, and fund flows connected to the relevant transactions.
[Save Mon Region Federation v. State of A.P., 2026 SCC OnLine SC 526 decided on 6-4-2026]
*This judgment was authored by Justice Vikram Nath.
Advocates who appeared in this case:
For the petitioners: AOR Prashant Bhushan, Neha Rathi, Kajal Giri, Somya Kumari, Prateek Yadav, Advocates
For the respondents: Tushar Mehta, Solicitor General, K.M. Nataraj, A.S.G., AOR Anil Shrivastav, Sharath Nambiar, Vinayak Sharma, Vatsal Joshi, Anuj Sriniwas Udupa, Chitransh Sharma, Yogya Raj Purohit, Indira Bhakar, Satvika Thakur, Ritika Ranjan, S. Subramanium, AOR Mukesh Kumar Maroria, Madhav Sinhal, Aaditya Shankar Dixit, Santosh Kumar, Sarthak Karol, Himanshu Satija, Aman Mehta, AOR Gurmeet Singh Makker, Anuj Udupa, Anmol Chandan, Disha Thakkar, AOR Amrish Kumar, Advocates