Court finds no specific DBN mandate supporting ISP/TSP exclusion, but upholds the restriction on independent policy grounds; GTPL’s petition dismissed, ₹5 lakh costs imposed
By Abhishek Pandey | Ahmedabad
The Gujarat High Court has upheld a contentious eligibility condition in the BharatNet Phase-III tender, allowing Gujarat Fibre Grid Network Limited (GFGNL) to exclude companies holding ISP/TSP licences in the state from the bidding process. The judgment, however, exposes a significant weakness in the administrative justification originally advanced for the restriction: GFGNL failed to produce a specific directive from Digital Bharat Nidhi (DBN) making the exclusion mandatory.
This distinction lies at the heart of the ruling. The court acknowledged that GFGNL had failed to substantiate its claim that the restriction was required under a national-level mandate. It nevertheless declined to invalidate the tender, finding that the exclusion could be independently justified on grounds of conflict of interest, competitive neutrality and network governance. These considerations were reflected in a BSNL committee report and the minutes of GFGNL board meetings.
The ruling, therefore, separates two questions that had become intertwined in the procurement dispute: whether DBN had expressly mandated the exclusion, and whether GFGNL could independently impose such a condition as part of its tender policy. While the first proposition remained unsubstantiated, the court accepted the second.
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A division bench comprising Acting Chief Justice Manash Ranjan Pathak and Justice Nikhil S. Kariel dismissed the petition filed by GTPL Hathway Limited. Justice Kariel authored the judgment. The court also directed GTPL to deposit ₹5 lakh with the Gujarat High Court Legal Services Authority.
The DBN Mandate That Could Not Be Established
The dispute over the exclusion clause acquired particular significance following GFGNL’s Corrigendum-5, issued on August 4, 2026.
GTPL had raised objections to the ISP/TSP restriction on June 17 and sought its removal or modification at the pre-bid meeting held the following day. GFGNL rejected the request through Corrigendum-5, maintaining that the condition could not be altered because it was mandated by DBN under the framework of the Amended BharatNet Programme (ABP).
That assertion became a central point of challenge before the High Court.
GTPL argued that no specific DBN instruction requiring the exclusion had been produced. It further submitted that DBN had itself described the corresponding restriction in BSNL’s draft as restrictive, undermining GFGNL’s claim that the provision represented a binding national-level requirement.
The bench accepted GTPL’s contention to a limited but consequential extent. It recorded that GFGNL had failed to place on record any specific DBN directive making the exclusion of ISP/TSP licence holders compulsory. Nor did the court consider a statement on DBN’s website, referring to the preparation of the RFP in coordination with BSNL, sufficient to establish an enforceable instruction imposing the disputed restriction.
This left a material gap in GFGNL’s stated justification. The authority had defended the condition as a consequence of a mandatory national policy requirement, but the documentary basis for that assertion remained unestablished.
The court, however, distinguished between an inadequately substantiated administrative justification and the substantive validity of the condition itself. The absence of a specific DBN directive did not, in its assessment, extinguish the independent policy considerations supporting the restriction. Consequently, the procedural deficiency was not considered sufficient grounds to set aside the tender.
A Ten-Year Network Contract and the Conflict-of-Interest Argument
The eligibility dispute arose from the RFP issued by GFGNL on June 4, 2026, for the selection of a Project Implementing Agency (PIA) under BharatNet Phase-III.
Clause 3.1(10) disqualified companies holding ISP/TSP licences in the Gujarat Licence Service Area from participating in the tender.
The restriction extended beyond companies holding licences directly. Under the affidavit prescribed in Format XX, bidders were required to declare that they did not hold the relevant licence, did not own more than 50 per cent of a licence-holding company, were not themselves more than 50 per cent owned by such a company and were not subsidiaries of any such entity.
GTPL fell within the scope of the provision because its wholly owned subsidiary held an ISP licence in Gujarat.
Defending the clause, Advocate General Kamal Trivedi, appearing for the state, and GFGNL’s government counsel G.H. Virk argued that the nature and duration of the proposed contract justified a stringent eligibility framework.
The selected PIA would be responsible for operating and maintaining the network for 10 years. At the same time, the infrastructure would serve multiple internet service providers, potentially including competitors of the selected agency.
The government’s concern was that an ISP-affiliated entity entrusted with network operations could enjoy a structural competitive advantage. Such an arrangement, it argued, could create opportunities for preferential treatment in service delivery, differential prioritisation in fault resolution or access to commercially sensitive information concerning network capacity and operations.
The court found this concern legitimate. It distinguished between preventive safeguards imposed at the qualification stage and punitive measures applied after a contractual violation. The existence of penalty provisions, the bench reasoned, could not necessarily substitute for eligibility conditions designed to prevent conflicts of interest from arising in the first place.
The ruling thus recognised that a public authority may seek to preserve operational neutrality through advance restrictions rather than relying exclusively on post-award enforcement.
Why the Court Rejected GTPL’s Challenge to the BSNL Model
GTPL’s challenge extended beyond the absence of a DBN directive. The company questioned the adoption of a restriction from BSNL’s procurement framework in Gujarat’s state-led implementation model.
Its senior counsel argued that the disputed provision had been drawn from BSNL’s RFP for 16 states in which BSNL functioned as the Project Implementing Agency. Gujarat, by contrast, followed a state-led model, with GFGNL responsible for implementation.
GTPL relied on a DBN Office Memorandum dated January 9, 2025, which, according to the company, permitted GFGNL to formulate an RFP suited to Gujarat’s specific requirements.
The company also highlighted a difference between the two procurement exercises. The first tender, issued in January 2025, did not contain the disputed exclusion. GTPL had previously completed a package under BharatNet Phase-II in Gujarat and was operating the network. It questioned the rationale for treating a company with an established record of participation in the project as ineligible for the subsequent phase.
The bench was not persuaded.
It accepted the concern that the BharatNet network, built on BSNL’s existing fibre infrastructure, required safeguards against potential conflicts involving companies that also provided ISP/TSP services in the same geographical market.
The court further noted that the restriction was limited to the particular Licence Service Area in which a company held the relevant licence. On that basis, it rejected the contention that the classification was arbitrary or violated Article 14 of the Constitution.
Nor did GTPL’s previous participation and performance under Phase-II, in the court’s assessment, establish that the eligibility framework adopted for Phase-III was unreasonable.
Earlier Acquiescence and the Timing of the Petition
The substantive validity of the eligibility condition was not the only consideration weighing against GTPL. The bench also examined the timing of the challenge and the company’s conduct in earlier procurement proceedings.
GFGNL had rejected GTPL’s representation through Corrigendum-5 on August 4, 2026. The company approached the High Court approximately 59 days later, close to the bid submission deadline. By then, the deadline had already been extended six times.
The bench took note of this sequence and viewed the circumstances as having afforded GTPL an opportunity that arose incidentally.
More significantly, the court examined GTPL’s earlier participation in BSNL’s procurement process in June 2025. Through a consortium, the company had participated in bids for Package No. 10 covering Haryana and Package No. 11 covering NER-1. Both procurement exercises contained a similar restrictive eligibility condition.
GTPL’s bid had been declared non-responsive because the prescribed affidavit had not been submitted. Despite having encountered the same restriction in those proceedings, the company did not challenge the condition at that stage.
The High Court treated this conduct as acquiescence, finding that GTPL had allowed a comparable restriction to remain unchallenged in earlier proceedings before questioning its validity in the Gujarat tender.
The bench also rejected the allegations of mala fides and the contention that the eligibility condition had been framed to target a particular company.
Public Interest and the Limits of Judicial Intervention
The court’s final consideration was the wider public interest attached to the BharatNet programme.
Referring to the Supreme Court’s judgment in Air India v. Cochin International Airport, the bench reiterated that a procedural deficiency in a government procurement exercise does not automatically warrant judicial intervention. The legality of the process must also be assessed against the broader public interest.
The court additionally referred to the Supreme Court’s decision in Just Rights for Children Alliance, considering internet access in the context of the constitutional protections under Articles 21 and 19(1)(a).
It observed that judicial interference with the procurement process could delay the expansion of digital connectivity and internet access in rural areas. Given the programme’s public significance, the bench found no sufficient justification to disrupt the tender on the grounds advanced by GTPL.
The petition was accordingly dismissed, and GTPL was directed to deposit ₹5 lakh with the Gujarat High Court Legal Services Authority.
Following the pronouncement of the judgment, GTPL sought an extension of a few additional days to submit its bid. The court declined the request.
ગુજરાતીમાં વાંચો: પ્રતિબંધનો આધાર વિવાદાસ્પદ, છતાં ટેન્ડર યથાવત્
