NEW DELHI: The Supreme Court on Thursday set aside the Madras High Court's directions asked the Tamil Nadu government to organise Formula 4 Racing event in Chennai, instead of a private company, and seek reimbursement of Rs 42 crore spent by the state exchequer for conduct of the championship, a motorsport series of races.
A bench of Justices P S Narasimha and Manoj Misra said the High Court disregarded the principle of public-private partnership adopted by governments across the globe as a matter of good governance and decided the issues, even though the scope of judicial review are limited in matters concerning contractual relationship of the State or its instrumentality with private participation.
SC Overturns Madras HC Order on Formula 4 Racing, Cites Limited Judicial Review
"Once the High Court was satisfied that the decision to hold the sports event is a matter of policy, it could not have proceeded to interfere with the specific terms of the MoU entered into between the authority and the appellant herein. Issues such as the mutual obligations, including the apportionment of expenditure that the contracting parties must bear, are beyond the scrutiny of the High Court in a public interest litigation," the bench said.
The bench said issues such as the mutual obligations, including the apportionment of expenditure that the contracting parties must bear, are beyond the scrutiny of the high court in a public interest litigation. “Finally, direction calling upon the State itself to take up the responsibility of conducting such sports events ignores the principle of public-private partnership adopted by governments across the globe as a matter of good governance, which takes into account the limited resources of the State coupled with issues of efficiency and expertise," the bench said.
The apex court said Madras High Court "exceeded" its jurisdiction by interfering in the contractual terms between the Tamil Nadu government's sports body and event organiser Racing Promotions Private Limited (RPPL).
Public-Private Partnership: SC Rejects HC’s Formula 4 Racing Reimbursement Order
“We are of the opinion that the High Court committed an error in issuing directions, which cannot be sustained in law”, the bench said.
The court said over a period, the policy shifted towards public-private partnerships or private finance initiatives.
"The shift is based on the experience that delivery of goods and services as part of public service can be provided more effectively by means of contracting with private enterprise than by direct provision by the government," the court said.
The bench said that micro-economics, as perceived in public finance, involves private participation and it can now be seen in three strategic investments.
The court said first, where the private sector provides capital to build infrastructure, and the state leases them out, and second, where private sector participation is involved in building infrastructure such as airports, metro rail transport, bridges by using their own resources, for which they would secure their consideration through tolls and usage charges.
"There are also instances where assets are built partly through private contributions and partly through government funding. The rationale for this micro-economic strategy is the limited resources of the state and the understanding about their functioning as lacking flexibility, or effective expertise," the court said.
Acting on a PIL, the High Court had passed several directions including ones by which the RPPL was to reimburse Rs 42 crore to Tamil Nadu government. The state had spent the amount from the public exchequer before the event was organised. The state government issued a statement on November 2, 2023, for organising the event between December 8-10.
PILs were filed in the high court raising multiple objections such as public inconvenience, lack of safety measures, noise pollution, environmental and ecological damage, and the lack of transparency in the use of public funds for the event in a manner that benefits a private party.
The state government contended the direction issued by the high court was unviable and its implementation would cause great loss to the city and its sportsperson and also affect the long-term goal of promoting and situating Chennai as a global sports centre.
The event was being organised in Chennai in terms of a Memorandum of Understanding of August 16, 2023 between Racing Promotions Private Limited (RPPL) and the Sports Development Authority of Tamil Nadu, for a term of three years.
[Read Judgment]
