Representational view of racing cars during the Formula 4 night street race in Chennai on September 1, 2024
| Photo Credit: R. Ravindran
The Supreme Court in a judgment on Thursday (February 20, 2025) set aside four directions given by the Madras High Court in a case concerning the conduct of Formula 4 racing in Chennai, including that the Racing Promotion Private Ltd (RPPL) must reimburse ₹42 crore to the Tamil Nadu government.
A Bench of Justices P.S. Narasimha and Manoj Misra said that public-private partnerships like this were adopted by governments across the globe as a matter of good governance. Such deals take into account the limited resources of the State, coupled with issues of efficiency and expertise.
The judgment authored by Justice Narasimha observed that the State could form a suitable policy to ensure equitable distribution of goods and services for the common good.
The Formula 4 event was conducted on the basis of a Memorandum of Understanding (MoU) entered into between RPPL and the Sports Development Authority of Tamil Nadu (SDAT) in August 2023 for a term of three years. According to the MoU, the RPPL would spend ₹202 crores as part of its responsibility and the SDAT was required to spend ₹42 crore towards license and operations fee, roads, and miscellaneous expenditures, including road beautification and painting.
“Experience has shown that resources generated by the government are inadequate and also that the management of these resources was inefficient and ineffective. 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,” Justice Narasimha said.
Besides a direction that RPPL must reimburse ₹42 crore, the High Court had directed that RPPL must deposit, in advance prior to next year and the upcoming third year’s event, the stipulated expenditure of ₹15 crore for the upcoming two years for holding the Street Circuit in Chennai. The High Court had also held that RPPL must bear entire expenses of the event and the State should restrict itself to only its facilitation.
“In future, the State is expected to take upon itself the responsibility of conducting of such events… This will ensure fairness and also dispel any doubt as to mala fides in distribution of the State largesse,” the High Court had held.
The apex court held that none of these four directions from the High Court could be sustained in law.
”The SDAT is an instrumentality of the State and acts as a nodal governmental authority for promoting sports and the welfare of sports persons. It is nobody’s case that the State through SDAT is distributing largesse or that public funds are being frittered away or that there is any defalcation of funds. The scope of judicial review in matters concerning contractual relationship of the State or its instrumentality with private participation, particularly as regards the scope and ambit of work and finances, are limited,” Justice Narasimha said.
Published – February 20, 2025 11:09 pm IST
