SC clears TN’s F4 partnership, rejects conditions set by HC

The Supreme Court on Thursday overturned the Madras high court ruling that directed the Tamil Nadu government to organise Formula 4 races and similar motor sports independently, excluding private parties. The apex court emphasised that public-private partnerships (PPPs) are widely embraced by governments globally as a model of good governance, which optimises limited state resources while leveraging efficiency and expertise from private entities.

A bench comprising justices PS Narasimha and Manoj Misra observed that the delivery of public services and infrastructure projects was often more effective when executed through private partnerships rather than direct government provision.

“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 bench stated in its order.

The dispute stemmed from a batch of public interest litigations (PILs) challenging the conduct of a Formula 4 race in Chennai. The petitioners raised concerns about public inconvenience, safety measures, noise pollution and alleged lack of transparency in the use of public funds for a privately organised event.

Racing Promotion Private Ltd. (RPPL), the company responsible for sponsoring and organising the Formula 4 championship, had entered into a memorandum of understanding (MoU) with the Sports Development Authority of Tamil Nadu (SDAT) in August 2023, agreeing to a three-year partnership for hosting the races. Under this MoU, RPPL committed to an investment of ₹202 crore, while SDAT was to contribute ₹42 crore for licensing, operational costs and infrastructure improvements.

The Madras high court, by its order on February 19, 2024, allowed the race to proceed but imposed several conditions, including full reimbursement of the Tamil Nadu government’s ₹42 crore expenditure by RPPL and an advance deposit of ₹15 crore for future events. The court also directed that, in subsequent years, the state should take over the organisation of such races, relegating RPPL’s role to mere facilitation.

Entertaining RPPL’s appeal, the Supreme Court found fault with the high court’s directions, particularly those mandating financial contributions from RPPL and restricting its role in future events. The bench noted that the high court had overstepped its judicial review powers by interfering with the contractual terms of MoU between the Tamil Nadu government and RPPL.

Further, the bench underscored the significance of public-private partnerships in modern governance, highlighting that such collaborations enhance efficiency and expertise. “The case at hand involves the conduct of the sports event through the collaborative effort of the instrumentalities of the State of Tamil Nadu, being the SDAT, and the appellant, a private enterprise,” it noted.

During the proceedings, SDAT submitted a detailed counter-affidavit arguing that the high court’s direction to take over the event independently would be economically unviable and counterproductive to Tamil Nadu’s long-term goal of establishing Chennai as a global sports hub. It also highlighted the benefits of such international events in boosting tourism, infrastructure and local sports development.

Acknowledging these considerations, the bench held that the high court’s insistence on state-led execution ignored practical governance models. “The 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,” the judgment read.

The bench proceeded to partially allow the appeals, setting aside the high court’s directions which mandated RPPL to bear all costs, deposit advance funds, and ordered the state to conduct such events in the future.