Formula 4 racing event: Supreme Court sets aside HC direction asking private firm to reimburse Tamil Nadu govt

New Delhi: The Supreme Court on Thursday set aside Madras High Court's directions, including the one asking a private company to pay Rs 42 crore to the Tamil Nadu government in connection with the Formula 4 Racing event in Chennai in 2023.

A bench comprising Justices P S Narasimha and Manoj Misra held the Madras High Court "overstepped" its jurisdiction by interfering in the contractual terms between the Tamil Nadu government's sports body and event organiser Racing Promotions Private Limited (RPPL).

"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 memorandum of understanding (MoU) entered into between the authority and RPPL. 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,” held Justice Narasimha, authoring the judgement.

Acting on a PIL, the high court 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 high court said, “In future, the state is expected to take upon itself the responsibility of conducting such an event in furtherance of its policy to encourage the racing sport and seek the support of private bodies having experience and expertise in the field. This will ensure fairness and also dispel any doubt as to mala fides in distribution of the state largesse.” RPPL had signed a three-year MoU with the Sports Development Authority of Tamil Nadu (SDAT) on August 16, 2023, to organise the event.

Under the agreement, RPPL committed to spending Rs 202 crore on the event, while SDAT was responsible for Rs 42 crore expenditure, including licensing fees, road improvements, and other miscellaneous costs.

The state government issued a statement on November 2, 2023 for organising the event between December 8 and 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.

Though the high court said it would not interfere with the government's policy decision to promote motor racing as a sport, it said a private party was organising the event and the role of the state government was limited to facilitating the event and the revenue and profits would accrue only to the firm.

The private firm had no objection with respect to the reservations expressed by the high court on public safety and health but was aggrieved after being directed to reimburse Rs 42 crore spent by the state.

The sport development authority, the bench said, acted as a nodal governmental authority for promoting sports and the welfare of sports persons and it was nobody’s case that it distributed the largesse or "frittered away" public funds.

"The scope of judicial review in matters concerning the contractual relationship of the State or its instrumentality with private participation, particularly as regards the scope and ambit of work and finances, are limited,” it added.