The Department for Transport (DfT) did not follow its own rules over the West Coast main line franchise bidding process, Virgin boss Sir Richard Branson told MPs today.
The rail franchise system is "flawed", Sir Richard told the House of Commons Transport Committee.
He was giving evidence after Virgin Trains launched a judicial review of the DfT's decision to award a new 13-year West Coast franchise to rival transport company FirstGroup.
Virgin has run the West Coast line since 1997.
Sir Richard told MPs today: "The Virgin (West Coast franchise) bid is more deliverable and much more financially robust.
"The DfT did not follow their own rules. The franchise system is flawed. The decision (to award the franchise to FirstGroup) is bad for the country, bad for passengers and bad for passengers on other franchises."
He said the Government should not be running a franchise process that was risky rather than one that aided passengers.
Sir Richard added that the interests of passengers should be "at the heart" of the franchise bidding process and that there should be "no repeat of this fiasco".
He said Virgin was recommending that the current rules and regulations for franchise should be completely reviewed and the award of a new West Coast franchise should be delayed until the review is complete.
Sir Richard said: "This bid by FirstGroup is absolutely preposterous. It's completely ridiculous. It's taking the system for a ride."
He added that Virgin had asked questions of the DfT about the bidding but replies "have not been forthcoming".
Committee member Kwasi Kwarteng (Conservative, Spelthorne) said people might say that Virgin, in taking legal action, was "bringing in the heavy artillery" and that Sir Richard was "using your prestige and fame" to challenge the decision.
Sir Richard replied that across various modes of transport he had "created a number of ventures with the principle aim of making a real difference to those sectors".
He went on: "The profit motive is not important to me. I am lucky enough to afford breakfast, lunch and dinner every day for the rest of my life."
The Virgin legal challenge has led to the Government delaying a final signing of the new West Coast franchise. The 13 years and four months franchise had been due to start in December.
Sir Richard said that FirstGroup had "some cash issues".
This was put to FirstGroup chief executive Tim O'Toole, who followed Sir Richard in giving evidence to the committee.
The committee's chairman Louise Ellman asked Mr O'Toole: "Do you have a cash problem?"
He replied: "No, we don't have a cash problem. We have steadily played down debt. This year we have pointed out that cash will be flat... but we believe cash flows will return to what they were."
Two previous operators of the East Coast main line have ended their franchises early.
Asked if this might happen to FirstGroup on West Coast, Mr O'Toole, whose company runs other train routes, replied: "I don't think there is any chance of our handing back the keys."
Mr O'Toole was repeatedly pressed as to whether FirstGroup's bid was more risky than Virgin's.
He replied: "Absolutely there is a risk. There is a risk in any venture of this kind."
Mr O'Toole said he believed growth on the West Coast line can be continued.
He added that allegations Virgin had made about the FirstGroup bid were "flat wrong". He said Virgin had been making "bad guesses about our bid, because they have not seen our bid".
Asked about concerns that jobs would be lost on the West Coast line, Mr O'Toole said the FirstGroup bid assumed staffing levels would be the same, at least for the first five years.
Asked what would happen after five years, Mr O'Toole said it was "very difficult" to predict.
On fares, he said: "We assume prices will increase by the rate of inflation."