The Allahabad High Court has reaffirmed that public authorities cannot arbitrarily reject tender bids on grounds of curable defects, particularly when such defects were not raised at the appropriate stage. In a significant ruling, the Court quashed the rejection of a bid by Konkan Railway Corporation Ltd., directing the North Eastern Railway to evaluate the financial bid after accepting a corrected bank guarantee, underscoring the principles of fairness and non-discrimination in tender processes.
Background & Facts
The Dispute
The petitioner, M/s Konkan Railway Corporation Ltd., a government enterprise, participated in a tender process initiated by the North Eastern Railway for the "Design, Supply, Erection, Testing & Commissioning of Traction Sub Stations with associated Switching Posts for 2x25 KV AT traction feeding system" on EPC Mode, valued at INR 262.12 crores. The petitioner’s bid was initially rejected on grounds of inadequate stamp duty on the bank guarantee, a defect the Court later deemed curable.
Key Facts
15.03.2026: Petitioner submits bid for the tender.
29.05.2026: Allahabad High Court, in Writ C No. 5810 of 2026, directs the respondent to permit the petitioner to cure the defect of inadequate stamp duty on the bank guarantee.
08.06.2026: Respondent rejects the petitioner’s bid via a letter (Annexure No. 1), citing an incorrect beneficiary name in the bank guarantee, communicated via WhatsApp.
18.06.2026: Petitioner submits a corrected bank guarantee with the correct beneficiary name.
19.06.2026: Respondent returns the corrected bank guarantee, alleging belated submission.
Procedural History
Earlier Litigation (Writ C No. 5810 of 2026):
29.05.2026: High Court permits the petitioner to cure the defect of inadequate stamp duty on the bank guarantee, observing that the respondent’s actions appeared mala fide.
The Court relied on the precedent Meerut Development Authority v. Assn. of Management Studies ((2009) 6 SCC 171), emphasizing that public authorities must act without arbitrariness or favoritism.
Present Writ Petition (Writ C No. 7099 of 2026):
08.06.2026: Respondent rejects the bid on a new ground - incorrect beneficiary name in the bank guarantee.
18.06.2026: Petitioner submits a corrected bank guarantee.
19.06.2026: Respondent rejects the corrected bank guarantee, alleging belated submission.
The Parties' Positions
Petitioner: Argued that the respondent’s actions were mala fide, aimed at eliminating the petitioner despite submitting the lowest financial bid. The petitioner contended that the defect of an incorrect beneficiary name was curable and had been pointed out belatedly to harass the petitioner.
Respondent: Alleged that the bank guarantee contained an incorrect beneficiary name and that the corrected submission was belated, justifying rejection.
Relief Sought
The petitioner sought the following reliefs:
Quashing of the impugned letter dated 08.06.2026 rejecting the bid.
Direction to the respondent to evaluate the petitioner’s financial bid in compliance with the Court’s order dated 29.05.2026.
Acceptance of the corrected bank guarantee dated 18.06.2026.
Direction to proceed with the tender process, including declaration, execution, and issuance of the work order.
The Legal Issue
The central question was whether public authorities can reject a tender bid on grounds of curable defects, particularly when such defects were not raised at the appropriate stage, thereby violating principles of natural justice and fairness in public procurement.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the respondent’s actions were mala fide and aimed at eliminating the petitioner, who had submitted the lowest financial bid.
Reliance was placed on the Court’s earlier order dated 29.05.2026, which had permitted the petitioner to cure the defect of inadequate stamp duty, observing that the respondent’s actions appeared arbitrary.
The petitioner contended that the defect of an incorrect beneficiary name was curable and had been raised belatedly to harass the petitioner.
Reference was made to a letter dated 09.03.2026 from Southern Railway (another arm of the respondent), which had permitted the petitioner to correct a similar defect in the beneficiary name of a bank guarantee after the issuance of the Letter of Acceptance (LOA), demonstrating inconsistent standards.
For the Respondent
The respondent contended that the bank guarantee contained an incorrect beneficiary name and that the corrected submission was belated, justifying rejection.
No specific legal precedent or statutory provision was cited to support the rejection.
The Court's Analysis
The Court critically examined the respondent’s conduct, highlighting the following key observations:
Curable Defects and Principles of Natural Justice:The Court observed that the defects pointed out by the respondent - first inadequate stamp duty and later an incorrect beneficiary name - were curable. The respondent’s failure to raise these defects at the appropriate stage violated principles of natural justice and fairness.
"In our view, the ground/certain defects for rejecting the tender of the petitioner are curable and thus, the rejection is clearly in gross violation of principles of natural justice and against the established principles of law."
Arbitrary and Mala Fide Conduct:The Court noted that the respondent’s actions appeared mala fide, aimed at eliminating the petitioner despite submitting the lowest financial bid. The respondent’s shifting grounds for rejection (from stamp duty to beneficiary name) were seen as a deliberate attempt to oust the petitioner.
"It appears to this Court that they are fixated to not allow the petitioner to participate in the tender on one ground or the other. All the defects, which had been pointed out by the authorities are curable defects and such defects could have been pointed out at much earlier stage."
Inconsistent Standards:The Court drew attention to the inconsistent standards applied by the respondent. While the North Eastern Railway rejected the petitioner’s bid for an incorrect beneficiary name, the Southern Railway had permitted the petitioner to correct a similar defect after the issuance of the LOA. This disparity demonstrated arbitrariness and lack of uniformity in the respondent’s actions.
"We are rather amused as to how there can be a two different yard-stick for two arms of the same organization. The acts of the respondent North Eastern Railways Authorities besides being arbitrary smacks of malafide and are whimsical."
Precedent on Tender Processes:The Court relied on the Supreme Court’s judgment in Meerut Development Authority v. Assn. of Management Studies ((2009) 6 SCC 171), which held that public authorities are not bound to accept the lowest bid but must act without arbitrariness or favoritism.
"The Supreme Court in Meerut Development Authority v. Assn. of Management Studies has held that State or authority under Article 12 of the Constitution of India is not bound to accept bid of L1 bidder, but is only bound to act without arbitrariness and favouristism."
Model Employer Obligations:The Court emphasized that the respondent, as a model employer, cannot engage in "hide and seek" tactics. The respondent’s conduct amounted to harassment, which is impermissible under law.
The Verdict
The Court allowed the writ petition and issued the following directions:
The impugned letter dated 08.06.2026 rejecting the petitioner’s bid was quashed and set aside.
The Respondent No. 2 was directed to evaluate the petitioner’s financial bid in compliance with the Court’s order dated 29.05.2026.
The respondent was directed to accept the corrected bank guarantee (with the correct beneficiary name) submitted by the petitioner within three working days from the date of the judgment.
The respondent was further directed to proceed with the tender process, including declaration, execution, and issuance of the work order.
What This Means For Similar Cases
Curable Defects Cannot Justify Arbitrary Rejection
Public authorities cannot reject tender bids on grounds of curable defects, particularly when such defects were not raised at the appropriate stage.
Defects such as incorrect beneficiary names in bank guarantees, inadequate stamp duty, or minor clerical errors must be pointed out promptly to allow the bidder to cure them.
Practitioners should argue that belated raising of defects, especially after judicial intervention, amounts to arbitrariness and mala fide conduct, violating principles of natural justice.
Uniformity and Fairness in Public Procurement
Public authorities must apply uniform standards across all arms of the organization. Disparate treatment of similar defects (e.g., permitting corrections in one case but rejecting in another) will be viewed as arbitrary and mala fide.
Model employers, such as government departments and public sector undertakings, cannot engage in harassment or adopt shifting grounds to eliminate bidders. Such conduct will attract judicial scrutiny and intervention.
Judicial Scrutiny of Tender Processes
Courts will closely examine the conduct of public authorities in tender processes, particularly when the lowest bidder is being eliminated on technical grounds.
Practitioners can rely on precedents like Meerut Development Authority v. Assn. of Management Studies to argue that public authorities must act without arbitrariness or favoritism, even if they are not bound to accept the lowest bid.
Key takeaways for bidders:
Ensure all tender documents, including bank guarantees, are error-free and compliant with tender conditions.
Document all communications with the tendering authority to demonstrate mala fide conduct if defects are raised belatedly.
Seek judicial intervention if the authority adopts shifting grounds or engages in harassment.
