The Calcutta High Court has affirmed that even when a tender document permits automatic debarment for exceeding bid limits, the principles of natural justice cannot be overridden. The Court set aside a three-year debarment order against a bidder who quoted above the estimated volume, holding that no punitive action can be taken without affording a prior opportunity to be heard.
Background & Facts
The Dispute
The dispute arose from an e-auction conducted by the Irrigation & Waterways Directorate, Government of West Bengal, for dredging and desilting river bed materials from New Cossye River between Tituan and Shyampur under the "No Cost to State Exchequer" scheme. The auction was conducted pursuant to Request for Proposal (RFP) No. WBIW/SE/WC-II/RFP-35(e)/2025-26, issued on 21.11.2025. The estimated volume of material to be dredged was 58,660,694.11 cubic feet, with a floor bid volume of 2,933,035.00 cubic feet.
Key Facts
- The petitioner, Greego Drive Private Ltd., participated in the e-auction held on 31.12.2025.
- The petitioner submitted a bid exceeding the estimated volume of earth, specifically quoting 5,86,58,035 cubic feet.
- On 02.01.2026, the Auction Evaluation Summary Sheet was uploaded by the 5th respondent (Superintending Engineer, Western Circle II), declaring the petitioner as the H1 bidder.
- On 16.01.2026, the petitioner submitted a representation alleging collusive bidding and bid rigging by the 6th and 7th respondents, and requested correction of its bid volume.
- No response was communicated to the petitioner regarding this representation.
- On 02.02.2026, the 5th respondent issued a Memo cancelling the entire e-auction under Clause 6.10.3 of the RFP.
- On 03.02.2026, the 3rd respondent (Chief Engineer, I&W Directorate) issued an Office Order debarring the petitioner from participating in all future e-auctions for three years and forfeiting its bid security.
Procedural History
- 21.11.2025: RFP No. WBIW/SE/WC-II/RFP-35(e)/2025-26 issued.
- 31.12.2025: E-auction conducted.
- 02.01.2026: Auction Evaluation Summary Sheet uploaded; petitioner declared H1 bidder.
- 16.01.2026: Petitioner’s representation alleging bid rigging and requesting bid correction submitted.
- 02.01.2026: Superintending Engineer (5th respondent) issued Memo No. 06 recommending cancellation and debarment.
- 07.01.2026: 5th respondent forwarded Memo No. 06 to Secretary, Irrigation & Waterways Department.
- 27.01.2026: Secretary consented to cancellation and punitive action.
- 02.02.2026: Memo cancelling e-auction issued.
- 03.02.2026: Office Order debarring petitioner for three years and forfeiting bid security issued.
- 09.04.2026: Writ Petition decided by the Calcutta High Court.
The Parties' Positions
For the Petitioner
The petitioner contended that:
- The debarment and forfeiture were imposed without any show-cause notice or hearing.
- The decision was taken by the 3rd respondent, who was not the designated authority under the RFP for evaluating financial bids.
- The representation dated 16.01.2026 alleging bid rigging was ignored.
- The penalty was disproportionate and violated principles of natural justice.
For the Respondent
The State contended that:
- Clause 6.10.3 of the RFP explicitly provided for automatic cancellation, forfeiture, and debarment upon bidding equal to or exceeding the estimated volume.
- The petitioner had voluntarily accepted the terms of the RFP by participating in the auction.
- The cancellation was justified as the bid exceeded the estimated volume, rendering the auction non-viable.
- No prior notice was required as the RFP terms were clear and binding.
Relief Sought
The petitioner sought:
- Setting aside of the Memo dated 02.02.2026 cancelling the e-auction.
- Setting aside of the Office Order dated 03.02.2026 debarring the petitioner for three years.
- Refund of the forfeited bid security.
- Declaration that the debarment order was illegal and violative of natural justice.
The Legal Issue
Can a public authority impose a debarment order for three years and forfeit bid security under a tender clause that permits automatic punishment, without issuing a show-cause notice or affording an opportunity of hearing to the bidder?
Arguments Presented
For the Petitioner
The petitioner relied on Erusian Equipment & Chemicals Limited v. State of West Bengal (1975) 1 SCC 70, Techno Prints v. Chhattisgarh Textbook Corporation (2025 SCC Online SC 343), Raman Kalra v. Govt. of NCT of Delhi (2017 SCC Online Del 9414), and AL. Sudais Haj Umrah Service v. Union of India (2023 SCC Online Del 476) to argue that debarment constitutes a civil penalty with serious commercial consequences. It casts a slur on the bidder’s reputation and affects future business opportunities. The Supreme Court in Erusian held that blacklisting requires adherence to principles of natural justice. The Delhi High Court in Raman Kalra held that debarment cannot follow automatically even if the tender conditions permit it. The petitioner further argued that the RFP did not expressly exclude the application of natural justice, and therefore, the rules must be read into the clause.
For the Respondent
The State contended that Clause 6.10.3 of the RFP was unambiguous and provided for automatic consequences upon exceeding the estimated volume. It relied on Raghunath Thakur v. State of Bihar (1989) 1 SCC 229, where the Supreme Court held that natural justice is not implied unless required by statute or rules. The State argued that the petitioner had full knowledge of the terms and voluntarily participated, thereby waiving any right to procedural fairness. It further submitted that the cancellation was necessary to prevent distortion of the auction process and protect public interest.
The Court's Analysis
The Court began by acknowledging that the State, as a contracting authority, has the right to determine whether to enter into a contract. However, it emphasized that such decisions are not immune from judicial review under Article 226 of the Constitution. The Court cited Kulja Industries Ltd. v. Western Telecom Project BSNL (2014) 14 SCC 731 to affirm that even contractual decisions by the State must be informed by reason and free from arbitrariness.
"It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution."
The Court then examined Clause 6.10.3 of the RFP, which provided for automatic cancellation, forfeiture, and debarment. While acknowledging the clarity of the clause, the Court held that the mere inclusion of such a provision does not negate the fundamental principles of natural justice.
The Court distinguished Raghunath Thakur by noting that while the Supreme Court there held that natural justice is not implied in the absence of statutory mandate, subsequent decisions such as UMC Technologies v. Food Corporation of India (2021) 2 SCC 551 and Gorkha Security Services v. Government (NCT of Delhi) (2014) 9 SCC 105 have firmly established that administrative actions with grave consequences must comply with the rules of natural justice, unless expressly excluded.
"The rules of natural justice are not embodied rules but their aim is to secure justice and to prevent miscarriage of justice."
The Court observed that debarment for three years is not a minor sanction. It affects the bidder’s livelihood, reputation, and future participation in public contracts. The Court further noted that the petitioner had raised a plausible allegation of bid rigging, which, if true, could have rendered the excess bid unintentional or the result of collusion. Ignoring this representation and imposing a blanket penalty without inquiry was arbitrary.
The Court also clarified that while the cancellation of the auction was lawful under Clause 6.10.3, the debarment and forfeiture were separate punitive actions requiring procedural fairness. The authority could not rely on the RFP clause as a carte blanche to bypass due process.
The Verdict
The petitioner succeeded in part. The Calcutta High Court set aside the Office Order dated 03.02.2026 insofar as it debarred the petitioner from participating in e-auctions for three years. The forfeiture of bid security was not set aside, but the petitioner was granted liberty to submit a fresh representation before the appropriate authority within eight weeks, seeking refund of the bid security and ventilating allegations of bid rigging and collusive bidding. The authority was directed to consider the representation after affording a hearing to the petitioner and any other affected parties, and to pass a reasoned order within eight weeks of receipt. No order was made on costs.
What This Means For Similar Cases
Debarment Requires Procedural Fairness, Even Under Automatic Clauses
- Practitioners must now argue that any debarment, regardless of RFP wording, requires a show-cause notice and hearing.
- RFP clauses that purport to impose automatic penalties are subject to judicial scrutiny under Article 14 and natural justice.
- Courts will not uphold debarment orders that bypass due process, even if the bidder allegedly breached a clear term.
Bid Rigging Allegations Must Be Investigated, Not Ignored
- If a bidder raises allegations of collusion or bid rigging before punitive action, the authority must investigate and respond.
- Failure to address such representations renders subsequent debarment orders vulnerable to challenge.
- Practitioners should always file detailed representations with supporting evidence at the earliest opportunity.
Debarment Is Not a Mechanical Penalty
- Authorities must exercise discretion in determining the proportionality of punishment.
- A three-year debarment may be excessive for an unintentional bid error.
- The judgment empowers bidders to request mitigation of penalties based on mitigating circumstances.
