The Madhya Pradesh High Court has affirmed that a bidder who submits the lowest bid in a public tender and subsequently refuses to sign the contract cannot evade forfeiture of the earnest money deposit merely by claiming a clerical error. The judgment reinforces the sanctity of tender terms and the binding nature of bid submissions once accepted.
Background & Facts
The Dispute
The petitioner, N.P. Patel and Co., participated in a public tender issued by the State of Madhya Pradesh for the implementation of the Sewerage Project in Morena Town under the AMRUT 2.0 Scheme. The estimated contract value was Rs. 149 crores. The petitioner submitted a financial bid of Rs. 14.5 crores, which was the lowest among all bids. After the financial bids were opened on 12.03.2025, the petitioner sent a letter on 13.03.2025 claiming a clerical error in quoting the rate and requested withdrawal of its bid and refund of the earnest money deposit (EMD). The respondents rejected this request, accepted the petitioner’s bid as the lowest, and directed execution of the contract. When the petitioner failed to sign the contract, the respondents forfeited the EMD by order dated 19.11.2025 and confirmed the forfeiture by order dated 20.11.2025.
Key Facts
- Tender invitation issued for Sewerage Project under AMRUT 2.0 Scheme with estimated value of Rs. 149 crores
- Financial bids opened on 12.03.2025
- Petitioner’s bid: Rs. 14.5 crores - lowest among all bids
- Petitioner’s letter requesting bid withdrawal and EMD refund dated 13.03.2025
- Respondents rejected withdrawal request on 14.03.2025 (implied from context)
- Petitioner filed W.P. No. 11706 of 2025 before Gwalior Bench on 25.03.2025
- Gwalior Bench disposed of petition on 09.04.2025 with liberty to file representation
- Petitioner submitted representation on 10.05.2025 (implied)
- Respondents rejected representation and ordered EMD forfeiture by order dated 19.11.2025
- Confirmation of forfeiture issued on 20.11.2025
- Fresh tender process initiated on 02.07.2025 after petitioner’s refusal to sign contract
- Petitioner filed present writ petition on 28.12.2025
Procedural History
- 12.03.2025: Financial bids opened; petitioner’s bid accepted as lowest
- 13.03.2025: Petitioner writes letter seeking withdrawal of bid and refund of EMD
- 09.04.2025: Gwalior Bench of High Court dismisses W.P. No. 11706 of 2025 but permits filing of representation
- 19.11.2025: Respondents issue order directing forfeiture of EMD
- 20.11.2025: Respondents confirm forfeiture and reject withdrawal request
- 28.12.2025: Writ Petition No. 10440 of 2026 filed before Jabalpur Bench
- 07.04.2026: Judgment delivered by Division Bench
The Parties' Positions
For the Petitioner: Argued that the bid of Rs. 14.5 crores was an obvious clerical error, being nearly 10% of the next lowest bid, and that forfeiture of EMD would be unjust. Relied on ABCI Infrastructures Private Limited v. Union of India and The Registrar, IIT v. M/s Hamid Enterprises to contend that manifest errors in bids should not attract forfeiture.
For the Respondent/State: Contended that the tender terms were clear and binding. The petitioner did not raise any error prior to bid opening. Clause 23.3 of the tender document explicitly provides for forfeiture of EMD upon failure to sign the contract. The State incurred loss and delay due to the need to re-tender, justifying forfeiture.
Relief Sought
The petitioner sought quashing of the orders dated 19.11.2025 and 20.11.2025, refund of the earnest money deposit, and a direction to permit withdrawal of the bid without penalty.
The Legal Issue
The central question was whether a successful bidder who fails to sign the contract after submitting the lowest bid can avoid forfeiture of the earnest money deposit by claiming a clerical error in the bid amount, when no such error was disclosed prior to bid opening.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the bid of Rs. 14.5 crores was so disproportionately low compared to other bids (which ranged from Rs. 140 - 149 crores) that it constituted a manifest error, akin to the Rs. 1569 bid in ABCI Infrastructures. Reliance was placed on ABCI Infrastructures and IIT v. Hamid Enterprises to assert that courts should intervene to prevent unjust forfeiture where a bid is ex facie erroneous. It was contended that forfeiture under Clause 23.3 should not apply where the error is so glaring that no reasonable person could have intended such a bid.
For the Respondent/State
The State contended that the tender document was unambiguous. Clause 23.3 clearly stated that failure to sign the contract would result in forfeiture of EMD, irrespective of the reason. The petitioner had ample opportunity to review and correct its bid before submission and chose not to. The Supreme Court’s decision in ABCI Infrastructures was distinguishable because the error there was astronomical and immediately apparent on the face of the bid. Here, the petitioner’s bid, though low, was numerically plausible and not inherently absurd. The State also emphasized that re-tendering caused administrative delay and financial loss, which the EMD was designed to compensate.
The Court's Analysis
The Court examined the tender document’s Clause 23.3, which explicitly states: "In the event of failure of the successful bidder to submit Performance Security and additional performance security (if any) or sign the Contract Agreement, his EMD shall stand forfeited without prejudice to the right of the employer for taking action against the bidder." The Court held that this clause is clear, unambiguous, and binding on all bidders.
"Petitioner did not make any such request [to withdraw] and it was only after the bids were opened that petitioner gave a letter seeking to withdraw his bid."
The Court distinguished ABCI Infrastructures and IIT v. Hamid Enterprises on factual grounds. In ABCI Infrastructures, the bid of Rs. 1569 for a highway project worth Rs. 1504 crores was so absurd that it could not be construed as a genuine offer. Similarly, in IIT v. Hamid Enterprises, a bid of Rs. 1.24 crores for scrap when others bid between Rs. 1.24 lakhs and Rs. 22.5 lakhs was manifestly erroneous. In contrast, the petitioner’s bid of Rs. 14.5 crores, while low, was not inherently impossible or irrational in the context of a Rs. 149 crore project. The Court noted that no documentary evidence, internal calculations, or prior communications demonstrated an error at the time of bid submission.
The Court emphasized that tender processes must be governed by certainty and fairness. Allowing bidders to withdraw after bid opening on grounds of alleged error would undermine the integrity of public procurement. The EMD serves as a deterrent against frivolous bidding and compensates for the cost of re-tendering, which the State undertook on 02.07.2025.
The Court further held that the petitioner had been afforded due process: it was permitted to file a representation after the earlier writ petition was dismissed, and the State considered it before issuing the impugned orders. No procedural illegality was found.
The Verdict
The writ petition was dismissed. The Court upheld the forfeiture of the earnest money deposit as lawful under Clause 23.3 of the tender document. The petitioner’s bid was accepted as the lowest, and its subsequent refusal to sign the contract triggered the forfeiture clause. No relief was granted for refund of EMD. The State’s orders dated 19.11.2025 and 20.11.2025 were affirmed.
What This Means For Similar Cases
Tender Terms Are Binding - Errors Must Be Raised Before Bid Opening
- Practitioners must advise clients to conduct rigorous internal review of bids before submission
- Any claim of clerical error must be communicated to the tendering authority BEFORE the bid opening
- Post-opening claims of error will not override clear contractual terms
Absence of Manifest Absurdity Does Not Justify Withdrawal
- A bid is not automatically voidable merely because it is significantly lower than others
- Courts will not intervene unless the error is so extreme that no reasonable person could have intended it
- The threshold for "manifest error" remains high - as established in ABCI Infrastructures
EMD Forfeiture Is a Valid Remedy for Non-Signing of Contracts
- Forfeiture under Clause 23.3 is not punitive but compensatory for re-tendering costs and delays
- Public authorities are entitled to rely on the finality of accepted bids
- This judgment reinforces the principle that tender documents are contracts of adhesion - bidders must accept terms as published
