1. Public tender for construction — Patent typographical error in bid price — Request for withdrawal — Forfeiture of bid security bank guarantee. (Para 3 )
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2025 Supreme(SC) 340
SUPREME COURT OF INDIA
SANJIV KHANNA, CJI., SANJAY KUMAR, K.V. VISWANATHAN, JJ.
M/S. ABCI Infrastructures Pvt. Ltd. - Appellant
VERSUS
Union of India And Others - Respondents
Civil Appeal No. of 2025 (Arising out of Special Leave Petition (Civil) No. 25394 of 2023)
Decided On : 14-02-2025
Important Points
IMPORTANT POINT
Mistake – A mistake may be unilateral or mutual, but it is always unintentional – If it is intentional, it ceases to be a mistake – Mistakes, including by authorities, should be resolved through corrective steps.
Mistake – A mistake may be unilateral or mutual, but it is always unintentional – If it is intentional, it ceases to be a mistake – Mistakes, including by authorities, should be resolved through corrective steps.
Subject
Civil Law - Contract Law
Act Referred
Headnote
(A) Government Contract – Tender – Encashment of Bank Guarantee – BRO justified encashing bank guarantee by citing delays caused by issuing a second notice inviting bids – This claim is baseless – BRO’s claim that delay was entirely due to Appellant’s mistake is flawed, ignoring BRO’s own lapses – Mistakes, including by authorities, should be resolved through corrective steps – A practical approach could have avoided delay, which was caused by BRO’s refusal to acknowledge Appellant’s genuine error and the unwarranted cancellation of the bid – Appellant to pay Rs.1 Crore to BRO, as a consequence of their error – Upon receiving this payment, BRO shall return Appellant’s original bank guarantee or demand draft of Rs.15.04 Crores within one week. (Paras 12, 13 and 16)
(B) Contract Act, 1872 – Section 20 – Mistake – A mistake may be unilateral or mutual, but it is always unintentional – If it is intentional, it ceases to be a mistake – Mistakes or errors, though avoidable, are committed inadvertently – They have varied consequences in law – Where both parties to an agreement are under a mistake as to matter of fact essential to an agreement, agreement is void. (Para 5)
Facts of the case:
Short question before Court is whether BRO was justified in accepting bid of Rs.1,569, and on failure of Appellant to execute agreement asking for forfeiture vide encashment of bank guarantee of Rs.15,04,64,000.
Findings of Court:
Alleged two-month delay by Appellant is incorrect. Error, submitted on 03.06.2023, became apparent only when financial bids were opened on 24.08.2023. Appellant promptly acknowledged mistake on 25.08.2023.
Result : Appeal allowed.
Judgement Key Points
Key Points: - (!) - (!) - (!) - (!) - (!) - (!)
What is the legality of enforcing encashment of a bank guarantee when a bid error is clearly evident and promptly disclosed?
What are the conditions under which a bidder’s mistake in bid submission may be corrected or relief granted under the Indian Contract Act, 1872 (Section 20) and related equitable principles?
What are the Court’s determinations regarding responsibility for delays and corrective steps in public contract bidding when a bidder commits a unilateral mistake?
Legal Category Hierarchy
Advocates appeared:
For the Petitioner(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Gaurav Khanna, AOR Ms. Natasha Sahrawat, Adv. Ms. Deepali Bhanot, Adv. Mr. Gautam Barnwal, Adv. Mr. Rudraksh Pandey, Adv. Ms. Alisha Roy, Adv.
For the Respondent(s): Ms. Archana Pathak Dave, A.S.G. Dr. N. Visakamurthy, AOR Mr. Yashraj Singh Bundela, Adv. Mr. Raman Yadav, Adv. Mr. Hitarth Raja, Adv. Mr. Udit Dedhiya, Adv. Mr. Mukesh Kumar Maroria, Adv. Mr. Sanjay Kapur, AOR Mr. Surya Prakash, Adv. Mr. Arjun Bhatia, Adv. Ms. Shubhra Kapur, Adv. Ms. Mahima Kapur, Adv.
For the Petitioner(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Gaurav Khanna, AOR Ms. Natasha Sahrawat, Adv. Ms. Deepali Bhanot, Adv. Mr. Gautam Barnwal, Adv. Mr. Rudraksh Pandey, Adv. Ms. Alisha Roy, Adv.
For the Respondent(s): Ms. Archana Pathak Dave, A.S.G. Dr. N. Visakamurthy, AOR Mr. Yashraj Singh Bundela, Adv. Mr. Raman Yadav, Adv. Mr. Hitarth Raja, Adv. Mr. Udit Dedhiya, Adv. Mr. Mukesh Kumar Maroria, Adv. Mr. Sanjay Kapur, AOR Mr. Surya Prakash, Adv. Mr. Arjun Bhatia, Adv. Ms. Shubhra Kapur, Adv. Ms. Mahima Kapur, Adv.
Table of Contents
2. Whether a patent error in bid price justifies acceptance of the bid and subsequent forfeiture of bid security upon failure to execute the agreement. (Para 4 )
3. The bid price was self-evidently unrealistic and a patent error; the authority's refusal to acknowledge the mistake and subsequent forfeiture was disproportionate and obdurate. (Para 10 , 11 , 12 , 13 )
4. Equitable relief is available to a bidder for a material, patent mistake of fact if they act promptly to inform authorities before a formal contract is entered. (Para 5 , 6 , 10 )
5. Appeal allowed — Appellant directed to pay a penalty — Respondent directed to return the bid security bank guarantee. (Para 16 , 17 )
6. When is a bidder entitled to equitable relief for a mistake in a public contract bid?
Relief is granted where a bidder makes a material mistake of fact, acts promptly in informing public authorities, and requests withdrawal or rectification before a formal contract is entered, provided the mistake is clear, explicit, and undisputed. (Para 5 , 6 )
7. How does the doctrine of proportionality apply to clerical errors in commercial bids?
When an error or mistake is writ large and self-evident, the doctrine of proportionality applies to ensure that the consequences or penalties imposed by the authority are not excessive or manifest imbalances of relevant considerations. (Para 9 , 10 )
8. Does a system error plea excuse a bidder from a typographical mistake in a financial bid?
No. If other bidders successfully uploaded their bids without issues, a plea of system glitch is generally not accepted, and the bidder remains at fault for the mistake. (Para 11 )
9. Can an authority justify forfeiting a bid security if the bid was patently unrealistic?
No. If the error is self-evident and the authority insists on accepting an unrealistic bid despite prompt notification of the mistake, the subsequent forfeiture of the bank guarantee is unjustified. (Para 10 , 12 , 13 )
JUDGMENT
SANJIV KHANNA, CJI.
Leave granted.
2. This is an avoidable litigation. No doubt, there was a mistake on the part of the Appellant – M/s ABCI Infrastructure Private Limited, albeit, instead of taking a pragmatic approach, Respondent No. 2 – Border Road Organisation [Hereinafter, “BRO.”] under the Ministry of Defence, Union of India, adopted an obdurate and overly legalistic stance, causing a delay in the project's execution.
3. We begin by briefly discussing the facts of the case:
o On 23.02.2023, BRO invited bids for the design and construction of two-lane twin tunnels, approximately 4.1 kilometres long, at Shinkun La Pass, including civil, electrical, and mechanical work, with approaches connecting the Darcha-Padam Highway to NHDL specifications in Himachal Pradesh and Ladakh. The estimated cost of the project was Rs.15,04,64,00,000/- (Rs. 1,504.64 crores). The project was to be completed within 48 months. The bid security amount was Rs.15,04,64,000/- (Rs. 15.04 crores)
o Ten bidders, including the Appellant, had submitted their online Technical and Financial Bids on 03.06.2023. The Appellant, like others, had furnished a bank guarantee of Rs.15,04,64,000/-.
o On 05.06.2023, technical bids were opened and seven bidders, including the Appellant, were declared technically qualified.
o On 24.08.2023, the financial bids of seven bidders, including the Appellant, were opened and the results were declared.
o The Appellant was ranked as L-1 bidder, with the bid price of Rs.1,569/- (Rupees One thousand five hundred and sixty-nine only). According to the Appellant, they had quoted a bid price of Rs.1,569 crores. However, due to what they claim was a system
error, the quoted amount appeared as just Rs.1,569.
o The Appellant claims that they discovered the mistake on 24.08.2023 when the financial bids were opened and announced, and therefore, on the next day, 25.08.2023, they informed the authorities that their actual bid was Rs.1,569 crores, not Rs.1,569. They attributed the error to a typographical mistake or a critical technical issue with the server. While we would not accept the plea of system error, the figure quoted was clearly unrealistic, a patent error and a mistake given the scale and nature of the work tendered. Though the mistake was bald-faced, what followed is incomprehensible, with BRO, insisting on accepting the bid, in spite of letters from the Appellant wanting to withdraw from the tender.
o BRO, guided by the Evaluation Committee, instead of accepting the obvious, vide letter dated 26.08.2023, called upon the Appellant to justify the quoted amount of Rs.1,569 by providing a detailed price analysis, including the scope of work, completion schedule, risk allocation, safety requirements, and proof of capability to complete the project, by 31.08.2023.
o On 30.08.2023, the Appellant reiterated that their intended bid was Rs.1,569 crores, not Rs.1,569, attributing the error to a technical or typographical mistake.
o On 07.09.2023, the Appellant sent another letter stating they should not be considered the L1 bidder, and the bank guarantee of Rs.15,04,64,000 may be returned to them without encashment.
o On 12.09.2023, the Appellant again wrote emphasizing that the bid was an error and that the bid security should not be forfeited.
o Vide letter 16.09.2023, BRO, unmoved, wrote to the Appellant’s bank, the State Bank of India, stating that the Appellant had been declared a defaulter, and their bid security was to be forfeited. The bank was asked to encash the bank guarantee and remit Rs.15,04,64,000 to BRO.
o The Appellant filed a writ petition before the High Court of Himachal Pradesh at Shimla, which stands dismissed by the impugned judgment dated 07.10.2023.
4. The short question before us is whether BRO was justified in accepting the bid of Rs.1,569, and on the failure of the Appellant to execute the agreement asking for forfeiture vide encashment of bank guarantee of Rs.15,04,64,000.
