1. Writ petition challenging banning order for 3 years for backing out from tender due to typographical error in bid price. (Para 2 , 3 )
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2026 Supreme(AP) 1274
HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
K. SREENIVASA REDDY, J.
Bhavani Industrial Engineering Services – Petitioner
Versus
Rashtriya Isapt Nigam Limited and others – Respondents
Writ Petition No.30763 of 2025
Decided On : 16-02-2026
Important Points
The banning or debarring of a contractor without providing prior notice or a reasonable opportunity to be heard is a violation of the principles of natural justice (audi alteram partem), rendering such an order illegal and liable to be set aside.
Subject
Administrative Law - Government Contracts
Act Referred
Headnote
(A) Constitution of India - Articles 14, 19 and 21 - Principles of Natural Justice - Audi alteram partem - Action of banning a contractor and deregistering the firm from the list of vendors without prior notice or a reasonable opportunity of hearing is in violation of the principles of natural justice, specifically the right to be heard before suffering the consequences of an adverse order. (Para 18)
(B) Government Contracts - Special Conditions of Contract - Clause regarding Default by Tenderers - While a contract may provide for debarring a successful tenderer at the discretion of the employer for backing out from a tender or other defaults, such discretionary power must be exercised in accordance with the law and fairness, ensuring that the affected party is given a chance to explain the circumstances, such as typographical errors in bidding. (Para 18)
Facts of the case:
A partnership firm registered as a micro enterprise participated in a tender for cleaning works. Due to a typographical error, the firm quoted a bid price that was 86% below the estimated value. Upon realizing the mistake, the firm notified the authority and expressed its inability to execute the work at the quoted price to avoid financial loss. The authority subsequently suspended the firm's business dealings and later issued an order banning the firm for three years and deregistering it from the vendors' list. The ban was issued without any prior notice or hearing provided to the firm.
Findings of Court:
The court noted that the quoted price was significantly lower than the estimate, making it practically impossible for a micro enterprise to execute the work. It was further observed that the authority failed to issue any notice or provide an opportunity for the firm to put forth its defense before passing the banning order.
Issues: Whether the banning and deregistration of a contractor based on a typographical error in a bid, without providing a prior notice or hearing, is arbitrary and violative of the principles of natural justice.
Ratio Decidendi: The court ruled that the action of banning business dealings without a prior notice is a clear violation of the principle of audi alteram partem. Even if the contract provides for debarment at the employer's discretion, the affected party must be given a reasonable opportunity to present their case before such a penalty is imposed.
Result: Writ Petition allowed; impugned Banning Order set aside.
(B) Government Contracts - Special Conditions of Contract - Clause regarding Default by Tenderers - While a contract may provide for debarring a successful tenderer at the discretion of the employer for backing out from a tender or other defaults, such discretionary power must be exercised in accordance with the law and fairness, ensuring that the affected party is given a chance to explain the circumstances, such as typographical errors in bidding. (Para 18)
Facts of the case:
A partnership firm registered as a micro enterprise participated in a tender for cleaning works. Due to a typographical error, the firm quoted a bid price that was 86% below the estimated value. Upon realizing the mistake, the firm notified the authority and expressed its inability to execute the work at the quoted price to avoid financial loss. The authority subsequently suspended the firm's business dealings and later issued an order banning the firm for three years and deregistering it from the vendors' list. The ban was issued without any prior notice or hearing provided to the firm.
Findings of Court:
The court noted that the quoted price was significantly lower than the estimate, making it practically impossible for a micro enterprise to execute the work. It was further observed that the authority failed to issue any notice or provide an opportunity for the firm to put forth its defense before passing the banning order.
Issues: Whether the banning and deregistration of a contractor based on a typographical error in a bid, without providing a prior notice or hearing, is arbitrary and violative of the principles of natural justice.
Ratio Decidendi: The court ruled that the action of banning business dealings without a prior notice is a clear violation of the principle of audi alteram partem. Even if the contract provides for debarment at the employer's discretion, the affected party must be given a reasonable opportunity to present their case before such a penalty is imposed.
Result: Writ Petition allowed; impugned Banning Order set aside.
Legal Category Hierarchy
- constitutional law
- administrative law
- contract law
-
practice and procedure
- alternative remedies (Para 18)
Advocates Appeared:
For the Petitioner: Sri V. Sudhakar
For the Respondents: Sri Kiran Kumar Vadlamudi, Sri V. Subramanyam.
For the Petitioner: Sri V. Sudhakar
For the Respondents: Sri Kiran Kumar Vadlamudi, Sri V. Subramanyam.
Table of Contents
2. Petitioner: Banning order without prior notice or opportunity of hearing violates natural justice. Respondent: Petitioner ignored system warnings and caused financial loss; appeal remedy available but not availed within time. (Para 5 , 6 )
3. Respondents did not issue notice before passing banning order. This violates principles of natural justice and audi alteram partem. (Para 18 )
4. A banning order passed without prior notice or opportunity of hearing is in violation of principles of natural justice and is liable to be set aside. (Para 18 )
5. Writ petition allowed. Impugned banning order set aside. No order as to costs. (Para 19 )
6. Is a prior notice and opportunity of hearing mandatory before passing a banning order against a contractor?
Yes. A banning order passed without prior notice or opportunity of hearing violates the principles of natural justice, specifically the audi alteram partem rule. (Para 18 )
7. Can a contractor be banned for backing out from a tender due to a typographical error resulting in an abnormally low bid?
While the circumstances may justify action, a banning order cannot be passed without affording the contractor an opportunity to be heard, as per principles of natural justice. (Para 18 )
8. Does the availability of an appellate remedy preclude a writ petition against a banning order passed in violation of natural justice?
No. The existence of an alternative remedy does not bar a writ petition when the impugned order is passed in violation of the principles of natural justice. (Para 18 )
ORDER :
K. SREENIVASA REDDY, J.
Heard Sri Y.Sudhakar Rao, learned counsel for the Writ Petitioner and Sri Kiran Kumar Vadlamudi, learned counsel for the respondent Nos.1 to 4.
2. This Writ Petition was filed seeking the following relief:
“…to issue a Writ or Order or direction more particularly one in the nature of Writ of Mandamus declaring the action of 2nd respondent in issuing the impugned Order vide Reference No.25/MS/SBC dated 07.05.2025 banning the petitioner for a period of 3 years with effect from 07.05.2025 and deregistering from the list of Ancillaries/Vendors/ Contractors of RINL from the date of issuance of Banning Order, as illegal, arbitrary, violative of principles of natural justice, apart from violation of the rights of Writ Petitioner under Articles 14, 19 and 21 of the Constitution of India and consequently, set-aside the Banning Order dated 07.05.2025 and pass such other order or orders …”
3. Contents of the affidavit filed by the Managing Partner of Writ Petitioner Company, in brief, are that the Writ Petitioner is a Partnership Firm registered with the Registrar of Firms, Visakhapatnam on 23.09.2015. The main object of the Writ Petitioner firm is to undertake and execute mechanical, structural, civil, electrical equipment erection and commissioning, technological assistance etc., and other contract business. The Writ Petitioner firm is also registered with the Ministry of Micro, Small and Medium Enterprises, Government of India as a Micro Enterprise. The Writ Petitioner firm is also a Registered Contractor of RINL-VSP, vide Registration No.VSP/WC/REGN-P/2023-134, dated 07.10.2023.
(b) On 07.05.2024, 1st respondent called for Tenders for Cleaning Works including Cooling System and PCI of BF-1 and BF-2 vide Notice Inviting Tender No.260000885 with an estimated value of Rs.4,25,62,634.40 paise and the contract period is 24 months. The Writ Petitioner firm participated in the bid and quoted price of Rs.59,58,727.60 paise via RFx No.2600008855. While entering the bid figures, it erroneously entered the digits and quoted the bid price as Rs.59,58,727.60 paise, which is 86% below the estimated amount. Realizing the error, the Writ Petitioner firm immediately made a communication dated 15.06.2024 to 3rd respondent, notifying the above typographical error and stating that it would be impossible for the Writ Petitioner firm to execute the works on the quoted price and apologized for the mistake.
(c) On 25.06.2024, 3rd respondent straightaway issued Suspension Order in respect of business dealings of the Writ Petitioner firm, stating that it was suspended for a period of Six (06) months for backing out from the subject work with effect from 25.06.2024. Respondent No.3, instead of lifting the suspension order after lapse of Three (03) months, vide Order dated 23.01.2025 extended the said suspension for a further period of Three (03) months with effect from 25.12.2024. Respondent No.2, without prior notice or hearing, vide Reference No.25/MS/SBC, dated 07.05.2025 issued order, banning the business dealings with Writ Petitioner firm for a period of Three (03) years with effect from 07.05.2025 and deregistered the firm from the list of Contractors of RINL. After receipt of orders, the Writ Petitioner addressed letters on 13.06.2025 and 15.07.2025 to 2nd respondent requesting the authority to consider the issue amicably, but there was no response whatsoever from 2nd respondent authority. The Writ Petitioner made a representation/ Appeal on 16.08.2025 to 3rd and 4th respondents for withdrawal of banning orders and the same is pending till date. Hence, the Writ Petition.
4. Respondent Nos.1 to 4 filed counter-affidavit denying the contents of the affidavit accompanying Writ Petition, contending inter alia that the Writ Petitioner firm submitted their communication stating the error, was made on 15.06.2024. Immediately upon submission of quotation, on 30.05.2025, the system generated quotation response document that contain explic
