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IN THE HIGH COURT AT CALCUTTA
SMITA DAS DE, J.
Shri Prabhat Kumar – Petitioner
Versus
The Union of India & Ors. – Respondents
W.P.A. No. 12605 of 2025
Decided On : 19-12-2025
Based on the provided legal document, the key points are as follows:
The petitioner participated in an e-auction process for leasing a railway parcel and was declared the highest bidder, but the bid was subsequently canceled, and the earnest money was forfeited without a formal notice or opportunity for explanation (!) (!) .
The petitioner inadvertently uploaded unsigned balance sheets due to a bona fide mistake, and immediately attempted to rectify this error by submitting corrected documents within the stipulated timeframe, demonstrating their good faith and intent not to mislead (!) (!) .
The authorities did not issue any show cause notice or provide an opportunity to explain or rectify the mistake before forfeiting the earnest money, which is a violation of principles of natural justice (!) (!) .
The circular governing the process specifies that forfeiture of earnest money and cancellation of lot are actions that can only be invoked against a successful contractor upon breach of contractual terms or submission of false or misleading documents with intent to deceive (!) (!) .
Since the bid had not been formally accepted into a concluded contract at the time of forfeiture, and the mistake was inadvertent and rectifiable, the action to cancel the bid and forfeit the earnest money was deemed arbitrary and illegal (!) (!) .
The legal principles emphasize that acceptance of a bid must be unconditional and without conditions to form a concluded contract. In this case, the bid was not accepted, and no binding contract existed when the forfeiture was imposed (!) (!) .
The order of cancellation and forfeiture was found to be disproportionate and not supported by a finding of intentional deception or falsehood, thus rendering it unlawful (!) .
The court quashed the order canceling the bid and forfeiting the earnest money, directing the authorities to refund the amount within 60 days (!) .
Overall, the decision underscores that minor procedural errors, especially when unintentional and promptly corrected, should not lead to punitive actions such as disqualification or forfeiture, particularly in the absence of proof of malicious intent.
| Table of Content |
|---|
| 1. challenge to bid rejection and emd forfeiture. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. petitioner's argument against punitive actions without notice. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 3. requirement of successful bid for contractor status. (Para 18) |
| 4. respondent's argument on emd and bid process obligations. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 5. judicial analysis of disqualification and emd forfeiture. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38) |
| 6. quashing of bid rejection and order to refund emd. (Para 39 , 40 , 41) |
JUDGMENT :
Smita Das De, J.
1. The instant writ petition has been filed by the petitioner in WPA No. 12605 of 2025 challenging inter alia, the rejection of a bid dated May 8, 2025 for leasing under lot No 13021-SLR-R1-HWH-RXL-25-1 coupled with forfeiture of the earnest money to the tune of Rs. 12,11,837/-.
2. Apropo, the facts made out in the ‘Writ Petition’ is that the petitioner is a proprietorship firm engaged in the business of transportation of goods of various natures under the name and style of ‘Aditya Enterprise’. The petitioner has submitted his bid and became the highest bidder pursuant to a tender notification dated May 8, 2025 for leasing of a parcel space in SLR coach of 13021, ex HWH to RXL. The petitioner has been declared as the highest bidder. At the outcome of the tender process, the petitioner has secured the business commitments from customers to ensure smooth execution of the lease work, but as such no formal agreement has been executed with the railway authorities. The petitioners bid has been cancelled by the Railway authorities by forfeiting the earnest money to the tune of Rs. 12,11,837/-, without serving any formal notice and/or order of cancellation by the Railway authorities, subsequently the same could be unravelled from the online portal.
3. The E-Auction process of the Railway Administration and subsequent conferment of leasehold right is guided and regulated by F.M. Circular 11 of 2022 read with F.M. Circular 12 of 2022 along with Standard Conditions of Contract.
4. To participate in the auction process the participants are adhered to certain rules of the circular which are categorically dealt with from Clause 1.2 to Clause 1.4 of F.M. Circular 11 of 2022 which is reproduced below-
“1.2 The entity shall be required to upload the Audited Balance Sheets P&L Account Statements of the last three Financial Years in their profile in IREPS before start of bidding in the auction in which they want to participate. Railways shall verify the Audited Balance Sheet and P&L Account statement uploaded in the profile in IREPS of the successful contractors anytime after acceptance of the bid or during the currency of contract, and if the information about the Financial Eligibility is found to be false /misleading or the documents uploaded by the firm are found to be false/invalid , then the allotment of a lot shall be cancelled or if the contract has been issued, the same shall be terminated forfeiting the EMD/ Security Deposit without any further notice.
1.3 If the Audited Balance Sheet and/or P&L Account Statement of all of the three preceding Financial Year(s) are not available, then the documents of the years (out of the three preceding years) for which the same are available shall be uploaded, and the same will be taken into consideration for judging the eligibility of the bidder.
1.4 If the turnover details are not entered by a registered entity in its IREPS profile, the system will not allow the entity to participate in auctions for lots for which the minimum turnover required is greater than zero.”
5. As per Clause 1.4 of the F.M. Circular 11of 2022 if all the requisite particulars are not filled up in computer generated IREPS, the system will not allow any entity to take part in the Auction process.
6. As per clause 1.0 to clause 1.4 if the turnover details are not correctly uploaded, the system itself would not allow any entity to register its Bid.
A successful bidder cannot be penalized for inadvertent documentation errors, and forfeiture of earnest money requires proof of intent to mislead, reflecting principles of natural justice.
Forfeiture of Earnest Money requires intent to mislead; accidental clerical errors should not disqualify bidders nor invoke punitive measures, affirming principles of natural justice.
The main legal point established is that in contractual matters, the court may intervene to prevent arbitrariness or favoritism by the government bodies, especially if the actions violate the equalit....
Forfeiture of bid security must be explicitly stipulated in the contract terms, and failure to bid higher does not equate to withdrawal from the bidding process.
A bidder cannot claim EMD refund due to an inadvertent error in a bid amount when sufficient safeguards exist in the bidding process to prevent such mistakes.
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