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2026 Supreme(Online)(Tel) 7362
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Renuka Yara, J
M/s. Goodwill Lubricants Pvt. Ltd – Appellant
Versus
Union of India – Respondent
WRIT PETITION No.5303 of 2026
For the Appellants/Petitioners: J. Prabhakar, Gummalla Bhasker Reddy
For the Respondents: Dominic Fernandes
In commercial tenders, 'net profit' is interpreted as profit after tax. The tender author has the primary right to interpret terms, and misrepresentation of eligibility criteria justifies the rejection of candidature without prior notice, especially when no final work order has been issued.
Headnote:The petitioner challenged the cancellation of its candidature in a tender process under Articles 14, 19, and 21 of the Constitution of India. The tender required bidders to demonstrate net profits for the previous three financial years via a Chartered Accountant certificate. The petitioner submitted a certificate showing profit before tax, which initially led to its placement on the merit panel; however, a subsequent re-evaluation revealed that the petitioner had incurred losses after tax for two of the three years, leading to the annulment of its candidature on the grounds of misrepresentation. The primary issues were whether the term 'net profit' could be interpreted as 'profit before tax' and whether the failure to provide a notice or hearing before annulment violated the principles of natural justice. The court reasoned that 'net profit' logically implies profit after the deduction of taxes and that the author of the tender is the best person to interpret its terms. Furthermore, the court held that in cases where misrepresentation is found during the verification of credentials, the candidature may be rejected without seeking an explanation from the candidate. In the result, the writ petition is dismissed.
ORDER:
Heard Sri J. Prabhakar, learned Senior Counsel representing Sri Gummalla Bhasker Reddy, learned counsel for the petitioner and Sri Dominic Fernandes, learned Standing Counsel for Indian Oil Corporation Limited (IOCL), for respondent Nos.2 and 3. Perused the entire record.
The writ petition is filed with the following prayer:
“…declaring the action of the respondents in issuing a letter of cancellation dated 12.02.2026, vide Ref: TAPSO/SSI/South Telangana/Grievance/03, as illegal, arbitrary, unjust, contrary to law and against the principles of natural justice and violative of articles 14, 19 and 21 of the Constitution of India by set a siding the same and pass such other order or orders...”
The issue involved is choosing of L1 bidder, who met eligibility criteria, more particularly, the one who had net profits for the previous three financial years. To authenticate the same the bidders were required to submit a certificate from Chartered Accountant (CA). The petitioner herein submitted certificate from CA showing net profits for the years 2021-22, 2022-23 and 2023-24. After evaluating the bids, the petitioner herein was declared to be on top of the merit panel followed by two others. Thereafter, upon receiving complaints, the tenderer issued letter dated 12.02.2026 annulling the candidature of the petitioner. The reasons cited for such annulment are that after multiple grievances were received, a subsequent re-evaluation and scrutiny by Verification Committee was done, which led to finding that the petitioner has not recorded net profits for last three consecutive years, instead it was profit before tax. The tenderer gave a finding that there was misrepresentation in the certificate of the CA with incorrect information about availability of net profits during the said period. Aggrieved by the said letter dated 12.02.2026 and annulment of the candidature, the present writ petition is filed alleging arbitrariness in the procedure of the annulment.
Learned Senior Counsel for the petitioner submits that the re-evaluation was taken up by the Verification Committee without issuing notice and without giving an opportunity to the petitioner for being heard on the certificate issued by the CA. Reliance is placed on the judgment of the Hon’ble Supreme Court of India in the case of Surguja Bricks Industries Company v. State of Chhattisgarh , 2025 SCC Online SC 2916, to contend that this Court can interfere in a tender process by placing reliance on the following paragraphs:
“21.5. …this Court held that New Horizons was constituted as a joint venture by the aforementioned companies. Once it was held that New Horizons was a joint venture, the experience of its various constituencies had to be taken into consideration if the Tender Evaluation Committee had adopted the approach of a prudent businessman. In respect of a joint venture, its experience can only mean the experience of the constituents of the joint venture. For the purpose of considering whether New Horizons had the experience as contemplated by the advertisement, the experience of the constituents of New Horizons had to be taken into consideration by the Tender Evaluation Committee. Failure to consider the same had rendered the decision arbitrary and irrational, leading to interference by this Court.
22. … it had failed to meet the eligibility criteria. Appellant highlighted that it had the requisite experience as a joint venture partner…
23. …no specific or explicit exclusion of the work experience gained by a contractor in a joint venture or partnership. As a matter of fact, appellant has relied on a previous letter of the third respondent dated 10.02.2017…
24. …an eligibility criteria should be clear and unambiguous. Otherwise, it may lead to arbitrary exercise of power by the State disqualifying a tenderer who would otherwise meet the eligibility criteria…. this Court declared that to hold that a State or its agencies can reject a tender for breach of a term or
