Invalid Bid Cannot Justify Cancelling Tender; Highest Valid Bidder Entitled to Contract: Allahabad High Court - 2024-02-26

Covering Law & Justice.

Allahabad High Court: Invalid Highest Bid Cannot Justify Cancelling Entire Tender Process; Highest Valid Bidder Entitled to Contract

Allahabad: In a significant ruling affecting public procurement processes, the High Court of Judicature at Allahabad has held that authorities cannot cancel an entire tender process merely because the highest bidder submitted an invalid bid. The Court underscored that the highest bid among all valid and compliant bids should be accepted, provided it is above the reserve price.

A Division Bench of Hon'ble Anjani Kumar Mishra , J. , and Hon'ble Jayant Banerji , J. , delivered the judgment in a writ petition challenging the cancellation of an e-auction for a short-term mining permit in Banda district, Uttar Pradesh, and the subsequent issuance of a fresh tender notice.

The case, filed by M/S Suddhtam Enterprises, arose from an e-tender-cum-e-auction initiated for mining rights over specific plots in Village Khapatiha Kala, Banda . Four companies participated in the auction. M/s G.D.S. Infrastructure emerged as the highest bidder at Rs. 231, while the petitioner, M/S Suddhtam Enterprises, was the second highest at Rs. 205.

The petitioner raised an objection, contending that the documents submitted by M/s G.D.S. Infrastructure (Aadhaar, Pan, Character Certificate) were not self-attested, which was a mandatory requirement of the tender notice.

Crucially, a committee constituted by the District Magistrate to process the bids failed to notice this deficiency during the technical bid evaluation, proceeding instead to open the financial bids. It was only later, after the financial bids were opened and M/s G.D.S. Infrastructure was found to be the highest, that the deficiency was apparently brought to light.

Following this, the Chief Treasury Officer, Banda , wrote a letter recommending the cancellation of the e-auction, citing the overlooked deficiency. Acting on this recommendation, the District Magistrate cancelled the initial auction and issued a fresh advertisement inviting bids.

The petitioner challenged both the CTO's recommendation letter and the fresh tender advertisement before the High Court, arguing that their bid was valid, above the reserve price, and thus the highest among all compliant bidders. They contended that the ineligible bid should have been discarded, and the contract awarded to them. The petitioner also questioned the authority of the Chief Treasury Officer, who was not part of the constituted tender committee, to recommend cancellation.

The State respondents, through instructions provided to the Court, admitted that the deficiency in M/s G.D.S. Infrastructure's bid documents had not been noticed by the committee at the time of opening technical bids and that the financial bid was wrongly opened due to this oversight.

The High Court sharply criticised the functioning of the committee, observing that it "did not perform its functions properly and did not scrutinize the tender documents." The Court agreed with the petitioner's submission, stating, "since the bid of the petitioner was above the reserve price and did not suffer from any legal defect as it complied with all the conditions of the tender notice, the ineligible bid should have been discarded and the petitioner was liable to be declared the highest bidder and was liable to be awarded the contract."

The Bench further found that the Chief Treasury Officer, not being a member of the tender committee, was an "unconcerned person" and therefore had "no right to recommend cancellation of the e-tender notice as a whole."

Holding that the petitioner was being unfairly penalized for the dereliction of duty by the tender committee, the Court found a "patent illegality" in the respondents' actions.

Accordingly, the High Court allowed the writ petition, quashing the letter/order dated 21.10.2023 passed by the Chief Treasury Officer, Banda , and the fresh Advertisement No.784/Khanij-30, Banda dated 28.10.2023 issued by the District Magistrate, Banda . The Court unequivocally observed that the petitioner's bid, being the highest among all valid and complete bids and above the reserve price, "was liable to be accepted."

This judgment reinforces the principle that tender authorities must properly scrutinize bids for compliance with all conditions and cannot use the non-compliance of an unqualified highest bidder as a ground to discard the entire process, especially when valid and eligible bids exist.

Case Details: * Case No.: WRIT - C No. - 39170 of 2023 * Petitioner: M/S Suddhtam Enterprises * Respondent: State Of U.P. And 5 Others * Bench: Hon'ble Anjani Kumar Mishra , J., Hon'ble Jayant Banerji , J. * Order Date: 26.02.2024