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J&K&L High Court Quashes Tender Cancellation, Holds Power to Cancel Must Be Fairly Exercised
The has set aside the cancellation and re-tendering of 39 public works projects, ruling that while an does not acquire a to a contract, the State's power to cancel a tender must be exercised fairly, rationally, and without arbitrariness in compliance with .
Justice Sanjay Parihar, presiding over a single-judge bench, delivered the judgment on , in a petition filed by 20 individuals and a construction firm challenging the sudden withdrawal of a tender process that had already reached the financial bid stage.
Background: A Tender Process Cut Short
The dispute arose from e-NIT No. 26 of 2025-26 issued on , by the Executive Engineer, , inviting bids for 44 civil works. A total of 330 bids were received. After technical evaluation, 86 bidders were found qualified. Five works were cancelled due to inadequate competition, but for the remaining 39 works, financial bids were opened. The petitioners emerged as the lowest bidders (L-1) for several of these works, and some even deposited performance security as required.
However, on , the Department issued a corrigendum withdrawing the tender process for the 39 works without assigning any reason. Two days later, fresh e-NITs were issued for the same works. The petitioners, who had been L-1 bidders, challenged this action as arbitrary and mala fide.
Arguments: vs. Contractual Discretion
Petitioners' Submission: , representing the petitioners, argued that once financial bids had been opened and the petitioners were identified as L-1, cancelling the entire process was irrational. He contended that the Department had no valid reason for the withdrawal and that the decision was influenced by complaints from unsuccessful bidders who had been technically disqualified. The petitioners had a that their bids would be considered fairly.
Respondents' Defence: The State relied on , which reserves the right to cancel the bidding process at any stage before award. They argued that no accrues merely by being L-1. The cancellation was justified to secure wider participation—since many bidders were rejected on a newly introduced GSTIN-linked bank account requirement—and to obtain more competitive rates, as the quoted rates were only about 3% below estimate, compared to an average of 23.77% below in the Division during the financial year.
Legal Analysis: The Distinction Between Power and Its Exercise
The Court acknowledged the settled principle that in tender matters is limited. Citing Tata Cellular v. Union of India (1994) and Jagdish Mandal v. State of Orissa (2007), Justice Parihar noted that courts do not sit in appeal over commercial decisions. However, the State's actions must still pass the test of Article 14.
The Court drew a critical distinction between the existence of power to cancel a tender and the lawfulness of its exercise. While Clause 27 gave the Department authority to cancel, that power could not be used arbitrarily. The Court observed:
"A contractual reservation of power cannot be equated with a licence to act arbitrarily. The exercise of such power remains subject to the discipline of and the settled principles governing of State action."
Why the Cancellation Failed Scrutiny
The Court examined the reasons given for the cancellation and found them wanting:
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Inadequate Foundation for 'Wider Participation': The Department had itself assessed competition as adequate for the 39 works—otherwise it would not have opened financial bids. Using 'wider participation' as a ground to cancel after that stage was inconsistent and lacked objective support.
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Flawed Financial Comparison: The claimed average rate of 23.77% below estimate pertained to road/earth works, while the tenders in question were for building works. The Court held that the comparison was not based on comparable works and could not justify cancellation.
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Reliance on Non-Existent Clauses: The complaints from unsuccessful bidders alleged violation of . However, the SBD produced before the Court contained no such clauses—Clause 25 dealt only with jurisdiction. The Court found that the record did not disclose any genuine defect in the process.
Justice Parihar emphasized:
"The tendering process is not an empty ritual. It proceeds through structured stages intended to secure transparency, equality and fair competition... abandonment of the process must rest upon , relevant and rational considerations."
The Court also dispelled any suggestion of , but found the decision-making process .
Key Observations from the Judgment
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"An does not acquire a to the contract merely because its financial bid is the lowest... However, the power to cancel must be exercised fairly, rationally and in accordance with Article 14."
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"Once the Department itself had proceeded to evaluate the technical bids, found sufficient participation in respect of the 39 works and thereafter opened the financial bids, the subsequent decision to cancel the entire process on the generalized ground of securing wider participation requires a cogent and objective foundation."
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"A contractual reservation of power cannot be equated with a licence to act arbitrarily."
The Decision: Quashed and Remanded
The Court quashed the corrigendum dated , insofar as it withdrew the tender process for the 39 works, and also set aside the consequential fresh e-NITs. The respondents were directed to resume the original tender process from the stage immediately prior to the impugned cancellation and proceed strictly in accordance with the SBD and applicable law.
The Court, however, clarified that this judgment does not direct the award of any contract to the petitioners. The competent authority remains free to take a final decision based on relevant considerations, applied uniformly, without being influenced by the quashed cancellation.
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Justice Sanjay Parihar
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