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National Thermal Power Corp. Ltd. v. M/s Ashok Kumar Singh & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1852 of 2015)Decided 13 Feb 2015
Civil Appeal No. 1852 of 2015
Justice T.S. Thakur · Justice R.K. Agrawal · Justice Adarsh Kumar Goel

Background

A contractor submitted two tenders to NTPC for construction work, each accompanied by an earnest money deposit, but withdrew its bids before the financial bids were opened and asked for the earnest money back. NTPC refused, citing a contract condition that earnest money would be forfeited on "revocation of the tender." The Allahabad High Court (Lucknow Bench) ruled in the contractor's favour, holding that withdrawal before the bid was opened did not amount to "revocation" under that clause, and ordered NTPC to refund the money.

Decision Breakdown

The Supreme Court held that the High Court had confused "revocation of the tender" (withdrawal by the bidder) with "revocation of the tender notice" (cancellation by the corporation): the clause plainly covered withdrawal by the bidder. Relying on its own earlier rulings in National Highways Authority of India v. Ganga Enterprises and other precedents, the Court held that a bidder's general right under Section 5 of the Contract Act, 1872 to withdraw an offer before it is accepted does not override a specific contractual term providing that earnest money will be forfeited on withdrawal: the two rights operate independently, and forfeiture clauses exist precisely to discourage non-genuine bids. Since the contractor had agreed to this condition when submitting its bid, it had no right to demand a refund upon withdrawing. The Court set aside the High Court's order and dismissed the contractor's writ petition, allowing NTPC's appeal.

Lesson Learnt

Withdrawing a bid or tender before it is even opened does not automatically entitle a bidder to get their earnest money back if the tender conditions clearly say the money will be forfeited on withdrawal: a specific forfeiture clause in a contract can validly override the general right to withdraw an offer before acceptance.

Official source (sci.gov.in)View Judgment (PDF)

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