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Vidarbha Irrigation Development Corporation v. M/s Anoj Kumar Agarwala

Civil Appeal · 2019 INSC 83Decided 23 Jan 2019
Civil Appeal No. 1049 of 2019
Justice Rohinton Fali Nariman · Justice Navin Sinha

Background

The Corporation invited tenders for canal earthwork, and three bidders responded, with Respondent No. 2 quoting the lowest price. The tender rules required a bank guarantee valid for 40 months, but Respondent No. 2 initially submitted one valid for only 6 months, later trying to add the missing 34 months a day after bids were opened. The Corporation accepted this correction and awarded the lowest bid to Respondent No. 2. Respondent No. 1, the second-lowest bidder, challenged this in the Bombay High Court, which ruled in its favour, prompting cross-appeals to the Supreme Court by the Corporation and Respondent No. 2.

Decision Breakdown

The Supreme Court held that the 40-month bank guarantee requirement was an essential, non-negotiable condition of the tender: one that had been specifically discussed and confirmed as non-relaxable at the pre-tender stage. Submitting a guarantee for only 6 months was therefore a "material deviation" that made the bid non-responsive under the tender's own rules, and such a defect could not later be cured by correction. However, the Court found the High Court's own reasoning unsatisfactory (it had wrongly focused on an unrelated affidavit issue) and noted it was impractical to simply hand the contract back to Respondent No. 2 if Respondent No. 1 declined the work at the lower price. Since Respondent No. 1's counsel voluntarily agreed to match the lower bid amount of Respondent No. 2, the Court ordered that Respondent No. 1 carry out the work at that lower price, and dismissed the appeals on that basis.

Lesson Learnt

In government tenders, a bidder must strictly comply with essential conditions (like the exact validity period of a bank guarantee) at the time of submission: a shortfall cannot be fixed afterward, no matter how small the resulting cost saving to the public exchequer might be.

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

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