Inadequate Stamp Duty On Bank Guarantee A Curable Defect; Rejection Of Bid On This Ground 'Arbitrary': Allahabad HC

A bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary consequently quashed the financial bid tabulation prepared by the respondent (North Eastern Railway), noting that it had rejected the petitioner's (M/S Konkan Railway Corporation Ltd.) technical bid on this 'flimsy' ground.

The Court further directed the respondent to reconsider the financial bids of all tenderers, including the petitioner's, without taking into account the impediment posed by the inadequate stamp duty on the bank guarantee submitted by the petitioner.

Briefly put, the petitioner had moved the HC challenging the sudden rejection of its Techno-Commercial Bid for a tender floated by the North Eastern Railway.

On May 19, 2026, the petitioner received an automated email merely stating that its technical bid was rejected because it "did not fulfil the eligibility criteria". There was no whisper about which criteria were not met.

Upon hearing this petition, the High Court initially stayed the earlier tender process and directed the respondents to provide a reasoned order within 24 hours.

Pursuant to HC's direction, the authorities provided a justification for the rejection, stating that there was a "legal lacuna" due to the non-submission of the requisite amount of Stamp Paper under the UP Stamp Act.

Senior Counsel appearing for the petitioner challenged this explanation, contending that the inadequacy of stamp duty is a curable defect and the Stamp Act is a fiscal measure, not enacted to arm a litigant with technicalities.

It was further contended that an authority inviting tenders is not bound to give effect to every term and condition mentioned in the notice and is entitled to waive any condition, even on the ground of a technical irregularity.

On the other hand, the counsel for the respondents submitted that the financial bid had already been opened and L-1 had been declared, and as such, a right had accrued in favour of the L-1 in the present tender.

Considering these submissions, the bench, at the outset, took exception to the respondent's subsequent act of offering a reason to justify the rejection on the ground of inadequate stamp duty in the bank guarantee.

"We do not appreciate this kind of improvement made by the authority in the reasoning of rejecting the technical tenders, as the law stands settled that the authority cannot invent or add new justification for a decision already taken during legal proceedings", the bench observed.

The Court further clarified that the inadequate stamp duty was a curable defect that could have been cured by the authority concerned.

Noting that the authorities had previously accepted a similar bank guarantee from the petitioner in another tender, the Bench found the action of the authorities to be "mala fide" and merely an attempt to 'eliminate' the petitioner, who had submitted the lowest financial bid.

As regards the respondents' contention that the financial bid had been opened, the bench stressed that it is well settled that a bidder, even if declared the highest bidder, does not, for that reason alone, obtain an indefeasible right to insist upon the award of the contract.

"Until the process matures into a concluded contractual relationship in accordance with the governing tender conditions, the bidder's position remains provisional. The Supreme Court in Meerut Development Authority v. Assn. of Management Studies reported in (2009) 6 SCC 171 has held that State or authority under Article 12 of the Constitution of India is not bound to accept bid of L1 bidder, but is only bound to act without arbitrariness and favouristism".

In view of these observations, the bench quashed the tabulation of the financial bids prepared on May 19, 2026, and directed the authorities to reconsider the financial bids of all tenderers, including the petitioner.

The petitioner was also asked to urgently make good the stamp duty deficiency on or before June 3, 2026, so that the exercise of considering the financial bid can be undertaken expeditiously.

With these directions, the petition was disposed of.