Inadvertently Uploading Incorrect Document For E-Auction Cannot Justify Forfeiture Of Deposit Without Intent To Mislead: Calcutta High Court

The Calcutta High Court has ruled that forfeiture of earnest money deposit (EMD) under the Railway e-auction framework cannot be sustained merely on the ground of an inadvertent or clerical mistake in uploading documents, unless the authorities first record a finding that the bidder acted with an intent to mislead.

Holding that forfeiture is penal in nature and entails serious civil consequences, Justice Smita Das De quashed the Railways' decision to forfeit ₹7,45,321 from the petitioner, observing that such action must satisfy the tests of proportionality, fairness and mens rea.

The Court was hearing a writ petition filed by Shri Manoj Kumar Verma, proprietor of Vishal Enterprise, who had challenged the rejection of his bid dated May 8, 2025 for leasing parcel space in the SLR coach of Train No. 12381 Poorva Express (Howrah–New Delhi), along with the forfeiture of the earnest money deposit. The petitioner had emerged as the highest bidder in the e-auction conducted through the IREPS portal under Freight Marketing Circular No. 11 of 2022.

According to the petitioner, although he was declared the highest bidder and had secured business commitments for execution of the lease, no formal agreement or letter of acceptance was ever issued by the Railway authorities. He contended that the bid was subsequently cancelled and the EMD forfeited without any prior notice or order, and that he came to know of the cancellation only through the online portal.

The petitioner explained that while uploading documents, the audited balance sheet was inadvertently uploaded without the auditor's signature, a fact that was immediately brought to the notice of the Railways. Upon being called to submit documents on May 15, 2025, the petitioner furnished the audited balance sheets and profit and loss accounts on May 20, 2025, to which no objection was raised. Despite this, the Railways neither issued the work order nor passed any reasoned order of rejection, and later proceeded to forfeit the EMD.

It was argued that the IREPS system itself does not permit participation unless mandatory fields and documents are uploaded, and therefore the fact that the petitioner was allowed to participate and declared the highest bidder demonstrated that the omission was neither material nor fraudulent. The petitioner further contended that before resorting to such drastic action, the authorities were bound to issue a show-cause notice and afford an opportunity of hearing, which was admittedly not done.

Placing reliance on Clause 1.2 of Freight Marketing Circular No. 11 of 2022, the petitioner submitted that forfeiture of EMD is contemplated only in cases where false or misleading documents are furnished by a “successful contractor” after allotment of the lot or issuance of contract. Since no contract had been concluded in the present case, the petitioner argued that the forfeiture was wholly without jurisdiction. Reliance was placed on the Division Bench decisions of the Calcutta High Court in Manjee Yadav and Dileep Kumar Sah, as well as the Supreme Court's judgment in Vedanta Ltd. v. Emirates Trading Agency LLC, to contend that a highest bidder does not acquire the status of a successful contractor in the absence of unconditional acceptance of the bid under Section 7 of the Indian Contract Act, 1872.

Opposing the petition, the Railway Administration argued that the e-auction process is fully automated and that upon closure of bidding, the system auto-accepts the highest bid and generates a bid sheet, which constitutes acceptance of the bid. It was submitted that scrutiny of turnover and supporting documents is carried out post-auction, and if the uploaded documents are found to be invalid or incorrect, the authorities are empowered under the Circular and the Standard Conditions of Contract to cancel the awarded lot and forfeit the EMD. The Railways contended that post-bid rectification is impermissible as it would undermine transparency and equal treatment of bidders.

After examining the rival submissions, the Court framed the central issue as whether a bidder who has been declared the highest bidder can be disqualified and subjected to forfeiture of EMD solely for uploading an incorrect document due to an inadvertent mistake, in the absence of any finding of intentional deception. The Court noted that the expressions “false”, “fabricated” or “incorrect” used in the Circular cannot be applied mechanically without examining the nature of the mistake and the intention behind it.

Justice Das De observed that in administrative law, punitive actions such as blacklisting or forfeiture must be informed by the doctrine of proportionality and cannot be imposed for bona fide or curable errors. The Court held that the authorities failed to examine whether the defect was clerical, inadvertent or intentional, and proceeded mechanically to impose the harsh consequence of forfeiture.

The Court further held that a “successful bidder” is not the same as a “successful contractor” and does not acquire contractual rights until there is an absolute and unqualified acceptance of the bid resulting in a concluded contract. In the absence of a letter of acceptance or execution of an agreement, the petitioner could not be treated as a successful contractor, and Clause 1.2 of Circular No. 11 of 2022 could not be invoked against him.

Finding that no material existed to suggest any intent to mislead or submit false documents, the Court concluded that the forfeiture of EMD was illegal, arbitrary and disproportionate. The Court accordingly quashed the order dated May 8, 2025 cancelling the petitioner's bid and forfeiting the earnest money, and directed the Railway authorities to refund the amount of ₹7,45,321 to the petitioner within a period of 60 days from the date of communication of the order.

Case Title: Shri Manoj Kumar Verma v. Union of India & Ors.

Case No.: WPA 13131 of 2025

Click here to read order