Terming the NER's actions as "nothing short of harassment", a bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary quashed a June 8, 2026, letter that rejected KRCL's bid due to a purportedly incorrect beneficiary name in a bank guarantee.

The Court directed the respondent authorities to accept the corrected bank guarantee and evaluate KRCL's financial bid within 3 working days.

Case in brief

A high-value tender was issued by the Varanasi Division of the North Eastern Railway for capacity upgradation work of electric traction power supply installations on an EPC mode. The estimated cost stood at Rs 262.12 Crores.

The petitioner-KRCL had previously approached the High Court when its bid was initially rejected. During that earlier round of litigation, the NER authorities claimed the rejection was due to the bank guarantee provided by KRCL lacking the appropriate stamp duty.

On May 29, 2026, the High Court held that an inadequate stamp duty on a bank guarantee is merely a 'lacuna' and a 'curable defect', and cannot be used to eliminate a bidder.

The bench had also allowed the KRCL to make good the deficiency, noting that the authorities' actions appeared mala fide and were an attempt to eliminate KRCL, which had submitted the lowest financial bid.

However, despite the HC's order, when KRCL submitted the adequately stamped bank guarantee, the NER authorities returned it on June 8, 2026. This time, they cited an entirely new reason: the bank guarantee was in the name of an incorrect beneficiary.

When KRCL subsequently submitted a fresh bank guarantee with the correct beneficiary's name on June 19, 2026, the authorities again rejected it, claiming it was submitted 'belatedly'.

Taking serious exception to this approach, KRCL moved the High Court by way of the present petition. During the hearing, the High Court noted that the NER authorities should have pointed out the incorrect beneficiary's name during the first round of litigation.

Scrutinising the documents and the manner in which the respondent authorities approached this particular tender, the bench remarked that they were "fixated to not allow the petitioner to participate in the tender on one ground or the other".

"All the defects, which had been pointed out by the authorities are curable defects and such defects could have been pointed out at much earlier stage. In our view, the ground/certain defects for rejecting the tender of the petitioner are curable and thus, the rejection is clearly in gross violation of principles of natural justice and against the established principles of law", the bench observed.

The Court then compared the NER's rigid stance with the approach of another railway division. The bench pointed out that the Southern Railway (Chennai), an arm of the same organization, had treated a similar error in the beneficiary's name by KRCL as a curable defect in March 2026, allowing them to make the necessary corrections.

"Having considered the facts and circumstances, we are rather amused as to how there can be a two different yard-stick for two arms of the same organization", the bench remarked as it stressed that the railways being a 'state instrumentality' needs to function uniformly and fairly.

The Court further criticized the authorities by observing thus:

"The acts of the respondent North Eastern Railways Authorities besides being arbitrary smacks of malafide and are whimsical. They ought to have spelt the inaccuracy in the name of the beneficiary of the Bank guarantee in the very first instance. As a model employer they cannot chose to play hide and seek".

Therefore, concluding that the authorities were “hell-bent to oust the legitimate participation of the petitioner in the tendering process for obvious reasons”, the Court set aside the rejection order and directed the NER to evaluate the financial bid and proceed further with the tender process.

Senior Advocate Sudeep Seth, assisted by Advocates Alok Kumar Singh and Kazim Ibrahim, appeared for Konkan Railway.

Advocate Aishwarya Shukla, appeared for M/s. Rail Vikas Nigam Ltd.

Case Title: M/S Konkan Railway Corporation Ltd. Versus Union of India, Thru. General Manager, North Eastern Railway And 5 Others 2026 LiveLaw (AB) 390