Court Rules State Cannot Impose Non-Existent Tender Conditions, Orders Return of Forfeited Security
In a significant judgment, the Patna High Court has ruled in favor of Sanjay Kumar Jaiswal, a transport agent, by quashing the Bihar State Food and Civil Supply Corporation Ltd.'s decision to cancel his contract, blacklist him for three years, and forfeit his security deposit and bank guarantee. The court found that the actions of the Corporation were arbitrary, as they were based on conditions not part of the original tender notice.
The case arose when the Corporation issued a show cause notice to Jaiswal, alleging violation of tender conditions and submission of a false affidavit, leading to the cancellation of his agreement. However, Jaiswal contended that the clauses cited for these allegations did not exist in the original tender document. The court observed inconsistencies in the Corporation's stand, further highlighting the arbitrary nature of their actions.
The judgment emphasized the doctrine of non-arbitrariness, noting that state entities must adhere strictly to the terms outlined in tender documents and cannot introduce new conditions retrospectively. This principle, rooted in Articles 14 and 19(1)(g) of the Indian Constitution, ensures fairness and equality in public contracts.
Referring to landmark cases such as Ramana Dayaram Shetty v. International Airport Authority of India, the court reiterated that any deviation from the stipulated tender conditions constitutes a violation of the constitutional guarantee of equal treatment under Article 14. Consequently, the court set aside the Corporation's memos and directed the return of Jaiswal's forfeited security and bank guarantee, marking a victory for the principle of fairness in public procurement.
Bottom line:-
Public Contracts - State and its instrumentalities are bound to act strictly in accordance with the terms and conditions stipulated in the tender notice and cannot act arbitrarily or beyond the conditions prescribed in the tender document.
Statutory provision(s): Articles 14, 19(1)(g) of the Constitution of India
