Court says inadvertent mention of 0.75% ePBG instead of 3% to 5% was a curable defect; successful bidder directed to deposit enhanced security and revive tender.
The Allahabad High Court has set aside the cancellation of a government tender after finding that the reason cited by the authorities — an inadvertent error in the Performance Bank Guarantee (ePBG) clause — was curable and did not affect the bidder’s merit or eligibility.
A division bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary was hearing a writ petition filed by M/s Yuvaan Infotech, which had challenged the cancellation of a tender floated on the Government e-Marketplace (GeM) portal for consultancy services related to the establishment of Aadhaar Enrollment Centres and project management.
According to the petitioner, it had been declared the successful bidder with H-1 ranking after technical and financial evaluation. The contract was also uploaded on the GeM portal, and only the formal signing remained. However, the tender was later cancelled by the authorities, initially citing “unavoidable circumstances.” When the court sought clarification, the State disclosed that the actual reason was an inadvertent mention of ePBG at 0.75% in the bid document, whereas the applicable norm required 3% to 5% of the contract value.
The court found this explanation insufficient. It held that the ePBG is only a performance security and does not determine the eligibility, technical competence, or comparative ranking of bidders. The bench observed that correcting the guarantee amount upward would not alter the competitive process, especially since the petitioner had already offered an unconditional undertaking to deposit the deficit amount and raise the guarantee to 5%.
Rejecting the State’s argument that such correction would amount to a material change in financial terms, the court held that Clause 2.3 of the RFP only laid down the procedure for amendment and did not prohibit modifications altogether. The bench also rejected the claim that other bidders would be prejudiced, noting that increasing the performance security burden on the successful bidder alone did not confer any advantage on him over others.
The court further observed that once the petitioner had cleared the technical and financial stages, been declared H-1, and the contract uploaded for signature, a legitimate expectation had arisen that the tender would be completed. Cancelling the process at that stage on a self-created and curable ground, without any public interest or impossibility of performance being shown, was held to be arbitrary and disproportionate.
Allowing the petition, the High Court quashed the cancellation order dated 22 August 2026. It directed the petitioner to deposit the deficit amount so as to raise the ePBG to 5% within one week. Upon such deposit, the tender will stand revived, and the respondents must make the contract document available for signature and completion of formalities within two weeks, subject to no other legal impediment.
Bottom Line :-
Tender - Cancellation of tender after declaration of petitioner as H-1 and upload of contract on GeM portal on ground that Performance Bank Guarantee was mistakenly mentioned as 0.75% instead of 3% to 5% - Held, defect was curable and not an essential condition affecting comparative merit of bidders - Tendering authority could not cancel entire process for its own inadvertent error when successful bidder undertook to deposit deficit ePBG up to 5% - Cancellation held arbitrary, disproportionate and unsustainable.
Statutory provision(s): Article 226 of the Constitution of India, Article 14 of the Constitution of India
M/s Yuvaan Infotech v. State of U.P., (All)(DB)(Lucknow) : Law Finder Doc id # 2982702
