Supreme Court Holds That Non-Compliance With Essential Tender Condition Relating to Bank Guarantee Period Is Fatal to Bid — Vidarbha Irrigation Development Corporation Vs Anoj Kumar Garwala
Background and Context
The Supreme Court of India recently adjudicated a significant question in public procurement law: whether a bidder's failure to submit a bank guarantee for the duration explicitly mandated under tender conditions could be rectified after the bids had already been opened. The case arose from a tendering exercise conducted by Vidarbha Irrigation Development Corporation for balance earthwork in a canal, initiated on 06.01.2018.
Three bids were received in response to the tender:
- Respondent No. 1 quoted Rs. 39.53 crores
- Respondent No. 2 quoted Rs. 39.15 crores
- Respondent No. 3 quoted Rs. 46.81 crores
Respondent No. 2 was the lowest bidder. However, a critical deficiency surfaced upon scrutiny — the performance security bank guarantee of Rs. 42.14 lakhs submitted by Respondent No. 2 was valid for only six months, whereas the tender conditions expressly required it to remain valid for 40 months.
Sequence of Events
The timeline of key events is material to understanding the controversy:
- Tender floated by Vidarbha Irrigation Development Corporation on 06.01.2018
- Pre-tender conference held on 30.01.2018
- Bank guarantee for Rs. 42.14 lakhs submitted by Respondent No. 2 on 12.03.2018 — valid for six months only
- Bids opened on 06.04.2018
- Respondent No. 2 sought to cure the deficiency on 07.04.2018 — one day after bid opening — by extending the guarantee by a further 34 months
- Bid of Respondent No. 2 provisionally accepted on 03.05.2018
- Tender Evaluation Committee evaluated all bids on 07.07.2018 and ultimately accepted Respondent No. 2's bid as the lowest
The core dispute was whether the tendering authority could legally condone the initial submission of a bank guarantee for an admittedly incorrect and insufficient period.
Competing Arguments Before the Supreme Court
Position of the Corporation and Respondent No. 2
The Corporation, represented by learned senior counsel Mr. Shekhar Naphade, argued on the following grounds:
- The Government Resolution (GR) dated 12.4.2017 permitted clarification to be sought from a bidder, after which the term of the bank guarantee could be extended to align with tender conditions
- The deficiency was remedied promptly — within one day of bid opening — and only thereafter was the bid accepted
- Accepting Respondent No. 2's lower bid over Respondent No. 1's bid would result in a saving of approximately Rs. 37 lakhs to the public exchequer
- Given the limited scope of judicial review in tender matters and the bona fide nature of the authority's decision, interference by the High Court was unwarranted
Respondent No. 2's senior counsel, Mr. Raju Ramachandran, broadly aligned with these submissions.
Position of Respondent No. 1
Learned senior counsel Mr. R. Basant, appearing for Respondent No. 1, countered that:
- The duration of the bank guarantee was a material and essential tender condition, incapable of post-bid rectification
- At the pre-tender stage itself, a proposal to permit extension of the bank guarantee after award of work was specifically rejected by the Department, relying on the PWD Circular dated 12.02.2016 and its corrigenda
- Respondent No. 2 had notice from the outset that any deviation on this condition would render its bid non-responsive
- The impugned High Court judgment could not sustain independent scrutiny but could be supported through the arguments advanced before the Supreme Court
Analysis of Tender Clauses
The Supreme Court undertook a detailed examination of the relevant clauses of the tender document.
Clause 2.15 — Pre-Tender Conference
Clause 2.15 laid down the framework for pre-tender clarifications. Sub-clause 4 of Clause 2.15 carried an explicit caution to all prospective tenderers:
"All tenderers are cautioned that the tenders containing any deviation from the contractual terms and conditions, specifications or other requirements and conditional Tenders will be rejected as non-responsive."