Summary
Where a bidder for a Rs.1,504-crore tunnel project quoted Rs.1,569 instead of Rs.1,569 crores, the Supreme Court held the error to be patent and self-evident, found the Border Roads Organisation's insistence on the bid and forfeiture of the Rs.15.04-crore bid security disproportionate, and directed refund of the security on the bidder paying Rs.1 crore for its own fault.
Issues
- Whether the Border Roads Organisation was justified in treating a bid of Rs.1,569 as valid and, on the bidder's refusal to execute the contract, forfeiting the bid security by encashing the bank guarantee.
- Whether a bidder who makes an obvious unilateral mistake in the price quoted and promptly seeks to withdraw is entitled to equitable relief, and on what terms.
Provisions considered
- Section 20, Indian Contract Act, 1872The Court noted that Section 20 renders an agreement void only where both parties are mistaken as to a matter of fact essential to it, and that an erroneous opinion as to value is not such a mistake; it held that the case, involving a unilateral mistake by the bidder, was not covered by Section 20 and turned instead to the equitable principles governing mistakes in public tenders. (¶ 5)
Held
- A mistake is by nature unintentional. A bidder for a public contract who makes a material mistake of fact in the bid and, on discovering it, promptly informs the authority and seeks withdrawal or rectification before a formal contract is concluded may be granted equitable relief, subject to the exceptions recognised in West Bengal State Electricity Board v. Patel Engineering Co. Ltd.; the mistake must be clear and undisputed. (¶¶ 5, 6, 7, 8)
- Although courts exercise restraint in judicial review of contractual and commercial matters, the doctrine of proportionality applies where the error is writ large and equity merits some relief, as recognised in M/s Omsairam Steels & Alloys Pvt. Ltd. v. Director of Mines and Geology. (¶ 9)
- The case fell within none of the exceptions: a price of Rs.1,569 for a 48-month project worth over Rs.1,500 crores involving roads and tunnels over 4 km in hilly terrain was self-evidently a mistake needing no argument, and the bidder acted promptly, acknowledging the error the day after the financial bids were opened; the allegation of a two-month delay by the bidder was incorrect. (¶¶ 10, 14)
- The bidder was nonetheless at fault for failing to add the required zeros, and its plea of a system glitch was rejected because other bidders had uploaded their bids without difficulty. (¶ 11)
- The authority's justification for encashment, namely delay caused by re-tendering, was baseless: knowing of the error, it should have treated the bid as non est rather than calling for justification, declaring the bidder a defaulter and invoking the guarantee. The delay was attributable to its own refusal to acknowledge a genuine error, and the fresh tender in any case yielded a lower price. (¶¶ 2, 12, 13, 15)
Result
Appeal allowed; High Court judgment set aside; appellant to pay Rs.1 crore to the Border Roads Organisation, on receipt of which the original bank guarantee or demand draft of Rs.15.04 crores is to be returned within one week; no order as to costs.