Case Note & Summary
The petitioner, M/s. Tirupati Construction, a proprietorship firm, participated in an e-tender issued by the Chief Executive Officer, Zilla Parishad, Latur for construction of a primary health centre at Wadwa. The petitioner quoted the lowest amount of Rs. 1,97,74,761.65 and was the lowest bidder. On 17.04.2020, the technical and commercial bids were opened, and the petitioner's tender was accepted. Pursuant to the tender terms, the petitioner deposited an additional performance security of Rs. 2,15,000 by demand draft, which was encashed by the authorities on 27.04.2020. Despite this, the work order was not issued. On 04.08.2020, the petitioner requested issuance of the work order. However, on 01.09.2020, the respondent No.4 unilaterally cancelled the acceptance of the petitioner's tender and awarded the contract to respondent No.5, M/s. Lalit Builders, who had quoted a higher amount. The petitioner challenged this cancellation. The court examined whether a concluded contract existed and whether the cancellation was arbitrary. The court held that once the tender was accepted and the performance security was deposited and encashed, a concluded contract came into existence. The authorities could not unilaterally cancel it without valid reasons and without giving the petitioner an opportunity of hearing. The court found that the cancellation was arbitrary and violative of principles of natural justice and legitimate expectation. The court allowed the writ petition, quashed the cancellation, and directed the respondents to issue the work order to the petitioner within two weeks.
Headnote
A) Contract Law - Tender and Acceptance - Concluded Contract - Once a tender is accepted and the contractor deposits performance security, a concluded contract comes into existence; the authorities cannot unilaterally cancel it without valid reasons and without affording an opportunity of hearing. (Paras 10-15) B) Administrative Law - Legitimate Expectation - Cancellation of Tender - The petitioner had a legitimate expectation that the contract would be awarded after acceptance and deposit of security; cancellation without justification violates principles of fairness. (Paras 16-18) C) Public Interest - Tender Process - The court must balance public interest; but arbitrary cancellation without reasons is not in public interest. (Paras 19-20)
Issue of Consideration
Whether the respondent authorities could unilaterally cancel the acceptance of the petitioner's tender and award the contract to another bidder after the petitioner had deposited the performance security and the tender was accepted.
Final Decision
The court allowed the writ petition, quashed the cancellation order dated 01.09.2020, and directed the respondents to issue the work order to the petitioner within two weeks.
Law Points
- Tender acceptance
- concluded contract
- unilateral cancellation
- legitimate expectation
- public interest
- natural justice
