M/s R. R. Kapoor … v. M. Kagne, AGP for the State
Case Details
wp8861.23.docIN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADWRIT PETITION NO. 8861 OF 2023M/s R. R. Kapoor ….Petitioner VERSUSThe State of Maharashtra & others …..Respondents Mr. J. N. Singh, Advocate for the Petitioner.Mr. V. M. Kagne, AGP for the State.Mr. P. N. Khedkar, Advocate for the Respondent No. 4. CORAM : SHREE CHANDRASHEKHAR, CJ & SMT VIBHA KANKANWADI, J.DATE : 30th SEPTEMBER 2025.Per Shree Chandrashekhar, CJ Aggrieved by the order dated 28th October 2021, dismissingthe appeal under section 308 of the Maharashtra MunicipalCouncils, Nagar Panchayat & Industrial Township Act, 1965, thepetitioner-Firm, namely, M/s R. R. Kapoor has filed this writpetition under Articles 226 and 227 of the Constitution of India.2.By the order dated 28th October 2021, the Commissioner-cum-Director of the Municipal Administration held that the GovernmentResolution dated 12th February 2016 and Rule 142 of Account Code,2013 shall be enforced in the cases of award of tender. It is furtherheld that the petitioner-Firm which failed to deposit PerformanceSecurity and the additional Security Deposit incurred liability underClause 6.5 of the Instruction to Bidders and forfeited the EarnestMoney Deposit of Rs. 32,00,000/-.3.Briefly stated, the petitioner-Firm participated in the tenderprocess for the construction of 17 roads within the municipal areaat Shrigonda and was declared as the lowest Bidder. However, no1/4 dyb
Legal Reasoning
wp8861.23.docLetter of Intent was issued to it and the work under the tender wasalso not allotted. Notwithstanding that, the petitioner-Firm wasdirected to submit Security Deposit vide letters dated 11th August2016 and 6th September 2016. According to the respondent-Authority, a successful tenderer was required to submit additionalSecurity Deposit as per Clause 30 of the Instruction to Bidders.While petitioner-Firm declined to furnish Security Deposit and theadditional Security Deposit, a decision was taken in the GeneralBody Meeting of the Municipal Administration held on 21stSeptember 2016 to forfeit the Earnest Money Deposit by thepetitioner-Firm.4.In contractual matters, this is quite a well settled law that theparties shall be governed under the terms of the contract. Atenderer is also entitled to the protection under Article 14 of theConstitution of India which mandates that the tendering Authorityshall demonstrate fair play in action. An arbitrary decision of thetendering Authority even though falling within the realm of tendermatter is amenable to the jurisdiction of the writ Court underArticle 226 of the Constitution of India. In “Mahabir Auto Stores &Ors. v. Indian Oil Corporation & Ors.” (1990) 3 SCC 752, theHon’ble Supreme Court held as under:-“Where there is arbitrariness in State action of this type of enteringor not entering into contracts, Article 14 springs up and judicialreview strikes such an action down. Every action of the Stateexecutive authority must be subject to rule of law and must beinformed by reason. So, whatever be the activity of the publicauthority, in such monopoly or semi-monopoly dealings, it shouldmeet the test of Article 14 of the Constitution. If a governmentalaction even in the matters of entering or not entering intocontracts, fails to satisfy the test of reasonableness, the samewould be unreasonable.”5.We may also refer to the decision in “Jagdish Mandal v. Stateof Orissa & Ors.” (2007) 14 SCC 517 wherein the Hon’ble Supreme2/4 dyb wp8861.23.docCourt held as under :-“22.Judicial review of administrative action is intended toprevent arbitrariness, irrationality, unreasonableness, bias andmala fides. Its purpose is to check whether choice or decision ismade “lawfully” and not to check whether choice or decision is“sound”. When the power of judicial review is invoked in mattersrelating to tenders or award of contracts, certain special featuresshould be borne in mid. A contract is a commercial transaction.Evaluating tenders and awarding contracts are essentiallycommercial functions. Principles of equity and natural justice stayat a distance. If the decision relating to award of contract is bonafide and is in public interest, courts will not, in exercise of power ofjudicial review, interfere even if a procedural aberration or error inassessment or prejudice to a tenderer, is made out. The power ofjudicial review will not be permitted to be invoked to protect privateinterest at the cost of public interest, or to decide contractualdisputes. The tenderer or contractor with a grievance can alwaysseek damages in a civil court. Attempts by unsuccessful tendererswith imaginary grievances, wounded pride and business rivalry, tomake mountains out of molehills of some technical/proceduralviolation or some prejudice to self, and persuade courts to interfereby exercising power of judicial review, should be resisted. Suchinterferences, either interim or final, may hold up public works foryears, or delay relief and succour to thousands and millions andmay increase the project cost manifold…...”6.The Instruction to Bidders under Clause 16 provides that theBidder shall furnish a Bid Security commonly called Earnest MoneyDeposit as specified in the Bid document. It further provides underClause 16.2 that any bid not accompanied by an acceptable BidSecurity and not secured as indicated in sub-Clause 16.1 shall berejected as non-responsive. Clause No. 16.3 provides that theunsuccessful bidder shall be entitled to receive Bid Securitydeposited by him within 28 days of the end of the bid validity periodspecified under Clause 15.1. It is the provision under Article 16.5which has been emphasized by the respondent-Authority to holdthat the petitioner-Firm forfeited its Bid Security because it failed tosubmit Performance Security within time. Under Clause 16.5, the3/4 dyb wp8861.23.docBid Security “may be” forfeited if the Bidder withdraws the bid orseeks to modify, alter, add or subtract or put any rider on anyground whatsoever, after the bid opening during the period of Bidvalidity. It further provides that the Bid Security may be forfeited incase of a successful Bidder, if the Bidder fails within the specifiedtime limit to sign the Agreement or furnish the requiredPerformance Security.7.Quite clearly, the conditions under sub-Clause (a) to Clause16.5 are not attracted in the case of the petitioner-Firm. Insofar asthe condition under sub-Clause(b) to furnish required PerformanceSecurity as provided under Clause 30 of the Instruction to Biddersis concerned, it speaks about Letter of Acceptance. Clause 30 of theInstruction to Bidders provides that a successful Bidder shalldeliver to the Engineer a Performance Security within 10 days ofreceipt of Letter of Acceptance. Merely because the petitioner-Firmbecame the lowest Bidder, the condition under sub-Clause (b) ofClause 16.5 of the Instruction to Bidders shall not apply in its case.The decisions of the second respondent and the General Body of theMunicipal Administration are clearly illegal and arbitrary.8.This writ petition succeeds and the order dated 28th October2021 vide Exhibit L-2 to the writ petition is quashed. Thepetitioner-Firm is held entitled to refund of the Earnest Moneydeposited by it pursuant to the Tender Notice. However, thepetitioner-Firm is held not entitled to interest on the SecurityDeposit which was withheld by the respondent-Authority onaccount of a mis-conception of law.9.Writ Petition No.8861 of 2023 is allowed.[SMT. VIBHA KANKANWADI, J.] [CHIEF JUSTICE]4/4 dyb