Patna High Court Affirms Rs. 5 Lakh Compensation For Unjust Tender Disqualification

Patna High Court Affirms Rs. 5 Lakh Compensation For Unjust Tender Disqualification

The Patna High Court has delivered a significant judgment regarding public procurement, affirming an award of Rs. 5 lakh as compensation to a lowest bidder who faced arbitrary exclusion from a tender process. A Division Bench comprising Justice Anil Kumar Sinha and Justice Vikash Kumar dismissed the intra-court appeal filed by the State of Bihar, which had challenged a prior single judge order directing the payment. The dispute originated from a tender floated by the Rural Works Department in Bihar, where the respondent company was initially declared technically eligible and subsequently recognized as the L-1 bidder.

What was the legal rationale behind awarding compensation for tender exclusion ?

The Division Bench held that compensation was warranted because the disqualification relied on a condition entirely absent from the Notice Inviting Tender, meaning the authorities acted arbitrarily without legal backing in the official tender stipulations.

The sequence of events revealed that following the initial declaration of the respondent as the lowest bidder, a Member of the Legislative Assembly lodged a complaint that triggered an enquiry. Consequently, the Tender Committee disqualified both the L-1 and L-2 bidders. The stated ground for disqualification was that the stamp papers utilized for executing affidavits had not been purchased in the individual names of the persons making those affidavits. The authorities subsequently cancelled the tender and initiated a fresh bidding process, ultimately awarding the project to another contractor.

The aggrieved respondent challenged the exclusion through a writ petition. Upon reconsideration following an earlier remand, the Single Judge determined that the disqualification was arbitrary. However, because approximately 80% of the project work had already been executed by the subsequent contractor, the Single Judge declined to interfere with the ongoing execution, instead granting Rs. 5 lakh in compensation. The State of Bihar challenged this direction in an intra-court appeal, arguing that holding the L-1 status did not confer any vested right or create a concluded contract. The State further pointed out that the respondent had chosen not to participate in the subsequent tender process.

Upon reviewing the submissions, the Division Bench observed that the condition regarding the purchase of stamp paper was entirely absent from the original Notice Inviting Tender. When pressed by the court, counsel for the State conceded that no such stipulation existed in the tender document. The High Court stressed that participants cannot be rendered ineligible on extraneous or trivial grounds that lack any basis in the published tender conditions. The bench emphasized that the relief granted by the Single Judge did not amount to awarding contractual damages or interfering with a concluded contract, but rather represented a balanced moulding of relief.

The appellate court noted that the single judge correctly balanced the established illegality in the original tender process against the advanced progress of the public work, avoiding disruption to a project nearing completion. Finding no legal infirmity in the approach adopted by the single judge, the Division Bench dismissed the appeal filed by the State of Bihar and reaffirmed the direction to pay Rs. 5 lakh to the disqualified bidder.