Supreme Court Upholds ONGC’s Decision to Forfeit Security Deposit in Bid Dispute
In a significant ruling, the Supreme Court of India dismissed a special leave petition filed by Pooja Ceratech Private Limited against Oil and Natural Gas Corporation Ltd. (ONGC). The case involved a dispute over a tender bid and the subsequent forfeiture of the security deposit. The Supreme Court upheld ONGC’s decision, stating that the forfeiture was in accordance with the terms of the tender document. The ruling reaffirmed that contractual clauses in tenders must be strictly adhered to and that courts should not interfere unless there is clear evidence of illegality or arbitrariness.
Background of the Case
ONGC had issued a tender for the sale of gas, in which Pooja Ceratech Pvt. Ltd. participated. The company submitted a technical bid, which was found eligible, and the price bids were scheduled to be opened on December 3, 2019. However, before the opening of the bids, the petitioner requested ONGC to allow modifications in its price bid, citing an arithmetic error. Initially, ONGC postponed the opening of the bids but later proceeded without considering the petitioner’s request. The company was subsequently disqualified, and ONGC invoked the security deposit under Clause 14.5(b) of the tender document.
Aggrieved by this decision, Pooja Ceratech Pvt. Ltd. filed a writ petition in the Gujarat High Court under Article 226 of the Constitution, challenging ONGC’s action. The High Court dismissed the petition, stating that the forfeiture was contractually valid. The petitioner then approached the Supreme Court, arguing that ONGC’s actions were arbitrary and unjust.
Arguments by the Petitioner
The petitioner, represented by Advocate Malak Manish Bhatt, contended the following:
- ONGC acted unfairly by refusing to allow the modification of the price bid despite initially postponing the bid opening.
- There was a clear arithmetic error in the pricing, which should have been considered a genuine mistake rather than a material modification.
- The forfeiture of the security deposit was unjustified as ONGC did not suffer any actual financial loss.
- ONGC’s actions violated the principles laid down in the Supreme Court’s judgment in Kailash Nath Associates v. Delhi Development Authority, which states that a security deposit cannot be forfeited unless actual loss is demonstrated.
Arguments by ONGC
ONGC, represented by Advocate Ajay Jain, defended its actions with the following arguments:
- The terms of the tender were binding on all bidders, and Clause 14.5(b) clearly stipulated that any modification or withdrawal of a bid would lead to forfeiture of the security deposit.
- The petitioner had explicitly requested to modify its bid, which constituted a material change and triggered the forfeiture clause.
- ONGC’s actions were fully compliant with the contractual terms, and there was no arbitrariness in its decision-making process.
- The petitioner was attempting to use judicial intervention to escape the consequences of its own mistakes.
Supreme Court’s Ruling
The Supreme Court, after reviewing the arguments, upheld ONGC’s decision and dismissed the special leave petition. The Court made the following key observations:
- The contractual terms were clear, and the petitioner had voluntarily participated in the bidding process, agreeing to abide by those terms.
- The forfeiture of the security deposit was explicitly mentioned in the tender document, and ONGC acted strictly per its provisions.
- The argument that ONGC had not suffered an actual financial loss was irrelevant, as the forfeiture was a pre-determined contractual consequence.
- ONGC’s decision did not violate any legal or constitutional principles, and the petitioner’s request to modify its bid was sufficient to trigger the forfeiture clause.
The Court stated:
“The action of the Corporation is absolutely in consonance with the terms and conditions of the tender document. As per Clause 14.5, the security deposit submitted by the bidders shall be forfeited by the Corporation in the event the bidder varies or modifies the bid in a manner not acceptable to ONGC during the validity period or any extension thereof duly agreed by the bidder.”
Key Legal Precedents Considered
- Kailash Nath Associates v. Delhi Development Authority – The Court distinguished this case, stating that the present matter involved contractual terms explicitly allowing forfeiture.
- Rajasthan State Industrial Development and Investment Corporation v. Diamond & Gem Development Corporation – Reinforced that courts should not interfere in contractual matters unless clear illegality is established.
- Bharat Coking Coal Ltd. v. AMR Dev Prabha – Affirmed that tender terms must be strictly enforced unless they are arbitrary or unreasonable.
Final Verdict
The Supreme Court’s decision reaffirms that tender conditions are sacrosanct, and bidders must comply with all terms and conditions without expecting post-submission modifications. This judgment has several implications:
- It upholds the authority of public sector enterprises like ONGC in enforcing tender terms.
- It discourages bidders from seeking post-submission modifications under the guise of errors.
- It clarifies that forfeiture clauses in tenders are valid even without proving actual financial loss.
- It ensures transparency and fairness in government procurement processes by emphasizing adherence to contractual obligations.
The ruling sends a strong message to bidders that they must exercise due diligence while submitting bids and cannot later seek relief from courts for their own lapses. By dismissing the special leave petition, the Supreme Court has upheld the sanctity of contractual agreements and reinforced the principle that judicial intervention in tender disputes should be minimal unless clear arbitrariness or illegality is demonstrated.
Petitioner Name: Pooja Ceratech Private Limited.
Respondent Name: Oil and Natural Gas Corporation Ltd. & Anr..
Judgment By: Justice M.R. Shah, Justice B.V. Nagarathna.
Place Of Incident: Gujarat.
Judgment Date: 03-12-2021.
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