Supreme Court Upholds Tender Acceptance Despite Procedural Delay Due to Bank Strike
The Supreme Court of India recently decided an important case concerning public contract tenders and procedural delays. The case, M/s Om Gurusai Construction Company v. M/s V.N. Reddy & Ors., examined whether a rigid tender condition could be relaxed under unavoidable circumstances.
Background of the Case
The case revolved around a tender issued by the Executive Engineer, Lower Wardha Project Division, Wardha for the construction of land development works. The bidding process involved multiple participants, and eventually, M/s Om Gurusai Construction Company (the appellant) was declared the lowest bidder (L-1).
The primary dispute arose due to a condition in the tender document—Clause 2.22.0 (ix)—which mandated that L-1 submit additional performance security within two days of opening the financial bid. The relevant portion of the clause stated:
“L-I shall submit the demand draft/BG or FDR additional performance security in the office of the Executive Engineer, Lower Wardha Project Division, Wardha within 2 days of opening of envelope-2. This duration of 2 days will not be relaxed under any circumstances. Failure to do so will result in forfeiture of EMD and the contractor/Joint Venture (jointly or individually) shall be debarred from participating in any bid of Water Resources Department/VIDC, Nagpur for two years from date of opening of envelope-2.”
The Dispute
The financial bid was opened on March 12, 2021 (Friday). However, the subsequent two days, March 13 and 14, were Saturday and Sunday, respectively, which were non-working days for banks. Further complicating the matter, there was a nationwide strike by nationalized bank employees on March 15 and 16, making it impossible for the appellant to deposit the additional security within the stipulated timeframe.
As a result, the appellant submitted the required security on March 17, 2021, the earliest possible working day. Despite this, the second bidder (L-2) challenged the acceptance of the appellant’s bid, arguing that the delay violated the tender condition. The High Court agreed with this argument and set aside the work order in favor of the appellant.
Supreme Court’s Consideration
The Supreme Court analyzed whether the tendering authority had violated Clause 2.22.0 (ix) by accepting the security deposit beyond the two-day deadline. The Court acknowledged the following key facts:
- March 13 and 14 were weekends, making banking transactions impossible.
- March 15 and 16 saw a nationwide strike of nationalized bank employees.
- The appellant’s bank, the Bank of Maharashtra, was one of the affected institutions.
- The appellant had no account in a scheduled bank that remained open during the strike.
- The Executive Engineer accepted the security deposit on March 17 after verifying the circumstances.
Key Judicial Observations
The Supreme Court referred to the legal principle, lex non cogit ad impossibilia (the law does not compel a person to perform an impossible act), stating:
“This is a case where the appellant has complied with the condition of furnishing the additional performance security at the earliest possible time, that it could possibly comply. That no one can be compelled to perform an impossible task is a well-accepted legal principle.”
The Court also referenced the landmark judgment in Raj Kumar Dey & Others v. Tarapada Dey & Others (1987), which reinforced the principle that laws and procedural mandates must be interpreted in a manner that does not require individuals to achieve the impossible.
Ruling and Impact
The Supreme Court found that the High Court had erred in striking down the work order. The tendering authority had exercised reasonable discretion in accepting the delayed deposit due to the extraordinary situation caused by the bank strike. The Court held:
“Decision-making authorities, like the tendering authority here, cannot be expected to turn a blind eye to undisputed ground realities and compelling necessities, like the one that presented itself here. After all, they do not live in ivory towers.”
Consequently, the Supreme Court set aside the High Court’s ruling and upheld the work order in favor of M/s Om Gurusai Construction Company.
Conclusion
This judgment reaffirms the principle that while tender conditions are crucial for maintaining transparency, they should not be applied in a rigid manner that disregards practical realities. The ruling provides clarity on the scope of discretion available to tendering authorities in cases where compliance is rendered impossible due to unforeseen circumstances.
By allowing flexibility where justified, the decision prevents unnecessary disqualifications and ensures that procedural mandates do not result in injustice.
Petitioner Name: M/s Om Gurusai Construction Company.Respondent Name: M/s V.N. Reddy & Ors..Judgment By: Justice J.K. Maheshwari, Justice K.V. Viswanathan.Place Of Incident: Wardha, Maharashtra.Judgment Date: 23-08-2023.
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