Uploading Incorrect Documents Inadvertent Error; Successful Highest Bidder Shouldn’t Be Penalised By Forfeiting Earnest Money: Calcutta High Court

The Writ Petition before the High Court was filed challenging the rejection of a bid for leasing of a parcel space coupled with forfeiture of the earnest money to the tune of Rs. 7,45,321.

The Single Bench of Justice Smita Das De held, “Having heard the parties and considering the documents available on record I am of the considered view that the petitioner should not be penalized by forfeiting his EMD on the ground of uploading incorrect documents without arriving at a finding that there exist an element of an intent to mislead.”

“The uploading of the incorrect documents is inadvertent and not false within the meaning of Circular No. 11 of 2022. The petitioner is improperly disqualified after being a successful highest bidder and the EMD amount has been forfeited illegally and disproportionately”, it added.

Advocate Saptarshi Roy represented the Petitioner, while Advocate Kaushik Dey represented the Respondent.

Factual Background

The petitioner is a proprietorship firm engaged in the business of transportation of goods of various natures under the name and style of ‘Vishal Enterprise’. The petitioner submitted his bid and became the highest bidder pursuant to a tender notification for leasing of a parcel space in SLR coach of 12381, ex HWH to NDLS Poorva Express. The petitioner’s bid was cancelled by the railway authorities by forfeiting the earnest money to the tune of Rs. 7,45,321 without serving any formal notice and/or order of cancellation by the railway authorities.

The petitioner was called upon by the Railway Administration, and a few documents, includingthe PL Account & Audited Balance sheet was sought. The petitioner requested the Railway authorities to condone the technical lapse committed inadvertently and to allow the tender process to be completed in favour of the petitioner, since there was no intention to mislead and/or submit false documents. It was claimed that even after acceptance of money and submission of complete corrected documents, the Railway authorities neither issued any formal order of rejection, nor proceeded to issue the tender work order to the petitioner.

Reasoning

The Bench reaffirmed that in cases of black listing and forfeiture, being penal in nature should be read in harmony with the doctrine of mens rea. The Bench noted that the authority failed to examine whether the mistake was clerical, inadvertent, curable or intentional. “It is a settled proposition of law that any administrative action must be proportionate. Therefore, forfeiture of EMD and cancellation of bid constitute serious civil consequences which requires finding of intent to mislead”, it added.

Considering that there was no letter of acceptance issued in favour of the petitioner, the Bench held that there could also be no intention to forfeit the earnest money even if the bidder gets disqualified for not meeting the eligibility criteria. “It appears from the record that after realisation, immediately the petitioner took steps to rectify the inadvertent error committed by the petitioner, by uploading an incorrect document which shows the bonafide intention 18 of the petitioner is not to mislead the respondent with any ulterior and/or oblique motive”, the order read.

“It is well settled proposition of law that Clause 1.2 can only be activated against a successful contractor if there is any breach of terms and conditions of the contract or the allotment of the lot inviting the serious consequence of forfeiture of earnest money /security deposit. Therefore mere participation in the tender process without the offer being accepted cannot be held the contract to be concluded”, it mentioned.

The Bench was of the view that the respondent authority mechanically and arbitrarily, without proper application of mind, invoked the relevant clause of the Circular. “A bidder cannot be penalized or disqualified for a bonafide clerical error as long as the essential eligibility remains to be undisputed. The Circular No. 11 of 2022 also does not mandate punitive measure in absence of intentional falsification”, it stated.

Thus, holding that the petitioner has been disqualified improperly by forfeiting the EMD, the Bench allowed the petition by quashing the rejection of the bid and the forfeiture of the EMD. “The authority shall refund the forfeited amounts of Rs. 7,45,321 /- to the petitioner within a period of 60 days from the date of communication of the order”, it directed.

Cause Title: Shri Manoj Kumar Verma v. The Union of India (Case No.: W.P.A. No 13131 of 2025)

Appearance

Petitioner: Advocates Saptarshi Roy, Kakali Das Chakraborty

Union Of India: Advocates Kaushik Dey, Jayita Das Chakraborty

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