Bidder Cannot Be Penalized For Bonafide Clerical Error If Essential Eligibility Is Undisputed: Calcutta High Court Sets Aside Railway Blacklisting

The Court was of the opinion that blacklisting has severe civil consequences and cannot be imposed mechanically or disproportionately. It reiterated that tender conditions must be interpreted in a manner that advances fairness and competition, rather than defeating genuine participation on hyper-technical grounds.

Justice Smita Das De observed, “…forfeiture is permissible only upon establishing that the bidder has misdeclared with an intent to mislead. The punitive charges levelled against the petitioner is ex facie, bad, illegal and not sustainable in the eye of law. Mere allegation of obtaining a false signature from the panel of handling staff is a matter of investigation by a competent Court of law since no such finding has been recorded by the authorities to prove the same. Moreover, the respondent authority mechanically and arbitrarily, without proper application of mind has invoked the relevant clauses of the said circular which are inapplicable in the instant case. A bidder cannot be penalized or disqualified for a bonafide clerical error as long as the essential eligibility remains to be undisputed. The said circular also does not mandate punitive measure in absence of an intentional falsification”.

“It is clarified that the Railways may reject manifest procedures but cannot assume that a transparent logistical split to be a false declaration. For the reasons recorded above this court finds the actions of the respondents is disproportionate and legally infirm. The petitioner shall not be debarred from participating/operating in existing and future contracts”, the bench further noted.

Advocate Saptarshi Roy appeared for the petitioner and Advocate Brajesh Jha appeared for the respondent.

In the matter, a tender process was conducted by the Railways in which the petitioner, a leaseholder, was disqualified and subsequently blacklisted on account of an alleged discrepancy in the bid documents. The authorities treated the error as a serious violation warranting punitive action.

Upon examining the record, the High Court found that the discrepancy was clerical in nature and did not affect the petitioner’s core eligibility or capacity to perform the contract. There was no allegation of fraud, misrepresentation of essential qualifications, or suppression of material facts that would justify blacklisting.

The Court examined the impugned action in light of the statutory framework under the Railways Act, 1989, particularly Sections 66(1) & (4) (false declaration of goods), Section 73 (penalty for overloading), Section 79 (permissible weight variation), and Section 163, and held that penal consequences require proof of a materially false declaration made with intent to defraud.

It further noted that the Railway authorities could not invoke punitive cancellation or debarment beyond what is contemplated under the Act.

The Court also adverted to Section 74 of the Indian Contract Act, 1872, observing that forfeiture and penalties must be proportionate and legally sustainable, and cannot be imposed in the absence of proven breach accompanied by mens rea.

Therefore, holding the impugned action to be unsustainable, the Court set aside the blacklisting order and directed the authorities to reconsider the petitioner’s case in accordance with law.

Cause Title: Ram Babu Yadav v. Union of India & Ors. W.P.A. No. 5673 of 2024

Appearances:

Petitioner: Saptarshi Roy, Kakali Das Chakraborty, Advocates.

Respondents: Brajesh Jha, Debapriya Samanta, Advocates.