Supreme Court Rules on Bid Security Requirement for Rail Project

The Supreme Court of India ruled on 10 October 2023, that requiring a physical “original” receipt of bid security when the payment was made digitally constitutes a “clear perversity.” The ruling came from a Bench of Justice J. B. Pardiwala and Justice K. Vinod Chandran, who set aside an order from the Patna High Court. The Court directed that the financial bid of Hardev Construction Private Limited be evaluated alongside other bids for a railway project.

The case originated from a tender issued by the Ministry of Railways for the “Engineering Procurement and Construction (EPC) of Construction of guide bunds, Launching Aprons and Associated River Protection Works” for the Bikramshila-Katareah New Line Rail Link Project (Bid/Package No. ECR-CAO-C-S-EPC-05-25-26 dated 06 January 2026). Hardev Construction Private Limited submitted a bid but was rejected at the technical stage for not providing a physical original of the Bid Security, as required by Clause 2.20.6(ii) of the Request For Proposal (RFP).

The appellant had made the required Bid Security payment directly to the authority’s account via an e-payment gateway and had uploaded the digital payment receipt on the e-procurement portal. Despite this, the bid was rejected. The Division Bench of the Patna High Court upheld this rejection, leading Hardev Construction to appeal to the Supreme Court.

During the Supreme Court proceedings, counsel for Hardev Construction, Sri A. K. De, argued that the rejection was solely based on the lack of a physical receipt. He highlighted that the payment had been made properly and that the financial bid was significantly lower than that of the third respondent, suggesting that rejecting the bid could result in public loss.

In contrast, Additional Solicitor General Sri Kanakamedala Ravindra Kumar, representing the Ministry of Railways, contended that the RFP’s Clause 2.20.6(ii) explicitly required physical submission of the original Bid Security. He maintained that the rejection was justified since the original receipt was not produced, which precluded any financial comparison.

The Supreme Court examined Clause 2.20.6 of the RFP, which allowed for the submission of Bid Security in multiple forms, including an uploaded scanned copy on the e-Procurement Portal and a physical delivery requirement for certain instruments. The Court concluded that the physical submission requirement only applies to instruments like Bank Guarantees or Demand Drafts, where possession is necessary for enforcement. In the case of e-payments, the funds were already transferred to the authority’s account.

The Court stated, “Insofar as the appellant is concerned, the money was deposited to the account of the respondents, and there is nothing further required to be produced.” The Bench emphasized that strict adherence to documentation should not override the practicality of digital transactions.

The ruling also clarified that previous judgments, including Prakash Asphaltings and Toll Highways (India) Ltd. v. Mandeepa Enterprises, do not apply when interpretations of tender conditions become unreasonable or impossible to comply with. The Supreme Court noted, “Rigid adherence to the letter of a document cannot be countenanced, especially when there is a clear impossibility in compliance of the same.”

The Supreme Court set aside the Patna High Court’s order and mandated the resumption of the tender evaluation process, highlighting the importance of adapting to digital transactions in public procurement. The amounts deposited had been refunded to Hardev Construction following the bid rejection. The case is formally titled Hardev Construction Private Limited v. Union of India & Ors.