Introduction:
In an important decision concerning public procurement, fairness in tender processes, and the limits of administrative discretion, the Allahabad High Court, Lucknow Bench, held that inadequacy in stamp duty affixed on a bank guarantee constitutes only a curable defect and cannot be used as a ground to eliminate an otherwise eligible bidder from a tender process. The Court emphasized that technical deficiencies capable of rectification should not be employed as tools to arbitrarily exclude bidders, particularly when such exclusion undermines the principles of transparency and fair competition governing public contracts.
The judgment was delivered by a Division Bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary in the case of M/S Konkan Railway Corporation Ltd. through Authorised Representative Mr. Om Prakash Verma v. Union of India through General Manager (N.E.R.), Gorakhpur and Others, reported as 2026 LiveLaw (AB) 310.
The dispute arose from a tender floated by the North Eastern Railway for execution of certain works. The petitioner, M/S Konkan Railway Corporation Ltd., participated in the bidding process and submitted its Techno-Commercial Bid along with the requisite documents, including a bank guarantee. However, on May 19, 2026, the petitioner received an automated communication informing it that its technical bid had been rejected on the vague ground that it had failed to satisfy the eligibility criteria. The communication did not specify which eligibility condition had allegedly been violated.
Aggrieved by the abrupt rejection and the absence of reasons, the petitioner approached the High Court challenging the decision. At the initial stage of the proceedings, the Court expressed concern regarding the non-disclosure of reasons and stayed further progress in the tender process. The Court also directed the authorities to provide a reasoned explanation for rejecting the petitioner’s bid within twenty-four hours.
Pursuant to this direction, the respondent authorities furnished an explanation stating that the petitioner’s bank guarantee suffered from a deficiency in stamp duty under the provisions of the Uttar Pradesh Stamp Act. According to the authorities, this defect constituted a legal lacuna justifying rejection of the technical bid.
The controversy thus shifted from the absence of reasons to the legality of rejecting a bidder solely on account of inadequate stamp duty on a bank guarantee. The case raised broader questions regarding the distinction between substantive eligibility requirements and technical irregularities, the power of authorities to waive minor defects, and the obligation of public bodies to act fairly and non-arbitrarily while conducting tender processes.
The judgment is significant because it reinforces the principle that public procurement decisions must be guided by fairness, transparency, and proportionality rather than hyper-technical objections designed to eliminate competition. It also addresses the extent to which administrative authorities may justify decisions after litigation has commenced and clarifies the legal consequences of deficiencies relating to stamp duty in commercial transactions.
Arguments of the Parties:
The petitioner challenged the rejection of its technical bid on several grounds, contending that the action of the railway authorities was arbitrary, unreasonable, and contrary to settled principles governing public tenders.
At the outset, the petitioner highlighted that the rejection communication issued on May 19, 2026 merely stated that the bid did not satisfy the eligibility criteria. No specific deficiency or violation was identified. According to the petitioner, the failure to disclose reasons rendered the decision arbitrary and deprived it of a meaningful opportunity to understand and challenge the basis of rejection.
Senior Counsel appearing for the petitioner argued that the subsequent explanation furnished by the authorities during court proceedings amounted to an impermissible attempt to improve upon and supplement the original decision. The authorities had initially not mentioned any defect relating to stamp duty, yet sought to rely upon this ground only after judicial scrutiny commenced.
On merits, the petitioner contended that deficiency in stamp duty on a bank guarantee is not a substantive defect affecting the validity of the bid. Rather, it is a technical irregularity capable of being cured by payment of the requisite stamp duty and penalty, if necessary. The petitioner submitted that the Stamp Act is essentially a fiscal statute enacted for the purpose of collecting revenue and not for invalidating commercial transactions or defeating substantive rights.
It was argued that courts have consistently recognized that deficiencies relating to stamp duty are generally curable in nature. Therefore, the authorities ought to have provided an opportunity to rectify the deficiency rather than rejecting the bid outright.
The petitioner further emphasized that an authority inviting tenders possesses discretion to waive minor technical irregularities where such waiver does not compromise fairness or prejudice competing bidders. Public procurement law, according to the petitioner, distinguishes between essential conditions affecting eligibility and ancillary conditions involving procedural compliance.
A significant aspect of the petitioner’s case was the allegation of discriminatory treatment. The petitioner pointed out that the same authorities had previously accepted a similar bank guarantee submitted by it in another tender process. This demonstrated that the alleged defect had not been treated as fatal in the past. Consequently, the petitioner argued that the sudden reliance upon stamp duty deficiency in the present case was motivated by an intention to exclude it from the competition.
The petitioner also highlighted that it had submitted the lowest financial bid. According to it, the rejection of its technical bid on a hyper-technical ground effectively eliminated the most competitive bidder and raised serious concerns regarding the fairness of the tender process.
The respondents, on the other hand, defended the rejection and maintained that compliance with tender conditions was mandatory. They contended that the bank guarantee submitted by the petitioner did not satisfy the requirements prescribed under the Uttar Pradesh Stamp Act and therefore suffered from a legal defect.
According to the respondents, the deficiency in stamp duty rendered the bank guarantee legally inadequate and justified rejection of the technical bid. They submitted that tender conditions are binding upon all participants and any deviation from prescribed requirements may legitimately result in disqualification.
The respondents further argued that the tender process had already progressed substantially. The financial bids had been opened and a bidder had been declared the lowest responsive bidder, commonly referred to as the L-1 bidder. As a result, rights had accrued in favour of the selected bidder and interference at this stage would disrupt the tender process.
The respondents contended that judicial review in tender matters should remain limited and courts should not interfere with commercial decisions unless there is clear evidence of arbitrariness, mala fides, or illegality. According to them, the decision to reject the petitioner’s bid fell within the realm of administrative discretion and did not warrant judicial intervention.
The competing submissions thus required the Court to determine whether deficiency in stamp duty constituted a fatal defect, whether the authorities could justify their decision through reasons supplied subsequently during litigation, and whether reopening the financial evaluation process would prejudice the rights of the bidder declared as L-1.
Court’s Judgment:
After carefully considering the facts and submissions, the Allahabad High Court found substantial merit in the petitioner’s challenge and concluded that the rejection of the technical bid could not be sustained.
The Court first addressed the conduct of the respondent authorities in supplying reasons only after judicial intervention. The Bench expressed strong disapproval of the attempt to improve upon the original decision by introducing a new justification during the course of litigation.
The Court observed that the rejection communication merely stated that the petitioner had failed to satisfy eligibility criteria without identifying any specific deficiency. Only after the Court directed the authorities to provide reasons did they rely upon the issue of inadequate stamp duty.
The Bench emphasized that administrative authorities cannot invent fresh grounds or supplement defective orders after the decision has already been challenged before a court. Such conduct undermines transparency and prevents meaningful judicial scrutiny. The Court therefore held that the subsequent justification could not automatically cure the deficiencies in the original decision-making process.
Turning to the substantive issue, the Court examined the nature of the defect relating to stamp duty. It observed that inadequacy in stamp duty does not ordinarily invalidate the underlying transaction. The purpose of stamp legislation is primarily fiscal in nature, aimed at securing revenue for the State.
The Bench accepted the petitioner’s contention that deficiency in stamp duty constitutes a curable defect rather than a fatal legal infirmity. Such defects can be remedied through payment of the requisite stamp duty and applicable charges. Consequently, the defect could not be treated as a legitimate basis for eliminating a bidder from a competitive tender process.
The Court observed that public authorities must distinguish between essential conditions affecting eligibility and technical irregularities capable of rectification. While strict compliance may be required in respect of substantive conditions, curable defects should not be employed as tools to exclude otherwise qualified participants.
A particularly significant factor influencing the Court’s decision was the conduct of the respondents in previous transactions. The Court noted that similar bank guarantees submitted by the petitioner had earlier been accepted by the same authorities. This inconsistency undermined the credibility of the respondents’ explanation and suggested selective application of standards.
The Bench concluded that the authorities’ reliance upon the stamp duty deficiency appeared to be a pretext rather than a genuine concern. The Court observed that the rejection seemed designed to eliminate the petitioner from the bidding process despite the fact that it had submitted the lowest financial bid.
In strong terms, the Court characterized the action of the authorities as mala fide and found that the technical objection was being used as a mechanism to exclude a competitive bidder. Such conduct, according to the Court, violated the constitutional requirement that public authorities act fairly, transparently, and without favouritism.
The Court then addressed the respondents’ argument that the financial bid had already been opened and that rights had accrued in favour of the L-1 bidder. Rejecting this contention, the Bench reiterated the settled principle that declaration as the lowest bidder does not create an indefeasible or vested right to obtain the contract.
The Court referred to the decision of the Supreme Court in Meerut Development Authority v. Association of Management Studies (2009) 6 SCC 171. In that case, the Supreme Court had clarified that a State authority is not bound to accept the bid of the lowest bidder. Rather, its obligation is to act fairly, reasonably, and free from arbitrariness.
Relying upon this principle, the Bench held that the rights of the L-1 bidder remain provisional until the tender process culminates in a concluded contract in accordance with the governing conditions. Therefore, reopening the evaluation process would not infringe any vested rights.
Having found the rejection unsustainable, the Court quashed the financial bid tabulation prepared on May 19, 2026. It directed the respondent authorities to reconsider the financial bids of all tenderers, including the petitioner, without treating the inadequate stamp duty on the bank guarantee as a disqualifying factor.
At the same time, the Court directed the petitioner to cure the deficiency by making good the requisite stamp duty on or before June 3, 2026. This direction ensured that the technical defect would be rectified while preserving the integrity of the tender process.
The judgment ultimately reinforces important principles governing public procurement. It affirms that public authorities cannot exclude bidders on the basis of minor and curable defects, cannot improve their decisions by introducing new reasons during litigation, and must ensure that tender processes remain transparent, competitive, and free from arbitrary exclusion. Through this decision, the Allahabad High Court has strengthened judicial oversight over administrative discretion in tender matters and reaffirmed that procedural technicalities cannot be permitted to defeat substantive fairness.