A public authority may cancel a tender award induced by a bidder’s invalid MSE exemption claim.

The Railways invited a GeM tender for linen-distribution services for four years.

Tharu and Sons claimed an exemption from the earnest money deposit (EMD) as a Small Enterprise, was declared the lowest bidder, and received a Letter of Acceptance (LOA) and an online contract on 24 August 2026.

The Railways later cancelled the LOA, stating that the firm’s Small Enterprise exemption was invalid on the date the tender opened.

The firm’s earlier Small Enterprise classification had ended following its reclassification as a Medium Enterprise; the Court found it was not entitled to claim the exemption on the relevant date.

The tender required an MSE certificate to be valid on the tender-opening date and required an undertaking as to the truthfulness of uploaded documents.

The firm challenged the cancellation, contending that the contract had been concluded and could not be unilaterally withdrawn.

1. Whether the Railways could cancel the LOA and contract after award on the ground that the petitioner had claimed an MSE exemption that was invalid on the tender-opening date.

2. Whether the petitioner’s arguments that the acceptance concluded the contract and that the contract was not voidable for a mistake of fact prevented cancellation.

The tender required bidders claiming EMD exemption to provide a valid MSE/Udyam certificate, registered for the relevant services and valid on the date of tender opening; failure to satisfy the requirement permitted summary rejection.

The tender also required an undertaking that uploaded documents and qualification representations were truthful, with specified consequences for false or incorrect information.

Under Section 19 of the Indian Contract Act, 1872, an agreement induced by fraud or misrepresentation is voidable at the option of the party whose consent was so induced.

The Court also considered Sections 2(b), 7 and 22 of the Act, concerning acceptance, absolute acceptance and mistake of fact, but found the petitioner’s reliance on them unmerited in the circumstances.

The cited decisions on cancellation of awarded tenders were distinguished as involving materially different facts.

The Court held that the petitioner could not claim the Small Enterprise exemption on the tender-opening date, notwithstanding its contention that it had been eligible when it submitted its bid.

The tender expressly required the certificate to remain valid on the opening date.

By claiming the exemption and submitting the required undertaking, the petitioner represented that it satisfied the tender conditions.

The Court found no material showing that, after the exemption’s invalidity became known, the petitioner withdrew its exemption claim.

It therefore concluded that the LOA had been issued on an erroneous representation and that the respondents could avoid the contract under Section 19; the petitioner’s acceptance-and-mistake arguments did not alter that result.

The writ petition was dismissed as devoid of merit.