After finding tender cancellation unjustified, Delhi HC orders DTIDC to give interim contract to L1 bidder at lower rate

DTIDC issued NIT No. 13/2026–27 dated 28 April 2026 for operation and maintenance, housekeeping, security and allied services at Maharana Pratap ISBT, Kashmere Gate, for an estimated cost of ₹23,04,11,076/-

The Petitioner and Respondent No. 3 were among three bidders; both were technically qualified, while the third bidder was disqualified.

Upon opening the financial bids, the Petitioner quoted ₹16,36,60,987.28 and emerged as the lowest bidder. Under the QCBS evaluation, the Petitioner scored 100 marks, while Respondent No. 3 scored 92.69 marks.

Earlier, a third-party challenge to the tender conditions, the use of the QCBS method and the non-publication of the tender on the Government e-Marketplace (“GeM”) portal had been dismissed in W.P.(C) 6915/2026 on 15 July 2026.

On 24 July 2026, the Board resolved to cancel the tender and re-float it on the GeM portal, citing the High Court’s observations concerning GeM and an alleged failure to follow the latest procurement manual.

DTIDC thereafter issued the impugned cancellation notice dated 31 July 2026, merely stating “Administrative Reasons”.

The Board also resolved to extend Respondent No. 3’s services for two months at ₹1,77,00,000/- per month, although the Petitioner had offered to provide the same services at ₹1,36,38,415.60 per month.

During the proceedings, DTIDC published a fresh tender on GeM on 20 August 2026 and stated that it was willing to accept the Petitioner’s services as an interim measure. The Petitioner agreed to take over from 1 September 2026, subject to a minimum two-month tenure.

Whether the Petitioner, having emerged as the technically qualified and highest-scoring/lowest-priced bidder, had locus to challenge DTIDC’s cancellation of the tender and proposed re-tendering.

Whether DTIDC’s reasons for cancelling the tender—non-publication on the GeM portal and alleged non-compliance with the latest procurement manual—were lawful, rational and supported by the record.

Whether DTIDC could continue Respondent No. 3’s services at a substantially higher monthly rate despite the Petitioner’s responsive bid at a lower rate.

Whether the Court should quash the cancellation notice and direct award of the original tender to the Petitioner, notwithstanding irregularities in the original tender process.

The Court applied Article 226 of the Constitution, under which State and public authorities must act fairly, reasonably and non-arbitrarily in contractual and tender matters, consistent with Article 14.

It relied on ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553, and Subhod Kumar Singh Rathour v. Chief Executive Officer, (2024) 15 SCC 461, for the proposition that State action in public procurement may be judicially reviewed where it is arbitrary, unfair or unreasonable.

At the same time, HUDA v. Orchid Infrastructure Developers (P) Ltd., (2017) 4 SCC 243, establishes that an L1 or highest-scoring bidder acquires no vested right to an award before acceptance of its bid.

The Court applied paragraph 3.5.3(d)(viii) of the Manual for Procurement of Non-Consultancy Services, 2025, which permits review of cancellation where the procuring entity intends to re-tender the same requirements.

It also applied paragraph 7.4.11 of the Manual, which permits cancellation only on properly justified grounds such as substantial change in requirements, an incurable tender infirmity, lack of responsive bids, ineffective competition, substantially excessive prices or failure of the successful bidder; where responsive bids exist, the procuring entity should ordinarily finalise the tender after considering mitigating measures.

The Court further considered the General Financial Rules, 2017, the tender’s QCBS provisions in Clauses 9–11, and DTIDC’s Clause 12.1 power to reject bids, holding that such contractual discretion remains subject to procurement rules and public-law standards of reasonableness.

The Court first held that the Petitioner had locus because it was a technically qualified participant and the procuring entity admittedly intended to re-tender the same requirements; paragraph 3.5.3(d)(viii) therefore permitted review of the cancellation decision.

The stated reason of deference to the earlier judgment on GeM was found illusory. In the earlier proceedings, DTIDC had defended non-publication on GeM, and the Court had not quashed the tender on that ground; its direction to place the final selection before the Board was a safeguard against bias, not an instruction or permission to cancel the tender.

The Court also found no explanation for DTIDC’s sudden conclusion, within nine days, that the services could be procured through GeM.

The alleged procurement-manual violation was equally unsatisfactory. DTIDC’s written submissions suggested that QCBS should not have been used and that Least Cost Selection was mandatory, but this contradicted DTIDC’s earlier position that QCBS had been consciously adopted under the applicable procurement framework to secure quality services.

Moreover, the Petitioner had obtained the highest possible score under the very QCBS system prescribed in the tender, and its bid would also have been lowest under an LCS approach.

Thus, the reasons recorded for cancellation were inconsistent with DTIDC’s earlier stand, unsupported by the Board minutes and failed the test of reasonableness.

The Court further considered the public-finance consequences. DTIDC continued Respondent No. 3’s services at ₹1.77 crore per month despite the Petitioner’s offer of approximately ₹1.36 crore per month, and had not initially asked Respondent No. 3 to match the Petitioner’s price.

This was inconsistent with paragraph 7.4.11(2) of the Manual, which favours finalising a tender where responsive bids are available and requires a reasoned balancing of the risks of re-tendering against delay, cost escalation and loss of transparency.

Nevertheless, the Court declined to quash the cancellation because the original process itself had been irregular: the tender had not been floated on GeM, participation by qualified bidders was limited, and the process was inconsistent with the applicable financial rules.

The Court therefore granted limited equitable relief to prevent continuing loss to the public exchequer without reviving or awarding the original tender.

However, it declined to quash the cancellation notice because the original tender process suffered from irregularities, particularly non-publication on GeM and limited qualified participation.

As limited relief, DTIDC was directed to award the Petitioner an interim contract at its quoted rate of ₹1,36,38,415.60 per month for a minimum period of two months or until selection of the final bidder under the GeM tender dated 20 August 2026, whichever was later.

The Petitioner was directed to take over from 1 September 2026, and Respondent No. 3 was directed to assist in a smooth handover.

DTIDC was permitted to proceed with and complete the fresh GeM tender.

The writ petition was accordingly allowed only to this limited extent; the prayer to quash the impugned cancellation notice was declined.