Consortium Members are Jointly and Severally Liable for Fraudulent Bid Documents and Statutory Debarment

In brief

The question

1. Whether a member of a consortium can be held liable for debarment due to fraudulent documents submitted by the lead member despite an internal withdrawal from the arrangement

The court held

The court held that a consortium member remains liable for fraudulent acts performed in the name of the consortium unless a formal withdrawal is communicated to and accepted by the Tendering Authority prior to the bid submission.

It also directed

The debarment of RCCL for two years was upheld, and the Writ Appeal was dismissed.

01Facts

The Appellant (RCCL) entered into a consortium with Respondent No. 3 (MP24) to bid for a road development project under the Karnataka Road Development Corporation Ltd. (KRDCL).

¶ 4

RCCL executed a Joint Bidding Agreement (JBA) and a Power of Attorney (POA) in favor of MP24 as the lead member.

¶ 4

On April 16, 2025, just before the bid submission deadline, RCCL allegedly emailed MP24 withdrawing from the consortium, but did not notify KRDCL.

¶ 5

The consortium submitted the bid, emerged as the lowest bidder (L1), and was subsequently found to have submitted a fabricated work-experience certificate purportedly from the Andhra Pradesh Water Resources Department.

¶ 6, 9

Following a show-cause notice, the State Level Debarment Committee (SLDC) debarred RCCL for two years from all Public Works Department (PWD) works for "deliberate connivance".

¶ 12

The learned Single Judge dismissed RCCL’s writ petition challenging the debarment.

¶ 15

RCCL appealed, arguing it had withdrawn from the consortium before the bid and was not vicariously liable for the fraud committed by the lead member.

¶ 26

02Issues

i.1. Whether a member of a consortium can be held liable for debarment due to fraudulent documents submitted by the lead member despite an internal withdrawal from the arrangement

¶ 16, 32

ii.2. Whether the principle of joint and several liability in a bidding process extends to penal consequences like debarment

¶ 17, 33

iii.3. Whether the debarment order satisfied the principles of natural justice and statutory requirements under the KTPP Act

¶ 21, 31

03Law Applied

Section 13 of the Karnataka Transparency in Public Procurements (KTPP) Act (concerning debarment for fraudulent practices).

Doctrine of joint and several liability in consortium bidding, whereby actions of the lead member bind all members vis-à-vis the Tendering Authority.

Principles of Natural Justice (Audi Alteram Partem) as applicable to administrative debarment proceedings.

Provisions in the judgment · 3 · Linked ones open on LawLens

KARNATAKA HIGH COURT ACT, 1961 Section 4

KARNATAKA TRANSPARENCY IN PUBLIC PROCUREMENTS ACT, 1999 Section 14

Indian Contract Act, 1872 Section 208

04Reasoning

The court examined the Joint Bidding Agreement (JBA) and the Power of Attorney (POA), noting that both documents explicitly stated that all members of the consortium would be jointly and severally liable for all obligations related to the bid.

The court rejected the 'internal withdrawal' argument, observing that an alleged private email to the lead partner, without formal notification to the Tendering Authority or cancellation of the registered POA, does not discharge a member's liability toward the public authority.

Reasoning that public procurement integrity is paramount, the court held that allowing members to escape consequences for fraud by citing internal disputes would undermine the transparency of the tendering process.