Failure to furnish performance security within stipulated time justifies annulment of the tender award.

The petitioner participated in NIT No. RWD/MMGSY (AWSESH-SC)/HQ/ET/2025-26/25 dated 4 October 2025 for Package No. MMGSY (AWSESH-SC) Harnaut-883, Tender ID-145414. He was declared technically qualified, emerged as the L-1 bidder, and was issued a Letter of Acceptance dated 14 January 2026 requiring submission of the prescribed performance security within the stipulated period.

The petitioner failed to furnish the bank guarantee within time, attributing the delay to his illness from typhoid. After recovery, he submitted the bank guarantee on 22 February 2026 along with medical documents, allegedly accepted by the authorities.

Before execution of the agreement, the Chief Engineer-I cancelled the work allotment/Letter of Acceptance by Memo No. 30 dated 14 March 2026, relying upon the petitioner’s failure to furnish the performance security and execute the agreement within the prescribed period.

During the proceedings, the respondents disclosed that the tender itself had subsequently been cancelled by Office Order No. 03 dated 30 April 2026 under Clause 33 of the NIT.

Whether the respondents were justified in cancelling the petitioner’s Letter of Acceptance/work allotment for failure to furnish the requisite performance security within the stipulated period, despite its subsequent submission?

Whether the petitioner was entitled to a writ directing the respondents to permit execution of the agreement and commencement of work after the tender itself had been cancelled?

Whether the cancellation order was arbitrary, violative of natural justice, or otherwise amenable to interference under Article 226 of the Constitution?

The Court applied Clause 34.2 of the Conditions of the Model Bidding Document, under which failure by the successful bidder to submit the performance security or sign the contract constitutes sufficient ground for annulment of the award and forfeiture of the bid security.

It further applied Clause 33 of the NIT, reserving the Engineer-in-Chief’s power to accept or reject any bid and cancel the bidding process before award of the contract without assigning reasons.

Relying on Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622, and the principles stated in Tata Cellular v. Union of India, (1994) 6 SCC 651, the Court held that tender conditions must ordinarily be enforced as framed and that judicial review in contractual tender matters is limited to arbitrariness, irrationality, mala fides, bias, or favouritism.

The Court also recognised that subsequent compliance cannot retrospectively cure an admitted failure to satisfy a mandatory tender condition within the prescribed time.

The Court found that the petitioner admittedly failed to submit the performance security within the time stipulated in the Letter of Acceptance, irrespective of whether the delay was caused by illness.

Clause 34.2 expressly authorised annulment of the award for such failure; therefore, the subsequent submission of the bank guarantee could not extinguish the petitioner’s accrued default or compel the authorities to accept delayed compliance.

The Court declined to rewrite or dilute the tender conditions and found no material demonstrating arbitrariness, mala fides, bias, or favouritism in the cancellation decision.

Further, because the tender process itself had been cancelled under Clause 33, no enforceable right survived in favour of the petitioner merely because he had earlier been declared L-1 or issued a Letter of Acceptance.

It also held that the subsequent cancellation of the tender eliminated any enforceable basis for directing execution of the agreement or commencement of the work.

The writ petition was accordingly dismissed, and any pending interlocutory applications were disposed of.