Tender authorities cannot disqualify an eligible registration applicant before the contract-signing stage.

The petitioner submitted a bid for a road-safety and crash-barrier tender issued by the Madhya Pradesh Road Development Corporation.

It had applied for registration with the State before submitting its bid.

After the technical bids were opened, the respondents sought information from the registration authority, which reported that the petitioner’s application had been treated as “de-active” because it had not been attended to for 90 days.

The respondents then declared the petitioner ineligible under Clause 4 of the NIT and refunded its earnest money deposit (EMD) before the financial bid was opened.

The petitioner challenged the disqualification under Article 226 of the Constitution.

1. Whether the respondents could disqualify the petitioner at the technical-bid stage because its registration application was shown as “de-active,” despite the NIT allowing an unregistered but otherwise eligible bidder to bid after applying for registration.

2. Whether refunding the petitioner’s EMD before the financial bid was opened was consistent with the NIT and the tender process.

Article 226 permits judicial review of State action in contractual matters where the decision is illegal, arbitrary, irrational, procedurally improper, or an abuse of power.

Under New Horizons Ltd. v. Union of India, the State must act fairly and reasonably, consistently with Article 14, when awarding contracts, while retaining an appropriate measure of administrative discretion.

Under Tata Cellular v. Union of India, review is concerned with the legality and decision-making process, including whether the authority exceeded its powers, committed an error of law, acted irrationally, or committed procedural impropriety.

The NIT permitted an unregistered bidder eligible for registration to submit a bid after applying to the appropriate authority; valid registration was required when the contract was signed.

Clause 17.4 provided for release of other bidders’ EMDs immediately after the financial bid was opened.

The Court read Clause 4 as making an application for registration sufficient for participation at the bidding stage, with valid registration required only when the contract was signed.

The NIT provided no stage for investigating whether the application was “active” or “de-active,” and the respondents therefore had no basis under its terms to disqualify the petitioner on that ground.

The premature EMD refund—before the financial bid was opened, contrary to Clause 17.4—further supported the finding that the petitioner had been excluded arbitrarily.

The decision thus fell within the grounds for judicial intervention identified in Tata Cellular.

It declared the petitioner’s bid eligible for consideration at the technical-bid stage, directed the petitioner to repay the refunded EMD, and directed the respondents to accept it and process the bid as if no refund had occurred.

The writ petition was allowed.