Supreme Court clarifies rules for bid mistakes in government contracts: ABCI Infrastructures vs. Union of India (2025)

Date of the Judgment: February 14, 2025

Citation: 2025 INSC 215

Judges: Sanjiv Khanna, CJI, Sanjay Kumar J., K.V. Viswanathan J.

When is a mistake in a government contract bid considered a genuine error? The Supreme Court of India addressed this question in a recent case involving a significant infrastructure project. The court examined whether the Border Roads Organisation (BRO) acted fairly when it insisted on enforcing a bid containing an apparent typographical error. This judgment clarifies the circumstances under which a bidder can withdraw a bid due to a mistake and the responsibilities of government bodies in such situations. The judgment was delivered by a bench comprising Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice K.V. Viswanathan.

Case Background

In February 2023, the Border Roads Organisation (BRO), under the Ministry of Defence, invited bids for the design and construction of twin tunnels, approximately 4.1 kilometers long, at Shinkun La Pass. This project included civil, electrical, and mechanical work, connecting the Darcha-Padam Highway in Himachal Pradesh and Ladakh. The estimated cost was ₹1,504.64 crores, with a completion timeline of 48 months. The bid security amount was ₹15.04 crores.

Ten bidders, including M/s ABCI Infrastructure Private Limited (the Appellant), submitted their bids on June 3, 2023, providing bank guarantees of ₹15.04 crores. On June 5, 2023, technical bids were opened, and seven bidders, including the Appellant, were declared technically qualified.

On August 24, 2023, the financial bids were opened, and the Appellant was ranked as the L-1 bidder. However, the Appellant’s bid price was listed as ₹1,569, which they claimed was due to a system error, with their actual bid being ₹1,569 crores. The Appellant informed the authorities of the mistake on August 25, 2023, requesting that they be allowed to correct the error.

Timeline:

Course of Proceedings

The Appellant filed a writ petition before the High Court of Himachal Pradesh at Shimla, challenging BRO’s decision to enforce the bid. The High Court dismissed the petition on October 7, 2023, leading the Appellant to appeal to the Supreme Court of India.

Legal Framework

The Supreme Court considered the following legal provisions and principles:

• Section 20 of the Indian Contract Act, 1872: This section states that an agreement is void if both parties are mistaken about a matter of fact essential to the agreement. The explanation clarifies that an erroneous opinion about the value of the subject matter is not considered a mistake of fact.
  
  “whereby both parties to an agreement are under a mistake as to matter of fact essential to an agreement , the agreement is void.”

Arguments

The Appellant argued that the quoted bid amount of ₹1,569 was a clear and obvious error due to a technical or typographical mistake. They contended that they promptly informed the BRO of the error and should not be held to such an unrealistic bid.

The BRO argued that the Appellant was at fault for the mistake and that accepting the withdrawal would cause delays and necessitate a fresh bidding process. They justified the encashment of the bank guarantee due to the delays caused by the Appellant’s error.

Issues Framed by the Supreme Court

1. Whether BRO was justified in accepting the bid of ₹1,569.
2. Whether BRO was justified in seeking forfeiture via encashment of the bank guarantee of ₹15,04,64,000.

Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”

Authorities

The Supreme Court referred to several cases and legal principles to support its decision:

• West Bengal State Electricity Board v. Patel Engineering Company Limited and Others (2001) 2 SCC 451 (Supreme Court of India): This case discusses equitable relief for bidders who make material mistakes in their bids, provided they promptly inform the authorities before a formal contract is entered into.
• Moffett, H. and C. Co. v. Rochester 178 U.S. 373 (1900) (Supreme Court of the United States): This case supports the principle that equitable relief may be granted where the mistake is apparent and promptly communicated.
• Hearne v. New England Marine Ins. Co. 22 L. Ed. 395 (Supreme Court of the United States): Similar to Moffett, this case emphasizes that mistakes must be clear and undisputed for relief to be granted.
• Spina Asphalt Paving Excavating Contractors, Inc. v. Borough of Fairview 304 NJ Super 425 (Superior Court of New Jersey): This case relates to the rectification of mistakes in bid specifications, noting that errors in price statements are generally material unless the error is patent and the bidder’s intent is obvious.
• M/s Omsairam Steels & Alloys Pvt. Ltd. v. Director of Mines and Geology, BBSR & Ors. 2024 INSC 520 (Supreme Court of India): This decision reiterates that the doctrine of proportionality applies when the error is significant and equity merits relief.
• Coimbatore District Central Cooperative Bank v. Coimbatore District Central Cooperative Bank Employees Association and Another (2007) 4 SCC 669 (Supreme Court of India): This case discusses the principle of proportionality in decision-making, emphasizing the balance between the objective and the means used to achieve it.

Judgment

The Supreme Court set aside the impugned judgment of the High Court and allowed the appeal with the direction that the Appellant pay ₹1 crore to BRO as a consequence of their error. Upon receiving this payment, BRO was directed to return the Appellant’s original bank guarantee or demand draft of ₹15.04 crores within one week.

“How each submission made by the Parties was treated by the Court?” in [TABLE]

“How each authority was viewed by the Court?”

• West Bengal State Electricity Board v. Patel Engineering Company Limited and Others (2001) 2 SCC 451 (Supreme Court of India):* The Court referred to this case to highlight the principle that equitable relief can be granted to a bidder who has made a material mistake in the bid, provided they promptly inform the authorities before a formal contract is entered into.
• Moffett, H. and C. Co. v. Rochester 178 U.S. 373 (1900) (Supreme Court of the United States):* The Court cited this case to support the view that where a mistake is apparent and the party promptly informs the other as soon as it is discovered but before entering into a contract, equitable orders may be passed.
• Hearne v. New England Marine Ins. Co. 22 L. Ed. 395 (Supreme Court of the United States):* The Court mentioned this case to reinforce the principle that the mistake should be clear, explicit, and undisputed for equitable relief to be granted.
• Spina Asphalt Paving Excavating Contractors, Inc. v. Borough of Fairview 304 NJ Super 425 (Superior Court of New Jersey):* The Court referred to this case to emphasize that an error in the statement of a price would not be treated as immaterial only when the case of error was patent and the true intent of the bidder obvious that such an error might be disregarded.
• M/s Omsairam Steels & Alloys Pvt. Ltd. v. Director of Mines and Geology, BBSR & Ors. 2024 INSC 520 (Supreme Court of India):* The Court cited this decision to reiterate that while the Court must exercise a lot of restraint in exercising the power of judicial review in contractual commercial matters, the doctrine of proportionality nevertheless applies when the error or mistake is writ large and equity merits the grant of some relief.
• Coimbatore District Central Cooperative Bank v. Coimbatore District Central Cooperative Bank Employees Association and Another (2007) 4 SCC 669 (Supreme Court of India):* The Court referred to this case to discuss the principle of proportionality in decision-making, emphasizing the balance between the objective and the means used to achieve it.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the self-evident nature of the error in the Appellant’s bid and the BRO’s overly rigid stance in enforcing it. The Court found that the quoted price of ₹1,569 was so disproportionate to the project’s estimated cost (₹1,504.64 crores) that it was clearly a mistake. The Court also considered that the Appellant promptly informed the BRO of the error.

Fact:Law

Logical Reasoning

Key Takeaways

• Bidders must exercise due diligence in preparing and submitting bids for government contracts.
• Government bodies should adopt a pragmatic approach when dealing with obvious errors in bids, balancing fairness and transparency.
• Prompt communication of errors can be a mitigating factor in seeking equitable relief.

Directions

The Supreme Court directed the Appellant to pay ₹1 crore to BRO as a consequence of their error. Upon receiving this payment, BRO was directed to return the Appellant’s original bank guarantee or demand draft of ₹15.04 crores within one week.

Development of Law

The ratio decidendi of the case is that when an error in a bid is self-evident and promptly communicated, a government body should not enforce the bid rigidly but should adopt a pragmatic approach, balancing fairness and transparency. This reaffirms the principles established in previous cases like West Bengal State Electricity Board v. Patel Engineering Company Limited and Others, emphasizing the importance of equity and proportionality in contractual commercial matters.

Conclusion

The Supreme Court’s judgment in the case of ABCI Infrastructures Pvt. Ltd. vs. Union of India clarifies the responsibilities of both bidders and government bodies in the event of a mistake in a government contract bid. The court emphasized the need for a balanced and pragmatic approach, especially when dealing with evident errors, ensuring fairness and transparency in the bidding process.