M/S Hydro Pneumatic Engineers ( Hyd) PVT. LTD. Rep. vs. The Union Of INDIA

Facts

M/s Hydro Pneumatic Engineers (Hyd) Pvt. Ltd. (Petitioner) participated in a tender floated by the Ministry of Defence (DRDO) on 14.02.2025 for a Service Contract for Operation and Maintenance of Propellant Plant. The Petitioner was declared the Lowest Bidder (L-1) with a bid of Rs. 57,24,61,693/-. Following negotiations, the Petitioner submitted a Revised Best and Final Offer (BAFO) of Rs 54,89,42,601/- including GST. Despite this, the tender was cancelled between 15.08.2025 and 20.08.2025 without reason. The Petitioner made representations, but the DRDO re-floated the same tender on 21.08.2025. The Petitioner challenged the cancellation and re-tendering as arbitrary and illegal, seeking a work order based on the original NIT.

Held

The Court held that the Petitioner's challenge to the cancellation and re-tendering lacked merit. It is settled law that a tender process does not obligate the award of a contract merely because a bidder is declared L-1. The respondents exercised their discretion to cancel the initial tender due to substantial deficiencies in the RFP, such as missing clauses on operational manager expenses and transportation price revision. The Petitioner's participation in the subsequent re-tender, without challenging the cancellation at that time, indicated acquiescence to the respondents' action. The Court found that the re-tender involving minimal changes did not inherently demonstrate arbitrariness or mala fide. The Petitioner's expectation of a work order was not a guarantee, as no concluded contract (Letter of Acceptance) was issued. The Petitioner failed to demonstrate malafide intention or lack of transparency. Therefore, the cancellation and re-tendering were within the respondents' permissible discretion and did not warrant judicial intervention. The writ petition was dismissed.

Key Issues

1. Whether the cancellation of the tender dated 14.02.2025 and the subsequent re-tendering on 21.08.2025 by the respondent authorities are arbitrary and illegal, violating Article 14 of the Constitution of India? Petitioner's arguments: The Petitioner contended that having been declared L-1 and submitting a revised BAFO, they had a legitimate expectation of receiving the work order. The abrupt cancellation without reason and subsequent re-tendering with minimal changes demonstrated arbitrariness and mala fide intent, defeating transparency and causing financial loss. They relied on the principle that the State must act fairly and reasonably. Respondents' arguments: The Union of India (Respondent) argued that the first tender was cancelled due to missing clauses in the RFP regarding operational manager expenses and transportation price revision. They further contended that the Petitioner, without challenging the cancellation, participated in the subsequent tender and only challenged the first tender's cancellation after not succeeding in the second. They cited precedents emphasizing judicial restraint in tender matters and respecting the employer's discretion.