M/S. Sree Sakthi And Co. vs. The Regional Manager

Held

The Court held that the impugned show cause notice was unjustified. The Court found that the petitioner's offer of Rs. 6,60,00,000/- was significantly below the estimated value of Rs. 14,61,29,000/-, and the respondent ought to have rejected the bid as it appeared unrealistic and incapable of performance. The Court noted that the petitioner had withdrawn its offer on June 24, 2025, before the contract was awarded on June 25, 2025. Applying Section 5 of the Indian Contract Act, 1872, the Court ruled that a proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer. Therefore, there was no binding contract, and the petitioner's withdrawal was permissible. The Court quashed the show cause notice. The respondent was permitted to recover expenses and losses incurred due to the floating of two tenders from the petitioner, irrespective of the outcome of the fresh tender floated on July 2, 2025, in which the petitioner was allowed to participate.

Facts

M/s. Sree Sakthi and Co. (petitioner) participated in a tender floated by the Central Warehousing Corporation (respondent) on April 24, 2025. The petitioner submitted a bid on May 9, 2025, quoting Rs. 6,60,00,000/- against an estimated value of Rs. 14,61,29,000/-. After the price bid opening on June 24, 2025, the petitioner withdrew its offer. However, on June 25, 2025, the respondent awarded the contract to the petitioner. Subsequently, on July 2, 2025, the respondent issued a show cause notice to the petitioner proposing to blacklist it for future tenders, citing clauses in the tender document regarding withdrawal of bids and debarment. The petitioner filed a writ petition challenging this show cause notice and seeking to participate in a new tender floated on July 2, 2025.

Key Issues

1. Whether the impugned show cause notice, proposing to debar the petitioner from participating in future tenders, is justified, considering the petitioner's withdrawal of its bid before the acceptance of the offer and the provisions of Section 5 of the Indian Contract Act, 1872? (Question of law) Petitioner's arguments: The petitioner contended that its offer was withdrawn before acceptance, and therefore, no concluded contract was formed. They relied on Section 5 of the Indian Contract Act, 1872, which allows revocation of a proposal before communication of acceptance is complete. The petitioner argued that the show cause notice was unjustified as there was no breach of contract. Respondent's arguments: The respondent argued that the writ petition was premature and liable to be dismissed. They contended that the petitioner's withdrawal was not bona fide, as it occurred after the price bid opening and upon learning that another bidder (L-2) had quoted a higher amount. The respondent asserted that the petitioner was bound by its offer and the clauses in the tender document, including those for forfeiture of EMD and debarment, as the petitioner failed to undertake the obligation after the contract was awarded.