Orissa High Court : Bidders Do Not Have a Right to Be Heard Before Tender Cancellation, Holds That No Vested Right Exists Before Contract Award
Safiya Malik
The Orissa High Court has adjudicated that bidders participating in a tender process do not acquire a vested right before the issuance of a Letter of Award (LoA) and that the tendering authority is not required to provide an opportunity of hearing before cancelling a tender. A three-judge bench comprising Chief Justice Chakradhari Sharan Singh, Justice Savitri Ratho, and Justice Sibo Sankar Mishra recorded that an administrative decision cancelling a tender before bid confirmation does not violate principles of natural justice. The court further held that reasons justifying such a decision need not always be recorded unless the cancellation affects an established legal right.
The matter arose from two writ petitions filed by a construction company challenging the cancellation of a tender in which it had been declared the lowest bidder. The petitioner contended that the cancellation was arbitrary and that it should have been awarded the contract. The State Government, through the Advocate General Shri. Pitambar Acharya, submitted that the decision to cancel the tender was based on a reassessment of project requirements and did not necessitate a hearing for the bidders.
The petitioner participated in a tender process initiated on August 17, 2023, for the widening and strengthening of the Bhawanipatna-Khariar road in Kalahandi district. The financial bids were opened on November 9, 2023, and the petitioner was declared the lowest bidder for two work packages. The Engineer-in-Chief (Civil) of Odisha recommended approval of the petitioner’s bid on November 23, 2023. However, the government issued a notice canceling the tender on March 1, 2024, prompting the petitioner to challenge the cancellation before the court.
The petitioner relied on previous decisions of the Orissa High Court in which the court had interfered with tender cancellations, holding that bidders should be given an opportunity of hearing before such decisions were made. The petitioner also referred to Mohinder Singh Gill v. Chief Election Commissioner, asserting that reasons for administrative decisions must be contained in the original order. The petitioner argued that the absence of recorded reasons rendered the cancellation unlawful.
On behalf of the State Government, the Advocate General submitted that bidders do not acquire an enforceable right merely by emerging as the lowest bidder. It was stated that courts should not interfere in tendering decisions unless clear evidence of arbitrariness or mala fide action is established. The government submitted that the decision to cancel the tender was based on technical grounds after a site reassessment, which indicated the need for modifications to the project.
The court framed five legal questions for determination, including whether the observations in Mohinder Singh Gill apply to administrative orders cancelling tenders, whether bidders must be given an opportunity of hearing before tender cancellations, and whether courts can direct the government to award a tender after setting aside its cancellation. The court recorded that bidders do not acquire any vested right before the issuance of a Letter of Award. It stated: "There is no necessity of giving an opportunity of hearing or prior notice before cancellation of tender notice to the highest/lowest bidder, as such bidder does not acquire any vested right to have the auction confirmed in his favor on that basis alone."
The court further stated that the decision in Sudhir Kumar Singh v. State of Uttar Pradesh does not apply to cancellations made before bid confirmation, as that case involved a contract that had already been partially executed. Regarding Mohinder Singh Gill, the court observed: "The observations made by the Supreme Court in paragraph-8 of Mohinder Singh Gill do not apply to a purely administrative decision canceling a notice inviting tender, unless such decision takes away a vested right." The court stated that unless a bidder has obtained a legally enforceable right, an administrative authority is not bound to provide reasons in every case of tender cancellation.
The judgment also recorded that the Division Bench decision in Bansal Infraprojects Pvt. Ltd. v. State of Odisha did not correctly apply the precedent set in Sudhir Kumar Singh. It was stated that "Even if the Court interferes with the decision to cancel a tender, it should not direct the authority to approve the bid of any bidder, in view of the law laid down by the Supreme Court." The court observed that judicial review in tender matters is limited and that unless cancellation decisions are arbitrary or motivated by malafides, courts should refrain from interfering with government tendering processes.
The court dismissed the petitions and upheld the State’s discretion in managing tender processes. It recorded that its previous decisions in Shree Ganesh Construction v. State of Odisha, Gangadhar Jena v. State of Odisha, and Bansal Infraprojects Pvt. Ltd. v. State of Odisha did not lay down the correct legal position.
Advocates Representing the Parties
For the Petitioner: K.B. Panda, Advocate; Shounak Kumar Panda, Advocate.
For the Opposite Parties: Pitambar Acharya, Advocate General; Aishwariya Dash, Additional Standing Counsel.
Case Title: M/s. Nanda Infra Construction Pvt. Ltd. v. State of Odisha & Ors.
Case Number: W.P.(C) No. 5790 of 2024 & W.P.(C) No. 5535 of 2024
Bench: Chief Justice Chakradhari Sharan Singh, Justice Savitri Ratho, Justice Sibo Sankar Mishra
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