NATIONAL HIGHWAY AUTHORITY OF INDIA versus M/S. GANGA ENTERPRISES AND ANR.

Citation: [2003] SUPP. 3 S.C.R. 114 · Decided: 28-08-2003 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
NATIONAL HIGHWAY AUTHORITY OF INDIA 
v. 
MIS. GANGA ENTERPRISES AND ANR. 
AUGUST 28, 2003 
B 
[S.N. VARIAVA AND H.K. SEMA, JJ.] 
Contract: 
Tender-Forfeiture of bid security-Bidders required to furnish bid 
C security and performance security-Bid SPcurity to be forfeited if bidder 
withdrew his bid during period of bid validity-Respondent gave his bid/ 
offer and furnished bank guarantee for bid security-Later, when he came 
to be highest bidder, withdrew his bid before expiry of period of bid 
validity-Appellant encashed the bank guarantee-Writ petition by 
respondent for refund of amount allowed by High Court-Held, by 
D invoking the bank guarantee and/or enforcing the bid security, there is no 
statutory right, exercise of which was being fettered-There is no term in 
the contract which is contrary to the provisions of the Contract Act-The 
Contract Act merely provides that a person can withdraw his offer before 
its acceptance-But withdrawal of an offer, before it is accepted, is a 
E completely different aspect from forfeiture of earnest/security money which 
has been given for a particular purpose-A person may have a right to 
withdraw his offer but if he has made his offer on a condition that some 
earnest money will be forfeited for not entering into contract or if some 
act is not performed, then even though he may have a right to withdraw 
F his offer, he has no right to claim that the earnest/security be returned to 
him-Forfeiture of such earnest/security, in no way, affects any statutory 
right unde1 .. 1e Contract Act-Such earnest/security is given and taken to 
ensure that a contract comes into existence-In government contracts, such 
a term is always included in order to ensure that only a genuine party 
G makes a bid 
Contract-Contract of guarantee-Tender-Bid security by way of 
bank guarantee-Forfeiture of on withdrawal of bid during period of bid 
validity-A contract of guarantee is a complete and separate contract by 
itself-The law regarding enforcement of an "on demand bank guarantee" 
H is very clear-If the enforcement is in terms of the guarantee, then Courts 
114 
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NATIONAL HJGHW A Y AUTHORITY OF INDIA v. GANGA ENTERPRISES 
115 
must not interfere with the enforcement of bank guarantee-The existence A 
or non-existence of an underlying contract become irrelevant when the 
invocation is in terms of the bank guarantee-The bank guarantee 
stipulated that if the bid was withdrawn within 120 days or if the 
performance security was not given or if an agreement was not signed, the 
guarantee could be enforced-The bank guarantee was enforced because B 
the bid was withdrawn within 120 days-Therefore, it could not be said 
that the invocation of the bank guarantee was against the terms of the bank 
guarantee-If the guarantee was rightly invoked, there was no question of 
directing refund-Bank guarantee-Courts' power to interferewith. 
Constitution of India, 1950: 
c 
Articles 226 and 299-Contractual disputes-Writ petition-
Maintainability of-Tender-Forfeiture of bid security-Writ petition for 
refand of amount allowed by High Court-Held, disputes relating to 
contracts cannot be agitated under Article 226-The dispute in this case D 
was regarding the terms of offer-It was thus a contractual dispute in 
respect of which a writ court was not the proper forum. 
Kera/a State Electricity Board v. Kurien E. Kalathil, (2000) 6 SCC 
293; State of V.P. v. Bridge & Roof Co. (India) Ltd, (1996) 6 sec 22 E 
and B.D.A. v. Ajai Pal Singh, (1989) 2 SCC 116, relied on. 
Verigamto Naveen v. Government of A.P., (2001) 8 SCC 344 and 
Harminder Singh Arora v. Union of India, (1986) 3 SCC 247, held 
inapplicable. 
CIVIL APPELLATE JURlSDICTION : Civil Appeal No. 4123 of 
1999. 
From the Judgment and Order dated 30.10.98 of the Delhi High Court 
in C.W.P. No. 739 of 1998. 
Mukul Rohatgi, Raju Ramachandran, Additional Solicitor Generals, 
Dushyant Dave, Sanjeev Sachdeva and Ms. Priya Puri, Mrs. Niranjan 
Singh, Mrs. Anil Katiyar, Lakshmi Raman Singh, Kamal Mohan Gupta, 
Mrs. Rita Choudhary, Manish Kumar and Sunil Kumar Jain for the 
F 
G 
apearing parties. 
H 
116 
SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R. 
A 
The following Order of the Court was delivered : 
B 
This appeal is against the Judgement of the High Court of Delhi dated 
30th October, 1998. 
Briefly stated, the facts are as follows : 
The Appellant issued a tender notice calling for tenders for collection 
of toll on a portion of the highway running throug
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