STATE OF HARYANA & ORS. versus M/S MALIK TRADERS

Citation: [2011] 10 S.C.R. 372 · Decided: 17-08-2011 · Supreme Court of India · Bench: V.S. SIRPURKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
(2011] 10 S.C.R 372 
STATE OF HARYANA & ORS. 
v. 
M/S MALIK TRADERS 
(Civil Appeal No. 7033 of 2011) 
AUGUST 17, 2011 
[V.S. SIRPURKAR AND CYRIAC JOSEPH, JJ.] 
Contract: 
c 
Tender - Inviting of bids for collection of toll - Terms of 
bid requiring to keep the offer/bid open for acceptance upto 
90 days after the last date of receipt of bid - Letter of 
acceptance issued to bidder within the bid validity period -
Bidder failed to deposit security amount and the first 
0 
instalment within the stipulated period - Letter of acceptance 
issued to bidder cancelled and bid security forfeited - HELD: 
A person may have a right to withdraw his offer, but if he has 
made his offer on a condition that the Bid Security amount 
can be forfeited in case he withdraws the offer during the 
E 
period of bid validity, he has no right to claim that the Bid 
Security should not be forfeited and it should be returned to 
him - In the instant case, the bidder had agreed to keep the 
bid open for 90 days after the last date of receipt of the bid 
and that he would be bound by the communication of 
acceptance of the bid within the said period of 90 days -
F 
Therefore, the bidder could not have withdrawn the bid within 
the said 90 days - Besides, since the bidder withdrew his offer 
during the period of bid validity in violation of the agreement, 
the full value of Bid Security was liable to be forfeited - The 
purpose of bid security is to ensure that the offer is not 
G withdrawn during the bid validity period of 90 days and a 
contract comes into existence - Such conditions are included 
to ensure that only genuine parties make the bids - The very 
purpose of such a condition in the offer/bid will be defeated, 
if forfeiture is not permitted when the offer is withdrawn in 
H 
372 
STATE OF HARYANA & ORS. v. MALIK TRADERS 
373 
violation of the agreement - High Court was not justified in 
A 
quashing the letters accepting the bid of the respondent and 
the letter cancelling the acceptance of the bid and forfeiting 
the Bid Security - Order of High Court set aside - Contract 
Act, 1872 - s. 5. 
The respondent was the second highest bidder for 
the bid of collection of toll. In terms of the written offer/ 
bid, the respondent agreed to ke,ep the bid open for 
acceptance upto 90 days after the last date of receipt of 
B 
bid. As the highest bidder failed to deposit the security C 
amount and the first instalment within the stipulated 
period, the letter of acceptance issued to that bidder was 
cancelled and a letter of acceptance dated 26.11.2008 
was issued to the respondent within the stipulated period 
of 90 days. Since the respondent also failed to deposit 
the security amount and the first instalment within the 
D 
stipulated period, the letter of acceptance issued to the 
respondent was cancelled by Memo dated 17.12.2008, 
and the Bid Security of Rs. 20 lakhs was forfeited. Bids 
were re-invited for collection of toll and this time the 
respondent being the highest bidder, its bid was accepted 
and it deposited the security amount a.nd the first 
instalment in terms of the letter of acceptance. Thereafter 
the respondent filed a writ petition before the High Court 
for refund of the forfeited amount of the Bid Security of 
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Rs. 20 lakhs in respect of the earlier bid contending that 
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before the receipt of the letter of acceptance, it, by letter 
dated 15.11.2008, had informed the authority concerned 
that it was not interested in the work and the amount of 
Bid Security be refunded to it. The writ petition was 
allowed by the High Court holding that since the offer was 
G . , · .. : 
withdrawn before it was accepted, there could be no 
acceptance of the offer and, as such, there could not be 
any consequence of the writ petitioner not honouring the 
commitment. Aggrieved, the State Government filed the 
appeal. 
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374 
SUPREME COURT REPORTS 
[2011] 10 S.C.R. 
A 
Allowing the appeal, the Court 
HELD: 1. It is true that as per s. 5 of the Contract Act, 
1872, a proposal may be revoked at any time before the 
communication of its acceptance is complete as against 
8 the proposer. It is also true that before receipt of the letter 
of acceptance dated 26.11.2008, the respondent had sent 
a letter dated 15.11.2008 withdrawing its offer. H·owever, 
admittedly, in paragraph 8 of the written offer/bid, the 
respondent had agreed to keep the bid open for 
C acceptance upto 90 days after the last date of receip

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