Simplified Explanation of the Judgment
In a noteworthy judgment, the Patna High Court has set aside the forfeiture of Earnest Money Deposit (EMD) from a security services company that was initially blacklisted for allegedly submitting forged experience certificates during a government tender process. The Court ruled that the forfeiture was not supported by the clauses in the Standard Bidding Document (SBD), which govern such contracts.
The petitioner company had participated in a tender issued by the Bihar Police Building Construction Corporation. It emerged as the successful bidder under certain items. However, the authorities discovered that the experience certificate submitted by the petitioner was allegedly forged. This led to the registration of a First Information Report (FIR) and the petitioner was blacklisted—first indefinitely, then revised to five years, and eventually limited to the end of the financial year 2023–24.
The issue before the Court was whether, in addition to blacklisting, the government could also forfeit the petitioner’s EMD simply because an FIR had been lodged against the company for submitting a forged document.
The High Court examined Clause 16.6 of the Standard Bidding Document, which specifies the circumstances under which EMD may be forfeited:
- If the bidder withdraws the bid after opening;
- If the bidder fails to accept corrections;
- If the successful bidder does not sign the agreement or furnish performance security.
Notably, none of the clauses mention forgery or registration of an FIR as grounds for forfeiture. The Court held that while the act of forgery may attract criminal or administrative consequences like blacklisting, it is not a valid reason under the contract to forfeit EMD. Additionally, although the respondents argued that the petitioner had not signed the agreement despite receiving notices, the Court found that the contract had already been cancelled due to the invalid certificate, making the argument irrelevant.
Relying on the Supreme Court’s decision in Mohinder Singh Gill v. Chief Election Commissioner [(1978) 1 SCC 405], the Patna High Court reiterated that reasons not cited in the original order cannot be supplemented later through affidavits or legal arguments.
Since the only reason cited in the forfeiture order was the registration of an FIR—which is not a valid contractual ground for forfeiture—the High Court set aside the order and directed the refund of the EMD to the petitioner.
Significance or Implication of the Judgment
This judgment is a significant precedent for contractors and businesses that participate in government tenders. It reinforces the principle that government authorities must strictly follow the terms of tender documents when imposing penalties like forfeiture or blacklisting.
For the government, the decision is a reminder to ensure that all tender-related actions, including punitive ones, are well-grounded in contract law and not merely based on criminal allegations unless specified in the bid conditions.
The judgment also emphasizes judicial discipline in administrative law—orders must stand or fall on their recorded reasons. New reasons cannot be introduced after litigation has begun, a safeguard essential to ensuring fairness and transparency in government decision-making.
Legal Issue(s) Decided and the Court’s Decision
- Can an EMD be forfeited on the ground that an FIR was registered for forgery of documents?
➤ No; such a ground is not contemplated under Clause 16.6 of the SBD. - Does the failure to sign an agreement justify EMD forfeiture if the award itself was not finalized due to forgery?
➤ No; if the contract was not executed due to rejection of documents, non-signing becomes irrelevant. - Can reasons for forfeiture be added later through counter affidavits?
➤ No; the Court held that only the reasons in the original order are valid for judicial review.
Judgments Relied Upon or Cited by Court
- Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, New Delhi & Ors., (1978) 1 SCC 405
Case Title
Savitri Surendra Security Pvt. Ltd. vs. Bihar Police Building Construction Corporation & Ors.
Case Number
Civil Writ Jurisdiction Case No. 15901 of 2023
Coram and Names of Judges
Hon’ble Mr. Chief Justice K. Vinod Chandran
Hon’ble Mr. Justice Partha Sarthy
Names of Advocates and who they appeared for
- Mr. Prabhat Ranjan — for the petitioner
- Mr. Prasoon Sinha — for the respondents
Link to Judgment
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
