Genuine Bidding Error Warrants Proportionate Penalty Not Full Forfeiture: Madras High Court Upholds Partial EMD Forfeiture in Public Tender Dispute

1. Case Snapshot

Case Name: Tamil Nadu Civil Supplies Corporation (TNCSC) vs Hyderabad Agricultural Co-Operative Association Ltd & Connected Appeals

Citation: WA Nos.2108, 2448, 3823 and 3825 of 2025

High Court: High Court of Judicature at Madras

Bench: Hon'ble Mr. Justice Sushrut Arvind Dharmadhikari (Chief Justice) and Hon'ble Mr. Justice G. Arul Murugan

Date of Judgment: 25th June, 2026

Area of Law: Public Procurement, Constitutional Law, Contract Law, Administrative Law, Earnest Money Deposit (EMD) Forfeiture

2. Judgment in Brief

The Madras High Court dismissed both the Corporation's appeal seeking full forfeiture of EMD and the bidder's appeal seeking complete refund, upholding the learned Single Judge's order directing partial forfeiture of 12.02% of the EMD (Rs.61,50,000/-) while refunding the balance (Rs.4,50,00,000/-). The dispute arose when a bidder for a Government tender inadvertently quoted Rs.66,000/- per metric tonne instead of the intended Rs.1,47,000/- and Rs.1,52,000/- for different varieties of Tur Dal. The bidder immediately notified the Corporation within minutes of discovering the error. The Court held that full forfeiture of Rs.5.11 Crores would be shockingly disproportionate and violative of Article 14, especially when no loss was caused to the Corporation which awarded the tender to the next bidder within 48 hours. However, the Court also held that complete exemption would diminish the institutional sanctity of public bidding, and the bidder's input negligence warranted a proportionate cost. The Court rejected the Corporation's argument that the arbitration clause barred writ jurisdiction, holding that constitutional challenges to arbitrary State action are maintainable despite alternative remedies.

3. Relevant Facts

The Tender Process

• The Tamil Nadu Civil Supplies Corporation (TNCSC) invited short e-tenders on 23.08.2024 for procurement of 60,000 Metric Tonnes of various varieties of Dal for distribution under the Special Public Distribution System (Special PDS).

• The Tender Document required submission of Earnest Money Deposit (EMD) of Rs.5,11,50,000/- under Clause 6.

• Clause 6 of the Tender Document enumerated situations under which EMD would be forfeited, including withdrawal or backing out after acceptance, or failure to sign the contract.

• The tender was governed by the Tamil Nadu Transparency in Tenders Rules, 2000.

The Bid and the Error

• Hyderabad Agricultural Co-operative Association Ltd (the bidder), a society controlled by the Government of Telangana, participated in the e-tender and submitted its bid on 09.09.2024.

• The bidder intended to quote Rs.1,47,000/- per MT for imported Tur Dal and Rs.1,52,000/- per MT for indigenous Tur Dal.

• Upon opening of financial bids on 14.09.2024, the bidder discovered that its quote was reflected as a flat rate of Rs.66,000/- per MT—a rate that was completely unviable and far below market prices.

Immediate Corrective Action

• The bidder immediately sent emails and a formal letter to the Corporation at 12:26 PM and 12:40 PM on 1

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