L1 bidder wins challenge after authorities refused work order despite policy allowing GST rate enhancement from 12% to 18%

Calcutta HC ruled in favor of L1 bidder who challenged refusal to grant work order after GST rate increased from 12% to 18% post-tender submission. Court held that State's November 2022 Memorandum allowing GST enhancement even for ongoing tenders was applicable to petitioner's case. Respondent authorities failed Wednesbury test by arbitrarily refusing to apply their own policy, constituting discrimination. Court directed authorities to either issue work order allowing petitioner to incorporate 6% GST enhancement in fresh quotation, or refund earnest money with 10% interest. All subsequent State actions including fresh tenders were set aside.

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Issues:
The petitioner challenged the refusal to grant work order despite being the L1 bidder and the forfeiture of Earnest Money Deposit (EMD).

Challenge against Refusal of Work Order and EMD Forfeiture:
The petitioner participated in the tender process and was the L1 bidder. After winning, the GST rate was increased from 12% to 18%. The petitioner requested to incorporate the enhanced 6% GST in the quoted rates, citing a Memorandum from the Finance Department. The respondent authorities insisted on the original agreement, leading to a loss for the petitioner. The State argued that the dispute pertained to a commercial contract and altering the terms would modify the contract. However, the petitioner argued that the Memorandum allowed for the GST enhancement. The State's actions were scrutinized for fairness, and the refusal to apply the Memorandum was deemed unreasonable and discriminatory.

Validity of Termination and Disqualification Clauses:
The respondent authorities had the right to terminate the contract under Clauses 19 and 21. However, subsequent correspondences and delays indicated a waiver of cancellation rights by the authorities. The conditions for disqualification under Clause 21 were not met as the petitioner did not withdraw the tender before acceptance, and no work order was issued. The petitioner's request for termination was influenced by the refusal to honor the Memorandum, and not a genuine intention.

Judicial Review and Relief Granted:
The Court applied the Wednesbury test, allowing for judicial review in cases of arbitrariness and discrimination. The respondents were directed to permit the petitioner to enhance the GST rates or refund the EMD with interest. The refusal to issue the work order and forfeiture of EMD were set aside, and subsequent actions were annulled. The respondents were instructed to issue the work order with the GST enhancement or refund the EMD. No costs were awarded, and urgent copies of the order were to be provided to the parties.

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