Contractor wins appeal against bank guarantee encashment after typographical error in bid submission under Section 20

SC held that while appellant was at fault for submitting bid of Rs.1,569 due to typographical error (failing to add zeros), BRO was unjustified in encashing bank guarantee of Rs.15.04 crores. Court found BRO should have acknowledged obvious mistake instead of treating it as valid bid under Section 20 Indian Contract Act. BRO's refusal to recognize genuine error and subsequent actions caused project delays. Appeal allowed with direction for appellant to pay Rs.1 crore to BRO, upon which BRO must return original bank guarantee within one week.

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The Supreme Court analyzed a case involving a bidding process for a construction project by M/s ABCI Infrastructure Private Limited and the Border Road Organisation (BRO) under the Ministry of Defence, Union of India. The core issue was whether BRO was justified in accepting M/s ABCI's bid of Rs.1,569 and subsequently encashing the bank guarantee of Rs.15.04 crores after M/s ABCI claimed it was a typographical error.The Court considered the legal framework under Section 20 of the Indian Contract Act, 1872, which deems an agreement void if both parties are mistaken about a material fact. The Court referred to the principle that equitable relief may be granted to a bidder who promptly informs authorities of a material mistake before entering into a contract. The Court cited American and US Supreme Court decisions emphasizing the need for clear, explicit, and undisputed mistakes for equitable relief.The Court also discussed exceptions to granting relief based on mistakes, such as the bidder's failure to act promptly, follow bid withdrawal rules, or rectify errors before bid opening. The Court referenced a New Jersey case where an error in bid specifications could be disregarded if the true intent of the bidder was clear. The Court highlighted the importance of transparency and fairness in bid processes.In analyzing the present case, the Court found that the error in M/s ABCI's bid of Rs.1,569 was self-evident and could not be debated given the project's scale and nature. The Court agreed that M/s ABCI was at fault for the mistake but criticized BRO for not acknowledging the error promptly. The Court noted that BRO's refusal to acknowledge the mistake and its subsequent actions caused unnecessary delays in the project.Ultimately, the Court directed M/s ABCI to pay Rs.1 crore to BRO as a consequence of the error. Upon receipt of this payment, BRO was instructed to return M/s ABCI's original bank guarantee within one week. The Court set aside the impugned judgment and allowed the appeal without costs.In conclusion, the Court emphasized the importance of acknowledging mistakes promptly and adopting a practical approach to resolve issues in contractual matters. The decision aimed to balance the interests of both parties while ensuring fairness and transparency in bidding processes.

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