Bidding Errors: A Pragmatic Approach to Contractual Mistakes

(हिंदी Translation Below)

In a recent landmark judgment, the Supreme Court of India, in the case of M/S ABCI Infrastructures Pvt. Ltd. v. Union of India & Others (2025 INSC 215), addressed the legal implications of an unintentional bidding error in a high-stakes government contract. The case revolved around a fundamental mistake in an infrastructure bid that led to prolonged litigation,

highlighting the importance of pragmatism in contract enforcement.

What is the matter?

On February 23, 2023, the Border Road Organisation (BRO) invited bids for the design and construction of twin tunnels at Shinkun La Pass. The estimated cost of the project was Rs.1,504.64 crores, with a completion period of 48 months. The appellant, M/S ABCI Infrastructures Pvt. Ltd., along with other bidders, submitted its financial bid on June 3, 2023.

When the financial bids were opened on August 24, 2023, the appellant’s bid was recorded as Rs.1,569 instead of Rs.1,569 crores. The appellant quickly acknowledged the mistake, attributing it to a typographical or system error, and sought rectification.

However, BRO refused to acknowledge the apparent error and insisted on enforcing the bid, ultimately declaring the appellant a defaulter and invoking the bank guarantee of Rs.15.04 crores.

The Supreme Court analyzed the matter through the lens of contract law, particularly focusing on the principle of mistake as defined under Section 20 of the Indian Contract Act, 1872. The Court emphasized the following key principles:

Section 20 of the Indian Contract Act, 1872.

20. Agreement void where both parties are under mistake as to matter of fact.—

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement the agreement is void.Explanation.—An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is not to be deemed a mistake as to a matter of fact.Illustrations

(a)A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.

(b)A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

(c)A, being entitled to an estate for the life of B, agrees to sell it to C, B was dead at the time of agreement, but both parties were ignorant of the fact. The agreement is void.

The bid amount of Rs.1,569 was so unrealistic that it was clearly a manifest error. Given the scale of the project, it was evident that no rational bidder would quote such a figure. The Court held that a self-evident mistake does not require extensive proof or debate. the Court noted that equitable relief should be granted in cases where the mistake is material and prompt. The BRO’s refusal to recognize the error, despite multiple clarifications from the appellant, was deemed an unreasonable and overly legalistic approach.

The Court invoked the doctrine of proportionality, stating that government agencies must adopt a balanced approach in contractual matters. The bid error was an inadvertent oversight, and forfeiting Rs.15.04 crores for a clerical mistake was deemed disproportionate.

The doctrine of proportionality is a legal and ethical principle used to assess whether an action, decision, or measure is appropriate and balanced in relation to its intended goal. It is commonly applied in various fields, including law, human rights, military operations, and administrative decision-making. The doctrine ensures that the means used to achieve an objective are not excessive or disproportionate to the desired outcome.

The Supreme Court set aside the High Court’s decision and ruled in favor of the appellant. The Court directed the appellant to pay Rs.1 crore as a consequence of their error while ordering BRO to return the bank guarantee of Rs.15.04 crores.

M/S ABCI Infrastructures case serves as a vital reminder that legal formalism should not override common sense and fairness in contract execution. The Supreme Court’s pragmatic approach upholds the integrity of the bidding process while preventing unnecessary financial penalties for genuine mistakes.

As India continues to develop its infrastructure sector, a balanced and equitable legal framework will be crucial in ensuring that procedural errors do not lead to disproportionate consequences.

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भारत के सर्वोच्च न्यायालय का ऐतिहासिक फैसला:

सरकारी ठेके में बोली संबंधी त्रुटि और आनुपातिकता का सिद्धांत

हाल ही में एक ऐतिहासिक फैसले में, भारत के सर्वोच्च न्यायालय ने M/S ABCI इंफ्रास्ट्रक्चर्स प्राइवेट लिमिटेड बनाम भारत संघ और अन्य (2025 INSC 215) मामले में एक उच्च-स्तरीय सरकारी ठेके में अनजाने में हुई बोली संबंधी त्रुटि के कानूनी प्रभावों पर विचार किया। यह मामला एक बुनियादी बोली संबंधी गलती पर केंद्रित था, जिसके कारण लंबी कानूनी लड़ाई हुई, और इसने ठेके के प्रवर्तन में व्यावहारिकता के महत्व को उजागर किया।

मामला क्या है?

23 फरवरी, 2023 को, बॉर्डर रोड ऑर्गनाइजेशन (BRO) ने शिंकुन ला दर्रे पर जुड़वां सुरंगों के डिजाइन और निर्माण के लिए बोलियां आमंत्रित कीं। इस परियोजना की अनुमानित लागत 1,504.64 करोड़ रुपये थी, और इसे 48 महीनों में पूरा किया जाना था।

अपीलकर्ता, M/S ABCI इंफ्रास्ट्रक्चर्स प्राइवेट लिमिटेड ने अन्य बोलीदाताओं के साथ 3 जून, 2023 को अपनी वित्तीय बोली जमा की।24 अगस्त, 2023 को जब वित्तीय बोलियां खोली गईं, तो अपीलकर्ता की बोली 1,569 करोड़ रुपये के बजाय 1,569 रुपये दर्ज की गई। अपीलकर्ता ने तुरंत इस गलती को स्वीकार किया और इसे टाइपोग्राफिकल या सिस्टम त्रुटि बताते हुए सुधार की मांग की।

हालांकि, BRO ने इस स्पष्ट त्रुटि को स्वीकार करने से इनकार कर दिया और बोली को लागू करने पर जोर दिया। अंततः, उन्होंने अपीलकर्ता को डिफॉल्टर घोषित कर दिया और 15.04 करोड़ रुपये के बैंक गारंटी को जब्त कर लिया।

सर्वोच्च न्यायालय ने इस मामले का विश्लेषण अनुबंध कानून के दृष्टिकोण से किया, विशेष रूप से भारतीय अनुबंध अधिनियम, 1872 की धारा 20 के तहत परिभाषित "त्रुटि" के सिद्धांत पर ध्यान केंद्रित किया।

न्यायालय ने निम्नलिखित मुख्य सिद्धांतों पर जोर दिया:

 धारा 20 :भारतीय अनुबंध अधिनियम, 1872

20. अनुबंध शून्य होगा जब दोनों पक्ष तथ्यात्मक गलती में हों।जहां अनुबंध के दोनों पक्ष अनुबंध के लिए आवश्यक तथ्य के संबंध में गलती में हों, वहां अनुबंध शून्य होगा।

स्पष्टीकरण: अनुबंध के विषय-वस्तु के मूल्य के बारे में गलत राय को तथ्यात्मक गलती नहीं माना जाएगा।

उदाहरण:

(क) A, B को एक विशिष्ट माल बेचने के लिए सहमत होता है, जो इंग्लैंड से बॉम्बे आ रहा है। बाद में पता चलता है कि समझौते से पहले ही जहाज डूब गया था और माल नष्ट हो गया था। दोनों पक्षों को इन तथ्यों की जानकारी नहीं थी। अनुबंध शून्य है।

(ख) A, B से एक घोड़ा खरीदने के लिए सहमत होता है। बाद में पता चलता है कि समझौते के समय घोड़ा मर चुका था, हालांकि दोनों पक्षों को इसकी जानकारी नहीं थी। अनुबंध शून्य है।

(ग) A, जो B के जीवनकाल के लिए एक संपत्ति का हकदार है, उसे C को बेचने के लिए सहमत होता है। समझौते के समय B मर चुका था, लेकिन दोनों पक्षों को इसकी जानकारी नहीं थी। अनुबंध शून्य है।

1,569 रुपये की बोली राशि इतनी अवास्तविक थी कि यह स्पष्ट रूप से एक गंभीर त्रुटि थी। परियोजना के पैमाने को देखते हुए, यह स्पष्ट था कि कोई भी तर्कसंगत बोलीदाता ऐसी राशि नहीं लगाएगा।

न्यायालय ने माना कि एक स्वतः स्पष्ट त्रुटि के लिए व्यापक सबूत या बहस की आवश्यकता नहीं है।

न्यायालय ने यह भी कहा कि जहां त्रुटि महत्वपूर्ण और तत्काल हो, वहां न्यायसंगत राहत प्रदान की जानी चाहिए। BRO का अपीलकर्ता की कई स्पष्टीकरणों के बावजूद त्रुटि को स्वीकार न करना एक अविवेकपूर्ण और अत्यधिक कानूनी दृष्टिकोण माना गया।

न्यायालय ने "आनुपातिकता के सिद्धांत" को लागू किया, यह कहते हुए कि सरकारी एजेंसियों को अनुबंध संबंधी मामलों में संतुलित दृष्टिकोण अपनाना चाहिए। बोली में हुई त्रुटि एक अनजाने में हुई चूक थी, और एक लिपिकीय गलती के लिए 15.04 करोड़ रुपये जब्त करना असंगत था।

आनुपातिकता का सिद्धांत एक कानूनी और नैतिक सिद्धांत है, जिसका उपयोग यह आकलन करने के लिए किया जाता है कि कोई कार्रवाई, निर्णय या उपाय अपने इच्छित लक्ष्य के संबंध में उचित और संतुलित है या नहीं। यह सिद्धांत कानून, मानवाधिकार, सैन्य कार्यवाही और प्रशासनिक निर्णय लेने सहित विभिन्न क्षेत्रों में लागू होता है। यह सुनिश्चित करता है कि किसी उद्देश्य को प्राप्त करने के लिए उपयोग किए गए साधन उसके परिणाम के लिए अत्यधिक या असंगत न हों।

सर्वोच्च न्यायालय ने उच्च न्यायालय के फैसले को रद्द कर दिया और अपीलकर्ता के पक्ष में फैसला सुनाया। न्यायालय ने अपीलकर्ता को उनकी गलती के परिणामस्वरूप 1 करोड़ रुपये का भुगतान करने का निर्देश दिया, जबकि BRO को 15.04 करोड़ रुपये की बैंक गारंटी वापस करने का आदेश दिया।

M/S ABCI इंफ्रास्ट्रक्चर्स मामला एक महत्वपूर्ण अनुस्मारक के रूप में कार्य करता है कि अनुबंध के निष्पादन में कानूनी औपचारिकता को सामान्य ज्ञान और निष्पक्षता पर हावी नहीं होना चाहिए। सर्वोच्च न्यायालय का व्यावहारिक दृष्टिकोण बोली प्रक्रिया की अखंडता को बनाए रखता है, साथ ही वास्तविक गलतियों के लिए अनावश्यक वित्तीय दंड को रोकता है।

जैसे-जैसे भारत अपने बुनियादी ढांचे के क्षेत्र का विकास कर रहा है, एक संतुलित और न्यायसंगत कानूनी ढांचा यह सुनिश्चित करने के लिए महत्वपूर्ण होगा कि प्रक्रियात्मक त्रुटियों के कारण असंगत परिणाम न हों।

Foreign Judgements relied on :

6. Thereafter, reference was made to two decisions of the Supreme Court of the United States in Moffett, H. and C. Co. v. Rochester4 and Hearne v. New England Marine Ins. Co.5 wherein it is observed that where the mistake is apparent and the party promptly informs the other as soon as it is discovered but before entering into a contract, equitable orders may be passed.

However, the mistake should be clear, explicit, and undisputed. Further, a mistake on one side may be a ground for rescinding but not for reforming a contract where the minds of the parties have not met, yet there is no contract and hence none to be rectified. Relief may not be granted where it is inequitable.

While accepting this legal position, this Court in West Bengal State Electricity Board (supra) has propounded the following exceptions to the general principle on a person seeking relief in equity on account of mistake:

“

27. ……..(1)Where the mistake might have been avoided by the exercise of ordinary care and diligence on the part of the bidder; but where the offeree of the bid has or is deemed

to have knowledge of the mistake, he cannot be permitted to take advantage of such a mistake.

(2) Where the bidder on discovery of the mistake fails to act promptly in informing to the authority concerned and request for rectification, withdrawal or cancellation of bid

on the ground of clerical mistake is not made before opening of all the bids.

(3) Where the bidder fails to follow the rules and regulations set forth in the advertisement for bids as to the time when bidders may withdraw their offer; however where the mistake is discovered after opening of bids, the bidder may be permitted to withdraw the bid.”

7. This judgment also refers to a decision of the Superior Court of New Jersey in Spina Asphalt Paving Excavating Contractors, Inc. v. Borough of Fairview.6 The said case is related to the rectification of mistakes in the bid specifications. Relief granted in the said case was

upheld by the Superior Court with the caution that generally an error in the statement of a price would not be treated as immaterial and it is only when the case of error was patent and the true intent of the bidder obvious that such an error might be disregarded.

8. In West Bengal State Electricity Board (supra), the private party, the bidder did not succeed for several reasons, including the factum that the error was not obvious and self-evident. Further, the correction of such mistakes after one and a half months after the opening of the bids would have violated the express clauses relating to the computation of the bid amount.

Thus, waiver of the rule or conditions in favour of the one bidder would have created unjustifiable doubts in the minds of others impairing the rule of transparency and fairness and providing room for manipulation for awarding contracts.

9. The decision in West Bengal State Electricity Board (supra) was referred to and followed where a relief to the bidder was apparent before this Court in M/s Om sairam Steels & Alloys Pvt. Ltd. v. Director of Mines and Geology, BBSR & Ors.7

This decision observes that while the Court must exercise a lot of restraint in exercising the power of judicial review in contractual commercial matters, the doctrine of proportionality nevertheless applies when the error or mistake is writ large and equity merits the grant of some relief. Reference was made to the decision in Coimbatore District Central Cooperative Bank v. Coimbatore District Central Cooperative Bank Employees Association and Another8 where discussing the question of proportionality or punishment imposed on the striking workmen it is observed:

“18. “Proportionality” is a principle where the court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a

conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise—the elaboration of a rule of

permissible priorities.

19. de Smith states that “proportionality” involves “balancing test” and “necessity test”. Whereas the former (balancing test) permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations,

the latter (necessity test) requires infringement of human rights to the least restrictive alternative. [Judicial Review of Administrative Action (1995), pp. 601-05, para 13.085; see also Wade & Forsyth: Administrative Law (2005), p. 366.]

20. In Halsbury's Laws of England (4th Edn.), Reissue, Vol. 1(1), pp. 144-45, para 78, it is stated:

“The court will quash exercise of discretionary powers in which there is no

reasonable relationship between the objective which is sought to be achieved

and the means used to that end, or where punishments imposed by administrative

bodies or inferior courts are wholly out of proportion to the relevant misconduct. The

principle of proportionality is well established in European law, and will be

applied by English courts where European law is enforceable in the domestic courts.

The principle of proportionality is still at a stage of development in English law; lack of

proportionality is not usually treated as a separate ground for review in English law,

but is regarded as one indication of manifest unreasonableness.”

Accordingly, in the said case the Appellant was directed to make a payment of Rs.3 crores within the stipulated period and on the said payment the security deposit in the form of a bank guarantee of over Rs.9 crores was directed to be refunded.