Tender Process Must Ensure Transparency, Not Exclusion: Legitimate Expectation of Unsuccessful Bidder Recognised – Meghalaya High Court Partly Overturns Judgment Cancelling Stadium Contract

“When All Bidders Quote the Same Price, Exclusion of Even Slightly Higher Bidder Without Justification Violates Principles of Fairness”, In a significant decision addressing government contracts and fairness in public tendering, the High Court of Meghalaya partially allowed appeals filed by the Meghalaya Power Generation Corporation Limited (MePGCL) and contractor Taibin Warjri, setting aside a prior order that had quashed the contract for the construction of a public stadium in Nongtrai, Mawsynram. While upholding the award of the tender to Warjri, the Division Bench led by Chief Justice I.P. Mukerji acknowledged that the process lacked procedural integrity, particularly in the exclusion of a higher bidder by a margin of just ₹1, and granted compensation for the violation of legitimate expectation.

The appeals arose from a Single Judge's ruling dated 7th June 2024 in a writ petition filed by Odimar Syiemsad, one of the bidders, alleging cartelisation, opacity, and procedural arbitrariness in the tender award. The Single Judge had set aside the entire tender and work order issued to Taibin Warjri. However, the appellate court took a more balanced view, finding no conclusive evidence of a cartel while recognising serious flaws in the process that disadvantaged the excluded bidder.

The Court held: "When four out of five bidders quote identical prices and the fifth quotes only ₹1 more, the exclusion of that bidder from the final negotiation undermines fair competition... The petitioner had a legitimate expectation to be considered."

“Excluding One Bidder From Final Round Where Others Are Allowed to Settle Privately Is Procedural Unfairness” – Court Affirms Contract But Compensates Excluded Bidder

The case involved a public tender floated by MePGCL on 4th July 2023 for the construction of an indoor stadium. The minimum bid value was set at ₹2,87,89,896, a figure the Court found “unusual” for such contracts, where typically a reserve ceiling is expected, not a minimum floor. All five bidders submitted tenders on the last day, and four of them, including Warjri, bid exactly the minimum. Odimar Syiemsad bid ₹1 more.

Subsequently, the Tender Committee invited only the four identical lowest bidders for a meeting on 7th February 2024, at which three bidders allegedly agreed to withdraw in favour of Warjri, who was then awarded the contract via a work order dated 15th February 2024. Syiemsad challenged the process in a writ petition, leading to the cancellation of the tender by the Single Judge.

However, on appeal, the Division Bench held: “Even if three tenderers backed out at that stage, Taibin Warjri and Odimar Syiemsad ought to have been asked to revise their rates so that the Committee could choose the lower of the two bids… The exclusion of Syiemsad was procedurally unfair.”

The Court, while not finding enough evidence to establish cartelisation, acknowledged that the process was conducted in a manner that "deprived one eligible bidder of fair participation". It thus awarded ₹21,59,242, or 7.5% of the contract value, to Odimar Syiemsad, citing the principle of compensating the loss of a legitimate commercial opportunity.

“Awarding a Public Work Cannot Become a Private Arrangement Among Bidders” – But Completed Work Not to Be Undone

The Court also addressed the issue of partial execution of the work. After Warjri was issued the work order, he commenced construction on 16th February 2024, and according to MePGCL’s records, had completed 7.29% of the work, valued at ₹23,07,105, before it was halted by the Single Judge’s order in June.

Rejecting the argument that the process should be annulled despite work already being undertaken, the Court observed:

“It would be very harsh on Taibin Warjri if the entire contract was cancelled... A substantial sum may have been spent by him... Although the tender process may not have been perfect, it cannot be said that the award of tender was illegal or wrongful or liable to be set aside.”

The Bench cited Tata Motors Ltd. v. BEST (2023 SCC OnLine SC 671) and Air India Ltd. v. Cochin International Airport Ltd. (2000) 2 SCC 617, reiterating that judicial interference in contractual decisions of the State must be exercised "with great caution and only when overwhelming public interest requires interference."

The Court made it clear that the doctrine of fairness in public contracts cannot be reduced to idealistic perfection, and that procedural aberrations alone cannot lead to annulment when public funds, time, and partial work are involved.

“Public Contracts Must Be Fair, Transparent, and Open – But Courts Will Not Set Aside Contracts Where Public Interest Is Served and No Mala Fide Is Proven”

Critically assessing the conduct of the Tender Committee, the Court refused to attribute mala fides, stating:

“I would not impute any impropriety among members of the Tender Committee… Theoretically, they were right in not calling Syiemsad because his bid was one rupee more… But in fairness, he should have been called.”

The Court explained that while technical qualifications were already vetted, the final negotiation process required greater transparency, especially when bids were nearly indistinguishable in value. The judgment repeatedly underscores that transparency is a constitutional requirement in public procurement, as laid down in Reliance Energy Ltd. v. Maharashtra SRDC (2007) 8 SCC 1 and Xcellence Medical Technologies Pvt. Ltd. v. HLL Infra Tech Services Ltd. (2021 SCC OnLine Del 4635).

Notably, the Court rejected the plea that the entire process was tainted with illegality, clarifying:

“The award of contract to Taibin Warjri is upheld… Although some injustice was caused to Odimar Syiemsad, the process does not warrant full cancellation, given the public expenditure and partial execution.”

A Rare Judicial Balancing Act Between Public Interest, Equity, and Contractual Justice

In a judgment that carefully weighs procedural fairness, public interest, and commercial realities, the High Court of Meghalaya has carved out a middle path—upholding the contract while recognising the procedural wrong done to a competing bidder.

By awarding compensation without cancelling the contract, the Court sets an important precedent in tender jurisprudence: that even in commercial matters, legitimate expectations born out of fair process cannot be ignored, and procedural unfairness, though not always fatal, can still attract judicial correction.

As the Court aptly noted: “The petitioner was deprived of his legitimate expectation… Equity demands recognition of that right, even if the project cannot be unwound.”

Date of Decision: 1st September 2025