ACCEPTANCE AND WITHDRAWAL OF TENDERS AND BIDS AND ITS RELEVANCE IN PRESENT TIMES

Written by: JAHANVI JAJOO, NATIONAL LAW UNIVERSITY, JODHPUR

TOPIC: ACCEPTANCE AND WITHDRAWAL OF TENDERS AND BIDS AND  ITS RELEVANCE IN PRESENT TIMES

 

 

ACCEPTANCE OF TENDER/BID

The acceptance of tender merely amounts to an intimation that the offer will be considered to remain open during the period specified, and that it will be accepted from time to time by giving orders of specified quantities, and does not bind either party unless and until such orders are given.[1]

The possibilities of acceptance of tender have been explained by Atkin J. in Percival Ltd v LCC Asylums and Mental Deficiency Committee:[2]

“These tenders…vary in form…It sometimes happens that the effect of the form of the tender with an acceptance is to make a firm contract by which the purchasing body undertakes to buy all the specified material from the contractor. On the other hand these tenders are very often in a form under which the purchasing body is not bound to give the tenderer any orders at all: in other words, the contractor offers to supply goods at a price and if the purchasing body chooses to give him an order for goods during the stipulated time, then he is under an obligation to supply the goods in accordance with the order, but apart from that nobody is bound. There is also an intermediate contract that can be made in which, although the parties are not bound to any specified quantity, yet they bind themselves to buy and pay for all the goods that are in fact needed by them. Of course, if there is a contract such as that, then there is a binding contract which will be broken if the purchasing body in fact do need some of the articles the subject of the tender, and do not take them from the tenderers.”

Where the notice inviting tender contained a clause that on acceptance of the bid, it would be construed that there was a concluded contract, and pursuant to the acceptance of the bid, a notification of award was issued, the non-signing of the formal contract was immaterial.[3]Acceptance is invalid, if the tender which was accepted did not comply with condition of having to make an initial deposit and there was no rule for waiver of the condition.

The offeree requested a tenderer to extend time of validity, in response to which the tenderer put a condition of reduction in rebate. Purported acceptance of the original tender did not create a contract.[4] In UOI v Mohan Meakin Breweries Ltd,[5] on voluntary offer made by a breweries company to supply certain quantity of rum to the army as a gesture of goodwill and not pursuant to any tender inquiry, the Government, while purporting to accept offer of the company to supply rum, issued a letter of acceptance of tender containing an arbitration clause and a default clause. The company however, never signed nor sent any acknowledgment of the receipt of the letter of acceptance of tender. It was held that the letter of acceptance of tender sent by the Government amounted in law, to a counter-offer, which was not accepted by the company as it had not signed the acknowledgment attached to it and mere payment of security deposit as per the letter did not amount to implied acceptance of all terms and conditions thereof.

Where a tenderer makes a standing offer to supply the goods as and when they are ordered, each order, when it is placed, is to that extent an acceptance of the standing offer, and creates a contract for the supply of goods so ordered. The standing offer may be withdrawn at any time as regards the goods not ordered.

REVOCATION OF TENDER/BID

Under Section 5 of the Indian Contract Act,1872, a tender can be withdrawn at any time before it is accepted, and if accepted by post or telegram, till such time the acceptance is posted or handed over for delivery.[6] In Sadhoo Lal Motilal v State of Madhya Pradesh,[7]  a tenderer revoked the tender after the letter of acceptance was posted by the government. It was held that the contract was complete as soon as the letter of acceptance was posted. Revision of tender amounts to revocation, rendering the tenderer liable for forfeiture of his deposit.[8] Acceptance of the highest tender does not end the offer of other tenderers. Thus, where the highest tenderer failed to deposit the security amount, acceptance of the tender of the second highest bidder bound him.[9]

The Delhi High Court relying on the judgement of the Supreme Court in National Highway Authority of India v Ganga Enterprises,[10] has held that it is lawful for parties to agree to be bound by the term that any offer made will remain open for acceptance by the other party upto a specified date, and that the offeror cannot withdraw his offer prematurely, without the consent of the other party.

REVOCATION IN CASE OF CONDITIONAL ACCEPTANCE OF BID/TENDER

If the acceptance of a bid or tender is subject to confirmation or approval of a higher officer or authority, the bid or tender can be revoked at any time before the condition is fulfilled, i.e., before the confirmation or approval, as there is no concluded contract.[11] The auction-purchaser is then not liable.

In State of Madras v R Ranganathan Chettiar,[12] the defendant was the highest bidder at an auction sale of a lease in two forests. The terms and conditions of the sale notification were to form part of the agreement to be executed but the sale was subject to the confirmation of District Forest Officer or the Conservator of Forests. The defendant deposited the entire sale price together with security deposit as required by rules, but the bid was not confirmed by the District Forest Officer and the sale price was ordered to be refunded and second auction was held. The amounts of sale price and security deposit were deposited in Court in the second sale. The defendant brought a suit for declaration against the state that he was entitled to the amount deposited in Court on second sale and also to refund of the security deposit. It was held that the auction sale of a successful bidder would be one which was not only the highest but also to a person to whom intimation or confirmation of the sale had been sent. At an auction sale, the highest bid was accepted by the DFO subject to confirmation. The confirmation was not communicated to the highest bidder and was later settled with a third party. It was held that there was no concluded contract between the government and the highest bidder, and therefore, the settlement with the third party was invalid on that ground.[13] Where after the auction, but before the acceptance, the government leased a forest to another person, the claim of the highest bidder who had deposited his instalment of bid money was negatived by the High Court as there was no enforceable ground.[14]

Where an auction sale was held on the express condition that the acceptance of the highest bid would be subject to the confirmation by a particular authority, the highest bidder can withdraw the offer in time before confirmation in spite of the fact that the bid was provisionally accepted or that he had deposited the earnest money or even the first instalment as per terms of the auction sale.[15]

CONTEMPORARY RELEVANCE

Today the relevance of tender has increased in all the areas be it procurement of goods, construction of buildings, for implementation of any government scheme, gas supply, oil supply, any sort of service that is required tenders are issued. There is increase use in issuing of tenders and so it becomes important for us to know in and out the rules that govern tenders.

In contemporary times there is proper drafting of clauses in tenders and bids, proper procedure is followed so that there are less chances of tenders being declared. Since now there is more clarity as to the application of laws parties issuing tenders and parties responding to tenders have been more careful and try to make less complicated. But in recent times there has been a trend that has grown more popularity that is not informing some clauses before issuing of tender which leads to tenderer to claim his security money. In Suresh Kumar Wadhwa v. State of M.P.[16]  court said “Hence, offeror/bidder may withdraw its offer/bid if new/altered terms are not acceptable to it, and is entitled to refund of security amount/ earnest money”. The appellant after being declared the highest bidder, received acceptance letter from nozrul officer, informing that his bid for plot was accepted subject to special terms and conditions. The special conditions were not part of the public notice that was issued before the auction proceedings. Appellant declined to accept the special terms and conditions and requested to return the security amount of rupees three lakhs which he had deposited at the time of submission of the bid but the request was denied.  So, the court said that appellant is correct in its position and the respondent has to pay back the security amount. The court in State of Haryana v. Malik Traders[17] in giving out its judgement reiterated the tender conditions. The court said that as per tender conditions the respondent could not have withdrawn the bid before 90 days and by withdrawing it before that period forfeits the right of security amount.

The laws haven’t changed much but the application, like in other laws too, vary from case to case.

[1] Dresser Rand S A v Bindal Agro Chem Ltd, AIR 2006 SC 871.

[2] Percival Ltd v LCC Asylums and Mental Deficiency Committee, (1918) 87 LJ KB 677 at 678–79.

[3] Oil and Natural Gas Petro Additions Ltd v Daelim Industry Co Ltd, (2015) 13 SCC 176.

[4] DS Constructions Ltd v Rites Ltd, AIR 2006 Del 98.

[5] UOI v Mohan Meakin Breweries Ltd, AIR 1988 NOC 33  (Del).

[6] Kochi Refineries Ltd v Reva Enviro Systems Pvt Ltd, 2016 SCC OnLine Ker 1564 : (2016) 1 KLJ 774.

[7] Sadhoo Lal Motilal v State of Madhya Pradesh, AIR 1972 All 137.

[8] Villayati Ram Mittal Pvt Ltd v UOI, AIR 2011 SC 301.

[9] Infra 7.

[10] National Highway Authority of India v Ganga Enterprises, AIR 2003 SC 3823

[11] Sri Durga Saw Mill v State of Orissa, AIR 1978 Ori. 41.

[12] State of Madras v R Ranganathan Chettiar, AIR 1975 Mad. 298.

[13] Haridwar Singh v Bagun Sumbrui, AIR 1972 SC 1242.

[14] Id.

[15] State of Madhya Pradesh v Hakim Singh, AIR 1973 MP 24.

[16] Suresh Kumar Wadhwa v. State of M.P., (2017) 16 SCC 757, paras 30 to 32.

[17] State of Haryana v. Malik Traders, (2011) 13 SCC 200, paras 10 to 15.

Leave a Comment

Your email address will not be published. Required fields are marked *