Disqualification of Bidder for Furnishing EMD Through Fixed Deposit Set Aside

The Hon’ble Supreme Court of India, in RR Constructions and Infrastructure India Pvt. Ltd. v. Gayatri Ventures and Ors. (Civil Appeal arising out of SLP (C) No. 37099 of 2025, dated May 20, 2026) allowed the appeal and set aside the judgement of the High Court which had disqualified the appellant from a tender process on the ground that the Earnest Money Deposit (EMD) had been furnished through a Fixed Deposit (FD) instead of a Demand Draft (DD). The Hon’ble Supreme Court held that the relevant tender conditions merely enabled out-of-State bidders to furnish EMD through DD and did not prescribe the same as a mandatory requirement.

The dispute arose from a tender floated by the Water Resources Department for construction works under the “Construction of Head Work of Lamti Feeder Minor Tank Scheme”. The appellant participated in the tender process and furnished the EMD through a FD issued by Punjab National Bank (PNB) in favour of the concerned Executive Engineer. However, the appellant was subsequently disqualified on the ground that out-of-State bidders were required to furnish EMD only through DD in terms of the tender conditions. The High Court upheld the disqualification while relying upon an earlier judgement rendered on identical tender conditions.

Before the Hon’ble Supreme Court, the appellant contended that furnishing EMD through DD was merely optional under the tender document and that the appellant had validly furnished an interest-bearing security in the form of FD. It was further submitted that the Tender Scrutiny Committee itself had initially found the appellant technically qualified and that the subsequent disqualification was contrary to the plain language of the tender conditions. Per contra, the respondents contended that the appellant had suppressed the fact of a subsequent disqualification relating to another technical requirement and further argued that the financial bid had already been opened and accepted in favour of the successful bidder.

Upon examining the tender clauses, the Hon’ble Supreme Court observed that Clause 2.13(a)(xiii), which referred to furnishing of bank drafts by out-of-State bidders, was couched in enabling language and did not prescribe DD as the sole permissible mode of EMD submission. The Hon’ble Supreme Court attached significance to the repeated use of the expression “may submit” in the relevant clauses and held that the condition was directory and not mandatory. The Hon’ble Supreme Court further observed that the FD furnished by the appellant constituted an “Approved Interest Bearing Security” within the meaning of Clause 2.13(a)(iv) and therefore satisfied the tender requirements.

The Hon’ble Supreme Court consequently held that the High Court had erred in treating submission of DD as a mandatory condition and set aside the impugned judgment. The Hon’ble Supreme Court accordingly restored the appellant’s qualification insofar as Envelope A of the tender process was concerned.

In relation to the subsequent disqualification concerning Envelope B, the Hon’ble Supreme Court clarified that no findings were being rendered on the merits thereof. However, considering that the earlier disqualification by the High Court would have rendered any response by the appellant futile, the Hon’ble Supreme Court permitted the appellant to approach the Tendering Authority within 48 hours with an appropriate representation against the subsequent disqualification. The appeal was accordingly allowed.