Deficiency in Stamp Duty on Bank Guarantee is a Curable Defect: Allahabad HC

The Hon’ble High Court of Allahabad, Lucknow Bench, in M/s Konkan Railway Corporation Ltd v. Union of India & Ors. (Writ-C No. 5810 of 2026), decided on May 29, 2026, held that deficiency in stamp duty on a bank guarantee constitutes a curable defect and cannot, by itself, justify rejection of a technical bid in a public tender process, particularly where such rejection is arbitrary and unsupported by contemporaneous reasons.

The dispute arose from Tender No. EPC-PSI-GKC-CHPG-NER floated by the North Eastern Railway. The petitioner’s techno-commercial bid was rejected through an e-mail stating only that it did not fulfil the eligibility criteria. No reasons were disclosed at the time of rejection. Following an earlier direction of the Hon’ble Court, the railway administration subsequently justified the rejection on the ground that the bank guarantee furnished by the petitioner was not stamped in accordance with the requirements of the U.P. Stamp Act and was therefore legally deficient.

The petitioner contended that insufficiency of stamp duty was merely a technical irregularity capable of being cured and could not constitute a ground for outright rejection of its bid. Reliance was placed on judicial precedents recognising that provisions relating to stamp duty are fiscal in nature and are not intended to defeat substantive rights. The petitioner further submitted that the respondents had accepted a similarly stamped bank guarantee submitted by the petitioner in an earlier tender process and had proceeded to open its financial bid, thereby demonstrating inconsistent application of tender conditions.

The respondents contended that the bid failed to satisfy mandatory tender requirements and that, by the time the writ petition was heard, the financial bids had already been opened, and the lowest bidder had been identified, creating rights in favour of such a bidder.

The Hon’ble Court observed that the original communication rejecting the petitioner’s technical bid merely stated that the eligibility criteria had not been fulfilled and contained no reasons whatsoever. It held that the subsequent attempt to justify the rejection through a fresh explanation amounted to an impermissible improvement of the original decision, contrary to the principle laid down in Mohinder Singh Gill v. Chief Election Commissioner. The Hon’ble Court further held that deficiency in stamp duty on a bank guarantee was, at best, a curable defect and could not be treated as a substantive ground for disqualification. It noted that the respondents had previously accepted a similarly stamped bank guarantee from the petitioner in another tender process, thereby undermining the consistency and fairness of their position.

The Hon’ble Court also rejected the contention that declaration of the lowest bidder created an enforceable right in favour of such bidder, reiterating the settled principle that participation in a tender process confers only a right to fair and non-arbitrary treatment and does not result in any vested right to award of the contract until a concluded contractual relationship comes into existence.

Accordingly, the Hon’ble Court set aside the tabulation of financial bids and directed the respondents to reconsider the financial bids of all tenderers, including that of the petitioner, without treating the deficiency in stamp duty as a disqualifying factor. The petitioner was simultaneously directed to cure the deficiency in stamp duty within the stipulated period, following which the tender process was directed to be completed expeditiously in accordance with law.