SC: Misreading Tender ITR Requirement Invalidates Bid Rejection

The Hon’ble Supreme Court of India, in the case of M/s Shanti Construction Pvt. Ltd. v. State of Odisha, (2025 INSC 1295), dated November 7, 2025, held that the expression “previous financial year” in Rule 27(4)(iv) of the Odisha Minor Mineral Concession Rules, 2016 must be interpreted to mean the most recent financial year for which an Income Tax Return could legally have been filed as of the date of bidding, and not a return for which the statutory filing deadline had not yet expired, reiterating that misinterpretation of a tender condition that wrongly excludes a compliant bidder vitiates the tender process.

The case arose from an auction notice issued on July 11, 2022, for extraction of sand from the Mahanadi Sand Quarry. Bidders were required to furnish either an Income Tax Return of the “previous financial year” demonstrating sufficient annual income or a bank guarantee. The highest bidder submitted its Income Tax Return for Financial Year 2020–2021, the latest return capable of being filed in law under Section 139(1) of the Income Tax Act, 1961 as of the bid submission date of July 18, 2022. The Tender Committee, however, rejected its bid for not submitting the return for Financial Year 2021–2022, even though the statutory deadline for filing that return (October 31, 2022) had not yet expired. Thereafter, the substantially lower bid of the successful bidder was accepted.

The Supreme Court held that the Tender Committee’s interpretation of Rule 27(4)(iv) was narrow and erroneous, as it required an Income Tax Return that could not have been filed by the bid date. This misconstruction wrongly excluded the highest bidder and defeated the purpose of the tender by diminishing competition and potential revenue to the State. The Court reiterated that although judicial restraint is the norm in tender matters, intervention becomes necessary where the decision-making process is vitiated by misinterpretation that adversely affects public interest. The Hon’ble High Court of Orissa had failed to address this core illegality and had therefore erred in sustaining the rejection of the highest bid.

Considering that more than three of the five years of the lease period had elapsed, that sand prices had increased, and that the successful bidder had expressed willingness to match the higher rate, the Supreme Court directed that a fresh auction be conducted under the Odisha Minor Mineral Concession Rules, 2016, permitting participation by all bidders. The Court further directed that the amount deposited by the successful bidder be refunded with interest at six percent per annum.

The judgment reaffirmed that tender conditions must be interpreted in a manner consistent with statutory timelines and public interest, and that exclusions based on misconstrued requirements cannot be allowed to defeat competition or diminish public revenue.