Cancellation of Tender for Inadvertently Low ePBG Held Arbitrary: Allahabad High Court

The Hon’ble High Court of Judicature at Allahabad, Lucknow Bench, in M/s Yuvaan Infotech through Partner Ritvik Pandey v. State of U.P. through Additional Chief Secretary, Medical and Health, Lucknow & Ors. (Writ-C No. 9641 of 2026), decided on September 18, 2026, held that cancellation of an advanced tender process on account of an inadvertent error in prescribing the Performance Bank Guarantee (“ePBG”) was disproportionate and arbitrary where the error was curable and did not affect the substantive evaluation of the bidders.

The dispute arose from a tender published on the GeM Portal for hiring consultancy services for establishing Aadhaar Enrolment Centres, project management and e-governance services. The petitioner was declared H-1 after successfully completing the technical and financial evaluation and the contract was subsequently uploaded on the GeM Portal for execution. The tender was thereafter cancelled on the stated ground of “unavoidable circumstances”.

The respondents subsequently disclosed that the actual reason for cancellation was the inadvertent specification of ePBG at 0.75% in the bid document instead of the prescribed 3% to 5%. The petitioner offered to deposit the deficit amount and raise the ePBG to 5%. The respondents contended that such correction would amount to a material change in the financial terms of the tender and prejudice other participants.

The Hon’ble Court held that ePBG was a performance security and did not affect the eligibility, technical competence or comparative merit of the bidders. Relying on Poddar Steel Corporation v. Ganesh Engineering Works, G.J. Fernandez v. State of Karnataka and B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd., the Hon’ble Court observed that ancillary tender conditions may be corrected or waived where such correction does not prejudice other participants. The Court further held that increasing the ePBG for the successful bidder did not confer any comparative advantage upon it or alter the ranking of the other bidders.

The Hon’ble Court further observed that the respondents could not take advantage of their own inadvertence in prescribing an ePBG contrary to the applicable GeM norms. It held that Clause 2.3 of the RFP merely prescribed the procedure for amendment and did not prohibit amendment of financial terms. The cancellation also defeated the petitioner’s legitimate expectation after it had successfully completed the tender process and had been declared H-1.

Accordingly, the Hon’ble Court quashed the order dated August 22, 2026 cancelling the tender and directed the petitioner to deposit the deficit ePBG to raise it to 5% of the contract value within one week. Upon such deposit, the tender was directed to stand revived and the respondents were directed to make the contract available for signature and completion of allied formalities within two weeks of such deposit. The Court clarified that the judgment was confined to the legality of the cancellation on the ground of inadequate ePBG and expressed no opinion on any other aspect of the tender process.