Facts of the Case

This is a public tender and bank-guarantee dispute, not a GST case — GST is mentioned only as part of the pricing terms in the tender documents. M/s Ganesh Electricals Pvt Ltd challenged the invocation of three bank guarantees, each worth Rs. 25,00,000, by the Assam Power Distribution Company Ltd (APDCL) in three connected writ petitions relating to Package Nos. 4, 11 and 15 of a domestic competitive bidding process for Solar Home Lighting Systems across several Assam districts.

Under the original tender terms (Appendix-1), 60% of the payment was to be released against supply of items, including 100% GST, upon submission of documents. However, when APDCL issued Letters of Award (LOAs) on 12.11.2021, the payment terms were altered (Annexure-A) to make the 60% instalment conditional on physical progress of work, rather than mere supply. The petitioner objected, revoked the LOAs, withdrew its bids, and sought return of its earnest money deposit (EMD), but APDCL instead terminated the LOAs and invoked the bank guarantees submitted as EMD, totalling Rs. 75,00,000 across the three packages.

Issues Involved

  1. Whether APDCL could unilaterally alter the payment terms of the tender (changing the basis for the 60% instalment from mere supply to physical progress) after the bids, based on the original terms, had already been accepted.
  2. Whether the invocation of the bank guarantees and forfeiture of the EMD, following the petitioner's withdrawal after this unilateral change, was legal.

Petitioner's Arguments

  • The petitioner argued that it had duly accepted and bid on the basis of the original tender terms (Appendix-1), and that APDCL's subsequent change of payment terms in the LOA (Annexure-A) was a unilateral variation it never agreed to, justifying its decision to revoke the LOAs and withdraw its bids and seek return of its EMD rather than proceed on altered terms.

Respondent's Arguments

  • APDCL contended that since the petitioner rejected the LOAs and withdrew its bids, it was entitled to terminate the LOAs and invoke the bank guarantees submitted as EMD for Package Nos. 4, 11 and 15.

Court Order / Findings

  • The Court held that the invitation to bid, including its payment terms, was an offer duly accepted by the petitioner through its bids, and that APDCL could not unilaterally alter those terms in the LOA to the petitioner's detriment.
  • It found APDCL's invocation of the bank guarantees, following the petitioner's justified withdrawal in response to the altered terms, to be arbitrary, unreasonable and illegal, violating Article 14 of the Constitution.
  • The writ petitions were allowed: the invocation of the three bank guarantees was declared illegal, and APDCL was directed to refund the forfeited Rs. 75,00,000 (Rs. 25,00,000 for each package) within 20 days of submission of the certified judgment copy.

Important Clarification

GST appears in this case only as a component of the tender price (payment inclusive of 100% GST) — there is no GST assessment, credit, or compliance question decided here. The ruling is a contract-law and constitutional (Article 14) precedent about a public authority's inability to unilaterally rewrite accepted tender terms, not a GST law precedent.

Sections Involved

  • Constitution of India – Article 14 (equality before law; arbitrary state action)
  • General principles of contract law governing invitation to tender, acceptance, and bank guarantee invocation (no specific GST provision was adjudicated)

Decision – In Favour of

Decided in favour of the petitioner, M/s Ganesh Electricals Pvt Ltd — the bank guarantee invocations were set aside and a refund of Rs. 75,00,000 was ordered against the respondent, Assam Power Distribution Company Ltd.

Case Details

  • Court: Gauhati High Court (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
  • Case No.: WP(C)/1188/2022, with linked WP(C)/1189/2022 and WP(C)/1190/2022
  • CNR: GAHC010023272022
  • Coram: Hon'ble Mr. Justice Devashis Baruah
  • Date of Order: 14-09-2023

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