M/S ABCI INFRASTRUCTURES PVT. LTD.versusUNION OF INDIA AND OTHERS

                  [2025] 3 S.C.R. 128 : 2025 INSC 215

                   M/s ABCI Infrastructures Pvt. Ltd.
                                   v.
                       Union of India and Others
                        (Civil Appeal No. 2546 of 2025)
                                14 February 2025
              [Sanjiv Khanna,* CJI, Sanjay Kumar and
                       K.V. Viswanathan, JJ.]


                            Issue for Consideration
       Whether BRO-Border Road Organisation was justified in accepting
       the bid of Rs.1,569/-, and on the failure of the appellant-L1 bidder
       to execute the agreement asking for forfeiture vide encashment
       of bank guarantee of Rs.15,04,64,000/-.

                                    Headnotes†
       Contract Act, 1872 – s.20 – Mistake of fact – Tender dispute –
       Forfeiture of bank guarantee/bid security on default –
       Respondent no.2- Border Road Organisation invited bids
       for the construction of tunnels and appellant ranked as L-1
       bidder – When financial bids opened, the appellants discovered
       their mistake that instead of appellant’s bid price of Rs.1569
       Crores, the quoted amount appeared to be just Rs.1569/- –
       Next day, the appellant informed the authorities regarding
       the mistake but respondent no.2 called upon the appellant
       to justify the quoted amount of Rs.1569/- – Respondent no.2,
       stating that the appellant had been declared a defaulter, and
       their bid security was to be forfeited, asked the appellant’s
       bank to encash the bank guarantee and remit Rs.15,04,64,000
       to respondent no.2 – Writ petition by the appellant – Dismissed
       by the High Court – Correctness:
       Held: As per explanation to s.20, an erroneous opinion as to the
       value of the thing which forms the subject matter of an agreement is
       not deemed to be a mistake as a matter of fact – Instant case does
       not fall under any exception to the general principle on a person
       seeking relief in equity on account of mistake, for the error or mistake
       in quoting a price of Rs.1,569/- is self-evident – Contract for an


* Author
[2025] 3 S.C.R.                                                                129

    M/s ABCI Infrastructures Pvt. Ltd. v. Union of India and Others


     estimated value of more than Rs.1,500 crores requiring construction
     of roads and tunnels in a hilly terrain can never be executed for a
     mere Rs.1,569/- – Appellant was at fault and had made the mistake,
     of having failed to add the required zeros in the financial bid – Plea
     of a system glitch cannot be accepted, as others had successfully
     uploaded their bids without problem – Claim of BRO that delay was
     entirely due to the appellant’s mistake is flawed, ignoring its own
     lapses – Mistakes, including by authorities, to be resolved through
     corrective steps – Practical approach could have avoided the delay,
     which was caused by BRO’s refusal to acknowledge appellant’s
     genuine error and unwarranted cancellation of the bid – Alleged
     two-month delay by appellant is incorrect – Appellant promptly
     acknowledged the mistake – Appellant directed to pay Rs.1 crore
     to BRO, as a consequence of their error – Upon receiving this
     payment, BRO to return the appellant’s original bank guarantee or
     demand draft of Rs.15.04 crores – Impugned judgment set aside.
     [Paras 5, 10, 13-17]

                               Case Law Cited
     West Bengal State Electricity Board v. Patel Engineering Company
     Limited and Others [2001] 1 SCR 352 : (2001) 2 SCC 451;
     M/s Omsairam Steels & Alloys Pvt. Ltd. v. Director of Mines and
     Geology, BBSR & Ors., 2024 INSC 520; Coimbatore District Central
     Cooperative Bank v. Coimbatore District Central Cooperative Bank
     Employees Association and Another [2007] 5 SCR 430 : (2007)
     4 SCC 669 – referred to.
     Moffett, H. and C. Co. v. Rochester, 178 U.S. 373 (1900); Hearne
     v. New England Marine Ins. Co., 22 L. Ed. 395; Spina Asphalt
     Paving Excavating Contractors, Inc. v. Borough of Fairview,
     304 NJ Super 425 – referred to.

                                  List of Acts
     Contract Act, 1872.

                              List of Keywords
     Tenders; Mistake of fact; Delay; Online technical and financial
     bids; Bank guarantee; System error; Typographical mistake; Patent
     error; Forfeiture of bid security; Bid specifications; Relief in equity;
     Defaulter of bid; Cancellation of bid.
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                                Case Arising From
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2546 of 2025
       From the Judgment and Order dated 07.10.2023 of the High Court
       of Himachal Pradesh at Shimla in CWP No. 6658 of 2023

                             Appearances for Parties
       Mukul Rohatgi, Sr. Adv., Gaurav Khanna, Ms. Natasha Sahrawat,
       Ms. Deepali Bhanot, Gautam Barnwal, Rudraksh Pandey,
       Ms. Alisha Roy, Advs. for the Appellant.
       Ms. Archana Pathak Dave, A.S.G., Dr. N. Visakamurthy, Yashraj
       Singh Bundela, Raman Yadav, Hitarth Raja, Udit Dedhiya, Mukesh
       Kumar Maroria, Sanjay Kapur, Surya Prakash, Arjun Bhatia, Ms.
       Shubhra Kapur, Ms. Mahima Kapur, Advs. for the Respondents.

                      Judgment / Order of the Supreme Court

                                    Judgment

       Sanjiv Khanna, CJI

       Leave granted.

2.     This is an avoidable litigation. No doubt, there was a mistake on the
       part of the Appellant – M/s ABCI Infrastructure Private Limited, albeit,
       instead of taking a pragmatic approach, Respondent No. 2 - Border
       Road Organisation1 under the Ministry of Defence, Union of India,
       adopted an obdurate and overly legalistic stance, causing a delay
       in the project’s execution.
3.     We begin by briefly discussing the facts of the case:
       •      On 23.02.2023, BRO invited bids for the design and construction
              of two-lane twin tunnels, approximately 4.1 kilometres long, at
              Shinkun La Pass, including civil, electrical, and mechanical
              work, with approaches connecting the Darcha-Padam Highway
              to NHDL specifications in Himachal Pradesh and Ladakh.
              The estimated cost of the project was Rs.15,04,64,00,000/-


1    Hereinafter, “BRO.”
[2025] 3 S.C.R.                                                         131

    M/s ABCI Infrastructures Pvt. Ltd. v. Union of India and Others


           (Rs. 1,504.64 crores). The project was to be completed within
           48 months. The bid security amount was Rs.15,04,64,000/-
           (Rs. 15.04 crores)
     •     Ten bidders, including the Appellant, had submitted their online
           Technical and Financial Bids on 03.06.2023. The Appellant, like
           others, had furnished a bank guarantee of Rs.15,04,64,000/-.
     •     On 05.06.2023, technical bids were opened and seven bidders,
           including the Appellant, were declared technically qualified.
     •     On 24.08.2023, the financial bids of seven bidders, including
           the Appellant, were opened and the results were declared.
     •     The Appellant was ranked as L-1 bidder, with the bid price of
           Rs.1,569/- (Rupees One thousand five hundred and sixty-nine
           only). According to the Appellant, they had quoted a bid price
           of Rs.1,569 crores. However, due to what they claim was a
           system error, the quoted amount appeared as just Rs.1,569.
     •     The Appellant claims that they discovered the mistake on
           24.08.2023 when the financial bids were opened and announced,
           and therefore, on the next day, 25.08.2023, they informed
           the authorities that their actual bid was Rs.1,569 crores, not
           Rs.1,569. They attributed the error to a typographical mistake
           or a critical technical issue with the server. While we would not
           accept the plea of system error, the figure quoted was clearly
           unrealistic, a patent error and a mistake given the scale and
           nature of the work tendered. Though the mistake was bald-
           faced, what followed is incomprehensible, with BRO, insisting on
           accepting the bid, in spite of letters from the Appellant wanting
           to withdraw from the tender.
     •     BRO, guided by the Evaluation Committee, instead of accepting
           the obvious, vide letter dated 26.08.2023, called upon the
           Appellant to justify the quoted amount of Rs.1,569 by providing
           a detailed price analysis, including the scope of work, completion
           schedule, risk allocation, safety requirements, and proof of
           capability to complete the project, by 31.08.2023.
     •     On 30.08.2023, the Appellant reiterated that their intended bid
           was Rs.1,569 crores, not Rs.1,569, attributing the error to a
           technical or typographical mistake.
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       •       On 07.09.2023, the Appellant sent another letter stating
               they should not be considered the L1 bidder, and the bank
               guarantee of Rs.15,04,64,000 may be returned to them without
               encashment.
       •       On 12.09.2023, the Appellant again wrote emphasizing that the
               bid was an error and that the bid security should not be forfeited.
       •       Vide letter 16.09.2023, BRO, unmoved, wrote to the Appellant’s
               bank, the State Bank of India, stating that the Appellant had
               been declared a defaulter, and their bid security was to be
               forfeited. The bank was asked to encash the bank guarantee
               and remit Rs.15,04,64,000 to BRO.
       •       The Appellant filed a writ petition before the High Court of
               Himachal Pradesh at Shimla, which stands dismissed by the
               impugned judgment dated 07.10.2023.
4.     The short question before us is whether BRO was justified in accepting
       the bid of Rs.1,569, and on the failure of the Appellant to execute the
       agreement asking for forfeiture vide encashment of bank guarantee
       of Rs.15,04,64,000.
5.     A mistake may be unilateral or mutual, but it is always unintentional.
       If it is intentional, it ceases to be a mistake. Mistakes or errors,
       though avoidable, are committed inadvertently. They have varied
       consequences in law. As per Section 20 of the Indian Contract Act,
       18722 whereby both parties to an agreement are under a mistake as
       to matter of fact essential to an agreement, the agreement is void.
       The explanation to Section 20 says that an erroneous opinion as to
       the value of the thing which forms the subject matter of an agreement
       is not deemed to be a mistake as a matter of fact. This will not be
       a case covered by Section 20 of the Contract Act. However, this is
       not the first time that this question has arisen either before this Court
       or Courts outside of India. In West Bengal State Electricity Board
       v. Patel Engineering Company Limited and Others3, this Court
       referred to paragraph 84 of American Jurisprudence (2nd Edition,
       Volume 64 at page 944), which reads:


2    Hereinafter, “Contract Act.”
3    (2001) 2 SCC 451
[2025] 3 S.C.R.                                                               133

      M/s ABCI Infrastructures Pvt. Ltd. v. Union of India and Others


              “As a general rule, equitable relief will be granted to a
              bidder for a public contract where he has made a material
              mistake of fact in the bid which he submitted, and where,
              upon the discovery of that mistake, he acts promptly in
              informing the public authorities and requesting withdrawal
              of his bid or opportunity to rectify his mistake particularly
              when he does so before any formal contract is entered into.”
6.    Thereafter, reference was made to two decisions of the Supreme
      Court of the United States in Moffett, H. and C. Co. v. Rochester4
      and Hearne v. New England Marine Ins. Co.5 wherein it is observed
      that where the mistake is apparent and the party promptly informs
      the other as soon as it is discovered but before entering into a
      contract, equitable orders may be passed. However, the mistake
      should be clear, explicit, and undisputed. Further, a mistake on one
      side may be a ground for rescinding but not for reforming a contract
      where the minds of the parties have not met, yet there is no contract
      and hence none to be rectified. Relief may not be granted where
      it is inequitable. While accepting this legal position, this Court in
      West Bengal State Electricity Board (supra) has propounded the
      following exceptions to the general principle on a person seeking
      relief in equity on account of mistake:
              “ 27. ……..
              (1)Where the mistake might have been avoided by the
              exercise of ordinary care and diligence on the part of the
              bidder; but where the offeree of the bid has or is deemed
              to have knowledge of the mistake, he cannot be permitted
              to take advantage of such a mistake.
              (2) Where the bidder on discovery of the mistake fails
              to act promptly in informing to the authority concerned
              and request for rectification, withdrawal or cancellation of
              bid on the ground of clerical mistake is not made before
              opening of all the bids.
              (3) Where the bidder fails to follow the rules and regulations
              set forth in the advertisement for bids as to the time when


4    178 U.S. 373 (1900)
5    22 L. Ed. 395
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             bidders may withdraw their offer; however where the
             mistake is discovered after opening of bids, the bidder
             may be permitted to withdraw the bid.”
7.     This judgment also refers to a decision of the Superior Court of
       New Jersey in Spina Asphalt Paving Excavating Contractors,
       Inc. v. Borough of Fairview.6 The said case is related to the
       rectification of mistakes in the bid specifications. Relief granted in
       the said case was upheld by the Superior Court with the caution
       that generally an error in the statement of a price would not be
       treated as immaterial and it is only when the case of error was
       patent and the true intent of the bidder obvious that such an error
       might be disregarded.
8.     In West Bengal State Electricity Board (supra), the private party,
       the bidder did not succeed for several reasons, including the factum
       that the error was not obvious and self-evident. Further, the correction
       of such mistakes after one and a half months after the opening of
       the bids would have violated the express clauses relating to the
       computation of the bid amount. Thus, waiver of the rule or conditions
       in favour of the one bidder would have created unjustifiable doubts in
       the minds of others impairing the rule of transparency and fairness
       and providing room for manipulation for awarding contracts.
9.     The decision in West Bengal State Electricity Board (supra) was
       referred to and followed where a relief to the bidder was apparent
       before this Court in M/s Omsairam Steels & Alloys Pvt. Ltd. v.
       Director of Mines and Geology, BBSR & Ors.7 This decision
       observes that while the Court must exercise a lot of restraint in
       exercising the power of judicial review in contractual commercial
       matters, the doctrine of proportionality nevertheless applies when
       the error or mistake is writ large and equity merits the grant of
       some relief. Reference was made to the decision in Coimbatore
       District Central Cooperative Bank v. Coimbatore District Central
       Cooperative Bank Employees Association and Another8 where
       discussing the question of proportionality or punishment imposed
       on the striking workmen it is observed:


6    304 NJ Super 425
7    2024 INSC 520
8    (2007) 4 SCC 669
[2025] 3 S.C.R.                                                         135

    M/s ABCI Infrastructures Pvt. Ltd. v. Union of India and Others


           “18. “Proportionality” is a principle where the court is
           concerned with the process, method or manner in which
           the decision-maker has ordered his priorities, reached
           a conclusion or arrived at a decision. The very essence
           of decision-making consists in the attribution of relative
           importance to the factors and considerations in the case.
           The doctrine of proportionality thus steps in focus true
           nature of exercise—the elaboration of a rule of permissible
           priorities.
           19. de Smith states that “proportionality” involves
           “balancing test” and “necessity test”. Whereas the former
           (balancing test) permits scrutiny of excessive onerous
           penalties or infringement of rights or interests and a
           manifest imbalance of relevant considerations, the latter
           (necessity test) requires infringement of human rights
           to the least restrictive alternative. [Judicial Review of
           Administrative Action (1995), pp. 601-05, para 13.085;
           see also Wade & Forsyth: Administrative Law (2005),
           p. 366.]
           20. In Halsbury’s Laws of England (4th Edn.), Reissue,
           Vol. 1(1), pp. 144-45, para 78, it is stated:
                “The court will quash exercise of discretionary
                powers in which there is no reasonable
                relationship between the objective which is
                sought to be achieved and the means used to
                that end, or where punishments imposed by
                administrative bodies or inferior courts are wholly
                out of proportion to the relevant misconduct. The
                principle of proportionality is well established in
                European law, and will be applied by English
                courts where European law is enforceable in the
                domestic courts. The principle of proportionality
                is still at a stage of development in English law;
                lack of proportionality is not usually treated as
                a separate ground for review in English law,
                but is regarded as one indication of manifest
                unreasonableness.”
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       Accordingly, in the said case the Appellant was directed to make a
       payment of Rs.3 crores within the stipulated period and on the said
       payment the security deposit in the form of a bank guarantee of over
       Rs.9 crores was directed to be refunded.
10. The present case does not fall under any exception, for the error
    or mistake in quoting a price of Rs.1,569/-, does not require any
    argument and cannot be debated as it is self-evident. A contract
    of this nature for an estimated value of more than Rs.1,500 crores
    spread over 48 months requiring construction of roads and tunnels
    of the length of more than 4 kilometres in a hilly terrain can never
    be executed for a mere Rs.1,569/-.
11. At the same time, we agree with BRO, that the Appellant was at
    fault and had made the mistake, of having failed to add the required
    zeros in the financial bid. The plea of a system glitch should not be
    accepted, as others had successfully uploaded their bids without a
    problem.
12. BRO justified encashing the bank guarantee by citing delays caused
    by issuing a second notice inviting bids. This claim is baseless, as
    BRO was aware of the Rs.1,569/- error. Instead of declaring the bid
    non est due to the clear mistake, BRO asked the appellant to justify
    the bid, cancelled the notice, declared the Appellant a defaulter,
    invoked the bank guarantee, and issued a fresh notice inviting bids.
13. Thus, BRO’s claim that the delay was entirely due to the Appellant’s
    mistake is flawed, ignoring BRO’s own lapses. Mistakes, including by
    authorities, should be resolved through corrective steps. A practical
    approach could have avoided the delay, which was caused by
    BRO’s refusal to acknowledge the Appellant’s genuine error and the
    unwarranted cancellation of the bid.
14. The alleged two-month delay by the Appellant is incorrect. The error,
    submitted on 03.06.2023, became apparent only when financial bids
    were opened on 24.08.2023. The Appellant promptly acknowledged
    the mistake on 25.08.2023.
15. A fresh tender was issued, and financial bids opened on 09.01.2024
    revealed the lowest bid of Rs.1,290 crores, lower than the earlier
    Rs.1,351 crores. Thus, while delayed, the contract was awarded at
    a lower cost.
[2025] 3 S.C.R.                                                      137

    M/s ABCI Infrastructures Pvt. Ltd. v. Union of India and Others


16. In view of the aforesaid discussion, we direct the Appellant to pay
    Rs.1 crore to BRO, as a consequence of their error. Upon receiving
    this payment, BRO shall return the Appellant’s original bank guarantee
    or demand draft of Rs.15.04 crores within one week.
17. The impugned judgment is set aside, and the appeal is allowed in
    the aforesaid terms. There would be no order as to costs.

     Result of the case: Appeal allowed.



     †
         Headnotes prepared by: Nidhi Jain