Allahabad HC Finds North Eastern Railway's Repeated Bid Rejections Against Konkan Railway Mala Fide, Quashes Rejection Letter

The Lucknow Bench found North Eastern Railway raised successive curable defects to oust Konkan Railway's lowest financial bid in a Rs 262.12 crore traction sub-station tender, and directed evaluation of the financial bid within three working days.

A Division Bench of the Allahabad High Court, Lucknow Bench, comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary, on 8 July 2026 quashed a rejection letter dated 8 June 2026 issued by North Eastern Railway against M/S Konkan Railway Corporation Ltd. in a public tender worth Rs 262.12 crores. The court found that the railway authorities had, on each occasion they were directed to proceed, manufactured a fresh ground to exclude Konkan Railway from the financial bid stage. It directed Respondent No. 2 to accept the corrected bank guarantee and evaluate Konkan Railway's financial bid within three working days. The judgment sits on a pattern the bench described as arbitrary, whimsical, and smacking of mala fide.

The Tender and the Repeated Exclusions

The tender in question concerned the design, supply, erection, testing, and commissioning of traction sub-stations with associated switching posts for a 2x25 KV AT traction feeding system in the Gorakhpur Cant.–Chapra Gramin section of Varanasi Division of North Eastern Railway, on EPC Mode, at an estimated cost of Rs 262.12 crores.

Konkan Railway Corporation Ltd., a Government enterprise, had submitted what was the lowest financial bid. Its participation in the tendering process was, however, repeatedly interrupted. The petitioner had first approached the court when its bid was rejected without any stated reason. When the court intervened in that earlier round, the railway authorities then raised a new objection: the bank guarantee furnished by the petitioner did not carry the appropriate stamp duty under the U.P. Stamp Act.

The bench, in Writ C No. 5810 of 2026 (M/S Konkan Railway Corporation Ltd. Thru. Auth. Mr. Om Prakash Verma Vs. Union of India Thru. General Manager (N.E.R.) Gorakhpur U.P. And 5 Others), had already held on 29 May 2026 that the inadequate stamp duty was at most a curable defect. The court permitted Konkan Railway to remedy the deficiency within a stipulated time. At no point during that proceeding, the bench noted, did the railway authorities raise any objection about the name of the beneficiary in the bank guarantee.

A New Ground Surfaces After the May 2026 Order

Konkan Railway duly submitted an adequately stamped bank guarantee in compliance with the 29 May 2026 order. On 8 June 2026, however, North Eastern Railway returned it, this time on the ground that the name of the beneficiary mentioned in the bank guarantee was incorrect. The rejection was communicated to the petitioner via WhatsApp on the same date.

Konkan Railway responded by submitting a corrected bank guarantee in the name of the correct beneficiary on 19 June 2026. The railway authorities returned this second corrected guarantee as well, now on the ground that it had been submitted belatedly.

Senior Advocate Sudeep Seth, assisted by Alok Kumar Singh and Kazim Ibrahim, appearing for the petitioner, submitted that the authorities were acting mala fide and that each intervention by this court was being met with a fresh technical ground to eliminate Konkan Railway from the process.

How the Bench Reasoned

The bench examined the sequence of events and the documents on record. On the stamp duty objection raised in the earlier round, the court had already recorded in its May 2026 order that the action of the authorities appeared mala fide and was “merely an attempt to eliminate the petitioner, who has submitted the lowest financial bid.”

In the present proceedings, the court found that the beneficiary-name defect was equally curable. Critically, it had before it a letter dated 9 March 2026 issued by Southern Railway, Chennai — another arm of Indian Railways — to Konkan Railway in connection with a work of similar nature. In that matter, after the issuance of a Letter of Award dated 29 January 2026 and submission of a bank guarantee by Konkan Railway on 7 February 2026, Southern Railway had returned the bank guarantee and asked for correction of the beneficiary's name. Southern Railway had permitted the correction to be made even after the bidding process had culminated.

The bench observed that North Eastern Railway and Southern Railway are both arms of the same organisation. If Southern Railway had treated the same defect as curable and permitted correction even post-award, North Eastern Railway could not take a contrary position during the bidding period itself. The court held that there cannot be two different yardsticks for two arms of the same organisation.

The bench also noted that the railway authorities ought to have pointed out the incorrect beneficiary name in the very first instance, when the bank guarantee was originally submitted. Having chosen not to do so, and having argued the stamp duty objection at length without once mentioning the beneficiary's name, the authorities could not be permitted to raise it as a fresh ground after the court had already directed the process to continue.

On the general legal position, the court referred to its May 2026 order, which had relied on the Supreme Court's decision in Meerut Development Authority v. Assn. of Management Studies, reported in (2009) 6 SCC 171, for the proposition that a State instrumentality is not bound to accept the bid of the lowest bidder, but is bound to act without arbitrariness or favouritism. The bench applied the same reasoning in the present petition, finding the conduct of North Eastern Railway to fall short of that standard.

The court was pointed in its assessment of the pattern: “the respondent authorities are hell-bent to oust the legitimate participation of the petitioner in the tendering process for obvious reasons.” It held that all the defects raised were curable and could have been flagged at an earlier stage. The rejection on each occasion violated the principles of natural justice and established principles of law.

The Principle Applied to Curable Defects

The court's reasoning on curable defects carries significance for how tendering authorities handle bank guarantee irregularities. The bench held that the beneficiary-name error was curable even during the currency of a contract, let alone during the bidding period. Where a defect is curable and has been acknowledged as such by another wing of the same authority, rejecting a bid on that ground without first offering an opportunity to rectify it is, in the court's view, illegal and without force of law.

The bench also took note of Konkan Railway's status as a Government enterprise. It observed that being a Government entity did not insulate it from procedural unfairness, and the fact that it had been repeatedly forced to approach the court in the same tender process made the pattern more, not less, concerning.

Order

The Division Bench quashed and set aside the impugned rejection letter dated 8 June 2026. It directed Respondent No. 2 to accept the corrected bank guarantee bearing the correct beneficiary's name and to evaluate the financial bid of Konkan Railway Corporation Ltd. within three working days from 8 July 2026, in compliance with the earlier order dated 29 May 2026 passed in Writ C No. 5810 of 2026. Respondent No. 2 was further directed to thereafter proceed in the tender process accordingly. The writ petition was disposed of with these directions.