Karnataka High Court Clarifies Tender Bids Must Exclude GST Where Expressly Stipulated; Judicial Review Limited in Procurement Decisions

Background and Context
The dispute arose from a public procurement process initiated by the State of Karnataka for works at the Thimmappanagundi Iron Ore Mine. The tender required bidders to submit financial bids for two distinct components: drilling operations and re-handling of ore dumps. The process was structured as a two-cover system, with technical bids evaluated first, followed by financial bids of technically qualified bidders.

The petitioner, FGM Pvt. Ltd., submitted its bid through the e-procurement portal, selecting an 18% GST rate as prompted by the portal. This resulted in its quoted unit rate reflecting the aggregate of the base price and GST. In contrast, another bidder submitted its bid exclusive of GST. The petitioner challenged the evaluation process, contending that the comparison of bids was distorted because its bid was considered inclusive of GST while the competitor’s was exclusive.

Arguments and Submissions
The petitioner argued that for a fair comparison, either GST should be uniformly included or excluded from all bids. It was submitted that the financial evaluation was arbitrary and resulted in unequal treatment, vitiating the decision-making process. The petitioner sought a direction for a fresh evaluation of bids on a uniform GST basis.

The respondents, represented by senior counsel, countered that the tender conditions were explicit: Clause 11.4 of the tender document required all prices to be quoted exclusive of GST, as the liability for GST was that of the employer. The respondents argued that the petitioner’s inclusion of GST in its bid, based on the portal’s design, could not override the clear terms of the tender. They further submitted that any ambiguity should have been clarified before bid submission, and that the successful bidder had correctly complied with the tender requirements.

Court’s Reasoning and Legal Principle
The High Court, after reviewing the tender clauses, found Clause 11.4 to be unambiguous in requiring all bids to be exclusive of GST. The Court emphasized that the deliberate exclusion of GST was intended to ensure uniformity, transparency, and comparability among bids. The Court held that the terms of the tender constitute the governing framework for the procurement process and bind all participants equally.

The Court rejected the petitioner’s reliance on the e-procurement portal’s functionality, holding that the portal’s design could not override the express stipulations of the tender document. The Court further noted that if the petitioner had any doubt, it was incumbent upon it to seek clarification prior to bid submission. The petitioner’s internal communications and subjective understanding could not alter the objective meaning of the tender conditions.

The Court distinguished between ambiguity in tender conditions and mistakes by bidders. It held that where the tender condition is clear, errors in understanding or application by a bidder cannot justify judicial interference. The Court reiterated that judicial review in tender matters is confined to examining arbitrariness, mala fides, irrationality, procedural impropriety, or violation of statutory or constitutional mandates. The Court found no such grounds in the present case.

Decision and Outcome
Concluding that the tendering authority had evaluated the bids strictly in accordance with the tender terms and that no arbitrariness or illegality was established, the Court dismissed the writ petition. The judgment reinforces the principle that strict adherence to tender conditions is essential in public procurement and that courts will not intervene to correct bidders’ mistakes or subjective misunderstandings where the terms are clear.