Tender Bidder Cannot Be Disqualified for Giving EMD by Fixed Deposit When Demand Draft Was Not Mandatory

Case Name: RR Constructions and Infrastructure India Pvt. Ltd. v. Gayatri Ventures and Ors.

Citation: 2026 INSC 514

Date of Judgment/Order: 20 May 2026

Bench: Justice Sanjay Kumar and Justice K. Vinod Chandran

Held: The Supreme Court held that a tender condition requiring Earnest Money Deposit from out-of-State bidders by Demand Draft cannot be treated as mandatory where the tender document uses permissive language and makes Demand Draft only one of the approved modes of furnishing EMD. The Court clarified that where the tender permits EMD through approved interest-bearing security, a Fixed Deposit drawn in favour of the tendering authority satisfies the requirement, and disqualification merely because the bidder furnished an FD instead of a DD is unsustainable. The Court further held that the word “may” in the relevant tender clauses indicated an option and not a compulsory condition.

Summary: The dispute arose from a tender issued by the Water Resources Department for construction of the Head Work of Lamti Feeder Minor Tank Scheme. The appellant, an out-of-State bidder, furnished its EMD through a Fixed Deposit of Punjab National Bank drawn in favour of the Executive Engineer, Water Resources Division, Chhuikhadan. The High Court disqualified the appellant on the ground that out-of-State bidders were mandatorily required to submit EMD through Demand Draft. The Supreme Court examined Clauses 2.13, 2.15 and 2.16 of the tender document and found that Clause 2.13(a)(xiii) mentioned bank draft as one approved mode, while Clause 2.13(b) and Clause 2.15 used the word “may”, thereby making Demand Draft optional and not mandatory. The Court also noted the State’s own admission that, as an accepted practice, it had been accepting FDRs even from out-of-State bidders, and that the tender scrutiny committee had initially found the appellant qualified.

Decision: The Supreme Court allowed the appeal, set aside the High Court’s judgment, and affirmed the appellant’s qualification at the stage of opening Envelope A concerning the EMD requirement. The Court clarified that it had not expressed any opinion on the subsequent disqualification arising from Envelope B relating to the pre-bid qualification certificate. Since the subsequent disqualification occurred after the filing of the special leave petition and after the High Court’s disqualification on Envelope A, the Court permitted the appellant to approach the tendering authority within 48 hours of uploading of the Supreme Court judgment with a representation against the subsequent disqualification, or to urge contentions based on the representation already submitted. Pending applications were disposed of.