Jammu & Kashmir High Court Says Bid Security Is Indispensable In Tendering Process, Rejects Substitution With Performance Security

The Jammu and Kashmir and Ladakh High Court has said that bid security cannot be substituted by performance security as both are distinguishable and are submitted on different stages of the tender process.

Justice Wasim Sadiq Nargal made this exposition while dealing with the question as to whether there exists any difference between Performance Security and Bid Security and could Performance Security be a substitute to the Bid Security. The other question that warranted an answer was if the submission of the former in place of the latter could be subsequently rectified.

In the instant matter the petitioner had participated in a tender process issued by the Office of the Chief Engineer, PW (R&B) Department, Jammu, for the construction of three roads. The petitioner submitted their tender documents, including a valid Bank Guarantee. The Summary evaluation considered the petitioner's bid as responsive. However, during the technical evaluation, the Tender Evaluation Committee declared the petitioner's bid as non-responsive because the Bank Guarantee had expired before the specified date.

The petitioner objected to this decision, but their objections were not entertained, and their tender was rejected as a result of which the petitioner filed a petition challenging the rejection and the subsequent allotment of the work to respondent no. 4.

Answering the question as to whether the respondents can accept the Performance Security submitted by the Contractor in place of Bid Security for any tender in negative, Justice Nargal observed providing of the performance security comes at a stage when the bidder is declared as L1 and that stage has not yet come in the instant case. A bidder as per the e-NIT was required to submit Earnest Money Deposit (EMD)/ Bid Security in the shape of FDR/DR/BG to the tune of 2% of the advertised cost of the work along with his bid and pledged to Chief Accounts Officer, PWD (R&B), Jammu. This was mandatory requirement as per the terms and conditions of the contact, the bench pointed.

Earnest Money Deposit and Performance Security are two different kinds of securities and have different purposes and obligations and are submitted at different stages of the tendering process and therefore , the non submission of the EMD in the shape of BG entailed outright rejection of the bid, the bench underscored.

While noting that the petitioner had submitted the Performance Security and not the Bid Security which was required under NIT, the court said that the performance security cannot substitute a bid security for any tender.

Deliberating on the other contention of the petitioner that he was entitled to rectify the performance security submitted as bank guarantee and also provide any additional security in terms of clause 15.1 of the Standard Bidding document (SBD), the court said that the same cannot be rectified as in case an essential tender condition which had to be strictly complied with was not so complied with, the employer would have no power to condone lack of such strict compliance.

"...It is crystal clear that the submission of performance security in placed of bid security cannot be rectified as the same is a mandatory requirement as per clause 6 of the e-NIT", the bench emphasised.

In view of the said legal position the bench could not appreciate any merit in the petition and accordingly dismissed the plea.

Case Title: Ghulam Nabi Mir Vs UT of J&K.

Citation: 2023 LiveLaw (JKL) 144

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