Clause forfeiting bid security illegal – Delhi HC

The Delhi high court last week held that the clause in a tender document for building contract permitting 5 per cent bid security amount to be forfeited in case of a non-responsive bid is “clearly penal in nature and thus provisions of Section 74 of the Contract Act would apply.” It cannot be categorized as a reasonable pre- estimate of damages for a non-responsive bid and thus the bank guarantee for 5 per cent of the bid amount cannot be en cashed in such an eventuality. The high court ruled this in the case of IVRCL Infrastructure and Projects Ltd vs National Highway Authority of India. ...