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 N

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