Rr Constructions and Infrastructure India Pvt Ltdv.Gayatri Ventures and Others

Legal Analysis: Rr Constructions and Infrastructure India Pvt. Ltd. v. Gayatri Ventures and Others

Citation: 2026 INSC 514

Court: Supreme Court of India

Bench: A Division Bench comprising Justice Sanjay Kumar & Justice K. Vinod Chandran

Date of Decision: May 20, 2026

Nature of Judgment: Civil Appeal arising out of SLP (Civil) No. 37099 of 2025 against the judgment of the High Court.

Synopsis of the Judgment

The appellant (an out-of-State bidder) participated in a tender issued by the Water Resources Department. The tender document provided that Earnest Money Deposit (EMD) could be submitted in various forms, including “Approved Interest Bearing Security” (Clause 2.13(a)(iv)) or “Bank Draft” (Clause 2.13(a)(xiii)). For out-of-State bidders, Clause 2.13(b) stated that they “may submit” EMD in the form of a bank draft. The appellant submitted a Fixed Deposit (FD) in the name of the Tendering Authority. The Tendering Authority initially qualified the appellant, but the High Court disqualified him, holding that a DD was mandatory for out-of-State bidders. The Supreme Court set aside the High Court’s order, holding that the word “may” in Clauses 2.13(b) and 2.15 indicates that the DD was only an option, not a mandatory condition. The FD was an “Approved Interest Bearing Security” under Clause 2.13(a)(iv). The Court affirmed the appellant’s qualification on Envelope A, but left open the issue of subsequent disqualification on Envelope B (relating to a pre‑bid qualification certificate), granting the appellant 48 hours to represent against that disqualification.

1. Basic Information of the Judgment

Case Title: Rr Constructions and Infrastructure India Pvt. Ltd. v. Gayatri Ventures and Others

Citation: 2026 INSC 514

Civil Appeal No.: Arising out of SLP (Civil) No. 37099 of 2025

Bench: Justice Sanjay Kumar & Justice K. Vinod Chandran

Date of Decision: May 20, 2026

Court: Supreme Court of India (Civil Appellate Jurisdiction)

Impugned Order: Judgment of the High Court disqualifying the appellant on the ground that EMD was not submitted by way of Demand Draft (DD) as allegedly mandatory for out-of-State bidders.

2. Legal Framework

Major Laws and Provisions Involved

• Constitution of India, 1950 – Article 226 (writ jurisdiction of High Courts), Article 136 (special leave to appeal).

• Tender Law Principles – Interpretation of tender documents; use of word “may” indicates option, not compulsion; strict compliance with mandatory conditions, but optional conditions cannot be treated as mandatory.

• Specific Clauses of Tender Document (Annexure P2) – Clause 2.13(a)(iv) (Approved Interest Bearing Security as a form of EMD), Clause 2.13(a)(xiii) (Bank Draft in case of tenderers of other States), Clause 2.13(b) (out-of-State tenderers “may submit” EMD in the form of bank draft as specified), Clause 2.15 (“Earnest Money for Tenders from other State” – renewal of DD).

Key Precedents Cited and Applied

• No specific precedents were cited; the Court relied on the plain language of the tender document and the well‑settled principle that the word “may” in a tender condition, in the absence of a clear mandatory intent, creates an option, not a compulsion.

3. Relevant Facts

The Water Resources Department (State of Chhattisgarh) issued a Notice Inviting Tender (NIT) for the work “Construction of Head Work of Lamti Feeder Minor Tank Scheme” with an estimated project value of Rs.13,72,98,000. The appellant (RR Constructions) and the 6th respondent (Gayatri Ventures) were among the bidders. The appellant’s financial bid was Rs.120 Crores; the 6th respondent’s was Rs.149 Crores.

The tender required submission of bids in three envelopes: Envelope A (technical and EMD), Envelope B (pre‑bid qualification certificate), and Envelope C (financial bid). The dispute arose regarding the form of EMD.

Clause 2.13(a) listed several approved forms of EMD, including sub‑clause (iv) “Approved Interest Bearing Security” and sub‑clause (xiii) “Bank Draft of State Bank of India or scheduled Banks in case of tenderers of other States.” Clause 2.13(b) stated: “The condition applicable to out of State bidders, in furnishing the EMD, which may be in the form of bank draft as specified in Clause 2.13(a)(xiii).” Clause 2.15 also used the word “may” with respect to submission of DD.

The appellant submitted a Fixed Deposit (FD) of Punjab National Bank (Banjara Hills Branch, Hyderabad) drawn in favour of the Executive Engineer, Water Resources Division, Chhuikhadan (CG). The FD was an interest‑bearing security.

The Tendering Authority initially found the appellant qualified. However, the 6th respondent filed a writ petition before the High Court challenging the appellant’s qualification. The High Court allowed the writ petition, holding that for out‑of‑State bidders, submission of EMD by way of Demand Draft was mandatory, and the appellant’s FD was invalid. Consequently, the appellant was disqualified, and the 6th respondent’s bid (being the next lowest) was accepted.

The appellant filed an SLP before the Supreme Court. During the pendency of the SLP, the appellant was also disqualified on Envelope B (pre‑bid qualification certificate). The appellant did not immediately challenge that disqualification. The Supreme Court set aside the High Court’s judgment on the EMD issue and granted the appellant 48 hours to represent against the Envelope B disqualification.

4. Issues

Issue No. 1: Whether the submission of EMD by way of a Demand Draft was a mandatory condition for out‑of‑State bidders, or merely an option.

Issue No. 2: Whether the Fixed Deposit (FD) submitted by the appellant qualified as an “Approved Interest Bearing Security” under Clause 2.13(a)(iv) of the tender document.

Issue No. 3: Whether the High Court erred in disqualifying the appellant on the ground that the EMD was not in the form of a DD.

Issue No. 4: Whether the Court should permit the appellant to contest the subsequent disqualification on Envelope B (pre‑bid qualification certificate) even though the appeal did not originally challenge that disqualification.

5. Ratio Decidendi

A. The use of the word “may” in Clauses 2.13(b) and 2.15 indicates that submission of DD was optional, not mandatory (Paras 8-9).

The Court examined the language of the tender document. Clause 2.13(a) listed multiple approved forms of EMD, including “Approved Interest Bearing Security” (sub‑clause iv) and “Bank Draft” (sub‑clause xiii). Clause 2.13(b) specifically addressed out‑of‑State bidders and stated that they “may submit” EMD in the form of bank draft as specified in Clause 2.13(a)(xiii). Clause 2.15 also employed the word “may”. The Court held that the word “may” in these clauses is permissive, not mandatory. If the tender authority intended DD to be the only acceptable form for out‑of‑State bidders, it would have used the word “shall”. Therefore, the appellant had the option to submit EMD either as a bank draft or in any other approved form, including an interest‑bearing security.

B. The Fixed Deposit was an “Approved Interest Bearing Security” within the meaning of Clause 2.13(a)(iv) (Para 9).

The Court interpreted the phrase “Approved Interest Bearing Security” to include a Fixed Deposit. The word “approved” was not meant to indicate prior approval by the State Government; rather, it was a loose expression describing a security that bears interest. A Fixed Deposit issued by a nationalised bank (Punjab National Bank) in favour of the Tendering Authority clearly falls within this category. Therefore, the appellant’s submission of a FD was perfectly valid.

C. The High Court’s judgment was unsustainable; the appellant’s qualification on Envelope A is affirmed (Para 10).

Since the submission of a DD was only an option and the appellant’s FD was a valid form of EMD, the High Court erred in disqualifying the appellant. The Court set aside the impugned judgment and declared that the appellant was qualified on the opening of Envelope A, as originally determined by the Tendering Authority.

D. The subsequent disqualification on Envelope B is not before this Court, but the appellant may represent against it within 48 hours (Paras 11-14).

The Court noted that after the High Court’s order, the appellant was also disqualified on Envelope B (concerning a pre‑bid qualification certificate). This disqualification was not challenged in the present appeal because it occurred after the SLP was filed and because, at that time, the appellant was already disqualified by the High Court. The Court held that it would not be fair to fault the appellant for not responding to that disqualification when the High Court’s order had already disqualified him on other grounds. Consequently, the Court permitted the appellant to approach the Tendering Authority within 48 hours of the judgment being uploaded with a representation against the Envelope B disqualification. The Court clarified that it had not expressed any opinion on the merits of that disqualification.

6. New Legal Principles Established / Reiterated

• In the interpretation of tender documents, the use of the word “may” indicates a permissive or optional condition, while “shall” indicates a mandatory condition. Unless the context clearly compels a contrary interpretation, a condition using “may” cannot be treated as mandatory.

• An Earnest Money Deposit (EMD) in the form of a Fixed Deposit (FD) drawn in favour of the Tendering Authority qualifies as an “Approved Interest Bearing Security” if the tender document accepts such securities, even if the document does not explicitly mention “Fixed Deposit” by name.

• Where a bidder is disqualified by the High Court on a particular ground, and during the pendency of an appeal a separate disqualification arises, the bidder may not be faulted for not challenging the separate disqualification immediately, because the primary disqualification rendered the challenge academic. In such circumstances, the appellate court may grant the bidder a limited opportunity to represent against the separate disqualification.

• A tender condition that is phrased as an option cannot be converted into a mandatory condition by subsequent interpretation. The Tendering Authority’s own acceptance of FDs from out‑of‑State bidders as a matter of practice is a relevant factor indicating that the condition was not intended to be mandatory.

7. Court’s Examination and Analysis

The Court first noted that the High Court had disqualified the appellant solely on the ground that the EMD was submitted by way of a Fixed Deposit instead of a Demand Draft. The Court then examined the relevant clauses of the tender document.

Clause 2.13(a) listed two relevant sub‑clauses: (iv) “Approved Interest Bearing Security” and (xiii) “Bank Draft of State Bank of India or scheduled Banks in case of tenderers of other States.” Clause 2.13(b) stated: “The condition applicable to out of State bidders, in furnishing the EMD, which may be in the form of bank draft as specified in Clause 2.13(a)(xiii).” The Court observed that the language “may be in the form of bank draft” clearly indicates that the bank draft is one of the permissible forms, not the exclusive form.

The Court also noted that Clause 2.15, titled “Earnest Money for Tenders from other State,” again used the word “may” and spoke about renewal of DD, but did not mandate that only a DD could be submitted.

The Court rejected the argument that the word “approved” in “Approved Interest Bearing Security” required specific approval from the State Government. The Court held that “approved” was used loosely to mean any interest‑bearing security that is ordinarily acceptable, such as a Fixed Deposit from a nationalised bank. The FD was made in favour of the Executive Engineer, which demonstrated that the appellant intended to secure the EMD in favour of the Tendering Authority.

The Court also took note of the submission of the learned Senior Counsel for the State, who admitted that as per accepted practice, the State had been accepting FDRs even from out‑of‑State bidders. This further supported the conclusion that the DD condition was not mandatory.

Having set aside the High Court’s order, the Court addressed the subsequent disqualification on Envelope B. The Court observed that the appellant had not challenged that disqualification, but given that it occurred after the SLP was filed and while the appellant was already disqualified by the High Court, it would be appropriate to give the appellant a final opportunity to represent against it. The Court granted 48 hours for the appellant to file a representation, leaving the merits of that disqualification open.

The appeal was allowed, and the impugned judgment of the High Court was set aside.

8. Critical Analysis

Strengths: The judgment is a straightforward application of the principle of plain language interpretation. It correctly holds that the word “may” cannot be read as “shall” in the absence of any compelling context. The Court also correctly identifies that the tender document itself listed multiple forms of EMD, and the specific clause for out‑of‑State bidders did not exclude those other forms. The acceptance of Fixed Deposits as an “Approved Interest Bearing Security” is pragmatic – a FD is a common and secure form of EMD. The judgment also protects the appellant from being penalised for not immediately challenging the subsequent disqualification, recognising the practical reality that a bidder who is already disqualified by the High Court may not have the incentive or standing to pursue a separate disqualification.

Potential concerns: The judgment does not provide a detailed analysis of the meaning of “Approved Interest Bearing Security” – it merely states that a FD qualifies. While this is likely correct, the tender could have been clearer by expressly listing “Fixed Deposit” as a permitted form. The Court’s reliance on the State’s admission that they had been accepting FDRs in practice is helpful but not strictly necessary. Another concern is that the Court granted only 48 hours to the appellant to file a representation against the Envelope B disqualification, which is a very short time. However, the appellant had already been aware of the disqualification for some time, and the Court’s intention was to expedite the matter rather than allow indefinite delays.

Practical impact: This judgment will be cited in all tender disputes where the interpretation of “may” versus “shall” is in question. It reinforces the principle that permissive language creates an option, not a mandate. It also clarifies that Fixed Deposits are acceptable as interest‑bearing securities in tenders, unless the tender explicitly excludes them. The judgment also provides guidance on how to handle subsequent disqualifications that arise during the pendency of an appeal.

9. Final Outcome

The Civil Appeal was allowed.

• The impugned judgment of the High Court was set aside.

• The qualification of the appellant on the opening of Envelope A (EMD) was affirmed.

• The Tendering Authority’s initial decision to qualify the appellant was restored.

• The Court did not express any opinion on the subsequent disqualification of the appellant on Envelope B (pre‑bid qualification certificate).

• The appellant was granted 48 hours from the uploading of the judgment to file a representation against the Envelope B disqualification before the Tendering Authority.

• Pending applications stood disposed of.

10. Practical Application

For bidders in public tenders: Always read the tender document carefully. If a condition uses the word “may”, it is generally optional unless the context clearly indicates otherwise. However, if you intend to rely on an option, ensure that the document does not contain any conflicting language (e.g., “only” or “shall”). When submitting EMD, a Fixed Deposit (FD) is usually acceptable if the tender accepts “interest bearing securities”. Ensure that the FD is made in favour of the Tendering Authority and is valid for the required period. Keep a copy of the FD receipt and all correspondence.

For tender authorities drafting tender documents: Use clear language. If you intend a condition to be mandatory, use the word “shall”. If you intend to give an option, use “may”. List all acceptable forms of EMD explicitly. If you accept Fixed Deposits, say so expressly. If you have a practice of accepting FDs from out‑of‑State bidders, document that practice to avoid disputes.

For lawyers challenging a bidder’s qualification on procedural grounds: First, examine whether the condition alleged to be violated is truly mandatory or merely optional. Look for the words “shall” or “must”. If the tender uses “may”, the challenge is weak. Also, check whether the Tendering Authority has accepted similar deviations in the past – consistent practice can guide interpretation. If the bidder has submitted an FD and the tender permits “interest bearing securities”, the bidder has a strong case.

For lawyers defending a bidder’s qualification: Argue that the use of “may” creates an option. Emphasise that the tender document listed multiple forms of EMD and did not exclude out‑of‑State bidders from using other forms. If the State has accepted FDs from other out‑of‑State bidders, bring that to the court’s attention as evidence of the authority’s own interpretation. Also argue that the purpose of EMD is to secure the bid, and a FD is as secure as a DD (if not more, because it cannot be dishonoured).

For a court dealing with interpretation of tender conditions: Follow the plain language rule. Do not add words that are not there. If the tender says “may”, do not read it as “shall”. If the tender lists multiple options, assume that all options are available unless one is expressly excluded. The authority’s own practice is a useful interpretative aid. If there is ambiguity, resolve it in favour of the bidder who has acted in good faith, especially if the deviation does not affect the competitiveness or integrity of the bidding process.

11. Court Lines

Line 1 (Option, not mandatory – Para 8):
“The word ‘may’ is also employed in Clause 2.15 and hence it is only in the nature of an option and not a mandatory condition.”

Line 2 (FD as approved security – Para 9):
“The word approved used is not to indicate any specific approval by the State Government, as is submitted by the learned Senior Counsel for the State, but loosely indicates Interest Bearing Security, which character a FD definitely has.”

Line 3 (High Court judgment unsustainable – Para 10):
“We are hence of the opinion that the impugned order is not sustainable going by the specific terms of the tender document and hence we set aside the order of the High Court and declare the qualification of the appellant on the opening of Envelope A as has been declared by the Tendering Authority.”

Line 4 (Subsequent disqualification – Para 13):
“We cannot but observe that even if a challenge was made against the subsequent disqualification, it would have been declined by reason of the disqualification ordered by the High Court. The appellant cannot be faulted for not having responded to the same.”

Line 5 (Opportunity to represent – Para 13):
“The disqualification on opening Envelope A with respect to the EMD, as ordered by the High Court having been reversed by us, we are of the opinion that the appellant could approach the Tendering Authority within 48 hours of this judgment being uploaded, with a representation against such disqualification.”

12. Legal Strategy Insight

For a bidder who has submitted a FD instead of a DD and is threatened with disqualification: Do not accept disqualification without a fight. First, point to the language of the tender document. If it says “may submit DD”, argue that DD is optional. If the tender lists “interest bearing securities” as an acceptable form, argue that a FD is an interest bearing security. If the Tendering Authority has accepted FDs from other bidders, bring evidence of that practice. If the authority insists on disqualification, challenge it before the High Court. Cite this judgment. If the High Court rules against you, appeal to the Supreme Court.

For a tender authority that wants to avoid such disputes: Amend your tender documents to list all acceptable forms of EMD explicitly. If you intend to require DD only from out‑of‑State bidders, use the word “shall” and state “only a Demand Draft drawn on a scheduled bank in India shall be accepted as EMD from bidders outside the State.” If you are willing to accept FDs, add “Fixed Deposit Receipt (FDR) from any nationalised bank” to the list of acceptable forms. This clarity will save litigation costs.

For a successful bidder whose bid has been accepted after a competitor’s disqualification: Be prepared for the possibility that the disqualification may be reversed on appeal. If the competitor challenges the disqualification, seek to intervene. Argue that the contract has already been awarded and that any reversal would cause irreparable harm. However, if the disqualification was based on an incorrect interpretation of the tender, the court may still reverse it, and you may have to compete again.

For a lawyer drafting a petition challenging a tender disqualification: Focus on the language of the tender document. Quote the relevant clauses verbatim. Highlight the use of “may” versus “shall”. If there is ambiguity, argue that ambiguity in tender documents must be interpreted in favour of the bidder (the principle of contra proferentem, though not always applied in tender law, can be invoked). Also, argue that the purpose of the EMD – to secure the bid – was fully satisfied by the FD, and that technical non‑compliance that does not affect the integrity of the process should not result in disqualification.

For a court deciding a tender dispute: First, determine whether the condition in question is mandatory or directory. If the tender uses “shall”, it is presumptively mandatory. If it uses “may”, it is directory unless the context shows an intent to make it mandatory. Consider the consequences of disqualification – if the deviation is minor and does not affect the fairness of the process, consider giving the bidder an opportunity to cure the defect. However, if the condition is clearly mandatory and the deviation is material, disqualification may be justified. In this case, the FD was a valid form of EMD, so there was no deviation at all.