Delhi High Court - Orders
Mahindra Susten Private Limited vs Nhpc Limited on 2 July, 2020
Author: C. Hari Shankar
Bench: C .Hari Shankar
$~1 & 2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 162/2020, I.A. 4922/2020 ,I.A. 4923/2020
MAHINDRA SUSTEN PRIVATE LIMITED ....Petitioner
Through: Mr. K.V. Viswanathan, Sr.
Advocate with Mr. Sanjeev
Kapoor, Mr. Prateek Kumar,
Ms. Sneha Janakiraman, Mr.
Apoorv Singhal and Ms. Smriti
Nair, Advs.
Versus
NHPC LIMITED ..... Respondent
Through: Mr. Tejas Karia, Mr. Gauhar
Mirza, Mr. Prakhar Deep and
Mr. Nishant Doshi, Advs.
AND
+ ARB.P. 217/2020, I.A. 4920/2020, I.A. 4921/2020
MAHINDRA SUSTEN PRIVATE LIMITED ....Petitioner
Through: Mr. K.V. Viswanathan, Sr.
Advocate with Mr. Sanjeev
Kapoor, Mr. Prateek Kumar,
Ms. Sneha Janakiraman, Mr.
Apoorv Singhal and Ms. Smriti
Nair, Advs.
Versus
NHPC LIMITED ..... Respondent
Through: Mr. Tejas Karia,
Mr. Gauhar Mirza, Mr. Prakhar
Deep and Mr. Nishant Doshi,
Advs.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 1 of 33
CORAM:
HON'BLE MR. JUSTICE C .HARI SHANKAR
ORDER
% 02.07.2020
(Video-Conferencing)
I.As.4923/2020 and 4921/2020 (exemption from paying court fee)
1. These applications, by the petitioner, seek exemption from filing notarized affidavits and paying court fee and process fee.
2. In view the restrictions imposed consequent on the Covid-2019 pandemic, and the administrative order dated 4th April, 2020, passed by this Court, on the administrative side, these applications are allowed, subject to the petitioner filing notarized affidavits and depositing court fee and process fee within 72 hours of resumption of normal Court work.
3. The applications are disposed of.
I.As.4920/2020 and 4922/2020 (exemption from filing typed copies of dim documents and permission to file lengthy synopsis and list of dates)
1. These applications seek exemption from filing typed copies of dim documents and permission to file lengthy synopsis and list of dates. Permission is granted.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 2 of 332. Prayer for exemption from filing typed copies of dim documents and permission to file lengthy synopsis and list of dates is allowed, subject to just exceptions.
3. The applications are disposed of.
O.M.P. (I)(COMM.) 162/2020 & ARB.P. 217/2020
1. O.M.P. (I) (COMM.) 162/2020 and Arbitration Petition 217/2020 have been preferred, by the petitioner, under Section 9 and Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act"), respectively.
2. Arb. P. 217/2020 seeks appointment of an Arbitrator to arbitrate on the disputes between the petitioner and the respondent, whereas O.M.P. (I) (COMM.) 162/2020 seeks interlocutory reliefs, during the pendency of the arbitration proceedings.
3. A brief overview of the facts is necessary at the outset.
4. Notice Inviting Tender (NIT), inviting bids for "Engineering Procurement Construction" (EPC) Contract for 10 MW capacity Floating Solar Power Project at West Kallada in the State of Kerala with its "Comprehensive Operation and Maintenance for 10 years", was issued, by the respondent-NHPC on 5th July, 2018. The NIT required the bidders to enter into a Pre-Contract Integrity Pact (hereinafter referred to as "the Integrity Pact"), prior to submission of the bid. Accordingly, the petitioner submitted the Integrity Pact on 3rd O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 3 of 33 September, 2018, its online bid on 4th September, 2018 and its offline bid on 6th September, 2018, in accordance with the terms of the NIT. A bank guarantee dated 31st August, 2018 for ₹ 97 lacs, was also submitted by the petitioner towards the bid security. The said bank guarantee has been extended from time to time, and stands encashed by the respondent.
5. Clause 3.2.A.1.2 of the NIT, along with the note appended thereunder, reads thus:
"3.2.A.1.2 The bidder should have experience of having successfully completed a project of any nature involving floating structures/platform/ deck/ underwater cable works, in last five (5) years on Engineering, Procurement and Construction (EPC) basis.
Note:-
Floatation Device Technology Provider: The bidder should propose name of the float technology provider with whom they expect to tie-up for supply of the floats. Bidder may propose any number of vendors (including bidders own design) along with their credentials as part of their technical bid. However, prior to signing of the contract agreement, the successful bidder shall communicate their finalised float vendor."
6. In accordance with the aforesaid stipulation in the NIT, the petitioner proposed the names of four floatation device technology providers, vide its letter dated 31st October, 2018, in response to which on 30th November, 2018, NHPC communicated, to the petitioner, thus:
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 4 of 33"By Speed Post Ref.No.:NH/CCW/CC-III/Floating-Solar/EPC/2018/708 Date: 31.11.2018 Email:-
[email protected]/shubham.pratyush@mahind ra.com M/s. Mahindra Susten Pvt. Ltd., 6th Floor, AFL House, Lok Bharati Complex, Marol Maroshi Road, Mumbai, Maharashtra-400059 Kind Attention: Mr. Ankit Jain, General Manager Subject: Engineering Procurement Construction (EPC) contract for development of 10 MW Floating Solar Power Project including evacuation arrangements at West Kallada Site, Dist.- Kollam in the state of Kerala, along with its comprehensive operation and maintenance for 10 (ten) years.
Ref: (i) E-TENDER NO. 2018_NHPC_355399_1 Dear Sir, This is with reference to your Bid submitted against aforesaid Tender.
In this regard, it is informed that your bid has been found Techno-commercially responsive on the basis of following proposed sub-contractor as per Clause - 3.2.A.1.2 of ITB/NIT:
1. M/s. Yellow 2 Gen Energy Pvt. Limited, Gurugram Thanking you, Yours faithfully Sd./-
General Manager (Civil Contracts-III) "
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 5 of 337. On 6th December, 2018, the petitioner was notified, by the NHPC that it had emerged successful for award of the aforesaid tender. It appears that after making eight requests, to the petitioner, for extension of the period of validity of the bid, submitted by the petitioner, the respondent, vide letter, dated 20th September, 2019, awarded the aforesaid tender to the petitioner. The subject of the said communication, as set out in the body thereof, reads "Notification of Award of Contract for "Ex-works Supply of all Plant and equipments and materials, specified spares complete in all respect (FIRST CONTRACT)" for "EPC contract for development of 10 MW Floating Solar Power Project including evacuation arrangements at West Kallada wsite, Dist.-Kollam in the state of Kerala, along with its Comprehensive Operation and Maintenance for 10 (ten) years". Para 4.0 of the said communication set out the total contract price for the work and para 5.0 stated that the Sub-contractor for the Float Device Technology provider, would be M/s. Yellow 2 Gen Energy Pvt. Ltd (hereinafter referred "Y2G"), who was required to submit a performance bank guarantee equivalent to 5% of value of work sublet. Paras 6.0 and 8.0 of the said letter read thus:
"6.0 You shall prepare and finalize the Contract Documents for signing of the formal Contract Agreement and shall enter into the Contract Agreement with us, as per the Proforma enclosed with the Bidding Documents, on non-judicial stamp paper on appropriate value within 28 days from the date of this notification of award.
***** 8.0 Please take the necessary action to commence the work and confirm action."O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 6 of 33
8. According to the petitioner, owing to the delay in awarding of the LOA to the petitioner, by NHPC, there were considerable technological advancements, which motivated the petitioner to address various communications, to the NHPC, opining that, in order to achieve optimum performance, inclusion of additional/alternative float technology providers would be appropriate.
9. Vide email dated 15th November, 2019, addressed to the respondent/NHPC, Y2G expressed its inability to participate in execution of the aforesaid contract, on the ground that it was unable to meet the schedule requirements of the petitioner.
10. The petitioner asserts that, ignoring the petitioner‟s requests for including other alternative float technology providers, the respondent invoked the bank guarantee, dated 31st August, 2018, for ₹97 lacs, submitted by the petitioner towards the bid security, on 3 rd March, 2020, and followed up the said invocation by issuance, to the petitioner, of successively, a notice dated 2nd March, 2020, terminating the contract and cancelling the award of work to the petitioner, an order dated 9th March, 2020, suspending further business dealings with the petitioner, and a Show Cause Notice dated 19 th June, 2020, directing the petitioner to show cause, in writing 15 days, as to why business dealings with the petitioner, be not banned, and the petitioner be not debarred from entering into any contract with the respondent. Of these documents, it is necessary to set out, in extenso, the suspension order, dated 9th March, 2020 and a Show Cause Notice, dated 19th June, 2020, read thus:
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 7 of 33"NHPC Limited (A Government of India Enterprise) BY REGD. POST/SPEED POST/COURIER Phone:___________ Date: 09.03.2020 Ref. No. NH/CCW/CC-III/Floating-Solar/EPC/2020/04/289 To MAHINDRA SUSTEN PVT. LTD.
G.M. BHOSLE ROAD P.K. KURNE CHOWK, WORLI MUMBAI, MAHARASHTRA-400018 Attention: Shri Ankit Jain, General Manager Subject: Intimation of Suspension of Business Dealings Dear Sir, Whereas the work of "Engineering Procurement and Construction (EPC) contract for development of 10MW Floating Solar Power Project including evacuation arrangements at West Kallada site, Dist.-Kollam in the state of Kerala, along with its comprehensive operation and maintenance for 10 (ten) years"
was awarded to your firm vide Letter of Award No. NH/CCW/CC-III/Floating-Solar/LOA/2019/613, 614, 615 dated 20.09.2019 amounting to Rs.59.70 Crores (Rs. Fifty Nine Crore Seventy Lac Only) with M/s. Yellow 2 Gen Energy Pvt. Ltd., Gurugram as approved Sub-contractor for the "Float Device Technology Provider".
Whereas the conduct of your firm in respect of the following is under investigation:
Brief of the default: M/s. Mahindra Susten Pvt. Ltd. have failed to submit Performance Guarantee @ 5% from the sub-contractor for the value of work sublet to the Sub-contractor along with Joint Deed of Undertaking from the sub-contractor i.e. M/s. Yellow 2 Gen, signed integrity pact between the Contractor & sub-contractor and could not sign the Contract agreement within O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 8 of 33 the extended time for signing of contract agreement even after giving adequate opportunity to sign the same by extending the date of signing of contract agreement thrice at M/s. Mahindra Susten Pvt. Ltd. request.
"Whereas the Competent Authority prima facie considered the allegations (under investigation) are of a serious nature and decided pending investigation, it is not in the interest of the corporation to continue business dealing with your firm.
This order shall have the following effects:
i) Further business dealings with your firm is Suspended within NHPC. The order of Suspension is effective with immediate effect and would operate for a period of six months or till the investigation is completed and whole process of final order is over within such period. However, if investigations are not completed in six months‟ time, the Competent Authority may extend the period of Suspension.
ii) During the period of Suspension, no business dealing shall be held with your firm. No enquiry/bid/tender shall be issued to your firm nor will the bids submitted by your firm be entertained.
iii) In cases where tenders have already been issued to you and price bids are yet to be opened, the Price Bid submitted by you shall not be opened and BG/EMD, if any, submitted by you shall be returned.
iv) In cases where tenders have already been issued to you and Price Bids have already been opened, the tendering process shall be continued.
v) In case of ongoing contracts between you & NHPC (including cases where contract has already been awarded before the issue of Suspension order) you will be required to continue with the execution and perform as per terms of the contract.
vi)
a) In case the Firm is in Joint Venture the following would also be applicable:
i) Participation of Agency in Joint Venture:O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 9 of 33
Tenders in which your firm has been proposed as Joint Venture Partner by any of the bidders and price bids have been opened prior to Suspension of your firm in such cases the tendering process shall not be annulled on his ground and the Agency shall be permitted to continue as Partner in the Joint Venture for such bidding. However where event of Price Bid opening has not taken place prior to Suspension/Banning of Agency then in such case Agency shall not be permitted to participate as Partner in the Joint Venture.
ii) Banning of joint venture:
As the Joint Venture is Banned, your firm intends to bid as Partner(s) of Joint Venture in bidding process then it shall be permitted to participate in the bidding process if it has not been Banned on grounds of its role and responsibility in the tendering process for which the Joint Venture has been Banned in Past. In case if the Joint Venture which has been Banned does not indicate the roles and responsibility of individual Partner(s) then, the partner of the Banned Joint Venture shall only be allowed to participate in the bidding process if its participation share is less than 35%.
b) Your firm shall not be allowed to participate as Sub-
Vendor/Sub-Contractor in the tenders. Further if your firm is an approved Sub-vendor under Any Contract for such equipment/component/service, the Main Contractor shall not be permitted to place work order/Purchase order/Contract on your agency as a Sub-Vendor/Sub-Contractor after the date of Suspension/Banning even though the name of the partly has been approved as a Sub-Vendor/Sub-Contractor earlier.
c) There would be no bar on procuring the spares and awarding Contracts towards Annual Maintenance (AMC)/O&M/Repair works on Agencies pertaining to the packages for which they have been Banned provided the Equipment has been supplied by such Agency.
d) Banning of business dealing shall not be applicable to the Subsidiary company of the Banned agency provided subsidiary company has not participated on the strength of the Banned agency.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 10 of 33On expiry of the above period of Suspension/Banning, you may approach Contracts Civil Division, with request for revocation of the order mentioning inter-alia the steps taken by you to avoid recurrence of misconduct which has led to Suspension.
Yours faithfully, Sd./-
General Manager (Contracts Civil-III) Email:[email protected] Telephone No.:+91(129) 2270974;
xxxxx xxxxx xxxx
NHPC Limited
(A Government of India Enterprise)
By Mail/Speed Post
Phone:___________
Date: 19.06.2020
Ref. No. NH/CCW/CC-III/Kerala-Floating/2020/554 M/s. Mahindra Susten Pvt. Ltd.
G.M. BHOSLE ROAD P.K. KURNE CHOWK, WORLI MUMBAI, MAHARASHTRA-400018.
Attn: Sh. Ankit Jain, General Manager
Subject: Show Cause Notice
Ref:1.LOANo.NH/CCW/CC-III/Floating -
Solar/EPC/2019/613-
615 Dated: 20.09.2019.
2.NHPC Letter No. NH/CCW/CC-III/Floating-
Solar/EPC/2020/253 Dated: 02.03.2020.
3.NHPC Letter No. NH/CCW/CC-III/Floating-
Solar/EPC/2020/289 Dated: 09.03.2020.
Dear Sir, O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 11 of 33 You are hereby required to Show Cause in writing within 15 days from the date hereof why Business Dealing with your firm should not be banned/your firm is placed in the Banning List (as the case may be) and be debarred from entering into any contracts with NHPC for the following reasons:
1. Non submission of Performance Guarantee @5% from the approved sub-contractor for the value of work sublet to the sub-
contractor along with Joint Deed of Undertaking from the Sub contractor i.e. Yellow 2Gen, signed Integrity Pact between Contractor & Sub Contractor for the work of "EPC Contract for development of 10MW Floating Solar Power Project including evacuation arrangements, at West Kallada Site, Dist.-Kollam in the state of Kerala, along with its comprehensive O & M for 10 years" as per LOA/Bid Conditions.
2. Non signing of Contract Agreement within extended time even after giving adequate opportunity by extending the date of Signing of Contract Agreement thrice at M/s. Mahindra Susten Pvt. Ltd. request.
Your reply (if any) should be supported by documents and documentary evidence which you wish to rely in support of your reply. In case you desire to present your case in person to NHPC, an Oral Hearing shall be conducted on 29th June, 2020 at 15:00 Hours for which prior intimation be furnished to this office. Should you fail to reply to this Show Cause Notice within the time and manner aforesaid, it will be presumed that you have nothing to say and we shall proceed accordingly.
Your reply, if any, and the documents/documentary evidence given in support shall be taken into consideration prior to arriving at a decision.
Yours faithfully, Sd./-
General Manager (Contracts Civil-III) Email:[email protected] Telephone No.:129-2270974"
(Emphasis as in original)
11. Asserting, in the circumstances, that arbitral disputes had arisen between the petitioner and respondent-NHPC, the petitioner has O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 12 of 33 approached this Court under Section 11 of the 1996 Act, vide Arbitration Petition 217/2020, seeking reference of the disputes, between the petitioner and the respondent, to arbitration and O.M.P. (I) (COMM.) 162/2020, seeking an ad interim injunction of the aforesaid suspension order, dated 9th March, 2020 and Show Cause Notice, dated 19th June, 2020, during the pendency of the arbitral proceedings. Additionally, it has been prayed that the respondent be restrained from proceeding with any investigation against the petitioner, in furtherance of the impugned suspension order and Show Cause Notice, and from acting on the proposal to debar the petitioner and suspend all business dealings with it.
12. I have heard, at length, Mr. K.V. Viswanathan, learned Senior Counsel for the petitioner and Mr. Tejas Karia, learned counsel for the respondent-NHPC.
13. Pursuant to the order, passed on by this Court on the last date of hearing, brief written submissions have also been placed on record by the learned counsel for the parties.
14. One of the principal contentions of the respondent, on which Mr. Tejas Karia made exhaustive arguments, is that the dispute, between the parties, is not referable to arbitration at all, as there is no concluded contract between the petitioner and the respondent. Rather, it is sought to be contended that, as the impugned actions, against the petitioner, have been taken by the the respondent in accordance with the Integrity Pact, dated 3rd September, 2018, the applicability of tghe O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 13 of 33 1996 Act stands completely excluded, in view of Clause 10.0 of the Integrity Pact, which reads thus:
"10.0 Law and Place of Jurisdiction This Pact is subject to Indian Law. The place of performance and jurisdiction is the Registered Office of the Employer, i.e. Faridabad (Haryana). The arbitration clause provided in the tender document/contract shall not be applicable for any issue/dispute arising under Integrity Pact."
15. The petitioner has invoked the provisions of the 1996 Act under Clause 6.3 of the General Conditions of Contract (GCC), which reads thus:
"6.3 Arbitration Except as otherwise provided, in GCC clause-6.2 hereinbefore, all questions, dispute or difference in respect of which the decision has not been final and conclusive arising between the contractor and the Employer, in relation to or in connection with the contract shall be referred for arbitration in the manner provided as under:
6.3.1 Either of the parties may give to the other notice in writing of the existence of such question, dispute or difference which shall be settled in accordance with the Arbitration and Conciliation Act, 1996, as amended up to date.
6.3.2 Any dispute or difference what so ever arising between the parties and of or relating to the construction, interpretation, application, meaning, scope, operation /or effect of this contract or the validity of the breach thereof, shall be settled by arbitration in accordance with the rules of arbitration of the Delhi High Court Arbitration Centre and the award made in the pursuance thereof shall be final and binding on the parties. It is a term of the Contract that O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 14 of 33 the Party invoking arbitration shall specify all disputes to be referred to arbitration at the time of invocation of arbitration and not thereafter.
6.3.3 The cost and expenses of arbitration proceedings will be borne by each party as per terms of Delhi High Court Arbitration Centre in equal shares. However, the expenses incurred by each Party in connection with the document preparation, presentation etc. to produce to arbitral tribunal on its behalf shall be borne by each Party itself. Majority award rendered by arbitral tribunal shall be final and binding on the Parties."
(Emphasized in original)
16. The contention of the respondent is that there was only a "Proposed EPC Contract", between the petitioner and the respondent and that, therefore, Clause 6.3 supra, would not apply. Mr. Vishwanathan draws my attention, in this context, to Clause 29.1 of the instructions to bidders, forming part of the NIT, which reads thus:
"29.1 Prior to the expiration of the period of bid validity, the Employer will notify the successful Bidder in writing by registered letter/ speed post / fax,, that its bid has been accepted. The notification of award will constitute the formation of the contract and will be considered for all purposes of execution of contract provisions till such time the signing of the Contract Agreement."
(Emphasis supplied)
17. Mr. Vishwanathan submits that, by operation of the afore- extracted Clause 29.1, the notification of the award of the contract constitutes the formation of the contract, and is entitled to be considered, for all purposes, as amounting to execution of the contract provisions, till formal signing of the contract agreement by the petitioner and the respondent. The notification of the contract having O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 15 of 33 taken place in the present case on 20th September, 2019, Mr. Vishwanathan submits that Clause 29.1 became, ipso facto, inapplicable and there existed, therefore, a contract between the petitioner and the respondent, so that the arbitration Clause 6.3 would enure in the petitioner‟s favour and would entitled the petitioner to seek arbitral remedies under the aegis of the Delhi International Arbitration Centre. Mr. Vishwanathan has also drawn my attention, in this context, to the definition of "Contract Documents" and "Contract", as contained in the GCC, which reads thus:
""Contract Documents" means the documents listed in Article 1.1 (Contract Documents) of the Form of Contract Agreement (including any amendments thereto).
"Contract" means the Contract entered into between the Employer and the Contractor, together with the Contract Documents referred to therein; they shall constitute the Contract, and the term "the Contract" shall in all such documents be construed accordingly."
18. Mr. Vishwanathan further refers to the "Form of Contract Agreement", forming part of the GCC, which is found in Clause 1.1, which reads thus:
"1.1 Contract Documents (Reference GCC Clause 2) The following documents shall constitute the Contract between the Employer and the Contractor, and each shall be read and construed as an integral part of the Contract:
(a) This Contract Agreement
(b) Notification of Award
(c) Special Conditions of Contract
(d) General Conditions of Contract
(e) Employer‟s Requirements (Technical Specifications)
(f) Procedures (as listed)
(g) Technical Data Sheets
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 16 of 33
(h) Information for Bidders
(i) The Bid and Price Schedules submitted by the
Contractor"
19. Mr. Vishwanathan also relies on the direction, in the letter of contract of 20th September, 2019, supra, directing the petitioner to commence work. He further submits that the respondent having, on the basis of the said notification of award of the contract, directed the petitioner to commence work, it can hardly lie in the mouth of the respondent to contend that there was no contract between the parties, and that, therefore, the disputes between them were not referable to arbitration.
20. Mr. Vishwanathan further submits that reliance, by the respondent, on the Integrity Pact, dated 3rd September, 2018, is completely misguided. He has taken me through the various covenants of the Integrity Pact, to emphasize that they had intended to cover cases of egregious defaults, by unscrupulous contractors, whose integrity is suspect. The various defaults, contemplated by Clause 3 of the Integrity Pact, in Mr Viswanathan‟s submissions, suffice to make this abundantly clear. For ready reference, Clauses 3.0 to 3.15 and 6.0 to 6.3 of the Integrity Pact are reproduced are reproduced thus:
"3.0 Commitments of the Bidder(s)/Contractor(s) The Bidder(s)/Contractor(s) commits itself to take all measures necessary to prevent corrupt practices, unfair means and illegal activities during any stage of its bid or during any pre-contract or post-contract stage in order to secure the contract or in furtherance to secure it and in particular commit itself to the following:-O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 17 of 33
3.1 The Bidder(s)/Contractor(s) will not offer, directly or through intermediaries, any bribe, gift, consideration, reward, favour, any material or immaterial benefit or other advantage, commission, fees, brokerage or inducement to any official of the Employer, connected directly or indirectly with the bidding process, or to any person, organization or third party related to the contract in exchange for any advantage in the bidding, evaluation, contracting and implementation of the contract.
3.2 The Bidder/Contractor further undertakes that it has not given, offered or promised to give, directly or indirectly any bribe, gift consideration, reward, favour, any material or immaterial benefit or other advantage, commission, fees, brokerage or inducement to any official of the Employer or otherwise in procuring the Contract or forbearing to do or having done any act in relation to the obtaining or execution of the contract or any other contract with Employer for showing or forbearing to show favour or disfavour to any person in relation to the contract or any other4 contract with Employer.
3.3 The Bidder(s)/Contractor(s) shall disclose the name and address of agents and representatives and Indian Bidder(s)/Contractor(s) shall disclose their foreign principals or associates.
3.4 The Bidder(s)/Contractor(s) shall disclose the payments to be made by them to agents/brokers or any other intermediary, in connection with this bid/contract.
3.5 Deleted.
3.6 The Bidder, either while presenting the bid or during pre-contract negotiations or before signing the contract, shall disclose any payments he has made, is committed to or intends to make to officials of the Employer or their family members, agents, brokers or any other intermediaries in connection with the contract and the details of services agreed upon for such payments.O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 18 of 33
3.7 The Bidder/Contractor will not collude with other parties interested in the contract to impair the transparency, fairness and progress of the bidding process, bid evaluation, contracting and implementation of the contract.
3.8 The Bidder/Contractor will not accept any advantage in exchange for any corrupt practice, unfair means and illegal activities.
3.9 The Bidder/Contractor shall not use improperly, for purposes of competition or personal gain, or pass on to others, any information provided by the Employer as part of the business relationship, regarding plans, technical proposals and business details, including information contained in electronic data carrier. The Bidder/Contractor also undertakes to exercise due and adequate care lest any such information is divulged.
3.10 The Bidder(s)/Contractor(s) commits to refrain from giving any complaint directly or through any other manner without supporting it will full and verifiable facts.
3.11 The Bidder(s)/Contractor(s) shall not instigate or cause to instigate any third person to commit any of the actions mentioned above.
3.12 If the Bidder/Contractor or any employee of the Bidder/Contractor or any person acting on behalf of the Bidder/Contractor, either directly or indirectly, is a relative of any of the officers of the Employer, or alternatively, if any relative of an officer of the Employer has financial interest/stake in the Bidder(s)/Contractor(s) firm (excluding Public Ltd. Company listed on Stock Exchange), the same shall be disclosed by the Bidder/Contractor at the time of filing of tender.
The term „relative‟ for this purpose would be as defined in Section 2(77) of the Companies Act 2013.
3.13 The Bidder(s)/Contractor(s) shall not lend to or borrow any money from or enter into any monetary O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 19 of 33 dealings or transactions, directly or indirectly, with any employee of the Employer.
3.14 The representative of the Bidder(s)/Contractor(s) signing Integrity Pact shall not approach the Courts while representing the matters of IEMs and he/she will wait their decision in the matter.
3.15 In case of sub-contracting, the bidder/principal contractor shall take the responsibility of the adoption of IP by the sub-contractor.
***** 6.0 Sanctions for Violations 6.1 Any breach of the aforesaid provisions by the Bidder/Contractor or any one employed by it or acting on its behalf shall entitle the Employer to take action as per the procedure mentioned in the "Guidelines on Banning of Business Dealings" attached as Annex - 3A and initiate all or any one of the following actions, wherever required:-
(i) To immediately call off the pre contract negotiations without assigning any reason or giving any compensation to the Bidder/Contractor. However, the proceedings with the other Bidder(s)/Contractor(s) would continue.
(ii) The Earnest Money Deposit (in pre-
contract stage) and/or Security
Deposit/Performance Bond (after the contract is Signed) shall stand forfeited either fully or partially, as decided by the Employer and the Employer shall not be required to assign any reason thereof.
(iii) To immediately cancel the contract, if already signed, without giving any compensation to the Contractor. The Bidder/Contractor shall be liable to pay compensation for any loss or damage to the O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 20 of 33 Employer resulting from such cancellation/rescission and the Employer shall be entitled to deduct the amount so payable from the money(s) due to the Bidder/Contractor.
(iv) Deleted.
(v) To encash the Bank guarantee, in order to recover the dues if any by the Employer, along with interest as per the provision of contract.
(vi) Deleted.
(vii) To debar the Bidder/Contractor from participating in future bidding processes of NHPC Ltd., as per provisions of "Guidelines on Banning of Business Dealings" of NHPC Ltd.
(Annex - 3A), which may be further extended at the discretion of the Employer.
(viii) To recover all sums paid in violation of this Pact by Bidder(s)/Contractor(s) to any middleman or agent or broker with a view to securing the contract.
(ix) In cases where irrevocable Letters of Credit have been received in respect of any contract signed by the Employer with the Bidder/Contractor, the same shall not be opened/operated.
(x) Forfeiture of Performance Security in case of a decision by the Employer to forfeit the same without assigning any reason for imposing sanction for violation of this Pact.
6.2 The Employer will be entitled to take all or any of the actions mentioned at para 6.1(i) to (x) of this Pact also on the Commission by the Bidder/Contractor or any one employed by it or acting on its behalf (whether with or without the knowledge of the Bidder/Contractor), of an offence as defined in O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 21 of 33 Chapter IX of the Indian Penal Code, 1860 or Prevention of Corruption Act, 1988 or any other statute enacted for prevention of corruption.
6.3 The decision of the Employer to the effect that a breach of the provisions of this Pact has been committed by the Bidder/Contractor shall be final and conclusive on the Bidder/Contractor. However, the Bidder/Contractor can approach the Independent External Monitor(s) appointed for the purposes of this Pact."
21. Mr. Vishwanathan points out that the impugned communications, in the form of the suspension order, dated 9 th March, 2020 and Show Cause Notice, dated 19th June, 2020, did not allege infraction, by his client, of any of the commitments of the bidders/contractors, as enumerated in the various sub-clauses of Clause 3.0 of the Integrity Pact and that, therefore, they cannot invite the sanctions contemplated by Clause 6.0 thereof. He points out that the defaults, to which the impugned suspension order, dated 9 th March, 2020 and Show Cause Notice, dated 19 th June, 2020, allude, do not violate any of the Clauses of Integrity Pact. Consequently, submits Mr. Vishwanathan, there can be no question of application, in the present case, of the Integrity Pact at all and that, therefore, per sequitur, Clause 10.0 of the Integrity Pact, too, would not apply. Rather, the procedure for suspension, issuance of Show Cause Notice etc., which has been followed in the present case, are relatable, according to Mr. Vishwanathan, to Clause 32(e) of the GCC, whereunder the disputes between the petitioner and respondent are arbitrable.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 22 of 3322. Regarding the prayer in O.M.P. (I) (COMM.) 162/2020 for interim stay of the operation of the suspension order, dated 9 th March, 2020 and Show Cause Notice, dated 19th June, 2020, Mr. Vishwanathan submits that the allegations, in the said communications, are entirely insufficient to justify an order of blacklisting or total ban of business dealings. Mr. Vishwanathan points out that the bonafides of the petitioner stand evidenced by the fact that the petitioner had furnished a performance bank guarantee for ₹ 6 crores, which has been repeatedly extended from time to time and continues to remain alive till date. Mr. Vishnathan submits, therefore, that every breach of the terms of the contract - assuming there was any - would not necessarily justify blacklisting of the contractor concerned and it is only deviant conduct, with malicious intent to renege from the obligations under the contract, which would justify such action.
23. Various judicial authorities have been cited by Mr. Vishwanathan, to underscore his submission that blacklisting is an extreme measure, amounting to civil death of the contractor, to which resort can be made only in cases of fraud, deception or misconduct of like degree, and not in a case such as the present.
24. Mr. Tejas Karia, learned counsel for the respondent, answering the submissions of Mr. Vishwanathan, emphasizes, at the outset, that the only signed document, between the petitioner and the respondent, was the Integrity Pact, and that EPC contract has never been signed O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 23 of 33 and continues to remain a proposed contract. Mr. Karia has drawn my attention to Clause 3.2.A.4 of the NIT, which reads thus:
"3.2.A.4 Bidders with Sub-contractors:
In case the Sole Bidder does not have all the required experience and also does not wish to enter into a joint- venture or wants to restrict the joint-venture partnership, he can associate Sub-contractor for specified activities (in case of Floatation Device Technology Provider or experience of installation of floating structures) in which he does not have the relevant experience. The criteria to be met by such Bidder shall be as follows:
(i) The Bidder himself to fully meet the following:
Technical criteria specified in para
3.2.A.1.1 and 3.2.A.1.3,
All criteria mentioned under financial
capacity.
(ii) The number of sub-contractors not to exceed one for meeting the technical experience Criteria as specified in para 3.2.A.1.2
(iii) The proposed sub-contractor to meet the specified criteria for the component work listed Technical experience Criteria as specified in para 3.2.A.1.2
(iv) The Bidder and his sub-contractor should submit separate undertakings that the Bidder/sub-
contractor shall be responsible for execution of that item of work for which they claim to have specific construction experience.
(v) The Applicant and his proposed sub-contractor should collectively satisfy as a whole all the specified experience requirements.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 24 of 33(vi) Sub-contractor shall submit Performance Bank Guarantee equivalent to 5% of value of Work sublet in addition to the Performance Bank Guarantee for whole contract submitted by the Bidder on award of Work."
25. Mr. Karia submits, relying on the afore-extracted Clause 3.2.A.4 of the NIT, that the collaboration with Y2G was entered into, by the petitioner, only because the petitioner lacked the requisite experience to perform the contract. Mr. Karia submits, that, therefore, having, so to speak, piggybacked on the experience of Y2G, to procure the tender, the petitioner could not seek to abandon Y2G and request for inclusion of any other sub-contractor in its place. Apropos Clause 29.1 of the NIT, Mr. Karia, while acknowledging, fairly, the fact that the said Clause does, indeed, state that notification of award would constitute the formation of the contract, till signature of the contract agreement, seeks to draw sustenance from Clauses 29.2 and 30, which follow immediately thereunder, and read thus:
"29.2 Upon the successful Bidder‟s furnishing of the performance security pursuant to ITB Clause 31, the Employer will promptly return/discharge the Bid Security to each unsuccessful Bidder, pursuant to ITB Sub-Clause 14.4.
*****
30. SIGNING OF CONTRACT AGREEMENT After notifying the successful bidder that its bid has been accepted, the Employer will prepare the Contract Agreement as per Format provided in Volume 5:
Forms & Procedures, incorporating all the correspondence exchanged between the parties, which have a bearing on the Contract.
Within 14 days of receipt of notice of readiness of the Contract Agreement by the Employer, the Employer O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 25 of 33 and the successful bidder shall sign the Contract Agreement."
(Emphasized in original)
26. Mr. Karia also relies on paras 5.0 and 6.0 of the letter of notification of award of the tender dated 20th September, 2019, which already stand reproduced hereinabove. He submits that, therefore, a concluded contract would come into existence only on signature of the formal contract documents and that, prior thereto, therefore, the petitioner could not seek to invoke the arbitration clause, which constitutes part of the contract. In this context, Mr. Karia also invites my attention to an email dated 18th October, 2019, from the petitioner to the respondent, which states that submission of performance of bank guarantee from the floater sub-contractor was a prerequisite for signing of the contract. He submits that, till date, the performance bank guarantee from the floater sub-contractor has not been submitted. There could, therefore, submits Mr. Karia, be no question of any final contract having fructified between the petitioner and the respondent. With regard to the reliance, by Mr. Vishwanathan, on the definitions of "Contract Documents" and Contract", as contained in the GCC and as reproduced in para 17 supra, Mr. Karia submits that these definitions would apply only where a contract has entered into, between the contractor and the employer, and that, no such contract having been entered into in the present case, these Clauses did not apply.
27. Consequently, submits Mr. Karia, the dispute was not referable to arbitration at all, as there was no concluded contract between the O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 26 of 33 petitioner and the respondent, the only document, signed by both the parties, being the Integrity Pact.
28. Apropos the petitioner‟s request for ad interim relief, as contained in its petition under Section 9 of the 1996 Act, Mr. Karia submits that, in exercise of its jurisdiction under Section 9, this Court could not interfere with an administrative decision of the respondent, to take civil action against the petitioner for breach of the contract. He submits that having obtained the contract on the basis of a sub- contract with Y2G, the petitioner could not, thereafter, seek replacement of Y2G with any other sub-contractor. Mr. Karia relies on the note below Clause 3.2.A.1.2 (reproduced in para 5 supra), to emphasize that any request for change of floating device sub- contractor, was permissible only prior to the contract being finalized. If, therefore, it was the contention of the petitioner that a contract existed between the petitioner and the respondent, Mr. Karia submits that the petitioner could not have sought change of the sub-contractor i.e. Y2G. Mr. Karia also submits that the impugned action of suspension of the petitioner‟s contract and issuance of Show Cause Notice, to the petitioner, are relatable to the Integrity Pact, specifically to Clause 6.0 thereof. He submits that, though the aforesaid communications may not have said so, in so many words, the allegations, therein, clearly indicated collusion between the petitioner and the new sub-contractors, whom the petitioner desired to induct into the contract between the petitioner and the respondent. The reference to the Integrity Pact, in the aforesaid two communications, according to Mr. Karia, was sufficient to justify invocation of the O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 27 of 33 Clauses thereof. By its action, Mr. Karia submits, the petitioner was seeking to tinker with the transparency of the entire bidding process, as well as the contract, which violated, essentially, Clauses 3.6, 3.7 and 3.9 of the Integrity Pact.
30. Mr. Tejas Karia also relies on Section 7 of the Contract Act, which requires absolute and unqualified acceptance, before a proposal is converted into a promise.
31. The said reliance, in my, prima facie, view, cannot effect the present case, as the issue is not whether a concluded contract, in terms of the Contract Act, has come into being between the petitioner and the respondent, but whether, by operation of Clause 29 of the NIT, till the date of signing of the formal contract between the parties, formation of the contract, had or had not taken place. In view of the expressed stipulation in Clause 29, I am, prima facie, of the view that a contractual relationship came into being between the parties, consequent to the communication of the notification of the acceptance of the bid of the petitioner.
31. Mr. Karia submits that as the Integrity Pact was squarely applicable, the dispute between the parties was not referable to arbitration, in view of Clause 10.0 thereof, and further, that this Court did not possess territorial jurisdiction to deal with the dispute. The petitioner would, if at all, he submits, have to approach the concerned civil court at Faridabad.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 28 of 3332. I have heard learned counsel at considerable length, and applied myself to the rival submissions made before me.
33. Prima facie, in my view, the invocation, by the respondent, of the Integrity Pact, does not appear to be justified. The suspension order, dated 9th March, 2020 and the Show Cause Notice, dated 19th June, 2020, do not even hint at breach, by the petitioner, of any of the "commitments" enumerated in the various sub-clauses of clause 3.0 of the Integrity Pact. The attempt to pigeonhole the alleged infraction of the petitioner, into Clauses 3.6, 3.7 and 3.9 of the Integrity Pact, is clearly an attempt to justify the invocation of the Integrity Pact, ex post facto, after the issuance of the impugned suspension order and the Show Cause Notice. In any event, the breaches to which the suspension order dated 9th March, 2020 and the Show Cause Notice dated 19th June, 2020 allude, cannot be said to be breaches of Clauses 3.6, 3.7 and 3.9 of the Integrity Pact.
34. There is, prima facie, merit in the submission of Mr. Vishwanathan, that the Clauses of the Integrity Pact make it clear that the invocation, thereof, is intended only in cases of egregious defaults, in which the integrity of the contractor has become suspect, and not for defaults of the kind to which the impugned suspension order dated 9th March, 2020 and the Show Cause Notice dated 19 th June, 2020 allude. Consequently, Clause 10.0 of the Integrity Pact, too, is, prima facie, inapplicable.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 29 of 3335. In view of Clause 29.1 of the NIT, reproduced in para 16 supra, it appears, prima facie, that the notification of the award constitutes formation of the contract, until the formal signing of the contract documents. Undisputedly, the letter of notification of the award of the contract to the petitioner, was issued by the respondent, on 20th September, 2019. The reliance, by Mr. Karia, on paras 5.0 and 6.0 of the said communications is neither here nor there, as these paragraphs do not indicate that the letter of notification of the award of the contract of the tender to the petitioner, would take effect only after the contract documents was signed. Rather, the direction to the petitioner, to commence work, as contained in Clause 8.0 of the notification of the award of contract, indicates that a contractual relationship between the petitioner and the respondent had come into being with the issuance of the said communication.
36. Prima facie, therefore, it appears that the dispute, between the parties, is arbitrable, and that Clause 6.3 of the GCC would apply thereto.
37. With reference to the petitioner‟s prayer for an injunction, I have already opined, prima facie, hereinabove, that the invocation of the Integrity Pact, by the respondent, against the petitioner, could not sustain on the facts of the case. Insofar as banning of business dealings is concerned, the GCC provides, therefor, only in Clause 32.1(e) thereof, which applies in the case of "corrupt" or "fraudulent" or "collusive" or "coercive" practices by the contractor, as is reflected by the heading of Clause 32. In fact, sub-clause (e) of Clause 32.1 O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 30 of 33 commences with the recital that "it is not in the interest of NHPC to deal with agencies who commit deception, fraud or other misconduct in the tendering process". The said Clause also goes on to state that the procedure, for banning of business dealings, would be governed by the respondent‟s "policy and procedure for banning business dealings".
38. Mr. Vishwanathan has taken me through Clause 5.0 of the "Guidelines of banning of business dealings", forming part of the contract documents, as well as to the various grounds, on which banning of business dealings could be initiated, as enumerated in the sub-clauses of Clause 6.0 thereof. He has also invited my attention to various decisions of the Supreme Court and of this Court, to underscore his submission that every default, in performance of a contract, would not justify a blanket order of blacklisting, as in the present case. The Supreme Court has also recognized, in Raghunath Thakur v. State of Bihar 1, that blacklisting or banning of business dealings, results in serious civil consequences, and may tantamount to civil death, in so far as commercial enterprises are concerned. It cannot, therefore, be resorted to in a routine manner.
39. Without commenting, further, on the merits of the other contentions, advanced before me, I of the opinion that the legality and propriety of the decision to ban all business dealings with the petitioner, as reflected in the suspension order dated 9 th March, 2020 and the Show Cause Notice dated 19th June, 2020, are seriously open 1 (1989) 1 SCC 229 O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 31 of 33 to dispute. Prima facie, on the allegations, contained in the said communications, the justifiability, of such an action, against the petitioner, involving the extreme step of banning all business dealings, is questionable, especially in view of the fact that the default on the part of the petitioner, in the submission of Mr. Vishwanathan was, essentially, owing to departure of Y2G from the contract. Given the seriousness of the act of banning of business dealings/blacklisting of the enterprise - which would result in the petitioner being rendered a commercial untouchable, insofar as all other PSUs are concerned, as well - the withholding of interim relief, at this stage, may result in irreparable prejudice to the petitioner. Grant of such interim relief would also be justified on the principle of balance of convenience as, in any case, the contract between the petitioner and the respondent stands terminated and if, in the ultimate analysis, the decision to ban the business dealings with the petitioner is found to be justifiable, it can always be enforced at that stage. No irreparable prejudice can be said to result to the respondent, if interim relief is granted to the petitioner.
40. Mr. Karia, learned counsel appearing for the respondent has, at the outset, argued, in his submissions, that he desires to file a response to these petitions, before they are finally decided.
41. Accordingly, in view of the above discussions, issue notice on O.M.P. (I) (COMM.) 162/2020 and Arb. P. 217/2020, to the respondent. Notice is accepted by Mr. Tejas Karia, learned counsel on behalf of the respondent.
O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 32 of 3342. Mr. Karia seeks and is granted three weeks‟ time to file replies to O.M.P. (I) (COMM.) 162/2020 and Arb. P. 217/2020, and Mr. Vishwanathan seeks and is granted one week‟s time to file rejoinders thereto.
43. Renotify O.M.P. (I) (COMM.) 162/2020 and Arb. P. 217/2020 for final disposal on 11th August, 2020.
44. Pending further orders, there shall be an ad interim injunction against operation of the suspension order dated 9th March, 2020 and the Show Cause Notice dated 19th June, 2020. The respondent would stand restrained from taking any action, prejudicial to the petitioner, on the basis of the said suspension order and the Show Cause Notice.
45. Let a copy of this order be e-mailed to learned Counsel as soon as it is ready, and uploaded on the website of this Court.
C. HARI SHANKAR, J.
JULY 02, 2020 r.bararia O.M.P. (I) (COMM.) 162/2020 & ARB.P. 217/2020 Page 33 of 33