Delhi District Court
M/S Oriental Structural Engineers Pvt. ... vs National Highways Authority Of India on 4 June, 2025
CS DJ ADJ 17202/16 Page 1 of 28
IN THE COURT OF SH. DIVYANG THAKUR
DISTRICT JUDGE-03:
SOUTH WEST DISTRICT: DWARKA COURTS:NEW DELHI
Civil Suit -CS DJ ADJ 17202/2016
CNR No. DLSW01-002581-2016
In the matter of :
M/s Oriental Structural Engineers Pvt Ltd.
Registered office at 21/48, Malcha Marg,
Chanakya Puri, New Delhi. .....Plaintiff
Versus
National Highways Authority of India
Corporate office at G-5 and 6, Sector 10,
Dwarka, New Delhi-110075. .....Defendant
Date of institution of the suit : 14.09.2015
Final Arguments Heard on : 22.05.2025
Date of Judgment : 04.06.2025
Decision : Decreed
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India
CS DJ ADJ 17202/16 Page 2 of 28
SUIT FOR RECOVERY OF MONEY
JUDGMENT
1. Present suit has been filed by the Plaintiff seeking (a) a decree of recovery of money to the tune of Rs. 87,78,000/-; (b) a decree of pendente lite and future interest @ 12% per annum on the aforesaid amount and (c) costs of the suit.
Brief background of the present case
2. The present suit was initially filed before the Hon'ble High Court of Delhi on 14.09.2015 whereby the summons of the suit were issued to the Defendant which were duly served and thereafter, written statement along with application for condonation of delay was filed on behalf of the Defendant. Thereafter, the present suit was transferred to the Court of Ld. District Judge, South-West, Dwarka Courts, Delhi vide order of the Hon'ble High Court dated 05.02.2016. The Plaint
3. The brief facts of the case as mentioned in the plaint are reproduced here as under:
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 3 of 28
(i) It is averred that the Defendant had invited request for qualification for construction of Agra - Etawah bypass in October 2014 and the Plaintiff was one of the qualified bidder out of the 12 bidders and thereafter, the Defendant had invited bids from the qualified bidders on 18.03.2015 and that the due date for submission of bids was fixed to be 05.05.2015 which was later extended by the Defendant to 20.05.2015. It is further submitted that the Plaintiff along with two other participants had submitted their bids accordingly and also furnished requisite bank guarantee towards the bid security amounting to Rs. 16.50 crores issued by Canara Bank, Diplomatic Enclave, Malcha Marg, New Delhi.
(ii) It is alleged that one M/s IRB Infrastructure Developers Ltd was declared to be the successful bidder and the bid of the Plaintiff failed consequently and thereafter, letter of award was also issued to the said successful bidder. It is submitted that the Defendant cannot undertake any exercise for evaluating the bid of unsuccessful bidder and that the Plaintiff's bid had become redundant for all purposes and could not be considered at all and that the contract, if any, between the Plaintiff and Defendant came to an end.
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 4 of 28
(iii) It is alleged that the Defendant had issued a letter dated 09.06.2015 to the banker of the Plaintiff i.e. Canara Bank, Malcha Marg, New Delhi invoking the bank guarantee submitted by the Plaintiff and that they are entitled to forfeit 5% of the bid security amount. It is submitted that the Defendant did not raise any objection at the time of evaluation of RFQ or during the process of submission of the bid or at any stage before opening of the bid. It is alleged that the Defendant has no right to retain or deduct any amount from the bid security and is liable to return the bank guarantee furnished towards the said bid security by the Plaintiff.
(iv) It is further submitted that on 10.06.2015, the Plaintiff had approached the Court by way of writ petition bearing WP(C) no. 5966/2015 along with an application seeking stay of the invocation of the said bank guarantee, however, before the said writ petition could be taken up, the bank guarantee had already been encashed by the Defendant to the tune of 5% of the bid security and therefore, the Plaintiff had withdrawn the said writ petition after reserving its rights to approach the appropriate forum seeking appropriate relief. The Plaintiff has pertinently mentioned that at the stage of RFP, a sum of M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 5 of 28 Rs. 3,40,000/- was paid to procure the documents and that if the bid of the Plaintiff was non-responsive, it would have been rejected on the RFQ stage and at the time of scrutiny. The Plaintiff further submitted that the Defendant cannot approbate and reprobate at the same time, firstly treating the bid as responsive and considering the same at the time of opening of the bid and thereafter, once the Plaintiff was held non successful bidder, invoked its bid security on the ground of its bid being non-responsive. Aggrieved, Plaintiff has filed the present suit for recovery of money against the Defendant which was initially filed before the Hon'ble High Court of Delhi and later transferred to the Court of Ld. District Judge, South-West, Dwarka Courts, New Delhi vide order dated 05.02.2016.
Proceedings of the Case
4. Summons for settlement of issues were issued to the Defendant which were duly served. Thereafter, WS was filed on behalf of the Defendant wherein it is submitted that the Plaintiff was declared as "Pre-qualified Applicant" on 18.03.2015 and that the conditions of the tender consist of standard terms as approved by the Ministry of Finance and that as per clause 3.2.1 of the RFP, prior to the evaluation M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 6 of 28 of the bid, the Defendant Authority was required to determine as to whether each bid is responsive to the requirements of the RFP and that the evaluation of the bid as per Appendix I is not dependent upon the bidder being successful bidder. It is submitted that on careful examination of the bids by the Evaluation Committee and the financial consultants, it was noticed that the bid of the Plaintiff was not submitted as per the format prescribed in Appendix I of the RFP. The Evaluation Committee rather found the material deficiencies in the format adopted by the Plaintiff which was not at all in consonance with the prescribed format of Appendix I and therefore, the same was declared to be non-responsive in conformity with clause 3.2.1(a) of the RFP. It is further submitted that clause 2.20.7(a) of the RFP clearly stipulates encashment of 5% of value of bid security by NHAI, if the bidder submits a non-responsive bid and thus, in terms of the same, the Plaintiff's bid having been decided non-responsive, as per clause 2.20.7(a), 5% of the bid security amount is liable to be forfeited and accordingly, the Defendant had issued a letter to the Canara Bank for invoking and encashing bank guarantee deposited by the Plaintiff to the tune of Rs. 82.50 lakhs i.e. 5% of the bid security amount of Rs. M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 7 of 28 16.50 crores and that the Plaintiff was duly informed by the Defendant regarding the same vide letter dated 10.06.2015.
5. It is alleged by the Defendant in the WS that the Plaintiff has concealed the material facts from the Court and have not approached the Court with clean hands. It is submitted that the Defendant, in accordance with the clause 3.2.1(a) declared the bid to be non- responsive and consequently, forfeited 5% of the bid security as envisaged in clause 2.20.7(a) of the RFP. It is further alleged that the suit of the Plaintiff is misconceived in as much as the amount in question has been forfeited in accordance with the terms of the RFP dated 18.03.2015 in which the Plaintiff had willingly participated without any demur. It is further alleged that the Plaintiff has no prima facie case and therefore, the suit of the Plaintiff is liable to be rejected.
6. Replication was filed by the Plaintiff wherein the Plaintiff has reiterated the contents of the plaint and denied the averments of the Defendant. Admission-denial of documents was not recorded on behalf of the parties.
7. On the basis of pleadings, the following issues were framed on M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 8 of 28 24.12.2016:-
(i) Whether the Plaintiff is entitled for the recovery of suit amount, as prayed for? (OPP)
(ii) Whether the Plaintiff is entitled for interest? If so, at what rate and for which period? (OPP)
(iii) Relief.
No other issue arose or pressed for by the parties and matter was proceeded for Plaintiff's evidence.
Evidence of the Parties
8. On 16.04.2018, PW-1 Maj. V.C. Verma (Retd.) had tendered his evidence by way of affidavit exhibited as Ex. PW1/A and relied upon the documents i.e. Ex. PW1/1 i.e. Board Resolution dated 23.07.2015; Ex. PW1/2 i.e. copy of RFQ document; Ex. PW1/3 i.e. copy of letter dated 18.03.2015; Ex. PW1/4 is RFP document; Ex. PW1/5 i.e. copy of letter dated 29.04.2015; Ex. PW1/6 i.e. copy of bank guarantee; Ex. PW1/7 i.e. copy of bid; Ex. PW1/8 i.e. letter dated 20.05.2016 (de-exhibited as not available on record); Ex. PW1/9 i.e. copy of letter dated 09.06.2015; Ex. PW1/10 i.e. copy of writ petition no. 5966/2015 (de-exhibited and marked as Mark A); Ex. M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 9 of 28 PW1/11 i.e. copy of order dated 10.06.2015; Ex. PW1/12 i.e. copy of letter dated 30.01.2015 (de-exhibited and marked as Mark B); Ex. PW1/13 i.e. copy of letter dated 30.09.2015; Ex. PW1/14 i.e. letters dated 08.02.2016 and 17.05.2016; Ex. PW1/15 i.e. copy of letter dated 18.10.2016; Ex. PW1/16 i.e. copy of letter dated 25.06.2016 and Ex. PW1/17 i.e. certificate u/s 65B of Indian Evidence Act.
9. During cross-examination, PW-1 deposed that the bid was submitted on 19.05.2015 and was opened on 20.05.2015 and admitted that RFP had to be filed in specified format as Appendix I. PW-1 denied the suggestion that it was not in accordance with the specifications of the Appendix I. PW-1 voluntarily deposed that their bid was submitted not exactly as per the specified Appendix I because of secretarial mistake which was inadvertent. Relevant portion of the cross-examination of PW-1 is extracted herein:
"...........The company had taken disciplinary action against the person who was responsible for this error. The concerned person was Mr. Uma Maheshwar my PA. It is incorrect to suggest that the company had not taken action or that the mistake was not the secretarial. I have personally M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 10 of 28 checked the Appendix I and found that it was not exactly as per what was specified in the RFP document. It is correct that in correct format was consisting 31 paras but in our format there were only 28 paras. The appendix I which was specified in the RFP document issued by NHAI downloaded through their website was for RFP, Invitation for works pertaining to public private participation (PPP mode). But the Appendix I which was submitted by us in respect of this project was inadvertently taken from RFP document pertaining to EPC (Engineering Procurement and Construction Contracts). It is wrong to suggest that the company had modified the Annexure I Clause 3, Clause 7 Sub Clause b, Clause 9, Clause 11, Clause No. 13 & 14. It is wrong to suggest that the company was not interested in participating in the bid..........." PW-1 thereafter, denied the suggestions of the Ld. Counsel for Defendant and was discharged on the even date.
10. No other witness was examined on behalf of the Plaintiff and therefore, PE was closed vide separate statement of the Ld. Counsel for Plaintiff and matter was proceeded for DE.
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 11 of 28
11. Thereafter, an application for substitution of AR was filed on behalf of the Defendant which was allowed vide order dated 12.11.2018.
12. On 08.04.2019, DW-1 Sh. Arun Jagga had tendered his evidence by way of affidavit exhibited as Ex. DW1/A. During cross- examination, he deposed that as per the records, three RFP were submitted for the bid in question and he was not part of the expert evaluation committee for the bid in question. He admitted that M/s IRB Infrastructure was the successful bidder and the contract was awarded to the said company. Relevant portion of the cross- examination is extracted herein:
"Question: Kindly refer to para 10 of your affidavit in evidence, who were the other two bidders referred in the said para?
Answer: It has been wrongly stated in the affidavit in evidence. Again said, averment about two bidders in para 10 of my affidavit in evidence has been mentioned inadvertently.
Mr. Rananjay Singh was General Manager (Technical), Incharge of UP but I am not aware M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 12 of 28 whether he was there at the time of opening of bid or not. Again said, he was part of the evaluation committee who evaluated the bid. Rananjay Singh was aware of the process of evaluation of the bids."
DW-1, after seeing the judicial record, further confirmed that the amount of Rs. 3,40,000/- was deposited by bidders at the time of submission of RFP documents. He further deposed that the amount of Rs. 3,40,000/- covers all administrative expenses including cost of evaluation of bid. He further admitted that the report of the Independent Financial Consultant was not filed by the Defendant Authority on record. He deposed that as per his understanding, there was no opening of technical bid but again deposed that financial bid and technical bid were opened simultaneously and again deposed that financial bid and other documents prescribed in the RFP documents were opened simultaneously.
13. DW-1 was further cross examined and discharged on 09.11.2023. No other witness was examined on behalf of the Defendant and therefore, DE was closed vide order dated 09.11.2023 and matter was fixed for final arguments.
14. Final arguments were heard on behalf of the parties. Written submissions were filed on behalf of the parties. Ld. Counsel for Plaintiff has submitted that the breach as alleged by the Defendant is merely a secretarial error which cannot be termed as a breach or default on part of the Plaintiff. It is further submitted that the Plaintiff was not a successful bidder and this fact has been admitted by the Defendant and that once the Plaintiff had lost the bid and was declared unresponsive bidder, there was no requirement for the Defendant to evaluate the bid submitted by the Plaintiff until the bid of the successful bidder was declared unsuccessful for any reason whatsoever. Ld. Counsel for Plaintiff further argued that the Defendant's witness had admitted in his cross-examination that a payment of Rs. 3,40,000/- towards the cost of bid documents and the fee / charges for the evaluation of the bid and the related process. It is further argued that the clause 1.2.3 relied upon by the Defendant is non-enforceable in the eyes of law as has also been upheld in the case of Gayatri-DLF Consortium and Ors Vs. National Highways Authority of India and Ors (10.03.2011 - DELHC) :
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 14 of 28 MANU/DE/0853/2011 and in Atlanta Limited Vs. NHAI and Ors (24.03.2025 - DELHC) : MANU/DE/2337/2025. It is submitted that judgment of Atlanta Limited (supra) was challenged by the NHAI before the Division Bench of the Hon'ble High Court of Delhi in LPA No. 342/2025 which was dismissed vide judgment dated 21.05.2025.
It is further argued that the said act of the Defendant is against the notification of the Ministry of Road Transport and Highways dated 30.01.2025 which categorically gives directions to the concerned departments including the Defendant Authority to give an opportunity to all the bidders to correct the mistake / secretarial error (if any) found in the bid or the documents annexed thereto and that the said notification records the directions not to encash the BGs in certain conditions which include the situation in question. It is submitted that the alleged change in format of the Appendix I by the Plaintiff was purely a clerical error and does not affect the merit of the bid to any extent whatsoever. It is submitted that immediately after the encashment of the Plaintiff's bank guarantee, the Defendant, vide notification dated 30.09.2015, changed the format of the RFP for the bids invited at a later date, by deleting the criteria of encashing bank M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 15 of 28 guarantee for a non-responsive bid. Ld. Counsel for Plaintiff has relied upon the following list of judgments:
(a) Lanco Infratech Ltd Vs. NHAI and Ors in WP(C) 8609/2011 passed by Hon'ble High Court of Delhi;
(b) Atlanta Limited Vs. NHAI and Ors in WP(C) 6646/2010 passed by Hon'ble High Court of Delhi;
(c) NHAI Vs. Atlanta Limited in LPA No. 342/2025 passed by Hon'ble High Court of Delhi;
(d) Gayatri-DLF Consortium and Ors. Vs. NHAI in WP(C) 6833/2010 passed by Hon'ble High Court of Delhi;
(e) Kailash Nath Associates Vs. DDA (2015) 4 SCC 136;
(f) Fateh Chand Vs. Balkishan Dass (1963) SCC OnLine SC 49;
(g) Maula Bux Vs. Union of India (1969) 2 SCC 554 and
(h) ONGC Ltd Vs. Saw Pipes Ltd (2003) 5 SCC 705.
15. Per contra, it has been submitted by the Ld. Counsel for Defendant that the Plaintiff witness has admitted the suggestion that the bid was not in accordance with the specified format as Appendix. Ld. Counsel for Defendant has referred to clause no. 2.2.07 of bid documents placed by Plaintiff for forfeiture and appropriation of bank guarantee. It is submitted that the bid of the Plaintiff was not M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 16 of 28 submitted as per the format of Appendix I as admitted by the Plaintiff witness during his cross-examination and due to the bid being declared as non-responsive, the Defendant, vide letter dated 09.06.2015, had invoked the encashed bank guarantee deposited by the Plaintiff to the tune of Rs. 82.50 lakhs of the bid security. It is further submitted that the suit of the Plaintiff may be dismissed. Findings
16. The following observations and inferences can be drawn from the record and evidence adduced :-
17. The background facts of the present suit are admitted between the parties. The plaintiff and defendant have clashed in the present suit on two points namely whether the bid of the plaintiff was non responsive and secondly whether the defendant was entitled to forfeit 5% of the value of the bid security as per the clause 2.20.7 (a) of RFP (Request For Proposal) (hereinafter referred to as contract in question).
18. As per the case of the plaintiff, the discrepancies in the format of Appendix-I as required by the defendant for the submission of the M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 17 of 28 bid where minor in nature and did not render the bid unresponsive and moreover it is submitted that as the plaintiff was not the highest bidder and remained unsuccessful, there was no requirement for the evaluation of the bid.
19. On the other hand, it is the case of the defendant NHAI that the clear letter of the contract in question renders the bid of the plaintiff as unresponsive and therefore, they are entitled to forfeit the sum of money in question.
20. Reference can be here made to the relevant clauses of the contract in question which is Ex.PW-1/4 which are reproduced herein:-
"2.20.7 The bid Security shall be forfeited and appropriated by the Authority as mutually agreed genuine pre-estimated compensation and damages payable to the Authority for, inter alia, time, cost and effort of the Authority without prejudice to any other right or remedy that may be available to the Authority hereunder or otherwise, under the following conditions:-
(a) If a Bidder submits a non-responsive M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 18 of 28 Bid;
Subject however that in the event of encashment of bid security occurring due to operation of para 2.20.7 (1), the damage so claimed by the Authority shall be restricted to 5% of the value of the Bid security."
21. As per clause 3.2, which provides the test of responsiveness, prior to evaluation of bids the authority shall determine whether each bid is responsive to the requirements of the RFP. As per 3.2.1(a), a bid shall be considered responsive only if it is received as per the format at Appendix-I.
22. Indubitably, the defendant authority has forfeited the bid amount under clause 2.20.7(a) due to the non-responsiveness of the bid. This would be a common reading of the letter dated 10.06.2015 issued by the defendant authority wherein reference is made to clause 3.2.1(a) and 2.20.7(a). An annexure is attached to the said letter dated 10.06.2015 showing the discrepancies between the prescribed RFP format and the bid submitted by the plaintiff company herein.
23. During cross-examination of sole plaintiff witness PW-1, the following facts came to light in the testimony, the relevant part of M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 19 of 28 which is extracted herein:-
"It is correct that RFP had to be filed in specified format as Appendix I. It is incorrect to suggest that it was not in accordance with the specified of the Appendix I. Vol. Our bid was submitted not exactly as per the specified Appendix I because of secretarial mistake which was inadvertent. The company had taken disciplinary action against the person who was responsible for this error. The concerned person was Mr. Uma Maheshwar my PA. It is incorrect to suggest that the company had not taken action or that the mistake was not secretarial. I have personally checked the Appendix I and found that it was not exactly as per what was specified in the RFP document. It is correct that incorrect format was consisting 31 pages but in our format there were only 28 pages. The appendix I which was specified in the RFP document issued by NHAI downloaded through their website was for RFP, invitation for works pertaining to public private participation (PPP mode). But the Appendix I which was submitted by us in respect of this project was inadvertently taken from RFP document pertaining to EPC (Engineering Procurement and Construction M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 20 of 28 Contracts). It is wrong to suggest that the company had modified the Annexure I clause 3.
Clause 7 Sub Clause B, Clause 9, Clause 11, Clause no.13 & 14. It is wrong to suggest that the company was not interested in participating in the bid."
24. As would be clear from the perusal of the aforesaid testimony of PW-1, the bid was not as per the format of Appendix-I as the Appendix-I submitted by the plaintiff company was for RPF document pertaining to EPC contracts whereas the present project was of PPP model i.e. Public Private Participation. It is not for the courts to second guess the mutual rights and obligations agreed upon between the parties and to substitute its own understanding of a qualitative term such as "responsiveness". As per the clear literal interpretation of the contract, all bids which were not in the prescribed format of Appendix-I are declared to be unresponsive. Due to the clear admission of PW-1, the bid of the plaintiff company was not as per the set format and therefore, the bid was correctly termed as unresponsive by the defendant company.
25. Therefore, we now come to the question as to whether the M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 21 of 28 defendant company was entitled to forfeit the sum of Rs.82,50,000/- as per the letter dated 10.06.2015 which was 5% of the bid security amount.
26. In M/s. Madhucon Projects Ltd. v. National Highways Authority of India & Ors. (2011 DHC 1459-DB), the Hon'ble High Court of Delhi has held that:-
"50. Learned counsel for respondent No.1 submitted that the bid security amount was a specific term of the RFP clause 2.1.7. Respondent No.1 was entitled to forfeit and appropriate damages inter aliain the event specified in Clause 2.20.7 in view of what is set out in clause 2.20.6. The said clause also provides that the bidder is deemed to have acknowledged and confirmed that the authority will suffer loss and damage on account of withdrawal of its bid or for any other default by the bidder during the period of bid validity as specified in the RFP. Clause 2.20.7 states that the amount is mutually agreed genuine pre-estimated compensation and damages payable to the authority for inter alia time cost and effort of the Authority. The conditions under which it applies includes where a bid is a non-responsive M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 22 of 28 bid. However, as per the latter part of sub-clause
(a) of clause 2.20.7 if the bid is a non-responsive bid, the damages are restricted to 5 per cent of the value of the bid security. The question, thus, arises whether in case of a non-responsive bid could it be said that 5 per cent of the value of the bid security was the genuine pre-estimate of damages?
51. It must be borne in mind that the stage for submission of the RFP is the second stage in the tendering process. There is an earlier scrutiny in pursuance of the RFQ submitted by the parties in terms whereof certain parties are enlisted for submitting the RFP. At the stage of the RFP a sum of `3.00 lakh is paid to procure the documents.
This amount cannot be the cost of the form but is really a pre-estimated cost of processing the RFP. A non-responsive bid is one where at the threshold on the opening of the bid it is found to be defective on one account or the other and is, thus, shut out from the process of scrutiny. This can have no co-relation with the value of the bid which would be the eventuality even if 5 per cent of the bid amount is encashed.
52. Learned counsel for respondent No.1 sought M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 23 of 28 to canvass that the objective is to prevent non- serious persons from submitting the bids. This, in our considered view, is taken care of by charging an amount for purchase of RFP documents and in other eventualities of say a party backing out,the bid security amount being forfeited. The occasion for non-responsive bid would only be a defect in submission of the RFP.
53. Learned counsel for respondent No.1 could not seriously dispute that the amount really is in the nature of a penalty. If it is so it cannot be said to be a reasonable pre-estimate of damages and the parties suffering losses must prove that it is suffering damages to that extent. We are of the view that there is hardly any quibble over the settled legal position in this behalf. Suffice it to say that in Maula Bux Vs. Union of IndiaAIR1970 SC 1955 the scope and ambit of Section 74 of the Contract Act, 1872 (hereinafter referred to as the ''Contract Act'') was discussed. It was observed that if the forfeiture of earnest money is in the nature of penalty Section 74 of the Contract Act would apply. In such a case proof of actual loss or damage would be essential.
However, if the forfeiture amount is reasonable M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 24 of 28 pre-estimate, it would not fall within Section 74 of the Contract Act. The legal position in this behalf has not changed. Section 74 of the Contract Act reads asunder: "74-Compensation for breach of contract where penalty stipulated for-[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."
54. The 5 per cent of the bid security amount would be `73.95 lakh approx. This cannot be said to be the charges for processing the bids. That charge, in fact, already stands recovered which had been pre-estimated at `3.00 lakh for purchase of the RFP document.
55. We have no hesitation to hold that the aforementioned clause permitting 5 per cent bid security amount to be forfeited in case of a non- responsive bid is clearly penal in nature and thus M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 25 of 28 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 encashed in such an eventuality.
56. Thus, even on the second issue we are of the view that even if the bid was non-responsive, the 5 per cent of the bid security amount could not have been forfeited."
27. Therefore, there is clear binding precedent to hold that the liquidated damages as postulated in clause 2.20.7(a) are in nature of penalty. The situation in Madhucon (supra) was slightly dissimilar to the present case inasmuch as the bid was held to be responsive in that case. However, on the point as to whether the damages as contemplated by clause 2.20.7(a) where a genuine pre-estimate or penalty, the Division Bench of Hon'ble High Court of Delhi was categorical in holding that the same cannot be held to be a genuine pre-estimate of damages and rather the same is by way of penalty and therefore, Section 74 of the Indian Contract Act would come into the picture. The Hon'ble High Court explained that the RFP stage was the M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 26 of 28 second stage in the tendering process and a certain sum was paid to procure the documents. It was further explained that a non responsive bid is one which at the threshold itself is found to be defective and thus, is shut out from the process of scrutiny and therefore, it cannot be said that such bid had reached the stage of evaluation.
28. In the present facts, it is clear from the admitted facts on record that the bid of the plaintiff was found to be non responsive at the very threshold itself. It has been proved from the evidence on record that only the second stage had been reached and there is no evidence to show that the bid once found to not be in accordance with Appendix-I, was then further evaluated by the scrutiny committee. The defendant has produced no witness to show that the evaluation committee considered the bid of the plaintiff. Rather, during the cross- examination of DW-1, it has come on record that the plaintiff had paid a sum of Rs.3,40,000/- for procuring the RFP documents and in fact it has been admitted by DW-1 that the amount of Rs.3,40,000/- covered all the administrative expenses including the cost of evaluation of bid. DW-1 has further admitted during the cross-examination that it was not reflected from the record that the bid of the plaintiff was evaluated M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 27 of 28 by the committee. No Minutes of Meeting of the NHAI committee have been placed on record and it is apparent that the bid of the plaintiff was declared unresponsive at the very threshold. The judicial precedent set in Madhucon Projects (supra) would clearly apply and thus, the sum of Rs.3,40,000/- is the genuine pre-estimate of damages which was agreed upon between the parties.
29. In conclusion therefore, I find that the defendant was not entitled to forfeit the amount of Rs.82,50,000/- as genuine pre- estimate of damages and is liable to refund the said amount alongwith interest @ 6% per annum from date of filing of suit till date of refund. The issues framed are decided and disposed off accordingly. Relief
30. In view of the aforesaid discussion, the suit of the Plaintiff is decreed with the following relief:-
(a) The plaintiff is entitled to receive a sum of Rs.82,50,000/- from the defendant alongwith interest @ 6% per annum from the date of filing of suit and till the date of realization.
(b) Cost of the suit.
M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India CS DJ ADJ 17202/16 Page 28 of 28
31. Decree sheet be prepared accordingly.
32. File be consigned to Record Room after due compliance. Digitally signed
DIVYANG by DIVYANG THAKUR THAKUR Date: 2025.06.04 15:05:17 +0530 Announced in the open court (Divyang Thakur) th On 4 day of June, 2025 Additional Sessions Judge-01 (West) Special Court under the POCSO Act/THC Previously District Judge-03 (South West) Dwarka / New Delhi M/s Oriental Structural Engineers Pvt Ltd. Vs. National Highways Authority of India