Delhi District Court
Also At vs M/S Oil & Natural Gas Corporation Ltd on 24 July, 2017
IN THE COURT OF SH. JITENDRA KUMAR MISHRA, ADDITIONAL
DISTRICT JUDGE - 01, PATIALA HOUSE COURTS, NEW DELHI
DISTRICT, NEW DELHI
CS No. 315/17
M/s Globe Eco Logistics Ltd.
Having its registered office at:-
16/17, Transport Nagar, Narol,
Ahmedabad-382405,
Gujrat.
Also at:-
605, Kirti Shikhar, District Centre
Janakpuri, New Delhi 110 058.
......... Plaintiff.
Versus
M/s Oil & Natural gas Corporation Ltd.
Having its registered office at:-
Jeevan Bharti Building-Tower-II
124, Indira Chowk, Connaught place,
New Delhi 110 001
IInd Address:-
9th Floor, Scope Minar
Laxmi Nagar, Delhi.
........ Defendant.
Suit presented on : 20.12.2010
Arguments Concluded on : 20.07.2017
Judgment Pronounced on : 24.07.2017
JUDGMENT
1. This is suit for recovery of Rs.21,71,300/- filed by the plaintiff. Briefly stated the facts of the case are:-
(a) The plaintiff is a limited company duly incorporated under CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 1 of 24 the provisions of Indian Companies Act, 1956. Mr. S. K. Manglaa being the Executive Director and Principal Officer of the plaintiff is fully entitled to sign, verify and file the present suit against the defendant. He is also duly authorized by the plaintiff to sign, verify and file the present suit by virtue of Power of Attorney dated 09.09.2010 in his favour.
(b) The defendant floated a tender bearing No. HQ / CHMM /AIMT / CONSOLE / 2009-2012 / zn6jc08008 for hiring services for Transportation of material by trucks / trailers through
- out India. The said tender was floated by defendant's Dehradun office under the supervision of Deputy General Manager (MM), Corporation M.M. Department, Oil and Natural Gas Corporation Limited, Old Secretariat Building, Tel Bhavan, Dehradun-248003. The biding process was carried out at the registered office of the defendant at Delhi by way of e-bidding through Internet.
(c) The plaintiff submitted bids and gave their quotation for allotment of the said tender in favour of the plaintiff. Pre-bid conference was held on 16.10.2008 and the bid was given on 12.12.2008 at 14:00 hours. After opening of technical bid on that day, four bidders were qualified and thereafter price bid was opened on 18.12.2008 for revised auction. Thereafter revised bid was submitted through e-bidding. The quotation for the plaintiff was accepted by the defendant. Offer rate of all the group over all in all group were GLOBE in L-1. The revised auction conducted on 18.12.2008 at 10 a.m. to 19.12.2008 upto 4 a.m. (the entire day and full night were operated e-bidding).CS No. 315/17
M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 2 of 24
(d) The price bid of first three groups was opened on 18.12.2008 in first stage i.e. group - I (Trailer), Group-II (Trailer) and group-IV (Trailer). The price bid was opened on 19.12.2008 at 11 p.m. in respect of Group-III (Trailer), Group III (Truck) and Group-IV (Truck).
(e) While bidding in the reversed auction through e-bidding, the price bid of group IV of Trailer in ONGC site, one zero was omitted due to the mistake on the part of the plaintiff and accordingly, the same was intimated on the spot itself on 18.12.2008 through mail while chatting in ONGC site and it was requested that the actual figure be read as 300050. Later on one letter dated 20.12.2008 was also written by the plaintiff to the defendant addressed at Dehradun, thereby informing that the plaintiff was not given the details of the revised auction of Group- IV of Trailer unless getting the confirmation from ONGC, Dehradun. The said letter was duly received by the defendant. It may be relevant to mention here that in tender bid, an amount of Rs.314862 was given for group-IV (Trailer).
(f) The defendant wrote a letter dated 18.03.2009 to the Branch Manager, Citi Bank, N. A., Ahmedabad, thereby submitting a claim of Rs. 14,10,000/- against the bank guarantee so furnished by the plaintiff in respect of the aforesaid tender and requesting the bank to pay the said amount in favour of the defendant through D.D. Payable at Dehradun at the earliest. The said claim was made by the defendant on account of the alleged losses suffered by the defendant due to wrong feeding of the CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 3 of 24 amount by the plaintiff in respect of the tender i.e. Group -IV (Trailer).
(g) On receipt of the said letter from the defendant, the bank contacted the plaintiff, thereby informing the plaintiff that the bank has received a claim from the defendant on 18.03.2009 under the aforesaid guarantee, whereby, the defendant had asked for part payment of Rs.14,10,000/- under the guarantee.
(h) In pursuance of the said information, the plaintiff in order not to disturb the said bank guarantee and under protest, sent a D.D. No. 010503 for a sum, of Rs. 14,10,000/- in favour of defendant, drawn on HDFC Bank, Delhi through letter dated 21.03.2009 thereby, requesting the defendant to send a letter to Citi Bank for not encashing the said bank guarantee. By virtue of the said letter dated 21.03.2009, the plaintiff further draw defendant's kind attention to the fact that while electronic bidding for all India material transportation, the bid for group IV of Trailer was fed wrong i.e the plaintiff fed Rs. 30050/- instead of 3,00,050/- by mistake which mistake was immediately pointed out to the defendant, as mentioned above. By virtue of the said letter, the plaintiff also requested the defendant not to penalize any one as heavily as it was not breach of contract or denial of anything from the side of the plaintiff. The plaintiff further requested the defendant to give a second thought to the decision of the defendant and to refund the EMD of Rs. 14,10,000/- to the plaintiff immediately.
(i) The defendant sent a fax message to the plaintiff on CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 4 of 24 6.5.2009, informing the plaintiff that the plaintiff has committed breach of the agreement and accordingly it warrants forfeiture of EMD as per clause no. 16.07 (b) of the bid document.
(j) The defendant was not entitled to forfeit / demand the amount given as earnest money for participating in the tender process under the terms and conditions of the tender. In any case the defendant has not suffered any monetary loss whatsoever on account of the clerical mistake on the part of the plaintiff and as such was not entitled to forfeit / demand the amount given as earnest money.
(k) Thus the present suit has been filed by the plaintiff to claim the amount alongwith interest.
2. Written statement filed by the defendant wherein it is alleged that the defendant invited bids by publicized terms and conditions of the tender. The defendant has forfeited Bid Security as per clause 16.7 (b). Thus, the floating of tender by the defendant is an admitted fact. It is further alleged that Pre-Bid Conference was held on 16.10.2008 at Corporate MM, Delhi. Closing time for submission of bid was 12.11.2008 (14:00 hours). Total six bids were received, including the bid of the plaintiff. Technical (Un-priced) bids were opened on the same day. After evaluation of technical (unpriced) bids, four bids, including that of plaintiff were short listed for price bid opening. Price bid of the plaintiff originally submitted to ONGC was accordingly opened alongwith those of other short listed bidders on 18.12.2008 at Corporate MM Office at Delhi. Reverse Auction was held at Corporate-MM, Delhi office on 18.12.2008, and 19.12.2008 as already stipulated in the tender. The details of reverse auction are as under:-
CS No. 315/17M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 5 of 24 (1) Auction No. 195.
-For Trailer-Group-I, II & IV
-Date: 18.12.2008.
-Start time -13:05 hrs.
-Finish time-19:50 hrs. (2) Auction No. 196.
-For Trailer-Group-I & II
-Date: 18.12.2008.
-Start time -20:15 hrs.
-Finish time-03:55 hrs. (3) Auction No. 198.
-For Trailer-Group-III, Truck-Group-III & Truck-Group-IV
-Date: 19.12.2008.
-Finish time -13:15 hrs. 2.1 The auction cited by the plaintiff in his plaint was auction no. 195 which stated at 13:05 hrs and ended at 19:50 hrs. The dispute raised by the plaintiff pertains to the price filled up by the plaintiff in his plaint that the reverse auction was conducted from 18.12.2008, 10.00 A.M. To 19.12.2008, 4.00 A.M. is irrelevant to the dispute raised by the plaintiff. The rest of the contents of plaint are denied.
3. Replication to the written statement filed by the plaintiff wherein it is submitted that the plaintiff committed a mistake, which was a genuine human error and the plaintiff sought to rectify the same immediately and the same fact has been admitted by the defendant in the reply as well. He further alleged that the defendant is wrongly trying to built up a case of modification of a bid, which is not the case and from the variation and from the bidding pattern, it is only a mistake has been caused by the plaintiff. Rest of the contents of the written statement are denied and averments made in the plaint are reiterated and affirmed.
CS No. 315/17M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 6 of 24
4. Vide order dated 26.09.2011, the following issues were framed:
(i) Whether the plaintiff is entitled to the recovery of suit amount or any portion thereof? OPP
(ii) Whether the plaintiff is entitled to interest on the awarded amount? If so, at what rate, on what amount and for what period? OPP
(iii) Relief.
5. To prove its case, the plaintiff examined Sh. Ram Ratan Aggarwal as PW1 to tender his evidence by way of affidavit as EX. PW1/A. He further relied upon documents Ex. PW1/1 to Ex. PW1/11. He also relied upon documents which are Ex. PW1/1 to PW1/9 which were admitted during admission / denial of documents on 08.09.2011. He was cross examined by Ld. counsel for the defendant. Thereafter by separate statement of AR of the plaintiff, plaintiff's evidence was closed. In defence, defendant examined Sh. Jai Ram Mangalni, as DW-1 who tendered his evidence by way of affidavit EX. DW-1/A. He was cross-examined by counsel for the plaintiff. Thereafter AR of the defendant by separate statement closed Defendant's evidence. Plaintiff also proved the following documents:-
• The copy of the original certificate of incorporation of the plaintiff is Ex.PW1/1.(OSR) • Copy of power of attorney duly executed by the plaintiff company is Ex.PW1/2.
• Original copy of reply of defendant dated 23.04.2010 alongwith envelop is Ex.PW1/3.
• Original copy of postal receipt is Ex. PW1/4.
• Copy of UPC is Ex.PW1/5.
• Copy of courier receipt is Ex. PW1/6.
• Copy of acknowledgement card duly received by the defendant is Ex. PW1/7.
• Original postal receipts dated 12.03.2010 are Ex. PW1/8 & Ex. PW1/9.
• Copy of UPC is Ex. PW1/10.CS No. 315/17
M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 7 of 24 • Copy of AD card duly received by the defendant is Ex. PW1/11.
• Copy of tender document Ex. P1
• Copy of letter dated 18.03.2009 Ex. P2
• Copy of letter dated 23.03.2008 Ex. P3
• Copy of fax message dated 0605.2009 Ex. P4
• Copy of legal notice dated 09.07.2009 Ex. P5
• Copy of letter dated 20.12.2008 Ex. P6
• Copy of letter dated 04.04.2008 Ex. P7
• Copy of letter dated 21.03.2008 Ex. P8
• Copy of reminder legal notice dated 02.03.2010 Ex. P9.
6. Written submissions have been filed by Ld. counsel for the plaintiff as well as Ld. counsel for the defendant. I have gone through the written arguments as submitted. I have also heard Sh. Ajay Shekhar, counsel for plaintiff and Sh. S.A. Saud counsel for defendant.
7. I have also gone through the entire records of the case including pleadings of the parties, evidence led by the parties and documents proved by the parties during trial.
8. My issue wise findings are:-
ISSUE NO.1
(i) Whether the plaintiff is entitled to the recovery of suit amount or any portion thereof? OPP 8.1 Onus to prove issue no. 1 is upon the plaintiff. In Ex. PW1/A, PW1 deposed in para 6 that while bidding in the reversed auction through e-
bidding, the price bid of group IV of Trailer in ONGC site, one zero was omitted due to the mistake on the part of the plaintiff and accordingly, the same was intimated on the spot itself on 18.12.2008 through mail while chatting in ONGC site and it was requested that the actual figure be read as CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 8 of 24 300050 in place of 30050. Later on, one letter dated 20.12.2008 was also written by the plaintiff to the defendant at Dehradun, thereby, informing that the plaintiff was not given the details of the revised auction of Group-IV of Trailer unless getting the confirmation from ONGC, Dehradun. The said letter was duly received by the defendant. He further deposed that during tender bid an amount of Rs.3,14,862.09 was given for group-IV (Trailer). The said letter is Ex. P6. This letter is of date 20.12.2008. This letter is not disputed by the defendant. During cross examination specific question put to PW1 by the defendant. Question and reply both are reproduced hereunder :
"Q : It is put to you that at the time of e-auction, if you enter a reduced bid, thereafter a prompt window appears on the screen and gives you a chance to confirm the same. Did you confirm at the prompt window?
Ans. It is correct that in such circumstance, prompt window appears. I am aware that prompt window appeared in this case also and we confirmed at the prompt window.
Q : I put it to you that because of your modifying bid in such a manner being lower than all other participants, the auction process was stalled and you bid of Rs.30050/- became the lowest bid?
Ans. I do not know."
8.2 In Ex. DW1/A it is deposed by DW1 that it is a sheer case of afterthought since after lowering the bid to the lowest level all other bidders backed out and the process was stalled. Thereafter, the plaintiff was informed the defendant about the said mistake and the same has rightly been catagorised as modification of the bid not acceptable to defendant. He further deposed that it is an afterthought to state that the alleged omission was a clerical mistake. He further deposed that after entering the reduced price, but before actual submission of the same, a 'prompt window' appears on the screen asking for re-confirmation before submission of such reduced price. It CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 9 of 24 was for the plaintiff to re-assure himself before actually submitting the reduced price. During cross examination this evidence has not been challenged by the plaintiff. DW1 admitted that in the present matter after the plaintiff committed mistake at the time of bidding and immediately after submitting the bid had telephonically as well as on their prompt window has informed the defendant that he has committed mistake by omitting one 'zero' in the bidding figure. DW1 further deposed that no remedial action was taken by the plaintiff on receipt of information about the mistake by plaintiff because once the system is on for reverse bidding, there is no provision for any remedial action.
8.3 In support of his arguments Ld counsel for plaintiff relied upon Fateh Chand Vs. Balkishan Dass, (1964) 1 SCR 515 wherein it was held:
"8. The claim made by the plaintiff to forfeit the amount of Rs. 24,000/- may be adjudged in the light of Section 74 of the Indian Contract Act, which in its material part provides :-
"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 maybe, the penalty stipulated for."
The section is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 10 of 24 the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrors is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.
10. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of tile case. jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according, to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damage"; It does not justify CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 11 of 24 the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.
15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief' as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court, is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract"
does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.
16. There is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant save as to the loss CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 12 of 24 suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract; nor wag there evidence that any other special damage had resulted. The contract provided for forfeiture of Rs. 25,000/- consisting of Rs. 1000/-paid as earnest money and Rs. 24,000/- paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs. 1,000/- which was paid as earnest money. We cannot however agree with the High Court that 10 per cent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant, and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs. 1,000/- which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs. 24,000/-, and we can rightly presume that lie must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract we are of opinion that the amount of Rs. 1,000/- (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs. 24,000/-during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed mesne profits for being kept out of possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose. The decree passed by the High Court awarding Rs. 11,250/- as damages to the plaintiff must CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 13 of 24 therefore be set aside."
8.4 He further relied upon Maula Bux Vs. UOI 1969 (2) SCC 554 :
"4. Under the terms of the agreements the amounts deposited by the plaintiff as security for due performance of the contracts were to stand forfeited in case the plaintiff neglected to perform his part of the contract. The High Court observed that the deposits so made may be regarded as earnest money. But that view cannot be accepted. According to Earl Jowitt in "The Dictionary of English Law"
at p. 689: "Giving an earnest or earnest-money is a mode of signifying assent to a contract of sale or the like, by giving to the vendor a nominal sum (e.g. a shilling) as a token that the parties are in earnest or have made up their minds." As observed by the Judicial Committee in Kunwar Chiranjit Singh v. Har Swarup A.I.R. 1926 P.C. 1. Earnest money is part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.
In the present case the deposit was made not of a sum of money by the purchaser to be applied towards part payment of the price when the contract was completed and till then as evidencing an intention on the part of the purchaser to buy property or goods. Here the plaintiff had deposited the amounts claimed as security for guaranteeing due performance of the contracts. Such deposits cannot be regarded as earnest money.
5. Section 74 of the Contract Act provides:
CS No. 315/17M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 14 of 24 "When a contract has been broken, if a sum is named in the contract as the amount to be paid in case (1) A.I.R. 1926 P.C. 1 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.
......
There is authority, no doubt coloured by the view which was taken in English cases, that Section 74 of the Contract Act has no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach: Natesha Aiyar v. Appavu Padayachi I.L.R. (1913) Mad. 178, Singer Manufacturing Company V. Raja Prosad I.L.R. (1909) Cal. 1960, Manian Patter V. The Madras Railway Company I.L.R (1906) Mad. 188. But this view is no longer good law in view of the judgment of this Court in Fateh Chand's case MANU/SC/0258/1963 : (1964) 1SCR 515. This Court observed at p. 526 :
"Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach, and (ii) where the contract contains any other stipulation by way of penalty. The measure of damages in the case of breach of 'a stipulation by Way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for."CS No. 315/17
M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 15 of 24 The Court also observed :
"It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the High Courts in India, that Section 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty"
comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by Section 74. In all cases, there fore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable but not exceeding the amount specified in the contract as liable to forfeiture", and that, "There is no. ground for holding that the expression "contract contains any other stipulation by way of penalty" is limited to cases of stipulation in the nature of an agreement to. pay money or deliver property on breach and does not comprehend covenants under which amounts paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeited."
8.5 Ld. Counsel for the plaintiff further relied upon Union of India CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 16 of 24 vs. Raman Iron foundry (1974) 2 SCC 231 :
"Having discussed the proper interpretation of cl. 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts: The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damages which are claimed are liquidated damages under cl. 14, but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. Sec. 74 of the Indian Contract Act eliminates the some-what elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages 'and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 17 of 24 damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages....... The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant."
8.6 He further relied upon Sir Chunnilal V. Mehta & Sons Ltd Vs. Century Spinning and Manufacturing Co. Ltd. AIR 1962 SC 1314 (1), Govt. of NCT of Delhi & ors vs. Suraj Chaudhary W.P.(C) 7977/2014 dated 21.11.2014, Kailash Nath Associates vs. Delhi Development Authority (2015) 4 Supreme Court Cases 136.
8.7 It is not disputed by plaintiff during cross examination of DW1 that the tender was re-floated in this matter. DW1 further deposed that he has not placed any document on record to show that defendant had not suffered loss on account of re-tendering. DW1 submitted that clause 16.7(b) of the tender is not applicable in the facts and circumstances of the case.
8.8 Clause 16.7 is being re-produced hereunder :
16.7 The Bid Security shall be forfeited by ONGC in the following events :
a. If Bid is withdrawn during the validity period or any extension thereof duly agreed by the Bidder. b. If Bid is varied or modified in a manner not acceptable to CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 18 of 24 ONGC during the validity period or any extension of the validity duly agreed by the Bidder.
c. If a Bidder, having been notified of the acceptance of its bid, fails to furnish Security Deposit / Performance Bank Guarantee (Performance Security) within 15 days of notification of such acceptance.
d. If the bidder has been disqualified from the tender process prior to the award of contract according to the provisions under section 3 of Integrity Pact. ONGC shall be entitled to demand and recover from bidder Liquidated damages amount by forfeiting the EMD / Bid Security (Bid Bond) as per section 4 of Integrity Pact.
9. Per contra, Ld counsel for defendant in his written arguments relied upon National Thermal Power Corporation Limited vs. Ashok Kumar Singh and Others (2015) 4 Supreme Court Cases 252 :
"10. In Ganga Enterprises case (supra) this Court was examining a similar question. The argument in that case, as is the position even before us, was that withdrawal of an offer before it was accepted could not result in forfeiture of the earnest money/security money given by the bidder. Repelling that contention this Court held that while a person may have a right to withdraw his offer at any time before the acceptance is conveyed to him if the offer is itself subject to the condition that the earnest money will be forfeited for not entering into contract or if some other act is not performed, then, even though he may have a right to withdraw his offer he will have no right to claim the refund of the earnest money. Forfeiture of the earnest money, in any such case, does not, observed this Court, infringe any statutory right under the Contract Act, 1872 for earnest/security is given and taken in such cases only to ensure that a contract comes into existence. What is important is that this Court recognised that absence of any term stipulating forfeiture of the earnest money may lead to situations where even those who do not have the CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 19 of 24 capacity or intention of entering into a contract venture into the bidding process for at times extraneous reasons. The purpose of such a clause providing for forfeiture of the earnest money clearly was to see that only genuine bids are received. This Court observed:
"9 ...The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted."
9.1 He also relied upon Ganga Enterprises and another (2003) 7 CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 20 of 24 SCC 410 a case which is relied upon in National Thermal Power Corporation Limited vs. Ashok Kumar Singh and Others (supra). The Hon'ble Supreme Court in Kailash Nath Associates vs. Delhi Development Authority (supra) clarified while explaining in para 40 of the said judgment :
"40. From the above, it is clear that this Court held that Maula Bux's case was not, on facts, a case that related to earnest money. Consequently, the observation in Maula Bux that forfeiture of earnest money under a contract if reasonable does not fall within Section 74, and would fall within Section 74 only if earnest money is considered a penalty is not on a matter that directly arose for decision in that case. The law laid down by a Bench of 5 Judges in Fateh Chand's case is that all stipulations naming amounts to be paid in case of breach would be covered by Section 74. This is because Section 74 cuts across the rules of the English Common Law by enacting a uniform principle that would apply to all amounts to be paid in case of breach, whether they are in the nature of penalty or otherwise. It must not be forgotten that as has been stated above, forfeiture of earnest money on the facts in Fateh Chand's case was conceded. In the circumstances, it would therefore be correct to say that as earnest money is an amount to be paid in case of breach of contract and named in the contract as such, it would necessarily be covered by Section 74."
9.2 In the present case the plaintiff himself deposed in Ex. PW1/A that he modified his bid whereas clause 16.7(b) specifically provides that Bid as varied or modified in a manner not acceptable to the defendant then the bid security is to be forfeited. Moreover, the plaintiff has concealed an important fact in his plaint that when he entered a reduced bid a prompt CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 21 of 24 window appeared on his screen. The fact regarding appearing of prompt window, he has not disclosed in the plaint.
9.3 In Kailash Nath Associates vs. Delhi Development Authority (supra) it was held :
" 42 In the present case, forfeiture of earnest money took place long after an agreement had been reached. It is obvious that the amount sought to be forfeited on the facts of the present case is sought to be forfeited without any loss being shown. In fact it has been shown that far from suffering any loss, DDA has received a much higher amount on re- auction of the same plot of land."
9.4 Hon'ble Supreme Court further clarified in para 43.1 "43.1 Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation."
9.5 In the same judgment Hon'ble Supreme Court in para 43.3 held :
43.3 Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine CS No. 315/17 M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 22 of 24 qua non for the applicability of the Section.
9.6 In para 13 of Ex. DW1/A it is specifically deposed by DW1 that the action of plaintiff resulted in stalling the process of further auction by way of preventing defendant from getting further reduction in rates from other bidders for Group-IV (Trailers). It is further deposed that in order to ensure continuity of services, defendant was compelled to extend the existing contract by one more year. Defendant was deprived of the opportunity to finalise for three years, thereby getting the long term price benefit. Therefore, the defendant was well within its right to invoke bid security as per the terms of tender. During cross examination a suggestion was given to which DW1 replied that he did not know if the present tender was re-floated in September, 2009. However he could not say if the tender was awarded w.e.f. December, 2009. Admittedly there was a delay of about one year. Plaintiff could not establish before the Court that new contract which was granted in December, 2009, was higher than the earlier contract.
9.7 Hon'ble Supreme Court in National Thermal Power Corporation Limited vs. Ashok Kumar Singh (supra) in para no. 13 held :
"13. The upshot of the above discussion is that it is no longer possible for the respondents to contend that the right to withdraw the bid in terms of Section 5 of the Contract Act, 1872 would entitle them to withdraw without suffering forfeiture of the earnest money even in cases where the submission and receipt of bids is itself subject to the condition that in the event of a withdrawal of the bid the earnest money stand forfeited. Inasmuch as the High Court remained totally oblivious of the true legal position while directing refund of the earnest money, it committed an error."CS No. 315/17
M/s Globe Eco Logistics Ltd. vs. O.N.G.C. Page no. 23 of 24 9.8 Applying the law as discussed herein above this court comes to the conclusion that admittedly a delay of one year was caused for awarding of tender due to modification of bid in a manner which was not acceptable to the defendant and thus the plaintiff is not entitled for release of the said amount. The plaintiff is not able to discharge the onus to prove this issue and thus issue no.1 is answered against the plaintiff.
ISSUE NO. 2.
(ii) Whether the plaintiff is entitled to interest on the awarded amount? If so, at what rate, on what amount and for what period? OPP
10. Since plaintiff is not able to discharge the onus to prove issue no. 1 therefore, issue no. 2 is also answered against the plaintiff.
RELIEF
11. In view of the discussions and observations made hereinabove, the suit of the plaintiff is dismissed. No order as to the cost. Decree sheet be prepared accordingly.
File be consigned to record room.
Pronounced in open Court on 24.07.2017 (Jitendra Kr. Mishra) Additional District Judge 01.
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