Calcutta High Court
Mbl Infrastructures Ltd. & Ors vs Rites Ltd. & Ors on 14 December, 2017
Equivalent citations: AIR 2018 (NOC) 770 (CAL.)
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Original Side
W.P. No. 1645 of 2010
MBL Infrastructures Ltd. & Ors.
Vs.
Rites Ltd. & Ors.
With
W.P. No. 1649 of 2010
MBL Infrastructures Ltd. & Ors.
Vs.
Rites Ltd. & Ors.
For the Petitioners : Mr. Jishnu Chowdhury, Advocate
Ms. Rajshree Kajaria, Advocate
For the Respondents : Mr. Sarvapriya Mukherjee, Advocate
Mr. Chayan Gupta, Advocate Mr. Sandip Das Gupta, Advocate Ms. Iram Hassan, Advocate Heard on : December 11, 2017 Judgment on : December 14, 2017 DEBANGSU BASAK, J.:-
Two writ petitions are taken up for consideration analogously as they involve similar issues. For the sake of convenience, the facts of W.P. No. 1645 of 2010 are alluded to.
The petitioners assail a decision of the first respondent in forfeiting the earnest money deposit in respect of a tender.
Learned Advocate for the petitioners submits that, the first respondent had floated a tender for construction of a railway siding. The first petitioner participated therein. The first petitioner deposited earnest money in terms of the tender conditions of such tender. The first petitioner suffered a show-cause notice dated July 20, 2009. The first petitioner replied thereto. The show-cause notice dated July 20, 2009 refers to one allegation while the impugned decision of the first respondent is on the basis of another ground. The decision is based on alleged suppression of a material fact which ground is absent in the show-cause notice. Relying upon 2014 Volume 9 Supreme Court Cases 105 (Gorkha Security Services v. Government (NCT of Delhi) & Ors.) he submits that, the decision of the first respondent suffers from the breach of principles of natural justice. He relies upon 2005 Volume 7 Supreme Court Cases page 159 (SACI Allied Products Ltd., U.P. v. Commissioner of Central Excise, Meerut) for a similar proposition.
On the aspect of the breach of principles of natural justice he draws the attention of the Court to the fact that, the impugned decision of the first respondent is contained in a writing dated October 1/4, 2010 which is issued by the General Manager (Projects) while the hearing was given by the Director (Projects). He refers to the decision of the Director (Projects) as disclosed in the affidavit-in-opposition. He submits that, the communication dated October 1/4, 2010 does not advert to the decision of the Director (Projects). Such a decision is obviously an afterthought, brought into being after the filing of the writ petition. He refers to pages 31 and 33 of the affidavit-in-opposition and submits that, it is inconceivable that an order sheet recording the so-called decision would have an order starting from the end of a page as appearing at page 31 of the affidavit-in-opposition. The decision dated July 20, 2009 was disclosed by way of an affidavit affirmed on November 23, 2012. Prior to such disclosure, such order was never communicated. The document at page 31 to 33 of the affidavit-in-opposition is, therefore, suspect. Such decision does not contain any reason. The decision of the first respondent as communicated by the writing dated October 1/4, 2010 also does not contain any reason. He relies upon 2007 Volume 4 Calcutta High Court Notes page 712 (Uniworth Resorts Limited and Ajay Prakash Lohia v. Ashok Mittal & Ors.) in support of the contention that, an administrative order must contain reasons.
Referring to the contents of the decision of the Director (Projects) as appearing in the affidavit-in-opposition he submits that, such decision suffers from the vice of perversity. Relevant documents have not been taken into consideration by the first respondent and the decision making authority. Therefore, the impugned decision of the first respondent should be interfered with.
Adverting to the facts of the matter he submits that, the first respondent has given a go-by to the show-cause notice. He submits that, after the issuance of the show-cause notice dated July 20, 2009, the first respondent asked the petitioners to extend the validity of the bid by a writing dated July 24, 2009. The first petitioner did so by a writing dated July 30, 2009. A second extension of the validity period was requested by the first respondent by a writing dated August 27, 2009 which was declined by the first petitioner. It is subsequent thereto that, the first respondent took the steps in the manner as stated. Therefore, the first respondent is deemed to have given a go-by to the show-cause notice. Referring to the impugned decision, the learned Advocate for the petitioners submits that, such a decision of the first respondent is in breach of the principles of proportionality. He relies upon All India Reporter 2017 Supreme Court page 3847 (Madhavan & Ors. v. The State of Tamil Nadu) in support of such proposition. Referring to 2015 Volume 4 Supreme Court Cases page 136 (Kailash Nath Associates v. Delhi Development Authority & Anr.) he submits that, by the impugned decision the first respondent forfeited the earnest money deposit. In the two writ petitions, a sum of Rs.1 Crore is involved. The first respondent not having suffered any loss, the question of forfeiting the earnest money deposit does not arise. The penalty clause appearing in the terms and conditions of the tender cannot be utilized for the purpose of making a profit.
Learned Advocate for the first respondent submits that, the tender conditions specify that, in the event, a tenderer is found to furnish any statement, information or document which is incorrect or false, then, the earnest money would be forfeited. In the present case, the first petitioner suffered an order of disqualification passed by the State of Jharkhand in respect of a project. Such fact was known to the first petitioner at the time of submission of the tender document. The first petitioner chose not to disclose such information. Such information is relevant.
Learned Advocate for the first respondent refers to the impugned decision which is made available in the affidavit-in-opposition. He submits that, the petitioners were repeatedly requested to provide a copy of the petition on which the High Court had passed the order. The petitioner did not do so. The petition before the High Court demonstrates that, the petitioners were aware of the order passed by the State of Jharkhand in December 2008 itself. The petitioners misled the first respondent at all material times. He refers to the Order dated February 23, 2010 passed by the High Court on a suit filed by the first petitioner. He also refers to the reply to the show-cause notice dated March 15, 2010 issued by the first respondent. He submits that, the impugned decision does not call for any interference by the Writ Court.
The first respondent issued a notice inviting tender dated January 3, 2009. Apparently, the petitioners formed a joint venture and participated in such tender. The petitioners had deposited the earnest money in terms of the tender. Tender conditions specify the validity period of the offer of a participant. With the validity period approaching, a request was made by the first respondent to the petitioners to extend the validity period which the petitioners did. A second request was made for the same purpose subsequently which the petitioners declined. The petitioners, thereafter, suffered a show-cause notice dated July 20, 2009. The petitioners replied to such show-cause notice. There was a second show-cause notice to which the petitioners replied also.
The first show-cause notice refers to dealing of the first petitioner with regard to the construction of Adityapur-Kandra Road for the State of Jharkhand. It notes that a writ petition was pending before the Ranchi High Court. It goes on to say that, the State of Jharkhand had initiated proceedings to blacklist the first petitioner. Consequently, the offer submitted by the petitioners in respect of the subject tender was vitiated by suppression of such material fact by making a declaration that the petitioners have no record of not completing the contract, inordinate delay in completion, litigation history or financial failure. The show-cause notice refers to clauses 6 and 9.4 of the tender conditions. It goes on to say that, if adequate explanation is not received, appropriate action would be taken. The second show-cause notice is of the same vein. The decision impugned in the present proceedings relates to such show-cause notices and is of the view that, the petitioners are guilty of suppression of material facts and that, the earnest money should be forfeited.
The relevant clause of the tender conditions relating to earnest money deposit is clause 9.4 which is as follows:-
"9.4. The Earnest Money is liable to be forfeited
a) if after bid opening during the period of bid validity or issue of Letter of Acceptance, whichever is earlier, any tenderer
i) withdraws his tender or
ii) makes any modification in the terms and conditions of the tender which are not acceptable to the Employer.
b) in case any statement/information/document furnished by the tenderer is found to be incorrect or false.
c) in the case of a successful tenderer, if the tenderer
i) fails to furnish the Performance Guarantee within the period specified under Clause 1 of "Clauses of Contract".
ii) Fails to commence the work within 15 days after the date of issue of Letter of Acceptance.
In case of forfeiture of E.M. as prescribed here in above, the tenderer shall not be allowed to participate in the retendering process of the work."
It is not in dispute that, the petitioners provided information in the tender bid by stating that, they did not have any history of litigation and that, there is nothing adverse against the petitioners. The first petitioner, as noted above, entered into a contract dated January 12, 2004 with the State of Jharkhand for the construction of Adityapur-Kandra Road. Such agreement was revoked by the State of Jharkhand by a writing dated September 13, 2008. This fact was known to the first petitioner as will appear from the interim application made by the first petitioner in the suit filed by the first petitioner being G.A. No. 2249 of 2009 in C.S. No. 233 of 2009. On November 25, 2008, the State of Jharkhand issued a show-cause notice against the first petitioner for embezzlement of Government money and for blacklisting. This was received by the first petitioner on December 3, 2008. The first petitioner submitted a reply to the show-cause notice issued by the State of Jharkhand on December 8, 2008. On December 11, 2008, the first petitioner was blacklisted and was prohibited from taking part in tenders countrywide. This order was passed by the State of Jharkhand. Such order was received by the first petitioner on December 16, 2008 and admitted to the so in the interim application made by the first petitioner in the suit filed by the fist petitioner in the High Court at Calcutta. Such fact is also reflected in the Order dated August 1, 2009 passed in G.A. No. 2249 of 2009 in C.S. No. 233 of 2009. On January 3, 2009 the Jharkhand High Court added the first petitioner as a party respondent in the pending Public Interest Litigation. The first respondent issued a notice inviting tender dated January 3, 2009 subsequent to these happenings. The petitioners participated in such tender process by filing a bid with declaration and affidavit on February 10, 2009. The petitioners did not make the requisite declaration as to the steps taken by the State of Jharkhand and the fact that, the first petitioner had suffered an order of blacklisting passed by the State of Jharkhand, in the bid document. Subsequently, a show-cause notice was issued by the first respondent to the first petitioner. Ultimately the impugned decision was taken.
The impugned decision does not travel beyond the allegations levelled in the show-cause notice. The first respondent proceeded to issue the show-cause notice for the purpose of forfeiture of earnest money deposit. Power to forfeit earnest money deposit is in clause 9.4 of the tender conditions.
Gorkha Security Services (supra) deals with blacklisting. It is of the view that, the show-cause notice must clearly spell out that the authority proposes to blacklist the delinquent. SACI Allied Products Ltd., U.P. (supra) is of the view that, it is impermissible to go beyond the show-cause notice. In the facts of the present case, it cannot be said that the authority has gone beyond the show-cause notice. The show- cause notices speak of violation of the tender conditions. It says that, action would be taken in terms of the tender conditions. The decision impugned does not blacklist the first petitioner. Rather, it forfeits the earnest money deposit. Power to forfeit is there under paragraph 9 of the tender conditions.
Uniworth Resorts Limited and Ajay Prakash Lohia (supra) is of the view that, a decision must be informed with reasons. In the present case, the impugned decision speaks as to why the forfeiture of earnest money is directed. It notices that, the first petitioner did suppress the material facts in the tender documents even after it becomes aware of the blacklisting order of the State of Jharkhand. It also notices that, in spite of repeated opportunities being granted, the first petitioner did not produce the application in which the interim order was passed by the Calcutta High Court. It, thereafter, proceeds to forfeit the earnest money deposit in terms of the tender conditions. It gives reasons as to why no order of blacklisting was passed. Therefore, the impugned decision of the authority cannot be said to be uninformed with reasons.
Madhavan & Ors. (supra) is rendered in the context of a criminal proceeding. The punishment awarded was found to be disproportionate to the offence committed. In the present case, the first respondent had two options available to itself to impose simultaneously or one in preference to the other. In the present case, an order of forfeiture of earnest money has been directed rather than an order of blacklisting, although the offence committed by the first petitioner and the same being established by requisite evidence, entitles the first respondent to do both. It cannot be said that, the impugned order suffers from disproportionality.
Kailash Nath Associates (supra) deals with forfeiture of earnest money and is of the view that, the penalty clause cannot be invoked for the purpose of making profit particularly when the authority did not suffer a loss. In the present case, the first respondent was entitled to impose the penalty of blacklisting also. It chose not to do so. It proceeds to forfeit the earnest money deposited in terms of the tender conditions.
In view of the discussions above, I find no infirmity in the impugned decision of the first respondent. W.P. No. 1645 of 2010 and W.P. No. 1649 of 2010 are dismissed. No order as to costs.
[DEBANGSU BASAK, J.]