Delhi District Court
Primatel Fibcom Ltd vs Gail (India) Ltd on 2 April, 2025
IN THE COURT OF SH. VIDYA PRAKASH
DISTRICT JUDGE (COMMERCIAL COURT)-02
NEW DELHI DISTRICT, PATIALA HOUSE COURTS
NEW DELHI
CS (COMM) No.: 591/2023
CNR No. DLND01-0092812023
IN THE MATTER OF:-
PRIMATEL FIBCOM LIMITED
G-71, WORLD TRADE CENTRE
BARAKHAMBA LANE
NEW DELHI-110001
EMAIL: [email protected]
...... PLAINTIFF
VERSUS
GAIL (INDIA) LIMITED,
16, BHIKAJI CAMA PLACE
R.K.PURAM
NEW DELHI-110066.
EMAIL: [email protected]
......DEFENDANT
Date of institution of suit : 27.10.2023
Date of reserving judgment : 10.03.2025
Date of pronouncement of judgment : 02.04.2025
JUDGMENT
1. Vide this judgment, I shall dispose off the present suit for recovery of Rs.1,28,02,674/- along with interest and costs, filed by plaintiff against the defendant.
BRIEF FACTS OF THE CASE:
2. The case of the plaintiff, as culled out from the plaint and the documents filed therewith, is as under:-
2.1 The plaintiff is stated to be a public limited company duly registered under the Companies Act, CS (COMM) No.:591/2023 Page 1 of 29 1956 bearing CIN No. U74899DL1995LC066700 and is also an MSME (Medium Enterprise), duly registered with Ministry of Micro, Small and Medium Enterprise, Government of India and having Udyam Registration No. UDYAM-UP-28-
0017034.
2.2 It is averred that the plaintiff is an Original Equipment Manufacturer (OEM) and is engaged in the business of manufacturing and trading of telecommunication and networking equipments and execution of the projects, including Government and Semi-Government projects. The plaintiff, inter-alia, is manufacturing Synchronized Digital Hierarchy (SDH) Equipments, which is capable of use in MPLSP, MPLS-TP Protocols, which is used for transfer of digital signals. The said product is required, inter-alia, for telecom, oil and gas pipelines, power, railways, infrastructure projects, for which, Tenders of considerable values are frequently floated by the Government and Public Sector Undertakings/Entities.
2.3 It is the case of the plaintiff that on 26.07.2019, the defendant i.e. GAIL (India) Limited had issued an E-Tender No. 8000015361 (REF NO.
GAIL/NOIDA/C&P/19058) for upgradation of its Telecom Systems along Mehsana-Vadodara RR5 and DUPL-DPPL OFC Routes and other facilities RR5. The plaintiff submitted its bid against the said e-tender along with the requisite documents and CS (COMM) No.:591/2023 Page 2 of 29 after detailed examination, an independent and impartial third-party agency i.e. M/s. TUV SUD South Asia Private Limited was engaged by the defendant, and the plaintiff was found to be technically qualified.
2.4 It is further the case of the plaintiff that after completely satisfying itself about the technical qualifications, requirement and the financial bid, submitted by it, and being the lowest (L1) as per norms of the Tender, the contract was awarded by the defendant to the plaintiff, vide FOA No. GAIL/NOIDA/C&P/19058 dated 12.12.2019, followed by Letter of Acceptance ( hereinafter referred to as "LOA") No. GAIL/NOID/19058/ 5800003555/GAILTEL dated 12.12.2019 and the estimated contract value for the project work was Rs.16,79,32,362.13Paise.
2.5 It is further the case of the plaintiff, that as per clause No.1.1 of technical BEC based, the following documents were submitted by the plaintiff:-
2.5.1 Purchase Order No. HFCL/DWDM/8026 dated 24.11.2017 issued by M/s HFCL to M/s Fibcom India Limited;
2.5.2 Experience Certificate issued by M/s HFCL dated 08.08.2019; and 2.5.3 Completion Certificate issued by M/s HFCL dated 23.09.2019.CS (COMM) No.:591/2023 Page 3 of 29
2.6 The aforesaid documents duly fulfilled and qualified the following technical criteria as prescribed under the Tender:
"1.1 In case Bidder is OEM:
1.1.1. The Bidder should have successfully supplied at least Ninety (90) Nos. of MPLS- TP Equipment in maximum two (2) number of orders in the preceding Seven (7) years which shall be reckoned from the final due date of submission of bid.
1.1.2. Minimum Ninety (90) Nos. of MPLS- TP equipment along with Network Management System (NMS) should have been in satisfactory operation for period of minimum one year which shall be reckoned from the final due date of submission of bid."
2.7 Aforesaid documents were also got verified and certified by the Third-Party Agency engaged by the defendant i.e. M/s TUV SUD South Asia Pvt. Ltd., which had also issued a Report in that regard.
2.8 It is further the case of the plaintiff that on 10.01.2020, in terms of the directions of the defendant, the plaintiff submitted a performance guarantee for an amount of Rs.1,67,93,236/-for the said project. Subsequently, due to revised required value, the same was revised to Rs.1,28,02,764/- on 11.03.2020.
2.9 It is averred that before commencement of the project work, in March, 2020, there was spread of novel Corona Virus and nationwide lockdown was imposed by the Government, which had material effect and bearing, due to which, supply chains were CS (COMM) No.:591/2023 Page 4 of 29 disrupted and the project work could not commence. It is further averred that the plaintiff had written various e-mails and letters to the defendant, thereby invoking force majeure situation/condition in terms of the Contract (Clause 26.1 of GCC) and seeking extension of time.
2.10 It is further averred that the defendant did not dispute the same, but, at the same time, no response was received from it and thus, due to the said force majeure conditions and in terms of the Contract, the period stood extended. In the meantime, the plaintiff with great difficulty was able to manage the raw materials to commence and initiate the project work under the Tender.
2.11 It is further averred that in a completely illegal manner and at the instance of the direct competitor, and on the basis of some mischievous complaint filed by one of the competitors and at the instance of Director (Marketing) of the defendant, who was in collusion with the said competitor, the defendant issued a Show Cause Notice cum Suspension Order No.GAIL/C&P/BANNING/SCN/FIBCOM/54 dated 20.07.2020 to the plaintiff, followed by another letter bearing No. GAIL/NOIDA/GAILTEL/01 of the same date i.e. 20.07.2020, whereby the defendant suspended the Contract. However, copy of the alleged complaint, on the basis of which, the alleged notice had been issued, was not provided to the plaintiff.
CS (COMM) No.:591/2023 Page 5 of 292.12 It is further averred that the plaintiff had submitted its initial reply on 21.07.2020, followed by a detailed reply dated 30.07.2020 to the said Show Cause Notice-cum-Suspension Order, whereby, it had given a detailed clarification to the defendant and submitted that it duly fulfilled the technical requirement and the documents submitted by plaintiff are genuine and reflect true and correct position. The Tender had been awarded after detailed scrutiny of the documents and also on the basis of an independent and impartial report of third party engaged by the defendant, which was submitted after duly satisfying itself that the plaintiff fulfilled the technical qualification and requirement. It was further mentioned that admittedly, HFCL was the bidder for the BSNL tender and Fibcom was OEM selected by HFCL for supply and installation of POTS (Packet Optical Transport System) Equipment in terms of the Tender. Hence, the PO issued to Fibcom for execution of the work was by HFCL and not by BSNL. BSNL had awarded the work of entire project to HFCL, which BSNL was ultimately carrying out for defence. It was only a portion of the project that was being carried out by Fibcom, which Fibcom had carried out successfully, and to the complete satisfaction of HFCL and HFCL was ultimately responsible to BSNL for the entire project. It was also mentioned that GAIL was wrongly construing the letter of BSNL, which in fact, confirmed the fact that the equipment supplied CS (COMM) No.:591/2023 Page 6 of 29 (POTS) Fibcom supported MPLS-TP and the equipments were physically installed after successful conduction of the Factory Acceptance Test. Further, the plaintiff also mentioned that BNSL nowhere disputed or denied the authenticity and genuineness of the Certificate issued by HFCL to Fibcom and correctness of its contents. In fact, the same were confirmed and affirmed and no wrong or fraudulent act had been committed by Fibcom, either as alleged, or otherwise and the allegation was absolutely wrong and misconceived and the notice had been wrongfully issued at the behest of competitor who was L2.
2.13 It is further averred that a hearing was granted by defendant on 02.09.2020, subsequent to which, vide letter dated 14.09.2020, the plaintiff submitted its additional response along with a letter dated 10.09.2020 of M/s BSNL addressed to M/s HFCL and Letter of HFCL dated 06.07.2020. In the said letters, HFCL as well as BSNL confirmed the supply and successful installation of the equipment and HFCL confirmed the genuineness and correctness of the Certificates and that the work done by OEM had been completed. It was further confirmed that it was the responsibility of HFCL for handing over of the entire and complete network deployed including the work done on behalf of individual OEM.
CS (COMM) No.:591/2023 Page 7 of 292.14 It is further averred that the plaintiff, in the view of detailed clarification provided, requested the defendant to revoke the said Show Cause Notice- cum-Suspension Order dated 20.07.2020 and to resume the Purchase Order, so that the plaintiff can supply the material and execute the project at the earliest, however, without going into the merit of the facts and circumstances and without deliberating on the issues at hand, and without consideration of the material on record, Banning Order dated 10.12.2020 was passed by Mr. Shailendra Chaurasia, Deputy General Manager (C&P) of the defendant, in a completely illegal and wrongful manner, on the same lines as the Show Cause Notice-cum- Suspension Order dated 20.07.2020, wherein it was stated that the plaintiff had indulged into fraudulent practice as per Clause No.1.1.2 of Bid Evaluation Criteria (BEC) and Clause No. B 2 (i) & (ii) of Annexure -1 of ITB of Contract Document.
2.15 It is further averred that it was stated in the banning order that the same can be challenged by filing an appeal before the Appellate Authority i.e. Committee of Director (BD) & Director (Finance), within a period of one month from the receipt of copy of that order. Accordingly,the suspension order dated 20.07.2020 and the said banning order dated 10.12.2020 were immediately challenged by filing an appeal before the Appellate Authority on 15.12.2020.
CS (COMM) No.:591/2023 Page 8 of 292.16 It is stated that after passing of the Banning Order, on 23.12.2020,the defendant had wrongfully, illegally and arbitrarily invoked the Bank Guarantee of Rs.1,28,02,764/- furnished by plaintiff, which was challenged by plaintiff by filing Petition under Section 9 of The A & C Act,1996, bearing No. OMP (I) (COMM) 621/2020, in which, the Court was pleased to dispose of the said petition by order dated 06.02.2021 by observing that the defendant will keep an equal amount of bank Guarantee in their account till the final resolution of dispute by way of arbitration/legal process.
2.17 It is further stated that in terms of the provisions in the agreement, the appeal is required to be heard and decided within a period of 45 days from the filing of the appeal with the Appellate Authority (Clause F.3). Thus, the appeal filed by the plaintiff on 15.12.2020, was required to be heard and decided by 31.01.2021, however, despite lapse of considerable period of time, no notice of hearing in the said appeal was received, and which was received belatedly only on 21.05.2021, thereby fixing the date of hearing as 25.05.2021. Further, despite confirmation by the plaintiff, the said date of 25.05.2021 was postponed and cancelled by the Appellate Authority itself. It is further alleged that during pendency of the said appeal, M/s. Fibcom India Limited was merged with the plaintiff CS (COMM) No.:591/2023 Page 9 of 29 company, which was previously known as M/s. Prima Telecom Limited.
2.18 It is further averred that in the evening of 31.05.2021, an intimation was received from the Authority fixing the new date of hearing on 01.06.2021, however, as the notice of hearing was too short, a request for postponing and rescheduling of the date was made by the plaintiff. Despite repeated e-mails and reminders dated 07.09.2021, 06.10.2021, 27.12.2021, 18.01.2022 and 31.03.2022, no hearing was granted.
2.19 It is further stated that being aggrieved by the banning order and non-hearing of the appeal, the plaintiff filed a writ petition bearing WP (C) No. 8381/2022 titled as 'Primatel Fibcom Limited v. GAIL (India) Limited' before Hon'ble High Court of Delhi, wherein, vide its order dated 26.05.2022, Hon'ble High Court of Delhi issued notice and was further pleased to clarify that the banning order dated 10.12.2020 shall not be construed as disabling the plaintiff from participating in other contracts and tenders, which may be floated by other entities, however, the said writ petition is still pending. It is alleged that after the issuance of the suspension and banning order, the defendant floated a fresh tender for the same work, as under the tender awarded to the plaintiff.
CS (COMM) No.:591/2023 Page 10 of 292.20 In the light of the aforesaid, the plaintiff is seeking recovery of Rs.1,28,02,674/- against the wrongful, illegal and arbitrary invocation and encashment of the Bank Guarantee of Rs.1,28,02,764/- furnished by plaintiff, along with pendent-lite and future interest.
2.21 It is further averred that as per the Office Memorandum dated 06.02.2023, bearing No.F.1/12023-PPD issued by the Ministry of Finance, Government of India, the Ministry of Finance had directed that for MSMEs, 95% of the performance security forfeited from such firms shall be refunded. The plaintiff herein wrote a without prejudice letter dated 27.02.2023 to the defendant for release of 95% of the Performance Bank Guarantee in favor of the plaintiff in tune with the said Office Memorandum dated 06.02.2023. However, the defendant deliberately failed to comply even with said Office Memorandum dated 06.02.2023 and vaguely refuted the request of the plaintiff. It is claimed that the tender document provides for an arbitration clause for resolution of disputes through the mechanism of arbitration. However, under Clause 39.3 of the said Tender, the arbitration clause shall not be applicable in case of banning of vendors/ suppliers/ contractors/ bidders/ consultants indulged in fraudulent/coercive practice. Further, under Annexure -1A, there is a list of excepted matters and the disputes/issues relating to CS (COMM) No.:591/2023 Page 11 of 29 indulgence of contractor/bidder/vendor in corrupt/fraudulent/collusive/coercive practices falls under the said list of excepted matters and is therefore, excluded from Arbitration.
2.22 It is further stated that the plaintiff instituted Pre-
Litigation Mediation before Delhi Legal Services Authority, Patiala House Courts, New Delhi. However, the defendant did not appear in the said proceedings and consequently, Non Starter Report was issued by the concerned Authority. Thereafter, the present suit came to be instituted.
3. Summons of the suit were issued to the defendant. The defendant was duly served with the summons of the suit sent through ordinary mode on 29.11.2023. However, despite service of summons, none appeared on behalf of defendant. Consequently, the defendant was proceeded against ex-parte, vide order dated 04.04.2024 passed by this Court.
4. In support of its case, the plaintiff has examined its AR namely Sh. Vijay Veer Singh, AR, as PW1, who has deposed on the lines of the averments made in the plaint. He also relied upon/proved the following documents:-
Srl. Document/Particulars Exhibit(s) no
1. Board Resolution dated Ex.PW1/1 08.02.2023.
2. Copy of Master Data of the Ex.PW1/2 plaintiff.
3. Copy of Udyam Registration Ex.PW1/3 Certificate of plaintiff.CS (COMM) No.:591/2023 Page 12 of 29
Srl. Document/Particulars Exhibit(s) no
4. Copy of Purchase order dated Ex.PW1/4 24.11.2017.
5. Copy of Experience Certificate Ex.PW1/5 dated 08.08.2019.
6. Completion Certificate dated Ex.PW1/6 23.09.2019.
7. Copy of Tender Documents and Ex.PW1/7 print out of Letter of Acceptance & dated 12.12.2019 alongwith dated Ex.PW1/8 27.12.2019.
8. Report dated 16.08.2019 issued Ex.PW1/9 by TUV SUD South Asia Pvt.
Ltd.
9. Copy of Bank Guarantee Ex.PW1/10 submitted by defendant.
10. Copy of letters dated 17.03.2020, Ex.PW1/11 08.05.2020 and 08.06.2020.
11. Copy of Show Cause Notice- Ex.PW1/12 cum-Suspension order alongwith (Colly) e-mail dated 20.07.2020.
12. Copy of Suspension of LOA Ex.PW1/13 alongwith e-mail dated 20.07.2020.
13. Printout of initial reply dated Ex.PW1/14 21.07.2020 alongwith e-mail.
14. Copy of detailed reply dated Ex.PW1/15 30.07.2020.
15. Copy of Letter dated 14.09.2020 Ex.PW1/16 alongwith letter dated 10.09.2020 of M/s BSNL.
16. Copy of letter dated 06.07.2020 Ex.PW1/17 of HFCL.
17. Copy of Letter dated 24.11.2020. Ex.PW1/18
18. Copy of the Banning Order dated Ex.PW1/19 10.12.2020 alongwith e-mail.
CS (COMM) No.:591/2023 Page 13 of 29Srl. Document/Particulars Exhibit(s) no
19. Copy of appeal filed by the Ex.PW1/20 plaintiff with acknowledgment receipt.
20. Copy of certified copy of order Ex.PW1/21 dated 06.02.2021.
21. Copy of merger order dated Ex.PW1/22 27.04.2021 passed by NCLT, & New Delhi and Certificate of Ex.PW1/23 change of name.
22. Copy of e-mails and letters. Ex.PW1/24 (Colly)
23. Copy of order dated 26.05.2022. Ex.PW1/25
24. Office of memorandum dated Ex.PW1/26 06.02.2023.
25. Office copy of letter dated Ex.PW1/27 27.02.2023.
26. Reply of letter dated 15.03.2023. Ex.PW1/28
27. Affidavit under Section 65B of Ex.PW1/30 Indian Evidence Act alongwith affidavit under Order XI Rule 6 (3) CPC.
5. Thereafter, vide separate statement of Ld. Counsel of plaintiff, ex-parte evidence of the plaintiff was closed on 07.08.2024.
6. I have already heard, Sh. Rohit Gandhi, Advocate for the plaintiff. I have also gone through the material available on record including the plaint, the evidence, oral as well as documentary, led from the side of the plaintiff and brief written synopsis filed by plaintiff, as also the authorities cited at the Bar.
7. At this juncture, it may be noted that on 29.03.2025, an additional affidavit along with list of documents and CS (COMM) No.:591/2023 Page 14 of 29 certain documents i.e., Udyog Adhaar Memorandum, Udyog Adhaar Certificate dated 29.06.2016, NISC Registration, copy of Renewal of Registration, Udyog Udhyam Certificate dated 30.03.2021, Udyam Registration Certificate showing that the plaintiff is duly registered as MSME for the years 2021-2022, 2022-2023, 2023-2024, 2024-2025 with last Classification dated 24.07.2024, has been filed on behalf of plaintiff and the same were taken on record, vide order dated 02.04.2024 passed by this Court.
ARGUMENTS:
8. After referring to the case of the plaintiff as mentioned in the plaint and the evidence, oral as well as documentary, led during trial, Ld. Counsel of plaintiff vehemently argued that the entire conduct of the defendant had been illegal and unjustified in terminating the contract and passing off banning order dated 10.12.2020, without complying with the principle of natural justice. He further submitted that the act of defendant in invoking the bank guarantee furnished by the plaintiff is also illegal and unjustified, inasmuch as the plaintiff had duly complied with the technical specifications laid down in the Tender Documents and stood as lowest bidder (L1), on the behest of the competitor of the plaintiff, which stood as L2 in the bidding process, in connivance with the concerned officer(s) of the defendant herein. For this purpose, he also drew attention of this Court to the relevant clauses dealing with technical specification as appearing in the tender documents (Ex.PW1/7 and Ex.PW1/8) as also to the report CS (COMM) No.:591/2023 Page 15 of 29 dated 16.08.2019 (Ex.PW1/9) furnished by third party agency i.e. TUV SUD South Asia Private Limited.
9. Ld. Counsel of plaintiff also referred to and relied upon order dated 15.10.2024, passed in WP (C) /8381/2022 by Hon'ble Delhi High Court, in support of his arguments that this Court is well within its jurisdiction to entertain and decide the present suit regarding decree of declaration and passing off money decree on account of illegal forfeiture by defendant of the bank guarantee furnished by the plaintiff. He pointed out that the said Writ Petition was pending at the time of institution of the present suit, however, it came to be disposed off recently, on 15.10.2024 and also placed True Copy of said order on record.
10. Ld. Counsel of plaintiff has further argued that the defendant chose not to appear and contest the present suit and thus, the entire case of the plaintiff should be deemed to be admitted by the defendant. He further submitted that the entire testimony of plaintiff's witness examined during trial, has also gone unchallenged and unrebutted from the side of the defendant. He, therefore, urged that the plaintiff is entitled to the reliefs as prayed for.
11. In support of his aforesaid submissions, Ld. Counsel of plaintiff has relied upon the following judgments:-
11.1 'Kailash Nath Associates v. Delhi Development Authority', reported as (2015) 4 SCC 136;CS (COMM) No.:591/2023 Page 16 of 29
11.2 'JMB Buildcon v. Chaman Singh & Ors.' reported as (2022) SCC Online Del 3091;
11.3 'Rajesh Gupta v. Ram Avtar', reported as 2022 SCC OnLine Del 1482;
11.4 'Union of India v. Kendriya Bhandar', reported as 2023 SCC OnLine Del 4005;
11.5 'R. B. Enterprises v. Union of India', reported as 2023 SCC Online Del 8321;
11.6 'Union of India, v. Indian Agro Marketing Co-
operative Ltd.', reported as 2023 SCC OnLine Del 4621;
11.7 'M/s Transstroy v. NHAI', 2015 SCC OnLine Del 9780; and 11.8 'Krofta Engineering Ltd. v. Hermes Properties Ltd. & Ors.', reported as 2013 SCC OnLine 1997.
ANALYSIS & CONCLUSIONS
12. Firstly, I shall deal with the issue as to whether or not the present suit is instituted within the period of limitation. In this regard, while referring to the relevant documents, Ld. Counsel of the plaintiff submitted that the suit is well within the period of limitation as the Banning Order (Ex. PW1/19) was passed by Deputy General Manager (C & P) of defendant on 10.12.2020. Therefore, it is claimed that since the present suit was filed on 27.10.2023, it is well within the period of limitation.
CS (COMM) No.:591/2023 Page 17 of 2913. This is a suit for declaration and recovery of money and limitation is 3 years from the date when the cause of action arises. The plaintiff has sought decree of declaration, thereby, seeking to declare the act of defendant in non refunding and / or forfeiting the bank guarantee, the suspension order, letter dated 20.07.2020 and the banning order dated 10.12.2020, as illegal and bad in law. Further, the plaintiff has also sought recovery of a sum of Rs.1,28,02,674/- besides pendente lite and future interest @ 12% per annum against the defendant.
14. Banning Order dated 10.12.2020 (Ex.PW1/19) was passed by Mr. Shailendra Chaurasia, Deputy General Manager (C&P) of the defendant on the ground that the plaintiff had indulged in fraudulent practice as per Clause No.1.1.2 of Bid Evaluation Criteria (BEC) and Clause No. B 2 (i) &
(ii) of Annexure -1 of ITB of Contract Document. The plaintiff initially challenged the said order by way of an appeal with the Appellate Authority in terms of Clause F.3 of the Tender Documents on 15.12.2020. As per the said clause, such appeal was required to be heard and decided within a period of 45 days from the date of filing thereof and thus, same ought to have been decided by 31.01.2021. However, it has been the categorical case of the plaintiff that the Appellate Authority, in its wisdom, did not decide the said appeal either till 31.01.2021 or even subsequent thereto for the reasons best known to them. That being so, this Court is entirely in agreement with the submissions made on behalf of plaintiff that inaction on the part of Competent Authority, coupled with the fact that banning CS (COMM) No.:591/2023 Page 18 of 29 order was passed on 10.12.2020, gave valid cause of action in favour of plaintiff to challenge the said order by way of civil proceedings in the form of present suit. Since, the present suit was filed on 27.10.2023, therefore, the Court is the view that the present suit is within the prescribed period of limitation.
TERRITORIAL JURISDICTION:
15. Ld. Counsel of plaintiff submitted that the registered office of the defendant is situated at 16, Bhikaji Cama Place, R.K. Puram, New Delhi, which falls within the territorial jurisdiction of this Court. Thus, it is submitted that this Court has got the territorial jurisdiction to decide this suit within the meaning of S. 20(a) & (c) CPC. He further argued that the terms and conditions dated 24.11.2017 of the contract,clearly stipulate 'That all terms and conditions herein shall be governed by the laws of India, to the exclusion of its rules of conflicts of laws and the courts of New Delhi'. He, therefore, submitted that this Court has got territorial jurisdiction to entertain and try the present suit.
16. It is the specific case of the plaintiff company, as mentioned in Para no.(vi) of the plaint, that contract was awarded by defendant to the plaintiff, vide FOA No. GAIL/NOIDA/C&P/19058 dated 12.12.2019, followed by Letter of Acceptance No. GAIL/ NOID/ 19058/ 5800003555/ GAILTEL dated 12.12.2019. The said LOA (Ex. PW1/8) itself reflects that the registered office of the defendant is situated at 16, Bhikaji Cama Place, New CS (COMM) No.:591/2023 Page 19 of 29 Delhi-110066. Further, the PW1 has also deposed on identical lines during his chief examination by way of affidavit (Ex. PW1/A). As already noted above, the entire testimony of said witness has gone unchallenged and un- rebutted from the side of defendant, which preferred not to cross examine the said witness examined on behalf of plaintiff company. Hence, this Court has territorial jurisdiction to adjudicate the dispute involved in the present suit.
SUBJECT MATTER JURISDICTION
17. During the course of arguments, Ld. Counsel of plaintiff submitted that the plaintiff herein never sought any relief for declaring the act of forfeiture of bank guarantee in the aforesaid writ petition filed before Hon'ble Delhi High Court and this fact has also been clarified in final order dated 15.10.2024 ( supra), whereby, the said writ petition came to be disposed off. Based on such submissions, he submitted that this Court has the inherent jurisdiction to decide the present suit.
18. In order to appreciate the aforesaid submissions made by Ld. Counsel of plaintiff, it would be apposite to reproduce the relevant portion of order dated 15.10.2024 (supra). Same is extracted here as under:-
"xxxx
6. In light of the above, the present petition is disposed of with the observation that the banning order dated 10th December, 2020 shall not be construed as disabling the Petitioner from participating, bidding or award of any contract or tender, either independently or as a consortium, CS (COMM) No.:591/2023 Page 20 of 29 which may be floated by any Government, PSUs, or other entities including GAIL.
7. Mr. Gandhi requests the Court to clarify that the Petitioner shall be free to take recourse to legal options for recovery of the amount, which has been wrongly encashed under the bank guarantee. However, since the issue of bank guarantee was not the subject matter of the banning order, in the opinion of the Court, such an observation is not necessary. Nonetheless, it is clarified that all rights and contentions of the parties, which are not the subject matter of the banning order, are left open. xxxx"
19. It is, thus, evident from above that Hon'ble Delhi High Court has expressly observed in the aforesaid order that the issue of bank guarantee was not the subject matter of the said writ petition and has clarified that all rights and contentions of the parties, which are not the subject matter of the banning order, are left open. As already noted above, the plaintiff is primarily seeking relief of declaration for declaring the act of defendant in forfeiting the bank guarantee as illegal and unjustified, with consequential reliefs in the form of money decree to the extent of amount of bank guarantee, besides interest and litigation costs. Thus, this Court finds substance in the arguments raised on behalf of plaintiff that by virtue of S.9 CPC, this Court has got the inherent jurisdiction to entertain and decide the present suit. It is so held accordingly.
20. Since the suit amount is above specified value i.e. Rs.3 lacs, as prescribed under the Commercial Courts Act, 2015, the Court has also pecuniary jurisdiction to adjudicate the suit.
CS (COMM) No.:591/2023 Page 21 of 29ENTITLEMENT:
21. Ld. Counsel of plaintiff has argued that the entire testimony of PW-1 has remained unchallenged and un- rebutted from the side of defendant and therefore, the plaintiff is entitled to the decree, as prayed for. He also referred to the relevant documents (Ex. PW1/1 to Ex. PW1/30), in order to bring home his point that these documents clearly prove that on 10.01.2020, in terms of the directions of the defendant, plaintiff submitted a performance guarantee of an amount of Rs.1,67,93,236/- for the project, which was subsequently, due to revised required value, the same was revised to Rs.1,28,02,764/- on 11.03.2020. However, after passing of the Banning Order (Ex.PW1/19), the defendant had wrongfully, illegally and arbitrarily invoked the Bank Guarantee of Rs.1,28,02,764/- furnished by plaintiff, on 23.12.2020 and thus, the said amount of Rs.1,28,02,674/- is due and payable by the defendant to the plaintiff at the time of filing of the suit. He, therefore, prayed that the suit may be decreed.
22. As already noted above, there is no challenge to the case of the plaintiff from the side of defendant, which preferred not to contest the present suit. The averments made by PW1 on oath are duly supported by the relevant documents Ex. PW1/1 to Ex. PW1/30, as already referred to herein above. Even otherwise, nothing contrary to the case of plaintiff has been brought on record. Hence, there is no reason to disbelieve such testimony made on oath.
CS (COMM) No.:591/2023 Page 22 of 2923. It is duly established during trial that the plaintiff had duly fulfilled and thus, qualified the technical criteria as prescribed under the tender. Not only this, the supporting documents showing that the plaintiff was actually meeting the technical criteria, were duly got examined, scrutinized, and satisfied by defendant through third party agency i.e. M/s TUV SUD South Asia Pvt. Ltd. The Verification and Certification Report (Ex.PW1/9) duly establishes this fact. It is also an established fact on record that the contract was awarded in favour of the plaintiff on 12.12.2019, vide Letter of Acceptance (Ex.PW1/8) issued to the plaintiff. It is also proved that the plaintiff had submitted performance bank guarantee initially to the tune of Rs.1,67,93,236/- for the said project, which was subsequently revised to Rs.1,28,02,764/- (Ex.PW1/10) on 11.03.2020. During subsistence of the said contract, the defendant had issued Show Cause Notice-cum-Suspension Order dated 20.07.2020 (Ex.PW1/13) and Letter of Suspension of LoA (Ex.PW1/12) to the plaintiff, which was duly replied on 21.07.2020, vide detailed reply (Ex.PW1/14), followed by another detailed reply dated 30.07.2020 (Ex.PW1/15).
24. Further, the plaintiff has duly proved during trial that vide letter dated 14.09.2020 (Ex. PW1/16), it had submitted its additional response along with a letter dated 10.09.2020 of M/s BSNL addressed to M/s HFCL (Ex. PW1/16) and Letter of HFCL dated 06.07.2020 (Ex. PW1/17). A bare perusal of said letters would reveal that HFCL as well as BSNL had duly confirmed the supply and successful CS (COMM) No.:591/2023 Page 23 of 29 installation of the equipment. HFCL had also confirmed the genuineness and correctness of the certificates, as also that the work done by OEM was complete at its end. It further confirmed that it is the responsibility of HFCL for handing over of the entire and complete network deployed including the work done on behalf of individual OEM. Not only this, the plaintiff is shown to have requested the defendant to revoke the said Show Cause Notice-cum- Suspension Order dated 20.07.2020 and to resume the Purchase Order, so that it could supply the material and execute the project at the earliest.
25. Further, despite repeated emails and reminders dated 07.09.2021, 06.10.2021. 27.12.2021, 18.01.2022, 31.03.2022 (Ex. PW1/24), it is claimed by plaintiff that no hearing was afforded to the plaintiff by the Appellate Authority constituted by the defendant herein. The defendant not only issued the suspension and banning order, but is also shown to have illegally and wrongfully invoked the aforesaid bank guarantee of Rs.1,28,02,764/- on 23.12.2020, as was submitted by the plaintiff, without affording an opportunity of hearing.
26. Needless to say that the invocation of bank guarantee during pendency of the appeal before Appellate Authority, was completely unwarranted and same amounts to high- handedness on the part of the defendant and thus, this Court is of the view that such act on the part of defendant was illegal, whimsical and arbitrary, besides being against the principles of nature of justice. Considering the fact that the defendant chose not to contest the present suit by not CS (COMM) No.:591/2023 Page 24 of 29 filing its written statement, the entire case of the plaintiff in that regard shall be deemed to have been admitted by virtue of Order VIII Rule 3 (A) CPC, as applicable to the Commercial Courts Act, 2015. Further, in the absence of any admission/ denial affidavit from the side of defendant, all the documents filed by plaintiff alongwith plaint, would also be deemed to be admitted by the defendant.
27. Pertinently, the stipulation regarding forfeiture in the agreement is by way of penalty and not against any loss or damage, which is prohibited in law. Moreover, there is no specific forfeiture letter or communication from the side of defendant, wherein, it would have claimed that it has suffered any consequential loss or damages and thus, would be within its right to forfeit the amount of Rs.1,28,02,674/- by encashing the bank guarantee. The plaintiff is shown to have written a letter dated 27.02.2023 (Ex.PW1/27) to the defendant for release of 95% of the Performance Bank Guarantee in its favour in terms of Office Memorandum dated 06.02.2023 (Ex.PW1/26). However, the defendant still did not comply with said Office Memorandum issued by the Ministry of Finance, Government of India, wherein, it has been directed that for MSMEs 95% of the performance security forfeited from such firms shall be refunded. Instead, the defendant is shown to have refused the request of the plaintiff, vide reply letter dated 15.03.2023 (Ex.PW1/28) on quite vague grounds. Hence, the Court finds considerable force in the submission of Ld. Counsel of plaintiff that the defendant had wrongly withheld the amount of Rs.1,28,02,674/- of CS (COMM) No.:591/2023 Page 25 of 29 the performance bank guarantee furnished by the plaintiff, in a completely illegal and unjustifiable manner, as the defendant has failed to show or prove that any loss whatsoever was suffered by it.
28. It is well settled law that there cannot be any forfeiture of the amount unless and until, loss is specifically proved by the party seeking to forfeit the amount. Further, it is also trite law that mere breach of a contract will not entitle the party to forfeit or retain the amount and it has to be specifically pleaded and also to prove such loss. It is further well settled that there cannot be any forfeiture by way of a penalty and the same is specifically prohibited under the provision of the Contract Act. While saying so, the Court is also fortified by the cited decisions of Hon'ble Apex Court in cases of Kailash Nath Associates ( supra), JMD Buildcon (supra) and Rajesh Gupta (supra), as also by the cited decisions of Hon'ble Delhi High Court in cases of Kendriya Bhandar (supra), R.B. Enterprises (supra) and Indian Agro Marketing Co-operative Ltd. (supra), M/s Transstroy (supra) and Krofta Engineering Ltd. (supra)
29. In view of the foregoing reasons and the discussion made hereinabove, this Court is of the considered view that the plaintiff has been successful to prove its case and thus, is entitled to decree of declaration, whereby, it is hereby declared that the act of defendant in forfeiting the bank guarantee to the tune of Rs.1,28,02,674/- was illegal and bad in law and thus, the plaintiff is held entitled to recover CS (COMM) No.:591/2023 Page 26 of 29 the said amount from the defendant. It is so held accordingly.
INTEREST:
30. The plaintiff has claimed pendente lite and future interest @ 12% p.a. He also argued that as per general market practice, the defendant is liable to pay interest @ 12% per annum on the suit amount. Needless to say that the plaintiff has neither claimed any pre-suit interest, nor paid any Court Fees thereupon.
31. Order VII Rule 2A of Code of Civil Procedure (hereinafter referred as CPC) in respect of a commercial dispute of a specified value was brought in the statute by way of amendment in respect of the requirements of pleadings, where the interest is claimed by the plaintiff.
32. Section 34 CPC provides that where the liability in relation to the sum so adjudged, had arisen out of commercial transaction, the rate of such further interest may exceed 6% per annum but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to the commercial transactions.
33. However, the statute provides that the pendent- lite interest should be awarded at the rate on which money are lent or advanced by nationalized banks in relation to commercial transaction under Section 34 of The Code of Civil Procedure.
CS (COMM) No.:591/2023 Page 27 of 2934. Therefore, considering all the facts and circumstances of the case, the Court is of the opinion that the plaintiff is entitled to recover compounded interest @ 10% per annum as claimed by it, the transactions between the parties being commercial in nature.
35. The plaintiff has also claimed the cost of the suit. Keeping in view the provisions contained in Sections 35 and 35A CPC, it has been established that the defendant failed to pay the outstanding dues despite service of summons of the suit upon it. Therefore, the defendant is responsible for the cost of the litigation to the extent of court fee and lawyers fee etc. as per the relevant rules. In my view, the plaintiff is accordingly entitled for the cost of litigation against the defendant.
RELIEF:
36. In the light of the aforesaid discussion, Court is of the view that the plaintiff has been able to prove its case on the basis of preponderance of probability. Thus, the suit is decreed in favour of plaintiff and against the defendant and the following reliefs are granted:-
36.1 decree of declaration is hereby passed in favour of plaintiff and against the defendant, whereby, it is declared that the act of defendant in forfeiting the bank guarantee to the tune of Rs.1,28,02,674/- was illegal and bad in law and thus, the plaintiff is held entitled to recover the said amount from the defendant;CS (COMM) No.:591/2023 Page 28 of 29
36.2 Pendente-lite and future interest is awarded @ 10% per annum from the date of filing of the suit till the date of its realization; and 36.3 Cost of the suit is also awarded in favour of the plaintiff.
37. Decree sheet be prepared accordingly.
38. File be consigned to Record Room, after due compliance.Digitally signed
Announced in the open court by VIDYA
VIDYA PRAKASH
on this 02nd Day of April, 2025. PRAKASH Date:
2025.04.02
17:26:30 +0530
(VIDYA PRAKASH)
DISTRICT JUDGE (COMMERCIAL COURT)-02 PATIALA HOUSE COURTS, NEW DELHI CS (COMM) No.:591/2023 Page 29 of 29