Patna High Court
M/S Suraksha Diagnostic Pvt. Ltd vs The State Of Bihar & Ors on 19 April, 2016
Author: Vikash Jain
Bench: Vikash Jain
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.15034 of 2014
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M/s Suraksha Diagnostic Pvt. Ltd. a Company incorporated under the Companies
Act having its registered office at DD-18/1, Salt Lake City, Sector-1, Kolkata-
700091 through one of its Directors namely, Shri Raman Kejriwal, son of Shri K.K.
Kejriwal, resident of JC 21, Salt Lake City, Sector- 3, Kolkata- 700098
.... .... Petitioner
Versus
1. The State of Bihar, through Principal Secretary, Department of Health & Family
Welfare, Government of Bihar, Patna
2. The Secretary, Health cum Executive Director, State Health Society, Bihar
through Secretary, Health Cum Executive Director, State Health Society, Bihar
3. The Secretary, Health Cum Executive Director, State Health Society, Bihar
4. The State Programme Officer, Secretary, Health cum Executive Director, State
Health Society, Bihar
.... .... Respondents
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Appearance :
For the Petitioner : Mr. Ashish Giri,Advocate
For the Stat : Mr. Kaushal Kumar Jha, AAG 14
Mr. Shankar Kumar Choudahry, AC to AAG 14
For the State Health Society: Mr. K.K.Sinha, Advocate
Mr. Shashi Shekhar, Advocate
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CORAM: HONOURABLE MR. JUSTICE VIKASH JAIN
ORAL JUDGMENT
Date: 19-04-2016
Heard learned counsel for the petitioner, for the State and for
the State Health Society.
2. This writ petition as amended by I.A. No. 8952 of 2014 has
been filed for quashing the order dated 06.11.2014 passed by the
Executive Director, State Health Society, Bihar, by which the petitioner
has been made to forfeit the earnest money deposited by him by way of
bank guarantees, the Request for Proposal (RFP) cancelled, and the
petitioner blacklisted from conducting work in the Department of
Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 2
Health, Government of Bihar and its agencies like State Health Society
and Bihar Medical Services & Infrastructure Corporation Limited, and
for a direction to the respondents to refund the amounts of the bank
guarantees with interest.
3. According to the petitioner, the respondent State Health
Society (for short "the Society") had issued a Request for Proposal
(RFP) for design, installation, refurbishment, operationalisation and
maintenance of imaging centres in six Government Medical Colleges
and Hospitals, 33 District Hospitals and in LNJP Ortho Hospital,
Rajbanshi Nagar, Patna in Public Private Participation (PPP) mode.
4. The petitioner participated and as required, furnished
earnest money deposit in the form of five bank guarantees for the five
clusters in question, as follows :-
a. BG No. 014 GT02141250004 dated 05.05.2014 of Rs.
30 lacs valid up to 01.11.2014.
b. BG No. 014 GT02141250003 dated 05.05.2014 of Rs.
30 lacs valid up to 01.11.2014.
c. BG No. 014 GT02141250002 dated 05.05.2014 of Rs.
30 lacs valid upto 01.11.2014.
d. BG No. 014 GT02140770008 dated 18.03.2014 of Rs.
30 lacs valid upto 17.09.2014.
e. BG No. 014 GT02140770010 dated 18.03.2014 of
Rs.30 lacs valid upto 17.09.2014.
In due course, a letter No. 3578 dated 15.05.2014 was received from
the respondents accepting the proposal of the petitioner for clusters 1
Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 3
and 2, and similarly, another letter No. 3646 dated 16.05.2014 was
received accepting the proposal for cluster Nos. 3, 4 and 5. All the
proposals were accepted by the petitioner vide letter dated
11.06.2014. A Memorandum of Understanding (MOU) was required to be executed between the parties, which however was still at the stage of negotiation. However, during such negotiations for finalization of the draft MOU, the respondent society invoked the bank guarantees through its letter No. 6790 dated 22.08.2014 addressed to the HDFC Bank, and subsequently encashed them.
5. Learned counsel for the petitioner submits that the actions taken against the petitioner in terms of impugned letter No.7973 dated 06.11.2014 (Annexure-1/3 of I.A. No. 8952 of 2014) is completely arbitrary and without the authority of law. It is submitted that the bank guarantees furnished by the petitioner were conditional in nature and only on the fulfillment of those conditions could the same have been invoked. The amounts covered under the bank guarantees were contemplated to be forfeited only in the following two circumstances.
(1) In the event of withdrawal of the offer by the bidder as a condition within the validity period.
(2) In the event of failure to furnish the valid contract performance guarantee by the bidder within one month from the receipt of the purchase order.
A perusal of the impugned order discloses that the solitary reason for Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 4 invoking the bank guarantees was that the validity thereof was to expire on 17.09.2014, and as such the Society decided to encash them. It is submitted that such action which is wholly unauthorized on the very terms of the bank guarantees, has caused serious prejudice and detriment to the petitioner. Reliance in this regard is placed on the decision of a co-ordinate Bench of this Court in the case of Hindustan Steel Works Construction Ltd. vs State of Bihar & Others [2009 (2) PLJR 909], as partially affirmed by a Division Bench of this Court in State Bank of India & Others vs Hindustan Steel Works Construction Ltd. [2012 (1) PLJR 54]. That apart, learned counsel for the petitioner also points out that the Society could not have invoked the bank guarantees in absence of any such contemplation in the RFP. Furthermore, the MOU had not been entered into between the parties, and the same could not therefore come to the aid of the Society to support its manifestly arbitrary and illegal action.
6. Learned counsel for the petitioner also questioned the legality of the impugned action by way of cancellation of RFP, forfeiture of Earnest Money Deposit and blacklisting, on the ground of violation of natural justice. It is pointed out that the show cause as contained in letter No. 7128 dated 11.09.2014 (Annexure-E to the counter affidavit) discloses that the Society had made up its mind to take the impugned actions against the petitioner at the stage of the show cause itself, rendering the issuance of the show cause a mere Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 5 eye wash and an idle formality. Attention is invited to para 10 of the show cause wherein it has been stated that the "SHSB decided to have them encashed." It was argued that the Society has proceeded with a pre-determined notion, which renders such action contrary to the law laid down in Oryx Fisheries Pvt. Ltd. vs The Union of India and others [(2010) 13 SCC 427].
7. As regards the delay alleged against the petitioner in entering into agreement with the Society, it is submitted that the same is completely baseless and misconceived. By its letters dated 15.05.2014 and 16.05.2014 (Annexures 5 and 6), the Society had informed the petitioner that he would be provided a draft of the MOU proposed to be signed by the parties. The petitioner had responded by filing its reply on 11.06.2014 (Annexure-7), accepting the offer to enter into a mutually agreed MOU. The Society sent the draft MOU by e-mail dated 11.08.2014. The petitioner thereafter sent a list by e- mail dated 19.08.2014 raising no less than 15 points by way of initial observations and objections to the draft MOU, along with proposed changes. One of the main objections was that clause 3.2.3 of the draft MOU constituted a condition in restraint of trade, having the effect of prohibiting the petitioner from engaging in any business at Patna for a period of two years after the termination of the contract. It is submitted that such condition could not legally have been imposed, being in violation of Section 27 of the Contract Act. This was one of Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 6 the main points of negotiation, and the Society could not lay blame at the door of the petitioner for the delay in signing caused by the disagreement on this point. This in effect meant that the Society was demanding compliance as if the petitioner was bound to accept all the conditions sought to be imposed in the draft MOU whether or not the same were in accordance with law. Finalisation of the agreement was dependent upon the petitioner's absolute and unqualified acceptance and free consent which was justifiably not forthcoming in the above circumstances.
8. As regards the order of blacklisting passed against the petitioner, it was argued that the same is illegal and unsustainable for the additional reason that the same had been made to operate for an indefinite period and thus fell foul of the well settled principle enunciated in the case of M/s Kulja Industries Ltd. vs Chief General Manager, W.T. Project, BSNL and others [(2014) 14 SCC 731].
9. Learned counsel for the Society, on the other hand, vehemently opposed the writ petition, submitting that the same is devoid of merit and is liable to be dismissed as such. Adverting to the counter affidavit, submissions were made at length by the Society in support of its contention that no fault can be found with the actions taken against the petitioner in view of the gross delay on the part of the petitioner in entering into the agreement and in starting the work. It is submitted that public interest has greatly suffered as the Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 7 imaging centers in a large number of institutions covered under the RFP could not be made operational by reason of delay attributable solely to the petitioner. It was argued that despite the Society's repeated endeavors to get the MOU finalized and the work started, the petitioner failed to visit the sites and kept delaying the matter. Even though the Society sent the draft MOU by e-mail dated 11.08.2014 and proposed the same to be signed by the parties on 12.08.2014, the petitioner failed to comply and instead sent a list of proposed amendments to the draft MOU more than a week later, on 19.08.2014, thus delaying the matter. It is further submitted that even though the petitioner visited the Society on 27.08.2014 and after discussions, gave an assurance to visit again on either 02.09.2014 or 03.09.2014 to finalize the terms of the MOU so that the same could be signed by the parties on 09.09.2014, he failed to turn up. An e-mail was sent on 03.09.2014 by the Society but the same was ignored and the petitioner did not visit the Society.
10. Having heard the parties and on consideration of the materials on record, this Court is of the view that the contention of the petitioner that the bank guarantees by their very terms were conditional in nature and could be invoked only upon the fulfillment of the conditions, merits consideration. The proposition of law to this effect as noticed by the Learned Single Judge in Hindustan Steel Work's case (supra) has not been disagreed with by the Division Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 8 Bench as referred above. However, the Division Bench had set aside the order of the Learned Single Judge to the extent that the Bank had been directed to refund the amount of the bank guarantee, and the petitioner was permitted to go before the Arbitrator in terms of the Bihar Public Works Contract Disputes Arbitration Tribunal Act 2008 to seek its reliefs.
11. In that view of the matter, this Court is refraining from deciding the merits of the issue relating to the legality of invocation and encashment of the bank guarantees by the respondents. The petitioner shall be at liberty to take recourse to the provisions of the Bihar Public Works Contract Disputes Arbitration Tribunal Act 2008 for seeking appropriate remedy and redressal of its grievances.
12. As regards the order of blacklisting of the petitioner, this Court is of the view that the same cannot be upheld. A bare perusal of the order makes it evident that the same has been made perpetual in nature and is thus contrary to the well settled law laid down in M/s Kulja Industries' case (supra). Moreover, such order could also not have been passed in absence of any concluded contract as the MOU had not been executed between the parties. The RFP did not also authorize the respondents to pass an order of blacklisting against the petitioner. Moreover, this Court is of the view that the Society must at least partially share the responsibility for delay in Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 9 finalizing the MOU. It is a matter of record that in response to the Society's e-mail dated 11.08.2014, the petitioner had submitted a list of objections and changes proposed therein about a week later by e- mail dated 19.08.2014. It appears that such proposals were rejected by the Society after a lapse of over two months by its letter No. 294 dated 21.10.2014 (Annexure-12), and that too only after the petitioner submitted its show cause reply (Annexure-F to the counter affidavit). It cannot therefore be said that the petitioner had acted negligently or with any express intention of deliberately delaying signing the MOU, moreso when the terms of the draft MOU were being objected to by the petitioner on grounds which cannot outright be termed frivolous or irrelevant.
13. Accordingly, the impugned order dated 06.11.2014 insofar as it has blacklisted the petitioner from conducting work with the Department of Health, Government of Bihar and its agencies is hereby quashed.
14. As regards cancellation of the RFP by the Society, this Court is not inclined to interfere as the same never culminated in a concluded contract between the parties. If the society was of the view that the petitioner was not serious about proceeding with the work, it was fully justified in abandoning negotiations with the petitioner and it was free to explore its options with other interested parties. As a matter of fact, it would appear that the petitioner in its show cause Patna High Court CWJC No.15034 of 2014 dt.19-04-2016 10 reply dated 15.09.2014 has already expressed its decision not to invest the huge sum required and to withdraw from the proposed projects in view of the issues raised by the petitioner remaining unresolved.
15. The writ petition stands disposed with the aforesaid observations and directions.
(Vikash Jain, J) Chandran U