Gujarat High Court
Pooja Ceratech Private Limietd Through ... vs Oil And Natural Gas Corporation Limited on 27 July, 2021
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3569 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-
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1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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POOJA CERATECH PRIVATE LIMITED THROUGH DIRECTOR
NARENDRA SUNDARJIBHAI PADILIYA
Versus
OIL AND NATURAL GAS CORPORATION LIMITED
================================================================
Appearance:
MR HARSHIT S TOLIA(2708) for the Petitioner(s) No. 1
MR CR ABICHANDANI(2421) for the Respondent(s) No. 2
MR DEVANG VYAS with MR RITURAJ M MEENA(3224) for the
Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 27/07/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs :
Page 1 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "A. Admit and allow the present petition.
B. Be pleased to issue a writ of mandamus and/or any other appropriate writ, order or direction in the nature of mandamus against the Respondent No.1 and quash and set aside its action of issuing the letter dated 03.02.2020 (served on 04.02.2020) on the Respondent No.2 for invocation of Bank Guarantee and all consequential actions thereto and direct the Respondent No.2 herein to not act upon the letter for invocation of Bank Guarantee issued by the Respondent No.1;
C. Be pleased to issue a writ of mandamus and/or any other appropriate writ, order or direction in the nature of mandamus against the Respondent No.2 to refund and reverse the Bank Guarantee if it is already encashed by the Respondent No.1;
D. Pending the admission, hearing and final disposal of the captioned petition, be pleased to stay the implementation, execution and operation of the impugned the letter dated 03.02.2020 (served on 04.02.2020) on the Respondent No.2 for invocation of Bank Guarantee and all consequential actions thereto and direct the Respondent No.2 herein to not act upon the letter for invocation of Bank Guarantee issued by the Respondent No.1 or reverse and refund of the amount if it is already encashed;
E. Issue ex parte ad interim relief in terms of paragraph no.9(C) above;Page 2 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 F. Grant any such other and/or further order/s that this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."
2. The case put up by the writ-applicant may be summarised as under :
3. The writ-applicant is a company registered under the Companies Act, 2013. The respondent no.1 - Oil & Natural Gas Corporation Limited issued a Tender Notice No.D16HC19004 dated 8th August 2019 for sale of gas from its Nawagam Field of GGS-I. The said tender was floated for the purpose of supply of gas available on fall back basis for five years to the prospective gas consumers for their own consumption. The reserve price for the purchase of gas was fixed at 3.69 USD/MMBTU (Metric Million British Thermal Unit). In accordance with the bidding mechanism, the tender was to be awarded in favour of the bidder whose bid was of the highest value. The tender was issued under the 'Two Bid System', i.e. Techno-Commercial Bid and Price Bid. One of the preconditions of opening of the bid was due qualification of the Techno-Commercial Bid. The last date of submission of the tender was 17 th September 2019 upto 2:00 p.m. and the date of opening of the bid was 17 th September 2019 at 3:00 p.m. It is not in dispute that the writ-applicant participated in the tender process by offering its bid. The writ- applicant received an email on 29 th November 2019 from one of the officers of the Corporation informing that upon evaluation of the technical bids on 17th September 2019, the price bids were to be opened on 3rd December 2019 at 3:00 p.m. Page 3 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
4. At this stage, we look into the core issue which led to this litigation. It appears that on 3 rd December 2019, i.e. the date on which the price bids were to be opened, the writ-applicant requested the Corporation to permit him to modify his price bid on the ground that he had committed a mistake in offering the price.
5. In the aforesaid context, we may refer to the communication dated 3rd December 2019, which reads as under :
"Oil & Natural Gas Corporation Limited Chandkheda Campus, Chandkheda, Ahmedabad - 380 005.
SUBJECT : FOR CALCULATE OUR PRICE INCLUDE RESERVE PRICE Ref :- ONGC E-Tender ref. no.D16HC19004 for "Gas Sale from Nawagam Field of GGS-1 of ONGC, Ahmedabad Asset Respected Sir, Because of Misunderstanding in price calculation of Basic Price (3.69 + 2.16) so total 5.85. So, consider our final price 5.85 USD/MMBTU.
Yours faithfully, Pooja Ceratech Pvt. Ltd.
Mr.Narendrabhai Cell : +919825230606"Page 4 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
6. No sooner the Corporation came to know about such modification as referred to above, then it decided to postpone the opening of the price bids.
7. The Corporation thereafter decided to open the price bids on 13th January 2020 but, on that date, the writ-applicant was not invited. The Corporation proceeded to look into the bids offered by five other bidders excluding the writ-applicant. At the end of the process of scrutiny of the price bids, one M/s.Vidres India Ceramics Private Limited emerged as the successful bidder having quoted the price of 2.64 USD in addition to the reserve gas price. The aforesaid led to a situation whereby the writ- applicant was out of the tender process. It appears that the Corporation thereafter decided to invoke the 12 bank guarantees furnished by the writ-applicant towards the security interest deposit, to the tune of Rs.1,03,26,720=00 (Rupees One Crore Three Lakh Twenty-Six Thousand Seven-Hundred Twenty Only). The HDFC Bank informed the writ-applicant about the invocation of the bank guarantee at the instance of the Corporation. The letter addressed by the Bank to the writ- applicant as regards the invocation of the bank guarantee reads thus :
"Date : 05.02.2020 To, Pooja Ceratech Private Limited 8A National Highway Plot No.6 Ceramic Plaza at Trajpar, Ta Morbi Morbi 363641 Dear Sir/Madam, Page 5 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 Sub : Invocation of Bank Guarantee No.101GT02192560001 to 11 and 101GT02192560012, Dtd. 13-Sep-2019 Please find enclosed a copy of claim letter sent by the beneficiary for the captioned bank guarantee of Rs.860,560.00 each issued by us on 13-Sep-2019 and valid upto 17-Oct-2020.
We shall have to invoke the guarantee and payment to be done to ONGC Ahmedabad Asset by debiting your A/c and/ or by liquidation of your FD for total amount of Rs.1,03,26,720.00 (Rupees One Crore Three Lac Twenty Six Thousand Seven Hundred Twenty Only) For HDFC Bank Ltd.
Authorised Signatory"
8. In view of the aforesaid, the writ-applicant had to come before this Court with the present writ-application.
SUBMISSIONS ON BEHALF OF THE WRIT-APPLICANT :
9. Mr.Tolia, the learned counsel appearing for the writ- applicant vehemently submitted that the action on the part of the Corporation in forfeiting the security deposit by invoking the bank guarantee could be termed as absolutely arbitrary and contrary to the terms of the tender document. He would argue that the Corporation was obliged to refund the security deposit as the Corporation declined to look into the modified price bid Page 6 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 offered by his client. According to Mr.Tolia, when the price bid, original as well as modified, was not at all taken into consideration, then the security deposit could not have been forfeited because there was no concluded contract between the parties. Mr.Tolia invited the attention of this Court to Clause 14.5 of the tender document, which provides for forfeiture of the security deposit. Mr.Tolia pointed out that the security deposit was liable to be forfeited by the Corporation in the event the bidder varied or modified the bid in a manner not acceptable to the Corporation during the validity period or any extension thereof duly agreed by the bidder. Mr.Tolia fairly conceded that in the case on hand the validity period was extended. Mr.Tolia tried his best to develop an argument that the Corporation could have been said to be justified in not permitting any change in the quotation after the opening of the tender. However, according to Mr.Tolia, when the price bid of the writ-applicant was not at all opened or looked into, then in such circumstances, the security deposit should have been refunded on finalization of the bid process.
10. Mr.Tolia would further argue that even otherwise the Corporation cannot be said to have suffered any loss so as to justify the forfeiture of the security deposit amount. Such argument of Mr.Tolia is based on Section 74 of the Contract Act.
11. In such circumstances referred to above, Mr.Tolia prays that there being merit in his writ-application, the same may be allowed and the Corporation may be directed to refund the entire amount towards the security deposit.
Page 7 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 SUBMISSIONS ON BEHALF OF THE CORPORATION :
12. Mr.Devang Vyas, the learned counsel appearing for the Corporation has vehemently opposed the present writ- application by raising a preliminary contention as regards the maintainability of the present writ-application. According to Mr.Vyas, the writ jurisdiction of this Court could be said to have been invoked in a purely contractual matter having no colour of public law and, therefore, the present writ-application is not maintainable.
13. Mr.Vyas submitted that the forfeiture of the security deposit amount is strictly in accordance with the terms of the tender document. According to Mr.Vyas, it was not permissible for the writ-applicant to offer a modified bid in a manner not acceptable to the Corporation during the extended validity period. According to Mr.Vyas, Clause 14.5 of the tender document makes it abundantly clear as regards the above.
14. Mr.Vyas invited the attention of this Court to few relevant averments made in the affidavit-in-reply filed on behalf of the Corporation, more particularly, as under :
"6.4 It is stated that the technical bid was opened on 17.09.2019 and subsequently price bid opening was scheduled for 03.12.2019 at 1500 hours. It is stated that the petitioner herein sent an unsolicited communication disclosing/ modifying his bid just few hours before the opening. The relevant part of the said communication is as under:Page 8 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "Because of misunderstanding in price calculation .... So, consider our final price 5.85 USD/MMBTU..."
That by way of the said unsolicited communication, the bidder has disclosed/varied the price just before few hours opening of the price bid i.e. 03.12.2019 at 1500 Hrs. The copy of the communication dated 03.12.2019 issued by the petitioner is annexed herewith and marked as Annexure B. 6.5 It is submitted that, with a view to take decision on the communication of the petitioner, the opening of the price bids was postponed and the necessary communications were sent to the higher ups for appropriate decision. Subsequently, the tender committee on 12.12.2019 and 18.12.2019 with due approval from the Competent Authority recommended as under:
1) Rejection of bid submitted by M/s. Pooja Ceratech Pvt. Ltd. as they have disclosed/varied/ modified the price just before few hours of opening of the price bid as per Clause 23 and 30.2 of Instruction to bidder of tender document.
2) Forfeit the SD amount of M/s. Pooja Ceratech Pvt. Ltd. as per Clause 14.5.(b) of Instruction to bidder of tender documents.
It is stated that the aforesaid decision was taken in accordance with Clause 14.5 (b) of the tender which reads as under:
Page 9 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "14.5. The Security Deposit (SD) submitted by bidders shall be forfeited by ONGC in the following events:
(a) Bidder withdraws the bid during validity period or any extension duly agreed by the bidder.
(b) Bidder varies for modifies the bid in a manner not acceptable to ONGC during the validity period or any extension thereof duly agreed by the bidder.
(c) Non-signing of Gas Supply Agreement within 60 (sixty) days from date of notification of award (NOA) to the bidder,
(d) Bidder is disqualified from the tender process prior to award of contract according to the provisions under Section 3 of integrity pact.
(e) On the occurrence of any other event as stipulated in the bid document."
6.6 Further the Corporation also relied on Clause no. 23 on internal page no. 14 of the tender which states that unsolicited post tender modification will lead to straight away rejection of the offer. For the sake of convenience of this Hon'ble Court all three conditions of the tender are reproduced as under:
Page 10 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "23.0 Unsolicited Post Tender Modifications:
unsolicited post tender modification will lead to straight away rejection of the offer.
24.0 Examination of Bid:
24.1 The ONGC will examine the techno commercial bids to determine whether they are complete, whether any computational errors have been made, whether required sureties have been furnished, whether the documents have been properly signed and whether the techno commercial bids are generally in order.
24.2 The ONGC will determine the conformity of each bid to the bidding documents. Bids falling under the purview of "Rejection Criteria" of the bid evaluation criteria of the bidding document will be rejected and may not subsequently be made responsive on correction of the in-conformity by bidder. Price bids [Bid schedule-part-II (price Bid)] uploaded under notes & price bid attachments node of e-portal would be opened in the case of only those bids that are techno commercially qualified.
24.3 Bidder agrees and accepts that ONGC's decision on whether any bid is complying with any tender conditions shall be final and binding on bidder.
25.0 Contacting ONGC:Page 11 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 No bidder shall contact ONGC on any matter relating to its bid, from the time of the opening to the time the contract is awarded."
6.7 It is further submitted that ONGC is a public sector unit company and the company has followed the detailed approach and due diligence in arriving a decision for what actions to be taken against the petitioner bidder herein. It is further submitted that the tender committee members of the answering respondent corporation has taken their decision based on tender condition mentioned in the tender which is approved by Director (Onshore) - I/C Marketing of ONGC.
6.8 It is further submitted that the corporation also relies on clause no. 18.1 which states that the bidder is permitted to make changes in its bid and resubmit the same in e-portal till the submission of deadline. Also, clause 17.7 in the tender specifically states that any change in the quotation after opening of the tender will not be considered. It is submitted that the bidder had ample amount of time to correct his bid.
6.9 That clause 20 of the tender states that no bid may be modified or withdrawn after deadline for submission of the bids. That Clause 17.4 of the tender mandates reading the "Help Document" if there is any kind of uncertainty in the mind of the bidder. For the sake of the convenience of this Hon'ble Court, the said clauses are reproduced herein below:Page 12 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "17.4 The price bid [bid schedule-part-II (price bid)] duly filled in excel format and digitally signed will be uploaded under a separate node available in the e-
portal under notes & price bid attachments. Bidders may refer the 'Help Document' provided in the e-portal in case of any difficulty.
17.7 Any change in quotation after opening of the tender WILL NOT BE CONSIDERED.
18.1 The duly completed bid with no system error message can be "submitted" in e-portal any time before the submission deadline is reached. The bidder shall also be permitted to make changes in his bid and re-submit the same in e-portal till the submission deadline. The final submitted version of bid only shall be considered by ONGC. No bid can be submitted after the submission deadline (date and time) is reached. The system time that will be displayed on e- procurement web page shall decide the submission deadline.
20.0 MODIFICATION AND WITHDRAWAL OF BIDS: No bid may be modified or withdrawn after the deadline for submission of bids."
15. Mr.Vyas further pointed out that the unsolicited e-mail forwarded by the writ-applicant seeking to modify the price bid on the pretext of a bonafide mistake led to a loss of more than Rs.1 crore to the Corporation. The same has been explained in the reply as under :
Page 13 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 "6.11.1 Loss of revenue per day based on reserve price of 3.69 USD/MMBTU = Rupees 121952/- per day approx.
(Calculation mentioned in Table-1 below) TABLE-1 M/s. Pooja Ceratech Pvt Ltd Morbi/ Tender-Nawagam Tender-
D16HC19004 Calculation of Revenue Losses based Typical Illustration on Reserve Gas Price Rs.
Parameter Symbol/Formula Result
Gas Quantity (SDMD) q 8750
365 days gas quantity (SCM) Q1=365 x q 3193750
365 days gas quantity (MSCM) Q2=Q1/1000 3193.75
Reserve Gas Price + Premium, P 3.69
USD/MMBTU (3.69)
Gross Calorific Value (GCV) Kcal/SCM 11710
Net Calorific Value (NCV) Kcal/SCM 10638
RBI ref rate - as in tender documents Rs/USD 69.44
Conversion Factor CF 39.68254
Gas Price (Rs./MSCM) p=(P*GCV*RBI*CF*)/ 11906.73
10,000
Gas Value (in Rs.) V=p*Q2 38027113
Marketing margin (Rs./MSCM) MM 200
Marketing margin (Rs.) MM1=MM*Q2*NCV/ 679502.25
10000
Gas Value including marketing margin V1=V+MM1 38706615
(in Rs.)
Applicable VAT (including additional VAT 15
VAT), %
Applicable VAT (in Rs.) VAT1 5805992
Value of Gas Cost (including Marketing V2=V1+VAT1 44512607
Margin and VAT) (in Rs.)
Annualized bid value, Rs. 44512607
Loss of revenue per day, based on 121952
quoted premium + Reserve gas price Rs.
Page 14 of 40
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C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
Price bid could be opened finally after delay of 41 days i.e. on 13-JAN-2020 instead of 03-DEC-2019. Total revenue loss in 41 days based on Reserve price only = 121952 x 41 = Rupees 5000032/- approx. (Rs. Fifty Lakh and Thirty Two).
6.11.2 Loss of revenue per day based on price quoted by Ms. Pooja Ceratech Private Limited (i.e. USD 3.69 + 5.85 = 9.54 USD/ MMBTU) = Rupees 311897/- per day approx... (Calculation mentioned in below Table-2) TABLE-2 M/s. Pooja Ceratech Pvt Ltd Morbi/ Tender-Nawagam Tender-
D16HC19004 Calculation of Revenue Losses based Typical Illustration on Reserve Gas Price Rs.
Parameter Symbol/Formula Result
Gas Quantity (SDMD) q 8750
365 days gas quantity (SCM) Q1=365 x q 3193750
365 days gas quantity (MSCM) Q2=Q1/1000 3193.75
Reserve Gas Price + Premium, P 9.54
USD/MMBTU (3.69+5.85)
Gross Calorific Value (GCV) Kcal/SCM 11710
Net Calorific Value (NCV) Kcal/SCM 10638
RBI ref rate - as in tender documents Rs/USD 69.44
Conversion Factor CF 39.68254
Gas Price (Rs./MSCM) p=(P*GCV*RBI*CF*)/ 30783.25
10,000
Gas Value (in Rs.) V=p*Q2 98313999
Marketing margin (Rs./MSCM) MM 200
Marketing margin (Rs.) MM1=MM*Q2*NCV/ 679502.25
10000
Gas Value including marketing margin V1=V+MM1 98993501
(in Rs.)
Applicable VAT (including additional VAT 15
VAT), %
Applicable VAT (in Rs.) VAT1 14849025
Page 15 of 40
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C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
Value of Gas Cost (including Marketing V2=V1+VAT1 113842527
Margin and VAT) (in Rs.)
Annualized bid value, Rs. 113842527
Loss of revenue per day, based on 311897
quoted premium + Reserve gas price Rs.
Date of Price Bid Opening (PBO) as 03/12/2019
scheduled earlier
Date of Price Bid Opening (PBO) 13/01/2020
Delay in monetization of gas due to 41
reschedule of PBO, No. of days
Total Loss of revenue per day due to 12787791
delay in monetization of gas, based on
quoted premium + Reserve gas price Rs.
Price bid could be opened finally after delay of 41 days i.e. on 13-JAN-2020 instead of 03-DEC-2019. Total revenue loss in 41 days based on Reserve price only = 311897 x 41 = Rupees 12787791/- approx. (Rs. One Crore Twenty Seven Lakh Eighty Seven Thousand Seven Hundred and Ninety One Only)."
16. In such circumstances referred to above, Mr.Vyas prays that there being no merit in the present writ-application, the same may be rejected.
ANALYSIS :
17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the action on the part of the Corporation in forfeiting the security deposit amount could be said to be in accordance with the terms of the tender document.
Page 16 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
18. Before adverting to the rival submissions canvassed on either side, we must first deal with the preliminary objection raised by Mr.Vyas on behalf of the Corporation as regards the maintainability of the present writ-application.
19. The Supreme Court, in the case of National Highways Authority of India vs. Ganga Enterprises and another, reported in (2003) Supp (3) SCR 114, has observed as under :
"This appeal is against the Judgement of the High Court of Delhi dated 30th October, 1998.
Briefly stated, the facts are as follows :
The Appellant issued a tender notice calling for tenders for collection of toll on a portion of the highway running through Rajasthan. The last date of submission of bid was 31st July, 1997. It was also provided that toll plazas would be got completed by the authority and handed over to the selected enterprise. There was two types of securities to be furnished, one being a bid security in an amount of Rs. 50 lakhs (Rupees fifty lakhs only). The other was a performance security by way of a bank guarantee of Rs. 2 Crores (Rupees Two crores only). Clauses 7.1 to 8 deal with bid security. They read as under :-
"7. Bid Security.
7.1. The bidder shall furnish, as a part of his bid, a Bid Security in an amount of Rs. 50 Lakhs (Rupees Fifty Lakhs Page 17 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 only), or an equivalent amount in a freely convertible currency. The Bid Security shall, at the bidder's opinion, be in the form of a Bank Draft, or Guarantee from a Bank located in India. The Bank Guarantee shall be in the Form of Bank Guarantee for Bid Security included herein, valid of 150 days after the last date for submission of the bid.
7.2. A bid not accompanied by an acceptable bid security shall be rejected by National Highways Authority of India as non-responsive.
7.3. The Bid Security of unsuccessful bidders will be returned by National Highways Authority of India as promptly as possible but not later than 30 days after the expiration of the period of bid validity.
7.4. The Bid Security of the successful bidder will be returned by National Highways Authority of India soon after the bidder has furnished the required Performance Security.
7.5. The Bid Security may be forfeited :
(a) if the bidder withdraws his bid during the period of bid validity; or
(b) in case the successful bidder fails within the specified period to Page 18 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
(i) furnish the required Performance Security; and (ii) sign the Agreement.
8. Bid Validity.
Bid shall remain valid for a period of 120 days after the last date of bid submission."
Thus, it is to be seen that the bid security of Rs. 50 lakhs was not for performance of the contract. It was in essence an earnest to be given to ensure that the bidder did not withdraw his bid during the period of bid validity and/or that after acceptance the performance security is furnished and the Agreement signed. The other terms pertained to the anticipated contract for collection of toll. It must be mentioned that the bid validity period was 120 days.
In terms of this tender document the Respondent gave his bid or offer. The offer/bid was in terms of the tender and thus it was also in two parts. The first part being an offer that the bid would not be withdrawn during the bid validity period and/or that on acceptance the performance security would be furnished and the Agreement signed. The second part of the offer dealt with the terms and conditions pertaining to the performance of the contract of collection of tolls, if the offer was accepted. As earnest/security for performance (of the first part of the offer) the Respondent along with his bid furnished a bank guarantee in a sum of Rs. 50 lakhs as bid security. The bank guarantee furnished was a "on demand guarantee" which specifically provided Page 19 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 that the bank guarantee could be enforced "on demand" if the bidder withdraws his bid during the period of bid validity or if the bidder, having been notified of the acceptance of his bids, fails to furnish the performance security or fails to sign the Agreement. The amount of the Bank? Guarantee was to be paid by the bank without demur on the written demand merely stating that one of these conditions had been fulfilled. The moment the bank guarantee was given and accepted by the Appellants the first portion of the offer, regarding bid security, stood accepted. Of course, this did not mean that a competed contract in respect of the work of toll collection had come into existence.
It is an admitted position that 120 days would have come to an end of 28th November, 1997. In August the technical bids were opened. In September the financial bids were opened, wherein it was found that the Respondent was the highest bidder.
On 20th November, 1997 the Respondent withdrew his bid i.e. he withdrew his bid before the expiry of 120 days. On 21st November, 1997, the Appellants accepted the offer of the Respondent. However, as the Respondent had withdrawn his bid the performance guarantee was not furnished and the Agreement was not entered into. The Appellants thus encashed the bank guarantee for Rs. 50 lakhs.
Page 20 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 The Respondent then filed a Writ Petition in the High Court, for refund of the amount. On the pleadings before it, the High Court raised two questions viz. (a) whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act and (b) whether the writ petition is maintainable in a claim arising out of a breach of contract. Question (b) should have been first answered as it would go to the root of the matter. The High Court instead considered question (a) and then chose not to answer question (b). In our view, the answer to question (b) is clear. It is settled law that disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India. It has been so held in the cases of Kerala State Electricity Board v. Kurien E. Kalathil reported in [2000] 6 SCC 293, State of U.P. v. Bridge & Roof Co. (India) Ltd. reported in (1996) 6 SCC 22 and B.D.A. v. Ajai Pal Singh reported in (1989) 2 SCC 116. This is settled law. The dispute in this case was regarding the terms of offer. They were thus contractual disputes in respect of which a Writ Court was not the proper forum. Mr. Dave however relied upon the cases of Verigamto Naveen v. Government of A.P. reported in [2001] 8 SCC 344 and Harminder Singh Arora v. Union of India reported in [1986] 3 SCC 247. These however are cases where the Writ Court was enforcing a statutory right or duty. These cases do not lay down that a Writ Court can interfere in a matter of contract only. Thus on the ground of maintainability the Petition should have been dismissed.
Page 21 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 By the impugned Judgment the Writ Petition has been allowed. The High Court holds that the offer was withdrawn before it was accepted and thus no completed contract had come into existence. The High Court holds that in law it is always open to a party to withdraw its offer before its acceptance. To this proposition there can be no quarrel. We therefore did not permit Mr. Dave to cite authorities for the proposition that an offer can be withdrawn before it is accepted.
The Court, however, then goes on to hold as under :
"The statutory right having been so exercised, the fetter imposed by the clause to the contrary in the tender documents and the bank guarantee could not override the provisions of the Indian Contract Act. Any clause in so far as it is contrary of comes in conflict with the provisions of the Indian Contract Act is inoperative and void and cannot be enforced. To have an enforceable contract there must be an offer and unconditional acceptance. A person who makes an offer has the right of withdrawing it before acceptance. Until the offer is accepted unconditionally it creates no legal right and the bid can be withdrawn at any time. Once it is held that there is no completed contract between the parties no further question can arise. There can be no breach of contract. There is no statutory rule or an act where under the security deposit in the form of a bank guarantee could be claimed by the respondent No. 2. The position may, however, be different if there is a statutory rule having force of law precluding withdrawal of a bid before its acceptance.Page 22 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 The petitioner was entitled to withdraw the bid because the prohibition against withdrawal does not have the force of law and there was no consideration to bind him down to the condition. In the present case there was no acceptance by respondent No. 2 on the date of withdrawal of the bid by the petitioner. In the circumstances the invocation and encashment of the bank guarantee is illegal and void and is liable to be set aside." In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. 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 Page 23 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 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.
There is another reason why the impugned Judgment cannot be sustained. It is settled law that a contract of guarantee is a complete and separate contract by itself. The law regarding enforcement of an "on demand bank guarantee" is very clear. If the enforcement is in terms of the guarantee, then Courts must not interfere with the enforcement of bank guarantee. The Court can only interfere if the invocation is against terms of the guarantee or if there is any fraud. Courts cannot restrain invocation of an "on demand guarantee" in accordance with its terms by looking at terms of the underlying contract. The existence or non- existence of an underlying contract become irrelevant when the invocation is in terms of the bank guarantee. The bank guarantee stipulated that if the bid was withdrawn within 120 days or if the performance security was not given or if an Agreement was not signed, the guarantee could be enforced. The bank guarantee was enforced because the bid was withdrawn within 120 days. Therefore, it could not be said that the invocation of the bank guarantee was against the terms of the bank guarantee. If it was in terms of the bank guarantee, one fails to understand as to how the High Page 24 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 Court could say that the guarantee could not have been invoked. If the guarantee was rightly invoked, there was no question of directing refund as has been done by the High Court.
Mr. Dave submitted that the Respondent had no option but to withdraw his offer as the Appellants had not completed the toll plazas. He pointed out that the period of the contract was to be from 1st October, 1997 to 30th September, 1999. He submitted that even though the contract, if accepted, was to commence from 1st October 1997, the Appellants had not accepted the offer till 20th November, 1997 and thus Respondent had to withdraw his offer. He submitted that it has come on record that the toll plazas were not completed till March, 1998. He submitted that the Respondent was forced to withdraw his offer because of the inaction/ negligence on the part of the Appellant. He submitted that under these circumstances Respondent should not be penalized by forfeiture of his deposit. We are unable to accept this submission. The Bid security was given to meet a specific contingency viz. non-withdrawal of the offer within 120 days. The contingency having arisen, Appellants were entitled to forfeit. It may only be mentioned that in the proposed Agreement there is a clause which provides that if there is a delay on the part of the Appellants, which results in delay in the work of collection of toll, the amount payable by the Respondent would be reduced pro-rata. Thus by reason of the delay Respondent would not have suffered. Also Respondent was well aware that 120 days would end on 28th November, 1997. Thus the Page 25 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 Respondent was aware when he gave his offer, that acceptance could be delayed till 28th November, 1997. Thus non-acceptance till 20th November, 1997 was not a ground would justify action of Respondent in withdrawing his offer.
In this view of the matter, the impugned Judgment is set aside. The Appeal is accordingly allowed. The Writ Petition of the Respondents shall stand dismissed. There will be no order as to costs."
20. Thus, not only the writ jurisdiction of this Court is invoked in a purely contractual matter, having no colour of public law and the writ remedy is thus not maintainable as held by the Supreme Court in the case of Joshi Technologies International vs. Union of India, reported in 2015 (7) SCC 728, but even otherwise the law with respect to interference by the courts in the forfeiture of security deposit has been sufficiently well- settled.
21. Similarly, the Supreme Court in the order dated 18th March 2015 passed in the Civil Appeal No.3053 of 2015 titled "National Highways Authority of India vs. M.E.I.L.-EDB-LLC (J.V.)" set aside the judgment of a Division Bench of the Delhi High Court holding forfeiture of the security deposit amount by MHAI to be bad and the Supreme Court held that such question can be adjudicated only in a suit or in an arbitration.
22. We may also refer to a recent pronouncement of the Madras High Court in the case of Rubina vs. Authorised Officer, Page 26 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 AXIS Bank Limited (MANU/TN/5378/2021), wherein the Hon'ble Chief Justice, speaking for the Bench, observed as under :
"5. However, the secured creditor says that it has duly forfeited the amount which has been tendered by the petitioner and no question arises of the sale going through or of the consideration being returned.
6. The Writ Court is not the appropriate forum to adjudicate as to whether the forfeiture or the quantum thereof is appropriate and as to whether the secured creditor in this case is obliged to extend the time for making the balance payment by the petitioning-auction purchaser. There is no dispute that the secured creditor has no authority to enlarge the time beyond 90 days from the date of auction. There is also no dispute that such date has long passed and the secured creditor has asserted that it has forfeited the consideration tendered by this petitioner.
7. The right to forfeit has, ordinarily, to be balanced against the rule against unjust enrichment. Merely because there is a forfeiture clause does not imply that the entire amount deposited has to be forfeited. The forfeiture clause, like an earnest money deposit clause or a liquidated damages clause, has to be regarded as a genuine pre- estimate of the loss that may have been incurred, but when a forfeiture clause does not indicate an amount but provides that the entire amount tendered would be forfeited, it may not be permissible to forfeit, say 99% of the payment made for the default in depositing the balance 1%. Thus, the Page 27 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 quantum that can be forfeited will depend on the extent of the loss or damage suffered by the party not in breach and this is, essentially, a question of fact that has to be adjudicated by an appropriate forum. The High Court, in exercise of the jurisdiction under Article 226 of the Constitution, is not such forum."
23. Having regard to the aforesaid, we could have declined to entertain the present writ-application relegating the writ- applicant to avail appropriate legal remedy before appropriate forum in accordance with law for the purpose of seeking refund of the security deposit amount. However, in the facts of the case on hand, we would like to look into the merits of the matter. In an appropriate case, a writ petition as against the State or an instrumentality of a State, arising out of a contractual obligation, is maintainable. The High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ- application. The Court could be said to have imposed upon itself certain restrictions in the exercise of this power.
24. In view of the aforesaid, we must first look into few relevant clauses of the tender document :
"6.0 AMENDMENT TO BIDDING DOCUMENTS:
6.1 At any time prior to the deadline for submission of bids, ONGC may, for any reason, whether at its own initiative or in response to clarification(s) requested by prospective bidder(s), modify the bidding documents by amendment(s).Page 28 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 6.2 All prospective Bidders who have purchased the bidding documents will be notified of the amendments in writing.
6.3 In order to allow prospective Bidders reasonable time to take the amendments into account in preparing their bids, ONGC may, at its sole discretion, extend the deadline for the submission of bids.
14.0 Security Deposit (SD) :
14.1 The Security Deposit (SD) is required to protect ONGC against the risk of Bidder's conduct, which would warrant the security's forfeiture in pursuance to clause 14.5.
14.2 Bidder to submit along with techno-commercial bid, Security Deposit (SD) for the gas they have bid based on the reserve gas price/ quantity quoted with applicable taxes.
Successful bidder shall revise the Security Deposit (SD) (including applicable taxes & duties) to the allocation level at the Contract Price (higher of quoted/matched premium plus applicable domestic gas price notified by MoP&NG, Govt. of India) and RBI reference rate of the previous month of allocation. Submission of such revised SD shall be pre- condition for signing of GSA.
14.3 All bidders, without relaxation of any kind whatsoever, will have to provide Security Deposit (SD) as Page 29 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 per conditions contained in 'Special Terms for Sale of Gas' provided in Annexure-II.
14.4 Techno-Commercial Bids submitted without Security Deposit (SD) will be ignored.
14.5 The Security Deposit (SD) submitted by bidders shall be forfeited by ONGC in the following events :
(a) Bidder withdraws the bid during validity period or any extension duly agreed by the bidder.
(b) Bidder varies or modifies the bid in a manner not acceptable to ONGC during the validity period or any extension thereof duly agreed by the bidder.
(c) Non-signing of Gas Supply Agreement within 60 (sixty) days from date of Notification of Award (NOA) to the Bidder.
(d) Bidder is disqualified from the tender process prior to award of contract according to the provisions under Section 3 of Integrity Pact.
(e) On the occurrence of any other event as stipulated in the bid document.
14.6 The Security Deposit shall be liable to be invoked for encashment on a weekly basis in the event of delay in utilization of gas (as per usage promised in the bid).
Page 30 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 14.7 On finalisation of the bidding process, Security Deposit (SD) of unsuccessful Bidders will be returned without carrying any interest.
17.7 Any change in quotation after opening of the tender WILL NOT BE CONSIDERED.
20.0 MODIFICATION AND WITHDRAWAL OF BIDS :
No bid may be modified or withdrawn after the dead line for submission of bids.
23.0 UNSOLICITED POST TENDER MODIFICATION :
Unsolicited post-tender modification will lead to straight away rejection of the offer.
25.0 CONTACTING ONGC :
No bidder shall contact ONGC on any matter relating to its bid, from the time of the opening to the time the contract is awarded."
25. Thus, from the aforesaid, more particularly, Clause 14.5(b), it could be said that as the writ-applicant sought modification in the price bid during the extended validity period in a manner not acceptable to the Corporation, the security deposit amount was liable to be forfeited by the Corporation. In accordance with Clause 14.1 referred to above, the security deposit was asked to protect the Corporation against the risk of bidder's conduct Page 31 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 which would warrant the forfeiture of the security deposit in pursuance to the Clause 14.5 referred to above.
26. We shall now deal with the last part of the submission canvassed on behalf of the writ-applicant as regards Section 74 of the Contract Act. This very Bench had the occasion to consider this aspect in the case of Jinmangal Corporation vs. Ahmedabad Urban Development Authority (Special Civil Application No.6981 of 2021, decided on 25 th August 2021). We quote the relevant observations thus :
"63. Thus, the Supreme Court in so many words has observed that Section 74 undoubtedly would apply to the cases of forfeiture of earnest money under a contract. However, if such forfeiture takes place under the terms and conditions of a public auction before the agreement is reached, Section 74 would have no application. In the case on hand, indisputably, the writ applicant failed to comply with the terms of the Tender and withdrew himself from the offer thereby entailing the consequences of getting the Earnest Money Deposit forfeited in accordance with the terms and conditions of the Tender Notice referred to above. In such circumstances, the principle of unjust enrichment as sought to be canvassed by Mr. Sukhwani would also pale into insignificance.
64. There is a reason for Mr. Sukhwani to place strong reliance on the decision of the Supreme Court in the case of Kailash Nath Associates (supra).Page 32 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021
65. In sum and substance what is held by the Constitution Bench of the Supreme Court in the cases of Fateh Chand (supra) and the recent judgment in Kailash Nath Associates (supra) is that whenever there is a breach of contract then earnest money which is forfeited because of the breach, whether by a plaintiff or a defendant in a contract, the forfeiture is of that amount which are in fact liquidated damages specified under a contract and that for claiming damages under a contract, whether liquidated under Section 74 of the Contract Act or unliquidated under Section 73 of the Contract Act, the existence of loss is a sine qua non. In other words, if no loss is caused to a seller who has in his pocket the monies of buyer, then the seller can only forfeit a nominal amount unless the seller has pleaded and proved that losses have been caused to him on account of the breach of contract by the buyer. Once there is no pleading of loss suffered by a seller under an agreement to sell, then large amounts cannot be forfeited though so entitled to a seller under a clause of an agreement to sell/contract entitling forfeiture of 'earnest money' because what is forfeited is towards loss caused, and that except a nominal amount being allowed to be forfeited as earnest money, any forfeiture of any amount, which is not a nominal amount, can only be towards loss if suffered by the seller. Thus if there is no loss which is suffered by a seller then there cannot be forfeiture of large amounts which is not a nominal amount, simply because a clause in a contract provides so.
The following has been held in the judgment in the case of Kailash Nath Associates (supra):
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(i) As per the facts existing in the case of Kailash Nath Associates (supra) the Single Judge of the High Court had held that since no damages were suffered by the DDA therefore the DDA could not forfeit the earnest money. (Para 30 of Kailash Nath Associates's case (supra)).
(ii) The Division Bench of the High Court however set aside the judgment of the Single Judge by holding that the amount tendered as earnest money could be forfeited because and simply the forfeiture of amount called as earnest money can be forfeited in terms of the contract. (Para 30 of Kailash Nath Associates's case (supra) reproducing Para 39 of the Division Bench judgment of the High Court).
(iii) The Supreme Court in the case of Kailash Nath Associates (supra) as per Para 44 of its judgment holds that the Division Bench of the High Court had gone wrong in principle because compensation can be awarded (where there is breach of contract) only if loss or damage is suffered i.e where there is no loss or damage suffered as a result of breach of contract no compensation can be awarded as law does not provide for a windfall i.e large amounts though called contractually as earnest money cannot be forfeited unless loss is pleaded and proved to have been suffered. These observations have cross-reference to Para 34 of the judgment of Kailash Nath Associates's case (supra) where with reference to the para of Fateh Chand's case (supra) it is Page 34 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 held that the language of Section 74 of the Contract Act that 'whether or not damage or loss is proved to have been caused by breach' is the language that such language only discharges proof of actual loss but that does not justify award of compensation where in consequence of breach no injury/loss has at all resulted.
(iv) Earnest money is an amount to be paid in case of breach of contract, and named in contract as such, and that forfeiture of earnest money is covered under the entitlement to liquidated damages under Section 74 of the Contract Act vide Para 40 in the case of Kailash Nath Associates (supra).
(v) The language of Section 74 of the Contract Act that "whether or not actual loss or damage is proved to have been caused thereby" means only that where it is difficult or impossible to prove loss caused by the breach of contract then the liquidated damages/amount (being the amount of earnest money) can be awarded vide Para 43(6) of Kailash Nath Associates's case (supra) but where nature of contract is such that loss caused because of breach can be assessed and so proved then in such cases loss suffered must be proved to claim the liquidated damages of earnest money. This finding has cross reference to Para 37 of judgment in Kailash Nath Associates's case (supra) where the observations of Supreme Court in Para 67 of the case of ONGC Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 are quoted that liquidated damages are awarded where it is difficult to Page 35 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 prove exact loss or damage caused as a result of breach of contract.
(vi) Even where liquidated damages can be awarded under Section 74 of the Contract Act because loss or damages cannot be proved in a contractual breach yet if the liquidated damages (earnest money) are a penalty amount by its nature i.e prescribed liquidated damages figure is unreasonable, then for the liquidated damages amount or earnest money amount forfeiture cannot be granted/allowed and that only reasonable amount is allowed as damages with the figure of liquidated damages being the upper limit vide Para 43(1) of Kailash Nath Associates's case (supra).
70 Mr. Sukhwani would also argue that the action of the AUDA in forfeiting the Earnest Money Deposit could not be said to be in accordance with the terms of the contract and therefore, his client is justified in complaining that the AUDA committed breach of contract in forfeiting the EMD. According to Mr. Sukhwani, the terms of contract could be said to be subject to the mandatory provisions of Section 74 of the Contract Act. In other words, according to Mr. Sukhwani, the action of the AUDA must be based on the provisions of Section 74 of the Contract Act. Its nature must therefore be determined in the light of the provisions of Section 74 of the Contract Act. We would have appreciated such argument of Mr. Sukhwani provided the provisions of Section 74 of the Contract Act are regarded as the implied terms of contract. Action contrary to Section 74 may then be Page 36 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 said to be action which is a breach of an implied term of contract, but the meaning of an "implied term" is not so wide as to include the provisions of any statute which may apply to the conduct of the contracting parties. Normally "terms will be implied where they are necessary to effectuate the intention of the parties or where they are required by statute". (Sutton and Shammom on Contracts, 7th Edition page 94). Examples of statutory implied terms may be gathered from the Sale of Goods Act. Such terms may either be implied subject to contract to the contrary or may be compulsorily implied notwithstanding the terms of a contract to the contrary. But Section 74 of the Contract Act does not purport to modify expressly the terms of a contract or to imply terms in a contract. It is generally an independent provision of law under which the Court has power to decide what reasonable compensation may be paid to a party for breach of contract whether or not loss is caused to him. Just as Section 73 of the Contract Act is not regarded as an implied term of the contract but is rather regarded as the remedy given by law to a person seeking compensation for breach of contract and indicating the amount of compensation which may be so claimed. Section 74 is a supplementary provision dealing with penal clauses in contract and statutorily resolving the distinction between the liquidated damages and penalty. Neither any principle nor authority was brought to our notice why Section 74 should be regarded as an implied term of the contract.
71. In the aforesaid context, we may refer to a Division Bench decision of the Calcutta High Court in the case of Page 37 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 M/s. India Government Mint and others vs. M/s. Shreebhumi Steel Pvt Ltd [MAT 359 of 2010 with CAN 3276 of 2020 decided on 4th October 2010], wherein the Court has observed thus:
"So far as the principles relating to implied terms are concerned, the position has been stated in Chitty on Contracts, 28th Edn., Chapter 13 which reads as follows :
"A term will not, however, thus be implied unless the court is satisfied that both parties would, as reasonable men, have agreed to it had it been suggested to them... the court will only imply a term if it is one which must necessarily have been intended by them, and in particular will be reluctant to make and implication where the parties have entered into a carefully drafted written contract containing detailed terms agreed between them. A term ought not to be implied unless it is in all the circumstances equitable and reasonable. But this does not mean that a term will be implied merely because in all the circumstances it would be reasonable to do so or because it would improve the contract or make its carrying out more convenient. "The touchstone is always necessity and not merely reasonableness"......Page 38 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022
C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 A term will not be implied if it would be inconsistent with the express wording of the contract." (emphasis in original)."
72. If we accept the entire case put up on behalf of the writ applicant, then it presupposes that money paid in advance, may it be by way of earnest money or may it be in the nature of part satisfaction of the total consideration, is, as a rule, refundable by the promisor unless it is proved and established that he is entitled to certain damages as contemplated under Section 73 of the Contract Act or to liquidated damages as contemplated under Section 74 of the Indian Contract Act or unless there is any specific stipulation between the parties as to the forfeiture of such money paid in advance. In other words, it assumes that as a rule any sum named in a contract as money paid in advance is penal and, therefore, hit by Section 74 of the Contract Act. We are of the view that either on principle or on law such an assumption is not justified. In our opinion, the doctrine of forfeiture in the case of earnest money is based on a principle completely independent of the consideration that are laid down in Section 74 of the Contract Act. In fact, an earnest money, belonging as it does to a class of its own, namely, that of deposit, is regulated and controlled by consideration which are peculiar to that class alone. Therefore, where the agreement is unequivocal and it is specifically agreed upon thereunder that what has been paid in advance towards a contract is nothing but an earnest money, as understood in law, then it has to be dealt with in the light of the principles which apply to such Page 39 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022 C/SCA/3569/2020 JUDGMENT DATED: 27/07/2021 deposits and not in the light of those that generally apply to restitution, penalty or liquidated damages."
27. In view of the aforesaid, even the argument as regards Section 74 of the Contract Act should fail considering the stipulations in the tender document.
28. For the foregoing reasons, this writ-application fails and is hereby rejected.
(J. B. PARDIWALA, J.) (VAIBHAVI D. NANAVATI, J.) /MOINUDDIN Page 40 of 40 Downloaded on : Sun Jan 16 03:33:52 IST 2022