Sikkim High Court
Gammon Engineers And Contractors ... vs Lanco Teesta Hydro Power Limited And Ors on 7 December, 2020
Equivalent citations: AIRONLINE 2020 SK 71
Author: Meenakshi Madan Rai
Bench: Meenakshi Madan Rai
THE HIGH COURT OF SIKKIM : GANGTOK
(Civil Extraordinary Jurisdiction)
DATED : 7th December, 2020
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SINGLE BENCH : THE HON'BLE MRS. JUSTICE MEENAKSHI MADAN RAI, JUDGE
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I.A. No.01 of 2020 in W.P.(C) No.38 of 2020
0
Petitioner : Gammon Engineers and Contractors
Private Limited
Versus
Respondents : Lanco Teesta Hydro Power Limited and Others
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Appearance
Mr. Arunabh Choudhury, Mr. Thupden Youngda and Mr. Dechen
Wangdi Lachungpa, Advocates for the Petitioner.
Mr. A.K. Upadhyaya, Senior Advocate with Ms. Rachhitta Rai,
Advocate for Respondent No.1.
Ms. Maninder Acharya, Senior Advocate with Mr. Om Prakash Shukla,
Advocate for Respondent No.2.
None present for Respondent No.3.
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ORDER
Meenakshi Madan Rai, J.
1. The Petitioner, by filing the instant Writ Petition assails the Communication, dated 06.11.2020, issued by the Respondent No.1 by which the Award granted to the Petitioner vide Letter of Acceptance, dated 15.03.2020 for "Construction of Balance Civil Works Package: Lot-II for Underground Power House and Transformer Cavern, Part of HRT-I and HRT-II, Surge Shafts, Pressure Shafts and Adits, TRT and other associated Structures etc. of Teesta-VI HE Project, Sikkim," amounting to a sum of Rs.1248,44,20,355/- (Rupees twelve hundred and forty eight crores, forty four lakhs, twenty thousand, three hundred and fifty five) only, was annulled and the Bid Security of Rs.10,00,00,000/- (Rupees ten crores) only, dated 16.01.2020 issued by the Bank of I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 2 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. Baroda, CFS Branch, Mumbai, is sought to be forfeited by the Respondents No.1 and 2.
2. Along with the Writ Petition, I.A. No.01 of 2020 has also been filed seeking the following reliefs;
"a. That the Hon'ble Court may be pleased to pass an ex-parte ad-interim order staying the effect and operation of the impugned communication No.LTHPL/Teesta-VI/CEO/2020/580 dated 06.11.2020 issued by the Respondent No.01 vide which LOA No. LTHPL/Teesta-
VI/2020/255-62 dated 15.03.2020 was annulled and Bid Security submitted vide BG.
No.29101GPER003820 dated 16.01.2020 issued by Bank of Baroda, CFS Branch, Mumbai having value INR 10 Crores to NHPC is sought to be forfeited; and b. That the Hon'ble Court may be pleased to pass an ex-parte ad-interim order directing the Respondent No.01 to forthwith accept the Security Performance by way of Bank Guarantee by(sic) dated 21.11.2020 being BG.
No.2910IGP001238220 issued by the Respondent No.3 and thereafter take necessary consequential steps in furtherance of the LOA dated 15.03.2020; and/or c. That the Hon'ble Court be pleased to issue an ex-parte ad-interim order or direction to the Respondent No.01 and 02 restraining them from encashing the security bid in the form of BG. No.29101GPER003820 dated 16.01.2020 issued by Bank of Baroda, CFS Branch, Mumbai having value INR 10 Crores to NHPC and further restraining the Respondent No.03 from honouring any such request made by the Respondent Nos.01 and 02 for encashment of the said Bank Guarantee; and d. Pass any other appropriate order/orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."
3. Records of the Registry reveal that the Writ Petition and I.A. No.01 of 2020 were submitted before the Registry on 27.11.2020 and resubmitted on 28.11.2020.
4. Caveat Petition No.10 of 2020 was filed by the Respondent No.1 on 25.11.2020. Registry informs that the Caveator was informed of the filing of the Writ Petition. On such I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 3 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. information, Counsel for the Respondent No.1 and Respondent No.2 entered appearance on 30.11.2020.
5. The I.A. supra was accordingly taken up for hearing on 30.11.2020. After the hearing commenced and Learned Counsel for the Petitioner made his submissions for some time, on account of network failure the hearing was discontinued and ordered to be listed on the next day (i.e. 01.12.2020). On 01.12.2020, Learned Counsel for the Petitioner and Respondents No.1 and 2 were heard at length and Orders reserved. In the interregnum, the parties were directed to maintain status quo as on 01.12.2020. On 02.12.2020, on being mentioned by Learned Counsel for the Petitioner, the matter was taken up. As per Learned Counsel for the Petitioner, although this Court had directed that the parties shall maintain status quo as on 01.12.2020, however, the Bank Guarantee for Bid Security of Rs.10,00,00,000/- (Rupees ten crores) only, had been transferred and encashed by the Respondent Companies on 01.12.2020. Consequently, vide Order dated 02.12.2020, the Respondents No.1 and 2 were directed to stay their hands from utilization of the encashed amount till further orders of this Court.
6. Now reverting to the I.A. No.01 of 2020, Learned Counsel Mr. Arunabh Choudhury for the Petitioner advanced the argument that an Online Bid was invited by the Respondent No.2 NHPC Ltd. on behalf of Respondent No.1 Lanco Teesta Hydro Power Limited ("LTHPL") vide Notice Inviting E-Tender, dated 06.09.2019. The Petitioner submitted its Bid for the said Contract towards which, a Bank Guarantee for Bid Security, dated 16.01.2020, amounting to Rs.10,00,00,000/- (Rupees ten crores) only, was I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 4 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. submitted to the LTHPL as per the Bid Document along with the Bid by the Petitioner. Following this, a Letter of Acceptance ("LOA") for the said Contract Work was issued on 15.03.2020. The completion time of the Contract was to be 52.5 months from the seventh day of the date of issuance of LOA. Clause 34 (Signing of Agreement) of the Instruction to Bidders ("ITB") stipulated that the Employers i.e. the Respondents No.1 and 2 herein and the successful Bidder were to sign the Agreement within fourteen days from the date of Notification of readiness of the Agreement. As per the provisions of the Bid Document under Clause 35 (Performance Security) of ITB, Clause 4.2 of Particular Conditions of Contract ("PCC") and Serial No.6 of the LOA, the Performance Security was to be submitted by the successful Bidder within twenty eight days from the date of issuance of the LOA. The said twenty eight days expired on 12.04.2020. That, the pandemic suddenly struck globally and the country also had to face the consequences as a result the Contract could not be signed. The Petitioner requested for relaxation in time for submission of the Performance Bank Guarantee ("PBG"), in response, the Respondent No.1 extended the time initially up to 31.07.2020 and thereafter up to 31.08.2020, 05.10.2020 and 05.11.2020. Before the expiry of 05.11.2020, vide Communication dated 04.11.2020, addressed to the Chief Executive Officer, LTHPL, the Petitioner informed the Respondent No.1 that they were in advanced discussions with the Bankers for the Bank Guarantee which required time for approval from their Corporate Office. That, due to the intervening Diwali holidays and other festivals in Maharashtra, they were apprehending some days' delay and hence requested the Respondent No.1 to grant them additional time till I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 5 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. 30.11.2020 to submit the Performance Bank Guarantee. That, the Respondent No.1 instead annulled the Award due to non- submission of PBG and non-signing of Agreement vide its Letter dated 06.11.2020. The reasons elucidated in the Letter was that sufficient time had already been provided by LTHPL by extending the time for submission of Performance Security in the form of Bank Guarantee keeping in view the situation due to the outbreak of Covid-19 pandemic, however, the Petitioner had failed to deliver the required Performance Security in the form of Bank Guarantee and hence the Contract Agreement had not been signed till date implying non-compliance of Clauses 34 and 35 of the ITB, Sub Clause 4.2 of PCC of Bid Document and terms as per Serial No.6 of the LOA, dated 15.03.2020. It was also notified vide this Communication that apart from the annulment of the Award granted vide LOA dated 15.03.2020, a sum of Rs.10,00,00,000/- (Rupees ten crores) only, issued by the Bank of Baroda as Bid Security shall be forfeited in accordance with Clause 18.6 of ITB.
7.(i) Learned Counsel for the Petitioner drew the attention of this Court to the LOA, dated 15.03.2020 and the terms detailed therein. Reference was also made by Learned Counsel to the "Conditions of Contract for Construction" at Clause 15.2 and it was submitted that as per the said provision, the Employer shall be entitled to terminate the Contract if the Contractor fails to comply with Sub Clause 4.2 of PCC or with a Notice under Sub Clause 15.1. The same Clause i.e. 15.1, also provides that in any of the events as detailed in the said Clause, the Employer may upon giving fourteen days' Notice to the Contractor, terminate the Contract and expel the Contractor from the site. That, the period of I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 6 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. Notice was subsequently modified to forty two days, despite this provision no Notice was issued to the Petitioner by the Respondents No.1 and 2 prior to the impugned Communication dated 06.11.2020. That, in the Communication dated 05.10.2020, Clause 15.2 of the "Conditions of Contract for Construction" has been invoked indicating existence of Contract between the parties whereas the Letter of 06.11.2020 invokes Clause 35.3 of ITB and Bid Security which deals with failure of the successful Bidder to comply with the requirements of Clauses 34 and 35 of the ITB. The invocation of two different Clauses itself leads to an anomalous circumstance.
(ii) Emphasizing on ITB Clause 33 at 33.2, it was canvassed by Learned Counsel that, "the notification of award (Letter of Acceptance) will constitute the formation of the contract until the contract has been effected pursuant to clause 34 hereunder." thereby indicating that a Contract existed between the parties and this fact is fortified by the provision raised by them in their correspondence dated 05.10.2020. Moreover, the conduct of the Respondent No.1 indicates that time was not the essence of the Contract as they themselves had extended the time on several occasions and finally up to 05.11.2020. Besides, although the PBG was not deposited as per stipulation, resources viz. machinery and manpower, had already been mobilized by the Petitioner on the site. That, now on 21.11.2020, the Performance Security of 3% of the Contract value has been deposited by the Petitioner in terms of the Office Memorandum of the Government of India, Ministry of Finance, Department of Expenditure, Policy Division, dated I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 7 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. 12.11.2020 giving fresh directives regarding reduction in Performance Security viz.
".........
3. In view of all above, it is decided to reduce Performance Security from existing 5-10% to 3% of the value of the contract for all existing contracts. However, the benefit of the reduced Performance Security will not be given in the contracts under dispute wherein arbitration/court proceedings have been already started or are contemplated. .................."
(iii) Hence, in view of the above facts and circumstances, the annulment of Contract is illegal and contrary to the terms set out. The impugned action of the Respondent No.1 in declining to accept the PBG and annulling the LOA is unjustified, arbitrary, unreasonable, irrational, illegal and discriminatory and violative of Articles 14, 19(1)(g) and 21 of the Constitution of India. That, the Petitioner apprehends that Respondents No.1 and 2 will encash the Bank Guarantee of Rs.10,00,00,000/- (Rupees ten crores) only, provided as Bid Security on 27.11.2020. Hence, the prayers in the I.A. as extracted supra.
8. The arguments in contra advanced by Learned Senior Counsel for the Respondents No.1 and 2 were that, in fact, the Petition is not maintainable as in the first instance, the Contract has not come into being. If the submission of the Petitioner regarding existence of a Contract between the parties by virtue of the mere issuance of an LOA is to be assumed as correct, then in such a circumstance, an Arbitration Clause exists in the Contract which ousts the jurisdiction of this Court, and the Petitioner is to take steps in consonance with that Clause, hence even on this ground the Petition is not maintainable. That, in the absence of a Contract, no Notice is required to be issued, even assuming such I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 8 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. Notice is mandated then the Letter of 05.10.2020 is sufficient Notice for the said purposes, as the intention of a Notice is to bring to the knowledge of the other party the relevant facts and the steps envisaged. The conduct of the Petitioner and their seriousness towards fulfilling the terms of the LOA as well as their financial capacity is suspect in view of their inaction and failure to abide by the terms as set out in the LOA. Despite the extension of dates on several occasions granted by the Respondent No.1, the Petitioner has reflected their inability to deposit the required amount of approximately Rs.67,00,00,000/- (Rupees sixty seven crores) only, as Performance Bank Guarantee. The Respondents No.1 and 2 had, in fact, deposited a sum of Rs.154,00,00,000/- (Rupees one hundred and fifty four crores) only, in the Account of the Petitioner by way of payment towards another Award but the Petitioner has shown no inclination to utilize the amount for the present purposes. That, Paragraphs 2.0 and 3.0 of the Letter dated 06.11.2020 details the extant provisions of the Bid Document and that the Respondent No.1 has taken due consideration of the outbreak of the pandemic and granted relaxation by affording the Petitioner sufficient time for submission of PBG up to 05.11.2020. The Petitioner despite such indulgence failed to take steps for submission of PBG resulting in the non-signing of the Contract till date and thereby non-compliance of Clauses 34 and 35 of the ITB, Sub Clause 4.2 of PCC of Bid Document and terms as per Serial No.6 of the LOA. Besides, "annulment" is not "termination" as only an LOA was issued and the Contract had not been signed hence it was reiterated that the question of the existence of a Contract between the parties does not arise.
I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 9Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors.
9. In response, Mr. Arunabh Choudhury for the Petitioner submitted that the two Letters from the Respondent No.1 invoked Clause 15.2 which is termination of Contract therefore indicating that the parties were in a Contract in terms of the LOA as per Clause 33.2.
10. Learned Counsel for the parties were heard in extenso and due consideration given to the rival submissions. I have also perused the documents relied on by the Petitioner.
11. At this juncture, the only consideration before this Court is whether the Petitioner has made out a prima facie case, whether the balance of convenience and inconvenience is tilted in its favour, and whether the damages likely to be incurred by the Petitioner will cause them irreparable loss and injury thereby entitling them to the reliefs claimed in the I.A. as already extracted supra.
12.(i) Indubitably, by the Letter dated 15.03.2020, the Respondent No.1 confirmed having accepted the Bid of the Petitioner and awarded them the Contract for the Work viz.
"Construction of Balance Civil Works Package: Lot-II for Underground Power House and Transformer Cavern, Part of HRT-I and HRT-II, Surge Shafts, Pressure Shafts and Adits, TRT and other associated Structures etc. of Teesta-VI HE Project, Sikkim,"
amounting to a sum of Rs.1248,44,20,355/- (Rupees twelve hundred and forty eight crores, forty four lakhs, twenty thousand, three hundred and fifty five) only. In terms of Paragraph 6.0 of the LOA, the Petitioner was requested to submit the Performance Security in the form of Bank Guarantee, within twenty eight days of issue of the LOA in terms of Sub Clause 4.2 of Particular I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 10 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. Conditions of Contract. It is not disputed that the twenty eight days stipulated in the LOA expired on 12.04.2020 and that the Respondent No.1 extended the time for submission of PBG on various dates initially up to 31.07.2020 and thereafter up to 31.08.2020 and 05.10.2020. The last extension was allowed up to 05.11.2020. The Petitioner, instead of abiding with the time frame afforded to it in terms of the LOA by the Respondents as well as extensions granted up to 05.11.2020, took its time to make the requisite financial arrangements and ultimately even failed to adhere to the opportunity extended up to 05.11.2020 with the feeble explanation of intervening holidays and festivals in the State of Maharashtra. The argument that the deposit of 3% of the value of the Contract was made on 21.11.2020 holds no water sans extension of date by the Respondents.
(ii) Clause 5.3(ii) of the ITB (Page 43 of the Paper Book), reads as follows;
"5.3 Bids submitted by a Bidder with sub- contractor(s), shall comply with the following minimum requirements:
(i) ..................
(ii) In order to ensure serious participation of the
sub-contractor(s) for work proposed to be executed by the sub-contractor(s), a Joint Deed of Undertaking (as per Attachment-6(ii) shall be required to be submitted by the Contractor and sub-contractor(s). Besides this, Sub- contractor(s) shall submit an additional Performance Bank Guarantee equivalent to 5% of corresponding value of work sublet in addition to Performance Bank Guarantee for whole contract submitted by the Bidder on award of work."
(iii) Clauses 34 and 35 of the ITB (Pages 60, 61 of the Paper Book) provides as under;
"34. Signing of Agreement 34.1 After notifying the successful Bidder that its Bid has been accepted, the Employer I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 11 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors.
will prepare the Agreement in the form provided in the Bidding Documents, incorporating all agreements between the parties. The contract shall be signed in three originals (two for Employer and one for Contractor). The Contractor shall provide to the Employer 35 sets of the Contract after its execution, free of charges.
34.2 After issue of Letter of Acceptance, the Employer/NHPC shall notify the contractor about the readiness of the Agreement. The Employer and the successful Bidder shall sign the Agreement within 14 days from the date of issue of such notice to the contractor. 34.3 Upon issue of Letter of Acceptance as per clause 33 hereof, the Employer/NHPC will notify the other Bidders that their Bids have been unsuccessful. The Earnest Money of all the unsuccessful bidders whose price bid has been opened will be returned by NHPC within 15 days of notification of the award of Contract to the successful bidder.
35 Performance Security 35.1 Within 28 days from the date of issue of Letter of Acceptance, the successful bidder shall furnish to the Employer a Performance Bank Guarantee in the form stipulated in the Conditions of Contract. The bidders who are qualified on the strength of their sub-contractor shall be required to furnish an additional Performance Bank Guarantee from their sub-contractor as per Clause 4.2 of Particular Conditions of Contract. The form of Performance Bank Guarantee provided in Section 4, of the Bidding Documents may be used.
Details of Employer's Bank at Project shall be shared at the time of award of Contract.
35.2 In case Bidding Company (subsidiary company) gets qualified and awarded the work package, the Parent company/ Holding Company, within 28 days from the date of issue of Letter of Acceptance, will be required to furnish an additional performance bank guarantee, as per Clause 4.2 of Particular Conditions of Contract, of value equivalent to (5%) five percent of the Contract Price or portion of work (where subsidiary Company is Joint Venture Partner) as the case may be, in addition to normal Performance Bank Guarantee to be I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 12 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors.
submitted by the Bidder to the Employer besides entering into a separate Agreement in the requisite Format provided in the Bid Document. The form of Performance Bank Guarantee provided in Section 4, of the Bidding Documents may be used.
35.3 Failure of the successful Bidder to comply with the requirements of Clause 34 or 35 hereof shall constitute a breach of contract, cause for annulment of the award, forfeiture of the Bid Security, and any such other remedy the Employer may take under the provisions of the Contract."
(iv) Clause 18.6 of the ITB (Page 52 of the Paper Book) lays down that the Bid Security may be forfeited in the following contingencies, the provision is extracted hereinbelow;
"18.6 The Bid Security may be forfeited:
a) if the Bidder withdraws its Bid or varies any terms & conditions in regard thereto during period of bid validity, except as provided in Sub-clause 24
b) in the case of a successful Bidder, if he fails within the specified time limit to;
i) sign the Agreement, or
ii) furnish the required performance
security.
c) if the Bidder adopts corrupt or collusive
or coercive or fraudulent practices
covered under ITB Clause-37 or defaults
committed under Integrity pact.
Any liability of GST arising out of forfeiture of bid security shall be borne by the concerned Bidder."
(Emphasis supplied)
13. As can be culled out from the submissions, the admitted position is that the Petitioner, who was the successful Bidder, failed to sign the Agreement within the specified time limit or during the extensions given by the Respondent Companies from April, 2020 through November, 2020 apart from which the Petitioner failed to furnish the required Performance Security. It emanates with clarity from the documents relied on by the Petitioner supra that the Bid Security of the successful Bidder I.A. No.01 of 2020 in W.P.(C) No.38 of 2020 13 Gammon Engineers and Contractors Pvt. Ltd. vs. Lanco Teesta Hydro Power Limited & Ors. would be returned by the Respondents when the Bidder has signed the Agreement with the Employer and furnished the required Performance Security to the Employer as laid down in Clause 18.5 of the ITB. However, on failure to take steps, the provision of Clause 18.6 of the ITB would kick into place.
14. In the light of the facts and circumstances placed before this Court and the discussions hereinabove, I am of the considered opinion that the Petitioner has failed to make out a prima facie case nor is the balance of convenience and inconvenience tilted in its favour nor have they made out a case of irreparable loss and injury for the purposes of granting them the reliefs as prayed for in the I.A.
15. It concludes thereby that the Order of this Court dated 01.12.2020 requiring the parties to maintain status quo and the Order dated 02.12.2020 directing the Respondents No.1 and 2 to stay their hands from expending the encashed amount deserves to be and is accordingly vacated.
16. I.A. No.01 of 2020 stands dismissed and disposed of.
(Meenakshi Madan Rai) Judge 07.12.2020 ml Approved for reporting : Yes