Kk Vidyut vs Union Of India Through Secretary Of ... on 19 December, 2024

[Cites 5, Cited by 0]

Bombay High Court

Kk Vidyut vs Union Of India Through Secretary Of ... on 19 December, 2024

1. The petitioner, invoking the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India, challenges the notice of termination dated 30 October 2024, issued by the respondents. The termination pertains to the contract awarded to the petitioner in furtherance of a tender process concerning the provision of Goods Shed facilities, construction of buildings, and the development of critical railway infrastructure.

2. The relevant facts and circumstances leading to the filing of this writ petition are summarized below to provide context to the dispute.

On 1 June 2023, the respondents issued e-Tender Notice No. CAOC-12-2023, inviting bids for a comprehensive railway infrastructure development project. The project encompassed the provision of Goods Shed facilities, construction of a track machine rest house, construction of an E1 building, platform surfacing work, supply of ballast, completion of balance earthwork in ANG, VLD, and RRI yards, and the construction of four major bridges at the Manmad entry arrangement in 2 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc connection with the Daund-Manmad Doubling Project.

3. The petitioner, being one of the bidders, was awarded the contract after meeting the eligibility criteria and completing the tender formalities. In compliance with the contractual requirements, the petitioner furnished a performance bank guarantee on 9 November 2023 for an amount of ₹7,66,63,700/- issued by IDBI Bank Ltd. This guarantee was verified by the respondents through their communication dated 21 November 2023. Subsequently, the petitioner submitted additional bank guarantees issued by Yes Bank Ltd., details of which are as follows: ₹8,43,30,100/- dated 16 April 2024; ₹15,33,230/- dated 17 May 2024; and ₹8,58,63,330/- dated 17 May 2024.

4. All these guarantees were subjected to the respondents' standard verification procedures and were confirmed to be genuine at that stage. Upon completion of these formalities, the petitioner commenced the execution of the work, deploying resources, machinery, and manpower at the designated project sites. According to the petitioner, the progress of the work was satisfactory and exceeded the cumulative value of all the submitted bank guarantees. The 3 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc petitioner asserts that it adhered to all contractual terms and complied with the work schedules and timelines stipulated under the contract.

5. On 18 September 2024 and 20 September 2024, the respondents issued letters to IDBI Bank and Yes Bank seeking re-verification of the bank guarantees submitted by the petitioner. This was done despite the fact that these guarantees had already been verified during the initial stages of the project.

6. Subsequently, based on material received by the respondents, a show-cause notice dated 25 September 2024 was issued to the petitioner. The show-cause notice alleged that the bank guarantees submitted by the petitioner were forged and fabricated documents. It was contended that these guarantees had been fraudulently submitted by the petitioner to fulfill the performance guarantee and mobilization advance requirements under the contract. The respondents relied upon Clause 62 of the General Conditions of Contract (GCC), which mandates the submission of valid performance guarantees and authorizes the respondents to terminate the contract, forfeit the bid security, and recover other dues in case of non- 4 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 :::

908-wp(l)35600-2024 Fin.doc compliance. The notice further warned the petitioner that the alleged forgery constituted a serious breach of trust and misrepresentation, which rendered the petitioner ineligible to continue with the project. The respondents also invoked the relevant provisions of the contract to debar the petitioner from participating in any re-tender process for the same work.

7. In response, the petitioner submitted a preliminary reply dated 27 September 2024. It was stated that due to the arrest of its director by investigation agency, the verification of the genuineness of the bank guarantees was delayed. The petitioner requested additional time to investigate the allegations and provide a detailed reply to the show-cause notice.

8. On 30 September 2024, the respondents issued a follow-up show-cause notice to the petitioner, reiterating the allegations made in the earlier notice dated 25 September 2024. The respondents emphasized that this would be the petitioner's last opportunity to respond to the allegations and required the petitioner to submit a reply within seven days from the receipt of the notice. In response, on 7 October 2024, the petitioner once again sought an extension of time, 5 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc citing the continued absence of its director, Mr. Kale, as the primary reason for the delay. The petitioner requested an additional 15 to 20 days to respond to the allegations.

9. On 17 October 2024, the respondents issued yet another communication, highlighting the submission of four alleged fake bank guarantees by the petitioner. Additionally, the respondents observed that the progress of work at the project site was almost negligible. Invoking Clause 62 of the General Conditions of Contract (GCC), the respondents granted the petitioner a further seven days to file a reply to the show- cause notice.

10. Despite these communications, the petitioner failed to provide a substantive response. Consequently, on 26 October 2024, the respondents issued a final notice, granting the petitioner an additional seven days to reply. The notice also referenced the provision under Clause 62 of the GCC, which mandates a 48-hour notice period before invoking termination proceedings.

11. On 27 October 2024, the petitioner submitted a reply, reiterating its earlier contention that the absence of its key personnel, Mr. Kale, had hampered its ability to complete the 6 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc verification of the bank guarantees. The petitioner once again sought an extension, this time requesting 20 to 25 more days to file a comprehensive response. However, the petitioner did not provide any substantive clarification or evidence to counter the allegations regarding the authenticity of the bank guarantees or the lack of progress at the project site.

12. Ultimately, on 30 October 2024, the respondents terminated the petitioner's contract. In the termination notice, the respondents referred to the repeated show-cause notices issued on 25 September 2024, 30 September 2024, 17 October 2024, and 26 October 2024. The termination was based on the petitioner's failure to provide a satisfactory explanation for the alleged submission of forged bank guarantees and the lack of significant progress in executing the work. The respondents also invoked Clause 62 of the GCC to debar the petitioner from completing the remaining work, while simultaneously forfeiting the petitioner's security deposit and performance bank guarantee.

13. In light of these developments, the petitioner has approached this Court under Article 226 of the Constitution of India, challenging the termination notice dated 30 October 7 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc 2024. The petitioner has also assailed the show-cause notices dated 25 September 2024, 30 September 2024, 17 October 2024, and 26 October 2024, contending that they were issued in violation of the principles of natural justice. Furthermore, the petitioner seeks a declaration that the arbitration clause in the tender document is void and unenforceable, arguing that it is contrary to law and public policy.

14. We have heard Mr. Jha, learned advocate for the petitioner, at length. Referring to Clause 62 of the General Conditions of Contract (GCC), Mr. Jha contended that the respondents were under an obligation to issue a notice to the defaulting contractor to rectify or make good the alleged defaults before resorting to contract termination. He submitted that Clause 62 mandates such notice in the event of non-compliance with any of the enumerated conditions in Sub-clauses (i) to (xvi). According to him, the respondents failed to adhere to this requirement and instead prematurely terminated the contract without affording the petitioner adequate opportunity to rectify the alleged defects.

15. Drawing our attention to the notice dated 26 October 2024, Mr. Jha argued that it contravened the mandatory 8 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc 48-hour notice period prescribed under Clause 62. He further submitted that the petitioner had completed substantial portions of the contracted work, the cumulative value of which exceeded the total amount of the bank guarantees furnished. Consequently, the respondents' action of terminating the contract, despite the progress achieved, was unjustified.

16. Mr. Jha also relied on the communication dated 11 October 2024, issued after the show-cause notice dated 25 September 2024. Through this communication, the respondents had granted an extension of time for the petitioner to complete the contracted work, extending the period from 15 September 2024 to 30 November 2024, albeit with a penalty of ₹7,66,637/- per week as per Clause 17B of the GCC. He contended that such an extension implied that the contract was still in force, and the respondents could not simultaneously terminate the agreement.

17. Mr. Jha further argued that the imposition of penalties under Clause 17B and the subsequent termination of the contract amounted to double jeopardy, penalizing the petitioner twice for the same alleged defaults. He emphasized that the petitioner was willing to address the respondents' 9 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc concerns regarding the bank guarantees by substituting them with new and valid guarantees. Such an approach, he submitted, would be in the public interest given the substantial work already completed by the petitioner under the contract.

18. He characterized the respondents' action as arbitrary and disproportionate, alleging that the termination was carried out without following the principles of natural justice. The petitioner was purportedly denied a fair opportunity to present its case. In support of his contentions, Mr. Jha placed reliance on the following judgments:

(i) Harbanslal Sahnia and Another vs. Indian Oil Corporation Ltd. and Others, reported in (2003) 2 SCC 107.

(ii) Khushee Construction through its Power of Attorney Holder vs. State of Bihar and Others, reported in 2020 SCC OnLine Pat 1279.

(iii) M/S. KTR Constructions vs. The State of Karnataka & Ors., W.P. No. 2867 of 2024.

19. Per contra, Mr. Bubna, learned advocate for the 10 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc respondents, vehemently opposed the petitioner's submissions. He pointed out that the petitioner had not disputed the fact that all the bank guarantees furnished by Yes Bank Ltd. and IDBI Bank Ltd. were forged and fraudulent. Given this undisputed position, the respondents were well within their rights to terminate the contract in accordance with Clause 62 of the GCC. Referring to Sub-clause (xvi) of Clause 62, Mr. Bubna submitted that the nature of the petitioner's default--furnishing forged bank guarantees--was so egregious that it could not be rectified or made good. Such an act constituted fraud, undermining the very foundation of the contractual relationship. He further highlighted the repeated notices issued by the respondents, including those dated 17 October 2024 and 26 October 2024, which provided the petitioner ample opportunity to explain or rectify the defaults. However, the petitioner failed to provide any satisfactory response, either regarding the authenticity of the bank guarantees or the negligible progress in work execution.

20. Mr. Bubna also emphasized that the respondents had acted transparently and in accordance with due process. Starting from the initial show-cause notice dated 25 September 2024, the respondents had issued multiple 11 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc communications to the petitioner, affording reasonable opportunities to respond. Despite these repeated chances, the petitioner evaded substantive replies, instead citing the absence of its director, Mr. Kale, and seeking unwarranted extensions.

21. He contended that the absence of any meaningful dispute regarding the forgery of bank guarantees rendered the principles of natural justice academic in this case. Even if there was any procedural lapse, it did not result in legal prejudice to the petitioner. Mr. Bubna also asserted that the petitioner's conduct, particularly the submission of forged bank guarantees, disqualified it from seeking relief under Article 226 of the Constitution of India. He argued that extraordinary constitutional jurisdiction could not be invoked to shield a contractor from the consequences of its fraudulent acts.

22. Rival contentions fall for our consideration. The issues primarily pertain to the alleged submission of forged bank guarantees by the petitioner and the consequent termination of the contract under Clause 62 of the General Conditions of Contract (GCC)-2022, as well as the interplay between 12 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc procedural safeguards and substantive contractual obligations.

23. Upon perusal of the record, the factual matrix remains undisputed. As per Clause 16.4 of Part-II of the GCC-2022, the petitioner was required to furnish a performance bank guarantee amounting to ₹7,66,63,687/- within 20 days from the issuance of the Letter of Acceptance (LOA). Additionally, the petitioner was obligated to provide bank guarantees equivalent to 110% of the mobilization advance in accordance with the contract. In compliance with the initial requirement, the petitioner purportedly furnished a performance bank guarantee dated 9 November 2023, amounting to ₹7,66,63,700/- through a letter dated 10 November 2023, allegedly issued by IDBI Bank Ltd. Subsequently, the petitioner provided three additional bank guarantees purportedly issued by Yes Bank Ltd., dated 16 April 2024 and 17 May 2024, to secure the first and second stages of the mobilization advance. These guarantees were for amounts of ₹8,43,30,100/-, ₹15,33,230/-, and ₹8,58,63,330/-.

24. However, the respondents, upon seeking verification of these bank guarantees from IDBI Bank Ltd. and Yes Bank Ltd. through letters dated 18 September 2024 and 20 September 13 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc 2024, received confirmations from both banks on 24 September 2024 stating that the guarantees were not issued by them. This revelation conclusively established that the four bank guarantees submitted by the petitioner were forged. Notably, the petitioner has not contested this finding, thereby admitting to the submission of fraudulent guarantees.

25. The terms governing the contractual relationship between the parties are outlined in the Special Conditions of Contract and the GCC-2022. Clause 62 of the GCC specifies the circumstances under which the respondents are empowered to terminate the contract. One such condition, enumerated under Clause 62(1)(ix), relates to the failure to execute contract documents in accordance with Paragraph 8 of the Instructions to Tenderers.

26. The relevant portion of Clause 62(1)(ix) reads as follows:

"Fail to execute the contract documents in terms of Para 8 of the Instructions to Tenderers."

27. Further, Paragraph 8 of the Instructions to Tenderers states:

"Failure to do so shall constitute a breach of the agreement 14 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc affected by the acceptance of the tender. The Contract Agreement shall be entered into by Railway only after submission of valid Performance Guarantee by the Contractor. In such cases, the Railway may determine that such tenderer has abandoned the contract, and thereupon his tender and acceptance thereof shall be treated as cancelled, and the Railway shall be entitled to forfeit the full amount of the Bid Security and other dues payable to the Contractor under this contract. The failed Contractor shall be debarred from participating in the re-tender for that work."

28. Paragraph 8 explicitly mandates that failure to submit a valid performance guarantee constitutes a breach, enabling the Railways to treat the contract as abandoned, cancel the tender, forfeit the bid security, and recover other dues payable under the contract.

29. Another relevant provision is Clause 62(1)(xvi), which empowers the respondents to terminate the contract in instances where the contractor submits fake documents or certificates in support of their credentials. The relevant portion of Clause 62(1)(xvi) reads as follows:

"Submits copy of fake documents/certificates in support of credentials, submitted by the tenderer."

30. In such instances, the Engineer, on behalf of the Railway, is required to serve the contractor with a written notice (Proforma at Annexure-IX) to make good the default within seven days. If the contractor fails to rectify the default or 15 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc comply with the Engineer's directions to the latter's satisfaction, the Railway is entitled to terminate the contract either in part or as a whole after issuing a final termination notice following a 48-hour period.

31. The inclusion of forged documents or fake credentials as a ground for termination reflects the serious view taken by the contracting authority on fraudulent practices, as such actions undermine the integrity of the tender process and the sanctity of public contracts. The Note appended to Clause 62(1)(xvi) provides a limited exception where part termination may be considered, provided the contractor has completed at least 80% of the original scope of work. However, this discretionary relief is contingent upon satisfactory progress, which is absent in the present case.

32. The provisions of Clause 62(1)(xvi) underscore the zero-tolerance policy against fraud, ensuring that the Railways are not compelled to continue contractual engagements with contractors who commit acts of forgery. The submission of forged bank guarantees, as established in this case, constitutes a breach of trust and directly attracts the consequences envisaged under Clause 62 of the GCC. 16 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 :::

908-wp(l)35600-2024 Fin.doc

33. Clause 52/52A of the General Conditions of Contract (GCC) mandates the submission of a declaration or affidavit in the format prescribed under Annexure (V) by the successful tenderer. This declaration unequivocally binds the tenderer to the stipulation that, should any information furnished by them be found to be false or forged, the tenderer would be banned from conducting business with the respondents for a period of two years. This provision underscores the significance of integrity and transparency in contractual dealings, especially in the context of public procurement, where adherence to these principles is paramount. The requirement under Clause 52/52A serves as a deterrent against fraudulent practices and ensures accountability, thereby safeguarding the sanctity of the tender process. In the present case, the petitioner has failed to dispute the critical fact that all bank guarantees furnished to the respondents were forged. This admission is fatal to the petitioner's case.

34. Fraud vitiates all solemn acts, and a contract founded on forged or fraudulent documents is void ab initio. Fraud not only nullifies the offending party's rights but also extinguishes the enforceability of any obligations arising out of such a contract. Therefore, the execution of the contract in question, 17 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc which was predicated on forged bank guarantees, is rendered void and unenforceable. The respondents were justified in invoking the provisions of Clause 62 to terminate the contract and forfeit the petitioner's bid security and other dues under the contract.

35. Mr. Jha, learned advocate for the petitioner, submitted that under Clause 62 of the General Conditions of Contract (GCC), it was obligatory for the respondents to issue a notice in writing and provide the petitioner with an opportunity to make good the default within seven days from the date of receipt of such notice. According to Mr. Jha, the respondents' failure to strictly adhere to this requirement invalidates the termination of the contract and renders their action unsustainable in law. For the purpose of considering this submission, it is necessary to examine the relevant portion of Clause 62, which reads as under:

"Clause 62(1): Determination of Contract owing to Default of Contractor If the Contractor should:

(i) to (viii) ...

(ix) Fail to execute the contract documents in terms of Para 8 of the Instructions to Tenderers, (xvi) Submits copy of fake documents/certificates in support of credentials, submitted by the tenderer, ...

18 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 :::

908-wp(l)35600-2024 Fin.doc Then and in any of the said cases, the Engineer on behalf of the Railway may serve the Contractor with a notice (Proforma at Annexure-IX) in writing to that effect and if the Contractor does not within seven days after the delivery to him of such notice proceed to make good his default in so far as the same is capable of being made good and carry on the work or comply with such directions as aforesaid to the entire satisfaction of the Engineer, the Railway shall be entitled after giving 48 hours' notice in writing to rescind the contract as a whole or in part."

36. The clause stipulates that a notice is to be issued to the contractor, providing an opportunity to remedy the default within seven days, subject to the default being of a nature that is capable of being rectified. However, it is evident from the language of the clause that the obligation to issue such a notice is contingent upon the nature of the default itself. Where the default is such that it can be rectified or made good, the contractor must be given an opportunity to remedy the same. On the contrary, where the default constitutes an irremediable breach, such as the submission of forged or fake documents, the question of rectification does not arise. Fraud, by its very nature, is incapable of being rectified or cured, as it fundamentally undermines the trust and integrity necessary for the continuation of a contractual relationship.

37. In the present case, the default attributed to the petitioner pertains to the submission of forged bank 19 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc guarantees, which was confirmed by the respective banks-- IDBI Bank Ltd. and Yes Bank Ltd. The petitioner has not disputed this fact, nor has he provided any plausible explanation or evidence to suggest that the bank guarantees were genuine. Under these circumstances, the respondents were justified in treating the default as one that could not be remedied or regularized under Clause 62. Issuing a notice requiring the petitioner to "make good" the default in such a scenario would not only be a futile exercise but would also amount to condoning an act of fraud, which is contrary to public policy and established principles of law.

38. Reliance placed by Mr. Jha on the notice requirement under Clause 62 overlooks the distinction between rectifiable and irremediable defaults. The issuance of a seven-day notice for rectification is not an absolute requirement but is subject to the inherent nature of the breach. Fraudulent acts such as the submission of forged documents fall outside the ambit of rectifiable defaults contemplated under Clause 62.

39. Furthermore, the respondents complied with the procedural requirements to the extent applicable in the given circumstances. Multiple show-cause notices were issued to the 20 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc petitioner, calling upon him to respond to the allegations of submitting forged bank guarantees. The petitioner failed to address the core issue of forgery and instead sought extensions of time on unrelated grounds. This conduct reinforces the respondents' conclusion that the petitioner was not in a position to remedy the default In light of the above, we find no merit in the submission that the respondents were under an obligation to issue a seven-day notice to the petitioner under Clause 62, as the nature of the petitioner's default rendered such a requirement inapplicable. The respondents' action in terminating the contract is consistent with the provisions of Clause 62 and does not suffer from any procedural infirmity.

40. It is a well-settled principle of law that fraud vitiates all transactions. As held by the Supreme Court in S.P. Chengalvaraya Naidu vs. Jagannath reported in (1994) 1 SCC 1, "a person whose case is based on falsehood has no right to approach the court." By knowingly submitting forged bank guarantees, the petitioner has forfeited any entitlement to the equitable relief of rectification or an opportunity to remedy the defect. Furthermore, Clause 62 of the GCC does not contemplate rectification of fraudulent acts, as fraud is not 21 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc a defect that can be "made good" but an act that necessitates termination of the contract and other punitive consequences.

41. Therefore, the submission of Mr. Jha that the petitioner should have been allowed to replace the forged bank guarantees with genuine ones has no substance. Fraudulent acts such as these cannot be remedied or regularized, and any argument to that effect is untenable both in law and on the facts of the present case. The respondents' action in terminating the contract is fully justified, given the gravity and irremediable nature of the petitioner's conduct.

42. The petitioner has further sought to challenge the termination on the ground of an alleged violation of the principles of natural justice, contending that adequate opportunity of hearing was not afforded. However, this contention is based on the premise of "inadequate" opportunity, rather than a complete denial of such an opportunity.

43. The record reveals that the respondents issued four show-cause notices to the petitioner, providing ample opportunity to address the issue of forged bank guarantees. The petitioner, in response, sought an extension of time citing 22 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc the unavailability of its director, instead of providing a substantive explanation or evidence to refute the allegations. It is evident that the petitioner was afforded sufficient opportunity to present its case but failed to offer any credible defense.

44. In our view, the failure to grant further time or additional opportunity does not amount to a breach of natural justice, especially in cases where the facts are admitted and indisputable, and where only one conclusion is legally tenable. The prejudice, if any, claimed by the petitioner is self-inflicted and does not arise from any procedural shortfall on the part of the respondents.

45. In this context, the reliance placed on the judgment of the Supreme Court in State of U.P. vs. Sudhir Kumar Singh and Others, reported in (2021) 19 SCC 706, is instructive. In paragraph 42 of the judgment, the Apex Court held:

"42.An analysis of the aforesaid judgments thus reveals:

42.1.Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice.

The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.

23 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 :::

908-wp(l)35600-2024 Fin.doc 42.2.Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.

42.3. No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice. 42.4. In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person. 42.5.The "prejudice" exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice."

46. The parameters for assessing the breach of principles of natural justice, as laid down by the Apex Court, are well- established. It is not the formality of a hearing or the mere issuance of notices that is decisive but whether the affected party was afforded a meaningful opportunity to respond. In the present case, the respondents issued four show-cause 24 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc notices to the petitioner, explicitly detailing the allegations of forged bank guarantees and calling for an explanation. Despite these opportunities, the petitioner failed to provide any substantive reply addressing the core allegations on merits.

47. Further, the petitioner has not disputed the fact that the bank guarantees submitted were forged, which is a critical and irrefutable aspect of the case. This admitted fraud eliminates the possibility of any alternative conclusion or prejudice to the petitioner arising from the decision of the respondents. It is a settled principle that procedural safeguards cannot be invoked as a shield to defend fraudulent or unlawful actions. In this context, the Apex Court's judgment in Sudhir Kumar Singh (supra) is particularly relevant, where it was held that the principles of natural justice do not require an endless or mechanical extension of procedural rights, especially when the facts are admitted and undisputed, and only one conclusion is legally tenable.

48. Therefore, based on these parameters, we hold that the issuance of four show-cause notices by the respondents, combined with the petitioner's failure to respond on merits, 25 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc establishes that no legal prejudice has been caused to the petitioner. The admitted fraud further reinforces this conclusion, rendering the petitioner's procedural objections untenable. As such, the impugned order does not warrant interference on the ground of breach of principles of natural justice.

49. The petitioner has also relied on the communication dated 11 October 2024, wherein an extension of time for completion of work was purportedly granted by the respondents, despite the issuance of the show-cause notice dated 25 September 2024. However, this contention does not advance the petitioner's case for several reasons.

50. Firstly, as of 11 October 2024, the petitioner had not furnished any reply to the earlier show-cause notices issued by the respondents. The communication relied upon by the petitioner merely extended the time for execution of the work, which appears to be a procedural step unconnected with the substantive issue of forged bank guarantees. This communication cannot be interpreted as a waiver of the respondents' right to terminate the contract for fraud, especially when the undisputed fact of the forged bank 26 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc guarantees had already come to light.

51. Secondly, the final show-cause notice under Clause 62, granting the petitioner 48 hours to respond, was issued on 26 October 2024, following due process and in compliance with the requirements of the contract. The petitioner's failure to respond to this notice or provide any plausible explanation further weakens its position.

52. Finally, the submission of forged bank guarantees constitutes a grave and irremediable breach of trust, undermining the integrity of the contractual relationship. It is a settled principle that fraud vitiates all transactions, and no subsequent act, including the communication extending the time for work completion, can regularize or condone such fraudulent conduct. In this light, the respondents were fully justified in invoking Clause 62 to terminate the contract.

53. The impugned act of termination, therefore, stands firmly on the legal foundation of the contractual provisions and the admitted facts of the case. We find no reason to interfere with the termination of the contract, as it is a legitimate exercise of the respondents' rights arising from the petitioner's own fraudulent actions.

27 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 :::

908-wp(l)35600-2024 Fin.doc

54. The petitioner's admission of having submitted forged bank guarantees to secure the contract conclusively negates any claim to equity or relief under the extraordinary constitutional jurisdiction of this Court under Article 226 of the Constitution of India. It is well-settled that Article 226 is not a forum for adjudicating disputes involving fraud, particularly where such fraud undermines public interest and contractual sanctity. The exercise of this Court's discretionary jurisdiction is contingent upon the petitioner coming with clean hands and demonstrating an unimpeachable case of procedural or substantive unfairness. The petitioner's conduct, rooted in deceit, forfeits its right to invoke this jurisdiction. Fraud vitiates not only the contract but also the petitioner's claim to any equitable relief under constitutional remedies.

55. The reliance placed by the petitioner on the judgment in Khushee Construction (supra) is wholly misplaced. The facts of that case reveal that the petitioner therein had unknowingly submitted a false document of deposit in the post office as earnest money. The error was attributable to a third party entrusted with the task of depositing the amount, and the petitioner had no knowledge of the forgery. The court, in those circumstances, found the petitioner to be an innocent 28 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc victim of the fraudulent acts of a third party and thus deserving of relief. In contrast, the facts of the present case demonstrate deliberate and conscious submission of forged bank guarantees by the petitioner, purportedly issued by IDBI Bank Ltd. and Yes Bank Ltd. Unlike the petitioner in Khushee Construction, who was misled by a third party, the petitioner here acted with full knowledge of the falsity of the bank guarantees. This distinction is critical, as the petitioner's actions amount to an intentional fraud designed to mislead the respondents into awarding the contract, thereby nullifying any claim to parity with the facts or principles applied in Khushee Construction.

56. Similarly, the petitioner's reliance on the judgment in M/S. KTR Constructions (supra) is equally untenable. That case involved debarment from future tenders due to a failure to issue a show-cause notice, an act that violated the principles of natural justice. The legal position regarding blacklisting is clear: no entity can be debarred without being provided a fair opportunity to respond to the allegations and reasons for the proposed blacklisting. The court, in that case, set aside the debarment order solely on the procedural ground of non-issuance of a show-cause notice. However, the 29 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc present case is distinct. The issue here pertains not to blacklisting but to the validity of the respondents' action in terminating a contract based on the petitioner's submission of forged documents. Judicial review of such actions is governed by a different set of parameters, focusing primarily on the adherence to contractual terms, the nature of the fraudulent act, and its impact on the sanctity of the contractual relationship. Fraud is an anathema to law and governance, and its proven existence obviates the necessity of detailed procedural safeguards like those applicable in blacklisting cases. Consequently, the reliance on M/S. KTR Constructions does not advance the petitioner's case.

57. In view of the foregoing discussion, it is evident that the petitioner has failed to establish any valid ground for interference by this Court. The undisputed facts, particularly the submission of forged bank guarantees, negate the petitioner's claim to any relief. Fraud vitiates all transactions, and the respondents' action in terminating the contract is consistent with the terms of the agreement and principles of law. The petitioner's attempts to draw parallels with other cases are not supported by the factual matrix of this case, which stands on its own footing. The respondents have acted 30 ::: Uploaded on - 20/12/2024 ::: Downloaded on - 21/12/2024 12:59:55 ::: 908-wp(l)35600-2024 Fin.doc within the bounds of their contractual rights, and the petitioner has failed to demonstrate any procedural or substantive infirmity warranting interference under Article

226.

58. Accordingly, the writ petition is dismissed with no order as to costs.

 (AMIT BORKAR, J.)                            (CHIEF JUSTICE)




                               31
::: Uploaded on - 20/12/2024         ::: Downloaded on - 21/12/2024 12:59:55 :::

Unlock Advanced Research with PRISMAI

Bombay High Court