Jharkhand High Court
Central Coalfields Limited vs M/S Aretpl-At(Jv) on 4 July, 2022
Bench: Shree Chandrashekhar, Ratnaker Bhengra
IN THE HIGH COURT OF JHARKHAND AT RANCHI
(Letters Patent Appellate Jurisdiction)
LPA No. 155 of 2018
1. Central Coalfields Limited, a Company incorporated under the Companies
Act, having its registered Office at Darbhanga House, PO-GPO, PS-Kotwali,
District- Ranchi (Jharkhand), through its Chairman-cum-Managing Director,
having office at Darbhanga House, PO-GPO, PS-Kotwali, District- Ranchi
(Jharkhand) and also through its Managing Director (Administration) Sri
Bimlendu Kumar, son of Jagdish Pandey, residing at Flat No.2C, Shanti
Apartment, Dangra Toli, Lalpur, P.O. & P.S.- Lalpur, District-Ranchi
(Jharkhand)
2. Director (Technical), Central Coalfields Limited, Darbhanga House,
PO-GPO, PS-Kotwali, District- Ranchi (Jharkhand)
3. General Manager (CMC), Central Coalfields Limited, Darbhanga House,
PO-GPO, PS-Kotwali, District-Ranchi (Jharkhand)
4. General Manager, Central Coalfields Limited, B&K Area, Kargali,
PO-Bermo, PS-Bermo, District-Bokaro, PIN 829104 (Jharkhand)
5. Staff Officer (Mining), Central Coalfields Limited, B&K Area, Kargali,
PO-Bermo, PS-Bermo, District-Bokaro, PIN 829104 (Jharkhand)
... ... Appellants
Versus
M/s ARETPL-AT(JV), having its office situated at Sanjay Chowk, Bye Pass
Road, P.O. & P.S.- Merah, District - Dhanbad, PIN 828202 (Jharkhand)
through its Authorized Signatory Avinash Kumar Singh, age not known to the
appellants, son of Arvind Singh, residing at Maithon, PO- Merah,
PS-Maithon, District- Dhanbad, PIN 829107 (Jharkhand)
... ... Respondent
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CORAM : HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
HON'BLE MR. JUSTICE RATNAKER BHENGRA
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For the Appellants : Mr. A.K. Das, Advocate
Mrs. Swati Shalini, Advocate
Mr. Shivam Utkarsh Sahay, Advocate
Mr. Saurav Kumar, Advocate
For the Respondent : Mr. Anil Kumar Sinha, Sr. Advocate
Ms. Amrita Sinha, Advocate
Ms. Madhavi Nikunj Horo, Advocate
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ORDER
04th July 2022 Per, Shree Chandrashekhar,J.
M/s ARETPL-AT(JV) approached the writ Court against the order contained in letter dated 12th October 2017 by which Letter of Acceptance (in short 'LOA') with respect to the work of "Hiring of HEMM for removal of OB at outsourcing patch of Konar part of AKK OCP of B-K 2 LPA No. 155 of 2018 Area for a period of four years" was cancelled for 2 days' delay in furnishing performance security.
2. The writ Court held that the stipulation under Clause 4.2 of NIT for furnishing performance security of 5% of annualized value of contract amount to be deposited within 28 days of LOA by the successful bidder was not a mandatory condition. The writ Court further held that the order of blacklisting for 3 years issued under Clause 4.2 of General Terms and Conditions (in short 'GTC') without issuing a show cause notice was bad in law.
3. The aforesaid findings by the writ Court in WP(C) No. 6106 of 2017 have been challenged by Central Coalfields Limited (in short 'CCL') on the grounds that (i) there was no concluded contract between the parties
(ii) CCL cancelled LOA and passed the order of forfeiture and debarment as provided under NIT and, (iii) writ Court exceeded its jurisdiction to interpret the clauses in NIT.
4. In support of the aforesaid submissions, Mr. A.K. Das, the learned counsel for the CCL has referred to the judgments in "Bharat Coking Coal Ltd. v. AMR Dev Prabha" (2020) 16 SCC 759, "South Eastern Coalfields Limited v. S. Kumar's Associates AKM (JV)" (2021) 9 SCC 166, "Central Coalfields Limited v. SLL-SML (Joint Venture Consortium)" (2016) 8 SCC 622, "South Delhi Municipal Corpn. v. Ravinder Kumar" (2015) 15 SCC 545, "Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd." (2013) 5 SCC 470, "Satish Batra v. Sudhir Rawal" (2013) 1 SCC 345, "Kisan Sahkari Chini Mills Limited v. Vardan Linkers" (2008) 12 SCC 500 and "Global Energy Ltd. v. Adani Exports Ltd." (2005) 4 SCC 435.
5. An e-Tender Notice was published on 15th May 2017 for engaging contractor for "Hiring of HEMM for removal of OB at outsourcing patch of Konar part of AKK OCP of B-K Area for a period of four years". The work under e-Tender Notice pertained to blast hole drilling, blasting, excavation, loading and transportation of all kinds of soil, rocks, broken rocks, hard rocks and extraneous materials including mixed soil, mixed hard soil, clay soil, pebbles, stone etc. and dumping outside the working zone. M/s ARETPL-AT(JV) which is respondent before us was declared L-1 bidder 3 LPA No. 155 of 2018 on 15th August 2017 and pursuant thereto LOA was issued to it on 15 th August 2017. Under LOA dated 15th August 2017, the respondent was required to furnish performance security of Rs.2,04,04,894/- and additional performance security of Rs.16,06,24,850/- within 28 days - that is, by 12th September 2017. In the meantime, the project site was handed over to the respondent on 18th August 2017 and work order was issued on 29th August 2017.
6. CCL issued letter dated 6th September 2017 reminding the respondent to furnish performance security by due date to avoid any adverse consequence. However, the respondent could furnish performance security of Rs. 2,04,04,894/- through 4 BGs drawn on State Bank of India, SME Branch, Dhanbad, all dated 11th September 2017, through letter dated 14 th September 2017. There is no dispute that the aforesaid bank guarantees furnished through letter dated 14th September 2017 were received by CCL on 15th September 2017.
7. As noticed above, by a communication dated 15th October 2017 the respondent was intimated cancellation of award of tender through LOA dated 15th August 2017.
8. Before the writ Court, the decisions in "Global Energy Ltd.", "Kisan Sahkari Chini Mills Limited ", "Verigamto Naveen v. Govt. of A.P." (2001) 8 SCC 344 and "Noble Resources Ltd. v. State of Orissa" (2006) 10 SCC 236 were pressed by CCL to submit that the terms of NIT are not amenable to judicial scrutiny and the writ Court should not have interfered in contractual matters which are generally beyond the realm of judicial review.
9. The arbitrary decision of CCL was under scrutiny before the writ Court which definitely possesses powers to examine any matter on the well known grounds of lack of fairness, arbitrariness, irrationality and proportionality, which are applied even in contractual matters. The works under e-Tender Notice of blast hole drilling, blasting, excavation loading and transportation etc. are essential activities for CCL to carry on its business. Any decision by CCL to award or cancel a contract must therefore be examined on the touchstone of public interest.
10. In "Joshi Technologies International Inc. v. Union of India"
(2015) 7 SCC 728 the Hon'ble Supreme Court held that writ petition is not maintainable to avoid contractual obligations on the ground of commercial 4 LPA No. 155 of 2018 difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract. At the same time, the Hon'ble Supreme Court has observed that the distinction between public law and private law element in the contract with the State is getting blurred and whether the contractual relations between the parties bear insignia of public element has to be examined in the facts of each case.
11. The writ Court posed to itself the inherent limitations on the scope of inquiry in the contractual matters and on examination of Clause 4.2 of NIT came to a conclusion that the condition to furnish performance security within 28 days of issue of LOA by the successful bidder is not a mandatory condition. The writ Court held that Clause 4.2 of NIT contained the discretionary powers of CCL by exercising which powers the contract may be cancelled with consequential forfeiture of security and blacklisting.
12. Clause 4.2 of the General Terms and Conditions (GTC) which contains the performance security condition is extracted as under:
"4.2 Performance Security (first part of security deposit) should be 5% of annualized value of contract amount and should be submitted within 28 days of issue of LOA by the successful bidder in any of the form given below:
- A Bank Guarantee in the form given in the bid document from any scheduled Bank. The BG issued by outstation bank shall be operative at its local branch at Area or branch at Ranchi.
- Govt. Securities, FDR (Scheduled Bank) or any other form of deposit Stipulated by the owner and duly pledged in favour of owner.
- Demand Draft drawn in favour of Central coalfields Ltd. on any Scheduled Bank payable at its Branch at Ranchi. The Earnest Money/Bid Security deposited online may be adjusted against the security deposit (Performance Security) on bidder's acceptance.
If performance security is provided by the successful bidder in the form of bank guarantee it shall be issued either-
(a) at Bidder's option by a Scheduled Bank or
(b) by a foreign bank located in India and acceptable to the employer.
the validity of the Bank Guarantee shall be for a period of one year on ninety days beyond the period of contract or extended period of contract (if any), whichever is more. Failure of the successful bidder to comply with the requirement as above shall constitute sufficient ground for cancellation of the award of work and forfeiture of the bid security.
Additionally the company reserves the right as follows:
"(a) All such defaulting parties, who fail to deposit Performance Guarantee or Security deposit in time shall be blacklisted/de-barred for participating in future tenders for a period of 3(three) years.5 LPA No. 155 of 2018
(b) In addition, all such individual firms/companies/associates/JVs who are the persons as defined in section 40A(2)(b) of the Income Tax Act 1961 of such blacklisted/debarred party, wherein the words "assessee" to be replaced with the words "blacklisted/debarred party" shall also remain blacklisted/debarred for a period of 3(three) years.
(c) In case a party has been blacklisted/debarred and it is found that such blacklisted party or any person as mentioned in clause (b) above has already participated in a tender which is yet to be awarded, the same participant shall not be considered and shall be rejected forthwith."
13. Clause 14 of the Instructions to Bidders (ITB) with reference to which CCL took the impugned decision is extracted below:
"14. Bid security/earnest money deposit 14.1 The bidder shall furnish, as part of his bid, a Bid Security/Earnest Money of the amount as shown in e-tender notice an in the form as deliberated at CI.3 of e-tender notice.
14.2 Any bid not accompanied by an acceptable Bid Security shall be rejected by the employer as non-responsive. 14.3 The Bid Security/EMD of the unsuccessful bidder shall become refundable. The unsuccessful bidder for this purpose means the bidders who have not qualified for opening of Par- II Price Bid) and those who have not emerged as L-I Bidder after opening of price bid.
14.4. The Bid Security/EMD (submitted in the form of Electronic fund transfer) of successful bidder may be retained and adjusted with performance security/ deposit at bidder's option.
14.5 The Bid Security/Earnest Money may be forfeited:
a. if the Bidder withdraws the Bid after Bid opening during the period of Bid validity/extended period of Bid validity/extended period of validity with mutual consent; or b. In the case of a successful Bidder, if the Bidder fails within the specified time limit to:
(i) sign the Agreement; or
(ii) furnish the required Perfomance Security/ Security Deposit.
c. Cases of bidder's default in uploading confirmatory documents etc.: As per relevant clause of e-NIT.
Additionally the company reserves the right to debar such defaulting contractor from participating in future bids for a minimum period of 12(twelve) months.
14.6 The Bid Security/EMD deposited with the Employer will not carry any interest."
14. On interpretation of these clauses, we are inclined to accept CCL's submission that it was mandatory for the contractor to furnish performance security within 28 days. The writ Court fell into error in undertaking an exercise to interpret different clause of the contract which are otherwise unambiguous - whether cancellation decision was right or not is a different issue.
6 LPA No. 155 of 201815. In "Silppi Constructions Contractors v. Union of India" (2020) 16 SCC 489 the Hon'ble Supreme Court has discussed the law on the subject in the following words:
"19. This Court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give "fair play in the joints" to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer.
20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case."
16. No doubt under Clause 4.2 of NIT the contractor is required to furnish performance security and additional performance security within 28 days of issue of LOA and adherence to the said stipulations by CCL 7 LPA No. 155 of 2018 cannot be faulted. It is also true that the consequence of failure to furnish performance security as mandated under Clause 4.2 of NIT that EMD furnished by the contractor shall be forfeited is also provided therein. However, even a bonafide decision of the employer can be challenged where decision making process itself was faulty - arbitrariness, irrationality and public interest are the other well known grounds. As would appear from the materials on record, 90 days' time was consumed in finalizing the contract which again would be required if a fresh tender was to be floated. Instead of accepting the BGs dated 11th September 2017 with a delay of 2 days - and, of course, for justifiable reasons - CCL decided to cancel LOA.
17. We find that the decision making process adopted by CCL was not in consonance with the rules of fairplay. The issue in the present case carries a public law element and the contract between parties was not purely in the realm of private contract. In "SLL-SML (Joint Venture Consortium)", the Hon'ble Supreme Court observed that acceptance or rejection of a bid or a bidder should not be looked at only from the point of view of the employer but also from the view point of the contractor. The Hon'ble Supreme Court further observed that there must be judicial restraint in interfering with administrative action and soundness of the decision taken by the employer should not to be questioned but the decision making process can certainly be subject to judicial review.
18. CCL in the counter-affidavit dated 24th February 2018 filed before the writ Court brought several cancellation orders to put forth a defence that it acted fairly and uniformly. However, the writ Court found that about 3 months' time was extended to M/s TIPL-MTC(JV) to furnish bank guarantee beyond the period of 28 days. With reference to "B.S.N Johsi v. Nair Coal Services Ltd." (2006) 11 SCC 548, the writ Court held that the past prevailing practice by CCL would be a relevant factor to hold that extension of time for furnishing bank guarantee could have been provided to the writ petitioner.
19. On this issue, the writ Court has held as under:
"........................
37. On perusal of the impugned order dated 12.10.2017, it appears that the order of cancellation of tender coupled with forfeiture of security deposit and blacklisting has been passed without describing any cogent or strong reason of the 8 LPA No. 155 of 2018 same. The order cancelling the awarded work is one aspect and the order of blacklisting is another. The order of cancellation of contract is passed merely on violation of any mandatory terms and conditions of the contract, however, the order of blacklisting debars any person from dealing with the government instrumentality for the time mentioned in the order. Thus, before passing the order of blacklisting, it is a sine-qua-non to hear the alleged delinquent so as to satisfy as to whether the default is intentional or has been caused under the situation beyond one's control. In the present case, the respondent-CCL has not called upon the petitioner to explain the circumstances under which the delay has been caused. The impugned order has been passed merely on the ground that in case of default, the respondent-CCL has the discretion to pass any order. It is a settled position of law that the State or its instrumentality while dealing with any private individual shall exercise the said discretion in fair and equitable manner.
38. For the aforesaid reason, I am of the view that the decision making process of the respondent-CCL in blacklisting the petitioner vitiates as the same has been passed in violation of the principles of natural justice i.e., without affording any opportunity to the petitioner to explain the reasons of alleged default.
......................
46. I have also perused Annexure-G series to the counter- affidavit dated 24.02.2018, which are the cancellation orders passed in relation to other tenderers. It appears that all those cancellation orders were passed alleging that in spite of the repeated request, neither the works were commenced nor the performance securities were deposited. In some of the instances referred by the respondent-CCL such as of M/s BPPL-UCC-VSSPL(JV) and M/s International Commerce Limited, wherein even after lapse of 28 days, the concerned tenderers were given notice to deposit the performance security which itself dilutes the own version of the CCL. In the case in hand, the sole ground for cancellation of the Letter of Acceptance and the work order of the petitioner is the delay of 2 days in deposit of performance security. Further, the factual context of the present case would also indicate that the bank guarantee was already submitted by the petitioner (i.e., after delay of two days) much before passing of the impugned order which was accepted by the respondent-CCL. Moreover, there is nothing on record to suggest that the CCL has been put to any loss for such a meagre delay of two days in submitting the bank guarantee. It was not the situation in the instances cited by the respondent-CCL. Thus, the case of the petitioner cannot be equated with the instances referred by the respondent-CCL.
47. Moreover, on perusal of the letter dated 14.01.2017 (Annexure- 20 ), it appears that the respondent-CCL in the matter of another contractor namely, M/s TIPL-MTC(JV) has allowed it to receive back the FDR and submit the bank guarantee after about three months i.e., much beyond the period of 28 days fixed for depositing the bank guarantee. The respondent-CCL cannot treat the contractors/bidders in different manner, thereby making discrimination among the class of contractors working with the respondent-CCL. In view of the judgment of "B.S.N Johsi" (supra) the past prevailing practice exercised by the respondent-CCL is also 9 LPA No. 155 of 2018 a relevant factor by which the extension of time was granted for furnishing bank guarantee having taken into consideration the fact of the case and thus, the case of the petitioner should have been considered in the factual context of the present case.
48. The respondents have also tried to contend before this court other reasons also for cancelling the tender so as to justify their action. It has been argued on behalf of the respondents that the petitioner has not started the preparatory work with the stipulated time. The said ground appears to be a portrayed one as the sole ground mentioned in the impugned order is the delayed deposit of the performance security.
49. During the pendency of the present case, the recourse to resolve the dispute out of court was taken in view of clause 13 of the General Terms and Conditions of the Contract, but the same failed. Learned counsel for the respondents submits that the print out of Structural Financial Messaging System (SFMS) of the State Bank of India, Commercial Branch, Ranchi (Annexure-B to the counter affidavit) indicates that the bank guarantee in question was prepared by the concerned bank on 13th September, 2017 and not on 11th September, 2017, as claimed by the petitioner. The said contention of the respondent-CCL that SFMS indicates that the bank guarantee was valid from 13th September, 2017 also cannot be accepted in view of the specific period mentioned in the bank guarantee/performance security issued by the State Bank of India, SME Branch, Bank More, Dhanbad, which clearly shows that the same is valid from 11th September, 2017 to 10th September, 2021."
20. In "Bharat Coking Coal Ltd. vs. AMR Dev Prabha" (2020) 16 SCC 759, the decision by the employer to extend time to furnish performance security was questioned before the writ Court. The Hon'ble Supreme Court while approving condonation of delay of 49 days in producing bank guarantees observed that there is no prohibition in law against public authorities granting relaxations for bonafide reasons.
21. In "AMR Dev Prabha" the Hon'ble Supreme Court has observed as under:
"46. With regard to other allegations concerning condonation of Respondent 6's delay in producing guarantees, we would only reiterate that there is no prohibition in law against public authorities granting relaxations for bona fide reasons. In Shobikaa Impex (P) Ltd. v. Central Medical Services Society, it has been noted that:
(SCC p. 243, para 20) "20. ... the State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It has been further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the Court must exercise its 10 LPA No. 155 of 2018 discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point."
22. The anxiety of CCL not to grant extension of time is that the officials of CCL faced enquiry for accepting performance security beyond 28 day's time.
23. In paragraph no.50 the writ Court has observed as under:
"50. One of the contentions of the respondent-CCL is that in some cases, Chairman-cum-Managing Director(s) of the other subsidiary coal companies of the Coal India Limited have been charge sheeted through the Chief Vigilance Commissioner for allowing deposit of performance security after expiry of 28 days. However, in the factual context of the present case, there appears to be no latches on the part of the petitioner in furnishing the performance security in time which eventually could not be furnished within the stipulated period of 28 days from the date of issuance of Letter of Acceptance due to the situation beyond control of the petitioner. There appears to be some procedural delay by the Bank (SBI) due to which the performance security could not be furnished in time and the intimation to that effect was also given by the Bank vide letter dated 08.09.2017 to the respondent-CCL. Nevertheless, only after two days of the prescribed period, the Bank Guarantee/Performance Security was furnished before the respondent-CCL. The petitioner being the L1 bidder was allotted the work and considering the peculiar facts of the case, the delay of 2 days in furnishing the bank guarantee is required to be condoned more so when the respondent company has not been put to any prejudice. The respondent-CCL is the instrumentality of the State and thus while taking such decision(s), it is required to act in a fair and judicious manner."
24. Notwithstanding the aforesaid development, we are of the opinion that the decision taken by CCL to cancel LOA dated 15 th August 2017 was not in the interest of anyone of the stakeholders. CCL faced with a situation as in the present case was required to weigh its options and take a conscious decision taking care of the interest of all. CCL was not required to follow the stipulations under NIT mechanically without assessing the probable injury to the company and contractor. The decision of CCL to cancel LOA was illegal and arbitrary.
25. Mr. A. K. Das, the learned counsel for CCL vehemently contended that there was no concluded contract between the parties and only LOA was issued to the respondent which by itself would not confer any right upon the respondent and while so the writ Court committed serious error in law in interfering with the decision of CCL. This submission is based on the 11 LPA No. 155 of 2018 decision in "S. Kumar's Associates AKM (JV)" wherein the Hon'ble Supreme Court has observed as under:
"25. On having discussed the non-compliance by the respondent of the terms of the LoI we turn to the NIT. Clause 29.2 clearly stipulates that the notification of award will constitute the formation of the contract "subject only" to furnishing of the performance security/security deposit. Thus, it was clearly put as a precondition and that too to be done within 28 days following notification of the award. The failure of the successful bidder to comply with the requirement "shall constitute sufficient ground for cancellation of the award work and forfeiture of the bid security" as per Clause 30.2. If we analyse Clause 34 dealing with the integrity pact the failure to submit the same would make the tender bid "as not substantially responsive and may be rejected".
26. We may also add that the definition of what constitutes a contract as per Clause (ix) itself includes the NIT, the acceptance of the tender, the formal agreement to be executed between the parties post contractor furnishing all the documents and the bid security amount.
27. The result of the aforesaid is that as rightly held in terms of the impugned order all that the appellants can do is to forfeit the bid security amount and, thus, it was so directed. Since as a precondition of any coercive action against the respondent, the High Court called upon the appellants to deposit a sum of Rs 10 lakhs in terms of the interim order dated 4-8-2010, a direction is made to deduct the bid security amount out of the sum of Rs 10 lakhs and to refund the balance amount to the respondent. The needful would now have to be done within two months as in terms of the interim order of this Court dated 8-2-2013 such refund has been stayed."
26. In the first place, the fact-situation in the present case are entirely different from "S. Kumar's Associates AKM (JV)". A reading of paragraph no.21 of the said judgment, which records that none of the mandatory conditions were fulfilled except mobilizing equipments at site was fulfilled by the contractor, makes it very clear that the ratio of this case can not be applied in the present case. Secondly, there is no dispute that 4 BGs furnished by the respondent as performance security were all dated 11 th September 2017 - prepared within due date. The reason why performance security could not be furnished within stipulated 28 days' from issue of LOA has been explained by the respondent in its letter dated 12th September 2017 that due to absence of signing authority the Bank could not issue bank guarantees. The truthfulness of defence put forth by the respondent was never questioned. On the contrary, the State Bank of India corroborated the same by issuing e-mail dated 8th September 2017. A decision to cancel LOA dated 15 th 12 LPA No. 155 of 2018 August 2017 was taken on 12th October 2017 and by that time the aforesaid materials were before CCL. Apparently, the judgment in "S. Kumar's Associates AKM (JV)" does not provide any justification for the order dated 12th October 2017.
27. The order of debarment of the respondent for 3 years from participating in future tenders of CCL can also not be supported in law. Clause 4.2 provides debarment for 3 years in the event the contractor fails to adhere to and comply with the requirement of furnishing performance security. This consequence is not applicable in every case. The relevant stipulation under Clause 4.2 provides that blacklisting for 3 years can be imposed upon a defaulting contractor in addition to forfeiture of EMD. But before recourse to the above provision, CCL is required to issue a show cause notice. We are inclined to adopt this interpretation for the reason that the expression used is "additionally the company reserves the rights". Moreover, the order of debarment of the respondent shall stand cancelled once the cancellation of LOA is held illegal and arbitrary.
28. Accordingly, LPA No. 155 of 2018 is dismissed.
29. However, in the circumstances, the natural consequence of this order that contract for the remaining part shall be awarded to the respondent shall not follow.
30. I.A No. 7044 of 2019 stands disposed of.
(Shree Chandrashekhar, J.) (Ratnaker Bhengra, J.) Jharkhand High Court, Ranchi Dated: 4th July 2022 RKM-NAFR