Jharkhand High Court
M/S. Aretpl-At (Jv) vs M/S. Central Coalfields Limited on 28 February, 2018
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No. 6106 of 2017
M/s. ARETPL-AT (JV), having its office at Sanjay Chowk, Bye Pass
Road, P.O. & P.S. Merah, Dhanbad-828202, through its Authorized
Signatory Avinash Kumar Singh, son Arvind Singh, residing at Maithon,
P.O. Merha, P.S. Maithon, District Dhanbad-828 207... Petitioner
Versus
1. M/s. Central Coalfields Limited, a subsidiary of Coal India Limited, a
Government of India Undertaking, having its registered office at
Darbhanga House, Ranchi, through its Chairman-cum-Managing
Director.
2. Director (Technical), M/s. Central Coalfields Limited, having its office
at Darbhanga House, Ranchi.
3. General Manager (CMC),M/s. Central Coalfields Limited, having its
office at Darbhanga House, Ranchi.
4. General Manager, M/s. Central Coalfields Limited, B. & K. Area,
Kargali, P.O. Bermo, P.S. Bermo, District Bokaro.
5. Staff Officer (Mining), M/s. Central Coalfields Limited, B. & K. Area,
Kargali, P.O. Bermo, P.S. Bermo, District Bokaro ... Respondents
CORAM: HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner : Mr. Anil Kumar Sinha, Sr. Advocate Miss Amrita Sinha, Advocate For the Respondents : Mr. A.K. Das, Advocate
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Order No. 33 Dated: 28.02.2018 The present writ petition has been filed for quashing the letter no. GM(B&K)/SO(M)/CT/AKK OCP/OB/DEBARRING/179 dated 12.10.2017 issued by the Staff Manager (Mining) of M/s Central Coalfields Limited (respondent no. 5) whereby the Letter of Acceptance in favour of the petitioner vide LOA No. CCL/GM(CMC)/B- K/2017/51/57 dated 15.08.2017 and work order no. GM(B&K)/SO(M)/CT/AKK OCP/OB/WO/107 dated 29.08.2017 have been cancelled and imposed penalty by way of forfeiture of earnest money of Rs.50,00,000/- deposited by the petitioner and also debarred the petitioner for a period of three years from participating of future tenders of Central Coalfields Limited (hereinafter referred to as "the CCL") in individual capacity or as joint venture. Further prayer has been made for issuance of direction upon the respondents to execute formal contract between the parties in terms of Clause 23 of 2 the Instructions to Bidders with respect to Tender of "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".
2. The factual background of the case as stated in the writ petition is that the respondent no. 1 published an e-Tender Notice being NIT No. CCL/ GM(CMC)/B-K/2017/51 dated 15.05.2017 inviting bids for the Hiring of HEMM for removal of OB including blast hole drilling, blasting, excavation loading and transportation of all kinds of soil, rocks, broken rocks, hard rocks, extraneous materials including mixed soil, mixed hard soil, clay soil, pebbles, stone etc. and dumping outside the working zone including spraying at haul road face at dump yard. The job involves making access trench/haul road with dozing grading maintenance and water sprinkling as may be required, face pumping or excavation operation as per instruction of the engineer-in- charge of AKK OCP Mine of B&K Area for a period of four years. The petitioner found itself eligible for the work and submitted its bid on 30.05.2017 and in financial bid it was found L-1 bidder. The respondent intimated the petitioner on 15.08.2017 via email that it has been awarded the work and served it a letter of acceptance vide Ref. No. CCLGM(CMC)/B-K/2017/51/57 dated 15.08.2017. As per the Letter of Acceptance, the petitioner had to deposit the Performance Guarantee of Rs. 2,04,04,894/- in the forms as detailed in clause no. 24 of the Instructions to Bidders and to submit additional performance security of Rs. 16,06,24,850/- alongwith normal performance security as per clause 20.2 of the Instruction to Bidders within a period of 28 days from date of issuance of Letter of Acceptance. The petitioner duly applied for the Bank Guarantee on 16.08.2017 to the satisfaction of the Banking authorities before the bank namely State Bank of India SME Branch, Dhanbad. The project site was handed over to the petitioner by the respondents vide letter dated 18.08.2017 for starting of work with immediate effect. Thereafter the petitioner deputed its man and machinery and arranged finance to start the work. The work order being No.GM(B&K)/SO(M)/CT/AKK OCP/OB/WO/107 dated 29.08.2017 was also issued in favour of the petitioner. The Respondent No.5 also informed vide letter dated 06.09.2017 received 3 on 12.09.2017 by the petitioner for furnishing performance security and additional performance security alongwith normal performance security within time. The Bank Guarantee was delayed by the Bank and accordingly the Bank vide email dated 08.09.2017 informed the respondent no. 3 that the Bank is under process of issuing the Bank Guarantee in favour of the respondent-CCL on request of the petitioner and the same will be issued shortly in terms with above Letter of Acceptance dated 15.08.2017. The petitioner, vide letter dated 12.09.2017 also informed the respondent no. 3 about the said delay on the part of the Bank in handing over the Bank Guarantee to the petitioner and thus the petitioner sought extension of three days from the respondent for submitting the Bank Guarantee. However, the respondent did not respond to the said letter of the petitioner. On 15.09.2017, the petitioner submitted four Bank Guarantees executed with effect from 11.09.2017 for a period of four years three months vide forwarding letter dated 14.09.2017, however, the petitioner was not allowed to start the work and accordingly vide letters dated 26.09.2017 and 27.09.2017 requested the respondent no. 3 to accept the Bank Guarantee and allow the petitioner to start the work. It further informed that the man and machinery is lying idle at the site, however, the respondent no. 3 did not respond to the said letter. Thereafter, the petitioner approached the Chief Vigilance Officer, Central Coalfields Limited vide letter dated 29.09.2017 and requested to look into the issue and further visited the office of the respondent- CCL on 12.10.2017, however, all went in vein. Suddenly on 13.10.2017, vide e-mail, the petitioner was in receipt of a letter dated 12.10.2017 whereby the respondent no. 5 cancelled the Letters of Acceptance dated 15.08.2017 and imposed penalty of forfeiture of earnest money of Rs.50,00,000/- deposited by the petitioner and also debarred it for a period of three years from participating in future tenders of CCL relying upon clause 23 of Instructions to bidders and on clause 4 of the General Terms and conditions of the Contract. During the pendency of the writ petition, the respondent-CCL floated fresh tender being NIT No. CCL/GM(CMC)/B-K/2017/81 dated 12.12.2017 with respect to the work in question and as such, the 4 petitioner sought to add the additional prayer in the writ petition for quashing the fresh tender by filing I.A. No. 9824/2017 and vide order dated 08.01.2018, the respondents were directed not to finalize the subsequent tender.
3. Mr. Anil Kumar Sinha, the learned Senior Counsel for the petitioner, submits that the impugned order dated 12.10.2017 has been passed in violation of the principles of natural justice as no any opportunity of hearing was given to the petitioner before passing the impugned order. It is further submitted that the impugned order has been passed on no fault of the petitioner as delay caused in depositing Bank Guarantee was beyond control of the petitioner, rather it was caused due to non-availability of the sanctioning authority of the Bank. It is further submitted that the petitioner has already deputed men and machineries at the work site and impugned order will cause irreparable loss to it. While referring to Annexures-7 and 8 to the writ petition, learned senior counsel appearing for the petitioner submits that the State Bank of India, SME Branch, Bank More, Dhanbad vide letter dated 8th September, 2017 informed the General Manager (CMC), Central Coalfields Limited, Ranchi inter alia that the request of the petitioner for issuance of bank guarantee is under active consideration and the same is under process and the bank guarantee is likely to be issued shortly in terms with the Letter of Acceptance dated 15th August, 2017. On 12th September, 2017, the petitioner also wrote a letter to the General Manager (CMC), Central Coalfields Limited, Ranchi, informing that the Bank has agreed to sanction the bank guarantee in the form of the performance bank guarantee within the specified period, but the same could not be formally issued due to absence of Deputy General Manager of the Bank, who is the signing authority for issuance of bank guarantee/performance bank guarantee for the contract in question.
4. It is further submitted that after issuance of the letter of termination dated 12.10.2017, the petitioner sent a legal notice to the respondent for revoking of the order and further for allowing him to start the work, however, no any reply was received. It is also submitted that though there was delay of two days in depositing the 5 Bank Guarantee, the validity period of the Bank guarantee was well within the period of said 28 days from the date of letter of acceptance dated 15.08.2017. The petitioner was acting diligently and there was no fault on its part. The bid of the petitioner was declared as L-1 being most competitive bidder and the purpose behind insisting on furnishing performance security by the awardee of the contract is apparently to secure the performance of the contract especially the delivery cycle. On bare reading of Clause 14.5 of the Instruction to Bidders, it would be clear that so far as forfeiture bid security/earnest money of the petitioner is concerned, the word "may" has been used, thus the same is not mandatory, rather discretionary/directory on the part of the respondent-CCL and such discretion has to be exercised judiciously considering the facts and circumstances of each case. It is further submitted that the bank guarantee was duly submitted on time as the Letter of Acceptance dated 15.08.2017 was received only on 26.08.2017, hence the period of 28 days would be calculated from 26.08.2017 i.e., the date of receipt of the letter of acceptance dated 15.08.2017. Neither in the letter of acceptance dated 15.08.2017 nor in the letter of information/reminder dated 06.09.2017, it was mentioned as to when the period of 28 days would expire. The period of 28 days would be calculated from the date of receipt of the Letter of acceptance and not from the date of issuance of Letter of acceptance. It is further submitted that the respondent-CCL and other subsidiaries of Coal India Limited in other cases have duly accepted the bank guarantee of the successful bidders inspite of delay in submitting the performance security and have allowed them to proceed with the work. It is also submitted that the Bank Guarantee is valid w.e.f. 11.09.2017 as mentioned in the Bank Guarantee itself and the effective date as mentioned in SFMS details is the date it was fed in its system.
5. Learned Senior Counsel for the petitioner, while referring to the letter contained in Ref. No.1662 dated 14th January, 2017, issued under the signature of the General Manager, Hazaribagh Area, Charhi, submits that the respondents in another case have relaxed the period of submission of performance security deposit within a period 6 of 28 days of issuance of Letter of Acceptance. Thus, the relevant Clause 20.2 cannot be said to be mandatory in nature, rather the same is directory, which has also been relaxed earlier considering the exigencies.
6. Learned Senior Counsel has also refers to various letters issued from the different subsidiaries of Coal India Limited (Annexure-16 series to the rejoinder filed by the petitioner) and submits that on previous occasions, the authorities of various subsidiaries of the Coal India Limited have relaxed the aforesaid condition of depositing the performance security within a period of 28 days from the date of issuance of Letter of Acceptance. However, in the present case, the performance guarantee/additional performance guarantee was prepared by the petitioner well within time i.e. on 11th September, 2017 and the same was submitted before the concerned authority of respondent-Central Coalfields Limited on 15th September, 2017 i.e. after two days' delay. Since Letter of Acceptance was issued to the petitioner on 15th August, 2017, which was a National Holiday, for counting the period of 28 days, the said date is also required to be exempted.
7. It is further contended that the letter dated 01.11.2017 issued by the Staff Officer, (Mining) B&K Area would itself suggest that the Bank Guarantee was already deposited by the petitioner before the CCL which was also accepted by it and, therefore, it would be presumed that the CCL has waived the delay in submission of Bank Guarantee. Thus subsequent return of the same would amount to an arbitrary action on the part of the CCL.
8. Learned Senior Counsel for the petitioner also submits that the latter part of Clause 13 of the General Terms and Conditions of the Contract, so far as it relates to settlement of dispute through arbitration is concerned, the same will not be attracted in the present case, as the petitioner did not invoke Clause 13, rather at the time of admission of the writ petition, the said Clause was referred at the instance of learned counsel for the respondents by making a submission that the petitioner should first take recourse of said 7 alternative forum for redressal of the dispute with the respondent- Central Coalfields Limited. Now vide order dated 13.1.2018 passed by the Area General Manager (B & K) of Central Coalfields Limited, the said settlement endeavours through alternative mode is now over, however, it will not mean that the petitioner cannot invoke the writ jurisdiction of this Court against the arbitrary action of the respondents.
9. Learned Senior Counsel appearing for the petitioner puts reliance on a judgment rendered by a Division Bench of Delhi High Court in the case of "M/s. Aurochem (India) Private Limited Vs. The Union of India & Ors.", reported in 1994 (29) DRJ (DB) 492 and submits that merely because time is limited for the performance of the contract or any part thereof, it does not necessarily become of the essence.
10. The learned Senior Counsel puts further reliance on the judgment rendered by the Hon'ble Supreme Court in the case of "B.S.N Johsi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors." reported in (2006) 11 SCC 548 and submits that the power of relaxation at the instance of the employer must be found out not only from the terms of the notice inviting tender, but also from the general practice prevailing. For the said purpose, the court may consider the practice prevailing in the past.
11. Per contra, the learned counsel for the respondents submits that the action of the respondents is strictly in accordance with law and also in conformity with the terms and condition of the NIT. All the parties are bound by the terms and conditions of the NIT and since the petitioner has failed to comply the terms and conditions of the NIT, it is not entitled to any relief. In a private contract between the parties where the consequence of each default is defined in the NIT itself, the question of additional opportunity of hearing does not arise. It is further submitted that the petitioner never deployed any man or machinery to commence the work. Admittedly the petitioner has made default in furnishing the bank guarantee in time and as such, it has to face the consequence. There is no clause in the tender 8 documents permitting waiver of the said condition or permitting extension of time and as such the bank guarantee furnished by the petitioner was returned to the banker vide letter dated 01.11.2017. The respondents have performed their part as per the tender and handed over the site to the petitioner on 18.08.2017 and also issued a formal work order on 29.08.2017, however, the petitioner delayed in depositing the bank guarantee in spite of the reminder of the respondents dated 06.09.2017. The Bank guarantee furnished by the petitioner was verified through SFMS (Structured Financial Machine System) and it was found that the validity period of the Bank Guarantee is from 13.09.2017 to 10.12.2021 and not with effect from 11.09.2017 as mentioned in the Bank Guarantee. It is further submitted that the request made by the petitioner vide letter dated 26.09.2017 could not have been entertained as there is no enabling clause permitting the respondents to deviate from the terms and conditions of the NIT and allow the petitioner to submit the Bank Guarantee belatedly. As per the instructions issued by the Contract Management Cell (in short CMC) from time to time, strict compliances of the terms and conditions of the contract have been insisted upon with further instruction that under no circumstances any condition mentioned in the tender documents can be allowed to be diluted nor can any deviation be permitted. There are several instances where even a Chairman-cum-Managing Director of the other subsidiaries of the Coal India Limited has been charge-sheeted through the Chief Vigilance Commissioner for allowing deposit of performance security after expiry of 28 days.
12. Learned counsel for the respondent-Central Coalfields Limited puts reliance on the judgments of the Hon'ble Supreme Court in the case of "Central Coalfields Limited & Anr. Vs. SLL-SML (Joint Venture Consortium) & Ors.", reported in (2016) 8 SCC 622 and "Rajasthan State Industrial Development and Investment Corporation & Anr. Vs. Diamond & Gem Development Corporation Limited & Anr.", reported in (2013) 5 SCC 470.
13. Heard the learned counsel for the parties and perused the 9 materials available on record. The petitioner was awarded a contract by the respondents being a L1 bidder. As per the condition of contract, the petitioner had to furnish the bank guarantee within a period of 28 days from the date of issuance of letter of acceptance i.e., till 13.09.2017. The petitioner furnished the bank guarantee on 15.09.2017 i.e., after 2 days from the due date of submission of bank guarantee. Vide letter dated 12.10.2017 which was received by the petitioner on 13.10.2017 through e-mail, the respondent no. 5 cancelled the tender awarded to the petitioner and imposed penalty of forfeiture of earnest money of Rs.50,00,000/- deposited by the petitioner and also debarred it for a period of three years from participating in future tenders of CCL relying upon Clause 23 of the Instructions to bidders and on Clause 4 of the General Terms and conditions of the Contract. The petitioner has challenged the impugned order mainly on the ground that the same has been passed in violation of the principles of natural justice and also on the ground that whatever the delay has occasioned in furnishing the bank guarantee was not intentional, rather the same was caused due to some technical default of the bank for which the petitioner could not be penalized. On the contrary, the stand of the respondents is that one of the specific conditions of the tender was that the petitioner was required to submit the performance guarantee within 28 days of the issuance of letter of acceptance and since the same was admittedly deposited after the prescribed period, the concerned authority has cancelled the tender awarded to the petitioner, imposed the penalty of forfeiture of security deposit and also blacklisted it for three years.
14. From the aforesaid factual context, it appears that the present issue involves a contractual dispute involving alleged violation of the terms and conditions of the contract which resulted into the termination of the contract along with forfeiture of the security deposit and also debarment of the petitioner for three years.
15. So far as the issue of jurisdiction of a Writ Court in contractual matter is concerned, the learned Senior Counsel for the petitioner puts reliance on a judgment rendered by the Hon'ble 10 Supreme Court in the case of "ABL International Limited & Anr. Vs. Export Credit Guarantee Corporation of India Limited & Ors.", reported in (2004)3 SCC 553, and submits that in absence of any disputed question of fact, availability of alternative forum is not a bar to invoke an extra ordinary jurisdiction of the High Court under Article 226 of the Constitution of India.
16. Per contra, the learned counsel for the respondents submits that in the present case, an alternative mode of settlement has provided through the means of arbitration and as such the present writ petition is not maintainable. To substantiate the argument, the learned counsel for the respondents puts reliance on the judgment of the Hon'ble supreme Court in the case of "Joshi Technologies International INC Vs. Union of India & Ors." , reported in (2015) 7 SCC 728. Learned counsel for the respondents further submits that during pendency of the writ petitioner, the petitioner moved the Area General Manager (B & K) Area of Central Coalfields Limited in terms with Clause 13 of the General Conditions of Contract, which failed in terms with the order dated 13th January, 2018 (Annexure-D to I.A. No.852 of 2018). Thus, in terms with the further provisions of Clause 13 of the General Conditions of the Contract, the dispute attracts the provisions of Arbitration and Conciliation Act, 1996.
17. The learned counsel for the respondents puts further reliance on a judgment of the Hon'ble Supreme Court in the case of "Global Energy Ltd. & Anr. Vs. Adani Exports Ltd. & Ors." reported in (2005) 4 SCC 435 and submits that the terms of the NIT are not amenable to judicial scrutiny and the courts cannot whittle down the terms of the tender as these are in the realm of contract unless the same are wholly arbitrary, discriminatory or actuated by malice.
18. It is further submitted by the learned counsel for the respondents that in the case of "Kisan Sahkari Chini Mills Limited & Ors. Vs. Vardan Linkers & Ors." reported in (2008) 12 SCC 500, the Hon'ble Supreme Court held that the remedy for a party 11 complaining breach of contract is before the Civil Court and in such cases public law remedy by way of writ petition under Article 226 of the Constitution of India cannot be invoked.
19. To appreciate the rival contentions of the parties on the issue of maintainability of the writ petition, it would be appropriate to discuss the law laid down by the Hon'ble Apex Court on the said issued.
20. In the case of "Verigamto Naveen Vs. Govt. of A.P. and others", reported in (2001) 8 SCC 344, the Hon'ble Supreme Court held as under:-
21. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation Commr., Radha Krishna Agarwal v. State of Bihar, Ramlal & Sons v. State of Rajasthan5, Shiv Shankar Dal Mills v. State of Haryana6, Ramana Dayaram Shetty v. International Airport Authority of India and Basheshar Nath v. CIT. Though there is one set of cases rendered by this Court of the type arising in Radha Krishna Agarwal case much water has flown in the stream of judicial review in contractual field. In cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in Dwarka Das Marfatia & Sons v. Board of Trustees of the Port of Bombay, Mahabir Auto Stores v. Indian Oil Corpn. And Shrilekha Vidyarthi (Kumari) v. State of U.P. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would 12 be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected.
21. In the case of "Noble Resources Ltd. Vs. State of Orissa", reported in (2006) 10 SCC 236, the Hon'ble Supreme Court held as under:-
18. It may, however, be true that where serious disputed questions of fact are raised requiring appreciation of evidence, and, thus, for determination thereof, examination of witnesses would be necessary;
it may not be convenient to decide the dispute in a proceeding under Article 226 of the Constitution of India.
19. On a conspectus of several decisions, a Division Bench of this Court in ABL International Ltd. opined that such a writ petition would be maintainable even if it involves some disputed questions of fact. It was stated that no decision lays down an absolute rule that in all cases involving disputed questions of fact, the party should be relegated to a civil court.
20. In Mahabir Auto Stores v. Indian Oil Corpn. this Court observed: (SCC p. 761, para 12) "It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."
21. In State of U.P. v. Vijay Bahadur Singh a Division Bench of this Court held that the Government cannot be denied to exercise its discretionary power provided the same is not arbitrary.
22. Interplay between writ jurisdiction and contractual disputes has given rise to a plethora of decisions by this Court. See, for example, Dwarkadas Marfatia & Sons v. Board of Trustees, Port of Bombay and Mahabir Auto Stores.
23. In Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai6 this Court stated: (SCC p. 235, paras 16-17) 13 "16. The position of law is settled that the State and its authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts. Even while playing the role of a landlord or a tenant, the State and its authorities remain so and cannot be heard or seen causing displeasure or discomfort to Article 14 of the Constitution of India.
17. It is common knowledge that several rent control legislations exist spread around the country, the emergence whereof was witnessed by the post-World War scarcity of accommodation. Often these legislations exempt from their applicability the properties owned by the Government, semi-government or public bodies, government-owned corporations, trusts and other instrumentalities of State."
24. Non-statutory contracts have, however, been treated differently. (See Bareilly Development Authority v. Ajai Pal Singh.)
25. A distinction is also made between performance of a statutory duty and/or dealing of a public matter by a State and its commercial activities. (See Indian Oil Corpn.Ltd. v. Amritsar Gas Service8 and LIC of India v. Escorts Ltd.)
26. In ABL International Ltd. this Court opined that on a given set of facts, if a State acts in an arbitrary manner even in a matter of contract, a writ petition would be maintainable. It was opined: (SCC p. 570, para 23) "23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent."
27. Contractual matters are, thus, not beyond the realm of judicial review. Its application may, however, be limited
22. In the case of "Joshi Technologies International Inc. Vs. Union of India and others", reported in (2015) 7 SCC 728, it is held as under:-
1469. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some public law character attached to it. 69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.
70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discrimination.
70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings 15 under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed.
Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated 16 with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.
71. Keeping in mind the aforesaid principles and after considering the arguments of the respective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.
23. Having gone through the aforesaid judgments of the Hon'ble Supreme Court, it may be construed that there is no absolute bar in entertaining a writ petition in a contractual matter where some disputed question of facts are involved. However, if the dispute involved in a matter is so complex which can only be determined after thorough long drawn adjudicatory process by leading evidences, the writ petition should not be entertained. Each and every case is to be dealt with on its own facts. If the materials on record are clearly evincible, the writ court may exercise the power of judicial review.
24. The power under Article 226 of the Constitution of India is plenary in nature and is not subjected to any of the other provisions 17 of the Constitution. The High Court has discretion to exercise or not to exercise such discretion having regard to the facts of each case. However, the High Courts have imposed self-restraints in such exercise of extraordinary jurisdiction of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction.
25. In the case of SLL-SML (Joint Venture Consortium) & Ors. (supra), cited by the learned counsel for the respondent-CCL, the Hon'ble Supreme Court held that the party issuing the tender (the employer) has the right to punctually and rigidly enforce the terms of the contract.
26. Learned counsel for the respondents also puts reliance on the judgment of the Hon'ble Supreme Court in the case of Rajasthan State Industrial Development and Investment Corporation & Anr. (supra) and submits that neither the matters relating to contract can be agitated nor the terms of the contract can be enforced through writ jurisdiction under Article 226 of the Constitution of India. The writ court cannot be a forum to seek any relief based on terms and conditions incorporated in the agreement between the parties. The terms of the contract have to be construed strictly without altering the nature of the contract as it may affect the interest of either of the parties adversely.
27. It is true that by way of judicial review, the High Court is not expected to act as a court of appeal while examining an administrative decision and to record a finding whether any different decision could have been taken in the facts and circumstances of the case. By way of judicial review, the Writ Court should ordinarily refrain from examining the details of the terms of the contract which have been entered into by the public bodies or the state. The Writ Courts have inherent limitations on the scope of any such enquiry. However, 18 the Courts can certainly examine whether "decision making process"
is unreasonable, irrational, arbitrary and violative of Article 14 of the Constitution of India. Once the procedure adopted by an authority in the matter of a contract is held to be against the mandate of Article 14 of the Constitution, the Writ Court cannot ignore such action on the pretext that the authorities concerned must have some latitude or liberty in contractual matters and any interference by the Writ Court would amount to encroachment on the exclusive right of the authority to take such decision.
28. Before coming to the merit of the case, it would be appropriate to go through the relevant provisions of the conditions of contract based on which the respondent terminated the contract of the petitioner.
4. Performance Security/Security Deposit 4.1 ---------------------------------------------------------------------- 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:
--------------------------------------------------------------------------- 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.
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 "assesses" to be replaced with the words "blacklisted/debarred party" shall also remain blacklisted/debarred for a period of 3(three) years.
c. In case of 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."
29. The aforesaid condition of the contract speaks that the first part of security deposit in terms of Performance Security should 19 be submitted within 28 days of issuance of Letter of Acceptance. In case the successful bidder fails to comply with the said requirement, it will be a sufficient ground for the company to cancel the awarded work and forfeit of the bid security. Apart from the cancellation of the awarded work and forfeiture of the security deposit, additional right is reserved with the company to blacklist/debar the bidder in future tenders for a period of three years in case of default in depositing the performance security in time.
30. In my considered view, the conditions referred herein above are not the mandatory conditions, rather the same are the discretionary power of the respondent-CCL by exercising the same, the contract of a bidder may be cancelled with consequential forfeiture of security and blacklisting.
31. On perusal of the impugned order dated 12.10.2017 it appears that the same has been passed solely on the ground that the successful bidder (the petitioner herein) furnished the bank guarantee on 15.09.2017, whereas the time fixed for furnishing the same was 12.09.2017 which according to the respondents is violative of Clause 23.3 of Instruction to Bidder and Clause 4.2 of Conditions of Contract. The tender awarded to the petitioner has been cancelled with other consequential punishments as has been enumerated in Clause 4.2 of the Condition of the Contract.
32. There appears to be two parts of the impugned order. First is the cancellation of tender with forfeiture of security deposit and the second is the order of blacklisting/debarment which power has been additionally reserved with the respondent-CCL in case of such failure of the successful bidder.
Order of blacklisting
33. The petitioner has challenged the order of blacklisting on the ground that the same has been passed in violation of the principles of natural justice. The respondents have also not stated that before passing the order of blacklisting, any show-cause notice was given to the petitioner.
34. In the case of "Kulja Industries Ltd. Vs. Chief 20 General Manager, Western Telecom Project BSNL and another", reported in (2014) 14 SCC 731, the Hon'ble Supreme Court held as under:-
17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "blacklisting"
simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court.
18. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of W.B. where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:
(SCC p. 75, para 20) "20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction.
Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist." Subsequent decisions of this Court in Southern Painters v. Fertilizers & Chemicals Travancore Ltd.4; Patel Engg. Ltd. v. Union of India5; B.S.N. Joshi & 21 Sons Ltd. v. Nair Coal Services Ltd.6; Joseph Vilangandan v. Executive Engineer (PWD) among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.
19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha Krishna Agarwal v. State of Bihar; E.P. Royappa v. State of T.N.; Maneka Gandhi v. Union of India; Ajay Hasia v. Khalid Mujib Sehravardi; Ramana Dayaram Shetty v.
International Airport Authority of India and Dwarka Das Marfatia and Sons v. Port of Bombay have ruled against arbitrariness and discrimination in every matter that is subject to judicial review before a writ court exercising powers under Article 226 or Article 32 of the Constitution.
20. It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non- discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject. A reference to the following passage from the decision of this Court in Mahabir Auto Stores v. Indian Oil Corpn.should, in our view, suffice: (SCC pp. 760-61, para 12) "12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of Bihar. ... In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-
22monopoly dealings, it should meet the test of Article 14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. ... It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."
35. In the case of "Gorkha Security Services Vs. Govt. (NCT of Delhi) and another", reported in (2014) 9 SCC 105, the Hon'ble Supreme Court held as under:-
16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts.
17. Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of paras 12 and 20 of the said judgment.
Necessitating this requirement, the Court observed thus: (SCC pp. 74-75) "12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such 23 powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.
20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."
18. Again, in Raghunath Thakur v. State of Bihar the aforesaid principle was reiterated in the following manner: (SCC p. 230, para 4) "4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that 24 the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of."
19. Recently, in Patel Engg. Ltd. v. Union of India speaking through one of us (Justice Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner: (SCC pp. 262-63, paras 13-15) "13. The concept of 'blacklisting' is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under: (SCC p. 75, para 20) '20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains.'
14. The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel the State to enter into a contract, everybody has a right to be treated equally when the State seeks to establish contractual relationships. The effect of excluding a person from entering into a contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar activity.
15. It follows from the above judgment in Erusian 25 Equipment case that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary-- thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors."
20. Thus, there is no dispute about the requirement of serving show-cause notice. We may also hasten to add that once the show-cause notice is given and opportunity to reply to the show-cause notice is afforded, it is not even necessary to give an oral hearing. The High Court has rightly repudiated the appellant's attempt in finding foul with the impugned order on this ground. Such a contention was specifically repelled in Patel Engg.
36. In the aforesaid judgments, the Hon'ble Supreme Court held that when a contract is entered between two private parties, then in case of any breach by one party the other party has every right to blacklist the defaulter and such right is unqualified. However, in a situation where an order of blacklisting has been passed by the State or its instrumentalities, then such order is within the realm of power of judicial review of the Writ Court and the same has to be tested in the touchstone of the principle of natural justice, doctrine of proportionality, reasonableness and fairness. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the government/government agencies for the purposes of gains. Thus, before taking such a harsh decision, the person concerned should be given an opportunity to represent his 26 case before he is put on the blacklist. The show cause must not be mere formality, rather the same should specifically mention the grounds according to which the department necessitates the action and also the proposed action so that the person aggrieved may explain the circumstances properly.
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 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.
Cancellation of tender and forfeiture of security deposit
39. The learned Senior Counsel for the petitioner submits that the condition of submitting the bank guarantee as performance security within a fixed period of 28 days of issuance of Letter of 27 Acceptance is not a mandatory condition and the delay may be condoned having taken into consideration of the facts and circumstances of the case. It is further submitted that other Subsidiaries of Coal India Limited in several cases have duly accepted the performance security in form of bank guarantee of the successful bidder in spite of delay and have allowed them to proceed with the work. On perusal of the record, it appears that the petitioner has committed 2 days delay in submitting of the Bank Guarantee. The question here is that the delay of 2 days on the part of the petitioner was required to be condoned by the respondents in view of the present facts and circumstances of the case.
40. I have perused the judgment of the Hon'ble Supreme Court rendered in the case of "Poddar Steel Corporation Vs. Ganesh Engineering Work & Ors." reported in (1991) 3 SCC 271, wherein the Hon'ble Supreme Court held thus, "6. ............ the requirements in a tender notice can be classified into two categories - those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the conditions. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. ............"
41. Subsequently, relying on the judgment of "Poddar Steel Corporation" (supra), a Bench of Delhi High Court in the case of "M/s Aurechem" (supra) held as under:-
55. The contract as provided therein has to be interpreted in accordance with the law of the purchaser's country. Sections 55 and 63 of the Indian Contract Act become relevant and applicable.
According to Section 63 every promisee may dispense with or may remit wholly or, in part, the performance of the promise made to him or may extend the time for such performance or may accept instead of it any satisfaction which he thinks fit. According to Section 55 when time for performance to do a certain thing is fixed by the contract, even if the time be of essence, the failure to perform does not automatically avoid the contract; it only renders the contract voidable at the instance of the promisee. If the time be not of essence, the promisee is entitled to compensation from the promisee for any loss occasioned to him by 28 such failure. If belated performance is accepted, the contract cannot be avoided nor compensation claimed. Merely because time is limited for the performance of the contract or any part thereof, it does not necessarily become of the essence. Time is of the essence of the contract only in the following three cases;
(1) Where the parties have expressly stipulated the time for performance to be exactly complied with; (2) Where the circumstances of the contract or the nature of the subject matter indicate that the fixed date must be exactly complied with; and (3) Where time though not of essence of the contract originally, on delay being occurred, the other party has given notice of limiting the performance within a reasonable time.
57. It is true that the State being State even while dealing with the private parties in the realm of contractual rights, when it proposes to exercise its discretion in the field left open or permitted by statutory law, it has to exclude arbitrariness and be fair and reasonable in its action.
(57.1) In Food Corporation of India vs. M/s Kamdhenu Cattle Feed Industries AIR 1993sc 1601, their Lordships have held: "in contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. "
(57. 2) Their Lordships also dealt with the doctrine of legitimate expectation and its operation in contractual matters. Their Lordships held" 'to satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons-likely to be affected by the decision. Whether the expectation of the claimant is reasonable or legitimate is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non- arbitrariness and withstand judicial scrutiny."
(emphasis supplied) (57. 3) It was a case of tender. Their Lordships approved of the State considering the amount in public fund and observed: "procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund".
59. What was the purpose behind insisting on furnishing performance security by the awardee of the 29 contract? Apparently to secure the performance of the contract specially the delivery cycle. Inspite of the delay in furnishing the performance security, the contract was being performed. The performance security was nevertheless furnished and became available for securing performance of the remaining part of the contract much before any occasion for any breach could have arisen. Cancelling the award of the contract would have simply created complications and given rise to litigation, at the cost of, sacrificing the laudable object behind the contract financed by the World Bank - the upkeep of the health of pregnant mothers and recently bom children.
42. In every contract some terms and conditions are invariably mentioned, however all those conditions are not mandatory in nature. Some conditions are regarded as mandatory however some are ancillary to the main conditions. Violation of ancillary conditions does not always warrant cancellation of awarded work. Though some condition of the tender are mandatory violations of which cannot be condoned, however, there are some conditions which are ancillary to the main condition whose violations are not fatal in nature. It is to be kept in mind that in any contract where the State or its instrumentality is dealing with a private party, the State/its instrumentality stands in upper pedestal and the conditions are fixed by it where the other party has no option but to accept the same. Under such situation, it is the bounden duty of a State/its instrumentality to act fairly and in equitable manner.
43. On perusal of the facts of the present case it appears that the Letter of Acceptance was issued to the petitioner on 15.08.2017 with a condition to submit the bank guarantee/performance security within 28 days from the date of issuance of Letter of Acceptance. The respondent-CCL vide letter dated 06.09.2017 informed the petitioner to submit the bank guarantee within time. Thereafter, vide letter dated 08.09.2017 the S.B.I informed the respondent-CCL that the Bank is under process of issuing the Bank Guarantee/Performance Security which will be issued shortly. Vide letter dated 12.09.2017, the petitioner also intimated the respondent-CCL that the sanctioning authority of the Bank is not available and as such, it requested for extension of time for submitting the Bank Guarantee. The petitioner 30 thereafter submitted the Performance Security by way of Bank Guarantee on 15.09.2017. The letter of termination of contract dated 12.10.2017 was issued.
44. From the aforesaid facts, it appears that the petitioner as well as its Banker had intimated to the respondent-CCL to extend the time before expiry of the time for furnishing the performance security, however, the respondent-CCL neither allowed nor rejected the request of the petitioner. In the meantime, before issuance of the impugned order, the petitioner submitted the bank guarantee just after 2 days of time limit. The entire circumstance shows that the petitioner was vigilant to furnish the bank guarantee but the same could not be furnished due to non-issuance of the bank guarantee by the bank in time. The contention of the respondent-CCL is that when there is a specific time frame mentioned in the tender document, no deviation whatsoever is permissible and the petitioner having delayed in submitting the bank guarantee is thus liable to face the consequences as provided under the terms and conditions of the contract. However, it appears from the record that the time frame for furnishing the Performance Security is directory in nature, extension of which should have been considered by the respondent-CCL keeping in view the aforesaid circumstances. Since the delay in furnishing the performance security was only for two days, the delay was required to be condoned in view of the fact that the circumstance was beyond the control of the petitioner which finds support from the letter issued by the bank to the respondent-CCL. Moreover, the petitioner has brought on record some of the instances where the respondent-CCL and the subsidiaries of the CCL have condoned the delay in furnishing the Bank Guarantee in certain cases.
45. The contention of the learned counsel for the respondent- CCL is that the Board of Directors of the respondent-CCL, in its 434th meeting took a decision that they would adhere to strict compliance of the requirement of submission of performance guarantee within 28 days of issuance of Letter of Acceptance and following that decision all the allotment of work of the defaulting contractors have been cancelled with forfeiture of earnest money and debarment in 31 conformity with Clause 14.5 of the tender documents along with Clause 4.2 of the General Terms and Conditions of the Contract. It is further contended that on 06.01.2017 the Board of Directors of the respondent-CCL in its meeting specifically decided that no relaxation of time frame given in the tender documents would be allowed henceforth to any tenderer under any circumstances. The decision taken by the Board of Directors of the CCL dated 06.01.2017 (Annexure-E to the additional counter-affidavit dated 24.02.2018 filed on behalf of the CCL) would show that the action against a contractor namely, M/s HSCL i.e., blacklisting/debarring from participating in future tenders for three years was taken on the ground that the said contractor failed to execute the awarded work in different projects and also failed to deposit the security money in time putting the CCL to a substantial loss.
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 32 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 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 33 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.
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.
51. For the reasons as aforesaid, the present writ petition is allowed. The impugned letter no. GM(B&K)/SO(M)/CT/AKK OCP/OB/DEBARRING/179 dated 12.10.2017 issued by the Staff Manager (Mining) of M/s Central Coalfields Limited is quashed with a direction to the respondents to proceed further with the petitioner as per the terms of the Instructions to Bidders with respect to the tender 34 in question.
Pending I.A. No. 8511 of 2017, I.A. No. 9860 of 2017 and I.A. No. 852 of 2018 stand disposed of.
(Rajesh Shankar, J.) Manish/A.F.R.