Delhi District Court
Gpa Capital Foods Pvt. Ltd vs Union Of India on 25 March, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 21/2021
GPA CAPITAL FOODS PVT. LTD.
Formerly known as:
AGRO PURE CAPITAL FOODS PVT. LTD.
Through its Authoritative Representative
O/A.: F-1734-1735,
DSIIDC Industrial Area,
Narela, Delhi-110040. ..Petitioner
versus
1. UNION OF INDIA
Through
Additional Secretary
Ministry of Defence, Govt. of India,
Room No. 101A, South Block,
New Delhi-110001
2. CHIEF DIRECTOR OF PURCHASE
Army Purchase Organization
Ministry of Defense,
Krishi Bhawan, New Delhi-110001
3. QUARTER MASTER COUNCIL,
Army Head Quarter,
Sena Bhawan, New Delhi-110001 ..Respondents
Date of Institution : 12/02/2021
Arguments concluded on : 22/02/2022
Decided on : 25/03/2022
Appearances : Sh. Vijay Kasana, Ld. Counsel for petitioner.
Sh. Ujjwal Kumar, Ld. Counsel for respondent no. 1.
JUDGMENT
1. Petitioner has filed the present petition/objections under OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 1 of 30 Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the impugned arbitral award dated 06/08/2020 of Sh. Kuldip Singh, Ld. Sole Arbitrator in DAC Claim No. 2521 of 2019 titled 'GPA Capital Foods Pvt. Ltd. vs Union of India and Others'. Ld. Sole Arbitrator in the impugned arbitral award held that petitioner/ claimant was not entitled to any amount as claimed in claim petition since EMD had been rightly forfeited and claims of the petitioner/claimant were rejected.
2. I have heard Sh. Vijay Kasana, Ld. Counsel for petitioner; Sh. Ujjwal Kumar, Ld. Counsel for respondent no. 1 and perused the record of the case, the arbitral proceedings record, filed brief written arguments, relied upon precedents on behalf of parties and given my thoughtful consideration to the rival contentions put forth.
3. Shorn of unnecessary details, following are the brief facts of the case of parties. Petitioner/claimant is a duly incorporated company earlier known as M/s Agro Pure Capital Foods Pvt. Ltd. and engaged in the business of importing, supplying, trading, exporting and manufacturing of besan (Desi Chickpeas Floor). Respondents issued a Request For Proposal (in short 'RFP') by publication on its website, inviting online bids for the tender of supply of 2835 Metric Tonnes (MT) of Gram Whole at Reserve Surplus Deposit, in three distinct delivery periods, i.e., a. Delivery period - 7th July 2018 to 6th August 2018; 1300 MT of Gram Whole.
OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 2 of 30b. Delivery period - 29th September 2018 to 29th October 2018, 600 MT of Gram Whole.
c. Delivery period - 1st December 2018 to 30th December 2018, 935 MT of Gram Whole.
The bidders were entitled to bid for one or more of the delivery periods. Petitioner/claimant in response to RFP also applied. Since the RFP also provided for deposit of Performance Bank Guarantee (in short 'PBG') in respect to each delivery period for which bid was submitted. PBG was to be returned without any interest whatsoever, after the receipt of performance security as specified in the contract. RFP also had condition that on acceptance of the bid of any bidder, such acceptance would be conveyed to the successful bidder by email/postal receipt and upon the bidder signing Acceptance Note (herein after referred as 'AT Note'), contract will come into force between the parties. On 05/06/2018, in terms of RFP, petitioner/claimant submitted its technical and financial bid for all three delivery periods and also submitted the PBG in the form of Fixed Deposit Receipt (in short 'FDR') dated 22/06/2018 for Rs. 26,22,126/- for the first delivery period. Respondents confirmed on 05/07/2018 that 7 bidders including petitioner/claimant had submitted their respective bids for the above mentioned tenders. On 16/07/2018 respondents confirmed that bids from 3 out of 7 bidders were confirmed for first delivery period, on the basis of technical qualification. The technical evaluation summary was published on 16/07/2018. Financial bid of the petitioner/claimant for first delivery period i.e., 07/07/2018 to 06/08/2018, was the lowest and thus petitioner/claimant was L-1 in respect of the same. Petitioner/ OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 3 of 30 claimant was aggrieved of the fact that despite being declared as L-1 on 16/07/2018 in respect of first delivery period, respondent failed to communicate the AT Note conveying the acceptance of the petitioner/claimant to the tender despite several requests made by petitioner/claimant to respondent. Vide letter dated 20/07/2018 petitioner/claimant intimated respondent that the offer to supply the goods as per the tender of the first delivery period stands closed and any acceptance regarding the same in future shall not be entertained and further requested the respondents that since the tender had become infructuous and had lost the sanctity of condition 'time is of essence' of contract and that they are not a part of it anymore, thus, their PBG should be returned back without any deductions. It is also the case of petitioner/claimant that the prices of the agro products were highly volatile and therefore, time is essence of the contract. It is also the case of petitioner/claimant that vide notice dated 23/07/2018 petitioner/claimant had also conveyed the above mentioned to respondents and thus, while reiterating the contents of the notice dated 20/07/2018, petitioner/claimant also filed petition under Section 9 of the Act in Delhi High Court seeking restraining of respondents from encashing the security deposit, which petition was later on withdrawn by petitioner/claimant on 16/11/2018; whereas Delhi High Court on 31/08/2018 granted interim protection to petitioner by restraining respondents from encashing the bank guarantee. It is also the case of petitioner/ claimant that it was later informed that PBG provided by petitioner was forfeited by respondents on 24/08/2018 and upon that petitioner moved an application to withdraw the application under Section 9 of the Act. It is the case of petitioner/claimant OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 4 of 30 that delay in opening of the bids and issuance of AT Notes is attributable to respondents itself and not any third party/person; accordingly, respondents cannot be permitted to take advantage of their own wrong doing by forfeiting the Earnest Money Deposit (in short 'EMD') of petitioner. It is also the case of petitioner that it had sent notice dated 10/09/2018 through lawyer to respondents requesting for release of Rs.26,22,126/- in its favour failing which to start bilateral discussion to resolve the dispute in accordance with the terms of DPM 7 and in case if bilateral discussions are not held, the arbitration clause would be invoked, requesting respondents to appoint an Arbitrator in accordance with contract. It is the case of petitioner that respondents failed to respond to the notice above said sent by petitioner. It is also the case of petitioner that it once again sent notice on 24/10/2018 to respondents, requesting them to appoint an arbitrator as neither the bank guarantee amount was returned nor the bilateral discussions were held but again no response was received by petitioner from respondents. It is also the case of petitioner that it had sent a final reminder dated 07/12/2018 to respondents but nothing was done at the end of respondents.
4. Petitioner/claimant filed Arbitration Petition No. 391 of 2019 before Delhi High Court and vide order dated 25/07/2019 in said petition Delhi High Court appointed present Ld. Sole Arbitrator, Retired Additional District Judge for arbitral proceedings between parties under aegis of DIAC. Arbitral proceedings culminated into impugned arbitral award.
5. Petitioner has impugned the arbitral award mainly on the OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 5 of 30 following grounds. The impugned arbitral award is against the public policy of India, against the fundamental policy of Indian law, against the basic notions of morality and justice, without considering the position of law in the case of damages as per The Contract Act and as per the settled judicial position. Impugned arbitral award has been passed without specifying the law on the basis of which the same was passed. The law of damages is covered by Section 73 to Section 75 of The Contract Act and in the present case Ld. Sole Arbitrator did not specify the provision on the basis of which the claim of respondents was up held. In the present case Section 74 of The Contract Act has no application and in the given circumstances the damages could only have been up held under Section 73 of The Contract Act whereas neither any damages were pleaded nor Ld. Sole Arbitrator has calculated the same; however, same were up held without specifying any reason. Ld. Sole Arbitrator passed the impugned arbitral award solely on the basis of the judgment of Supreme Court in the case of State of Haryana & Ors. vs Malik Traders, MANU/SC/0945/2011 while ignoring the settled position of law on the subject. The law laid in the case of Malik Traders (supra) does not hold the field and is per incuriam as in said case neither judicial precedents on the subject were considered nor Sections 73 to 75 of The Contract Act were considered, so said judgment is not having any precedent value. Ld. Sole Arbitrator failed to consider the law laid by Supreme Court in the case of Kailash Nath Associates vs DDA, MANU/SC/0019/2015, wherein it was held that the damages can only be awarded if the same are proved and if damage or loss is not suffered, the law does not provide for a windfall. In the OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 6 of 30 present case respondents neither pleaded damages nor quantified the same and despite that Ld. Sole Arbitrator upheld forfeiture of bank guarantee. Without proving damages, the forfeiture of Bank Guarantee could not have been upheld. Section 28 of The Act mandates the Arbitral Tribunal to decide the dispute in accordance with the substantive law of land but the claim of petitioner/claimant was dismissed by Ld. Sole Arbitrator without even dealing with the contentions of law raised by petitioner/ claimant. Ld. Sole Arbitrator completely ignored the provisions of The Contract Act while passing the impugned award. Petitioner/claimant through Ld. Counsel prayed for setting aside of the impugned arbitral award.
6. Petitioner through Ld. Counsel argued in terms of the grounds of impugning the arbitral award. Ld. Counsel for petitioner argued that in terms of law laid in the case of Kailash Nath Associates (supra) it was inter alia held that damages can only be awarded if the same are proved, whereas if damages or loss is not suffered, law does not provide for windfall and in the present case respondents did not plead damages nor quantified the same but despite that Ld. Sole Arbitrator upheld forfeiture of bank guarantee whereas without proving damages, the forfeiture of bank guarantee could not have been upheld. It was argued by Ld. Counsel for petitioner that while passing the impugned arbitral award Ld. Sole Arbitrator ignored the provisions of The Contract Act per contra to Section 28 of The Act. Ld. Counsel for petitioner relied upon the case of State of Assam vs Ripa Sarma, MANU/SC/0213/2013 wherein Supreme Court held that when a judgment is pronounced in such a manner that is ignorant OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 7 of 30 of earlier judgments of the Court by either similar or large benches, it would be per incuriam. Ld. Counsel for petitioner argued that the relevant law on the subject i.e., Sections 73 to 75 of The Contract Act was not presented before Supreme Court in the case of Malik Traders (supra) and Supreme Court was not provided an occasion to deal with the said sections and since judgment in that case was passed without considering the aforesaid provisions of The Contract Act, so it does not have the precedent value. Ld. Counsel for petitioner argued that in the case of Narmada Bachao Andolan & Ors. vs State of Madhya Pradesh & Ors., MANU/SC/0599/2011, Supreme Court discussed the principle of per incuriam. Ld. Counsel for petitioner also relied upon the cases of Tril Roads Private Limited vs National Highway Authority of India, MANU/DE/3422/2018; Directorate General, Border Security Force & Ors. vs NIIT Technologies Ltd., MANU/DE/4478/2019; Applied Communication and Controls vs Union of India & Ors., MANU/DE/1836/2018; MBL Infrastructure Limited vs Rites Limited & Ors., MANU/WB/0306/2020. It was prayed by Ld. Counsel for petitioner to set aside the impugned arbitral award.
7. In the filed reply as well as written arguments respondents through Ld. Counsel averred and argued that petitioner had not gone through the tender conditions properly due to his own negligence to carefully read and understand the tender conditions whereby petitioner failed to properly conclude the contract; therefore, respondents were rightful in forfeiting the EMD deposited by petitioner. Ld. Counsel for respondents referred to OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 8 of 30 paras 7,10,11 and 14 of the RFP Part-I and para 4 of Part-II of RFP. It was argued by Ld. Counsel for respondents that in para 7 of the RFP Part-I it was clearly mentioned that bid shall not be withdrawn for time period between deadline for submission and expiration of the bid validity and object of such clause was to discourage unnecessary bidding and to attract only genuine parties who are interested in executing the contract. It was argued by Ld. Counsel for respondents that bid validity was for 60 days from the last date of submission of bids, in terms of paras 10 and 11 of RFP Part-I and in case if the bidder withdraws from tender within such validity period of tender then his EMD would be forfeited, whereas object of these clauses was to again to desist unnecessary/non interested parties for making bids. It was also argued by Ld. Counsel for respondents that as per para 14 of RFP Part-I, only upon issuance of AT Note a legally valid contract would come into existence between parties and such contract note would be communicated to the bidder and commences from the date of signing the contract. It was also argued by Ld. Counsel for respondents that as per para 4 of Part-II of RFP though time was essence of the contract and delivery was to be made within the delivery period but details given for delivery period commencing from 07/07/2018 were tentative and provisional and the firm delivery period was to be mentioned in the AT Note and that too commencing after 10 working days of the issuance of AT Note whereas subsequent delivery was to be correspondingly adjusted and exact dates were to be endorsed in the AT Note accordingly. It was argued by Ld. Counsel for respondents that it was the prerogative of respondents to issue the AT Note after completion of scrutiny of bids and other OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 9 of 30 departmental procedures and it cannot be up on the insistence of petitioner that his bid be accepted as it is and immediately without issuance of AT Note. Ld. Counsel for respondents argued that bid/offer was still an unconfirmed bid/offer on part of petitioner and still pending approval/acceptance on part of respondents for which specific penalty for withdrawing from offer/bid was a condition to which petitioner has agreed to upon the application for raising such bid/offer as per RFP and therefore, petitioner cannot cry foul that his EMD shall not be forfeited since it was only petitioner who itself had submitted letter revoking his offer as it cannot wait longer for issuance of AT Note and that too within the time period between the deadline for submission and expiration of the bid validity. Ld. Counsel for respondents argued that para 14 of RFP Part-I stated that contract would not be made unless AT Note has been issued; therefore, petitioner proacted miscalculation without application of business sense and failed to understand that unless AT Note have been issued after proper scrutiny and due process the contract is not made and therefore procurement of materials before completion of contract is misjudged/errored step taken as there was acceptance of the bid pending before the department. Ld. Counsel for respondents argued that as per letter of petitioner dated 23/07/2018 it was stated that time being the essence of contract and delivery period had gone thereby, therefore, cannot be concluded; however, petitioner failed to appreciate additional paras mentioned therein; that the delivery period timeline was tentative/provisional and is not absolutely confirmed and only upon acceptance of bid after the issuance of AT Note that the contract would come into existence. Further, delivery clause in OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 10 of 30 para 4 of RFP Part-II clearly states that upon the AT Note the confirmed delivery period would be appropriately mentioned and stated; so therefore it is not the fault of respondents; instead it is a miscalculation on the part of petitioner to procure materials before hand and without issuance of AT Note and subsequent withdrawal of his bid. It was argued by Ld. Counsel for respondents that as per RFP and conditions which petitioner agreed to while making the bid, respondent was rightful to forfeit its EMD since petitioner withdrew the offer which was specifically prohibited and clearly mentioned in the RFP that in case of any withdrawal of bid/offer after submission of bid and before its due validity, it would lead to direct forfeiture of the EMD of that bidder. Ld. Counsel for respondents also argued that respondents invested time and resources to conclude the tender process and at the end of it the petitioner withdrew fully aware and agreeing to that the withdrawal after bidding would lead to forfeiture of the EMD. Ld. Counsel for respondents relied upon the cases of National Thermal Power Corporation Ltd. vs Ashok Kumar Singh & Ors., MANU/SC/0143/2015; National Highways Authority of India vs Ganga Enterprises & Ors., MANU/SC/0665/2003; State of Maharashtra & Ors. vs A.P. Paper Mills Ltd., MANU/SC/1673/2006 and State of Haryana vs Malik Traders, MANU/SC/0945/2011. Ld. Counsel for respondents prayed for dismissal of the present petition.
8. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 11 of 30 from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
9. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 12 of 30 arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 13 of 30 three months it may entertain the application within a further period of thirty days, but not thereafter."
10. Supreme Court in case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd, 2021 SCC OnLine SC 157 has held that the date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Act. It is from this date that: "(a) the period of '30 days' commences for filing an application under Section 33 for correction and interpretation of the award, or for additional award; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of limitation for filing objections to the award under Section 34 commences."
11. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under Section 34 of The Act is also eligible for the same. Accordingly, present petition filed on 12/02/2021 is also within the period of limitation.
12. Following are the undisputed brief facts of the case and relevant terms and conditions of the RFP, which were so detailed in the counter statement of claim by respondents before Ld. Sole Arbitrator and not denied in the filed reply to the same by petitioner/claimant before Ld. Sole Arbitrator.
OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 14 of 30
"1. BRIEF FACTS OF THE CASE
S. Fact Description
No.
1 REQUEST FOR 62703/Q/6/RFP/2018-19/AR/2018/
PROPOSAL (RFP) No. and APO(PUR-III) dt 01 Jun 2018 Date 2 CRITICAL DATE OF RFP 04 Jun 2018 Published 04 Jun 2018 Clarification Start 18 Jun 2018 Clarification End 18 Jun 2018 (firm participated Pre Bid Meeting. Copy of the minutes in Pre Bid Meeting) Exhibit R-1 25 Jun 2018 Bid Submission End 25 Jun 2018 Physical Submission of EMD as under:-
Items Delivery EMD Amount
Period (in Rs.)
Gram 07 Jul 18 to 26,22,126/-
Whole 06 Aug 18
Gram 29 Sep 18 to 12,10,212/-
Whole 29 Oct 18
Gram 01 Dec 18 to 18,85,914/-
Whole 30 Dec 18
(Exhibit R-2)
3 24 Aug 2018 EMD Validity
4 25 Jun 2018 & subsequent TEC (Exhibit R-3)
days
5 16 Jul 2018 & subsequent CNC (Exhibit R-4)
days
6 23 Jul 2018 Firm's letter dated 23 Jul 2018 for
resiling from offer (Exhibit R-5)
7 26 Jul 2018 Respondent letter to the Claimant to
explain the implication of letter
dated 23 Jul 2018. (Exhibit R-6)
8 27 Jul 2018 In the bilateral discussion with the
Claimant it was reiterated by them
that they stood by letter dated 23 Jul
2018
9 10 Aug 2018 AT Notes for item 2 & 3 issued
(Exhibit R-7 Colly)
10 24 Aug 2018 EMD forfeiture letter to firm &
bank (Exhibit R-8 Colly)
11 24 Aug 2018 DD received from bank
12 27 Aug 2018 DD deposited in Govt Treasury
OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 15 of 30
2. RELEVANT TERMS & CONDITIONS OF THE RFP
Ser Concerned Description
No Paras
1. Para 7 of 7. Modification and Withdrawal of Bids. A
Part-I of bidder may modify or withdraw his online bid the RFP after submission as per the facility provided in the CPP Portal, only prior to the date and time prescribed for end of submission of Bid. No bid shall be modified after the deadline for submission of bids. No bid may be withdrawn in the interval between the deadline for submission of bids and expiration of the period of bid validity specified. Withdrawal of a bid during this period will result in forfeiture of Bidder's bid security (EMD). However if bidder may desire to withdraw before bid submission closing date/time, he may do so online in the portal and offline EMD would be refunded but not cost of the tender. Once with-drawn online, he cannot participate again in this tender.
2. Para 10 of 10. Validity of Bids. The Bids should remain Part-I of valid till 60 days from the last date of the RFP submission of Bids.
3. Para 11 of 11. Earnest Money Deposit.
Part-I of 11.1 Bidders, registered or unregistered, are the RFP required to submit EMD along with their bids.
Bidders desirous of bidding only for one or more delivery period need to furnish separate EMDs earmarked for each such delivery period as per details given at Appendix-F. 11.2 The EMD will be submitted in the form of a Fixed Deposit Receipt, Banker's Cheque(in favour of 'PCDA NEW DELHI') payable at Delhi or Bank Guarantee from any of the public sector banks or a private sector bank authorized to conduct government business as per Form DPM-
13(Attached as Appendix-G). EMD will remain valid for a period of 45 days beyond the final bid validity period. EMD of the unsuccessful bidders will be returned to them at the earliest. The EMD of the successful bidder would be returned, without any interest whatsoever, after the receipt of Performance Security from them as called for in the contract. The EMD will be forfeited under the following circumstances unilaterally without any communication made to the bidder in this regard:-
OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 16 of 30(a) If the bidder withdraws or amends, impairs or derogates from the tender in any respect within the validity period of their tender.
(b) Withdrawal of a bid after bid submission deadline will result in Bidder's forfeiture of bid security (EMD) (also refer Para 7 part I of the RFP).
(c) Canvassing by the Bidder in any form, unsolicited letter and post-tender correction may invoke summary rejection with forfeiture of EMD (also refer Para 9 of Part I of the RFP).
4. Para 14 of 14. ACCEPTANCE OF TENDER (AT) Part-I of 14.1 On behalf of the President of India, the the RFP acceptance of the offer by the Chief Director of Purchase and communication of the acceptance to the tenderer (AT Note), a legally valid contract comes into existence between the parties under the provisions of the Indian contract Act, 1872 (and as amended till date), and both the parties to the contract are contractually and legally bound by the terms & conditions of the contract. 14.2 Acceptance of the Tender will be communicated to the successful bidder on the email id / postal address as given by the bidder in Central Public Procurement Portal (CPPP) from the email id [email protected] and would have construed as communicated to the bidder. The date of signing of AT Note will be taken as commencement of the contract. The same will also be communicated by Speed Post/Regd post.
5. Para 16 of 16. Delivery period. The time for and date of Part-I of delivery of the store shall be the essence of the the RFP contract and the delivery must be completed as per the given delivery period. The details of DP and terms & conditions for extension of DP are as per Para 3 & 4 of Part-II of this RFP. It may be noted that a sum equivalent to 0.5% of the price of contracted quantity which the contractor has failed to deliver, for each week or part thereof will be imposed as liquidated damages for any supplies made after the original DP.
6. Part 4 of Delivery Period. The time for and the date of Part-II of delivery of the stores shall be deemed to be the the RFP essence of the contract and the delivery must be completed as per delivery period. The Delivery will be as per details given in the BOQ to this OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 17 of 30 RFP. The first Delivery Period is tentatively from 07 Jul 2018. However the firm DP will be mentioned in the AT notes and commence after 10 working days of issue of AT note(s). The subsequent delivery period will be correspondingly adjusted and exact dates will be endorsed in AT notes accordingly.
13. As per arbitral proceedings record following was the Gram Whole (Defence Food Specification No. 27-D) with respect to the first delivery period from 07/07/2018 to 06/08/2018:-
Sr Item Qty Delivery L1 Vendor L1 Total Value No Code (In Period Vendor's (In Rs) MT) Basic Rate per MT (Quoted) Per MT
(a) Gram Whole (Defence Food Specification No. 27-D) Item 1 1300 07 Jul to M/s Agro 46240.00 6,01,12,000.00 06 Aug 18 Pure Capital Foods Pvt Ltd
14. Against aforesaid supply of 1300 Metric Tonnes of Gram Whole tender, petitioner/claimant had deposited fixed deposit receipt dated 22/06/2018 of Rs.26,22,126/- inter alia with letter before participating in the tender to be held on 25/06/2018. On 22/06/2018 petitioner/claimant also gave following certificate regarding acceptance of terms and conditions of RFP:-
"CERTIFICATE REGARDING ACCEPTANCE OF TERMS & CONDITIONS OF RFP OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 18 of 30 To The Chief Director of Purchase Army Purchase Organization DGST, QMG's Branch, IHQ MoD(Army), Krishi Bhawan, New Delhi - 110001.
SUBJECT: ACCEPTANCE OF TERMS & CONDITIONS OF RFP No. 62703/Q/6/RFP/2018-19/AR/2018/ APO(PUR-III) Dated 01 Jun 2018 FOR TENDER OF 2835 MT GRAM WHOLE FOR THE ARMED FORCES.
Sir,
1. I/We have downloaded the RFP No. 62703/Q/7/RFP/2018- 19/AR/2018/APO(PUR-III) Dated 01 Jun 2018 for Tender of 2835 MT GRAM WHOLE from the website (http://eprocure.gov.in/eprocure/app) as per your advertisement, given in the above mentioned website.
2. I/We hereby certify that I/We have read and understood the entire terms and conditions, mentioned in the above mentioned RFP (including those mentioned, Appendices, Defence Food Specification etc. enclosed with the RFP), which will form part of contract.
3. I/We also read and understood corrigendum(s) issued from time to time by Army Purchase Organization, DGST, IHQ of MoD(Army) (hereinafter referred to as APO) prior to submitting this acceptance letter.
4. After having read and understood the RFP as mentioned above, I/We hereby unconditionally accept all the terms & conditions mentioned in the RFP (including those mentioned in, Appendices, Defence Food Specification etc. enclosed with the RFP).
5. I/We hereby unconditionally accept that the documents uploaded in first and second cover including the BOQ filled and uploaded by us on CPPP as per Para 2(b) (ii) of the said RFP is deemed to have been checked and willingly submitted as correct in all respects.
6. In case any provision of the RFP are found violated, APO shall be at liberty to reject this tender/bid including the forfeiture of the full Earnest Money Deposit (EMD) amount submitted along with tender and we shall have NO claim/right whatsoever against APO in satisfaction of this condition.OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 19 of 30
Yours faithfully, Stamp impression Sd/-
Date: 22/06/2018 Director/Auth. Sign.
Place: For Agro Pure Capital Foods Pvt. Ltd"
15. Vide letter dated 23/07/2018 of petitioner served upon respondents on 26/07/2018 petitioner informed respondents to treat their offer for first delivery period i.e., 07/07/2018 to 06/08/2018 as closed inter alia mentioning therein:-
"We may add here that the terms of RFP as stipulated and mentioned above are uncertain and incapable to be interpreted and therefore also cannot be considered still we with all earnestness were ready and arranged the goods but cannot now keep it therefore have no alternative but to treat our offer for 1 st DP (07.07.2018 to 06.08.2018) as closed and now if you send any acceptance on the basis of the caption tender submitted by us under which you failed to place the order to supply from 07.07.2018 to 06.08.2018 with the lapse of time (terms of RFP uncertain) our offer for the 1st DP ( 07.07.2018 to 06.08.2018) does not exist anymore and no order can be placed upon us on the basis of the said non existing offer for the 1 st DP ( 07.07.2018 to 06.08.2018) which legally stand withdrawn without financial repercussion to anyone.
As such at present on account of non-placement of order and already technically the entire 1st DP delivery period (07.07.2018 to 06.08.2018) having expired (taking into account 10 working days after issue of AT as term of RFP stated above), our present offer for the 1st DP ( 07.07.2018 to 06.08.2018) is stand no more in existence for your consideration and any action by you would be at your own Peril entitling us to take appropriate action in accordance with law as advised for the 1st DP."
16. Respondents sent letter dated 26/07/2018 for bilateral discussion to petitioner/claimant to be held on 27/07/2018 consequent to the receipt of above said letter dated 23/07/2018 of petitioner.
17. Consequent of the petitioner/claimant resiling from its offer OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 20 of 30 in respect of L1 bid for supply of 1300 MT Gram Whole for first DP, respondents issued letter dated 24/08/2018 forfeiting Rs. 26,22,126/- the amount of the fixed deposit receipt and on same day communicated to the Manager of bank concerned for its encashment.
18. Supreme Court in the case of Kailash Nath Associates vs Delhi Development Authority (supra) had elicited the law on compensation for breach of contract under Section 74 as follows:-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 21 of 30 to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
19. Delhi High Court in the case of Tril Roads Private Limited vs National Highway Authority of India (supra) inter alia held that in the filed writ petition it would not examine the question of forfeiture of the security bids as per the RFPs or the quantum that should be forfeited under the applicable and relevant clause; which were left open for petitioner therein to take recourse to civil remedy as per law relying upon the case of National Highways Authority of India vs MEIL-EDB LLC (JV), Civil Appeal No. 3053/2015 decided on 08/03/2015 by Supreme Court.
20. The fixed deposit receipt as security/EMD of sum of Rs. 26,22,126/- was for 1300 Metric Tonnes quantity of Gram Whole (Defence Food Specification No. 27-D) for item 1 for total value of Rs. 6,01,12,000/-; which was deposited by petitioner/claimant with respondents in terms of Para 11 of Part-I of RFP and accordingly, it was well below 4.4% of the total value of the goods to be supplied consequent upon issuance of AT by respondents. 60 days validity period was specified in Para 10 of Part-I of RFP which period begun to run from the last date of submission of bids i.e., 25/06/2018 and such period was valid till 24/08/2018. In terms of Para 7 Part-I of RFP, no bid was to be OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 22 of 30 withdrawn by the bidder in the interval between the deadline for submission of bids and expiration of the period of bid validity specified and in case of withdrawal of a bid during this period, it was to result in forfeiture of security/EMD of bidder. Per contra to aforesaid agreed terms of RFP, petitioner/claimant resiled from the bid offer by letter dated 23/07/2018 within bid validity period of 60 days, above said. Respondents had invested time and resources to conclude the tender process and at the end of it the petitioner/claimant withdrew the bid offer fully aware and agreeing to that the withdrawal after bidding would lead to forfeiture of the EMD.
21. Facts and circumstances laid in the case of MBL Infrastructure Limited vs Rites Limited & Ors.(supra) are different and distinguishable to the facts and circumstances of the case in hand. In the case of MBL Infrastructure Limited vs Rites Limited & Ors. (supra), the tender documents required disclosures to be made regarding the previous poor performance of the bidder, the "non-disclosure" of an instance of poor performance by the bidder was a breach of the agreement. Said case was held to be clearly breach of contract by the bidder in not disclosing the material fact while submitting its bid. It was not the case whereby the bidder had resiled from the bid in the validity period of the bid. Also considering the nature of the contract in the said case and value of the work, the writ petition was disposed off holding forfeiture should be restricted to a sum of Rs.2 lakh.
22. In the case of Kailash Nath Associates vs DDA (supra) the OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 23 of 30 relevant clause was:-
"(iv) In case of default, breach or non-compliance of any of the terms and conditions of the auction or mis-representation by the bidder and/or intending purchaser, the earnest money shall be forfeited."
25% of the bid amount of a public auction as per terms was deposited as earnest money by the bidder therein. Following law laid in the case of ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 was elicited therein:-
"68. From the aforesaid discussions, it can be held that:
(1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same. (2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act. (3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of a contract. (4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine pre-
estimate by the parties as the measure of reasonable compensation."
23. Also was held in the case of Kailash Nath Associates vs DDA (supra) that in a case where public auction is held, forfeiture of earnest money may take place even before an agreement is reached. It was held that in that event Section 74 of OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 24 of 30 The Contract Act is not attracted. In the facts and circumstances of the case of Kailash Nath Associates vs DDA (supra) forfeiture of earnest money took place long after an agreement had been reached and the amount sought to be forfeited on the facts of the said case was sought to be forfeited without any loss being shown. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 of The Contract Act would have no application.
24. Section 73 of The Indian Contract Act, 1872 inter alia embodies that when an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
25. Supreme Court in the case of National Thermal Power Corporation Ltd. vs Ashok Kumar Singh & Ors. (supra) inter alia held that it was no longer possible for bidders to contend that right to withdraw bid would entitle them to withdraw without suffering forfeiture of the earnest money even in cases where the submission and receipt of bids was itself subject to the condition that in the event of a withdrawal of the bid earnest money shall stand forfeited. Supreme Court therein had relied upon on similar pronouncement in the cases of Malik Traders (supra); National Highways Authority of India vs Ganga Enterprises & Ors. (supra); State of Maharashtra & Ors. vs A.P. Paper Mills Ltd. (supra).
OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 25 of 3026. The delivery periods had sufficient gaps in between. The tentative/provisional first delivery period as per RFP was 07/07/2018 to 06/08/2018 whereas the second tentative/ provisional delivery period was from 29/09/2018 to 29/10/2018. It was accordingly ample clear from the terms of the RFP, more specifically in paras 7,10,11,14,16 of Part-I of RFP and para 4 of Part-II of RFP, above elicited, that only on issuance of AT Note not only legally valid contract will come into existence but such AT Note will also specify the exact delivery period and date of signing of AT Note was to be taken as commencement of the contract and firm delivery period was to mentioned in AT Note and commence after 10 working days of issuance of the AT Note. Thus there was provision for sufficient time to be given to the bidder for providing the goods on issuance of the AT Note. Before expiry of 60 days bid period, claimant/petitioner resiled from the offer in the bid by letter dated 23/07/2018 before issuance of any AT Note and after appreciating the gamut of evidence and material before Ld. Sole Arbitrator, Ld. Sole Arbitrator rightfully concluded that withdrawal of offer/bid by claimant/petitioner within bid validity period was per contra to RFP conditions and merely non receipt of AT Note on 07/07/2018 does not entitle petitioner/claimant to withdraw the offer/bid by letter dated 23/07/2018. Accordingly, Section 73 of The Indian Contract Act, 1872 entitled respondents to forfeit the earnest money deposited in form of above said fixed deposit receipt, which is well below 4.4% of the total value of the 1300 Metric Tonnes quantity of goods offered to be supplied and such quantification for forfeiture cannot by any means be said to be excessive or exorbitant. Respondents had invested time and OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 26 of 30 resources to conclude the tender process and at the end of it the petitioner/claimant withdrew the bid offer fully aware and agreeing to that the withdrawal after bidding would lead to forfeiture of the EMD.
27. In the fact of the matter, relied upon precedents of petitioner are of no help to petitioner for setting aside the impugned arbitral award since they embody facts and circumstances entirely different and distinguishable to the facts and circumstances of the case in hand.
28. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 27 of 30 the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt. Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC
296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 28 of 30 under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
29. Relying upon the law laid in the precedents above said, it can be said that not only the reasonings of Ld. Sole Arbitrator are logical, but all the material and evidence were taken note of by Ld. Sole Arbitrator and this Court cannot substitute its own evaluation of conclusion of law or fact to come to the conclusion other than that of Ld. Sole Arbitrator. Cogent grounds, sufficient reasons have been assigned by Ld. Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator, who is an experienced and Learned Retired Additional District Judge and was competent to make assessment, while taking into consideration the facet of the matter. Re-appraisal of the matter OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 29 of 30 cannot be done by this Court. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act. For the foregoing reasons, the petition is hereby dismissed.
30. The parties are left to bear their own costs.
31. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2022.03.25
13:00:28 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 25 March, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 21/2021 GPA CAPITAL FOODS PVT. LTD. VS UNION OF INDIA & Ors. Page 30 of 30