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20. As is clear from a conjoint reading of Regulation 5(6)(h)&(k), the Bank Guarantee (Bid Bond) submitted by the successful bidder is "retained" when LoI is issued and at the time of authorization replaced by a "Performance Bond"(performance Bank Guarantee). This, we note, is meant to be the mode through which the Board is entitled to enforce order of penalty that may be passed by following the procedure prescribed.

21. As stipulated in Regulation 10(3) of the Authorization Regulations, quoted above, it is not permissible for grant of authorization to be "renunciated" by the authorized entity for a "period of three years" from the date of such grant. The regulations define the word "renunciate" to mean "sale, assignment, transfer or surrender" to any other person or entity. Regulation 10, by clauses (4) & (5), permits such "renunciation" in favour of any other entity "after the end of three years period" subject to the proposal being submitted in the manner specified and the Board being satisfied, inter alia, that such renunciation in favour of any other entity - essentially transfer of authorization - "will not adversely affect" the development of the CGD network.

(i) 25% of the amount of the performance bond for the first default; and

(ii) 50% of the amount of the performance bond for the second default:

Provided that the entity shall make good the encashed performance bond in each of the cases at sub-clause

(i)and (ii) within a week of encashment, failing which the remaining amount of the performance bond shall also been cashed and authorization of the entity terminated.

[Emphasis supplied]

31. Regulation 16, as quoted above, is the procedure statutorily prescribed for imposition of civil penalty under Section 28 or for suspension or cancellation of authorization under Section 23. The authority given by the above quoted Regulation 16(1)(c) to "encash the performance bond of the entity", to the extent specified, is a consequence not different from but same as the one conferred on the Board by Section 28, being "civil penalty". From this perspective, we are clear in our mind to conclude that the act of encashment of the performance bond in exercise of jurisdiction under Regulation 16(1)(c) by the Board will necessarily have to be preceded by imposition of civil penalty under Section 28. To put it more clearly, the Board will first have to impose the penalty and then is permitted to recover it by encashing the performance bond. To put it slightly differently, the encashment of the performance bond is only the mode of execution of the order imposing the civil penalty and not imposition of a penalty by itself.

14. For the foregoing default in the due process, we are unable to uphold the impugned order to the extent thereby penalty of encashment of twenty five percent of the performance bond was imposed against each of these appellants. The impugned orders, to that extent, are set aside. The Board will use the money which was realized in terms of directions to the bank for encashment for restoring the performance bonds to their original position."