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Madhya Pradesh High Court · body

2017 DIGILAW 515 (MP)

Sadguru Kripa Electrical v. Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd.

2017-04-17

ROHIT ARYA

body2017
ORDER 1. This writ petition under Article 226/227 of the Constitution of India has been filed seeking quashment of cancellation of bid and forfeiture of security deposit vide order dated 2.2.2017 (Annexure P-8) in the matter of Notice Inviting Tenders dated 27.12.2016 (Annexure P-1) and for cancellation of fresh NIT (Annexure P-9). 2. On notice, respondents have filed counter affidavit. During course of hearing, learned counsel for the petitioner does not press for the relief against cancellation of the contract and the fresh NIT (Annexure P-9) and confines his relief to the extent of forfeiture of security deposit. 3. The facts necessary for disposal of the writ petition are that the petitioner had submitted three tenders through e-tendering as electrical contractor for various nature of works defined in the NIT (Annexure P-1). The petitioner was L-1 and at the time of submission of the bid, he had quoted price 26%, 26.01% and 426.04% below SOR (Schedule of Rates). At the time of submission of tender, the petitioner had deposited earnest money in the form of demand draft as per Clause 14 of Section II - Instruction to Bidders of the NIT (for short, Instructions). As per Clause 11.2.1 of Section III - General Conditions of Contract of NIT (for short, General Conditions), the petitioner had deposited security of 10% in the form of Demand Draft. According to the petitioner, there was no communication from the respondents for deposit of performance security in any particular form, however, the petitioner was prepared to deposit the performance guarantee in the form of Bank Guarantee as contemplated under Clause 11.3.1 of General Conditions. The petitioner was required to deposit the performance guarantee at the time of signing the contract. However, to his surprise, the petitioner's contract was cancelled and earnest money was forfeited giving rise to file the instant writ petition. 4. In the counter affidavit, it has been submitted that as the petitioner had quoted 26% below SOR, therefore, to secure the risk of substandard performance of the contract, the petitioner was required to furnish security to the extent of difference of rate of price i.e. 26%, 26.01% and 26.04%. 4. In the counter affidavit, it has been submitted that as the petitioner had quoted 26% below SOR, therefore, to secure the risk of substandard performance of the contract, the petitioner was required to furnish security to the extent of difference of rate of price i.e. 26%, 26.01% and 26.04%. The petitioner had submitted security deposit only to the extent of 10% and did not comply with the directives of the submission of the performance security in the form of Demand Draft and that led to cancellation of contract resulting into forfeiture of earnest money. 5. Learned counsel for the petitioner contends that Clause 11.3.1 of the General Conditions is as clear as noon day that performance security is to be submitted in the form of Bank Guarantee of the value to be determined by the respondents and communicated to the petitioner. In para 5.4 of the petition, the petitioner has submitted that there was no communication from the respondents as regards submission of Bank Guarantee and in para 5.8 of the petition, he has contended that the petitioner had prepared a demand draft of 20% of the value of the contract as performance security to be deposited and had approached to the respondents but the same was not accepted and he was given to understand vide Annexure P-4 that the petitioner is required to deposit Rs.2,28,334/- as margin money, to which the petitioner protested as there is no requirement of deposit of margin money in cash or otherwise than by way of Bank Guarantee, but to no avail. Therefore, the insistence for deposit of the aforesaid amount since is contrary to the terms and conditions of the NIT, the cancellation of the tender and consequential forfeiture of the earnest money is patently illegal and runs counter to Articles 14 and 19 (1)(g) of the Constitution of India. Learned counsel contends that the aforesaid insistence of deposit in cash or otherwise than by way of Bank Guarantee is not one of the reasons for which the contract can be cancelled as specified under Clause 14.3 of the Instructions dealing with various contingencies for forfeiture of the earnest money. It is in fact and in effect arbitrary exercise of power, which otherwise is unsustainable in the eye of law. 6. It is in fact and in effect arbitrary exercise of power, which otherwise is unsustainable in the eye of law. 6. Per contra, Shri Vivek Jain, learned counsel for the respondents submits that as the petitioner was required to comply with the order - Annexure P-4 and since he failed to comply with it, he has made himself liable for cancellation of contract. Learned counsel further contends that section - IV deals with the Special Conditions of Contract and Clause 5 thereunder required as under :- "The contract performance guarantee (Security Deposit) will be provided by the Contractor in the form of Demand Draft." 7. As such, the petitioner was required to deposit the performance guarantee by way of demand draft and insistence for deposit of the same by way of Bank Guarantee was contrary to the terms and conditions of NIT. Learned counsel further contends that Clause No.5 of the Special Conditions of Contract shall have march over the conditions in the NIT in the event of any conflict as indicated from the said document as referred above and therefore even if under Clause 11.3.1 of General Conditions, it is provided that the performance guarantee shall be in the form of Bank Guarantee, Clause 5 of the Special Conditions of Contract shall prevail and the petitioner was required to deposit the demand draft as required under order - Annexure P-4. That having not been done, the petitioner in fact failed to comply with the terms and conditions of the contract and it tantamount to withdrawal of his bid under clause (a) and (e) of Clause 14.3 of the Instructions. Therefore, no exception to the act of forfeiture can be taken in the facts and circumstances of the case. 8. Heard. 9. Scope of interference in contractual matter under Articles 226/227 of the Constitution of India by now is well settled and the same by and large is limited to decision making process in the matter of consideration and award of contract and not the very factum of the award of contract. 8. Heard. 9. Scope of interference in contractual matter under Articles 226/227 of the Constitution of India by now is well settled and the same by and large is limited to decision making process in the matter of consideration and award of contract and not the very factum of the award of contract. It needs no reiteration that the authority under Article 12 of the Constitution of India falling within the meaning of "State" as contemplated under Article 12 of the Constitution of India in the matter of award of contract is required to act in accordance with the terms and conditions of Notice Inviting Tender and such acts must withstand the test of reasonableness and fairness. In the instant case, the short controversy involved relates to the form in which the performance guarantee was required to be submitted by the successful bidders. On the one hand Clause 11.3.1 of the General Conditions requires performance guarantee to be submitted in the form of Bank Guarantee, whereas Clause 5 of the Special Conditions of Contract quoted above though talks of "performance guarantee" but in the bracket has used the words "Security Deposit", which in fact dealt with under Clause 11.2.1 of the General Conditions to be submitted by the contractor in the form of bank draft. 10. Looking to the condition No.11.2.1 and 11.3.1 of the General Conditions, "performance guarantee" and "security deposit" are not interchangeable and the security deposit is to be deposited in the form of demand draft, whereas the performance guarantee is required to be deposited in the form of bank guarantee. Hence, Clause 5 of the Special Conditions of Contract has led to incongruous situation giving rise to the instant undesirable dispute. The respondents themselves are responsible having not been careful while drafting conditions under Clause 11.3.1 of the General Conditions and use of terminology giving rise to conflict of meaning in special conditions. Under such circumstances, if the petitioner had not deposited the performance guarantee as demand draft, the same cannot be said to be contrary to the terms and conditions of the NIT and for this reason, the petitioner cannot be said to have either withdrawn from the bid or committed default after having been declared successful bidder as contemplated under clause (a) and (e) of Clause 14.3 of the Instructions. As it has transpired during course of argument that pursuant to fresh NIT, contract since has been awarded to the third party and there is no grievance in relation thereto. In the opinion of this Court, the respondents have not acted fairly with the petitioner and the action of forfeiture of the earnest money is found to be an act of arbitrariness; antithesis of Articles 14 and 19 (1)(g) of the Constitution of India. 11. Resultantly, the impugned action of the forfeiture of the earnest money is quashed. The respondents are directed to refund the earnest money to the petitioner within a period of four weeks from today, failing which the amount due shall carry interest at the rate of 6% till payment. Writ petition is disposed of accordingly. No order as to costs.