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WP (C) No.4331 of 2011 HIGH COURT OF DELHI
Date of Decision: 02.08.2011 WP (C) No.4331 of 2011 & CM No. 8869/2011
M/S PATEL ENGINEERING LTD. …PETITIONER
Through: Mr.Rajiv Nayar, Sr.Advocate with Mr. Jai Munim, Ms.Shally
Bhasin and Ms.Shikha Sarin, Advocates.
Through: Mr.Neeraj Chaudhri, CGSC with Mr.Akshay Chandra and
Mr.Mohit Auluck, Advocates for R-1/UOI.
Mr. Amrinder Sharma, Sr.
Advocate with Ms. Padma Priya and Mr.Somesh Chandra Jha, Advocates for R-2/NHAI.
HON‟BLE MR. JUSTICE RAJIV SHAKDHER
JUDGMENT
1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2011:DHC:3864-DB
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be No reported in the Digest?
SANJAY KISHAN KAUL, J.
1. The National Highways Authority of India (for short „NHAI‟)/respondent No.1, issued a request for qualification in November, 2010 for a six-laning project of Dhankuni-Kharagpur Section of NH-6 from 17,600 to 1,29,000 in the States of West Bengal and Orissa under the National Highway Development Projects Phase-V on design, build, finance, operate, transfer and toll basis. The petitioner, a public limited company, submitted its bid on 10.01.2011. The bid submitted by the petitioner and other bidders were processed and by a letter of award dated 17.01.2011, respondent no. 2 informed the petitioner that its bid had been accepted and that the petitioner should execute the relevant documents in that regard.
2. It is the say of the petitioner that on account of various factors including amendments, perceived insufficient time etc., the bid submitted by the petitioner was significantly higher than it should have been and thus the petitioner came to the conclusion on 24.01.2011 that the bid made by it was commercially unviable. This fact was intimated to respondent no.2 on 24.01.2011 within the period of 7 days prescribed for the petitioner to execute the necessary documents.
3. As a sequitur to this, respondent no.2 informed other bidders, and ultimately the contract was awarded to M/s.Ashoka Buildcon Limited at a much lower premium of Rs 126.06 crores. We may notice at this stage that the petitioner had specified a premium of Rs 190.53 crores.
4. All the bidders were to submit a bid security amount of Rs.13.97 crores. Part „D‟ deals with the bid security amount. Clause 2.20.[6] envisages forfeiture of bid security amount in the following terms: “2.20.[6] The Authority shall be entitled to forfeit and appropriate the Bid Security as Damages inter alia in any of the events specified in Clause 2.20.[7] herein below. The Bidder, by submitting its Bid pursuant to this RFP, shall be deemed to have acknowledged and confirmed that the Authority will suffer loss and damage on account of withdrawal of its Bid or for any other default by the Bidder during the period of Bid validity as specified in this RFP. No relaxation of any kind on Bid Security shall be given to any Bidder.”
5. The aforesaid amount was agreed as a genuine preestimate of compensation in respect of the eventuality set out in the clause 2.20.7. The facts of the case fall within such an eventuality where a contractor fails to sign and return a duplicate copy of the LOA. Clause 2.20.[7] reads as under: “2.20.[7] The Bid Security shall be forfeited and appropriated by the Authority as mutually agreed genuine pre-estimated compensation and damages payable to the Authority for, inter alia, time, cost and effort of the Authority within prejudice to any other right or remedy that may be available to the Authority hereunder or otherwise, under the following conditions: a) If a Bidder submits a non-responsive Bid, “subject however that in the event of encashment of bid security occurring due to operation of para 2.20.[7] (a), the damage so claimed by the authority shall be restricted to 5% of the value of the bid security.; b) If a Bidder engages in a corrupt practice, fraudulent practice, coercive practice, undesirably practice or restrictive practice as specified in Clause 4 of this RFP; c) If a Bidder withdraws its Bid during the period of Bid validity as specified in this RFP and as extended by mutual consent of the respective Bidder(s) and the Authority; d) In the case of Selected Bidder, if it fails within specified time limit – i) To sign and return the duplicate copy of LOA; ii) To sign the Concession Agreement; or iii) To furnish the Performance Security within the period prescribed therefor in the Concession Agreement; or e) In case the Selected Bidder, having signed the Concession Agreement, commits any breach thereof prior to furnishing the Performance Security.”
6. It is in view of the aforesaid facts and circumstances that respondent no.2 took a decision to encash the bank guarantee furnished towards the bid security amount; however in the meanwhile petitioner addressed a letter dated 01.02.2011 volunteering to make the payment of Rs.13.97 crores in return of the bank guarantee; which amount was duly paid vide a demand draft on 03.02.2011. Thus, the issue of encashment of the bid security amount stood concluded with the said step and both the parties accepted the same.
7. The grievance of the petitioner arises out of the subsequent action taken by respondent no.2 to issue a show cause notice dated 24.02.2011 to the petitioner to debar the petitioner for a period of five years from “pre-qualification, participating or bidding” for future projects to be undertaken by respondent no.2. 7.[1] This show cause notice was replied to by the petitioner on 01.03.2011, and the impugned letter was issued on 20.05.2011, on the basis of which respondent has debarred the petitioner for a period of one year commencing from the date of issue of the letter, i.e., 20.05.2012 from “pre-qualification, participating or bidding” for future projects of or to be undertaken by respondent no.2. 7.[2] The petitioner made a representation against such debarment to the Ministry of Road Transport and Highways on 28.05.2011, and subsequently filed the present writ petition on 13.06.2011 under Article 226 of the Constitution of India making a prayer for quashing of the letter dated 20.05.2011.
8. The aforesaid grievance has naturally been contested by respondent no.2. Respondent no.1/UOI has not filed any separate counter affidavit in this matter.
9. We have heard learned counsel for the parties.
10. It is the say of learned senior counsel for the petitioner that the forfeiture of the bid security amount concluded the consequence which the petitioner could be visited with on its failure to convey the acceptance in respect of the LOA. In other words the petitioner could not be penalized any further by being debarred from participation in future projects undertaken by respondent no. 2. According to the learned counsel the order of debarment was in the nature of the petitioner being blacklisted.
11. The learned counsel in this behalf has drawn our attention to clause 4.[2] which forms part of part 4 with the heading „Fraud and Corrupt Practices‟. Clause 4.[2] reads as under: “Without prejudice to the rights of the Authority under Clause 4.[1] hereinabove and the rights and remedies which the Authority may have under the LOA or the Concession Agreement, or otherwise if a Bidder or Concessionaire, as the case may be, is found by the Authority to have directly or indirectly or through an agent, engaged or indulged in any corrupt practice, fraudulent practice, coercive practice, undesirable practice or restrictive practice during the Bidding Process, or after the issue of the LOA or the execution of the Concession Agreement, such Bidder or Concessionaire shall not be eligible to participate in any tender or RFP issued by the Authority during a period of 2(two) years from the date such Bidder or Concessionaire, as the case may be, is found by the Authority to have directly or indirectly or through an agent, engaged or indulged in any corrupt practice, fraudulent practice, coercive practice, undesirable practice, or restrictive practices, as the case may be.”
12. Learned senior counsel for the petitioner submitted that the aforesaid clause applied only if the petitioner indulged in any “corrupt practice”, “fraudulent practice”, “coercive practice”, “undesirable practice” or “restrictive practice” during the bid process or after the issuance of LOA or on the execution of the Concession Agreement, and that the definition of each of these expressions provided in clause 4.[3] made this aspect quite clear. Learned counsel thus submitted that the case of the petitioner does not fall in any of the aforementioned practices as defined in clause 4.[3] read with clause 4.2. 12.[1] A reference was made to following paragraphs of the show cause notice dated 24.02.2011 to buttress this point: “AND WHEREAS subsequent to technical evaluation, Financial Bids were opened on 13.01.2011 in the presence of the Bidders representative and it was noted that M/s Patel Engineering Ltd. had offered the highest premium of Rs.190.53 Crore for the said project. Therefore, as per RFP Volume-I, Clause 3.3.1, M/s Patel Engineering was declared by the NHAI as the Selected Bidder and subsequently was issued the letter of Award (LOA), as per clause 3.3.[5] of RFP Volume-I. Copy of letter dated 17.01.2011 is enclosed. AND WHEREAS, M/s Patel Engineering Ltd., vide letter No.Hyd/181/NHAI-DK BOT/3326 dated 24.01.2001, had expressed their inability to accept the LOA, stating that errors have crept in impacting the bid value significantly. Copy of letter dated 24.01.2011 is enclosed. AND WHEREAS, as per Clause 2.20.07(d) of the RFP, in case the Selected Bidder fails to accept the LOA, the bid security shall be forfeited and appropriated by NHAI as mutually agreed genuine pre-estimated compensation as payable to NHAI for, interalia, time, cost and effort of NHAI without prejudice to any other right or remedy that may be available to the NHAI thereunder or otherwise. AND WHEREAS, in view of your conduct which has, inter-alia, resulted in delay of execution of a project of National importance, a view is made out not to deal with you in future for participation and/or award of further projects of NHAI. It needs to be appreciated that the projects being undertaken by NHAI are of huge magnitude and both in terms of manpower and finance besides being of utmost National importance, striking at the root of economic development and prosperity and general public and a nation as a whole, the NHAI cannot afford to deal with entities who fail to perform their obligations as in your case. AND WHEREAS, in the premises it is proposed to debar above named noticee for a period of five years from pre-qualification, participating or bidding for future projects of/or to be undertaken by NHAI, either directly in your name or indirectly in any other name or in association with any other person entity in which you may choose to carry on your business. In view of the aforesaid, you are hereby called upon to show cause within 14 days of the receipt of this notice as to why action as aforesaid should not be taken against you. If no reply is received within the said period, it shall be presumed that you have nothing to say against the proposed action of NHAI and NHAI shall be free to take appropriate action as may be deemed fit in the facts and circumstances of the case and as per applicable law.”
13. It was contended that aforesaid extract from the show cause notice would reveal that as per respondent no.2, it was the failure on the part of the petitioner to enter into the contract after being declared a successful bidder which occasioned delay in execution of the project propelling respondent no.2 in coming to a prima facie view that it would not deal with the petitioner in respect of its future projects for a period of time, which was tentatively proposed as five years. 13.[1] Learned senior counsel for the petitioner submits that such a show cause notice could not have been issued for the reason that it was not envisaged under the terms and conditions of the invitation to offer and no such decision ought to have been taken de hors the contract. This was more so according to the learned counsel as no guidelines had been provided. 13.[2] Learned senior counsel for the petitioner has also drew our attention to the contents of the final order of debarment dated 20.05.2011, to demonstrate that the debarment order was passed on grounds which did not find a mention in the show cause notice. The reason being, according to the learned counsel, to somehow bring the order of debarment within the four corners of clause 4.[2] read with clause 4.[3] of the ITB. 13.[3] It is his say that clause 4.3(e) which defines restrictive practices cannot bring within its ambit allegations of “pooling” or “malafides”: “restrictive practice” means forming a cartel or arriving at any understanding or arrangement among Bidders with the objective of restricting or manipulating a full and fair competition in the Bidding Process.”
14. In other words it was contended that the allegations pertaining to “pooling” and “mala fides” were incorporated in the debarment letter dated 20.05.2011 only as an afterthought with a view to bring the petitioner with the purview of “restrictive practices”.
15. In order to appreciate the aforesaid submission, we consider it appropriate to reproduce the relevant portion of the letter of debarment dated 20.05.2011 which reads as under: “ In view of your conduct, Show Cause Notice dated 24.02.2011 was issued to you seeking your explanation as to why action should not be taken to debar above named addresses for a period of five years from prequalification, participating or bidding for future projects of / or to be undertaken by NHAI, either directly in your name or indirectly in any other name or in association with any other person entity in which you may choose to carry out your business. In response to the said Show Cause Notice dated 24.02.2011, you vide letter dtd.01/03/2011, inter-alia, stated that minutes of the pre-bid meeting, which included several amendment/queries, were communicated on website of NHAI on 7.1.2011 while bid submission was kept the next date on 10.01.2011. You also stated that in the light of the above notice in the bid clarification, certain anomalies crept up in bid submission, which were only discovered subsequent to the letter of intent being issued. It is noted that above submission was also made in your letter dated 24/01/2011, wherein you have accepted the fact that other bidders also participated under the similar circumstances. Further the fact remains that clarification/amendments communicated by NHAI were „minor‟ and cannot be attributed as a cause for occurrence of an „error‟ of „major‟ nature and magnitude. With project facilities clearly spelt out in the RFP document, the project cost gets frozen well in advance and similarly traffic assessment & projections, which largely impact the financial assessment, are also not expected to be left out for last few days of bid submission. Therefore, stating that an „error‟ of this nature and magnitude occurred is neither correct nor justified. It is to be noted that your actof nonacceptance of LOA has resulted in huge financial loss, to the tune of Rs.3077 crores, as assessed over the life of concession period, in terms of lower premium, apart from cost of the time and effort, to NHAI. It is further noted that this is the first case where a bidder has not accepted the LOA, and warrants exemplary action to curb any practice of „pooling‟, and „malafide‟ in future. After considering all material facts, and your reply in response to the Show Cause Notice, NHAI is of the considered view that no justifiable grounds have been made out in support of your action of non-acceptance of LOA. Keeping in view the conduct of the addresses, NHAI find that they are not reliable and trustworthy and have caused huge financial loss to NHAI. Therefore, it is hereby informed that without prejudice to any other rights available to NHAI in terms of the provision of RFP document and/or the applicable law, you the above named addresses are hereby barred from prequalification, participating or bidding for future projects of / or to be undertaken by NHAI, either directly in your name or indirectly in any other name or in association with any other person entity in which you may choose to carry out your business for a period of one year from the date of issue of this letter.”
16. The aforesaid apart, the petitioner is also aggrieved by the website display of respondent no.2 where the name of the petitioner is shown with the remark „the applicant has been debarred by NHAI‟. He thus submits that this may have an effect on the other tenders issued by third parties, in which, the petitioner may want to participate.
17. The last aspect urged by learned counsel for the petitioner is that without prejudice to the aforesaid, the punishment imposed on the petitioner is disproportionate, and such a decision of debarment can form subject matter of adjudication under Article 226 of the Constitution of India in view of the judgment of the learned Single Judge of this Court in M/s V.K.Dewan and Co. v. Municipal Corporation of Delhi & Ors.; AIR 1994 Delhi 304.
18. On the other hand, learned senior counsel for respondent no.2 has pointed out to us that all that the respondent no.2 has done is to take a decision not to