M/S Ambey Industries vs Chhattisgarh State Civil ...
2023 Latest Caselaw 821 Chatt

                                                                        AFR

           HIGH COURT OF CHHATTISGARH, BILASPUR

                   Writ Petition (C) No.2145 of 2022

                   Order Reserved on : 14.12.2022
                   Order Passed on :       9.02.2023

   M/s Ambey Industries, a proprietorship firm, through its Proprietor Shri
   Dilip Kumar Agrawal, S/o Shri Durgaprasad Agrawal, aged about 48
   years, having its registered office at Satpara, Abhanpur, District Raipur,
   Chhattisgarh
                                                               ---- Petitioner
                                 versus

1. Chhattisgarh State Civil Supplies Corporation Limited through its
   Managing Director, Block No.7A, 2 nd Floor, Office Complex, Sector 24,
   Atal Nagar, Nawa Raipur, Chhattisgarh

2. Managing Director, Chhattisgarh State Civil Supplies Corporation
   Limited, Block No.7A, 2nd Floor, Office Complex, Sector 24, Atal Nagar,
   Nawa Raipur, Chhattisgarh
                                                            --- Respondents

                                  and

                   Writ Petition (C) No.2174 of 2022

   M/s Ambey Industries, a proprietorship firm, through its Proprietor Shri
   Dilip Kumar Agrawal, S/o Shri Durgaprasad Agrawal, aged about 48
   years, having its registered office at Satpara, Abhanpur, District Raipur,
   Chhattisgarh
                                                               ---- Petitioner
                                 versus

1. Chhattisgarh State Civil Supplies Corporation Limited through its
   Managing Director, Block No.7A, 2 nd Floor, Office Complex, Sector 24,
   Atal Nagar, Nawa Raipur, Chhattisgarh

2. Managing Director, Chhattisgarh State Civil Supplies Corporation
   Limited, Block No.7A, 2nd Floor, Office Complex, Sector 24, Atal Nagar,
   Nawa Raipur, Chhattisgarh
                                                            --- Respondents
                                             2




For Petitioner          :       Mr. Manoj Paranjpe along with Mr. Apurv Goyal
                                and Mr. Shreyansh Agrawal, Advocates
For Respondents         :       Mr. V.R. Tiwari, Senior Advocate assisted by
                                Mr. Atul Kumar Kesharwani, Advocate


                 Hon'ble Shri Arup Kumar Goswami, Chief Justice
                    Hon'ble Shri Arvind Singh Chandel, Judge

                                     C.A.V. ORDER

Per Arvind Singh Chandel, J.

1. Since common questions are involved in both the writ petitions,

they are disposed of by this common order.

2. Both the writ petitions have been preferred by the petitioner against

the respondents for the following reliefs:

"1. That, this Hon'ble Court may kindly be pleased to issue a writ/writs, direction/directions, order/orders quashing the impugned order dated 21/04/2022 (ANNEXURE P/1) passed by the Respondent Corporation;

2. That, this Hon'ble Court may kindly be pleased to issue a writ/writs, direction/directions, order/orders quashing the impugned order dated 13/04/2022 (ANNEXURE P/2) passed by the Managing Director of the Respondent Corporation;

3. That, this Hon'ble Court may kindly be pleased to issue a writ/writs, direction/directions order/orders quashing the impugned communication dated 01/04/2022 (ANNEXURE P/3) passed by the Respondent Corporation;

4. That, this Hon'ble Court may kindly be pleased to issue a writ/writs, direction/directions, order/orders quashing the impugned order dated 31/03/2022 (ANNEXURE P/4) passed by the Respondent Corporation;

5. That, this Hon'ble Court may kindly be pleased to declare that the price bid of the Petitioner firm has

been validly withdrawn with effect from the receipt of the letter dated 30/03/2022 by the Respondent Corporation;

6. That, this Hon'ble Court may kindly be pleased to issue a writ/writs, direction/directions, order/orders to the Respondent Corporation to return the earnest money deposit of the Petitioner along with interest;

7. That, this Hon'ble Court may kindly be pleased to grant any other relief(s), which is deemed fit and proper in the aforesaid facts and circumstances of the case."

3. According to the petitioner, the respondents issued e-tender dated

7.2.2022 for purchase of chana for financial year 2022-23. The e-

tender was issued for 4 divisions which were divided into 4 groups,

i.e., Group-1, Group-2, Group-3 and Group-4 for supply of chana in

various districts of the State. Writ Petition (C) No.2145 of 2022

relates to tender process of Group-1, i.e., e-tender No.92241, which

was for supply of chana in the regions of Bastar, Bijapur,

Dantewada, Kanker, Kondagaon, Narayanpur, Sukma, Balod,

Kawardha and Rajnandgaon. Writ Petition (C) No.2174 of 2022

relates to e-tender No.92280 for Group-4, which was for supply of

chana in the regions of Balrampur, Korea and Surajpur. The bid of

the petitioner for Group-1 was Rs.5185 per quintal and for Group-4

it was Rs.5344 per quintal. Price bids were opened on 16.3.2022

and the bids of the petitioner were found to be the lowest in Group-

1 and Group-4 tenders. Thereafter, invoking Clause 29 of the

tender document, the Corporation called upon the petitioner to

negotiate the bid prices. The petitioner thereafter immediately on

22.3.2022 further reduced the bid price for both the tenders by

further reducing 10 paisa per quintal, i.e., Rs.5184.90 and

Rs.5343.90 per quintal for Group-1 and Group-4 respectively. It

was further contended that there was a sudden turmoil in the

market condition after 22.3.2022 and the prices of the petrol, diesel,

toll taxes and packing materials etc. surged and considering the

fact that the Corporation was not accepting or rejecting the price bid

from the petitioner firm, a letter of withdrawal dated 30.3.2022

(Annexure P10 in both the writ petitions) was served by the

petitioner firm upon the Respondent Corporation on 31.3.2022

citing reasons for withdrawal of its offer dated 9.3.2022 and

requesting the Corporation to call next highest bidder (L2) to make

the supply and also to release the earnest money deposited by the

petitioner firm. The Corporation, acting in the most arbitrary

manner, chose not to respond to the communication dated

30.3.2022 (Annexure P10) and instead it proceeded to accept the

bid submitted by the petitioner firm and communicated the

acceptance via e-mail which was sent on the same day, i.e.,

31.3.2022 (Annexure P4) at 7:24 p.m. The Respondent

Corporation also issued a communication dated 1.4.2022

(Annexure P3) wherein letter dated 30.3.2022 was rejected by the

Corporation. It was held by the Corporation that the request made

by the petitioner firm was against the terms and conditions of the

tender. Invoking Clause 42 of the terms and conditions of the

tender, a detailed petition was filed by the petitioner before the

Managing Director of the Respondent Corporation. The Managing

Director passed the final order dated 13.4.2022 (Annexure P2) and

gave a direction to the petitioner firm to enter into an agreement

within 7 days from the date of order. It was also observed that in

case agreement is not entered into by the petitioner firm the

Corporation shall exercise its rights provided for in Clause 16 of the

tender document. Assailing the order dated 13.4.2022, the

petitioner firm filed Writ Petition (C) No.1960 of 2022 and Writ

Petition (C) No.1965 of 2022, respectively. However, despite

receiving the advance copy of the petitions, the Respondent

Corporation without issuing a show cause notice proceeded to pass

order dated 21.4.2022 (Annexure P1) just to frustrate the above

mentioned petitions. Thereafter, vide its order dated 21.4.2022

(Annexure P1), the Managing Director of the Respondent

Corporation, by invoking Clause 16 of the tender document

forfeited the amount of EMD to the tune of Rs.4.45 Crores for

Group-1 and Rs.2.81 Crores for Group-4 and further, debarred the

petitioner firm from participating in future tender process of the

Respondent Corporation for a period of 3 years without even

issuing a show cause notice to the petitioner firm. Thereafter, the

petitioner firm sought liberty from the Court and withdraw Writ

Petitions (C) No.1960 of 2022 and 1965 of 2022 and filed the

instant writ petitions, i.e., Writ Petitions (C) No.2145 of 2022 and

2174 of 2022.

4. In their reply, the Respondents pleaded that despite communication

dated 21.3.2022 the petitioner did not enter into an agreement and

violated the terms and conditions of the tender document. The rate

quoted by the petitioner was accepted and the intimation was sent

through e-mail on 31.3.2022 itself and thereafter the letter dated

31.3.2022 was also sent through speed post. It has been further

contended that in the light of Clause 16B of the tender document,

the Respondents have rightly forfeited EMD and the petitioner has

been rightly debarred from participating in the future tender process

of the Respondent Corporation for a period of 3 years.

5. We have heard the arguments raised on behalf of the parties and

perused the material available with due care.

6. Before entering into the factual matrix, it is relevant to note the

following specific terms and conditions of the e-tender (Annexure

P6), which read as follows:

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7. Clause 16A clearly provides that in the event of tender being

approved, it is mandatory for the tenderer to enter into an

agreement within 10 days of acceptance. Clause 16B provides that

in the event of not executing an agreement within the prescribed

period, the EMD deposited shall be forfeited in favour of the

respondents and the tenderer shall be debarred from participating

in future tender process. Further, Clause 29 deals with negotiation

which provides that the negotiation will be carried only with L-1

(Lowest Bidder).

8. From perusal of the above conditions, it is clear that the words

"from the date of acceptance of tender" occurring in Clause 16A are

the key words to apply in Clause 16 of the terms and conditions of

the tender for supply of chana. From a reading of Clause 29 it is

apparent that the rate quoted by the tenderer is not final and it is

always subject to negotiation with the tenderer.

9. It was the contention of the petitioner that the Corporation acting in

most arbitrary manner chose not to respond to the communication

dated 30.3.2022 and instead proceeded to accept the bid submitted

by the petitioner and communicated the acceptance via e-mail

which was sent on the same date, i.e., 31.3.2022 (Annexure P4) at

7:24 p.m. From perusal of the letter of the petitioner dated

30.3.2022 (received by the respondents/Corporation on 31.3.2022),

whereby the petitioner has withdrawn the offer, it is seen that the

said letter contained the seal affixed by the respondents authorities,

which shows that the letter was received during the working hours

in the office. The e-mail with regard to the acceptance of the

proposal of the petitioner firm was sent through e-mail on 31.3.2022

at 7:24 p.m. as contained in Annexure P18. This contention made

by the petitioner has not been disputed by the

respondents/Corporation and neither the letter dated 31.3.2022

submitted by the petitioner which was received by him on 7:24 p.m.

has been denied by the respondents. Annexure P10 as well as

Annexure P18 clearly demonstrate that after withdrawal of the offer

by the petitioner, the respondents have communicated to the

petitioner firm that its rates have been accepted. The contents of

Annexure P18 and Annexure P10 have also not been disputed by

the respondents/Corporation. From a bare reading of Clauses 16A

and 16B of the tender document, it is apparent that the said clauses

can be invoked only in the event of tender being approved and

accepted. In the case in hand, before acceptance of the bid/offer

the petitioner firm had withdrawn its bid/offer and it had been duly

communicated to the respondents/Corporation.

10. It was the contention of the petitioner that under the provisions of

Section 5 of the Indian Contract Act, 1872 (henceforth 'the Contract

Act') a proposal could be revoked at any time before the

communication of its acceptance was completed as against the

proposal and hence the petitioner was fully within its right to revoke

its offer before its acceptance by the respondents/Corporation. In

this regard, reliance was placed by learned counsel for the

petitioner on Food Corporation of India v. Sujit Roy, 1999 SCC

OnLine Gau 35.

11. Opposing the above contentions, the respondents/Corporation,

relying on the judgment passed by the Supreme Court in National

Highways Authority of India v. Ganga Enterprises, (2003) 7 SCC

410 submitted that the petitioner has no right to withdraw the offer

and since the petitioner has refused to enter into a contract, the

Corporation has rightly invoked Clause 16 of the tender document.

12. In Sujit Roy (supra), it is observed by the Supreme Court that the

person can withdraw/modify his proposal, before communication of

acceptance is completed, against him. The statutory right created

by the provisions of the Contract Act cannot be overridden or taken

away by the provisions of tender document. Relevant paragraphs

of Sujit Roy (supra) are as under:

"7. In reply to the aforesaid submission, Mr. AM Lodh, learned counsel for the respondent, contended that under section 5 of the Contract Act, 1872, a proposal could be revoked at any time before the communication of its acceptance was complete

as against the proposer and hence the respondent was fully within his right to revoke his offer before its acceptance by the appellants. In support of this submission, Mr. Lodh cited the decision of the Delhi High Court, in Suraj Besan & Rice Mills v.

Food Corpn. of India, AIR 1988 DELHI 224, in which a learned single Judge has held that a person can withdraw or modify his offer or tender before communication of the acceptance is complete as against him and that the Government by merely providing a clause to the contrary in the tender notice could not take away the legal rights of such person. He also relied on the decision of a Division Bench of this court in Abdus Salam Chowdhury v. State of Assam, AIR 1991 Gauhati 9, in which it has been held that under the provisions of section 5 of Indian Contract Act, a proposal may be revoked at any time before communication of its acceptance is complete as against the proposer and that such a statutory right under the provisions of the Contract Act cannot be overridden or taken away by the provision of the local Rules framed by the State Government regulating the settlement/sale of Mahal/Coupe to the forest Contractors. Mr. Lodh further submitted that in any case the letter dated 5.7.1997 of the respondents to the appellants did not amount to modification of his offer and, therefore, the earnest money furnished by the respondent was not liable to be forfeited under clause-4 of the tender documents. He argued that before taking the decision to forfeit the earnest money of the respondent in the impugned communication dated 26.11.1997, the appellants should have observed the principles of natural justice. Relying on the decision of the Supreme Court in Braj Kishore Thakur v. Union of India, 1997 (3) SLJ 73, Mr. Lodh contended that since in the aforesaid communication dated 26.11.1997 no reason for forfeiting the earnest money furnished by the respondent was given by the appellants, the impugned decision was liable to be quashed and the respondent was entitled to a direction from this court for refund of the earnest money amount to Rs.8,06,000. He placed reliance on the decision of a Division Bench of the Allahabad High Court in Shyam Biri Works Pvt. Ltd. v. UP Forest Corporation, AIR 1990 Allahabad 205 in which the court directed refund of the earnest money amount with interest @ 15% furnished by a tenderer pursuant to invitation of tenders.

9. But the aforesaid clause-4 of the tender documents makes it clear that if the tenderer resiles from or modifies his offer and/or the terms and conditions thereof in any manner, he does it at the risk of his earnest money being liable to be forfeited. This is because of the understanding mentioned in the aforesaid clause-4 of the tender documents that the tender

documents have been made available to him and he is being permitted to tender in consideration of the aforesaid stipulation that the earnest money deposited by him would be liable for forfeiture if he resiles from or modifies his offer and/or the terms and conditions thereof in any manner after submitting the same. The liability for forfeiture of the earnest money of the tenderer arose not out of a contract between the tenderer and the acceptor on acceptance of his tender but on account of a pre- contract understanding between the tenderer and the acceptor that the offer submitted by the tenderer would not be withdrawn or modified in any manner during the period within which the acceptor was to take a decision on the offer. The object of including such an understanding in clause-4 of the tender documents obviously was to ensure that the offer of the tenderer remained firm during the period within which the acceptor was to take a decision on the offer.

10. The next question is as to whether in every case in which the tenderer after submitting his tender resiled or modified his offer and/or the terms and conditions thereof in any manner, the earnest money furnished by him was to be automatically forfeited. Clause-4 of the tender documents only says that the earnest money "shall be liable to forfeiture" if the tenderer after submitting his tender resiles from or modifies his offer and/or the terms and conditions thereof in any manner. Further the last limb of clause-4 of the tender documents states that the earnest money will be returned to all unsuccessful tenderers as soon as practicable after decision on tenders. It is thus clear from the express language used in clause-4 of the tender documents that where the tenderer resiled from or modified his offer in any manner after having submitted the tender, the earnest money furnished by him could not be straightaway and automatically forfeited by the accepting authority. In our considered opinion, where a tenderer after submitting his tender resiles from or modifies his offer in any manner during the period within which the offer is to remain valid and the authority is to take a decision on the offer, the authority can forfeit the earnest money of the tenderer only if it finds that such withdrawal or modification of his offer has resulted in loss to the acceptor on account of the withdrawal or modification of the offer. This is because in the absence of any concluded contract between the tenderer and the accepting authority the earnest money furnished by the tenderer was not to be forfeited for any breach of contract but to make good any loss that the accepting authority may suffer due to premature withdrawal or modification of the offer by the tenderer. Any other construction of clause-4 of the tender documents would

invest the Food Corporation of India, which is an instrumentality of State, with the arbitrary power to forfeit earnest money of a tenderer even in a case where it did not suffer any loss. The questions to be decided in this case, therefore, are whether the respondent in fact withdrew or modified his offer before the due date and as to whether such withdrawal or modification of his offer resulted in any loss to the appellants."

13. In Ganga Enterprises (supra), it is held by the Supreme Court as

under:

"9. In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bis are received would be lost if forfeiture was not permitted."

14. From perusal of both the above mentioned judgments of the

Supreme Court in Sujit Roy (supra) and Ganga Enterprises (supra),

it is clear that the facts of Ganga Enterprises (supra) are slightly

different from the case in hand as in Ganga Enterprises (supra)

there was a specific clause in the tender document which provided

that forfeiture of EMD can be done on withdrawal of bid/offer during

the period of bid validity, whereas in the case in hand no such

clause is inserted in the tender document and the

respondents/Corporation have invoked Clause 16 of the tender

document which clearly provides that after acceptance of the offer,

if the tenderer failed to enter into an agreement then the EMD can

be forfeited. Thus, the case of Ganga Enterprises (supra) cited by

the respondents is not applicable to the present case. Resultantly,

in view of the provisions of Section 5 of the Contract Act and in view

of the judgment in Sujit Roy (supra), the action on the part of the

respondents in forfeiting the amount of EMD is not sustainable

especially taking note of the fact that the offer was duly withdrawn

and communicated before its acceptance and Clause 16 can be

invoked only in the special event enumerated in Clause 16 of the

tender document, i.e., after acceptance.

15. Now the contention raised on behalf of the petitioner with respect to

the order dated 21.4.2022 (Annexure P1), whereby the petitioner

has been debarred from participating in future tender process for a

period of 3 years is concerned, it is contended that no show cause

notice was issued before passing of the order of black listing. It is

submitted that it is no longer res integra that before the order of

black listing is passed a show cause notice is required to be issued

and when admittedly a show cause notice has not been issued the

order of black listing cannot be sustained. In this regard, learned

counsel for the petitioner placed reliance on S.K. Patodia &

Associates, through its Director, Pravesh Gadia v. State of

Chhattisgarh, through Secretary, Department of Urban

Administration and Development, 2022 SCC OnLine Chh 155 in

which it was observed by a Division Bench of this Court as follows:

"25. In Radhakrishna Agrawal (supra), grievance was expressed against the order of the State Government passed in 1974 revising the rate of royalty payable by the petitioners under a lease of 1970, and, after that, cancelling the lease by a letter dated 15.03.1975. The case of the petitioners was that the revision of the rate of royalty payable by the petitioners for the lease to collect and exploit sal-seeds from the forest area was illegal during the subsistence of the lease, and thereafter, cancellation of the lease itself was illegal for a number of reasons including on the ground of not affording an opportunity to show cause against cancellation of the lease. It was observed that the limitations imposed by rules of natural justice cannot operate upon powers which are governed by the terms of an agreement exclusively.

26. In Erusian Equipment & Chemicals Ltd. (supra), the Hon'ble Supreme Court observed as follows:

"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 he blacklist."

27. In Gorkha Security Services (supra), the Hon'ble Supreme Court observed that serving of show cause notice is a requirement before recourse can be taken for blacklisting. It was observed that the fundamental purpose behind serving of the show cause notice is to make the noticee understand the precise case set up against him which he has to meet and for this purpose, a statement of imputations detailing out the alleged

breaches and defaults he has committed, is required so that he gets an opportunity to rebut the same and also indicating the nature of action which is proposed to be taken for such a breach.

28. In the aforesaid case, although a show cause notice was issued, the show cause notice was conspicuously silent about blacklisting and it was on that ground, it was held by the Hon'ble Supreme Court that without any specific stipulation in that behalf, respondent could not have imposed the penalty of blacklisting. The Hon'ble Supreme Court also repelled the contention advanced by the respondents that no prejudice was caused to the appellant in not issuing the show cause notice. The Hon'ble Supreme Court held that that no case was set up by the respondents that by omitting to state the proposed action of blacklisting, no prejudice is caused to the appellant. It was also observed that had the action of blacklisting being specifically proposed in the show cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the respondents were not satisfied with the explanation qua the defaults. The Hon'ble Supreme Court further observed that the extreme nature of such a harsh penalty like blacklisting with severe consequences, would itself amount to causing prejudice to the appellant.

29. In UMC Technologies Private Limited (supra), it was held by the Hon'ble Supreme Court that for a show cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting. As the notice in the said case was silent about the proposed action of blacklisting, the Hon'ble Supreme Court held that the show cause notice issued in the said case did not fulfill the requirement of valid show cause notice for blacklisting and accordingly, the order of blacklisting was set aside and having regard to the peculiar facts and circumstances of the case, the matter was remanded to the Corporation for a fresh consideration."

It was further observed as under:

"36. In view of the above discussion, the impugned order dated 03.11.2021 debarring the petitioner from participating in the future tender of the respondent No.2 for a period of two years cannot be sustained in law. Accordingly, the order dated 03.11.2021, so far as it relates to debarring the petitioner from participating in the future tender of the respondent No.2 is set aside. The respondents are, however, at liberty to issue appropriate show cause notice to the petitioner on the issue of blacklisting."

16. In the light of the above quoted observations, if we examine the

facts of the instant case, apparently, no separate show cause

notice was issued to the petitioner before passing of the order of

black listing dated 21.4.2022 (Annexure P1). Thus, apparently, the

petitioner has not been provided any opportunity of hearing before

passing of the said order dated 21.4.2022.

17. Resultantly, as discussed hereinabove, the petitioner succeeds in

its case. Accordingly, both the writ petitions are allowed. The

impugned orders dated 13.4.2022 (Annexure P2) and dated

21.4.2022 (Annexure P1) are set aside. The respondents are

directed to refund the earnest money deposited by the petitioner

firm in both the cases within a period of one month from the receipt

of this order, failing which, the petitioner firm shall be paid simple

interest @ 6% per annum till final payment of the earnest money.

                       Sd/-                                            Sd/-
              (Arup Kumar Goswami)                           (Arvind Singh Chandel)
                   Chief Justice                                      Judge

Gopal