Otik Hotels & Resorts Pvt. Ltd. & ... vs Indian Railway Catering & Tourism ...
2010 Latest Caselaw 1834 Del

         IN THE HIGH COURT OF DELHI AT NEW DELHI


                                               Reserved on: 18th February, 2010
                                               Decision on: 8th April, 2010


            W.P.(C) No. 9564 of 2009 & C.M APPL No. 7567 of 2009


         OTIK HOTELS & RESORTS PVT LTD
         & ANR
                                                            ..... Petitioners
                           Through: Mr. Neeraj Kishan Kaul, Senior Advocate
                           with Mr. Sameer Nandwani, Advocate.


                           versus


         INDIAN RAILWAY CATERING & TOURISM
         CORPORATION LTD.                        ..... Respondents
                  Through: Mr. Gaurab Banerjee, ASG with
                  Mr. Sunil Malhotra, Mr. Saurabh Agarwal and
                  Mr. Dinesh Kumar, Advocates.

                                             AND

              W.P.(C) No. 9566 of 2009 & CM APPL No. 7579 of 2009

         OTIK HOTELS & RESORTS PVT LTD
         & ANR
                                                           ..... Petitioners
                           Through: Mr. Neeraj Kishan Kaul, Senior
                           Advocate with Mr. Sameer Nandwani, Advocate.


                                    versus


         INDIAN RAILWAY CATERING & TOURISM
         CORPORATION LTD.                       ..... Respondents
                  Through: Mr. Gaurab Banerjee, ASG with Mr.
                  Sunil Malhotra, Mr. Saurabh Agarwal and
                  Mr. Dinesh Kumar, Advocates.


          CORAM: JUSTICE S. MURALIDHAR

         1.     Whether reporters of local paper may be allowed
                to see the judgment?                                        No
         2.     To be referred to the report or not?                        Yes
W.P. (C) Nos. 9566 & 9564 of 2009                                     Page 1 of 10
          3.     Whether the judgment should be referred in the digest? Yes


                                    JUDGMENT

1. Both the petitions are filed by Otik Hotels & Resorts Pvt. Ltd., and

against the Indian Railway Catering & Tourism Corporation Ltd.

(IRCTC), and raise similar issues. The lead Petition would be Writ

Petition No. 9566 of 2009, the outcome of which will have a bearing

on the connected Writ Petition No. 9564 of 2009.

2. On 21st April 2005, IRCTC floated a tender for providing catering

services in the No. 2121-22 Sampark Kranti Express. A similar tender

was floated on 06th May 2005 in respect of No. 6687-88 Navyug

Express. The basic condition to be fulfilled in order to be considered

eligible was that the bidder should have a minimal annual turnover of

Rs. 3 crores in catering and hospitality and food and beverage related

business for the last one year. As proof of this, the bidder had to

enclose "Balance Sheet, Profit and Loss Account of last completed

year, duly audited by a Chartered Accountant/Published Annual

Report."

3. The Petitioner was declared successful bidder for both the bids. The

Petitioner submitted a balance sheet, which showed its sales/income

for the year 2003-2004 as Rs. 3,57,34,224.76. A photocopy of the

balance sheet for the year ending 31st March 2004 has been enclosed

with the counter affidavit dated 1st June 2009 filed by IRCTC. The

Profit and Loss Account reveals the sum of Rs. 3,10,75,776 as the

sales/income figure for the year ending 31st March 2003 and

Rs.3,57,34,224.76 as the sales/income for the year ending 31st March

2004. While the balance sheet is countersigned for M/s Sunil Gupta

and Associates, the Chartered Accountants, by their partner, Mr. Rishi

K. Gupta on 28th August 2004, the P&L Account has been

countersigned by the other partner, Mr. Rakesh K. Gupta. At the time

of submission of the bids, an undertaking was given by the Petitioner

in which it was stated that in the event of any information being

submitted by it being subsequently found to be incorrect, the IRCTC

would have the right to summarily reject the bid, cancel the licence or

revoke the same at any time, without assigning any reasons.

4. It subsequently came to the notice of the IRCTC that in the Balance

Sheet submitted by the Petitioner before the Income Tax Department

the figure for sales/income was shown as Rs. 2,90,12,396.68 for the

year ending 31st March 2004. By a show cause notice dated 16th

October 2007, the Petitioner was asked to explain this discrepancy. In

its reply dated 30th October 2007, while not disputing the fact that it

had shown the above figure for sales before the Income Tax

authorities, the Petitioner sought to explain the difference of Rs.

67,21,828.08 as corresponding to the value of the stock

transfer/consignment sales which were exempted from sales tax and,

therefore, excluded in the balance sheet filed with the Income Tax

Department.

5. By an order dated 17th March 2008, the IRCTC

terminated/cancelled the licence issued to the Petitioner for catering

services in respect of the two trains, Sampark Kranti Express and

Navyug Express, with effect from 9th April 2008 and 7th April 2008

respectively. The IRCTC recorded the fact that the balance sheets

submitted before the Income Tax Department were the final accounts

of the company as it had been audited by the statutory auditors of the

Company M/s Anil Khatri & Co., and were placed in the Annual

General Meeting (AGM) of the Petitioner on 24th August 2004. The

said audited accounts were adopted by the AGM under Section 173 of

the Companies Act, 1956 (`Act‟). These figures showed that the

turnover of the Petitioner was less than Rs. 3 crores for the year 2003-

04. Consequently, it was concluded that the Petitioner did not fulfill

the eligibility criteria and therefore its licence was cancelled. Further,

since the petitioner had misrepresented the actual sales figures with a

view to mislead IRCTC to obtain contracts, the petitioner was banned

from all future business dealings with the IRCTC for a period of 2

years from the date of the letter.

6. The Petitioner filed Writ Petition (Civil) No. 2732 of 2008 in this

Court in which an interim order was passed on 3rd April 2008 staying

the operation of the said order dated 17th March 2008. On a subsequent

date, IRCTC sought vacation of the said order stating that the

Petitioner continued to take part in and was awarded tenders. However,

a statement was made on behalf of the Petitioner, which was recorded

in the order dated 21st July 2008, that "the Petitioner will not take part

in future tenders till the next date of hearing." The tenders referred to

hereinabove were in respect of three trains, viz., No. 2721-22 (Dakshin

Express), No. 2669-70 (Ganga Kaveri) and No. 8101-02 (Muri

Express), which were awarded to the Petitioner in the month of May

2008. However, these were made contingent upon the final outcome of

the pending writ petition.

7. On 23rd September 2008 a detailed order was passed by this Court

disposing of W.P(C) No. 2732 of 2008 by issuing, inter alia, the

following directions:

"(a) Petitioner will give a reply to the show cause notice dated 16.10.2007 along with necessary documents, on which the petitioner wishes to rely upon, within a period of two weeks from today.

(b) Respondent will consider the material on record and thereafter give a personal hearing to the petitioner and thereafter pass a speaking order within a period of three weeks from today.

(c) It is agreed that till the matter is finally disposed of, the operation of the impugned order dated 17.03.2008 shall remain partially stayed to the extent that the catering licence with respect to train nos. 6687-6688, Navyug Express and 2121-2122, MP - Sampark Kranti Express shall not be cancelled."

8. Thereafter, a further hearing was given to the Petitioner by IRCTC

and the fresh impugned order was passed on 22nd April 2009. The said

order referred to the letters written on 14th March 2009 and 31st March

2009 by the IRCTC to the Petitioner requiring the Petitioner to produce

the annual report along with the balance sheet filed by it before the

Registrar of Companies (ROC). However, the Petitioner did not supply

the said documents. After considering all the material produced before

it, the IRCTC found that the annual report as filed by the Petitioner

with the ROC in the year 2004-05 showed that for the year ending 31st

March 2004, the figures for the sales/income was Rs. 2,90,12,396.88.

This matched with the figures in the balance sheet and P&L Account

submitted by the Petitioner before the Income Tax authorities. It was

also noticed that this excluded the consignment transfers. The IRCTC

also referred to the figures disclosed by the Petitioner in the Sales Tax

returns, which also did not indicate the sales to be in excess of Rs. 3

crores.

9. It is pointed out by the IRCTC that debarment of the Petitioner for a

period of two years from the date of the letter dated 17th March 2008,

came to an end on 16th March 2010. Although the maximum period of

debarment, in terms of clauses 9.1 and 9.2 of the agreement, was one

year, no such period was specified under clause 8.1, which concerned

the breach of the terms and conditions of the licencee.

10. The learned counsel for the Petitioners submitted that the

requirement of the tender condition was only that the copies of the

balance sheet as certified by the Chartered Accountant, and not by an

Auditor, had to be submitted. Referring to the provisions of Sections

226 and 233(A) of the Act, it is submitted that it is only that Chartered

Accountant who is appointed at an AGM who is competent to sign the

balance sheet. However, where the requirement is that a report signed

by a Chartered Accountant has to be filed than then any Chartered

Accountant, even other then the auditor of the company, is competent

to sign such report/certificate/balance sheet. It is submitted that now

the IRCTC is trying to amend its own tender document and is trying to

read the word "Auditor" in place of "Chartered Accountant".

11. The above argument does not impress this court. It is not possible

to accept the submission that the Petitioner can give different figures of

sales turnover to different statutory authority for the same accounting

period. Obviously, when in order to ascertain if the Petitioner was

doing sufficient business in the area or not, the IRCTC asked it to

produce the Balance Sheet and Profit & Loss Account for the past one

year, it means that audited balance sheets and accounts duly certified

by the company‟s auditors be produced.

12. The IRCTC is not concerned with the Petitioner‟s tax planning.

However, it is concerned that the statement made to it in an application

for award of a contract be truthful. The IRCTC cannot be expected to

examine if the submission of two different balance sheets, containing

different sales figures for the same accounting period, to two different

statutory authorities is justified or not. The IRCTC also cannot be

expected to form an opinion on whether the explanation offered that

the difference constituted the consignment sales figures was a plausible

one. As far as the IRCTC is concerned it was able to ascertain that the

balance sheet filed by the petitioner for the year 2003-04 showed the

figures of sales for the year ending 31st March 2004 as to Rs.

2,90,12,396.88, which was identical to the sales figure submitted for

the same period by the petitioner with the Income Tax authority.

Therefore, on the Petitioner‟s own showing it furnished a different

balance sheet to the ROC and the IT authorities from the one submitted

by it to the IRCTC for the same period.

13. The above documents clearly establish that the Petitioner‟s

turnover was not Rs. 3 crores and above as claimed. The Respondent

IRCTC was justified in cancelling the petitioner‟s bid as it was based

on misrepresentation of the facts.

14. As regard the contention that debarment could not be for a period

beyond one year, this Court finds that Respondent IRCTC is relying

pon Clause 8.1 and not Clauses 9.1 and 9.2. Therefore, there is no

restraint on the IRCTC imposing a ban on a person found to be in

breach of the conditions of the licence for a period exceeding one year.

It was up to the IRCTC to decide for which period such debarment

would remain.

15. In the above circumstances, this Court finds no reasonable ground

having been made out by the Petitioner to persuade the Court to

interfere with the order dated 22nd April 2009 passed by IRCTC. Writ

Petition (Civil) No. 9566 of 2009 is accordingly dismissed and the

application also stands dismissed. Interim order stands vacated.

16. In Writ Petition (Civil) No. 9564 of 2009, it is not in dispute that

the award of catering services for the three trains was made even while

Writ Petition (Civil) No. 9566 of 2009 remained to be decided. If,

during the said time, three more contracts were awarded to the

Petitioner when the validity of the earlier order was still in question,

then clearly the Petitioner could not be permitted to participate in a

future tender till such time that issue which was in the courts was

resolved. Consequently, this Court finds no illegality committed by the

IRCTC in cancelling the three contracts awarded to the Petitioners

during May 2008. It is clearly understood that such award of contracts

would be subject to the outcome of the Writ Petition (Civil) No. 9566

of 2009, since the Petitioners could not otherwise have participated in

the bidding while being debarred by the IRCTC.

17. For the aforementioned reasons, this Court does not find merit in

Writ Petition (Civil) No. 9564 of 2009 as well.

18. The said Petition is also dismissed. Interim order stands vacated

and the application also stands dismissed.

S. MURALIDHAR, J.

8th April, 2010 „ashish‟