Brahmaputra Cracker And Polymer ... vs Aquafil Polymers Company Private ...
2014 Latest Caselaw 1343 Del

           *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                          Date of decision: 12th March, 2014.

+                                   CS(OS) No.2/2013

         BRAHMAPUTRA CRACKER AND POLYMER LTD ...Plaintiff
                    Through: Ms. Rashmeet Kaur and Ms. Akansha
                             Chauhan, Advocates.

                                       Versus

    AQUAFIL POLYMERS COMPANY PRIVATE LTD..Defendant
                 Through: None.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.

The plaintiff has instituted this suit for recovery of Rs.51,68,000/-

from the defendant, pleading:

I. that the plaintiff, a Government of India Undertaking, vide an

Invitation to Bid dated 26.08.2010, invited bids through its authorized

consultant M/s Engineers India Ltd. (EIL) for putting up a grass-root

Petrochemical Complex at Lepetkata;

II. that the bids were to be submitted by 24.09.2010 along with an

Earnest Money Deposit (EMD)/Bid Security for Rs.38 Lakhs in the

form of a Demand Draft or a non-recoverable Bank Guarantee and

inter alia required the bidders to have independently completed at

least one similar contract in the last ten years of the bidding date;

III. that the defendant, a private limited company, submitted its bid along

with its EMD in the form of a bank guarantee and unconditionally

accepted all terms and conditions contained in the Bid Documents

without any deviation;

IV. that while evaluating the bids with respect to the experience criteria

prescribed under the Tender Conditions, the authorized consultant of

the plaintiff, EIL, found discrepancies in the Work Order and

Completion Certificate submitted by the defendant in respect of

alleged work done by it for one M/s Ambur Economic Development

Organization Ltd., Chennai (AEDO) against a Work Order dated

16.01.2005;

V. that upon being contacted, AEDO vide letter dated 11.10.2010

informed the plaintiffs that it had never issued the Work Order in

question and that the Work Order and Completion Certificate

submitted by the defendant in this regard were fake;

VI. that accordingly, the plaintiff issued a Show Cause Notice dated

12.10.2010 to the defendant seeking clarification regarding the

aforesaid discovery of forged documents submitted by the defendant;

VII. that since the defendant failed to satisfy the plaintiff that the Work

Order and Completion Certificate filed by it were genuine and

authentic documents, the plaintiff rejected its bid and decided to

forfeit the EMD furnished by the plaintiff in accordance with Clause

35.1 of Special Conditions of Contract (SCC) read with Clause 10.4

of the Instructions to Bidders which permitted such forfeiture in case

of submission of false/forged documents for evaluation of bids;

VIII. that the plaintiff hence invoked the bank guarantee supplied by the

defendant in terms of Clause 2(a) thereof vide its invocation letter

dated 24.11.2010; however the said invocation letter was

subsequently withdrawn when this Court in CS(OS) 2400/2010, at the

instance of the defendant herein challenging such invocation of bank

guarantee being not in accordance with the specific terms and

conditions thereof, was pleased to restrain the State Bank of India (the

bank which had issued the bank guarantee) from releasing any sum

under the bank guarantee; and,

IX. that the plaintiff thereafter re-invoked the bank guarantee under

Clause 35.1 of the SCC vide its invocation letter dated 02.12.2010;

however the said invocation was also not pressed by the plaintiff in

light of another restraining order passed by this Court in CS(OS)

1023/2011 on the allegation of the defendant herein that the aforesaid

Clause 35.1 of the SCC was not one of the terms for invocation of the

bank guarantee.

The plaintiff thus, after two unsuccessful attempts at invoking the bank

guarantee, has now filed the present suit for directly recovering from the

defendant the amount of Rs.51,68,000/- comprising of the sum of Rs.38

Lakhs covered under the bank guarantee and interest of Rs.13,68,000/- on

the said amount at 18% per annum from October 2010 till the institution of

this suit. The plaintiff has also sought pendente lite and future interest at

18% per annum.

2. Summons in the suit were issued on 04.01.2013 and upon non-

appearance of the defendant despite due service, this Court ordered the

defendant to be proceeded ex-parte vide order dated 04.10.2013.

3. The plaintiff has examined two witnesses to support its case. The first

witness, Mr. Rajeev Garg, employed as a Deputy General Manager

(Projects) with the plaintiff, has reiterated the averments made by the

plaintiff in the plaint and tendered inter alia the following documents in

evidence:

I. Certified True Copy of relevant extracts of Bid Documents dated

26.08.2008, exhibited as PW1/1;

II. Certified True Copy of the Bank Guarantee submitted by the

defendant, exhibited as PW1/2;

III. Certified Copy of an Internal Note Sheet of the Evaluation Committee

of the plaintiff whereunder it has been concluded that the defendant

had purposefully submitted forged documents to meet the Bid

Qualification Criteria, exhibited as PW1/4;

IV. Certified Copy of the letter dated 24.11.2010 of the plaintiff invoking

the Bank Guarantee, exhibited as PW1/5, and;

V. Certified Copy of the letter dated 02.12.2010 of the plaintiff re-

invoking the Bank Guarantee, exhibited as PW1/6.

4. The second witness is Mr. Pankaj Kumar Sharma, Deputy General

Manager (Projects) of EIL, who has deposed in detail regarding - (i) the

procedure followed by EIL in evaluating the bids, (ii) the detection of the

discrepancy in the documents submitted by the plaintiff, (iii)

correspondence with AEDO regarding the said discrepancy, (iv) the Show

Cause Notice issued by EIL in pursuance thereto and, (v) its response

submitted by the defendant. He has also tendered inter alia the following

documents in evidence:

I. Certified True Copies of Notice of Acceptance and Completion

Certificate dated 30.01.2006 submitted by the defendant along with

its bid, exhibited as PW2/1 and PW2/2;

II. Certified True Copy of the Email addressed to AEDO to seek

clarification regarding the discrepancy detected in the documents

submitted by the defendant; exhibited as PW2/3;

III. Certified True Copy of the response by Email by AEDO to the Email

sent by EIL, exhibited as PW2/4;

IV. Certified Office Copy of the Show Cause Notice dated 12.06.2010

issued by EIL to the plaintiff, exhibited as PW2/8; and,

V. Certified True Copy of the response of the plaintiff to the Show

Cause Notice issued by EIL, exhibited as PW2/9.

5. The plaintiff has also filed in pursuance of an order of this Court on

27.01.2014, a brief written synopsis, which has been perused.

6. The bank guarantee (Exhibit PW1/2) submitted by the defendant

along with its bid and the amount covered whereunder is sought to be

recovered from the defendant by the plaintiff vide the present suit, reads as

follows:

"WHEREAS, M/s Aquafil Polymers Co. Pvt. Ltd. having its registered office at 202/203, Shayamak Complex, B/h, Kamdhenu Complex, Ploytechnic, Ahmedabad - 380 015 (hereinafter call "the Bidder") has submitted his bid dated 24th September, 2010 for the works of "DM Water plant package for Brahamaputra Petrochemical Complex of Brahmaputra Cracker and Polymer Limited, Lepetkata (Assam)" against bidding document no.6907/T-084/10-11/SPL/C9 (hereinafter called "The Bid")

KNOW ALL MEN by these presents that We State Bank of India having our branch office at 11, U.N. Brahmachari Street Kolkata-700 017 (hereinafter called "The Bank") are bound unto "Brahmaputra Cracker and Polymer Limited Dibrugarh, Assam" (hereinafter called "the OWNER") in the sum of Rs.38,00,000/- (Rupees Thirty Eight Lacs Only) for which payment well and truly to be made to the said OWNER, the Bank binds itself, its successors and assigns by these presents. SEALED with the Common Seal of the said Bank this 21st day of September, 2010.

THE CONDITIONS of this obligation are:

(1) If Bidder withdraws his bid during the period of Bid Validity specified on the Bid Form; OR

(2) If the Bidder having been notified of the acceptance of his bid by the Employer during the period of Bid validity;

a) fails or refuses to execute the Contract Form, if required; or

(b) fails or refuses to furnish the Performance Bank Guarantee in accordance with the instructions to bidders; or

(c) if bidder does not accept the correction of arithmetical errors as per Instructions to Bidders.

We undertake to pay to the OWNER up to the above amount upon receipt of his written demand, without the OWNER having to substantiate its demand, provided that in its demand the OWNER will note that amount claimed by it is due to it owing to the occurrence of one or both of the two above stated conditions specifying the occurred condition or conditions.

This Guarantee will remain in force up to and including the date 31st Day of March, 2011 i.e. 189 days after the deadline for submission of Bids as such deadline is stated in the Instructions to Bidders or as it may be extended by the Employer, notice of which extension(s) to the Bank is hereby waived. Any demand in respect of his guarantee should reach the Bank not later than the above date.

Notwithstanding anything contained mentioned above;

i) Our liability against this guarantee is restricted to Rs.38,00,000/- (Rupees Thirty Eight Lacs Only).

ii) This Bank Guarantee shall be valid up to 31.03.2011;

and

iii) And unless a claim in writing is lodged with us up to 31.03.2011 or the extended date or expiry of this guarantee all our liabilities under this guarantee shall stand discharged.

iv) We are liable to pay the guaranteed amount or any part thereof under this Bank Guarantee and only if you serve upon us a written claim or demand on or before 31.03.2011."

It is thus apparent from a bare perusal of the bank guarantee furnished by

the defendant that submission of false/forged/fabricated documents along

with the bid is not one of the terms for invocation of the bank guarantee.

7. The question therefore before this Court is whether the plaintiff can

be held to be entitled to recover the said amount from the defendant, if its

attempts at forfeiting the amount deposited by the defendant vide a Bank

Guarantee have borne no fruit, on account of the ground of invocation relied

upon by the plaintiff being evidently not relatable to the terms of

encashment of the Bank Guarantee submitted by the defendant.

8. At the outset, it must be noted that an entitlement to „claim or

recover‟ money under a contract is completely different from a right to

„forfeit‟ earnest money deposited under a contract. The former relief is

granted by way of compensation for the damages/loss suffered by a party

under a contract on account of non-performance of its terms by the other

party or if there is an unequivocal term in the contract for payment of such

liquidated damages (though in light of the judgment of the Division Bench

of this Court in Vishal Engineers Vs. Indian Oil Corporation

MANU/DE/6829/2011, even in such cases some proof of damages/loss has

to be supplied). The latter relief of forfeiture stands on a completely

different footing, inasmuch as it predicated on securing due performance of

the contract entered into, and entails confiscation of money which already

lies with a party on account of breach by the other party of the terms and

conditions of the contract entered into, and such right to forfeit may in

certain circumstances even be implied from the contract though not

expressly contained therein (see Entrepreneurs Co-op. Group Housing

Society Vs. Schindler India Pvt. Ltd. MANU/DE/1940/2013 wherein I have

dealt with this aspect in detail).

9. The relief of recovery sought by the plaintiff cannot be granted for

the simple reason that the plaintiff has neither indicated as to how, if at all, it

has suffered any damage or loss from the acts of the defendant, nor has it

been able to refer to any term in the bid documents which entitle it to claim

the stipulated amount from the defendant. The terms in the bid documents

relied upon by the plaintiff viz. Clause 10.4 of the Instructions to Bidder and

Clause 35.1 of the Special Conditions of Contract merely enable the

plaintiff to forfeit the earnest money already lying deposited with it and not

to recover or make a claim for the said amount from the defendant. The

plaintiff cannot also, in making the present demand, be said to be exercising

its right of forfeiture - since such a right which merely involves retention by

a party of a property delivered under a contract - does not call for any

assistance or decree from a Court. The Court cannot in any case, in the garb

of facilitating forfeiture of an amount, convert the action into one of

recovery of an amount, which as elucidated, is distinct and based on entirely

different considerations and whereunder some proof of damages/loss is

indispensable.

10. There is another aspect of the matter. It is not the case of the plaintiff

that the bank guarantee furnished by the defendant was not in compliance

with the plaintiff's terms and conditions or that it was incorrectly drawn.

Rather, the conduct of the plaintiff suggests that the plaintiff has all along

accepted the bank guarantee so supplied by way of earnest deposit. The

plaintiff thus cannot now be permitted to indirectly encash the bank

guarantee, when the terms upon which the bank guarantee has been issued,

do not admittedly envisage any encashment as per the grounds and terms

relied upon the plaintiffs. Thus, probed from any angle, I am unable to find

any basis for granting the relief sought by the plaintiff in the present suit.

11. The plaintiff in support of his case has relied upon National

Highways Authority of India Vs. Ganga Enterprises (2003) 7 SCC 410.

However a perusal of the judgment reveals that it was a case where

encashment of the bank guarantee was permitted upon the finding that the

enforcement was in terms of the bank guarantee. The said case law is thus

not applicable to the present case since neither can the invocation be said to

be in terms of the guarantee nor is the present suit filed for encashment of

any bank guarantee. In fact, the judgment cited by the plaintiff clearly

stipulates that Courts can interfere with enforcement of a bank guarantee if

the invocation is against the terms of the guarantee.

12. The suit is resultantly dismissed. No costs.

Decree sheet be prepared.

RAJIV SAHAI ENDLAW, J.

MARCH 12, 2014.

aa (corrected and released on 18th April, 2014)