M/S. Vijay Nirman Company Pvt. ... vs National Highways & ...
2019 Latest Caselaw 3971 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                           Decided on: 28th August, 2019

+                   CS(COMM) 707/2017

      M/S. VIJAY NIRMAN COMPANY PVT. LTD.                ..... Plaintiff
                Represented by: Ms. Pragya Ohri, Mr. Aayush
                                Chandra, Ms. Aditi Soni, Advs.
                     versus

      NATIONAL HIGHWAYS & INFRASTRUCTURE
      DEVELOPMENT CORPORATION LIMITED             ..... Defendant
              Represented by: Ms. Suruchi Suri, Ms. Aasia Hasan,
                              Advs.

CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA

MUKTA GUPTA, J. (ORAL)

1. By this suit the plaintiff seeks recovery for a sum of ₹1 crore 98 lakhs along with the interest @ 24 % per annum from the defendant on the plea that the defendant illegally encashed its bank guarantee which was furnished by the plaintiff as bid security.

2. Case of the plaintiff in the suit is that on the defendant issuing a notice on 15th April, 2015 inviting Request for Proposal (in short RFP) in respect of "Two Laning of Pasighat - Mariyang - Yingkiang Road (now NH-513) from Singer river to Sijon river section from 19.880 km to 43.257 km (Length - 23.377 km) in Arunachal Pradesh under Arunachal Pradesh Package of SARDPNE on EPC Mode"; the plaintiff was one of the bidders and in terms of Clause 1.2.4 of the RFP was required to deposit a bid security of ₹1.98 crores along with its bid having validity of not less than

180 days, inclusive of claim period of 60 days from bid due date. The bid due date under the RFP was 15th May, 2015 and the bid security was refundable not later than 150 days from the bid due date except in case of selected bidder. Thus, the plaintiff along with the bid, furnished the bank guarantee (BG No. 1501501BGB00015) for a sum of ₹1.98 crores issued by IDBI Bank valid up to 9th October, 2015 with the claim period up to 9th December, 2015 thereby with the total validity for a period of 208 days from the bid due date which was 15th May, 2015. On 14th May, 2015 the bid due date was extended and thereafter again extended uptil 23rd June, 2015. Pursuant to the second extension, the validity of the Bank Guarantee dated 13th May, 2015 was extended for a further period of one month i.e. from 9 th October, 2015 to 9th November, 2015 and the claim period accordingly extended up to 9th January, 2016. Thus, the total validity for the Bank Guarantee was for 200 days including the claim period.

3. Vide letter dated 12th August, 2015 defendant informed the plaintiff that its bid was rejected as the same was declared non-responsive on account of "BG is not in confirming with RFP condition". The plaintiff replied vide its letter dated 13th August, 2015 requesting the defendant not to reject the bid as the BG was in accordance with RFP having validity not less than 180 days. IDBI, the issuing bank, issued a letter to the plaintiff dated 18th November, 2015 informing that the claim period of the Bank Guarantee was upto 9th January, 2016 and that the commission had been paid for the said period also and the said letter of the bank was enclosed by the plaintiff along with its letter dated 24th November, 2015 reiterating that the Bank Guarantee was in due compliance of RFP.

4. Grievance of the plaintiff is that despite the Bank Guarantee being in conformity with RFP and without checking the validity or seeking clarification from the issuing Bank, the defendant not only rejected the bid but also invoked the Bank Guarantee illegally, though the plaintiff claims no relief qua illegal rejection of the bid.

5. In support of its claim plaintiff examined two witnesses namely Mr. Sanjeev Raman (PW-1) the authorized officer of the plaintiff as also summoned Shri Devender Singh, Deputy General Manager, IDBI Bank as (PW-2). In his evidence PW-1 reiterated the claims made in the plaint and Shri Devender Singh confirmed issuance of letter dated 20 th November, 2015 to the plaintiff confirming the validity and the claim period of the Bank Guarantee till 9th January, 2016.

6. To support its claim learned counsel for the plaintiff relies upon the following relevant Clauses of the RFP issued by the defendant.

"1.2.4. A Bidder is required to deposit, along with its BID, a BID security of ₹1.98 crore (₹One crore Ninety Eight Lakh only) (the "BID Security"), refundable not later than 150 (One hundred & fifty) days from the BID Due Date, except in the case of the Selected Bidder whose BID Security shall be retained till it has provided a Performance Security under the Agreement. The Bidders will have an option to provide BID Security in the form of bank guarantee acceptable to the Authority, and in such event, the validity period of the bank guarantee, shall not be less than 180 (one hundred and eighty) days from the BID Due Date, inclusive of a claim period of 60 (sixty) days, and may be extended as may be mutually agreed between the Authority and the Bidder from time to time. The BID shall be summarily rejected if it is not accompanied by the BID Security. 2.1.6. The Bidder shall deposit a BID Security of ₹1.98 crore (₹ One crore Ninety Eight Lakh only) in accordance with the provisions of this RFP. The Bidder has to provide the BID

Security in the form of a Bank Guarantee acceptable to the Authority, as per format at Appendix-II. The bidders shall also submit Demand Draft for ₹20,000/- issued from a scheduled Bank in India in favour of "Managing Director, NHIDCL, New Delhi" payable at New Delhi.

2.1.7. The validity period of the Bank Guarantee, shall not be less than 180 (one hundred and eighty) days from the BID Due Date, inclusive of a claim period of 60 (Sixty) days, and may be extended as may be mutually agreed between the Authority and the Bidder. The BID shall be summarily rejected if it is not accompanied by the BID Security. The BID Security shall be refundable no later than 150 (one hundred and fifty) days from the BID Due Date except in case of the Selected Bidder whose BID Security shall be retained till it has provided a Performance Security under the Agreement. 3.1.8. The Authority will get the BID security verified from the issuing authority and after due verification, the Authority will evaluate the Technical BIDs for their compliance to the eligibility and qualification requirements pursuant to clause 2.2.1 & 2.2.2 of this RFP. "

7. Case of the defendant in the written statement is that the validity of bid security being till 9th November, 2015 which was less than 180 days, the bid was non-responsive in terms of Clause 2.20.4 and, thus in terms of Clause 2.20.5 of the RFP, the bid security not being refundable, BG was invoked. In support of its defence, defendant examined one witness namely Shri Yogesh Chandra Srivastava (DW-1).

8. The relevant Clauses of the RFP on which defendant places its reliance are as under:

"2.20.4. The Authority shall be entitled to forfeit and appropriate the BID Security as Damages inter alia in any of the events specified in Clause 2.20.5 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.

2.20.5. The BID Security shall be forfeited and appropriated by the Authority as damages payable to the Authority for, inter alia, time cost and effort of the Authority without prejudice to any other right or remedy that may be available to the Authority under the bidding documents and/ or under the Agreement, or otherwise, under the following conditions:

(a) If a Bidder submits a non-responsive BID as defined in 3.1.6;

(b) If a Bidder engages in a corrupt practice, fraudulent practice, coercive practice, undesirable practice or restrictive practice as specified in Section 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 the specified time limit;

(i) to sign and return the duplicate copy of LOA;

(ii) to sign the Agreement; or

(iii) to furnish the Performance Security within the period prescribed therefor in the Agreement; or

(e) In case the Selected Bidder, having signed the Agreement, commits any breach thereof prior to furnishing the Performance Security.

3.1.6.1. As a first step towards evaluation of Technical BIDs, the Authority shall determine whether each Technical BID is responsive to the requirements of this RFP. A Technical BID shall be considered responsive only if:

(a) .....

(c) Technical bid is accompanied by the BID Security as specified in Clause 2.1.6 and 2.1.7;

(h) Cost of Bid document of ₹20,000/- (Rupees Twenty Thousand)"

9. A perusal of the Clause 1.2.4 clearly reveals that the bid security in the form of Bank Guarantee acceptable to the Authority required a validity period of not less than 180 days from the bid due date inclusive of a claim period of 60 days and the bid security was required to be as per format Appendix-II. Even Clause 4 of Appendix-II provided that the Guarantee shall be irrevocable and remain in force for a period of 180 days from the bid due date inclusive of a claim period of 60 days or for such extended period as may be mutually agreed between the Authority and the bidder. The Bank Guarantee No. 1501501BGB00015 dated 13th May, 2015 clearly notes for ₹1,98,00,000., the date of expiry as 9th October, 2015, and last date of claim 9th December, 2015. The Bank Guarantee as extended due to the bid due date being extended, had the expiry date of 9th November, 2015 and the last date of claim was mentioned as 9th January, 2016. The terms of Bank Guarantee required as per RFP was not less than 180 days inclusive of the 60 days claim period and as noted along with the claim period, the validity of the Bank Guarantee furnished by the plaintiff was beyond 180 days. Hence, the rejection of the bid of the plaintiff being non-responsive was illegal on the part of the defendant. The invocation of the Bank Guarantee on the said count pressing into service Clause 2.20.4 and 2.20.5 is also illegal.

10. Similar issue came up before this Court in M/s. Transstroy (India) Limited Vs. National Highways Authority W.P.(CRL) 443/2015 decided on 21st May, 2015 wherein this Court noted:

"8. I have heard learned counsels for the parties and perused the record. What clearly comes through is that the period of validity comes to an end (in respect of which there is no dispute raised before me) with the expiry of 180 days; a period which is to commence from the bid due date.

8.1 What is not disputed before me, is that, the provision for the validity period in the bank guarantee is made in clause 1.2.4 of the RFP. This clause being most crucial from the point of view of the issue raised in the instant writ petition, the same is extracted hereinbelow for the sake of convenience:

".... 1.2.4 A bidder is required to deposit, along with its BID, a BID security of Rs. 5.67 crore (Rupees five crores and sixty seven lakhs only) (the "BID Security"), refundable not later than 60 (sixty) days from the BID Due Date, except in the case of the Selected Bidder whose BID Security shall be retained till it has provided a Performance Security under the Agreement. The Bidders will have an option to provide BID Security in the form of bank guarantee acceptable to the Authority, and in such event, the validity period of the bank guarantee, shall not be less than 180 (one hundred and eighty) days from the BID Due Date, inclusive of a claim period of 60 (sixty) days, and may be extended as may be mutually agreed between the Authority and the Bidder from time to time. The BID shall be summarily rejected if it is not accompanied by the BID Security...." (emphasis is mine)

9. A perusal of the said clause would show that the bidder (in this case the petitioner) had the option to provide a bid security in the form of a bank guarantee acceptable to the respondent, and if, such a route was adopted, the validity period of the bank guarantee could not be less than 180 days from the bid due date. However, to this was added a caveat which was that this period of 180 days would include a claim period of 60 days. The said clause also made a provision for extension of this period if, it was, mutually agreed to between the parties concerned, i.e. the bidder and the respondent herein.

10. Concededly, the petitioner had submitted a bank guarantee which, as indicated above, is dated 11.9.2014. The bank guarantee contained two clauses which are the subject matter of contention in the present matter, i.e. clause 4 and 13.

11. For the sake of convenience, clause 4 of the unamended bank guarantee and clause 13 of the bank guarantee which is identical both, in the amended and unamended bank guarantee are set forth below.

"4. This Guarantee shall be irrevocable and remain in full force for a period of 210 (two hundred and ten) days from the BID Due Date 12-09-2014 inclusive of a claim period of 60 (sixty) days or for such extended period as may be mutually agreed between the Authority and the Bidder, and agreed to by the Bank, and shall continue to be enforceable till all amounts under this Guarantee have been paid on or before 09- 04-2014."

xxx "13. For the avoidance of doubt, the Bank's liability under this Guarantee shall be restricted to Rs.5.67 Crores (Rupees five crores and sixty seven lakhs only). The Bank shall be liable to pay the said amount or any part thereof only if the Authority serves a written claim on the Bank in accordance with paragraph 8 thereof, on or before 09th April, 2015.

Notwithstanding anything contained herein before, our liability under this guarantee is restricted to Rs.5.67 Crores (Rupees five crores and sixty seven lakhs only) in the aggregate and it will remain in force till the 08- 02- 2015. Unless a claim or demand in writing is made against us under this bank guarantee before the expiry that is before the 09-04-2015 all your rights under the said guarantee shall be forfeited and we shall be relieved and discharged from all liability here under, irrespective whether the original guarantee together with all extensions if any, returned to us."

12. As would evident upon perusal of clause 4 of the unamended bank guarantee, the error which had crept in was that it indicated that the bank guarantee shall continue to be

enforceable till all amounts under the bank guarantee were paid on or before 9.4.2014. This was an obvious error; the date ought to have been 9.4.2015.

12.1 There is also no dispute raised before me that the petitioner carried out the necessary amendments in clause 4 of the bank guarantee by submitting an amended bank guarantee; a fact to which I have made a reference above. The amended bank guarantee corrected the date in clause 4 from 9.4.2014 to 9.4.2015.

12.2 Therefore, the area of discord, in a sense, gets narrowed down to clause 13.

12.3 A perusal of clause 13 would show that the first sub- paragraph of paragraph 13 contains two dates. The first date is indicative of the fact that the bank guarantee in issue was to remain in force till 8.2.2015, while the second date makes a provision for the period within which a claim or a demand in writing had to be made for the bank guarantee amount to be paid to the person who invoked the bank guarantee, which in this case was the respondent. The second date referred to in the said clause is: 9.4.2015.

12.4 Therefore, the net effect of clause 13 would be that while it was valid and enforceable till 8.2.2015 the person invoking the bank guarantee was given further time to lodge a claim or make a demand on date prior to 9.4.2015.

13. Mr. Bhatta has argued that the petitioner could not have provided that the bank guarantee will remain in force till 8.2.2014.

13.1 As indicated above, this argument proceeds on the basis that 180 days from the bid due date, i.e. 12.9.2014 would end on 11.3.2014 and not on 8.2.2015.

13.2 According to me, the respondent, in a sense, has been its own enemy. The reason for coming to this conclusion is the language of clause 1.2.4. The language is plainly indicative of the fact that while the bank guarantee had to remain valid for a period of 180 days from the bid due date, the said validity period was to include the claim period of 60 days. Therefore, if

one were to work backwards from 9.4.2015, the validity period of the bank guarantee would end on 8.2.2015, which is what was provided in the bank guarantee.

13.3 It is, in fact, the argument of the learned counsel for the petitioner that in the instant case the period provided is more than 180 days as the period for lodging a claim or making a demand is extended till a date prior to 9.4.2015 and not 11.3.2015.

13.4 I tend to agree with the learned counsel for the petitioner on this score.

14. Having regard to these facts, could the respondent have declared the petitioner's bid as non-responsive? In my view, the answer has to be in the negative. If that is the conclusion reached, then the action of the respondent in declaring the bid as "non-responsive" was illegal and, therefore, the consequent action of invoking and encashing the bank guarantee can also not be sustained."

11. Since the plaintiff has been able to prove that the defendant has illegally invoked the Bank Guarantee, the plaintiff is entitled to a decree for a sum of ₹1.98 crores for the illegal invocation of the Bank Guarantee in its favour and against the defendant and also entitled to an interest @ 9% per annum from the date of encashment of the Bank Guarantee i.e. 6 th November, 2015 till the date of realization. Decreed accordingly.

12. Suit is disposed of.

(MUKTA GUPTA) JUDGE AUGUST 28, 2019 'ga'