Delhi High Court
Indian Railway Catering & Tourism ... vs M/S Jayanta Kumar Ghosh Outdoor ... on 5 March, 2020
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 05.03.2020
+ LPA 87/2020 & C.M.Appln.6238/2020
INDIAN RAILWAY CATERING & TOURISM CORPORATION
LTD ..... Appellant
Through: Mr. Nikhil Majithia, Advocate
versus
M/S JAYANTA KUMAR GHOSH OUTDOOR CATERING PVT
LTD ..... Respondent
Through: Mr. Neeraj Malhotra, Senior
Advocate with Mr. Jitender Mehta, Mr. Akshya
Sachdeva and Mr. Ujjawal Kumar, Advocates
CORAM:
HON'BLE MS. JUSTICE HIMA KOHLI
HON'BLE MS. JUSTICE ASHA MENON
ASHA MENON, J.
1. This appeal has been preferred by the appellant/Indian Railway
Catering & Tourism Corporation Limited (for short, „IRCTC‟) against the
judgment dated 09.01.2020, passed by the learned Single Judge in W.P.(C)
36/2020 filed by the respondent/M/s.Jayanta Kumar Ghosh Outdoor
Catering Pvt. Ltd. allowing the petition and setting aside the order dated
20.12.2019 whereby, the respondent/company was debarred from
participating in the future projects of the appellant/IRCTC for a period of
three years while upholding forfeiture of the Earnest Money Deposit (for
short, „EMD‟) for a sum of Rs.10 lakhs.
2. The brief facts as are relevant for the disposal of the present appeal
are that under a new arrangement, the appellant/IRCTC was to operate
certain trains, namely, Tejas Trains while paying haulage charges as also the
custody charges to the Indian Railways. Catering and allied services on the
Tejas Trains were also to be managed by the appellant/IRCTC, but in order
to do so, it published a Notice Inviting Tender (for short, „NIT‟) on
30.08.2019, inviting bids for Catering and Allied On-Board Services for the
said Tejas Trains. The Open E-Tender No.-2019/IRCTC/CATERING/
TEJAS TRAINS dated 30.08.2019, provided for a pre-bid meeting on
09.09.2019 at 11:30 hrs.. The last date and time of submission of bids was
14.09.2019 upto 15:00 hrs. and the date and time of opening of the technical
bids was 14.09.2019 at 15:15 hrs. An EMD of Rs.10 lakhs was required to
be deposited by the bidders. The period of Licence Fee was two years plus
one year on the Lucknow-New Delhi Tejas Express and Ahmedabad-
Mumbai Tejas Express. The Instructions to Tenderers in Clause 4.0
provided as follows:-
" QUALIFYING CRITERIA
Mandatory Criteria
Technical Criteria Documents Required to be
scanned and uploaded
1.0 xxx Xxx
2.0 Xxx Xxx
3.0 Xxx Xxx
4.0 Net Worth: Firm/Company have Certificate for net worth
minimum of Rs.5 crore on issued by Charted
31.03.2019 Accountant.
NOTE
1. xxx xxx
2. The data submitted by the successful bidder, in
compliance of the above eligibility conditions shall be subject
to verifications by IRCTC itself or through an agency (Expert
in Forensic Audit) appointed by IRCTC, for which all
necessary documents shall have to be essentially provided by
the bidder, if so required. If the successful bidder is found to
be ineligible on such verification, the letter of award will be
terminated along with forfeiture of license fee and Security
deposit. In such eventuality the successful bidder will also be
debarred for 3 years from participating in the future projects
of IRCTC."
3. Vide letter dated 20.09.2019, issued by the appellant/IRCTC, the
respondent/company was awarded the licence for provision of "On-Board
Catering and Allied Services in the Ahmedabad-Mumbai Tejas Express @
Annual Concession Fee of Rs.2,51,55,555/-", for a period of two years,
extendable further by one more year subject to the terms and conditions of
the bid document. The said Licence Fee with GST @18%, thus totalling to
Rs.2,96,83,555/-, was deposited by the respondent/company alongwith a
Security Deposit of Rs.2 crores. However, vide letter dated 20.12.2019, the
appellant/IRCTC conveyed to the respondent/company its decision to
terminate the licence so granted on 20.09.2019 on the ground that it did not
fulfil the mandatory eligibility criteria in respect of the net worth of the
company and the disclosure made alongwith its bid to claim net worth to the
extent of Rs.5.25 crores, was not supported by necessary documents, as was
revealed from the reply dated 16.12.2019, submitted by the
respondent/company in response to the Show-Cause Notice dated
11.12.2019, issued by the appellant/IRCTC. While so terminating the
Agreement/Letter of Award dated 20.09.2019, forfeiture of the Security
Deposit and the Licence Fee was also directed and the respondent/company
was debarred from participating in the future projects of the
appellant/IRCTC for a period of three years.
4. Aggrieved by this termination, the respondent/company filed W.P.(C)
36/2020, with the following prayers: -
1. Issue an appropriate Writ, Direction or Order quashing the
impugned letter of termination dated 20.12.2019 issued by
Respondent at the objection of M/s Brandavan Food
Products.
2. Issue an appropriate Writ, Direction or Order directing
Respondent that upon quashing of termination letter dated
20.12.2019, Petitioner may be permitted to execute work in
accordance with Letter of Award dated 20.9.2019.
3. Without prejudice to the aforesaid prayer, Issue an
appropriate Writ, Direction or Order inter alia directing
Respondent to refund security and lease amount totalling to
Rs. 4.96 crores in case this Hon'ble Court upholds the
termination letter dated 20.12.2019.
4. Issue an appropriate Writ, Direction or Order inter alia
directing Respondent to pay an amount to the extent of
additional expense incurred, being the amount of loss
suffered by the Petitioner herein upon issuance of
termination letter dated 20.12.2019.
5. Issue an appropriate Writ, Direction or Order inter alia
directing Respondent to give personal hearing to Petitioner
for explaining the stand of Petitioner.
6. Pass any order or further orders as this Hon'ble Court may
deem fit and proper.
5. Before the learned Single Judge, however, the respondent/company
did not press its challenge to the impugned order terminating the Letter of
Award and limited the challenge to the decision of the appellant/IRCTC of
forfeiting the Security Deposit and the Licence Fee and banning it for a
period of three years from participating in the future projects of the
appellant/IRCTC.
6. After hearing both sides, the learned Single Judge concluded that the
punishment imposed on the respondent/company for a bona fide mistake,
was shockingly disproportionate and could not be sustained and thus set
aside the impugned order dated 20.12.2019, save and except for the
forfeiture of the EMD of Rs.10 lakhs deposited by the respondent/company
at the time of submission of the bid. Aggrieved thereby, the
appellant/IRCTC has preferred the present appeal.
7. Mr. Nikhil Majithia, learned counsel for the appellant/IRCTC
contended that the learned Single Judge has erroneously concluded that
while submitting its bid, the mis-information provided by the
respondent/company in respect of its net worth, was a bona fide mistake as
the documents on record clearly established otherwise. He pointed out that
there were in fact, two Resolutions of the respondent/company of the same
day and the date and time of the alleged meetings held pursuant to the two
Meeting Notices of the same date, reflecting two different figures, was also
the same, which goes to show that the documents in question were
fabricated. He submitted that the initial share capital of the
respondent/company was only Rs.1 crore. The certified copy uploaded by
the respondent/company alongwith Form No.SH-7 on the website of the
Registrar of Companies was of a resolution adopted by the shareholders in
the EGM held on 30.03.2019, where the following was resolved: -
"RESOLVED that the Authorized Share Capital of the
Company be increased from Rs.100,00,000/- to Rs.150,00,000/-
by the creation of additional 5,00,000 Equity Shares of Rs.10/-
each."
8. The Notice dated 15.03.2019 for this meeting, copy whereof is placed
at page No.191 of the appeal paper-book, records the following Agenda: -
"1. To consider and if thought fit to pass with or without
Notification, the following Resolutions as an ordinary
Resolution:
RESOLVED that the Authorized Share Capital of the
Company be increased from Rs.100,00,000/- to Rs.150,00,000/-
by the creation of additional 5,00,000 Equity Shares of Rs.10/-
each."
9. It is submitted that there was no scope of erroneously certifying these
copies as the originals would have been available with the
respondent/company even at the time of filling Form No. SH-7 and they
were correctly uploaded. This clearly showed that the attempt made on the
part of the respondent/company was to appear to have fulfilled the
requirements on paper before the last date for submission of the bids, i.e.
14.09.2019, which was extended to 15.09.2019. That was why Form No.SH-
7 was uploaded on 12.09.2019, declaring the authorized share capital of the
respondent/company to be Rs.5,25,00,000/- while the Memorandum of
Articles reflected the authorized share capital as Rs.1.5 crores only. It was
submitted that an attempt was made by the respondent/company to
misrepresent that the net worth of the company was what was claimed as on
30.03.2019, by fabricating the Resolution and the EGM Notice for
enhancement of the authorised share capital of the company from Rs.1 crore
to Rs.5.25 crores, which unfortunately bore the same date as the earlier
Resolution and EGM Notice whereby the authorized share capital of the
company was to be increased only to Rs.1.25 crores.
10. Learned counsel for the appellant/IRCTC further contended that
though ordinarily, blacklisting is done only for a period of one year, this
project being the first of its kind for the appellant/IRCTC and being very
prestigious, in an effort to ensure transparency and honest disclosure, such
an onerous condition was placed of not only forfeiting the Security Deposit
and Licence Fee, but also of blacklisting the defaulter for three years.
Therefore, the learned Single Judge erred in limiting the penalty to a mere
forfeiture of the EMD of Rs.10 lakhs deposited by the respondent/company.
11. On the other hand, Mr. Neeraj Malhotra, learned Senior Advocate
appearing for the respondent/company contended that there is no reason why
this mix-up should be described as mala fide. It was submitted that when the
respondent/company had submitted Form PAS-3 on 18.09.2019, the paid-up
share capital of the respondent/company was disclosed as Rs.429.53 lakhs.
Since the Ministry of Corporate Affairs had accepted the details uploaded on
its website on increase of the authorized share capital vide the Form No.SH-
7, on 12.09.2019, the respondent/company had no clue about the bona fide
mistake committed while uploading the details of the Resolution passed for
enhancement of the authorized share capital, which was in fact enhanced to
Rs.5,25,00,000/-. It was only after the complaint of M/s. Brandavan Food
Products was forwarded by the appellant/IRCTC to the respondent/company
for seeking an explanation, that this discrepancy was noted. It was in reply
to the Show-Cause Notice dated 11.12.2019, issued on the basis of the
discovery made during the Forensic Audit, that the respondent/company
sought to explain that an error had taken place in uploading the correct
Resolution and that the Meeting Notice dated 15.03.2019 had called for a
meeting to resolve that the authorized share capital was to be increased to
Rs.5.25 crores and not Rs.1.5 crores and the said Resolution was also passed
on 30.03.2019. It was further submitted that the wrong uploading was a
bona fide mistake and the learned Single Judge had rightly observed so and
had further tested the decision of the appellant/IRCTC on the anvil of
fairness and proportionality to limit the penalty imposed to Rs.10 lakhs. In
the said circumstances, it was contended that the judgment did not deserve
interference.
12. We have heard the arguments advanced by learned counsel for the
parties and have perused the record. We find force in the contention of the
learned counsel for the appellant/IRCTC that existence of two sets of
Notices and two sets of Resolutions, both dated 15.03.2019 and 30.03.2019,
respectively raises serious doubts as to the bona fides of the
respondent/company in uploading the details on the website of the Registrar
of Companies, as it did on 12.09.2019, after the pre-bid meeting had taken
place on 09.09.2019, but before closure of the bids on 14/16.09.2019. An
erroneous uploading of the Resolutions may by itself be a bona fide error,
provided that there was only one Resolution reflecting the correct value of
the enhanced authorized share capital. In the instant case, the
respondent/company has not been able to satisfactorily explain as to why
were there two sets of Notices, both dated 15.03.2019, one for calling the
EGM to resolve that the authorized share capital be enhanced from Rs.1
crore to Rs.1.5 crores and the other for resolving that the authorized share
capital of the company be enhanced from Rs.1 crore to Rs.5.25 crore. There
is also no explanation coming forth as to why were there two sets of
Resolutions of the same date i.e. 30.03.2019, one resolving that the
authorized share capital be enhanced from Rs.1 crore to Rs.1.5 crores and
the other resolving that the authorized share capital of the company be
enhanced from Rs.1 crore to Rs.5.25 crores.
13. Ex facie, it does appear that since Clause 4 of the bid document, as
extracted hereinabove, required that as per the Technical Criteria, the net
worth of the Firm or Company had to be a minimum of Rs.5 crores, as on
31.03.2019, an effort was made to antedate the documents so as to reflect an
enhanced net worth, for being eligible for bidding. Thus, there is no ground
to hold that the termination order, which in any case has not been challenged
by the respondent/company, is bad in law.
14. Holding that the respondent/company had furnished incorrect
information bona fidely, the learned Single Judge elected to limit the penalty
imposed to forfeiture of the EMD of Rs.10 lakhs. We are however unable to
subscribe to the said view, particularly in the light of the observations made
hereinabove that there did not appear any surrounding circumstances for this
court to believe that a bona fide mistake was committed by the
respondent/company. However, the question of proportionality of the
penalty has to be considered so as to determine as to whether forfeiture of
the Security Deposit of Rs.2 crores, Licence Fee of Rs.2.96 crores and
blacklisting for a period of three years from participating in the future
projects of the appellant/IRCTC, was the appropriate penalty to be imposed
on the respondent/company.
15. The Supreme Court in Kulja Industries Ltd. v. Chief General
Manager, Western Telecom Project BSNL & Ors., (2014) 14 SCC 731 has
observed as below:-
"25. Suffice it to say that "debarment" is recognised
and often used as an effective method for disciplining deviant
suppliers/contractors who may have committed acts of
omission and commission or frauds including
misrepresentations, falsification of records and other breaches
of the regulations under which such contracts were allotted.
What is notable is that the "debarment" is never permanent
and the period of debarment would invariably depend upon the
nature of the offence committed by the erring contractor."
16. We are in agreement with the submission made by learned Senior
Counsel for the respondent/company that blacklisting would have serious
consequences as it amounts to civil death. At the same time, the
appellant/IRCTC is well entitled to insist on transparency, as commercial
transactions require stringent standards of disclosure and the said approach
cannot be faulted. It is also within the right of the appellant/IRCTC to
impose onerous conditions on bidders to discourage suppression of material
facts or fraudulent disclosures. In that light, the penalty of forfeiture of the
EMD of Rs.10 lakhs, as imposed by the learned Single Judge, does not
appear to be proportionate.
17. Debarment, for any period, would have to be assessed on its
proportionality that ought to be commensurate with the nature of the offence
committed by the erring contractor. Though the Supreme Court in Kulja
Industries Ltd. (supra) has observed that the court ought not to determine the
period of blacklisting, in the present case, on a query posed to the
appellant/IRCTC, learned counsel had informed the learned Single Judge
that the appellant/IRCTC was not inclined to modify the period of
blacklisting and therefore, it was held that there would be no useful purpose
in remanding the matter back to the appellant/IRCTC for reconsideration.
18. Be that as it may, since the quantum of punishment is subject to
judicial review for the court to examine its fairness and proportionality, on
the facts of this case, we find that mere forfeiture of the EMD of Rs.10 lakhs
would not suffice. In our opinion, a reasonable amount, enough for the
respondent/company to feel the pinch ought to be recovered for the improper
disclosure of material facts and the same need not be limited to forfeiture of
the EMD of Rs.10 lakh. In our opinion, to balance the equities, discourage
the respondent/company from future infractions and send a message to other
bidders that they must make honest disclosures, recovery of four times of the
EMD of Rs.10 lakhs would be just and fair.
19. The appeal is thus partly allowed. The impugned judgment is
modified and the appellant/IRCTC is held entitled to recover a sum of Rs.40
lakhs that shall include the EMD of Rs.10 lakhs, already deposited by the
respondent/company. The said amount shall be deposited by the
respondent/company with the appellant/IRCTC within four weeks from
today.
20. The appeal alongwith the pending application is disposed of on the
above terms while leaving the parties to bear their own expenses.
(ASHA MENON)
JUDGE
(HIMA KOHLI)
JUDGE
MARCH 05, 2020/s
