Delhi High Court
M/S Hfcl Limited vs M/S Telecommunications ... on 3 June, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: June 03, 2022
+ O.M.P.(I) (COMM.) 173/2022, I.A. 8902/2022
M/S HFCL LIMITED ..... Petitioner
Through: Mr. Bishwajit Bhattacharya, Sr. Adv.
with Mr. Zeeshan Hashmi and Mr.
Salman Hashmi, Advs.
versus
M/S TELECOMMUNICATIONS
CONSULTANTS INDIA LTD. ..... Respondent
Through: Mr. Nikhilesh Krishnan and Mr. Jai
Pratap, Advs.
CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
V. KAMESWAR RAO, J. (ORAL)
1. The petition has been filed under Section 9 of the Arbitration and
Conciliation Act, 1966, inter alia seeking an ex-parte ad interim stay on
tenders dated May 10, 2022, bearing nos. TCIL Tender No. -
TCIL/4110008/I/22-DEF/01E, TCIL Tender No.- TCIL/41/0009/I/22-
DEF/02E, TCIL Tender No.- TCIL/41/0010/I/22-DEF/03E, Tender
No. - TCIL/4110011/I/22-DEF/04E, all for the state of Uttar Pradesh, as
the scope of work of the impugned tenders is already within the scope of
work to be performed by the petitioner under the BSNL Tender dated
June 21, 2013 and Memorandum of Understanding („MOU‟, for short)
dated January 30, 2014 between Telecommunications Consultants India
Ltd. („TCIL‟ and the respondent herein) and Himachal Futuristic
Communications Ltd. (HFCL Ltd.‟ and the petitioner herein) dated
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Digitally Signed By:ASHEESH
KUMAR YADAV
Signing Date:03.06.2022
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January 30, 2014 read with first addendum dated September 18, 2014,
BSNL Purchase Order („PO‟, for short) No. CT/P0/04/2014-15 dated
September 09, 2014 ("BSNL PO"), TCIL PO No. TCIL/15/1612/1114
MM/58P dated September 19, 2014 along with its all amendments and
TCIL PO No. TCIL/16/1611/I/14- MM/57P dated September 19, 2014.
2. It is the case of the petitioner and so contended by Mr. Bishwajit
Bhattacharya, Ld. Sr. Counsel that BSNL published a tender bearing
Tender No.-CA/CNP/NFS OFC/T- 44112013 on June 21, 2013 for
procurement, supply, trenching, laying, installation, testing and
maintenance of Optical Fibre Cable, PLB Duct and accessories for
construction of exclusive optical NLD backbone and Optical Access
Routes on Turnkey Basis For Defence Networks. A bidder could bid for
one or more packages wherein each package comprises of different sets
of States/UT's. The petitioner and respondent herein bid for „Package C‟,
comprising of Uttar Pradesh, Rajasthan and Uttarakhand. They entered
into a „Teaming Agreement‟ dated August 19, 2013, to submit a bid for
Package C of the BSNL Tender. According to him, the said Teaming
Agreement contained an exclusivity clause being Clause 2, which barred
either party from entering into any agreement of similar nature with any
third party for the bid package.
3. The petitioner and respondent entered into an MOU dated
January 30, 2014 (as amended vide the first amendment dated September
18, 2014), for the purpose of bidding for the BSNL tender and to put
down the terms of their relationship. The MOU delineated individual
scope of work of both the parties and chalked out the responsibilities in
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their scope of work. Specifically, Clause 7.4 of the MOU states as
under:-
"AMC will be done by the respective parties related to
their scope of work. However, TCIL will get 4% on the
sale value of HFCL 's AMC portion of work towards the
expenditure incurred on Manpower and other services."
Clause 25 .1.1 0 of the BSNL Tender states "Undertaking
duly signed by Lead bidder and its partner stating that
both of them, shall be liable for due performance of the
contract jointly and severally, shall be submitted after
declaration of L1 bidder as given at Clause 13.6 and 13.7
above.".
4. It is stated that a reading of Clause 1.2 and 7.3 of the MOU and
Clause 13.7 and 25.1.10 of the BSNL tender shows that the petitioner is
OFC manufacturer alongwith the respondent as they are individually and
independently responsible for their scope of work and also jointly and
severally liable towards BSNL for the execution of the project.
5. Further, it is stated that Clause 4.3 of the MOU provides that the
Annual Maintenance Contract („AMC‟) is within the scope of work of
the petitioner. It states "The sole responsibility of supply of SOR material
during the execution of the project shall be of HFCL. HFCL shall be
entirely responsible for supply, warranty, AMC, Payments and all other
terms mentioned in the teaming agreement with the other OEMs ". It is
the case of the petitioner that Clause 3 of the MOU bars the respondent
from entering into any agreement of similar nature with any third party
with respect to Package C. Therefore, the impugned tenders are in breach
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of the MOU, because the services being sought to be procured under the
impugned tenders are the same as the services currently being provided
by the petitioner and covered by the MOU.
6. He stated that the BSNL Tender also contains several clauses
whereby it can be ascertained that the work for maintenance and
preventive correction to be done under the AMC was part and parcel of
the main tender and has to be performed by the petitioner after expiry of
the warranty period. Clauses 47, 83.2, 154, 186.11.14, 189, 197 and 207
support the aforesaid fact. It is stated that the petitioner took into
consideration the aforesaid clauses and the fact that AMC services will
be performed by the petitioner, and fixed the cost of its products for
submission of the bid while making its decision of partnering with TCIL
to bid for the project.
7. Thereafter, BSNL issued a PO dated September 09, 2014 to the
respondent as the contractor and the petitioner as the Teaming Agreement
Partner. The said PO was issued in furtherance of the BSNL tender.
Clause 32 of the PO reads as under:-
"Annual maintenance Contract:
(i) After commissioning and handing over of the network to
PICG by BSNL, PICG will sign the Agreement for AMC with
the successful lead suppliers as per the terms contained in
section 4 and other relevant clauses of the tender. (i) the
purchaser also reserves the right to blacklist the bidder in case
the vendor fails to honour the AMC commitment after expiry of
the warranty period"
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KUMAR YADAV
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8. Subsequently, the respondent issued POs dated September 19,
2014 in favour of the petitioner for procurement of services pursuant to
the issuance of the BSNL PO. He stated, the MOU has been referred to
in the POs and forms a part of the TCIL POs. The petitioner performed
its obligations under the agreements without demur and provided its
services as per its scope of work. As per Clause 89 of the Tender and
Clause 17 of the PO, the bidder had to provide warranty for 3 years for
materials supplied. After completion of the warranty period, the
petitioner started providing operation and maintenance services under the
AMC clauses as provided for in the MOU and the Tender.
9. He stated, on January 31, 2020, the petitioner wrote a letter to the
respondent informing it of its obligation to issue a PO for AMC so that
the petitioner continue maintaining the network as per agreed terms. In
reply, the respondent, vide letter dated February 06, affirmed its
obligation of issuing PO for post warranty AMC services on back-to-
back basis, upon receipt of corresponding PO from the Project
Implementation Core Group in favour of the respondent. On December
31, 2020, the respondent sent a letter to the petitioner stating that they
have received consent letter dated December 11, 2020 from BSNL
regarding AMC services in Package C. It further stated that the AMC
agreement has been sought for from BSNL and will be communicated to
the petitioner as soon as the respondent receives it. The consent letter
received from BSNL provided for the period from October 01, 2020 till
March 31, 2020. According to Mr. Bhattacharya, the aforesaid letter
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affirms the fact that there was no dispute on the fact that the petitioner
has the right to perform AMC services.
10. The petitioner sent a letter vide email dated May 20, 2021 stating
"as discussed today, please find letter regarding AMC material required
for maintenance." The said email bore the subject "Letter for AMC
material" Subsequently, vide email dated May 24, 2021, which bore the
subject "Letter for material to be arranged by PICG for preventive
maintenance and fault rectification under AMC", the petitioner stated as
under:-
"this has with reference to trailing mail on dated 20th May
regarding immediate support for material to be arranged by P
ICG for preventive maintenance and fault rectification under
AMC. Request your immediate support in this matter. "
11. He stated, the petitioner sent reminders on May 31, 2021 and
June 07, 2021 stating that the petitioner will not be responsible for any
unforeseen incident caused because of the absence of material.
Thereafter, on June 09, 2021 the respondent replied stating "as discussed
please find enclosed copy of letter written to BSNL regarding the matter
for your information and necessary action.". According to Mr.
Bhattacharya, the respondents had sent letters dated June 09, 2021 and
July 06, 2021 wherein they admitted that after cessation of the warranty
period, AMC services have been provided by the petitioner. In the letter
dated June 09, 2021, the respondent referred to two letters of BSNL dated
February 23, 2021 and December 11, 2020 as „AMC Letters‟. However
the petitioner was not provided with a copy of these letters.
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KUMAR YADAV
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12. The petitioner started providing AMC services from February
2020. It has provided the said services ever since, under the assurance of
the respondent that money for such services will be paid immediately
upon execution of the AMC with BSNL.
13. Thereafter, BSNL shared the AMC agreement for the duration
October 2020-March 2021 with the respondent for execution between
them. As per the MOU and POs, a back-to-back agreement needs to be
executed between the petitioner and the respondent for AMC services to
enable the petitioner to raise invoices for the work already done. It is the
case of the petitioner that the respondent breaches the MOU by not
executing back-to-back AMC/PO with the petitioner.
14. Mr. Bhattacharya further stated that the petitioner vide its letters
bearing No. HFCL/Kanchan/HQ/2232 dated February 8, 2022 and
bearing No. HFCL/Kanchan/HQ/2295 dated April 18, 2022 has raised
concerns regarding rising dues for AMC services and execution of AMC,
but the respondent did not respond to the said letters, either positively or
negatively. It is stated that approx. ₹50 crore is due towards AMC
services already provided.
15. He stated, the respondent issued the impugned tenders on May
10, 2022 with the date of opening of Technical bid as June 01, 2022 and
the date for opening of financial bid to be notified later. He stated, the
said tenders have been issued without affording an opportunity to be
heard to the petitioner and without any fault or deficiency on the part of
the petitioner. It is also stated that as on the date of issuance of the
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impugned tenders, BSNL had imposed damages because of the fault in
provision of services by the respondent.
16. He stated, the impugned tenders have been issued for providing
maintenance services during AMC period for OFC based NLD and
access links across the state of Uttar Pradesh. The impugned tenders
clearly state that they have been issued under the BSNL Tender; however
the petitioner is already providing AMC services under the said tender
and is entitled under the BSNL Tender to provide the said services for the
entire duration of 7 years. In protest, the petitioner sent a letter dated May
20, 2022 to the respondent and called upon them to cancel and withdraw
the impugned tenders and execute the AMC.
17. In substance, the submission of Mr. Bhattacharya is that:-
(i) A valuable right to perform the AMC services had already
accrued in favour of the petitioner and the respondent has
acknowledged that right several times and assured the petitioner
that it will abide by the terms of the agreements between them.
The impugned tenders are in complete breach of the terms of the
MOU and defeat the vested right in favour of the petitioner.
Apart from the terms of the MOU, the respondent has recognised
the petitioner‟s right for performing AMC services on several
occasions.
(ii) The MOU provides for back-to-back obligations between
the parties. The aforesaid obligation is not only with respect to
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AMC services but in respect of each and every right and
obligation.
(iii) Clause 5.1 of the MOU states that terms of payment and
financial guarantees between the parties shall be on back-to-back
basis. Clause 5.3 states the raising of invoices and the payment of
such invoices is also on back-to-back basis and that payments
received by the respondent from BSNL shall be released in
favour of the petitioner on back-to-back basis. Clause 13.7
provides for a joint team for following-up and ensuring
expeditious release of payment against invoices submitted to
BSNL by the respondent.
(iv) The action of the respondent in issuing the impugned
tenders dated May 10, 2022 are illegal and in absolute breach of
the MOU.
(v) The respondent cannot introduce a third party into the
project.
(vi) The intent of BSNL in seeking the provision of AMC
services from the OFC manufacturer is clear as the manufacturer
of the supplied goods would be in the best position to maintain
such goods as opposed to a third party.
(vii) While formulating the bid and fixing price for supplies, the
petitioner had considered the fact that AMC services will also be
provided by it for which it will be paid. Clause 83.2 of the BSNL
Tender also provides that the AMC quoted by the bidder will be
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KUMAR YADAV
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taken into consideration while evaluation of the bid by BSNL.
The respondent's act of unilaterally and arbitrarily denying the
petitioner the benefit to which it is legally entitled to, is not only
in gross violation of the MOU but is also illegal and causes
irreparable damage to the petitioner.
(viii) The actions of the respondent are actuated by mala fide as
it never asked the petitioner not to provide AMC services when it
sent letters and emails wherein the petitioner clearly stated that it
was providing AMC services for more than a year and sought its
assistance in seeking materials. The intent of the respondent is to
illegally deny the petitioner the dues for providing AMC services
which are due from the respondent.
18. On the other hand, Mr. Nikhilesh Krishnan, learned counsel
appearing for the respondent would justify issuance of the impugned
tenders. He stated that the BSNL Tender is primarily related to
procurement, supply, trenching, laying, installation, testing and
maintenance of Optical Fibre Cable, PLB Duct and accessories for
construction of exclusive Optical NLD backbone and Optical Access
Routes on Turnkey Basis for Defence Networks.
19. It is his submission that it is an important work, which cannot be
delayed. He states that the petitioner has not approached this Court with
clean hands and has concealed from the Court, important documents,
which will show the stand of the respondent herein. He stated, no doubt
the MOU has been executed between the parties with regard to executing
the work / tender of BSNL including AMC but Mr.Bhattacharya has
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KUMAR YADAV
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conveniently not referred to Clauses 8.3 and 8.4 of the MOU, which
contemplates execution of separate agreement for AMC. He states that
till date, no separate agreement for AMC has been executed because of
the reasons attributable to the petitioner. In this regard, Mr. Krishnan
states that the respondent had written to the petitioner with regard to the
AMC agreement. The petitioner vide its letter dated March 18, 2021 had
raised certain issues, which were not as per BSNL tender. In fact, the
respondent had vide emails / letters dated May 13, 2021 and May 21,
2021 called upon the petitioner to give its consent for accepting the
BSNL, AMC agreement without change.
20. Though the petitioner had written a letter dated September 02,
2021, there is another issue of rates for providing AMC, which has
cropped up between the parties. According to him, the average price in
Uttarakhand and Rajasthan is ₹2218/- per km whereas the rate of AMC
of the petitioner in Uttar Pradesh is ₹4800/- per km, which is on a higher
side, resulting in a difference of ₹75,91,08,000/- between the price of the
petitioner and recently recorded price in Uttarakhand and Rajasthan. He
states that Clauses 8.3 and 8.4 contemplates that the parties shall execute
an agreement, which means that if it is on mutually agreed terms, an
agreement can be executed. He also states that till date, no agreement
with regard to AMC has been executed by the respondent with the
petitioner for the work in Uttar Pradesh. Hence, TCIL is not liable to pay
the petitioner. It is only for the purpose of AMC that the tenders have
been issued. He also states that the petitioner is within its right to apply
against the tenders. He, on instructions, also states that if the petitioner
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meets the rate of ₹2218/- per km, the grant of tender for AMC could be
considered by TCIL / respondent.
21. That apart, it is his submission that the scope of judicial review
under Section 9 of the Arbitration and Conciliation Act, 1996 is very
limited. That apart, it is a discretionary relief and it is not necessary that
every relief, which has been prayed for, needs to be granted.
22. That apart, he also states, in view of the provisions of the
Specific Relief Act, more specifically Sections 14 (b), 41(e) and 41(h),
the Court cannot interdict an ongoing infrastructure project, which is
ultimately for a larger public interest. In this regard, he has referred to the
judgment of a Coordinate Bench of this Court in the case of West
Haryana Highways Projects Private Limited v. National Highways
Authority of India and Ors., 2020 (272) DLT 446. He also relied upon
the judgment of the Supreme Court in the case of M/s N.G. Projects
Limited v. M/s Vinod Kumar Jain & Ors. 2022 AIR (SC) 1531.
23. Having heard the learned counsel for the parties, the issue which
arises for consideration is, whether the petitioner is entitled to the relief
as prayed for in the present petition. In substance, the relief sought by
the petitioner is a restraint order against the respondent from proceeding
ahead with the tenders issued on May 10, 2022. There is no dispute that
an MOU has been executed between the parties with regard to the work
referred to above, to be awarded by the BSNL. The work includes
procurement, supply, trenching, laying, installation, testing and
maintenance of Optical Fibre Cable, PLB Duct and accessories for
construction of exclusive Optical NLD backbone and Optical Access
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Routes on Turnkey Basis for Defence Networks and also the warranty
thereof and including AMC subsequent to the warranty period. The
Clauses referred to by Mr.Bhattacharya are primarily Clauses 1.2, 4.3 and
7.3 of the MOU, which I reproduce as under:-
"1.2 Whereas the Parties agree that as between
themselves, each party shall be individually responsible for
employing capital and resources in executing the individual
Scope of Work and as a corollary be independently
responsible with respect to the commercial risks associated
with non-performance or negligence / or breach relating to
individual Scope of Work, in accordance with the Project
terms and conditions.
xxx xxx xxx
4.3 The sole responsibility of supply of SOR material
during the execution of project shall be of HFCL. HFCL
shall be entirely responsible for supply, warranty, AMC,
Payments and all other terms mentioned in the teaming
agreement with other OEMs.
xxx xxx xxx
7.3 The Parties shall undertake joint and several
liabilities to the BSNL for the execution of the Project in
respect of their obligations to the BSNL pursuant to the
Project. However, irrespective of joint and several
liabilities agreed between the Parties towards the BSNL,
each of them expressly agrees to bear its own losses and
retain profits arising from the performance of their
respective work split as per Annexure I."
24. The Clauses as referred to by Mr. Bhattacharya, no doubt do
contemplate that the petitioner shall have the responsibility for supply,
warranty, AMC etc., but at the same time Clauses 8.3 and 8.4, of the
MOU, which have been referred to by Mr.Krishnan and reproduced as
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under, also contemplate that for the purpose of AMC, there shall be a
separate agreement to be executed between the parties and concedingly
no agreement has been executed between the parties till date. In the
absence of any agreement between the parties, it is prima facie doubtful,
whether the petitioner can claim AMC as a matter of right.
"8.3 The expiration of 36 calendar months from the
Effective Date or till the successful completion of the project
and warranty obligations whichever is later and period fo
maintenance (AMC) for which Parties shall sign an
independent Agreement.
8.4 On signing of alternate agreement, if mutually
agreed between the Parties."
25. The plea of Mr.Krishnan is primarily that the petitioner had
raised certain issues with regard to the BSNL agreement. That apart, it
raised an issue of rates, which have been awarded by the petitioner for
providing AMC, which according to Mr. Krishnan is on a higher side, as
compared to the rates of Uttarakhand and Rajasthan, which is not
acceptable to the respondent. On this, Mr. Bhattacharya has submitted
that these rates were offered to TCIL at the time when TCIL had bid for
the BSNL Tender.
26. Going by the submissions made by learned counsel for the
parties, it is clear that as per Clauses 8.3 and 8.4 of the MOU, for the
purpose of AMC, there has to be a separate agreement executed between
the parties. Concedingly, the parties have not entered into an agreement
with regard to AMC.
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27. A plea was taken by Mr. Bhattacharya that AMC is being carried
out by the petitioner. The said plea has been contested by Mr.Krishnan
by stating that no such work for Uttar Pradesh has been awarded to the
petitioner. This Court is of the view, albeit prima facie, that the
submission made by Mr. Krishnan based on Clauses 8.3 and 8.4 of the
MOU is appealing. Till such time an agreement is executed between the
parties, the petitioner cannot claim the work of AMC in Uttar Pradesh.
Hence, the prayer as sought for by the petitioner cannot be granted. In
other words, it shall amount to this Court directing the parties to enter
into an agreement, even though the terms are not mutually agreeable.
Such a direction cannot be given.
28. Mr. Krishnan is justified in relying upon the judgment in the case
of West Haryana Highways Projects Private Limited (supra), wherein
this Curt had considered the provisions of the Specific Relief Act, 1963,
held as under:-
"46. On the other hand, I find merit in the contention of
respondent no.1 that if the petitioner, notwithstanding the
protestations of respondent no.1, were directed to carry out
maintenance work, such a direction would undoubtedly
involve an element of supervision from this Court, which is
neither feasible nor permissible in the light of Sections
14(b) read with Section 41(e) of the Specific Relief Act. At
this point, it is important to ask - then who shall carry out
the repair and maintenance work under the Concession
Agreement? The answer to this query lies in Article 17.9.1 of
the Concession Agreement which vests respondent no.1 with
the power to carry out remedial, operation and maintenance
works on the project highway at the risk and cost of the
petitioner, even during the subsistence of the agreement.
Evidently, the impugned NITs were issued by respondent
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no.1 in pursuance of this power. Keeping in view the fact
that there is a serious dispute between the parties regarding
the quality of work rendered by the petitioner, any
injunction granted upon these NITs could possibly impede
or delay the repair and maintenance work on the highway as
also have a direct impact on its safety and condition. For
this reason, granting such an injunction, as rightly
contended by respondent no.1, would fall foul of Section
20A of the Specific Relief Act and operate against public
interest. Thus, keeping in view the fact that the NITs dated
17.04.2020 and 05.05.2020 issued by the respondent no.1
solely pertain to the execution of repair and maintenance
works of the stretch of highway which comprise of the
Delhi/Haryana border to Rohtak Section of NH- 10 from Km
29.700 to Km 87.000, I find no reason to restrain these
NITs. For this reason, all the reliefs sought in the first
petition as also the petitioner's prayer in the second petition
seeking to restrain the respondent no.1 from issuing any
notice/letter with regard to repair and maintenance, cannot
be granted. However, it is made clear that this Court is not
expressing any opinion on whether respondent no.1 is
justified in issuing these NITs or whether the quality of
petitioner's repair and maintenance work is adequate or
not; these issues can only be determined in arbitration.
Therefore, it would be open for the petitioner to agitate
these issues in arbitration."
29. If the petitioner has any grievance with regard to the fact that it
was entitled to the AMC work in Uttar Pradesh, surely the petitioner can
seek such remedy as available in law in terms of the contract executed
between the parties.
30. Insofar as the judgment in the case of M/s N.G. Projects Limited
(supra) is concerned, the Supreme Court held as under:-
"23. In view of the above judgments of this Court, the Writ
Court should refrain itself from imposing its decision over
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the decision of the employer as to whether or not to accept
the bid of a tenderer. The Court does not have the expertise
to examine the terms and conditions of the present day
economic activities of the State and this limitation should be
kept in view. Courts should be even more reluctant in
interfering with contracts involving technical issues as there
is a requirement of the necessary expertise to adjudicate
upon such issues. The approach of the Court should be not
to find fault with magnifying glass in its hands, rather the
Court should examine as to whether the decision-making
process is after complying with the procedure contemplated
by the tender conditions. If the Court finds that there is total
arbitrariness or that the tender has been granted in a
malafide manner, still the Court should refrain from
interfering in the grant of tender but instead relegate the
parties to seek damages for the wrongful exclusion rather
than to injunct the execution of the contract. The injunction
or interference in the tender leads to additional costs on the
State and is also against public interest. Therefore, the State
and its citizens suffer twice, firstly by paying escalation
costs and secondly, by being deprived of the infrastructure
for which the present-day Governments are expected to
work."
31. In view of my above discussion, I do not see that the petitioner
has made out a case for granting the relief as prayed for in the petition.
The petition is dismissed. No costs.
I.A. No. 8902/2022 (for stay)
In view of my decision in the petition, this application has become
infructuous. The same is dismissed as such.
V. KAMESWAR RAO, J
JUNE 03, 2022/ak
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