Delhi High Court
Saurabh Metals Pvt. Ltd. vs Union Of India & Ors. on 12 July, 2023
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 12.07.2023
+ W.P.(C) 8456/2023 & CM APPLs. 32233-32234/2023
SAURABH METALS PVT. LTD ..... Petitioner
Through: Ms. Purti Gupta & Ms. Henna
George, Advocates.
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr. Vineet Dhanda, CGSC with
Mr. Vinay Yadav, Mr. Archit
Aggarwal, Advocates for R-1, 2
& 3.
Mr. Santosh Kr. Rout & Mr.
Abhishek Chakraborty,
Advocates for R-4/PNB.
CORAM:
HON'BLE MR. JUSTICE PRATEEK JALAN
PRATEEK JALAN, J. (ORAL)
%
1. The present writ petition has been filed challenging a
communication dated 08.06.2023 issued by the Ministry of Railways,
Government of India by which it has communicated its decision to
forfeit and encash a performance bank guarantee dated 30.11.2021 for
the sum of ₹25.20 lakhs. The performance bank guarantee was
submitted by the petitioner in support of a bid for supply of 1000 nos.
Box N/BG Axle in terms of the specifications stated in the tender
documents.
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
2. The petitioner is a small scale industry registered under the
Micro, Small and Medium Enterprises ["MSME"] Development Act,
2006. It participated in the aforesaid tender and was awarded the
tender by the Ministry of Railways, Government of India, by a letter
of acceptance dated 17.11.2021. The delivery period specified in the
letter of acceptance was "D+30 weeks", "D" being the date of the
Development Order. It is undisputed that the Development Order in
the present case was issued on 29.12.2021, and the period of 30 weeks
therefrom would conclude on 26.07.2022.
3. The contention of the petitioner in the writ petition is that it was
unable to supply the axles in terms of the aforesaid contract due to the
investment required for manufacturing of axles, in terms of the
technical specifications in the tender. The petitioner was earlier in the
business of forging and had disclosed that it had not supplied axles
previously. Ms. Purti Gupta, learned counsel for the petitioner,
submits that the petitioner was not aware of the extent of investment
required for manufacturing of axles, particularly with regard to the
required heat treatment facility, and such information was also not
disclosed in the tender document. She states that the petitioner was
unable to invest resources at the required level. The petitioner, in fact,
visited the wheel and axle plant of the Indian Railways in Bangalore in
June 2022, and was surprised to see its scale and the equipment
required for the manufacturing process. It therefore requested the
Ministry of Railways to cancel the Development Order.
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
4. Ms. Gupta relies upon a Scheme dated 06.02.2023 [Vivad se
Vishwas I], as revised on 11.04.2023, issued by the Ministry of
Finance, Government of India [hereinafter, "the Scheme"] for relief to
be granted to MSMEs which have been unable to provide goods and
services to the Government of India and public sector undertakings.
She submits that, in terms of the aforesaid Scheme, the petitioner,
being a small scale industry, was entitled to refund of 95% of the
performance security and earnest money deposit forfeited by the
procuring agency. According to learned counsel, this creates a special
equity in the petitioner's favour, upon which encashment of the bank
guarantee in question may be injuncted.
5. Mr. Vineet Dhanda, learned Central Government Standing
Counsel, however, submits that relief in terms of the Scheme was
denied to the petitioner in view of the fact that it did not meet the
eligibility conditions for applicability of the Scheme. He submits that
the delivery period in the present case extended until 26.07.2022,
whereas one of the eligibility conditions in the Scheme was that the
original delivery period/completion period stipulated in the contract
must be between 19.02.2020 and 31.03.2022. Mr. Dhanda contends
that the petitioner was therefore not eligible for the relief sought.
6. In rejoinder, Ms. Gupta draws my attention to the fact that the
Scheme was applicable to eligible tenders where the date of closing of
the tender was between 19.02.2020 and 31.03.2022. She submits that
in the present case, the tenders were to be submitted by 22.07.2021
and the present case therefore falls within the Scheme parameters.
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
7. Having heard learned counsel for the parties, I am of the view
that no injunction can be granted at this stage against invocation of the
performance bank guarantee. A copy of the bank guarantee dated
30.11.2021 has been annexed to the petition. It is unconditional, and
the petitioner's banker has undertaken to pay the amount claimed by
the respondent upon demand, notwithstanding any dispute or disputes
raised by the petitioner. It is well settled that an injunction against
invocation of an unconditional bank guarantee can be granted only in
egregious cases of fraud or special equities, giving rise to irretrievable
injury. Reference, for example, may be made to the judgment of the
Supreme Court in Standard Chartered Bank vs. Heavy Engineering
Corporation Ltd.1.
8. Ms. Gupta submits that special equities in the present case arise
out of the terms of the Scheme, by which special concessions were
given to MSMEs in the wake of the COVID-19 pandemic. The
question therefore at this stage is whether the petitioner, at least prima
facie, falls within the ambit of the Scheme.
9. The revised Scheme dated 11.04.2023 contains the following
eligibility criteria and provisions for relief thereunder:
"2. The following parameters will determine eligibility for
benefits under this scheme:
SN Parameter Eligibility condition
i Nature of Procurement of Goods and
procurement eligible
(2020) 13 SCC 574; paragraphs 19 to 23.
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Digitally Signed
Signing Date:12.07.2023
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for the relief Services
ii Central government Ministry/ Department/ attached
procurement entitles or subordinate office/
to whom this scheme autonomous body/ Central
applies Public Sector Enterprise
(CPSE)/ Central Public Sector
Banks/ Financial Institution etc.
iii Nature of the Registered as a Medium, Small
supplier/ contractor or Micro Enterprises (MSME)
eligible for the as per prevalent scheme of
scheme Ministry of MSME on the date
of claim by supplier/ contractor.
MSME may be registered for
any category of Goods and
Services.
iv Eligible contracts in Where original delivery period/
case of forfeiture of completion period stipulated in
performance security contract was between
or imposition of 19.02.2020 and 31.03.2022
Liquidated Damages (both dates are inclusive).2
(LD) or the damages
levied under "Risk In case of risk purchase, the
Purchase" (RP) or original delivery period of the
debarment action main contract (and not the risk
purchase contract) should be
between 19.02.2020 and
31.03.2022.
v Eligible tenders in Tenders, where date of closing
case of forfeiture of of the tender was between
Bid security (Earnest 19.02.2020 and 31.03.2022
Money Deposit) or (both dates are inclusive)3
debarment action
Emphasis supplied.
Emphasis supplied.
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
3. The following amount shall be refunded by the procuring
entities as a relief under this scheme after determining eligibility
as per para 2 as above:
SN Cause of action Amount/extent of relief
i. Performance security 95% of the performance
forfeited by the security forfeited by the
procuring entities for procuring entity.
failure to execute
contracts by the
contractors.
ii Imposition of 95% of the Liquidated Damages
liquidated damages (LD) deducted or 95% of the
(damages deducted risk purchase amount realized
for late deliveries) or by the procuring entities from
the damages levied the MSME.
under the risk
purchase.
iii Bid security (Earnest 95% of the Bid security (Earnest
Money Deposit) Money Deposit) forfeited.
forfeited
iv Debarment of the Revocation of debarment by
contractor due to issue of an appropriate order by
default in execution of the procuring entity. The date of
eligible contracts/ revocation shall be the date of
eligible tenders under such order.
the scheme
However, in case a firm has
been ignored for placement of
any contract due to debarment
in the interim period (i.e. date of
debarment and the date of
revocation under this order), no
claim shall be entertained."
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
10. As far as performance security is concerned, paragraph 2(iv) of
the Scheme requires the original delivery period/completion period to
be between 19.02.2020 and 31.03.2022. Admittedly, the present case
does not fall within these parameters. I am therefore of the view that
the contention of the Government of India in its communication dated
22.05.2023 to this effect cannot be faulted.
11. I am also of the prima facie view that Ms. Gupta's reliance
upon paragraph 2(v) of the scheme is misplaced. The aforesaid clause
applies to cases of forfeiture of bid security [earnest money deposited
or action for debarment of tender]. In the present case, the bank
guarantee in question was submitted under Clause 13 of the
"Instructions to Tenderers", and was to secure performance of the
contract. Clause 11 of the Instructions to Tenderers specifically
provides that earnest money deposit was not required. The case
therefore falls within paragraph 2(iv), which covers "performance
security", rather than paragraph 2(v) of the Scheme.
12. In the absence of the benefit of the Scheme being available to
the petitioner, I do not find any ground of fraud or special equities to
justify an injunction against the invocation of the bank guarantee. The
petitioner's own case is that it was unaware of the infrastructure
required for compliance of its contractual obligations. It is stated in the
writ petition that the petitioner submitted a tender for supply of 1000
axles only on account of the fact that a quotation for less than 50% of
the tendered quantity was deemed to be unresponsive. I am unable to
accept, at least at this stage, that a contracting party, even if it is an
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
MSME, can be absolved of its contractual obligations on such a
ground. It is for a party to satisfy itself that it is capable of executing a
contract before participating in a tender. In fact, Mr. Dhanda has
drawn my attention to a communication dated 03.07.2021 signed by
the petitioner, in which the petitioner has stated that it has examined
the relevant specifications and is aware of the nature of the stores
required, and that it undertakes to supply the stores in accordance with
the requirements.
13. Having regard to the aforesaid position, I do not find any
ground to injunct the encashment of the subject bank guarantee in the
present proceedings under Article 226 of the Constitution.
14. The petition is, therefore, dismissed and the interim order dated
13.06.2023 is vacated. All pending applications are disposed of.
15. The parties are free to avail of all contractual remedies in
respect of their respective claims and counter claims, if any.
PRATEEK JALAN, J
JULY 12, 2023
'pv'
Signature Not Verified
Digitally Signed
Signing Date:12.07.2023
23:11:04
