Page No.# 1/15 vs M/S. Ar-Allied Subhadra (Jv) And 6 ...
2023 Latest Caselaw 2667 Gua

                                                                Page No.# 1/15

GAHC010078712021




                      THE GAUHATI HIGH COURT
  (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

                         Case No. : WA/239/2021

         THE GENERAL MANAGER (CONS) AND ANR.
         N.F. RAILWAY, MALIGAON, GUWAHATI-781011.

         2: THE CHIEF ENGINEER/CONSTRUCTION-III
          N.F. RAILWAY
          MALIGAON
          GUWAHATI-781011

         VERSUS

         M/S. AR-ALLIED SUBHADRA (JV) AND 6 ORS.
         HAVING ITS PRINCIPAL PLACE OF BUSINESS AT CHANDANA PARK,
         MAHANANDA PARA, DIST.- DARJEELING, SILIGURI-734001, WEST
         BENGAL.

         2:M/S. AIPL- RIC (JV)
          HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 201 NEW PARK STREET
         KOLKATA-700017
         WEST BENGAL.

         3:M/S. SUBHADRA CONSTRUCTION
         A PARTNERSHIP FIRM HAVING ITS PRINCIPAL PLACE OF BUSINESS AT
         CHANDANA PARK
          MAHANANDA PARA
          DIST.- DARJEELING
          SILIGURI-734001
         WEST BENGAL.

         4:SHASHIPAL MEHTA
          S/O- LATE RAM IQBAL MEHTA
          R/O- FLAT NO. B-2
          BLOCK NO. 1
          GREEN VISTA RESIDENCY APPAR BHANU NAGAR
          SEVAK ROAD
                                                                 Page No.# 2/15

     P.O. AND P.S. SILIGURI-734001
     DIST.- DARJEELING
     WEST BENGAL
     ONE OF THE PARTNER OF PETITIONER NO. 3.

     5:AJAY KR. SRIVASTAV
      S/O- LATE RAM SHANKAR PRASAD SRIVASTAVA BIDYA APARTMENT
      FLAT NO. L-2
      DANGIPARA
      SILIGURI-734001 ONE OF THE PARTNER OF PETITIONER NO. 3.

     6:MD. ISLAMUDDIN
      S/O- LATE MD. NOIMUDDIN
      BIDYA APARTMENT
      FLAT NO. N-2
      DANGIPARA
      SILIGURI-734001 ONE OF THE PARTNER OF PETITIONER NO. 3.

     7:M/S. ALLIED INFRASTRUCTURE AND PROJECTS PVT. LTD.

     HAVING ITS REGD. OFFICE AT 1
     GANESH CHANDRA AVENUE
     2ND FLOOR
     KOLKATA-700013
     WEST BENGAL

                              -BEFORE-
                      HON'BLE THE CHIEF JUSTICE
          HON'BLE MR. JUSTICE ARUN DEV CHOUDHURY


For the appellants     : Mr.G. Goswami, Advocate


For the respondents    : Mr.R. Hussain,

Mr. A.A. Ahmed, Advocates.

Date of Hearing        : 01.06.2023

Date of Judgment       : 04.07.2023
                                                                       Page No.# 3/15



                                JUDGMENT & ORDER
S. Mehta, C.J.

The instant intra-Court writ appeal takes exception to the judgment and final order dated 25.03.2021 passed by the learned Single Judge whereby the writ petition, being, WP(C) 155/2020 preferred by the respondents herein was accepted and the order dated 02.05.2019 issued by the appellants, cancelling the contract entered into with the respondents (writ petitioners) and forfeiting their Earnest Money Deposit (EMD) to the tune of Rs.51,51,870/-, was interfered with and reversed.

2. The brief facts relevant and essential for disposal of the appeal are noted hereinbelow.

A Tender Notice dated 17.09.2018 was floated by the appellant Northeast Frontier Railway (hereinafter referred to as the Tendering Authority) for carrying out the task of earthwork in forming embankment including Pawakhali station yard, construction of minor bridges including RUB/LHS [Total 44 Nos.], including other miscellaneous ancillary works from Chainage 83.50 Km. to 106.837 Km. between station Pawakhali to Thakurganj in connection with construction of New BG line from Arariya to Galgalia of NF Railway (Construction). The approximate value of work was Rs.1000373270.52 and the earnest money deposit was quantified at Rs.51,51,870/-. The respondents/writ petitioners claim that pursuant to the publication of the tender notice, they formed a joint venture and participated in the tender process by depositing the earnest money as quantified (supra). While the bidders (respondents herein) were waiting for acceptance of their bids and completion of the formalities to conclude the contract in question, to the utter shock and surprise of the joint venture bidders, Page No.# 4/15

i.e. the respondents/writ petitioners, a communication dated 02.05.2019 was issued by the tendering authority conveying that not only the contract in question purportedly entered into with the writ petitioners had been cancelled but in addition thereto the EMD had also been forfeited. The said communication/order was challenged by the joint venture bidders/respondents by filing the captioned writ petition, which has been accepted by the learned Single Judge vide order dated 25.03.2021, which is assailed in this writ appeal.

3. We have heard learned counsel appearing for the parties and perused the material available on record.

4. On a perusal of the impugned judgment, it transpires that the reasons which persuaded the learned Single Judge to interfere with the impugned action were that:-

(i) there was no concluded contract inter se between the parties and that there was no reliable material on record to show that the letter of acceptance dated 18.01.2019 was ever delivered to the bidders in writing.

(ii) the endorsement of the postal department that the premises were found closed could not be equated to a refusal which would have a different connotation.

(iii) non-delivery of the communication dated 18.01.2019 on account of the remark of "closed" could not lead to presumption of service and delivery of the letter dated 18.01.2019.

(iv) As per the stipulation in the letter of acceptance dated 18.01.2019, the bidders were required to return the duly signed duplicate copy in all pages so as to constitute a binding contract. Since hardcopy of the letter of acceptance along with the annexures was never served upon the Page No.# 5/15

bidders, the parties could not be said to have arrived at a concluded contract. Since there was no contract between the parties, the question of termination could not arise and the EMD could not be forfeited.

5. Having held so, the learned Single Judge proceeded to interfere with and reverse the order dated 02.05.2019 whereby termination of the contract and forfeiture of EMD were directed.

6. Mr. G. Goswami, learned counsel representing the appellants urged that the NIT by itself indicated that the process was being invited as an e-Tender. The joint venture bid of the respondents herein was accepted by the Tendering Authority, i.e. the appellants herein and the letter of acceptance was issued in a hardcopy to the respondents. However, the respondents somehow managed to have the hardcopy returned by an endorsement "closed" purportedly made by the postal department.

Nonetheless, in terms of the tender notice dated 17.09.2018 which clearly indicated that the open tenders were being invited through e-Tendering process, the letter of acceptance was also transmitted to the joint venture partnership on their official e-mail address and thus, the plea taken by the respondents/writ petitioners that there was no concluded contract between the parties because the documents were not provided to them is absolutely frivolous and unacceptable.

Mr. Goswami submitted that is the admitted case in the pleadings of the writ petition that the petitioners received the letter of acceptance forwarded to them through email. However, they tried to evade the acceptance of their bid offer by devising a totally fictional story that the validity of the offer of the joint venture bidders was only for 60 days w.e.f. date of opening of the tender and Page No.# 6/15

since the land acquisition process had not been completed, the writ petitioners intimated the Railways not to issue the letter of acceptance. However, the letter of acceptance was issued unilaterally but well after the expiry of validity of the offer.

In this regard, the contention of Mr. Goswami was that the bidders themselves wrote a letter dated 25/26.12.2018 (Annexure -VI to the writ petition) whereby the term of their consent was extended for a period of 30 days. It is during this extended period that the letter of acceptance was issued. He drew the Court's attention to the following stipulations in the letter of acceptance dated 18.01.2019;-

"This acceptance letter shall be legal and enforceable contract between you and Railway. If you fail to execute the work or fail to execute formal Contract Agreement in accordance with the stipulation in the acceptance letter, it would make you liable for breach of the contract and Railway Administration shall be entitled to take recourse to and action as deemed fit in accordance with stipulation of the tender.

While every care has been taken to fully incorporate the decision of the accepting authority regarding acceptance of your offer, the Railway administration reserves the rights to correct the inadvertent mistakes which may have occurred in communication of the accepted rates and other terms and conditions at the time of signing the formal contract agreement between the contractor and the Railway administration."

and urged that the non-execution of a formal contract is of no consequence to the action of termination and forfeiture because the contract stood completed when the bid submitted by the respondents herein, being a bid offered by the highest qualifying bidders within the meaning of the Indian Contract Act, was accepted by the tendering authority with the issuance of letter of acceptance dated 18.01.2019.

He urged that in spite of service of the letter of acceptance through email, Page No.# 7/15

when no response was forthcoming from the side of the successful bidders, i.e. the respondents, a letter dated 13.03.2019 was issued to them intimating that they had avoided to perform their obligations in terms of the letter of acceptance and in case they failed to submit the Performance Guarantee for an amount equal to 5% of the contract value within 30 days, as per clause 36(a) of the tender document, the contract would be terminated, the EMD forfeited and other dues against the contract would also be recovered. It was further mentioned in the said letter that even after expiry of 55 days from the date of issuance of the letter of acceptance, the bidders had not responded by furnishing the Bank Guarantee and the execution of the contract agreement was held up on their account. This information was further reiterated by notice dated 29.03.2019 (Annexure-5) but despite that, the bidders failed to respond whereupon the impugned communication dated 02.05.2019 was issued terminating the letter of acceptance and forfeiting the EMD in terms of the NIT and the Regulations for Guidance of Bidder.

7. Mr. Goswami urged that the plea taken by the respondents/writ petitioners before the Single Bench that they did not receive the copy of the letter of acceptance is nothing but a ruse to avoid the consequences of non- performance. The fact regarding receipt of the said letter through email is not disputed. If at all, the bidders felt any constraint in sending back the signed documents after receiving the letter of acceptance, because they had not received the hardcopy thereof, they could immediately have responded through email and fresh copies would have been sent to them. However, they intentionally chose to remain silent and did not respond to the notices dated 20.03.2019 and 29.03.2019 and thus, it is virtually a situation wherein the bidders acquiesced to the fact of having violated the terms and conditions of the Page No.# 8/15

letter of acceptance.

8. Regarding the contention of the respondents/writ petitioners that the land for construction purposes under the NIT had not been acquired, Mr. Goswami urged that the said plea is totally frivolous and made up because the project was to be completed in phases. Sufficient land had already been acquired for commencing the project. He drew the Court's attention to the Clause 19 of the Regulations for the Guidance of Tenderers as per which, before making the offer, the tenderers were required to make an inspection of the site so as to satisfy themselves about the hydrological, climatic and physical conditions prevailing at site, the nature, extent and practicability of the works, all existing and required roads and other means of communication etc. They were under an obligation to obtain all necessary information as to risk, contingencies and other circumstances which could affect or influence their tender as provided in para 19.1. There was a specific stipulation in the Regulations for Guidance that the tenderer would be deemed to have inspected the site in all respects before quoting rates and that he had satisfied himself about the nature and type of work including ancillary works necessary for the satisfactory fulfilment of the contract.

It was the contention of Mr. Goswami that the burden to inspect the site conditions before quoting the rates was upon the bidders and since the bid was offered by the respondents joint venture bidders being conscious of all these site conditions, it has to be presumed that they were aware about the availability of land and the feasibility of the work conditions before submitting their bids.

9. Regarding the observations made in the impugned judgment that there was no concluded contract between the parties and thus, the termination and Page No.# 9/15

forfeiture could not be done, Mr. Goswami placed reliance on the Supreme Court judgments in the cases of National Highways Authority of India -Vs- Ganga Enterprises & Anr., reported in (2003) 7 SCC 410 and Kailash Nath Associates -Vs- Delhi Development Authority & Anr. , reported in (2015) 4 SCC 136 and urged that the concept of concluded contract would have no applicability in the present scenario. The N.F. Railways, being the Tendering Authority, floated the NIT and the respondents/writ petitioners as joint venture submitted their bid. The bid of the respondents was found to be the highest qualifying bid and was accepted. Thus, the contract stood concluded with the acceptance thereof by the Tendering Authority, i.e. the appellants herein. The subsequent signing of documents was only relevant for the purpose of formal documentation. However, for all practical purposes, the contract stood concluded no sooner the letter of acceptance was issued by the Railways i.e. on 18.01.2019. He thus implored the Court to accept the appeal; set aside the impugned judgment and restore the decision of the appellants and allow them to proceed further in terms of the decision/communication dated 02.05.2019.

10. Per contra, learned counsel Mr. R. Hussain representing the respondents/writ petitioners, vehemently and fervently opposed the submissions advanced by the appellants' counsel. He urged that it is an admitted case of the appellant Railways that the hardcopy of the letter of acceptance dated 18.01.2019 was not served on the bidders. Though the letter was received through email, the annexed documents as mentioned at the concluding part of the acceptance letter were never provided to the bidders, and thus, they were prevented from signing the formal contract agreement for reasons beyond their control and as a consequence, the contract inter se between the parties was never concluded. Since there was no concluded contract, there is no legal Page No.# 10/15

sanctity behind the action of termination of the contract and the forfeiture of the EMD.

In support of his contentions, learned counsel for the respondents/writ petitioners has placed reliance on the Supreme Court judgments in the cases of Central Coal Fields Limited & Anr. -Vs- SLL-SML (Joint Venture Consortium) & Ors., reported in (2016) 8 SCC 622 and Union of India -Vs- Vertex Broadcasting Company Private Limited & Ors. , reported in (2015) 16 SCC 198.

He thus implored the Court to dismiss the appeal and affirm the judgment rendered by the learned Single Judge.

11. We have given our thoughtful consideration to the submissions advanced at Bar; carefully perused the impugned judgment and material available on record; and have given our respectful consideration to the precedents cited at Bar.

12. The very beginning line of the NIT dated 17.09.2018 makes it clear that open tenders were being invited through e-Tendering process. Thus the tendering authority, i.e. NF Railway (appellant herein) was undeniably entitled to communicate with the bidders through email. The fact regarding the respondents/writ petitioners being the joint venture bidders having received the communication dated 18.01.2019 through email is not disputed.

Clause 7.1 of the Regulations for the Guidance of Tenderers stipulates that the bidder whose tender is accepted shall be required to appear in the office of the General Manager concerned to execute the contract documents within seven days after notice to do so. Failure to comply shall constitute a breach of the agreement effected by the acceptance of the tender in which case the full value Page No.# 11/15

of the earnest money accompanying the tender shall stand forfeited without prejudice to any other rights or remedies.

Clause 7.2 provides that in the event of any tenderer, whose tender is accepted refusing to execute the contract documents as therein before provided, the Railway may determine that such tenderer has abandoned the contract leading to consequence of cancellation and forfeiture of EMD and also to recover the liquidated damages for such default equivalent to the amount of Performance Guarantee.

Clause 19 of the Regulations for the Guidance of Tenderers makes it obligatory upon the tenderer to examine the site in extenso and to satisfy itself before quoting the rates. Once the rates are quoted, it would be presumed that the tenderer has inspected the site.

13. A fervent plea was advanced by the respondents/writ petitioners' counsel that the Railways had not even acquired the land for construction of the project works and thus, the tenderer would have been unable to execute the project. This argument is fallacious on the face of record because it was made clear in the Regulations for the Guidance of Tenderers that they should inspect the site before quoting the rates so as to be sure of the working conditions. Once the rates were quoted, the tendering authority is entitled to raise presumption that the bidder(s) had inspected the site and evaluated the rate offered according to the site conditions. That apart, the Railways had admittedly acquired 30% of the land from chainage no-83.50 km to 106.837 km. A specific plea is taken by the Railways in their pleadings that the process for acquisition of the remaining land was under way. The fact that 30% of the land had been acquired and was available is admitted in the letter dated 18.01.2019 forwarded by the respondents to the Chief Engineer, Construction, N.F. Railway, Maligaon. Hence, Page No.# 12/15

the plea of non-availability of land taken by the respondents/writ petitioners in defence of their action of not coming forward to execute the formal contract agreement is frivolous on the face of record.

14. There is no merit in the argument of the respondents that as there was no executed contract between the parties, termination was not permissible. Law is well settled in this regard by Hon'ble the Supreme Court in the case of National Highways Authority of India (supra) wherein at paragraph 9, after discussing the relevant provisions of the Contract Act, it was held that by invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a Page No.# 13/15

term was not there, even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted.

15. In the case at hand, as per the terms and conditions of the NIT and the Regulations for Guidance to tenderers, which we have referred extensively (supra), the obligation to execute the formal contract after acceptance of the tender was upon the bidders. The respondents/writ petitioners submitted their bid and quoted their rates being conscious of the prevailing terms and conditions. Clause 19 of the Guidelines lays an onus upon the bidders to inspect the site conditions on all aspects before quoting the rates. Once these rates are quoted, it is to be presumed that the bidder has made himself aware of all working conditions. This provision is made so that the bidder may apprise himself about the site conditions before offering the rates. The rate offered by the joint venture bidders was accepted by the tendering authority with the issuance of the letter of acceptance dated 18.01.2019 and hence, the contract stood concluded. The subsequent step of signing the documents was only to create the formal working document. The relevant paragraph quoted (supra) from the letter of acceptance dated 18.01.2019 puts the controversy beyond the pale of doubt. The ratio of the Supreme Court judgment in the case of Central Coal Fields Limited (supra) relied upon by the respondents' counsel is not applicable to the facts of the present case because the issue involved therein was regarding furnishing of bank guarantee in the prescribed format and the consequences of deviation therefrom.

The Supreme Court judgment in the case of Union of India -Vs- Vertex Broadcasting Company Private Limited and others (supra) relied upon by Page No.# 14/15

the respondents' counsel will also not apply to the present fact scenario because the said judgment also deals with an entirely different set of facts wherein the employer unilaterally modified the conditions in the final agreement whereupon the bidders refused to accept the modified conditions. In that eventuality, the forfeiture of the earnest money was held to be unjustified. In the present case, no such situation prevails and hence, the said judgment does not apply to the facts prevailing in the case at hand.

16. We are convinced that the ratio of the Supreme Court judgment in the case of National Highways Authority of India -Vs- Ganga Enterprises (supra), wherein the Hon'ble Supreme Court made the following observations in paragraph 9,

"9. In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always Page No.# 15/15

included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted."

concludes the controversy in favour of the appellant. It being a case of the Public Sector Undertaking, issuing the NIT, by inviting the offers of the prospective bidders, accepted the rates offered by the joint venture bidders by the letter dated 18.01.2019 and hence, the contract stood concluded.

17. Hence, we are of the firm view that the learned Single Judge was not justified in causing interference into the decision/communication dated 02.05.2019 of the tendering authority, i.e. the appellant herein, in cancelling the bid of the respondents/writ petitioners and forfeiture of the EMD offered along with the bid. As a consequence, the impugned judgment and order dated 25.03.2021 passed by the learned Single Judge in WP(C) 155/2020 is hereby reversed.

The appeal is allowed in these terms.

No order as to cost.

                      JUDGE                           CHIEF JUSTICE


Comparing Assistant