Gujarat High Court

Hermes Technologies Private ... vs Union Of India on 22 August, 2022

Bench: Ashutosh J. Shastri

     C/SCA/18145/2021                          CAV ORDER DATED: 22/08/2022




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/SPECIAL CIVIL APPLICATION NO. 18145 of 2021

=============================================

HERMES TECHNOLOGIES PRIVATE LIMITED Versus UNION OF INDIA ============================================= Appearance:

for the Respondent(s) No. 1,3 MR KUNAN B NAIK(3210) for the Respondent(s) No. 2 =============================================

CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR and HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI

Date : 22/08/2022

CAV ORDER

(PER : HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI)

1. The present petition is filed under Article 226 of the

Constitution of India for seeking the following reliefs:-

"A. Your Lordships may be pleased to issue a writ of certiorari and or any other appropriate writ, order or direction to quash and set aside the termination letter dated 18th August 2021 (Annexure H) issued by the Respondent No. 3 herein by declaring it illegal and bad in law;

B. Your Lordships may be pleased to issue a writ of certiorari and or any other appropriate writ, order or direction to declare the action of Respondent No.2 in invocation of the Bank Guarantee dated 1st January 2020 bearing Bank Guarantee No. 006GT02200010017 issued by HDFC bank in favour of the Respondent No.2 (Annexure E) as bad in law, illegal, and violative of Article 14 and 16 of the Constitution of India and further be

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

pleased to direct the Respondent No.2 to repay the amount of Rs.10,00,000/ (Rupees Ten Lakh Only) to the Petitioner with appropriate interest thereon;

C. Pending hearing of this petition, Your Lordships may be pleased to direct the Respondent No.2 to immediately repay the amount of Rs.10,00,000/- (Rupees Ten Lakh Only) to the Petitioner with appropriate interest thereon;

D. Grant ad-interim relief in terms of prayer clause (C);

E. Your Lordships may be pleased to grant such order and further orders/reliefs as may be deemed just and proper in the interest of Justice."

2. The background of facts which has given rise to filing of

present petition is that respondent no. 2 with an intention to

enhance the production from the marginal nomination fields by

infusion of new technology and expertise invited bids to

undertake the operations to enhance the production of 17

onshore areas comprising of producing oil and gas fields by

issuing Notice Inviting Offer (for short 'NIO') for Production

Enhancement Operations in Marginal Nomination Fields.

According to the petitioner, after understanding the details of

work as provided in the Motera Field Docket (Ahmedabad Asset)

as published by the respondent no.2 in June, 2019 and Model

Production Enhancement Contract (For short 'MPEC')

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

submitted its e-bid for Contract Area No. ONGC/MNF/2019/CA-

3/MOTERA on 20.01.2020. As required under Clause - 13(IV) of

the said NIO, petitioner submitted a bid bond of Rs.10,00,000/-

(Rupees Ten Lakhs only) in the form of Bank Guarantee dated

01.01.2020 issued by HDFC Bank in favour of respondent no. 2.

in view of Article 18.3 of the said MPEC, it was stipulated that in

case of crude oil and natural gas delivery point at common

facilities operated by ONGC for further processing and

transportation, the processing and transportation charges shall

not be levied and such facility may be provided to the contractor

subject to availability. It is further the say of the petitioner that

on 14.05.2020, respondent - Corporation accepted petitioner's

e-bid and respondent no. 3 issued a Notification of Award (NoA)

in favour of petitioner for Contract Area CA-3 comprising of four

(4) fields at Motera, South Viraj, Virgovindpura and Wamaj.

According to the petitioner, in response to such NoA, the

respondent - Corporation arranged filed visit for the petitioner

and after concluding the said visit, the Director/s of petitioner

were informed about lacunas observed by the authority at

various sites. Petitioner also raised concerns about the

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

operation of Motera GGS as contrary to what was provided in

the said Motera Field Docket and petitioner was informed by

the officers of the ONGC that Motera GGS was not a common

facility in terms of Article 18.3 of MPEC and as such, the

operational costs of Motera GGS will have to be borne by

petitioner. It was also informed that about four (4) wells were

mentioned that in the said Motera Field Docket and same will

not be allocated to petitioner. In view of the aforesaid exchange

of communication between petitioner and the respondent -

Corporation, suddenly on 18.08.2021, respondent no. 3 vide

letter No. DLI/CMM/MNF/ZNSAC19007/CA-3/MOTERA illegally

and arbitrarily terminated NoA and encashed the bid bond/Bank

Guarantee of Rs.10 lakhs which was provided by petitioner.

2.1. Petitioner as such feeling aggrieved by and dissatisfied

with the said sudden and abrupt decision dated 18.08.2021 was

constrained to approach this Court by way of present petition

under Article 226 of the Constitution of India for challenging the

same and for seeking consequential reliefs as prayed for.

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

3. On pleadings having been completed, learned advocates

appearing on behalf of both the parties prayed for their petition

being heard and disposed. In view of the urgency being

projected and accordingly, upon request of the learned

advocates, this Court took up the hearing of present Special

Civil Application.

4. Mr. Anuj Dave, learned advocate appearing on behalf of

the petitioner has vehemently contended that action on the part

of the respondent - authority in passing the impugned decision

as also encashment of the Bank Guarantee is not only unjust and

arbitrary, but fainted with mala fides and as such, has submitted

that ONGC being an instrumentality of State is under obligation

to act fairly, justly and reasonably, which is the demand of

Article 14 of the Constitution of India. It has further been

contended that the respondent - Corporation has acted with the

petitioner with mala fide intent and other similarly placed

bidders as provided in its Motera Field Docket that Motera GGS

is joint facility for Motera and Kalol and as such, petitioner

submitted bid under the bona fide belief that operational cost of

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

the said GGS shall be borne by the respondent - Corporation by

virtue of Article 18.3 of MPEC. Had it been conveyed to

petitioner that operational cost would be borne by the

petitioner, petitioner would have thought while submitting the

bid and as such, the respondent - authority with sole intention

to defeat the right of petitioner has illegally terminated the NoA

and encashed the Bank Guarantee and thereby prejudiced the

right of the petitioner.

4.1. Learned advocate Mr. Dave has contended that the

petitioner was initially informed by the respondent -

Corporation that it was no longer authorized to handover four

(4) wells that were to be operated by the petitioner as per the

terms of the contract and, therefore, could not be allocated to

the petitioner. On the contrary, the concerned officials of ONGC

were pressurizing the petitioner to purchase the disputed land

worth more than Rs.23 crores and as such, the clever design

was made by the respondent - authority against the petitioner.

Hence, Mr. Dave has vehemently requested the Court to grant

the relief as prayed for in the petition. According to learned

advocate Mr. Dave, procurement of land was a part of

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

requirement and acquisition was to be made by the respondent

- authority rather than the petitioner and as such, the action on

the part of the respondent - Corporation is not only unjust and

arbitrary, but unfair to the petitioner. By drawing attention to

various documents, it has been contended that petitioner was

not dealt with in a fair manner. It has further been contended

that impugned order which has been passed is not only unjust

and arbitrary, but also in violation of the principles of natural

justice inasmuch as, no detailed reasons are assigned and as

such, the order under challenge is not sustainable in the eye of

law. Hence a request is made to allow the petition.

5. As against this, Mr. Kunan Naik, learned advocate

appearing on behalf of respondent - Corporation has

vehemently contended that order impugned in the petition is

passed after providing full opportunity to the petitioner and the

same is passed in conformity with the principles of natural

justice. According to learned advocate Mr. Naik, the terms and

conditions were explicitly clear and, since, there was no

ambiguity of any nature and with open eyes, petitioner

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

participated in the bid process, as such, now it is not open for

the petitioner to raise any grievance. Apart from that learned

advocate Mr. Naik has further submitted that as per the terms

and conditions of the tender documents and in view of Clause 5

of NoA, petitioner was required to furnish Performance Bank

Guarantee (PBG) of Rs.4,63,35,760/- within a period of sixty

days from the date of issuance of NoA i.e. latest by 13.07.2020

and here is a case in which despite petitioner being informed

specifically and requested time and again, has miserably failed

to meet with the said circumstance. On the contrary, vide letter

dated 06.07.2020, a request was made to ONGC for extension of

PBG and time has also been extended for further period of 30

days commencing from 13.07.2020 to 12.08.2020. Once again, a

further period of 30 days was also extended as per the request

of petitioner itself i.e. upto 11.09.2020 and later on, it was

specifically informed by the respondent - authority to petitioner

that in case of failure to submit PBG, action will be taken as per

the tender terms and conditions.

5.1. Learned advocate Mr. Naik has further submitted that

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

even later on vide e-mail dated 17.02.2021 and 29.06.2021

reminding petitioner to submit PBG as per Clause 5 of NoA ,

however, despite such opportunity being extended and more

than enough time is granted and despite final intimation as well,

PBG till date has not been submitted and as such, same being a

clear failure to meet with the terms and conditions, such

material breach has been dealt with by the authority by passing

the impugned order, which according to learned advocate Mr.

Naik cannot be assailed while the petitioner in the background

of present facts. Here is the case wherein, petitioner rather has

forced the respondent authority to initiate action. As a result of

this, the respondent - authority, according to learned advocate

Mr. Naik is thoroughly justified in terminating the NoA with

immediate effect.

6. Having heard the learned advocates appearing for the

respective parties and having gone through the material on

record, it appears that as per the terms and conditions of the

tender documents and Clause 5 of NoA, petitioner was required

to furnish Performance Bank Guarantee within sixty days and

same has not been submitted undisputedly even after granting

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

more than sufficient opportunities and extension of time. Term 5

of NoA is reflecting and clearly stated in communication dated

14.05.2020 reflecting on page 357, which reads as under :-

"PERFORMANCE OF BANK GUARANTEE (PBG):

As per Article 14.1 of Model Production Enhancement Contract (MPEC), please submit the Performance Bank Guarantee in the format as per Annxure-1(Y-2) of NIO of Bid document for amount of Rs.4,63,35,760.00 (Rupees Four Crores Sixty Three Lakhs Thirty Five Thousand Seven Hundred and Sixty Only) within 60 days from the date of this Notification of Award (NoA).

The Performance of Bank Guarantee should be either valid for the entire Contract Period or valid for not less than 12 Months provided that it shall be renewed no later than on Month prior to the expiry of the existing Performance Bank Guarantee. Fields should be handed over only after submission of Performance of Bank Guarantee by you.

Please keep the bid bond valid and alive till submission of PGB."

6.1. It is clearly emerging from the order itself that such

Performance Bank Guarantee (for short, 'PBG') though

requested to be furnished has not been furnished and for that

purpose, even reminders have also been made by the

respondent authority by granting extension of time as prayed

for by petitioner. Vide letter dated 06.07.2020, petitioner itself

has requested ONGC for extension of time for furnishing PBG,

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

which came to be extended for a period of 30 days vide

communication dated 27.07.2020. It further appears that

request was made by the petitioner seeking extension of time to

furnish PBG and respondent vide letter dated 19.08.2020

granted time to the petitioner to submit PBG, namely time was

extended upto 11.09.2020 and despite reminders having been

sent through e-mail on 17.02.2021 and 29.06.2021, it was not

furnished. Clause 5 of NoA has not been adhered to by

petitioner which clearly attracts breach of terms and conditions

and as such, prima facie the authority is justified in taking

action against the petitioner. Extraordinary jurisdiction under

Article 226 of the Constitution of India is also basically based

upon principle of equity as well in the instant case, conduct of

the petitioner disentitles the petitioner seeking any relief. It is

in this background, respondent authority was constrained to

take action in terms of the tender documents and as such, there

is hardly any reason to exercise extraordinary jurisdiction in

favour of the petitioner, more particularly, when the terms and

conditions are apparently clear. It appears that Clause 23

relates to issue of termination as is reflecting on page 336

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

produced by the petitioner and one of the clauses i.e. clause

23.2 empowers the owner to terminate the contract by giving

notice and different events would warrant such termination.

One of the clause contained is clause (f) which clearly stipulates

that owner may terminate the contract in the event the

contractor fails to maintain Performance Bank Guarantee as per

the provisions of the contract. The said Chapter also deals with

the consequences of the termination and as such, apparent

reading of these terms and conditions relates to impugned

action. It appears that prima facie the respondent - authority

appears to be justified in passing the impugned communication.

7. Additionally, this Court has also observed from the records

that there is a specific mechanism provided for Dispute

Resolution as stipulated under Article 27, which undisputedly is

applicable to the petitioner and in view of the said clause, the

issue which is tried to be agitated by the petitioner in this

petition, can as well be resolved and adjudicated upon by this

agreed dispute resolution mechanism. The said clause being

relevant, same is reproduced hereunder :-

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

ARTICLE-27

DISPUTE RESOLUTION

"27.1.The Parties will use all reasonable efforts to resolve any and all contractual or other disputes or Claims arising out of or in connection with this Contract, including but not limited to any questions regarding its existence, performance, breach, validity or termination thereof or the exercise of the powers of the Joint Monitoring Committee (the "Dispute") by amicable discussions between the Parties.

27.2.In the event of a Dispute, either Party shall serve a written notice upon the other Party (the "Dispute Notice") proposing that the Parties seek to resolve the Dispute by amicable negotiation. If a Dispute is not amicably settled within 15 (fifteen) days as of the receipt of the Dispute Notice or such extended time as the Parties may agree upon, either Party may require that senior management of each Party meet in person or by phone within 25 (twenty five) days of the Dispute Notice to attempt to resolve the Dispute.

27.3. If a Dispute is not amicably settled within 30 (thirty) days as of the receipt of the Dispute Notice, such Dispute shall at the request of either Party, to the exclusion of the ordinary courts be referred to and finally resolved through arbitration under the Arbitration and Conciliation Act, 1996 (as amended from time to time) by 3 (three) arbitrators. The Parties shall appoint one arbitrator each and the Arbitrators so appointed shall appoint the third Arbitrator which shall act as the presiding Arbitrator.

27.4. If any Party fails to appoint an Arbitrator within thirty (30) days of receipt of the written

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

request to do so, or if the Arbitrators, so appointed by the Parties fail to agree on the appointment of the third Arbitrator within thirty (30) days of the appointment of the last arbitrator to the Arbitral Tribunal, the third arbitrator shall be appointed in accordance with Arbitration and Conciliation Act, 1996 as amended from time to time."

8. From the aforesaid circumstances prevailing on record,

this Court is of the opinion that no case is made out by the

petitioner to exercise equitable extraordinary jurisdiction and

this Court is also of the opinion that petitioner is not remediless.

Hence, looking to the scope well defined by catena of decisions

delivered by the Apex Court, we are of the opinion that no case

is made out to call for any interference.

9. Learned advocate Mr. Dave has relied upon two decisions

delivered by Hon'ble Supreme Court in the case of Monnet

Power Company Limited v. Union of India & Ors., reported

in 2016 239 DLT 10 as well as in the case of Vice Chairman

& Managing Director, City and Industrial Development

Corporation of Maharashtra Ltd., v. Shishir Realty Private

Limited & Ors., reported in 2021 SCC Onlilne SC 1141. But,

the present background of facts which are prevailing and the

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

undisputed situation reflecting from the impugned order, we see

no reason or assistance to the petitioner's case as the

backgrounds of facts of the said cases are altogether different.

From the decision delivered by Delhi High Court in the case of

Monnet Power Company Limited (supra), an attention is drawn

to paragraph 32 of the said decision to substantiate his case, but

it is not understandable as to how the said observations would

come to rescue the petitioner from the undisputed position

reflecting from the impugned action. Hence, this decision is of

no assistance to the petitioner. So far as the decision in the case

of Vice Chairman & Managing Director, City and Industrial

Development Corporation of Maharashtra Ltd. (supra), it is in a

different set of circumstance altogether and emphasis has been

tried to be laid on paragraph 64 of the said decision by the

learned counsel for the petitioner. Here there is no question of

promissory of estoppel available to the petitioner in view of the

fact that it is not the case at any point of time raised before the

authority that on account of issue of procurement of land,

petitioner's request has been not adhered. On the contrary, the

impugned order reflects that without any demur, extension has

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

been sought on more than one occasion and as such, when the

terms and conditions of the tender documents are not

ambiguous and clear enough to indicate what is to be meted

with by the petitioner, there is hardly any reason for this Court

to apply the said principle of estoppel which is tried to be

canvassed and as such, the said decision is also of no assistance

to the petitioner.

10. Yet one another peculiar feature is also noticed by the

Court i.e. pre-bid conference had also been held to understand

more vigorously clarity of terms and requirements of conditions

and the scope of work, but it appears from the impugned order

and the record that no such grievance was voiced out by

petitioner and as such, looking to the overall circumstances

prevailing on record, the Court is of the view that no case is

made out by the petitioner for grant of any prayer.

11. Additionally, law is abundantly clear by now that in

respect of tender terms and conditions and in respect of

contractual disputes, judicial review shall not be undertaken

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

lightly and as such, keeping the said authoritative principle in

mind, the Court is of the opinion that present petition does not

deserve to be entertained. It has been held by the Hon'ble Apex

Court in the case of Reliance Energy Limited & Anr., v.

Maharashtra State Road Development Corporation

Limited & Ors., reported in (2007) 8 SCC 1 to the following

effect:-

36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of "non-discrimination". However, it is not a free- standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to "right to life". In includes "opportunity". In our view, as held in the latest judgment of the Constitution Bench of nine-Judges in the case of I.R. Coelho vs. State of Tamil Nadu (2007) 2 SCC 1, Article 21/14 is the heart of the chapter on fundamental rights. It covers various aspects of life. "Level playing field" is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field". We may clarify that this doctrine is, however, subject to public interest. In the world of globalization, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)

(g) of the Constitution. This is because the said doctrine provides space within which equally-placed competitors are allowed to bid so as to subserve the larger public

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

interest. "Globalization", in essence, is liberalization of trade. Today India has dismantled licence-raj. The economic reforms introduced after 1992 have brought in the concept of "globalization". Decisions or acts which results in unequal and discriminatory treatment, would violate the doctrine of "level playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of "equality" should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of "level playing field". According to Lord Goldsmith - commitment to "rule of law" is the heart of parliamentary democracy. One of the important elements of the "rule of law" is legal certainty. Article 14 applies to government policies and if the policy or act of the government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional.

37. In the case of Union of India and another vs. International Trading Co. and another - (2003) 5 SCC 437, the Division Bench of this Court speaking through Pasayat, J. had held : "14. It is trite law that Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional.

"15. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the state, and non-arbitrariness in essence and substance is the heart beat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for a discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualized than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness."

38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This "legal certainty" is an important aspect of the rule of law. If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate doctrine of "level playing field".

12. Yet another decision in the case of M/s. N.G. Projects

Limited v. M/s. Vinod Kumar Jain & Ors., rendered in Civil

Appeal No. 1846 of 2022 decided on 21.03.2022, it has been

held by Hon'ble Apex Court as under:-

23. In view of the above judgments of this Court, the Writ Court should refrain itself from imposing its decision over 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

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

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.

26. A word of caution ought to be mentioned herein that any contract of public service should not be interfered with lightly and in any case, there should not be any interim order derailing the entire process of the services meant for larger public good. The grant of interim injunction by the learned Single Bench of the High Court has helped no-one except a contractor who lost a contract bid and has only caused loss to the State with no corresponding gain to anyone."

13. In the aforesaid premises and in view of the overall

consideration of the material on record, we are of the view that

petitioner has miserably failed to make out any case and

accordingly, we deem it proper to dismiss the petition with cost

quantified at Rs.10,000/- (Rupees Ten Thousand Only) payable

C/SCA/18145/2021 CAV ORDER DATED: 22/08/2022

to the Chief Minister's Covid Relief Fund bearing State Bank of

India Account No. 10354901554, IFSC Code - SBIN0008434

(S-B-IN-ZERO-ZERO-ZERO-EIGHT-FOUR-THREE-FOUR), PAN

NO.AAATG2587L. The said cost is ordered to be paid within a

period of four (4) weeks from the date of receipt of this order

failing which the State would be entitled to recover the same as