Patna High Court
M/S Suraksha Diagnostic Pvt. Ltd vs The State Of Bihar And Ors on 9 August, 2024
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.15034 of 2014
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M/s Suraksha Diagnostic Pvt. Ltd. Salt Lake City, Sector-1, Kolkata- 700091
through one of its Directors namely, Shri Raman Kejriwal, son of Shri K.K.
Kejriwal, resident of JC 21, Salt Lake City, Sector- 3, Kolkata- 700098
... ... Petitioner/s
Versus
1. The State Of Bihar and Ors Government of Bihar, Patna
2. The Secretary, Health cum Executive Director, State Health Society, Bihar
through Secretary, Health Bihar
3. The Secretary, Health Cum Executive Director, State Health Society, Bihar
4. The State Programme Officer, Secretary, Health cum Executive Director,
State Health Society, Bihar
... ... Respondent/s
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Appearance :
For the Petitioner/s : M/s Ashish Giri
Nikhil Kumar Agrawal, Advocate
For the Respondent/s : Mr. Manish Kumar,
AC to AAG 6
For B.S.H.C : M/s K.K.Sinha
Shashi Shekhar, Advocates
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CORAM: HONOURABLE JUSTICE SMT. G. ANUPAMA CHAKRAVARTHY
CAV JUDGMENT
Date : 09-08-2024
1. At the outset, it is relevant to mention here that
earlier the writ petition was filed for quashing the order dated
06.11.2014
passed by the Executive Director, State Health
Society, Bihar, by which the petitioner has been made to forfeit
the earnest money deposited by him by way of Bank
guarantees, the Request for Proposal (RFP) cancelled and the
petitioner blacklisted from conducting work in the Department
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
of Health, Government of Bihar and its agencies like State
Health Society and Bihar Medical Services & Infrastructure
Corporation Limited, and for a direction to the respondents to
refund the amounts of the Bank guarantees with interest.
2. A coordinate Bench of this Court vide judgment
dated 19.04.2016 disposed of the Writ petition(CWJC No.
15034 of 2014), dealt with the facts and circumstances of the
case. The relevant part of the judgment is quoted hereinbelow
as follows:
"13. Accordingly, the impugned
order dated 06.11.2014 insofar as it has
blacklisted the petitioner from conducting work
with the Department of Health, Government of
Bihar and its agencies is hereby quashed.
14. As regards cancellation of the
RFP by the Society, this Court is not inclined to
interfere as the same never culminated in a
concluded contract between the parties. If the
society was of the view that the petitioner was
not serious about proceeding with the work, it
was fully justified in abandoning negotiations
with the petitioner and it was free to explore its
options with other interested parties. As a
matter of fact, it would appear that the
petitioner in its show cause reply dated
15.09.2014 has already expressed its decision
not to invest the huge sum required and to
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
withdraw from the proposed projects in view of
the issues raised by the petitioner remaining
unresolved.
15. The writ petition stands
disposed with the aforesaid observations and
directions."
3. The petitioner herein had filed a review
application before this Court bearing Civil Review No. 7 of
2019 (arising out of CWJC No. 15034 of 2014) for limited
purpose to review the judgment and order dated 19.04.2016
passed in CWJC No. 15034 of 2014 (M/s Suraksha Diagnostic
Pvt. Ltd. vs. The State of Bihar & Ors.) only to the extent
wherein in para -11 of the said judgment the Hon'ble Court has
refrained from deciding the merit of the issue relating to the
legality of invocation and encashment of the Bank guarantees
by the respondents with a liberty to the petitioner to take
recourse to the provisions of Bihar Public Works Contract
Dipustes Arbitration Tribunal Act, 2008 for seeking appropriate
remedy and redressal of its grievances.
4. After hearing the parties, Learned coordinate
Bench of this Court disposed of the Civil Review No. 7 of 2019
vide judgment dated 01.12.2021. The relevant part of the
judgment is quoted hereinbelow as follows:
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
"9. In the above view of the
matter, the relevant part of the judgment of
this Court dated 19.04.2016 passed in CWJC
No. 15034 of 2014 in which the petitioner has
been granted liberty to take recourse to the
provision of the Bihar Public Works Contract
Disputes Arbitration Tribunal Act, 2008 for
seeking appropriate remedy and redressal of
its grievances, is hereby recalled.
10. The review application
stands disposed of.
11. Let the writ petition be
accordingly listed before the appropriate
Bench according to roster."
5. Accordingly, the Writ petition has been listed
before this Court for deciding the issue of encashment of Bank
guarantee.
6. Heard the parties.
7. The Writ petition is filed seeking direction to
the respondents to refund the amounts of the Bank guarantees
with interest.
8. The brief facts culled out of the petition are that
the respondent State Health Society (for short "the Society")
issued a Request for Proposal (RFP) for design, installation,
refurbishment, operationalisation and maintenance of imaging
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
centres in six Government Medical Colleges and Hospitals, 33
District Hospitals and in LNJP Ortho Hospital, Rajbanshi Nagar,
Patna in Public Private Participation (PPP) mode.
9. It is contention of the petitioner that the
petitioner participated and as required, furnished earnest money
deposit in the form of five Bank guarantees for the five clusters
in question, as follows :-
a. BG No. 014 GT02141250004 dated
05.05.2014 of Rs. 30 lacs valid up to
01.11.2014.
b. BG No. 014 GT02141250003 dated
05.05.2014 of Rs. 30 lacs valid up to
01.11.2014.
c. BG No. 014 GT02141250002 dated
05.05.2014 of Rs. 30 lacs valid upto
01.11.2014.
d. BG No. 014 GT02140770008 dated
18.03.2014 of Rs. 30 lacs valid upto
17.09.2014.
e. BG No. 014 GT02140770010 dated
18.03.2014 of Rs.30 lacs valid upto
17.09.2014
10. It is further contended that a letter No. 3578
dated 15.05.2014 was received from the respondents accepting
the proposal of the petitioner for clusters 1 and 2, and similarly,
another letter No. 3646 dated 16.05.2014 was received
accepting the proposal for cluster Nos. 3, 4 and 5. All the
proposals were accepted by the petitioner vide letter dated
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
11.06.2014. A Memorandum of Understanding (MOU) was
required to be executed between the parties, which, however,
was still at the stage of negotiation. However, during such
negotiations for finalization of the draft MOU, the respondent
society invoked the Bank guarantees through its letter No. 6790
dated 22.08.2014 addressed to the HDFC Bank, and
subsequently encashed them.
11. Learned counsel for the petitioner submits that
the actions taken against the petitioner in terms of impugned
letter No.7973 dated 06.11.2014 (Annexure-1/3 of I.A. No. 8952
of 2014) is completely arbitrary and without the authority of
law. It is submitted that the Bank guarantees furnished by the
petitioner were conditional in nature and only on the fulfillment
of those conditions could the same have been invoked. The
amounts covered under the Bank guarantees were contemplated
to be forfeited only in the following two circumstances.
(i) In the event of withdrawal of the offer by the
bidder as a condition within the validity period.
(ii) In the event of failure to furnish the valid
contract performance guarantee by the bidder within one month
from the receipt of the purchase order.
12. Learned counsel for the petitioner submits that
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
the impugned order discloses that the solitary reason for
invoking the Bank guarantees was that the validity thereof was
to expire on 17.09.2014, and as such the Society decided to
encash them. It is submitted that such action which is wholly
unauthorized on the very terms of the Bank guarantees, has
caused serious prejudice and detriment to the petitioner.
Reliance in this regard is placed on the decision of a co-ordinate
Bench of this Court in the case of Hindustan Steel Works
Construction Ltd. vs State of Bihar & Others [2009 (2)
PLJR 909], as partially affirmed by a Division Bench of this
Court in State Bank of India & Others vs Hindustan Steel
Works Construction Ltd. [2012 (1) PLJR 54]. That apart,
Learned counsel for the petitioner also points out that the
Society could not have invoked the Bank guarantees in absence
of any such contemplation in the RFP. Furthermore, the MOU
had not been entered into between the parties, and the same
could not therefore come to the aid of the Society to support its
manifestly arbitrary and illegal action.
13. Learned counsel for the petitioner also
questioned the legality of the impugned action by way of
cancellation of RFP, forfeiture of Earnest Money Deposit and
blacklisting, on the ground of violation of natural justice. It is
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
pointed out that the show cause as contained in letter No. 7128
dated 11.09.2014 (Annexure-E to the counter affidavit)
discloses that the Society had made up its mind to take the
impugned actions against the petitioner at the stage of the show
cause itself, rendering the issuance of the show cause a mere
eye wash and an idle formality. Attention is invited to para 10 of
the show cause wherein it has been stated that the "SHSB
decided to have them encashed." It was argued that the Society
has proceeded with a pre-determined notion, which renders such
action contrary to the law laid down in Oryx Fisheries Pvt.
Ltd. vs The Union of India and others [(2010) 13 SCC 427].
14. As regards the delay alleged against the
petitioner in entering into agreement with the Society, it is
submitted that the same is completely baseless and
misconceived. By its letters dated 15.05.2014 and 16.05.2014
(Annexures 5 and 6), the Society had informed the petitioner
that he would be provided a draft of the MOU proposed to be
signed by the parties. The petitioner had responded by filing its
reply on 11.06.2014 (Annexure-7), accepting the offer to enter
into a mutually agreed MOU. The Society sent the draft MOU
by e-mail dated 11.08.2014. The petitioner thereafter sent a list
by e-mail dated 19.08.2014 raising no less than 15 points by
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
way of initial observations and objections to the draft MOU,
along with proposed changes. One of the main objections was
that clause 3.2.3 of the draft MOU constituted a condition in
restraint of trade, having the effect of prohibiting the petitioner
from engaging in any business at Patna for a period of two years
after the termination of the contract. It is submitted that such
condition could not legally have been imposed, being in
violation of Section 27 of the Contract Act. This was one of the
main points of negotiation, and the Society could not lay blame
at the door of the petitioner for the delay in signing caused by
the disagreement on this point. This in effect meant that the
Society was demanding compliance as if the petitioner was
bound to accept all the conditions sought to be imposed in the
draft MOU whether or not the same were in accordance with
law. Finalisation of the agreement was dependent upon the
petitioner's absolute and unqualified acceptance and free
consent, which was justifiably not forthcoming in the above
circumstances.
15. Learned counsel for the respondent Society,
on the other hand, vehemently opposed the writ petition,
submitting that the same is devoid of merit and is liable to be
dismissed as such.
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
16. Learned counsel for the respondent Society
averred that no fault can be found with the actions taken against
the petitioner in view of the gross delay on the part of the
petitioner in entering into the agreement and in starting the
work. It is submitted that public interest has greatly suffered as
the imaging centers in a large number of institutions covered
under the RFP could not be made operational by reason of delay
attributable solely to the petitioner.
17. Learned counsel for the respondent Society
contended that despite the Society's repeated endeavors to get
the MOU finalized and the work started, the petitioner failed to
visit the sites and kept delaying the matter. Even though the
Society sent the draft MOU by e-mail dated 11.08.2014 and
proposed the same to be signed by the parties on 12.08.2014, the
petitioner failed to comply and instead sent a list of proposed
amendments to the draft MOU more than a week later on
19.08.2014, thus delaying the matter. It is further submitted that
even though the petitioner visited the Society on 27.08.2014 and
after discussions, gave an assurance to visit again on either
02.09.2014 or 03.09.2014 to finalize the terms of the MOU so
that the same could be signed by the parties on 09.09.2014, he
failed to turn up. An e-mail was sent on 03.09.2014 by the
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
Society but the same was ignored and the petitioner did not visit
the Society.
18. Heard the rival contentions of the Learned
counsel for the petitioner as well as the Learned counsel for the
respondents.
19. Learned counsel for the petitioner drawn
attention of this Court on some judgments of Hon'ble Supreme
Court as well as Hon'ble Division Bench of this Court, which
are Oryx Fisheries Private Limited Vs. Union of India and
Ors. reported in (2010)13 Supreme Court Cases 427
(paragraph nos. 23, 24, 27, 31, 32, 33, 35 and 38) , Gorkha
Security Services Vs. Government (NCT of Delhi) & Ors.
reported in (2014) 9 Supreme Court Cases 105 (Paragraph
Nos. 21, 26 and 29), Suresh Kumar Wadhwa Vs. State of
Madhya Pradesh & Ors. reported in (2017) 16 Supreme
Court Cases 757 (Paragraph Nos. 23, 26, 27, 29 to 32, 37, 40
and 45), Union of India & another Vs. Millenium Delhi
Broadcast LLP & Ors. reported in (2022) 7 Supreme Court
Cases 67 (paragraph Nos. 6, 7, 10, 13, 14 and 15) and
Ramadhar Sah Vs. The State of Bihar & Ors. passed in
CWJC No. 5589 of 2024 (Paragraph Nos. 2, 5 and 6) .
20. The Hon'ble Division Bench of this Court in
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
Ramadhar Sah (supra) vide judgment dated 08.05.2024 held
as follows:
7. We do not find ourselves
persuaded to uphold the forfeiture of EMD on the
basis of a letter which was not incorporated in the
NIT. If the conditions in the letter was incorporated
in the NIT, definitely the consequence of forfeiture
could have visited the petitioner. Clause 16.6 as we
extracted from the NIT does not contemplate a
situation of false representation resulting in
forfeiture of the EMD.
"8. On the above reasoning, we find
the forfeiture to be illegal and not in consonance
with the NIT. Annexure-P-10 order to the extent it
forfeits the EMD is set aside. The petitioner shall be
returned the EMD within a period of one month from
today, failing which interest @ 6% shall be levied."
21. Learned counsel for the petitioner submits that
the MOU is not applicable as the same was not signed by the
parties and hence not binding. Further MOU is not part of
Request for Proposal. MOU is not applicable as there is no
unilateral application of the same. MoU is also not applicable
as Bank guarantee is separate contract to be govern by its own.
22. Learned counsel for the petitioner further
submits that SBD is not applicable, as SBD was not the part of
RFP and hence cannot be adopted now and SBD does not relate
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
to present work, but works contract.
23. Learned counsel for the petitioner also
submits that Clause 30(vi) of the Bihar Finance Rule does not
have application as the respondents themselves delayed beyond
21 days after conditional acceptance of petitioner. It is further
submitted that the delay was not attributable to petitioner as
already held in para 12 of the earlier judgment dated
19.04.2016. For better appreciation, para 12 of the judgment
dated 19.04.2016 is necessary to be quoted:
"12. As regards the order of
blacklisting of the petitioner, this Court is of the
view that the same cannot be upheld. A bare
perusal of the order makes it evident that the same
has been made perpetual in nature and is thus
contrary to the well settled law laid down in M/s
Kulja Industries' case (supra). Moreover, such
order could also not have been passed in absence
of any concluded contract as the MOU had not
been executed between the parties. The RFP did not
also authorize the respondents to pass an order of
blacklisting against the petitioner. Moreover, this
Court is of the view that the Society must at least
partially share the responsibility for delay in
finalizing the MOU. It is a matter of record that in
response to the Society's e-mail dated 11.08.2014,
the petitioner had submitted a list of objections and
changes proposed therein about a week later by e-
mail dated 19.08.2014. It appears that such
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
proposals were rejected by the Society after a lapse
of over two months by its letter No. 294 dated
21.10.2014 (Annexure-12), and that too only after
the petitioner submitted its show cause reply
(Annexure-F to the counter affidavit). It cannot
therefore be said that the petitioner had acted
negligently or with any express intention of
deliberately delaying signing the MOU, moreso
when the terms of the draft MOU were being
objected to by the petitioner on grounds which
cannot outright be termed frivolous or irrelevant."
24. Annexure-1 relates to the notice inviting
Request For Proposal. It is clear from the contents that Earnest
Money Deposit was mentioned at Clause No. V: Submission for
Requirement and it also discloses that the Earnest Money
Deposit or Bank guarantee of Rs. 30,00,000/- in favour of
State Health Society Bihar payable at Patna. For the purpose of
5 clusters, the petitioner paid 5 X 30,00,000/- = Rs.
1,50,00,000/-. The details of the Bank guarantee are already
mentioned supra. Annexure-2 are conditional Bank guarantee
dated 18.03.2014 wherein it is specifically mentioned as
follows:-
"As an irrevocable Bank Guarantee for an
amount of Rs. 30,00,000/- (Rs. Thirty lakhs only) valid for
180 days from 18.03.2014 is required to submitted by the
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
Contractor/Supplier which amount is liable to be forfeited
by the purchaser in the event of
(1) the withdrawal of the offer by the
Bidder as a condition within the validity period.
(2) failure to furnish the valid contract
performance guarantee by the bidder within one month
from the receipt of the purchase order."
Admittedly, such situation did not come into
existence.
25. The contents of Annexure-5, which is
addressed by the Secretary, Health - cum - Executive Director
to the petitioner Company clearly disclose that shortly the
petitioner would be provided with the draft of the MOU
proposed to be signed between the representatives of
petitioner agency and that of the Department of Health/State
Health Society, Bihar. The MOU will be signed separately for
each cluster/Health Institution.
26. On perusal of the record, it is evident that the
parties did not enter into MOU till the date. Annexures -5 and 6
deal with the details of Clusters 1 to 5. In Annexure-6 also it is
informed by the Secretary, State Health Society, Bihar to the
Managing Director of the petitioner that draft MOU shall be
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
provided by the respondents. Annexure-7 is the letter of
conditional acceptance given by the petitioner Company in
favour of the Secretary, Health -cum-Executive Director
wherein it is specifically mentioned that "we hereby accept
your offer and agree to enter into mutually agreed
Memorandum of Understanding". The word "mutually agreed"
has to be read along with MOU. The record also reveal that after
two months, the draft MOU was sent by the Secretary, Health-
cum-Executive Director to the petitioner through e-mail i.e.
dated 11.08.2014. The counter affidavit of the respondents also
disclose that the Society vide e-mail dated 11.08.2014 sent the
draft MOU proposed to be signed between the parties on
12.08.2014. To that effect the petitioner was requested to
confirm by e-mail for which the petitioner Company has given
a reply vide Annexure-7 contending that "Before entering into
MOU, you will be requested to earmark the proposed space
after mutual technical & patient facility evaluation within the
respective institutions". It is the contention of the respondent
that the petitioner failed to response the aforesaid request for
entering into the MOU . On perusal of Annexure-C, the e-mail
sent by the State Programme Officer, State Health Society to
the petitioner disclose that the e-mail was sent on 11 th August,
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
2024 at 16:10 hours directing the petitioner to get MOU
signed by 3 PM of 12 August, 2014. Admittedly, the petitioner
is the resident of Calcutta, even 24 hours time was also not
given to the petitioner to come down from Calcutta to Patna
to sign the MOU. The petitioner has given a reply to the e-
mail of the respondent i.e. Annexure-8, the e-mail is dated 19 th
August, 2014 at 1.14 PM. Wherein it is referred that "please
find attached our initial observations on the draft MOU sent by
you. Please let us know your comments on the same." Inspite of
making the objection for MOU by the petitioner, the
respondents have encashed the Bank guarantee of the petitioner
on 22 August, 2014 and later a notice was sent to the petitioner
on 11.09.2014. The letter addressed by Dr. A.K.Shahi to the
Branch Manager, HDFC Bank Patna clearly disclose that
respondents have encashed three Bank guarantee dated
05.05.2014 and the proceeds were being credited in the
Allahabad Bank, Sheikhpura, Patna in Account No.
20244462130 of State Health Society, Bihar. Annexure-E
addressed by the Executive Director to the petitioner clearly
disclose that the Bank guarantees will expire on 17.09.2014 and
as the petitioner has delayed or avoided to get the MOU signed
and they have encashed the Bank guarantee. The condition
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
between the parties is that the MOU shall be signed between
them for mutually agreed terms and conditions. As to how the
respondents has enchased the Bank guarantee by forfeiting the
amount of the petitioner is not all properly explained by the
respondents. Admittedly, the previous order of this Court clearly
disclose that the order dated 21.10.2014 passed by the
respondents in blacklisting the petitioner was set aside.
Therefore, this Court opines that the respondents themselves
have delayed in sending the draft MOU and that the terms and
conditions are not mutually agreeable and therefore, the
petitioner replied through an e-mail making his objections.
Further the respondents, without considering them in the proper
perspective have forfeited the amount of the petitioner by
encashing the Bank guarantee and thereafter, blacklisted the
petitioner. This Court is of the considerable opinion that the
action of the respondents in encashing the Bank Guarantee is
illegal and arbitrary in nature and hence, the respondents are
directed to refund the amounts of the Bank guarantee along
with 9% simple interest to the petitioner, from the date of
encashment.
27. In result, the Writ petition is allowed setting
aside the impugned order dated 06.11.2014 passed by the
Patna High Court CWJC No.15034 of 2014 dt.09-08-2024
Executive Director, State Health Society, Bihar (Annexure-I/3).
28. Interlocutory application(s), if any, shall stand
disposed of.
(G. Anupama Chakravarthy, J)
Spd/-
AFR/NAFR NAFR
CAV DATE 09.07.2024
Uploading Date 14.08.2024
Transmission Date NA
