Tripura High Court
Sterling & Wilson Private Limited vs The Tripura State Electricity ... on 30 September, 2022
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HIGH COURT OF TRIPURA
AGARTALA
WP(C) No. 552 of 2021
Sterling & Wilson Private Limited,
A Company incorporated under the Companies Act, 1956, represented by its
director/Key Managerial Personnel, having his office at Universal Majestic, 9th
Floor, P.L. Lokhande Marg, Chembur (West), Mumbai 400043.
----- Petitioner(s)
Versus
1. The Tripura State Electricity Corporation Limited,
Represented by its Chairman-cum-Managing Director, having his office at Bidyut
Bhavan, Banamalipur, Sub-Division Agartala, PS East Agartala, District West
District, Pin 799003.
2. The Chairman-cum-Managing Director,
Tripura State Electricity Corporation Limited, having his office at Bidyut Bhavan,
Banamalipur, Sub-Division Agartala, PS East Agartala, District West District, Pin
799003.
3. The Director (Technical),
Tripura State Electricity Corporation Limited, having his office at Bidyut Bhavan,
Banamalipur, Sub-Division Agartala, PS East Agartala, District West District, Pin
799003.
4. The Deputy General Manager,
Transmission Division, Tripura State Electricity Corporation Limited, having his
office at 79 Tilla, Sub-Division Agartala, PS NCC, District West District.
----- Respondent(s)
5. The State of Tripura,
Represented by the Commissioner & Secretary to the Power Department,
Government of Tripura, having his office at New Secretariat Complex,
Gurkhabasti, Agartala, PO Kunjaban, PS New Capital Complex, Sub-Division
Sadar, District West Tripura.
6. The Commissioner & Secretary to the Power Department,
Government of Tripura, having his office at New Secretariat Complex,
Gurkhabasti, Agartala, PO Kunjaban, PS New Capital Complex, Sub-Division
Sadar, District West Tripura.
-----Proforma Respondent(s)
For Petitioner(s) : Mr. Somik Deb, Sr. Adv.
Mr. S.D. Bhattacharjee, Adv.
Ms. R. Chakraborty, Adv.
For Respondent(s) : Mr. K. De, Addl. GA.
Mr. N. Majumder, Adv.
Date of Hearing : 6th September, 2022.
Date of Pronouncement : 30th September, 2022.
Whether fit for reporting : YES
WP(C) No.552 of 2021
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B_E_F_O_R_E_
HON‟BLE THE CHIEF JUSTICE MR. INDRAJIT MAHANTY
HON‟BLE MR. JUSTICE S.G. CHATTOPADHYAY
JUDGMENT & ORDER
[Per S.G. Chattopadhyay], J
By filing this writ petition, the petitioner who is a company
registered under the Companies Act, 1956 has challenged:
(i) The notice dated 18.06.2021 (Annexure-12) issued by the
Tripura State Electricity Corporation Limited (TSECL for short) whereby the
contract awarded to the petitioner by Notification of Award (NOA) dated
11.01.2021 (Annexure-5) was terminated and the Earnest Money Deposit (EMD
for short) submitted by the petitioner in the shape of bank guarantee of an
amount of Rs.2,73,83,153/- (Rupees two crores seventy three lakhs eighty three
thousand one hundred fifty three only) was forfeited by TSECL.
AND
(ii) The memorandum dated 23.06.2021 (Annexure-13)
whereby the petitioner was put on the blacklist and debarred from participating in
any tender of TSECL for next 5 years w.e.f. the financial year 2021-22.
[2] The factual context of the case is as under:
The petitioner submitted its bid to the tender floated by TSECL for
the works and supply contract, being a turnkey project, for up-gradation of
Surjamaninagar Substation of TSECL from 132 KV to 400 KV. TSECL by issuing
Notification of Award (NOA) dated 11.01.2021 (Annexure-5) confirmed the
acceptance of the bid of the petitioner and awarded the contract to him. Among
the other terms and conditions, petitioner was called upon to sign a contract
agreement with TSECL within 28 days from the date of issuance of the Notification
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of Award (NOA) and furnish performance security at the rate of 10% of the
contract price in the shape of bank guarantee. The petitioner furnished the EMD in
the shape of bank guarantee of Rs.2,73,83,153/- (Rupees two crores seventy
three lakhs eighty three thousand one hundred fifty three only) vide B.G.
No.495801GL0006620 dated 22.01.2020. Subsequently, the Government of India,
Ministry of Finance, Department of Expenditure by issuing office memorandum
No.F.9/4/2020-PPD dated 12.11.2020 (Annexure-8) decided to reduce
performance security from existing 5-10% to 3% of the value of the contract for
all existing contracts except the contracts which were under dispute in arbitration
proceedings or Court proceedings respecting such dispute already started or
contemplated. After such reduction of the rate of performance security, the
petitioner approached TSECL by making several communications for reducing the
performance security for the said contract to 3% of the contract price. But TSECL
did not reduce the amount of performance security. Rather, by the impugned
notice dated 18.06.2021 (Annexure-12) TSECL terminated the contract and
forfeited the EMD submitted by the petitioner in the shape of bank guarantee on
the ground that the petitioner failed to adhere to the schedule given by TSECL and
comply with the instructions issued by TSECL for completing the contractual
formalities which tantamounted to loss of faith and delayed the time bound
centrally sponsored project of TSECL causing immense loss of credibility to TSECL.
[3] By another memorandum dated 23.06.2021 (Annexure-13),
TSECL blacklisted the petitioner and debarred it from participating in any tender of
TSECL for next 5 years.
[4] Petitioner's case is that despite reduction of performance security
from 5-10% to 3% by the Ministry of Finance, Government of India by office
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memorandum dated 12.11.2020 (Annexure-8), TSECL insisted for 10%
performance security and on the ground of failure of the petitioner to deposit 10%
performance security, terminated the contract and forfeited the EMD already
furnished by the petitioner without issuing any show cause notice to the petitioner
which is grossly illegal and liable to be quashed.
[5] As stated, petitioner has also challenged memorandum dated
23.06.2021 (Annexure-13) whereby he was blacklisted and debarred from
participation in any tender of TSECL for the next 5 years w.e.f. the financial year
2021-22. Petitioner has claimed that the disability created by the order of
blacklisting is completely illegal because the petitioner was given no opportunity to
represent his case before he was put on the blacklist.
[6] Having received notice, respondents No.1,2,3 and 4 who are the
principal respondents have submitted counter affidavit on 08.07.2022. It has been
asserted by the respondents that despite several communications followed by
reminders, the petitioner did not perform the contractual formalities like signing of
the contract agreement with TSECL and furnishing of performance security in
terms of the bid document namely Instruction to Bidders (ITB). The respondents
pleaded that pursuant to the various communications received from the petitioner,
the respondents confirmed to the petitioner that reduction of performance security
from 5-10% to 3% of the contract price in view of Government of India's
memorandum dated 12.11.2020 was under the consideration of TSECL and
petitioner was asked to complete the contractual formalities pending such
consideration, but the petitioner did not turn up. Even no meeting convened by
the respondents to finalize the contract was attended by the petitioner. It has
been averred by the respondents that non-payment of the performance security
WP(C) No.552 of 2021
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as per the terms within the stipulated time and non signing of the contract
agreement are sufficient causes for annulment of the award of contract and
forfeiture of the EMD. Pursuant to that, they forfeited the bank guarantee after
numerous letters and Emails to the petitioner to attend the kick off meeting and
complete further formalities in terms of the ITB. But, the petitioner declined to do
anything on the ground that bills of huge amount of the petitioner were pending
with the respondents which according to the respondents tantamounted to
unwillingness of the petitioner to execute the contract. As a result of the inaction
of the petitioner, respondents suffered huge loss and the centrally sponsored
project was delayed. The delay in execution of such time barred project has
incurred huge commercial and financial loss to the respondents. The respondents
have contended that in view of such conduct of the petitioner, his contract was
terminated and the EMD was forfeited in terms of the contract documents and he
was put on the blacklist for 5 years. According to the respondents, the writ
petition is devoid of merit and liable to be dismissed.
[7] The writ petitioner in order to impeach the stand of the
respondents submitted rejoinder affidavit on 22.07.2022, which reads as under:
"3.23 It is stated that the issuance of the memorandum by the
Central Government after the issuance of the NIT by the
Respondent No.1 would imply that the memorandum ought to
be applicable on the terms and conditions of the NIT, and more
so because the memorandum was brought in with a very
specific purpose which was to ameliorate the financial stress
that was being faced by industries at large. Therefore, it is
wholly preposterous to suggest that the Petitioner was liable to
deposit the Security Deposit amount of 10% of the contract
price whereas Central Government‟s Order directed for a much-
reduced amount.
3.24 In light of the above, it is humbly submitted that not
only was the Respondent No.1 acting in defiance of another of
the Central Government but also in blatant disregard to the
principles of natural justice while blacklisting and debarring the
Petitioner. Such debarment without issuing a show-cause
notice and calling upon the Petitioner to provide reason is
WP(C) No.552 of 2021
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patently illegal and ought to be called back by the Respondent
no.1 immediately. It has been recognized time and again by the
Hon‟ble Supreme Court of India that debarment, which
amounts to civil death of a contractor and its business, without
even affording the opportunity to show cause to such
contractor is completely in violation of the principles of natural
justice and therefore, the same cannot be sustained.
3.25 It is trite law that no person and/or company may be
blacklisted without being accorded a right of hearing, even if
such right of hearing is not provided statutorily and/or
contractually. The Respondents being a governmental body is
bound to act in conformity with the principles of natural justice
when interacting with members of the public. An order of
blacklisting creates a disability for the concerned person and
operates to the prejudice of the commercial person. It is stated
that not only has the Respondent No.1 illegally and arbitrarily
forfeited the earnest money deposited by the Petitioner as its
bid security, but also blacklisted the Petitioner.
3.26 It is also settled law that principles of judicial review
would apply to the exercise of contractual powers by
government bodies in order to prevent arbitrariness, illegality
and irrationality of decision making. It is humbly stated that
this is not a case where the statute and the governing
contractual documents were silent as to the manner and
method, in which a company was to be sanctioned and in the
extreme cases be debarred and/or blacklisted by the
Respondent No.1. It is vital to note that there are governing
contractual documents existing between the parties which
explicitly provide for the specific manner and method in which
a serious consequence like blacklisting may be allowed.
3.27 In view of the above, it is submitted that the primary
documents, which govern the relationship between the parties
including the manner of debarment (should such an event
arise) are the Bidding Documents which include the Notice
Inviting Tender, which includes the Invitation for Bids,
Instructions to Bidders, Bid Data Sheet, the General Conditions
of Contract, Special Conditions of Contract and Sample Forms
and Procedures. The Bidding Documents have already been
annexed to the writ petition and are not being reannexed to
avoid prolixity.
3.28 It is stated that the Bidding Documents, more
specifically Clause 36 of the Instructions to Bidders („ITB‟)
makes it abundantly clear that a firm and/or individual may
face sanction or a period of ineligibility if they are engaged in
corrupt, fraudulent, coercive, collusive, or obstructive practices.
It is humbly submitted that the Petitioner was never found to
be in violation of the specific requirement of and offences
covered in the aforementioned Clause 36 of the ITB. No finding
was ever given by the Respondent No.1 which would clearly
evince that the Petitioner Company violated Clause 36 of the
ITB in any manner whatsoever.
WP(C) No.552 of 2021
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3.29 It is respectfully submitted that Clause 36 of the ITB has
been put in place to curb and keep in check the transgressions
and excesses of state power. The crux of Clause 36 is that a
State entity, such as the Respondent No.1, should have
extremely limited and minute grounds for debarring and/or
blacklisting a firm or company.
3.30 However, the Respondent No.1 has indulged in grave
excesses and have wholly transgressed the clear mandate of
Clause 36 of the ITB, i.e. not to debar unless it is found that a
Company has violated the limited grounds of Clause 36.
3.31 In addition to the transgression of the Bidding
Documents, the Respondents have wholly given a go-bye to the
Modifications which were brought in to ensure that if sanctions
are levied against a Company, the same are done with checks
and balances.
3.32 It is stated that the Modifications, which have already
been set out in the captioned writ petition, clearly state that a
failure to honour bids after emerging as successful "in two or
more cases" may a Company be debarred. It is vital to note that
the Petitioner has never failed to honour its bid, let alone to
honour bids in two or more cases within the same year. In light
of this, there did not exist any cogent reason as to why the
Petitioner was blacklisted and such blacklisting and/or
debarment is a clear transgression of the Bidding Documents
and the Modifications.
3.33 In view of what has been stated herein, the Petitioner
submits that the said Reply filed by the Respondents is
vexatious in nature and is unsubstantiated in law, and the same
may therefore not be relied upon by this Hon‟ble Court. The
Petitioner prays before this Hon‟ble Court be pleased to not
place any reliance on the said Reply, and the Respondents be
directed to forthwith revoke the order of debarment and refund
the Petitioner‟s earnest deposit money."
[8] Heard Mr. Somik Deb, learned senior advocate appearing along
with Mr. S.D. Bhattacharjee and Ms. R. Chakraborty, learned advocates for the
petitioner. Also heard Mr. Nepal Majumder, learned counsel appearing for the
principal respondents.
[9] The basic stand of the petitioner is as under:
(i) Despite the notification dated 12.11.2020 of the Ministry of
Finance, Government of India reducing performance security from 5-10% to 3%,
TSECL was insisting for furnishing 10% performance security in violation of the
WP(C) No.552 of 2021
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decision of the Government of India which was completely illegal and contrary to
law.
(ii) The petitioner claimed the benefit of the said decision dated
12.11.2020 of the Government of India and brought forward the hardships of the
petitioner due to non-payment of its pending bills by TSECL. Inspite of that,
TSECL without providing any opportunity of hearing to the petitioner terminated
the contract and forfeited the EMD furnished by the petitioner which is
unsustainable in law.
(iii) It is settled proposition of law that since blacklisting is a punitive
measure which prevents a person from the privilege and advantage of entering
into lawful relationship with the Government for the purposes of gains, the person
affected must be given an opportunity to represent his case before he is put on
the blacklist. Since no notice was issued to the petitioner prior to its blacklisting
and no opportunity of hearing was given, the action of TSECL is completely illegal
and liable to be quashed.
[10] Petitioner's counsel has relied on some decisions which will be
referred to at the appropriate stage. As discussed, the present writ petition raises
two issues for our consideration which are as under:
(i) Whether TSECL was justified in terminating the contract and
forfeiting the EMD furnished by the petitioner in the shape of a bank guarantee by
Annexure-12 on the ground that the petitioner did not pay 10% of the contract
price as performance security despite Government of India's office memorandum
dated 12.11.2020 (Annexure-8) reducing the rate of performance security from
10% to 3% for all tenders/contracts issued/concluded till 31.12.2021.
WP(C) No.552 of 2021
Page - 9 of 32
(ii) Whether the petitioner was entitled to a notice to be heard before
the name of the petitioner was put on the blacklist and the petitioner was
debarred from participation in any tender of TSECL for the next 5 years and
whether such notice to be heard was served on the petitioner.
[11] First, we shall take up the second issue for consideration.
Memorandum dated 23.06.2021 whereunder petitioner was blacklisted for 5 years
reads as under:
"TRIPURA STATE ELECTRICITY CORPORATION LIMITED
(A Govt. of Tripura Enterprise)
No.01/DT/Corp. Office/TSECL/2021-22/17666-84 Dated 23.06.2021
MEMORANDUM
Sub:- Debarring of M/s. Sterling & Wilson Pvt. Ltd.,
Mumbai 400 043, Maharashtra from participation
in any Tender of TSECL for next 5(five) years.
Ref:- 1) NOA No. DGM/TD/AGT/2020-21/NOA/273, dt.
11.01.2021.
2) E-ES-19-20-0035, dated 18.01.2021
3) F.16(99)/DGM/TD/AGT/2020-21/7064-67, dt.
08.02.2021.
4) F.16(99)/DGM/TD/AGT/2020-21/7238-40, dt.
23.02.2021.
5) F.16(99)/DGM/TD/AGT/2020-21/7462-67, dt.
16.03.2021.
6) E-ES-19-20-0035, dated 22.03.2021
7) E-ES-19-20-0035, dated 31.03.2021
8) F.5(140)/Corp. Office/TSECL/2021-22/222-27,
dt. 01.04.2021.
9) F.192/Corp.Office/TSECL/2021-22/271-76, dt.
12.04.2021.
10) NEAGT/TLC/PLT-SMN/2020-21/394, dt.
28.04.2021
11) NEAGT/TLC/PLT-SMN/2020-21/410, dt.
06.05.2021
12) E-ES-19-20-0035, DATED 08.05.2021
Notification of Award (NOA) vide No. DGM/TD/AGT/2020-
21/NOA/273, dt. 11.01.2021 for the Project namely "Up-gradation of
132 KV Surjamaninagar Sub-Station of TSECL into 400 KV in Tripura"
was issued by TSECL in favour of M/s. Sterling & Wilson Pvt. Ltd.,
Mumbai for an amount of Rs.117,00,57,532.00 inclusive of applicable
GST.
WP(C) No.552 of 2021
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As per terms and conditions laid down in the NOA, the firm was
required to furnish Performance Securities and enter into Contract
Agreement with TSECL within 28 (twenty eight) days from the date of
issue of NOA.
M/s. Sterling & Wilson Pvt. Ltd., has not complied with the
contractual formalities despite several correspondences made by
TSECL in this regard. Further the firm has requested TSECL for
cancellation of NOA dated 11th January, 2021.
The above act of M/s. Sterling & Wilson Pvt. Ltd. has tantamount to
loss of faith and has led to inordinate delay into the time-bound
centrally sponsored Project of TSECL and has also caused immense
loss of credibility to TSECL.
Consequently, Notification of Award (NOA) vide
No.DGM/TD/AGT/2020-21/NOA/273, dt. 11.01.2021 has been
terminated by TSECL vide No. F.16(99)/DGM/TD/AGT/2021-22/831-
38, dated 18.06.2021.
In view of all above, TSECL hereby decides for debarring of M/s.
Sterling & Wilson Pvt. Ltd. from participation in any Tender of TSECL
for next 5(five) years w.e.f. FY: 2021-22.
This is issued without prejudice to any other rights and remedies
available to TSECL.
Sd/-
(Debashis Sarkar)
Director (Technical)
Bidyut Bhavan, TSECL,
Agartala.
To
M/s. Sterling & Wilson Pvt. Ltd.,
Universal Majestic, 9th Floor, P.L. Lokhande Marg,
Chembur (West),
Mumbai 400 043, Maharashtra"
[12] Mr. Somik Deb, learned senior advocate appearing for the
petitioner has challenged the said memorandum mainly on the grounds that
petitioner was entitled to a notice to be heard before the name of the petitioner
was put on the blacklist. Counsel contends that no such notice was issued to the
petitioner and moreover, the petitioner was blacklisted for a period of 5 years
whereas the documents provide for debarment for a maximum period of 3 years
and that too in exceptional cases. Counsel contends that since the cardinal
principles of natural justice is not followed in the case, memorandum dated
23.06.2021 issued by TSECL whereby the petitioner was blacklisted is liable to be
quashed. To nourish his contention, counsel has relied on the decision of the Apex
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Court in the case of M/s. Erusian Equipment & Chemicals Ltd. vs. State Of
West Bengal & Another reported in (1975) 1 SCC 70 wherein the Apex Court
has held that the order of blacklisting has the effect of depriving a person of
equality of opportunity in the matter of public contract. A person who is on the
approved list is unable to enter into advantageous relations with the Government
because of the order of blacklisting. A person who has been dealing with the
Government in the matter of sale and purchase of materials has a legitimate
interest or expectation. When the State acts to the prejudice of a person it has to
be supported by legality. The Hon'ble Apex Court has also held that since
blacklisting tarnishes one's reputation, the State must act without discrimination
and without unfair procedure. In paragraph 20 of the judgment, the Hon'ble Apex
Court has held that person concerned should be given an opportunity to represent
his case before he is put on the blacklist. Observation of the Apex Court is as
under:
"20. Blacklisting has the effect of preventing a person from
the privilege and advantage of entering into lawful relationship
with the Government for purposes of gains. The fact that a
disability is created by the order of blacklisting indicates that
the relevant authority is to have an objective satisfaction.
Fundamentals of fair play require that the person concerned
should be given an opportunity to represent his case before he
is put on the blacklist."
[13] Counsel has also relied on the judgment of the Supreme Court in
the case of Joseph Vilangandan vs. The Executive Engineer, (PWD),
Ernakulam & Ors. reported in (1978) 3 SCC 36 wherein the Apex Court has
reiterated that a notice giving clear intimation to the person concerned that it was
proposed to debar him from taking any contract in future under the department is
one of the fundamentals of fair play. Observation of the Apex Court is reproduced
hereunder:
WP(C) No.552 of 2021
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"17. The majority judgment of the Kerala High Court,
inasmuch as it holds that a person is not entitled to a hearing,
before he is blacklisted, must be deemed to have been
overruled by the decision of this Court in Erusian Equipments
(ibid) wherein it was held that:
Fundamentals of fair play require that the person
concerned should be given an opportunity to represent his case
before he is put on the black-list.
Controversy in the instant case, therefore, narrows down into
the issue, whether such an opportunity was given to the
appellant. Answer to this question will turn on an interpretation
of the notice, dated April 17, 1968 (Ex. P-8) given by the
Executive Engineer to the appellant. This notice has been
extracted in a foregoing part of this judgment. The material
sentence therein is :
You are therefore requested to show cause ... why the work
may not be arranged otherwise at your risk and loss, through
other agencies after debarring you as a defaulter........
The crucial words are those that have been underlined. They
take their colour from the context. Construed along with the
links of the sentence which precede and succeed them, the
words "debarring you as a defaulter", could be understood as
conveying no more than that an action with reference to the
contract in question, only, was under contemplation. There are
no words in the notice which could give a clear intimation to
the addressee that it was proposed to debar him from taking
any contract, whatever, in future under the Department. A
perusal of the appellant‟s reply (Ex. P-7), dated May 20, 1968,
sent to the Executive Engineer, also appears to show that by
the word "debarring" mentioned in the Executive Engineer‟s
letter dated April 17, 1968 (Ex. P-6), he understood as
debarring him from executing the contract in question after
declaring him as a defaulter, and then getting the same work
done by other agencies, at his risk and loss. All that has been
said in Ex. P-7 by the appellant is directed to justify that the
non-execution of the contract was not due to his fault, but due
to the delay on the part of the Department in handing over the
building to him for starting the work within the time specified
in the agreement, and consequently, if any loss would be
incurred by the Department in getting the work done through
any other agency, he would not be liable to make good the
same. In short, the letter ( Ex.P-6) dated April 17, 1968 from
the Executive Engineer, did not give any clear notice to the
appellant that action to debar him from taking in future any
contract, whatever, under the Department or its Ernakulam
Division was in contemplation. The appellant was thus not
afforded adequate opportunity to represent against the
impugned action."
[14] Learned counsel of the petitioner further argued that order
relating to blacklisting without complying with the fundamental principle of natural
WP(C) No.552 of 2021
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justice is completely illegal. Counsel has relied on the decision of the Apex Court in
the case of Raghunath Thakur vs. State of Bihar & Ors. reported in (1989)
1 SCC 229 wherein the Apex Court has succinctly held that even if the rules do
not express so, it is an elementary principle of natural justice that parties affected
by any order should have right of being heard and making representations against
the order (Para 4).
[15] Learned counsel has further relied on the decision of the Apex
Court in the case of Southern Painters vs Fertilizers & Chemicals
Travancore Ltd. & Anr. reported in (1994) Supp (2) SCC 699 wherein the
Apex Court has taken similar view as in the case of M/s. Erusian Equipment &
Chemicals Ltd. (Supra) and held that the fundamentals of fair play require that
the person concerned should be given an opportunity of hearing before he is put
on the blacklist.
[16] Learned counsel of the petitioner has vehemently argued that
blacklisting or debarring a person from taking a contract in the department which
is a state within the meaning of Article 12 of the Constitution is an administrative
act and audi alteram pertam which is one of the cardinal principle of natural
justice is a mandatory requirement before taking an action of blacklisting. Counsel
has relied on the decision of the Supreme Court in the case of Gorkha Security
Services vs. Government (NCT of Delhi) & Ors. reported in (2014) 9 SCC
105 wherein the Apex Court having followed the leading judgment in M/s.
Erusian Equipment & Chemicals Ltd. (Supra) as well as the decision in the
case of Raghunath Thakur (Supra) and held as under:
"16. It is a common case of the parties that the blacklisting
has to be preceded by a show-cause notice. Law in this regard
is firmly grounded and does not even demand much
amplification. The necessity of compliance with the principles of
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natural justice by giving the opportunity to the person against
whom action of blacklisting is sought to be taken has a valid
and solid rationale behind it. With blacklisting, many civil and/
or evil consequences follow. It is described as "civil death" of a
person who is foisted with the order of blacklisting. Such an
order is stigmatic in nature and debars such a person from
participating in government tenders which means precluding
him from the award of government contracts.
17. Way back in the year 1975, this Court in Erusian
Equipment & Chemicals Ltd. v. State of W. B. [(1975) 1 SCC 70],
highlighted the necessity of giving an opportunity to such a
person by serving a show-cause notice thereby giving him
opportunity to meet the allegations which were in the mind of
the authority contemplating blacklisting of such a person. This
is clear from the reading of Paras 12 and 20 of the said
judgment. Necessitating this requirement, the court observed
thus:
"12. Under Article 298 of the Constitution the executive
power of the Union and the State shall extend to the carrying
on of any trade and to the acquisition, holding and disposal of
property and the making of contracts for any purpose. The State
can carry on executive function by making a law or without
making a law. The exercise of such powers and functions in
trade by the State is subject to Part III of the Constitution.
Article 14 speaks of equality before the law and equal
protection of the laws. Equality of opportunity should apply to
matters of public contracts. The State has the right to trade.
The State has there the duty to observe equality. An ordinary
individual can choose not to deal with any person. The
Government cannot choose to exclude persons by
discrimination. The order of blacklisting has the effect of
depriving a person of equality of opportunity in the matter of
public contract. A person who is on the approved list is unable
to enter into advantageous relations with the Government
because of the order of blacklisting. A person who has been
dealing with the Government in the matter of sale and purchase
of materials has a legitimate interest or expectation. When the
State acts to the prejudice of a person it has to be supported by
legality.
* * *
20. Blacklisting has the effect of preventing a person
from the privilege and advantage of entering into lawful
relationship with the Government for purposes of gains. The
fact that a disability is created by the order of blacklisting
indicates that the relevant authority is to have an objective
satisfaction. Fundamentals of fair play require that the person
concerned should be given an opportunity to represent his case
before he is put on the blacklist".
18. Again, in Raghunath Thakur v. State of Bihar [(1989) 1
SCC 229] the aforesaid principle was reiterated in the following
manner:-
WP(C) No.552 of 2021
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"4. Indisputably, no notice had been given to the
appellant of the proposal of blacklisting the appellant. It was
contended on behalf of the State Government that there was no
requirement in the rule of giving any prior notice before
blacklisting any person. Insofar as the contention that there is
no requirement specifically of giving any notice is concerned,
the respondent is right. But it is an implied principle of the rule
of law that any order having civil consequence should be passed
only after following the principles of natural justice. It has to be
realised that blacklisting any person in respect of business
ventures has civil consequence for the future business of the
person concerned in any event. Even if the rules do not express
so, it is an elementary principle of natural justice that parties
affected by any order should have right of being heard and
making representations against the order. In that view of the
matter, the last portion of the order insofar as it directs
blacklisting of the appellant in respect of future contracts,
cannot be sustained in law. In the premises, that portion of the
order directing that the appellant be placed in the blacklist in
respect of future contracts under the Collector is set aside. So
far as the cancellation of the bid of the appellant is concerned,
that is not affected. This order will, however, not prevent the
State Government or the appropriate authorities from taking
any future steps for blacklisting the appellant if the
Government is so entitled to do in accordance with law i.e. after
giving the appellant due notice and an opportunity of making
representation. After hearing the appellant, the State
Government will be at liberty to pass any order in accordance
with law indicating the reasons therefor. We, however, make it
quite clear that we are not expressing any opinion on the
correctness of otherwise of the allegations made against the
appellant. The appeal is thus disposed of."
[17] In the case of Kulja Industries Limited vs. Chief General
Manager, Western Telecom Project Bharat Sanchar Nigam Limited &
Ors. reported in (2014) 14 SCC 731, the Apex Court held that fair hearing to
the party being blacklisted is an essential pre-condition for a proper exercise of
the power and a valid order of blacklisting made pursuant thereto. The decision of
M/s. Erusian Equipment & Chemicals Ltd. (Supra) was followed and the
following observation was made by the Hon'ble Apex Court:
"17. That apart, the power to blacklist a contractor whether the
contract be for supply of material or equipment or for the
execution of any other work whatsoever is in our opinion
inherent in the party allotting the contract. There is no need for
any such power being specifically conferred by statute or
reserved by contractor. That is because "blacklisting" simply
signifies a business decision by which the party affected by the
WP(C) No.552 of 2021
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breach decides not to enter into any contractual relationship
with the party committing the breach. Between two private
parties the right to take any such decision is absolute and
untrammelled by any constraints whatsoever. The freedom to
contract or not to contract is unqualified in the case of private
parties. But any such decision is subject to judicial review when
the same is taken by the State or any of its instrumentalities.
This implies that any such decision will be open to scrutiny not
only on the touchstone of the principles of natural justice but
also on the doctrine of proportionality. A fair hearing to the
party being blacklisted thus becomes an essential pre-condition
for a proper exercise of the power and a valid order of
blacklisting made pursuant thereto. The order itself being
reasonable, fair and proportionate to the gravity of the offence
is similarly examinable by a writ court.
18. The legal position on the subject is settled by a long line of
decisions rendered by this Court starting with Erusian
Equipment & Chemicals Ltd. v. State of W.B.[(1975) 1 SCC 70]
where this Court declared that blacklisting has the effect of
preventing a person from entering into lawful relationship with
the Government for purposes of gains and that the Authority
passing any such order was required to give a fair hearing
before passing an order blacklisting a certain entity. This Court
observed:
"20. Blacklisting has the effect of preventing a person from the
privilege and advantage of entering into lawful relationship
with the Government for purposes of gains. The fact that a
disability is created by the order of blacklisting indicates that
the relevant authority is to have an objective satisfaction.
Fundamentals of fair play require that the person concerned
should be given an opportunity to represent his case before he
is put on the blacklist."
Subsequent decisions of this Court in Southern Painters v.
Fertilizers & Chemicals Travancore Ltd. [1994 Supp (2) SCC
699]; Patel Engg. Ltd v. Union of India [(2012) 11 SCC 257:
(2013) 1 SCC (Civ) 445]; B.S.N. Joshi & Sons Ltd. v. Nair Coal
Services Ltd. [(2006) 11 SCC 548]; Joseph Vilangandan v.
Executive Engineer (PWD) [(1978) 3 SCC 36] among others
have followed the ratio of that decision and applied the
principle of audi alteram partem to the process that may
eventually culminate in the blacklisting of a contractor."
[18] Mr. Deb, learned senior advocate has also placed reliance on the
decision of the Apex Court in the case of Vetindia Pharmaceuticals Limited
vs. State of Uttar Pradesh & Anr. reported in (2021) 1 SCC 804 and
contended that again in the said decision, the Hon'ble Apex Court has reiterated
the law laid down in the earlier decisions and held that show cause notice is
mandatory for blacklisting or debarment of a contractor and the show cause notice
WP(C) No.552 of 2021
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must contain the specific proposal of blacklisting in clear terms. Counsel has
referred to paragraph 10 of the judgment wherein the Apex Court having followed
its earlier decision in the case of Gorkha Security Services (Supra) and has
held as under:
"10. The question whether a show-cause notice prior to
blacklisting mandates express communication why blacklisting
be not ordered or was in contemplation of the authorities, this
Court in Gorkha Security Services [Gorkha Security Services v.
State (NCT of Delhi), (2014) 9 SCC 105] held as follows:-
"27. We are, therefore, of the opinion that it was
incumbent on the part of the Department to state in the show-
cause notice that the competent authority intended to impose
such a penalty of blacklisting, so as to provide adequate and
meaningful opportunity to the appellant to show cause against
the same. However, we may also add that even if it is
not mentioned specifically but from the reading of the show-
cause notice, it can be clearly inferred that such an
action was proposed, that would fulfil this requirement. In the
present case, however, reading of the show-cause notice does
not suggest that noticee could find out that such an action
could also be taken. We say so for the reasons that are recorded
hereinafter.
28. In the instant case, no doubt the show-cause notice
dated 6-2-2013 was served upon the appellant. Relevant
portion thereof has already been extracted above (see para 5).
This show-cause notice is conspicuously silent about the
blacklisting action. On the contrary, after stating in detail the
nature of alleged defaults and breaches of the
agreement committed by the appellant the notice
specifically mentions that because of the said defaults
the appellant was "as such liable to be levied the cost
accordingly". It further says „why the action as
mentioned above may not be taken against the firm, besides
other action as deemed fit by the competent authority‟. It
follows from the above that main action which the respondents
wanted to take was to levy the cost. No doubt, the notice
further mentions that the competent authority could take
other actions as deemed fit. However, that may not
fulfil the requirement of putting the defaulter to the
notice that action of blacklisting was also in the mind of the
competent authority. Mere existence of Clause 27 in the
agreement entered into between the parties, would not
suffice the aforesaid mandatory requirement by vaguely
mentioning other "actions as deemed fit". As already pointed
out above insofar as penalty of blacklisting and forfeiture
of earnest money/security deposit is concerned it can
be imposed only, "if so warranted". Therefore, without any
specific stipulation in this behalf, the respondent could not have
imposed the penalty of blacklisting.
WP(C) No.552 of 2021
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* * *
33. When we apply the ratio of the aforesaid
judgment to the facts of the present case, it becomes difficult
to accept the argument of the learned Additional
Solicitor General. In the first instance, we may point out that no
such case was set up by the respondents that by omitting to
state the proposed action of blacklisting the appellant in the
show-cause notice, has not caused any prejudice to the
appellant. Moreover, had the action of blacklisting being
specifically proposed in the show-cause notice, the appellant
could have mentioned as to why such extreme penalty is
not justified. It could have come out with extenuating
circumstances defending such an action even if the defaults
were there and the Department was not satisfied with the
explanation qua the defaults. It could have even pleaded with
the Department not to blacklist the appellant or do it for a
lesser period in case the Department still wanted to blacklist
the appellant. Therefore, it is not at all acceptable that
non-mentioning of proposed blacklisting in the show-cause
notice has not caused any prejudice to the appellant. This
apart, the extreme nature of such a harsh penalty like
blacklisting with severe consequences, would itself amount to
causing prejudice to the appellant."
[19] In respect of blacklisting, the principal respondents in their
affidavit dated 08.07.2022 has asserted as under:
"12........The act of failure of M/s STERLING & WILSON
PRIVATE LTD. in complying with the requisite commitments
despite TSECL‟s repeated correspondences has tantamount to
loss of faith and has led to inordinate delay into the time-bound
centrally sponsored Project of TSECL and has also caused
immense loss of credibility to TSECL. In view of the same,
TSECL after obtaining approval of the Board of Directors of
TSECL, has debarred the firm M/s STERLING & WILSON
PRIVATE LTD., from participation in any tender of TSECL for
next 5(five) years."
[20] In order to controvert the plea of the petitioner that no notice of
hearing was issued to the petitioner before the order of blacklisting for 5 years
was issued, the answering principal respondents in paragraph 30 of their counter
affidavit has averred as under:
"30. That, in reply to the averments made in paragraph-2.26
the answering respondents submits that, TSECL has complied
with all the formalities as per norms before debarring the firm
M/s Sterling & Wilson Private Limited, from participation in any
tender of TSECL for next 5(five) years vide Memorandum No.
WP(C) No.552 of 2021
Page - 19 of 32
01/DT/Corp. Office/ TSECL/ 2021-22/17666-84, Dated:
23.06.2021."
[21] Even though the respondents annexed several written
communications made between the respondents and the petitioner, they could not
produce any document to show that notice of hearing was given to the petitioner
before the name of the petitioner was put on blacklist.
[22] This apart, the Works & Procurement Policy and Procedure of
Power Grid Corporation of India Ltd. (Annexure-6) under Clause C.3.11 on the
subject of Black-listing of Firms/Banning of Business has specified the grounds on
which a firm can be blacklisted or banned. The said Clause C.3.11.1 reads as
under:
"C.3.11.1 Notwithstanding any other provision of this
document, POWERGRID may decide to black-list firms or ban
business with them, for specified time or indefinitely, based on
facts and circumstances of the particular case generally on the
following grounds:
(i) Corrupt or Fraudulent practices resorted to by Contractor
including mis-representation of facts.
(ii) Wilful indulgence by the Contractor in supplying sub-
standard material irrespective of whether pre-despatch
inspection conducted by POWERGRID or not.
(iii) Repeated use of delaying tactic in fulfilling contractual
obligations wilfully.
(iv) Established litigant nature of the contractor to derive
undue benefit.
(v) Continued poor performance in several contracts."
[23] Clause C.3.11.3.1 of the said document contemplates that in the
first stage show cause notice shall be issued to the contractor to be replied by the
contractor within 30 days. It would be appropriate to reproduce Clause C.3.11.3.1
of the document which reads as under:
"C.3.11.3.1 In the first stage the approval for issuing show
cause noticed (to be replied within one month by the
contractor) shall be sought. On receipt of such approval, P&S
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group of Corporate Contracts shall issue the „So Cause‟ notice
to be replied by the contractor within 30 days."
[24] We have scrutinized the documents annexed to the counter
affidavit of the principal respondents received under the seal of the Registry of
this Court on 08.07.2022 which are Annexure 1 to Annexure 16. By letter dated
01.04.2021 which is Annexure 8 of the respondents, petitioner was further asked
to comply with all contractual formalities like deposit of performance securities and
signing of contract agreement with TSECL and he was also asked to attend the
kick off meeting scheduled on 07.04.2021 failing which, petitioner was told,
necessary action would be taken as per Clauses of the bid document. Similar
notice was issued to the petitioner on 12.04.2021 (Annexure-10 of the
respondents) asking him to comply with the contractual formalities failing which
necessary legal actions would be initiated. Some other communications to the
petitioner from the respondents followed. Thereafter, the contract was terminated
and the EMD furnished by the petitioner was forfeited and the petitioner was
blacklisted and debarred for next 5 years from participation in any tender of
TSECL under Annexure 16 of the respondents. Annexure 16 does not refer to any
notice of hearing to the petitioner. Moreover, the documents furnished by the
respondents under Annexure 1 to Annexure 16 along with their counter affidavit
do not contain any notice to the petitioner containing a specific proposal of putting
him on the blacklist. The Hon'ble Supreme Court in the judgments cited to supra
has consistently viewed that show cause notice to the contractor with a specific
proposal of blacklisting to provide him an opportunity of hearing before his name
is put on the blacklist is one of the fundamentals of fair play and thus mandatory.
[25] Having applied the ratio decided by the Hon'ble Apex Court in the
judgments aforesaid, we hold that the order of blacklisting dated 23.06.2021
WP(C) No.552 of 2021
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under Annexure 13 to the petition stands vitiated from the very inception on the
grounds aforesaid. Thus, the order of blacklisting merits interference. Resultantly,
the same is set aside.
[26] Now, we shall deal with the issue as to whether the decision of
the principal respondents terminating the contract and forfeiting the EMD of the
petitioner under Annexure 12 to the writ petition is legally sustainable. The order
dated 18.06.2021 (Annexure 12 to the writ petition) whereunder the contract was
terminated and the EMD was forfeited reads as under:
"TRIPURA STATE ELECTRICITY CORPORATION LIMITED
(A Govt. of Tripura Enterprise)
No.F.16(99)/DGM/TD/AGT/2021-22/891-38 dt.18/06/2021
To
M/s. Sterling & Wilson Pvt. Ltd.,
Universal Majestic, 9th Floor, P.L. Lokhande Marg,
Chembur (West),
Mumbai 400813, Maharashtra
Kind Attn: Mr. Rajib Dutta, Regional Head East (Substation) T&D
Division.
Subject: Notice of Termination under Section-II Instruction to
Bidders (ITB) Clause 35.2 against Notification of Award (NOA) No.
DGM/TD/AGT/2020-21/NOA/273, dt, 11.01.2021 for the Power
Project of TSECL namely "Up-gradation of 132 KV Surjamaninagar
Substation of TSECL into KV in Tripura".
Ref:1)NOANo.DGM/TD/AGT/2020-21/NOA/273, dt.11.01.2021
2) E-ES-19-20-0035, dated 18.01.2021
3)F.16(99)/DGM/TD/AGT/2020-21/7064-67, dt.08.02.2021.
4)F.16(99)/DGM/TD/AGT/2020-21/7238-40,dt. 23.02.2021.
5)F.16(99)/DGM/TD/AGT/2020-21/7462-67,dt. 16.03.2021.
6) E-ES-19-20-0035, dated 22.03.2021
7) E-ES-19-20-0035, dated 31.03.2021
8)F.5(140)/Corp.Office/TSECL/2021-22/222-27, dt.01.04.2021.
9)F.192/Corp.Office/TSECL/2021-22/271-76, dt.12.04.2021.
10)NEAGT/TLC/PLT-SMN/2020-21/394, dt.28.04.2021.
11) NEAGT/TLC/PLT-SMN/2020-21/410, dt.06.05.2021.
12) E-ES-19-20-0035, dated 08.05.2021
Dear Sir,
1.0 This has reference to the subject Project awarded by Tripura
State Electricity Corporation Limited (TSECL) on M/s. Sterling &
Wilson Pvt. Ltd. and the correspondences including the e-mail
communications from time to time.
WP(C) No.552 of 2021
Page - 22 of 32
2.0 As per terms and conditions laid down in the Notification of
Award (NOA) vide NOA No. NOANo.DGM/TD/AGT/2020-21/NOA/273,
dated 11th January, 2021, and in line with Bid Clause Under Section-II
Instruction to Bidders (ITB) Clause No.34 (Signing the Contract
Agreement) and Clause No.35(Performance Security), the scheduled
period to furnish Performance Securities and enter into Contract
Agreement with TSECL was within 28(twenty eight) days from the
date of issue of NOA. However, despite of repeated reminders and
correspondences, you have not complied with the same.
3.0 Please note that you have failed to adhere to the schedule
given by TSECL and moreover you have not complied with any
instructions or requests issued by TSECL for completing the
contractual formalities.
4.0 It may be mentioned that the above act of M/s. Sterling &
Wilson Pvt. Ltd. has tantamount to loss of faith and has led to
inordinate delay into the time bound centrally sponsored Project of
TSECL and has also cause immense loss of credibility to TSECL.
5.0 In view of the above, and your failure in meeting
commitments by you despite TSECL‟s repeated correspondences, the
subject Notification of Award (NOA) vide No.DGM/TD/AGT/2020-
21/NOA/273, dated 11th January, 2021 is hereby terminated in line
with Bid Clause under Section-II Instruction to Bidders (ITB)Clause
No.35.2[Failure of the successful Bidder to comply with the
requirements of ITB Clause No.34 ((Signing the Contract Agreement)
and Clause No.35 (Performance Security)]. Upon termination and in
the line with ITB Clause No.35.2, the Bid Security (EMD amount)
submitted in the shape of Bank Guarantee of Rs.2,73,83,153/-
(Rupees two crore seventy three lac eighty three thousand one
hundred and fifty three only) (B.G.No.495801GL0006620, Dt-
22.01.2020. Claim period valid up to 31.03.2022) will be forfeited by
TSECL.
6.0 This is without prejudice of TSECL‟s other rights available
under the terms & condition of the NOA.
Yours faithfully
For & on behalf of Tripura State Electricity Corporation Limited
Deputy General Manager
Transmission Division
TSECL, 79 Tilla, Agartala."
[27] Main ground of challenge to the said order is that Ministry of
Finance, Government of India by order dated 12.11.2020 under Annexure 8
decided to reduce performance security from 5-10% to 3% of the value of the
contract which was made applicable to all tenders/contracts issued/concluded till
31.12.2021. Learned counsel of the petitioner contended that the case of the
petitioner was squarely covered under the said office memorandum (Annexure 8)
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because the contract was awarded to the petitioner by issuing NOA dated
11.01.2021 (Annexure 5). Counsel argued that despite the said memorandum
issued by the Government of India reducing the performance security to 3%, the
respondents were insisting upon the petitioner to furnish 10% performance
security which was issued to give relief to the contractors in view of the slowdown
in economy and financial crunch suffered by them due to Covid pandemic. Counsel
contends that the respondents being state within the meaning of Article 12 of the
Constitution should have acted in furtherance of the said decision of the
Government of India. In contrary, they created pressure on the petitioner to
furnish 10% performance guarantee and ultimately terminated his contract and
forfeited the performance guarantee furnished in violation of the said decision of
the Government of India which is grossly illegal and unsustainable in law.
[28] Counsel has also contended that huge amount of bills of the
petitioner were pending with the respondents for clearance. Petitioner made
written communications with the respondents to appreciate the hardships faced by
the petitioner and consider for reducing the performance security to the extent of
3% in terms of Government of India's decision. The respondents paid no heed to
the request of the petitioner and terminated the contract and forfeited the EMD.
Counsel, therefore, argued for setting aside the termination order dated
18.06.2021 (Annexure-12 to the writ petition). Counsel has also contended that
before the termination and forfeiture order was issued, petitioner was not put on
notice of such action and thus no opportunity was given to him to explain the
facts and circumstances on his defence. Relying on the decision of the Apex Court
in the case of S.L. Kapoor vs. Jagmohan & Ors. reported in (1980) 4 SCC
379 , counsel contends that non-observance of principles of natural justice is itself
WP(C) No.552 of 2021
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a prejudice to any man for which no separate proof of prejudice is necessary. In
this regard, the Apex Court in paragraph 24 of the judgment has observed as
under:
"24..........................................................................................
In our view the principles of natural justice know of no
exclusionary rule dependent on whether it would have made
any difference if natural justice had been observed. The non-
observance of natural justice is itself prejudice to any man and
proof of prejudice independently of proof of denial of natural
justice is unnecessary. It will comes from a person who has
denied justice that the person who has been denied justice is
not prejudiced. As we said earlier where on the admitted or
indisputable facts only one conclusion is possible and under the
law only one penalty is permissible, the Court may not issue its
writ to compel the observance of natural justice, not because it
is not necessary to observe natural justice but because Courts
do not issue futile writs. We do not agree with the contrary
view taken by the Delhi High Court in the judgment under
appeal."
[29] Counsel has further contended that the defendants have taken
the plea that despite repeated requests and demands made by them, the
petitioner failed to comply with the contractual liabilities by paying the
performance security and signing the contract for which the contract was
terminated and EMD was forfeited. According to learned counsel of the petitioner,
the contract was rescinded by the respondents without issuing any notice to the
petitioner. Therefore, the respondents are liable to refund the EMD to the plaintiff.
Counsel submits that the unilateral rescission of the contract by the respondents
being arbitrary and unreasonable is not binding on the petitioner. Therefore, he is
entitled to the refund of the EMD. In support of his contention, counsel has relied
on the decision of the Apex Court in the case of Ramachandra Narayan Nayak
vs. Karnataka Neeravari Nigam Limited & Ors. reported in (2013) 15 SCC
140 wherein the Apex Court in paragraph 51 of the judgment has held as under:
"51. Defendant 3 passed the order of rescinding the contract
without issuing any show-cause notice or holding an enquiry,
as required under Clause 3(d) of the contract and therefore the
WP(C) No.552 of 2021
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learned trial judge has rightly recorded the findings on the
aforesaid contentious issues in favour of the plaintiff and
rightly held that the rescinding of the contract was not
justified. The unilateral rescission of the contract with the
plaintiff by Defendant 3 is arbitrary and unreasonable. The
action of Defendant 3 in rescinding the contract has resulted in
serious civil consequences of imposition of penalty and
forfeiture of the earnest money deposit amount, security
deposit and withholding the bill amount in relation to the
execution of the work by the plaintiff. Therefore, Defendant 3
before rescinding the contract, by invoking his power under
Clause 3(d) of the agreement, should have complied with the
conditions mentioned in the said clause as the same are
mandatory."
[30] Relying on the decision of the Apex Court in the case of
Managing Director, Haryana State Industrial Development Corporation
& Ors. vs. Hari Om Enterprises & Anr. reported in (2009) 16 SCC 208,
counsel of the petitioner has stated that the Apex Court in this judgment has
succinctly held that the drastic power of forfeiture ordinarily should be undertaken
as a last resort for which sound reasons have to be assigned. Counsel contends
that in the given case, TSECL committed mistake by not providing the benefit of
the decision of the Government of India by reducing the rate of performance
security from 10% to 3%. TSECL taking advantage of its own wrong held the
petitioner guilty of delaying the execution of the projects and forfeited the EMD
after termination of contract which is not permissible. Counsel has referred to
paragraph 27 of the judgment which reads as under:
"27. The jurisdiction of "State" to resort to the drastic power
of resumption and forfeiture ordinarily should be undertaken as
a last resort. Keeping in view the fact that the Corporation was
obligated to comply with the principles of natural justice and,
particularly, in view of the fact that was required to be
determined was the capacity as also bona fides of an
entrepreneur to start an industrial undertaking on the plots,
the Corporation was required to assign some reasons as to why
the plot in question had to be resumed. While doing so, it
evidently was required to take into consideration its own
conduct. A party cannot take advantage of its own wrong.
While State takes penal action against the allottee, its bona
WP(C) No.552 of 2021
Page - 26 of 32
fides would be one of the relevant factors before an order of
resumption and forfeiture of the amount deposited is passed."
[31] Counsel contends that even though principal respondents made
communications with the petitioner asking him to comply with the contractual
liabilities by paying 10% performance security and signing the contract, no notice
was issued to the petitioner conveying the proposed action of termination of
contract and forfeiture of EMD in specific terms. Counsel, therefore, urges the
Court to issue direction to the respondents for refund of EMD to the petitioner by
setting aside Annexure 12.
[32] Respondent's counsel on the other hand has referred to the bid
documents and contended that the Instructions to Bidders (for short ITB) in
Section II under Clause 35.2 contains as under:
"35. Performance Security
* * * *
35.2 Failure of the successful Bidder to comply with the
requirements of ITB Clause 34 or Clause 35 shall constitute
sufficient grounds for the annulment of the award and
forfeiture of the bid security, in which event the Employer may
make the award to the next lowest evaluated Bidder or call for
new bids."
[33] Counsel has also referred to Clause 34 of the said document
which reads as under:
"34. Signing the Contract Agreement
34.1 At the same time as the Employer notified the successful
Bidder, that its bid has been accepted, the Employer in
consultation with the Bidder will prepare the Contract
Agreement provided in the Bidding Documents, incorporating
all agreements between the parties.
34.2 The Contract Agreement shall be prepared within
twenty-eight (28) days of the Notification of Award and the
successful Bidder and the Employer shall sign and date the
Contract Agreement immediately thereafter."
WP(C) No.552 of 2021
Page - 27 of 32
[34] Mr. Nepal Majumder, learned counsel of TSECL has vehemently
argued that despite several communications made on behalf of the principal
respondents, the petitioner did not sign the contract agreement within the
stipulated time after the Notification of Award (NOA) was issued to the petitioner
as a successful bidder. Mr. Majumder, learned counsel has referred to the said
communications which are at Annexure 1 to Annexure 16 of the respondents.
[35] Counsel contends that under Annexure 1 dated 11.01.2021, the
acceptance of the bid of the petitioner was communicated to him and the
petitioner was informed that the Notification of Award (NOA) constituted formation
of the contract which came into force with immediate effect and petitioner was
asked to enter into contract agreement by signing the document within 28 days
from the date of NOA. Under Annexure 2 dated 18.01.2021, the petitioner
acknowledged the receipt of the NOA and referred to Government of India's
decision to reduce the rate of performance security from 10% to 3% of the
contract value. Under Annexure 3 dated 08.02.2021, respondents informed the
petitioner that performance security will remain the same i.e. 10% of the contract
value as per NOA and the petitioner requested to submit the performance security
as per NOA. Annexure 4 of the respondents indicate that under Annexure 4
dated 23.02.2021, petitioner was again requested to submit the performance
security as per NOA and attend the kick off meeting so that the project could be
started as soon as possible. Under Annexure 5 dated 16.03.2021, petitioner
was again requested to deposit performance security in terms of the NOA.
Petitioner was requested to attend the kick off meeting scheduled on 24.03.2021
and comply with the contractual formalities like furnishing of performance security
and signing of contract agreement in terms of the bid document.
WP(C) No.552 of 2021
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[36] In response to Annexure 5 dated 16.03.2021, petitioner by its
letter dated 22.03.2021 under Annexure 6 informed the respondents that
petitioner was under tremendous pressure due to closure of financial year and
requested the respondents to postpone the kick off meeting to the 1 st week of
April, 2021. By a letter dated 31.03.2021, under Annexure 7, the petitioner
informed the principal respondents with reference to the NOA that huge amount
of bill of the petitioner (Rs.5,29,27,133.00/-) was pending with the respondents.
Petitioner stated that as an EPC contractor, it was very difficult to sustain during
the pandemic situation if such huge amount was outstanding with the
respondents. The petitioner company informed the respondent that the SWPL
Board of the company refused permission to execute the present contract.
Petitioner, therefore, requested the respondents for cancellation of the NOA and
refund the EMD. It would be appropriate to reproduce the said letter (Annexure 7)
dated 31.03.2021 of the petitioner which is as under:
"STERLING & WILSON
Our Ref: E-ES-19-20-0035 Date: 31.03.2021
The Dy. General Manager
Transmission Division
Tripura State Electricity Corporation Ltd.
79-Tilla, Agartala- 799006
West Tripura
Dear Sir,
Ref: 1) UP-GRADATION OF 132 KV SURJAMANINAGAR
SUBSTATION OF TSECL INTO 400 KV IN TRIPURA (NIT No.
DGM/TD/AGT/2019-20/16)
2) NOA No.: DGM/TD/AGT/2020-21/NOA/273 dtd: 11.01.2021
3) LOA Ref. No: AGM/TC/2016-17/47 dtd: 28.02.2017 for
Renovation and Up-Gradation of Protection System in the Substations
in the State of Tripura
Sub: Issues related to the Outstanding Amount as on date from
M/s. TSECL
This has reference to the LOA Ref. No: AGM/TC/2016-17/47 dtd.:
28.02.2017 for Renovation and Up -Gradation of Protection System in
the Substations in the State of Tripura.
WP(C) No.552 of 2021
Page - 29 of 32
As you aware that we are yet to receive payment of Rs.5.30 Cr. from
M/s. TSECL on account of RA Bill. Kindly refer the below table wherein
the outstanding amount is clearly shown.
Sl. Invoice
Invoice No Total Amount (INR)
No. date
F2160000002 28-08- 1,03,78,336.72
6 2019
F2160000002 28-08- 30,17,829.96
7 2019
F2160000002 28-08- 77,63,741.63
8 2019
F2160000003 28-08- 2,61,71,592.18
0 2019
F2160000002 28-08- 19,46,429.09
9 2019
19F21600000 27-02- 20,04,592.97
056 2020
19F21600000 27-02- 7,10,939.05
057 2020
19F21600000 27-02- 7,10,939.05
058 2020
19F21600000 27-02- 2,22,732.55
059 2020
TOTAL 5,29,27,133.00
From the above, you can understand that such a huge amount is
pending from TSECL end for approx. 2 year. As an EPC contractor it is
very difficult to sustain during this pandemic situation by carrying this
huge amount of outstanding.
Moreover, we have already paid to our vendors & contractors for the
job executed against RA bills. Hence, we are hugely cash negative from
last 1 year and facing various challenges due to non-payment by TSECL.
With reference to the Clause No.32.3 of NIT regarding Due Dates for
Payments, M/s. TSECL is bound to make progressive payment as and
when the payment is due as per the terms of payment set forth as
herein after. Hence nonpayment to SWPL from last 2 years is clearly a
contractual violation & would request you to release the outstanding
payment with immediate effect.
Also to note that, in the above payment scenario it would be very
difficult for us to execute recent placed NOA No.: DGM/TD/AGT/2020-
21/NOA/273 dtd: 11.01.2021 for UP-Gradation Of 132 kv
Surjamaninagar Substation of TSECL Into 400 kV in Tripura against Our
quotation ref: E-ES-19-20-0035 dtd: 05.03.2020.
As such, SWPL Board has refused permission to us to execute this
contract. Therefore, we hereby request you for cancelation the NOA of
Surjamaninagar Substation & release our EMD BG per return.
Thanking you and assuring you of our best service at all times.
Yours faithfully,
For STERLING AND WILSON PRIVATE LIMITED.
Sd/-
RAJIB DUTTA
(REGIONAL HEAD EAST (SUBSTATION) T & D)"
WP(C) No.552 of 2021
Page - 30 of 32
[37] Under Annexure 8 dated 01.04.2021, TSECL informed the
petitioner that until and unless the balance works are complete and completion
certificate is sent by TSECL to National Load Despatch Centre (NLDC), final
instalment of fund would not be released by NLDC in favour of TSECL to enable
TSECL to make payment against the dues claimed by the petitioner. Petitioner was
again requested to comply with the contractual formalities and execute the work
in terms of NOA and attend the kick off meeting scheduled on 07.04.2021 failing
which, it was stated that actions would be taken as per the bid document. Under
Annexure 9, mail was sent to the petitioner inviting him to the kick off meeting
scheduled on 07.04.2021 at 03.30 pm in Kolkata. Under Annexure 10 dated
12.04.2021, TSECL informed the petitioner that the proposal for reduction of
performance security from 10% to 3% was under the consideration of TSECL.
Petitioner was informed that despite repeated requests, he did not attend the
meeting on 07.04.2021 which showed unwillingness of the petitioner to execute
the project which was a priority project of the State Government. Petitioner was
asked to respond in writing and comply with the contractual formalities failing
which necessary legal actions would be taken against the petitioner. By another
letter dated 28.04.2021 under Annexure 11, TSECL asked the petitioner to
convey its action plan regarding commencement of the work because no man and
material was yet mobilized by the petitioner to the work site and despite repeated
communication, petitioner did not attend any kick off meeting for commencement
of works. By a letter dated 06.05.2021 under Annexure 12, TSECL again
wanted the petitioner to communicate its action plan regarding commencement of
the work to TSECL. In response, petitioner by a letter dated 08.05.2021 under
Annexure 13 claimed that the bid was valid till 31.01.2021. Petitioner claimed
WP(C) No.552 of 2021
Page - 31 of 32
refund of the EMD since validity of the bid expired and the parties could not settle
the issue of performance security.
[38] In view of the response received from the petitioner, the
respondent terminated the contract and forfeited the EMD under communication
dated 18.06.2021 (Annexure 14 of the respondents). Under communication
dated 19.06.2021 (Annexure 15 of the respondents), the respondents
requested the Manager (Forex), Union Bank of India, Industrial Finance Branch,
Mumbai to credit the performance security furnished in the shape of bank
guarantee into the account of the respondents and under memorandum dated
23.06.2021 (Annexure 16 of the respondents) petitioner was blacklisted and
debarred from participation in any tender of TSECL for the next 5 years.
[39] It would clearly emerge from the communication of the petitioner
dated 31.03.2021 (Annexure 7 of the respondents) and the communication dated
08.05.2021 (Annexure 13 of the respondents) that despite repeated requests of
the respondents, the petitioner declined to perform his contractual liabilities and
execute the work. Several kick off meetings were organized by the respondents
for commencement of the work. But the petitioner did not attend any of those
meetings. Under communication dated 12.04.2021 (Annexure 10 of the
respondents), the respondent categorically stated that the proposal for reduction
of the performance security from 10% to 3% was under the consideration of
TSECL. When the petitioner raised the plea of pendency of outstanding bills,
respondents replied that unless completion certificate of the present work was
despatched to the Nodal agency of TSECL called NLDC, final instalment of fund
would not be released. Petitioner was, therefore, requested by the respondents to
execute the work so that such completion certificate could be sent to NLDC.
WP(C) No.552 of 2021
Page - 32 of 32
Despite the repeated requests of the respondents, petitioner did not mobilize his
men and materials to the work site. There is no doubt that as a result of inaction
of the petitioner, the priority project of TSECL was delayed causing huge loss to
them. TSECL in their communication made to the petitioner referred to the
Clauses of the bid document and proposed that appropriate action in terms of
those Clauses would be taken against the petitioner in the event of failure to
execute the work. In these circumstances, the plea of the petitioner that
appropriate notice was not served on him before termination of contract and
forfeiture of EMD is not acceptable. Moreover, petitioner company itself by letter
dated 31.03.2021 (Annexure 7 of the respondents) wanted cancellation of the
award of contract. Also by letter dated 08.05.2021 (Annexure 13 of the
respondents), petitioner claimed refund of the EMD without taking any action
towards execution of the work.
[40] For the reasons stated above, we decline to interfere with the
notice dated 18.06.2021 (Annexure 12 to the writ petition) whereby the contract
was terminated and petitioner's EMD was forfeited by TSECL (respondent).
However, for the reasons stated in the preceding paragraphs, the memorandum
dated 23.06.2021 (Annexure 13 to the writ petition) whereunder the petitioner
was put on the blacklist and debarred from participating in any tender of TSECL
for the next 5 years stands quashed and set aside.
[41] In terms of the above, the writ petition is disposed of. Pending
application(s), if any, shall also stand disposed of.
(S.G. CHATTOPADHYAY), J (INDRAJIT MAHANTY), CJ
Rudradeep
WP(C) No.552 of 2021
