{"id":64905,"date":"2011-08-02T00:00:00","date_gmt":"2011-08-01T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-patel-engineering-ltd-vs-union-of-india-anr-on-2-august-2011"},"modified":"2016-07-14T17:57:37","modified_gmt":"2016-07-14T12:27:37","slug":"ms-patel-engineering-ltd-vs-union-of-india-anr-on-2-august-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-patel-engineering-ltd-vs-union-of-india-anr-on-2-august-2011","title":{"rendered":"M\/S Patel Engineering Ltd. vs Union Of India & Anr. on 2 August, 2011"},"content":{"rendered":"
Delhi High Court<\/div>\n
M\/S Patel Engineering Ltd. vs Union Of India & Anr. on 2 August, 2011<\/div>\n
Author: Sanjay Kishan Kaul<\/div>\n
*           IN THE HIGH COURT OF DELHI AT NEW DELHI\n\n\n%                                          Date of decision: 02.08.2011\n\n\n+           WP (C) No.4331 of 2011 & CM No. 8869\/2011\n\n\nM\/S PATEL ENGINEERING LTD.                                      ...PETITIONER\n\n                                Through:        Mr.Rajiv Nayar, Sr.Advocate\n                                                with Mr. Jai Munim, Ms.Shally\n                                                Bhasin and Ms.Shikha Sarin,\n                                                Advocates.\n\n\n                                        Versus\n\n\nUNION OF INDIA & ANR.                                           ...RESPONDENTS\n\n                                Through:        Mr.Neeraj Chaudhri, CGSC\n                                                with Mr.Akshay Chandra and\n                                                Mr.Mohit Auluck, Advocates\n                                                for R-1\/UOI.\n\n                                                Mr. Amrinder Sharma, Sr.\n                                                Advocate with\n                                                Ms. Padma Priya\n                                                and\n                                                Mr.Somesh     Chandra   Jha,\n                                                Advocates for R-2\/NHAI.\n\nCORAM:\nHON'BLE MR. JUSTICE SANJAY KISHAN KAUL\nHON\u201fBLE MR. JUSTICE RAJIV SHAKDHER\n\n1.      Whether the Reporters of local papers\n        may be allowed to see the judgment?                             Yes\n\n________________________________________________________________________________________\nWP (C) No.4331 of 2011                                                      Page 1 of 25\n 2.        To be referred to Reporter or not?                             Yes\n\n3.        Whether the judgment should be                                 No\n          reported in the Digest?\n\n\nSANJAY KISHAN KAUL, J.\n<\/pre>\n
     1.     The National Highways Authority of India (for short<\/p>\n
            \u201eNHAI\u201f)\/respondent            No.1,      issued        a     request     for<\/p>\n
            qualification in November, 2010 for a six-laning project<\/p>\n
            of Dhankuni-Kharagpur Section of NH-6 from 17,600 to<\/p>\n
            1,29,000 in the States of West Bengal and Orissa<\/p>\n
            under the National Highway Development Projects<\/p>\n
            Phase-V on design, build, finance, operate, transfer<\/p>\n
            and     toll   basis.     The     petitioner,      a       public   limited<\/p>\n
            company, submitted its bid on 10.01.2011. The bid<\/p>\n
            submitted by the petitioner and other bidders were<\/p>\n
            processed and by a letter of award dated 17.01.2011,<\/p>\n
            respondent no. 2 informed the petitioner that its bid<\/p>\n
            had been accepted and that the petitioner should<\/p>\n
            execute the relevant documents in that regard.<\/p>\n
     2.     It is the say of the petitioner that on account of various<\/p>\n
            factors including amendments, perceived insufficient<\/p>\n
            time etc., the bid submitted by the petitioner was
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 2 of 25<\/span>
\n             significantly higher than it should have been and thus<\/p>\n
            the petitioner came to the conclusion on 24.01.2011<\/p>\n
            that the bid made by it was commercially unviable.<\/p>\n
            This fact was intimated to respondent no.2 on<\/p>\n
            24.01.2011 within the period of 7 days prescribed for<\/p>\n
            the petitioner to execute the necessary documents.<\/p>\n
    3.      As a sequitur to this, respondent no.2 informed other<\/p>\n
            bidders, and ultimately the contract was awarded to<\/p>\n
            M\/s.Ashoka Buildcon Limited at a much lower premium<\/p>\n
            of Rs 126.06 crores. We may notice at this stage that<\/p>\n
            the petitioner had specified a premium of Rs 190.53<\/p>\n
            crores.\n<\/p>\n
    4.      All the bidders were to submit a bid security amount of<\/p>\n
            Rs.13.97 crores.          Part \u201eD\u201f deals with the bid security<\/p>\n
            amount. Clause 2.20.6 envisages forfeiture of bid<\/p>\n
            security amount in the following terms:<\/p>\n
                    “2.20.6 The Authority shall be entitled to
\n                    forfeit and appropriate the Bid Security as
\n                    Damages inter alia in any of the events
\n                    specified in Clause 2.20.7 herein below.<\/p>\n
                    The Bidder, by submitting its Bid pursuant
\n                    to this RFP, shall be deemed to have
\n                    acknowledged and confirmed that the
\n                    Authority will suffer loss and damage on
\n                    account of withdrawal of its Bid or for any
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 3 of 25<\/span>
\n                     other default by the Bidder during the
\n                    period of Bid validity as specified in this
\n                    RFP. No relaxation of any kind on Bid
\n                    Security shall be given to any Bidder.”<\/p>\n
    5.      The aforesaid amount was agreed as a genuine pre-<\/p>\n
            estimate of compensation in respect of the eventuality<\/p>\n
            set out in the clause 2.20.7. The facts of the case fall<\/p>\n
            within such an eventuality where a contractor fails to<\/p>\n
            sign and return a duplicate copy of the LOA. Clause<\/p>\n
            2.20.7 reads as under:\n<\/p><\/blockquote>\n
                     “2.20.7 The Bid Security shall be forfeited
\n                     and appropriated by the Authority as
\n                     mutually agreed genuine pre-estimated
\n                     compensation and damages payable to the
\n                     Authority for, inter alia, time, cost and effort
\n                     of the Authority within prejudice to any
\n                     other right or remedy that may be available
\n                     to the Authority hereunder or otherwise,
\n                     under the following conditions:\n<\/p><\/blockquote>\n
                 a) If a Bidder submits a non-responsive Bid,
\n                    “subject however that in the event of
\n                    encashment of bid security occurring due to
\n                    operation of para 2.20.7 (a), the damage so
\n                    claimed by the authority shall be restricted
\n                    to 5% of the value of the bid security.;<\/p><\/blockquote>\n
\n\n                 b) If a Bidder       engages in a corrupt practice,\n                    fraudulent         practice, coercive practice,\n                    undesirably        practice or restrictive practice\n                    as specified      in Clause 4 of this RFP;\n\n<\/pre>\n
                 c) If a Bidder withdraws its Bid during the
\n                    period of Bid validity as specified in this RFP
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 4 of 25<\/span>
\n                      and as extended by mutual consent of the
\n                     respective Bidder(s) and the Authority;\n<\/p><\/blockquote>\n
                 d) In the case of Selected Bidder, if it                    fails
\n                    within specified time limit –\n<\/p><\/blockquote>\n
                       i)    To sign and return the duplicate\n                     copy of LOA;\n\n<\/pre>\n
                          ii)   To sign the Concession Agreement;
\n                     or\n<\/p><\/blockquote>\n
                        iii) To furnish the Performance Security
\n                     within the period prescribed therefor in the
\n                     Concession Agreement; or<\/p>\n<\/blockquote>\n
                 e) In case the Selected Bidder, having signed
\n                    the Concession Agreement, commits any
\n                    breach thereof prior to furnishing the
\n                    Performance Security.”\n<\/p><\/blockquote>\n<\/blockquote>\n
    6.      It is in view of the aforesaid facts and circumstances<\/p>\n
            that respondent no.2 took a decision to encash the<\/p>\n
            bank guarantee furnished towards the bid security<\/p>\n
            amount;         however       in     the     meanwhile         petitioner<\/p>\n
            addressed a letter dated 01.02.2011 volunteering to<\/p>\n
            make the payment of Rs.13.97 crores in return of the<\/p>\n
            bank guarantee; which amount was duly paid vide a<\/p>\n
            demand draft on 03.02.2011. Thus, the issue of<\/p>\n
            encashment          of    the      bid   security      amount        stood<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 5 of 25<\/span>
\n             concluded with the said step and both the parties<\/p>\n
            accepted the same.\n<\/p><\/blockquote>\n
    7.      The grievance of the petitioner arises out of the<\/p>\n
            subsequent action taken by respondent no.2 to issue a<\/p>\n
            show cause notice dated 24.02.2011 to the petitioner<\/p>\n
            to debar the petitioner for a period of five years from<\/p>\n
            “pre-qualification, participating or bidding” for future<\/p>\n
            projects to be undertaken by respondent no.2.<\/p>\n
    7.1     This show cause notice was replied to by the petitioner<\/p>\n
            on 01.03.2011, and the impugned letter was issued on<\/p>\n
            20.05.2011, on the basis of which respondent has<\/p>\n
            debarred the petitioner for a period of one year<\/p>\n
            commencing from the date of issue of the letter, i.e.,<\/p>\n
            20.05.2012 from “pre-qualification, participating or<\/p>\n
            bidding” for future projects of or to be undertaken by<\/p>\n
            respondent no.2.\n<\/p>\n
    7.2     The petitioner made a representation against such<\/p>\n
            debarment to the Ministry of Road Transport and<\/p>\n
            Highways on 28.05.2011, and subsequently filed the<\/p>\n
            present writ petition on 13.06.2011 under Article 226<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 6 of 25<\/span>
\n             of the Constitution of India making a prayer for<\/p>\n
            quashing of the letter dated 20.05.2011.<\/p>\n
    8.      The aforesaid grievance has naturally been contested<\/p>\n
            by respondent no.2. Respondent no.1\/UOI has not filed<\/p>\n
            any separate counter affidavit in this matter.<\/p>\n
    9.      We have heard learned counsel for the parties.<\/p>\n
    10.     It is the say of learned senior counsel for the petitioner<\/p>\n
            that    the     forfeiture      of    the    bid    security      amount<\/p>\n
            concluded the consequence which the petitioner could<\/p>\n
            be visited with on its failure to convey the acceptance<\/p>\n
            in respect of the LOA.               In other words the petitioner<\/p>\n
            could not be penalized any further by being debarred<\/p>\n
            from participation in future projects undertaken by<\/p>\n
            respondent no. 2.           According to the learned counsel<\/p>\n
            the order of debarment was in the nature of the<\/p>\n
            petitioner being blacklisted.\n<\/p>\n
    11.     The learned counsel in this behalf has drawn our<\/p>\n
            attention to clause 4.2 which forms part of part 4 with<\/p>\n
            the heading \u201eFraud and Corrupt Practices\u201f. Clause 4.2<\/p>\n
            reads as under:\n<\/p>\n
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 7 of 25<\/span>
\n                   “Without prejudice to the rights of the
\n                  Authority under Clause 4.1 hereinabove and
\n                  the rights and remedies which the Authority
\n                  may have under the LOA or the Concession
\n                  Agreement, or otherwise if a Bidder or
\n                  Concessionaire, as the case may be, is
\n                  found by the Authority to have directly or
\n                  indirectly or through an agent, engaged or
\n                  indulged in any corrupt practice, fraudulent
\n                  practice, coercive practice, undesirable
\n                  practice or restrictive practice during the
\n                  Bidding Process, or after the issue of the
\n                  LOA or the execution of the Concession
\n                  Agreement, such Bidder or Concessionaire
\n                  shall not be eligible to participate in any
\n                  tender or RFP issued by the Authority during
\n                  a period of 2(two) years from the date such
\n                  Bidder or Concessionaire, as the case may
\n                  be, is found by the Authority to have
\n                  directly or indirectly or through an agent,
\n                  engaged or indulged in any corrupt practice,
\n                  fraudulent practice, coercive practice,
\n                  undesirable      practice,   or   restrictive
\n                  practices, as the case may be.”\n<\/p>\n<\/p>\n
    12.     Learned senior counsel for the petitioner submitted<\/p>\n
            that the aforesaid clause applied only if the petitioner<\/p>\n
            indulged       in    any     “corrupt       practice”,       “fraudulent<\/p>\n
            practice”, “coercive practice”, “undesirable practice”<\/p>\n
            or “restrictive practice” during the bid process or after<\/p>\n
            the issuance of LOA or on the execution of the<\/p>\n
            Concession Agreement, and that the definition of each<\/p>\n
            of these expressions provided in clause 4.3 made this
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 8 of 25<\/span>
\n             aspect quite clear.           Learned counsel thus submitted<\/p>\n
            that the case of the petitioner does not fall in any of<\/p>\n
            the aforementioned practices as defined in clause 4.3<\/p>\n
            read with clause 4.2.\n<\/p>\n
    12.1 A reference was made to following paragraphs of the<\/p>\n
            show cause notice dated 24.02.2011 to buttress this<\/p>\n
            point:\n<\/p>\n
                    “AND WHEREAS subsequent to technical
\n                    evaluation, Financial Bids were opened on
\n                    13.01.2011 in the presence of the Bidders
\n                    representative and it was noted that M\/s
\n                    Patel Engineering Ltd. had offered the
\n                    highest premium of Rs.190.53 Crore for the
\n                    said project. Therefore, as per RFP Volume-I,
\n                    Clause 3.3.1, M\/s Patel Engineering was
\n                    declared by the NHAI as the Selected Bidder
\n                    and subsequently was issued the letter of
\n                    Award (LOA), as per clause 3.3.5 of RFP
\n                    Volume-I. Copy of letter dated 17.01.2011 is
\n                    enclosed.\n<\/p><\/blockquote>\n
                    AND WHEREAS, M\/s Patel Engineering Ltd.,
\n                    vide letter No.Hyd\/181\/NHAI-DK BOT\/3326
\n                    dated 24.01.2001, had expressed their
\n                    inability to accept the LOA, stating that
\n                    errors have crept in impacting the bid value
\n                    significantly. Copy of letter dated 24.01.2011
\n                    is enclosed.<\/p><\/blockquote>\n
                    AND WHEREAS, as per Clause 2.20.07(d) of
\n                    the RFP, in case the Selected Bidder fails to
\n                    accept the LOA, the bid security shall be
\n                    forfeited and appropriated by NHAI as
\n                    mutually agreed genuine pre-estimated
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 9 of 25<\/span>
\n                     compensation as payable to NHAI for, inter-
\n                    alia, time, cost and effort of NHAI without
\n                    prejudice to any other right or remedy that
\n                    may be available to the NHAI thereunder or
\n                    otherwise.\n<\/p>\n
                    AND WHEREAS, in view of your conduct
\n                    which has, inter-alia, resulted in delay of
\n                    execution    of   a    project   of   National
\n                    importance, a view is made out not to deal
\n                    with you in future for participation and\/or
\n                    award of further projects of NHAI. It needs to
\n                    be appreciated that the projects being
\n                    undertaken by NHAI are of huge magnitude
\n                    and both in terms of manpower and finance
\n                    besides    being     of    utmost     National
\n                    importance, striking at the root of economic
\n                    development and prosperity and general
\n                    public and a nation as a whole, the NHAI
\n                    cannot afford to deal with entities who fail to
\n                    perform their obligations as in your case.<\/p>\n
                    AND WHEREAS, in the premises it is
\n                    proposed to debar above named noticee for
\n                    a period of five years from pre-qualification,
\n                    participating or bidding for future projects
\n                    of\/or to be undertaken by NHAI, either
\n                    directly in your name or indirectly in any
\n                    other name or in association with any other
\n                    person entity in which you may choose to
\n                    carry on your business.\n<\/p>\n
                       In view of the aforesaid, you are hereby
\n                    called upon to show cause within 14 days of
\n                    the receipt of this notice as to why action as
\n                    aforesaid should not be taken against you. If
\n                    no reply is received within the said period, it
\n                    shall be presumed that you have nothing to
\n                    say against the proposed action of NHAI and
\n                    NHAI shall be free to take appropriate action
\n                    as may be deemed fit in the facts and
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 10 of 25<\/span>
\n                     circumstances of             the    case and as            per
\n                    applicable law.”\n<\/p>\n<\/p>\n
    13.     It was contended that aforesaid extract from the show<\/p>\n
            cause notice would reveal that as per respondent no.2,<\/p>\n
            it was the failure on the part of the petitioner to enter<\/p>\n
            into the contract after being declared a successful<\/p>\n
            bidder which occasioned delay in execution of the<\/p>\n
            project propelling respondent no.2 in coming to a<\/p>\n
            prima facie view that it would not deal with the<\/p>\n
            petitioner in respect of its future projects for a period<\/p>\n
            of time, which was tentatively proposed as five years.<\/p>\n
    13.1 Learned senior counsel for the petitioner submits that<\/p>\n
            such a show cause notice could not have been issued<\/p>\n
            for the reason that it was not envisaged under the<\/p>\n
            terms and conditions of the invitation to offer and no<\/p>\n
            such decision ought to have been taken de hors the<\/p>\n
            contract. This was more so according to the learned<\/p>\n
            counsel as no guidelines had been provided.<\/p>\n
    13.2 Learned senior counsel for the petitioner has also drew<\/p>\n
            our attention to the contents of the final order of<\/p>\n
            debarment dated 20.05.2011, to demonstrate that the
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 11 of 25<\/span>
\n             debarment order was passed on grounds which did not<\/p>\n
            find a mention in the show cause notice. The reason<\/p>\n
            being, according to the learned counsel, to somehow<\/p>\n
            bring the order of debarment within the four corners of<\/p>\n
            clause 4.2 read with clause 4.3 of the ITB.<\/p>\n
    13.3 It is his say that clause 4.3(e) which defines restrictive<\/p>\n
            practices cannot bring within its ambit allegations of<\/p>\n
            “pooling” or “malafides”:\n<\/p>\n
                     “restrictive practice” means forming a
\n                     cartel or arriving at any understanding or
\n                     arrangement among Bidders with the
\n                     objective of restricting or manipulating a
\n                     full and fair competition in the Bidding
\n                     Process.”\n<\/p><\/blockquote>\n
    14.     In other words it was contended that the allegations<\/p>\n
            pertaining       to    “pooling”        and     “mala       fides”     were<\/p>\n
            incorporated in the debarment letter dated 20.05.2011<\/p>\n
            only as an afterthought with a view to bring the<\/p>\n
            petitioner with the purview of “restrictive practices”.<\/p>\n
    15.     In order to appreciate the aforesaid submission, we<\/p>\n
            consider it appropriate to reproduce the relevant<\/p>\n
            portion of the letter of debarment dated 20.05.2011<\/p>\n
            which reads as under:\n<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 12 of 25<\/span>
\n                      ” In view of your conduct, Show Cause
\n                     Notice dated 24.02.2011 was issued to
\n                     you seeking your explanation as to why
\n                     action should not be taken to debar
\n                     above named addresses for a period of
\n                     five    years      from     prequalification,
\n                     participating or bidding for future
\n                     projects of \/ or to be undertaken by
\n                     NHAI, either directly in your name or
\n                     indirectly in any other name or in
\n                     association with any other person entity
\n                     in which you may choose to carry out
\n                     your business. In response to the said
\n                     Show Cause Notice dated 24.02.2011,
\n                     you vide letter dtd.01\/03\/2011, inter-alia,
\n                     stated that minutes of the pre-bid
\n                     meeting,      which     included     several
\n                     amendment\/queries,                      were
\n                     communicated on website of NHAI on
\n                     7.1.2011 while bid submission was kept
\n                     the next date on 10.01.2011. You also
\n                     stated that in the light of the above
\n                     notice in the bid clarification, certain
\n                     anomalies crept up in bid submission,
\n                     which were only discovered subsequent
\n                     to the letter of intent being issued.\n<\/p>\n
                        It is noted that above submission was
\n                     also made in your letter dated
\n                     24\/01\/2011, wherein you have accepted
\n                     the fact that other bidders also
\n                     participated      under      the    similar
\n                     circumstances. Further the fact remains
\n                     that             clarification\/amendments
\n                     communicated by NHAI were \u201eminor\u201f and
\n                     cannot be attributed as a cause for
\n                     occurrence of an \u201eerror\u201f of \u201emajor\u201f nature
\n                     and magnitude. With project facilities
\n                     clearly spelt out in the RFP document,
\n                     the project cost gets frozen well in
\n                     advance and similarly traffic assessment
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 13 of 25<\/span>
\n                      & projections, which largely impact the
\n                     financial assessment, are also not
\n                     expected to be left out for last few days
\n                     of bid submission. Therefore, stating that
\n                     an \u201eerror\u201f of this nature and magnitude
\n                     occurred is neither correct nor justified.
\n                     It is to be noted that your actof non-\n<\/p>\n
                     acceptance of LOA has resulted in huge
\n                     financial loss, to the tune of Rs.3077
\n                     crores, as assessed over the life of
\n                     concession period, in terms of lower
\n                     premium, apart from cost of the time
\n                     and effort, to NHAI. It is further noted
\n                     that this is the first case where a bidder
\n                     has not accepted the LOA, and warrants
\n                     exemplary action to curb any practice of
\n                     \u201epooling\u201f, and \u201emalafide\u201f in future.<\/p>\n
                        After considering all material facts, and
\n                     your reply in response to the Show
\n                     Cause Notice, NHAI is of the considered
\n                     view that no justifiable grounds have
\n                     been made out in support of your action
\n                     of non-acceptance of LOA. Keeping in
\n                     view the conduct of the addresses, NHAI
\n                     find that     they are not reliable and
\n                     trustworthy and have caused huge
\n                     financial loss to NHAI. Therefore, it is
\n                     hereby informed that without prejudice
\n                     to any other rights available to NHAI in
\n                     terms of the provision of RFP document
\n                     and\/or the applicable law, you the above
\n                     named addresses are hereby barred
\n                     from prequalification, participating or
\n                     bidding for future projects of \/ or to be
\n                     undertaken by NHAI, either directly in
\n                     your name or indirectly in any other
\n                     name or in association with any other
\n                     person entity in which you may choose
\n                     to carry out your business for a period<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 14 of 25<\/span>
\n                      of one year from the date of issue of
\n                     this letter.”\n<\/p>\n<\/p>\n
    16.     The aforesaid apart, the petitioner is also aggrieved by<\/p>\n
            the website display of respondent no.2 where the<\/p>\n
            name of the petitioner is shown with the remark \u201ethe<\/p>\n
            applicant has been debarred by NHAI\u201f.                              He thus<\/p>\n
            submits that this may have an effect on the other<\/p>\n
            tenders issued by third parties, in which, the petitioner<\/p>\n
            may want to participate.\n<\/p>\n
    17.     The last aspect urged by learned counsel for the<\/p>\n
            petitioner is that without prejudice to the aforesaid,<\/p>\n
            the     punishment          imposed         on     the     petitioner       is<\/p>\n
            disproportionate, and such a decision of debarment<\/p>\n
            can form subject matter of adjudication under Article<\/p>\n
            226 of the Constitution of India in view of the<\/p>\n
            judgment of the learned Single Judge of this Court in<\/p>\n
            M\/s V.K.Dewan and Co. v. Municipal Corporation of<\/p>\n
            Delhi & Ors.<\/a>; AIR 1994 Delhi 304.\n<\/p>\n
    18.     On     the    other     hand,      learned       senior     counsel       for<\/p>\n
            respondent no.2 has pointed out to us that all that the<\/p>\n
            respondent no.2 has done is to take a decision not to
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 15 of 25<\/span>
\n             deal with the petitioner for a period of one year on<\/p>\n
            account of the petitioner having backed out at the last<\/p>\n
            minute from entering into the contract. The parties<\/p>\n
            participating in such bids are well experienced and the<\/p>\n
            petitioner is one such party, which is in fact a public<\/p>\n
            limited company, and which has been participating in<\/p>\n
            various tenders including that of respondent no.2. The<\/p>\n
            difference between the petitioner as H-1 and H-2 to<\/p>\n
            whom ultimately the contract was awarded is quite<\/p>\n
            large (i.e., a differential itself amounting to Rs.64<\/p>\n
            crores). Since the bid security forfeiture term in the<\/p>\n
            contract provided for a pre-estimate of damages, only<\/p>\n
            that amount was forfeited, i.e., a sum of Rs.13.97<\/p>\n
            crores. Learned counsel has referred to the final order<\/p>\n
            passed by respondent no.2 to contend that it is a first<\/p>\n
            case where a bidder has not executed LOA, and<\/p>\n
            respondent no.2 as a prudent commercial party is<\/p>\n
            entitled to take a decision to discourage such practice<\/p>\n
            in future by contractors like the petitioner. The<\/p>\n
            decision taken by respondent no.2 is a prudent<\/p>\n
            commercial decision not to deal with a contractor like
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 16 of 25<\/span>
\n             the petitioner for a limited period of one year and that<\/p>\n
            the position could be no different only because<\/p>\n
            respondent no.2 is a public sector enterprise.                              A<\/p>\n
            decision, such as the one taken by respondent no. 2,<\/p>\n
            would not have been called into question if a private<\/p>\n
            party had decided not to deal with such relcalcitrant<\/p>\n
            entity.\n<\/p>\n
    19.     It is the say of learned counsel for respondent no.2<\/p>\n
            that the debarment is for a short period of time<\/p>\n
            keeping in mind the nature of contracts which are<\/p>\n
            entered into by respondent no.2.                        Learned senior<\/p>\n
            counsel for respondent no.2 states that clause 4.2 has<\/p>\n
            no role to play in the present case, and that the<\/p>\n
            decision taken by it is de hors the same in view of<\/p>\n
            clause 2.20.7 which states that the encashment of the<\/p>\n
            bid security amount is \u201ewithout prejudice to any other<\/p>\n
            right or remedy that may be available to the<\/p>\n
            authority”.\n<\/p>\n
    20.     We find the action of respondent no.2 is completely<\/p>\n
            justified and in accordance with law. The petitioner, a<\/p>\n
            corporate entity, knew the nature of bid it was making.
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 17 of 25<\/span>
\n             It made a bid for RS 190.57 crores. On having found<\/p>\n
            out that the next highest bid of H-2 was for Rs.126.06<\/p>\n
            crores (as revised), though the original bid was even<\/p>\n
            lower, it had a second thought and under the garb of<\/p>\n
            ostensibly re-visiting a business decision withdrew<\/p>\n
            from the tender.               It naturally bore the financial<\/p>\n
            consequences of the bid security amount being<\/p>\n
            forfeited without any demur or protest.                         What the<\/p>\n
            petitioner seeks by way of the present writ petition is a<\/p>\n
            right to continue to participate in the tenders to be<\/p>\n
            issued of respondent no.2 in the near future despite<\/p>\n
            the aforesaid conduct.              We cannot lose sight of the<\/p>\n
            fact that respondent no.2 is dealing with highway<\/p>\n
            projects all over the country which are of critical<\/p>\n
            national importance both in terms of their economics<\/p>\n
            and logistical relevance.             Expeditious construction of<\/p>\n
            road links is an important part of infrastructure<\/p>\n
            development of the country. Any delay in such<\/p>\n
            infrastructure projects is a national waste. In such a<\/p>\n
            situation for the petitioner to have withdrawn at the<\/p>\n
            last minute, ostensibly on the ground of prudent
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 18 of 25<\/span>
\n             commercial          decision        can       certainly       invite     the<\/p>\n
            consequences of the tenderer declining to deal with<\/p>\n
            such an entity for a specified period of time. Learned<\/p>\n
            senior     counsel       for    respondent          no.2     has     rightly<\/p>\n
            contended         that    but     for   the     fact    that     the    said<\/p>\n
            respondent is a public sector undertaking such a<\/p>\n
            decision would have passed muster of the court on the<\/p>\n
            ground of         business expediency.                  The     fact    that<\/p>\n
            respondent no.2 is a public sector undertaking ought<\/p>\n
            not to disable it from taking a commercially prudent<\/p>\n
            and if you take an expedient decision in its own<\/p>\n
            interest. It is not the function of this Court to interfere<\/p>\n
            with such a decision which impinges on its business<\/p>\n
            efficacy merely because it happens to be taken by a<\/p>\n
            public sector undertaking which, in the instant case,<\/p>\n
            happens to be respondent no.2. The order of the<\/p>\n
            respondent no.2 also notes that this is a first instance<\/p>\n
            of its kind. The reference of \u201epooling\u201f and \u201emala fide\u201f is<\/p>\n
            made in that context, and as clarified by learned<\/p>\n
            counsel for respondent no.2, not to bring it within the<\/p>\n
            parameters of clause 4.2.\n<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 19 of 25<\/span>\n<\/p>\n
     21.     In our considered view, such an action by respondent<\/p>\n
            no.2, in the given facts and circumstances of the case,<\/p>\n
            is a decision which any prudent businessman placed in<\/p>\n
            a similar situation would naturally have taken to deter<\/p>\n
            such like entities from conducting themselves in a<\/p>\n
            manner, to say the least, which is unbusinessman like.<\/p>\n
            In such circumstances, it would be both unfair and<\/p>\n
            unreasonable for the court to issue a direction<\/p>\n
            requiring respondent no. 2 to deal with a person (i.e.,<\/p>\n
            the petitioner) who had no qualms in ditching the<\/p>\n
            project at the nth hour.\n<\/p>\n
    22.     We are also unable to accept the submission of<\/p>\n
            learned senior counsel for the petitioner that adequate<\/p>\n
            opportunity was not granted to the petitioner to<\/p>\n
            defend its case since an oral hearing was not accorded<\/p>\n
            to the petitioner.         A right of personal hearing is not an<\/p>\n
            inbuilt right in such like proceedings especially given<\/p>\n
            the peculiar facts of the case, which stand unrebutted.<\/p>\n
            In this regard, we draw strength from the observations<\/p>\n
            of the Supreme Court in Union of India & Anr. v. Jesus<\/a><\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 20 of 25<\/span>
\n             Sales Corporation; (1996) 4 SCC 69 where para 5<\/p>\n
            reads as under:\n<\/p>\n
                  5. The High Court has primarily considered the
\n                  question as to whether denying an opportunity
\n                  to the appellant to be heard before his prayer
\n                  to dispense with the deposit of the penalty is
\n                  rejected,  violates   and    contravenes   the
\n                  principles  of   natural   justice.  In   that
\n                  connection, several judgments of this
\n                  Court have been referred. It need not be
\n                  pointed     out     that   under     different
\n                  situations and conditions the requirement
\n                  of compliance of the principles of natural
\n                  justice vary. The courts cannot insist that
\n                  under all circumstances and under
\n                  different statutory provisions personal
\n                  hearings have to be afforded to the
\n                  persons concerned. If this principle of
\n                  affording personal hearing is extended
\n                  whenever statutory authorities are vested
\n                  with the power to exercise discretion in
\n                  connection with statutory appeals, it shall
\n                  lead to chaotic conditions. Many statutory
\n                  appeals and applications are disposed of
\n                  by the competent authorities who have
\n                  been vested with powers to dispose of the
\n                  same. Such authorities which shall be
\n                  deemed to be quasi- judicial authorities
\n                  are expected to apply their judicial mind
\n                  over the grievances made by the
\n                  appellants or applicants concerned, but it
\n                  cannot be held that before dismissing
\n                  such appeals or applications in all events
\n                  the quasi- judicial authorities must hear
\n                  the appellants or the applicants, as the
\n                  case may be. When principles of natural
\n                  justice require an opportunity to be heard
\n                  before an adverse order is passed on any
\n                  appeal or application, it does not in all
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 21 of 25<\/span>
\n                   circumstances mean a personal hearing.
\n                  The requirement is complied with by
\n                  affording an opportunity to the person
\n                  concerned to present his case before such
\n                  quasi-judicial authority who is expected to
\n                  apply his judicial mind to the issues
\n                  involved. Of course, if in his own discretion if
\n                  he requires the appellant or the applicant to be
\n                  heard     because    of    special   facts   and
\n                  circumstances of the case, then certainly it is
\n                  always open to such authority to decide the
\n                  appeal or the application only after affording a
\n                  personal hearing. But any order passed
\n                  after taking into consideration the points
\n                  raised in the appeal or the application
\n                  shall not be held to be invalid merely on
\n                  the ground that no personal hearing had
\n                  been afforded. This is all the more important
\n                  in the context of taxation and revenue matters.
\n                  When an authority has determined a tax
\n                  liability or has imposed a penalty, then the
\n                  requirement that before the appeal is heard
\n                  such tax or penalty should be deposited cannot
\n                  be held to be unreasonable as already pointed
\n                  out above. In the case of Shyam Kishore v.<\/p><\/blockquote>\n
                  Municipal Corporation of Delhi (supra) it has
\n                  been held by this Court that such requirement
\n                  cannot be held to be harsh or violative of
\n                  Article 14 of the Constitution so as to declare
\n                  the requirement of pre-deposit itself as
\n                  unconstitutional. In this background, it can be
\n                  said that normal rule is that before filing the
\n                  appeal or before the appeal is heard, the
\n                  person concerned should deposit the amount
\n                  which he has been directed to deposit as a tax
\n                  or penalty. The non-deposit of such amount
\n                  itself is an exception which has been
\n                  incorporated in different Statutes including the
\n                  one with which are concerned. Second proviso
\n                  to Sub-section (1) of Section 4-M says in clear
\n                  and unambiguous words that an appeal against
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 22 of 25<\/span>
\n                   an order imposing a penalty shall not be
\n                  entertained unless the amount of the penalty
\n                  has been deposited by the appellant.\n<\/p>\n
                  Thereafter the third proviso vests a discretion
\n                  in such Appellate authority to dispense with
\n                  such deposit unconditionally or subject to such
\n                  conditions as it may impose in its discretion
\n                  taking into consideration the undue hardship
\n                  which it is likely to cause to the appellant. As
\n                  such it can be said that the statutory
\n                  requirement is that before an appeal is
\n                  entertained, the amount of penalty has to be
\n                  deposited by the appellant; an order dispensing
\n                  with such deposit shall amount to an exception
\n                  to the said requirement of deposit. In this back-
\n                  is ground, it is difficult to hold that if the
\n                  Appellate authority has rejected the prayer of
\n                  the appellant to dispense with the deposit
\n                  unconditionally or has dispensed with such
\n                  deposit subject to some conditions without
\n                  hearing the appellant, on perusal of the petition
\n                  filed on behalf of the appellant for the said
\n                  purpose, the order itself is vitiated and liable to
\n                  be quashed being violative of principles of
\n                  natural justice.\n<\/p>\n
                                               (emphasis is ours)<\/p>\n
            23.         We also do not find that the consequences<\/p>\n
            stipulated in the impugned letter are disproportionate<\/p>\n
            when examined in the context of the conduct of the<\/p>\n
            petitioner.       The case referred to by learned senior<\/p>\n
            counsel for the petitioner in V.K.Dewan and Co. v.<\/p>\n
            Municipal Corporation of              Delhi & Ors.<\/a>\u201fs case (supra)<\/p>\n
            was a case where period of debarment imposed was<\/p>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 23 of 25<\/span>
\n             three years. The aspect of proportionality has to be<\/p>\n
            examined          in    the     context        of        the    facts    and<\/p>\n
            circumstances arising in a given case. In the present<\/p>\n
            case, after proposing a debarment for a period of five<\/p>\n
            years, the decision taken by respondent no.2 is of<\/p>\n
            debarment of petitioner for a year from participating in<\/p>\n
            the tenders to be issued by respondent no.2 within the<\/p>\n
            said     time     frame.       The     effect       of    the    petitioner<\/p>\n
            withdrawing from the contract is that the respondent<\/p>\n
            no.2 has suffered a loss of Rs 64 crores per year to<\/p>\n
            begin with, and thereafter, on an extrapolated scale,<\/p>\n
            spread over a period of 25 years, the loss is pegged at<\/p>\n
            Rs.3077 crores; as set out in the final order.                           The<\/p>\n
            respondent no.2 was thus well within its rights to take<\/p>\n
            appropriate action against the petitioner, and taking<\/p>\n
            into consideration the enormity of the loss, we are of<\/p>\n
            the considered view that respondent no.2 has dealt<\/p>\n
            with the petitioner rather lightly.\n<\/p>\n
        24.     Insofar as the display on website is concerned, the<\/p>\n
            same is only stating a fact that respondent no.2 has<\/p>\n
            taken a decision to debar the petitioner from further
\n________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 24 of 25<\/span>
\n             dealing for a period of one year. It is not a debarment<\/p>\n
            qua any third party. It is for the third parties to take an<\/p>\n
            informed decision whether they would like to deal with<\/p>\n
            the petitioner keeping in                mind the conduct of the<\/p>\n
            petitioner qua respondent no.2. We can only sum up<\/p>\n
            by noting that the consequences which flowed in this<\/p>\n
            case pursuant to the conduct of the petitioner are<\/p>\n
            those, which are of, the petitioner\u201fs own making; it has<\/p>\n
            no one else to blame but itself.\n<\/p>\n
    25.     We find the writ petition devoid of both merit and<\/p>\n
            substance and hence dismiss the same with costs<\/p>\n
            quantified at Rs.1,00,000\/-.\n<\/p>\n
    26.     Interim order stands vacated.\n<\/p>\n<\/p>\n
                                                  SANJAY KISHAN KAUL, J.\n<\/p>\n<\/p>\n
AUGUST 02, 2011                                         RAJIV SHAKDHER, J.\ndm\n\n\n\n\n<\/pre>\n
________________________________________________________________________________________
\nWP (C) No.4331 of 2011                                                      Page 25 of 25<\/span>\n <\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court M\/S Patel Engineering Ltd. vs Union Of India & Anr. on 2 August, 2011 Author: Sanjay Kishan Kaul * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of decision: 02.08.2011 + WP (C) No.4331 of 2011 & CM No. 8869\/2011 M\/S PATEL ENGINEERING LTD. …PETITIONER Through: Mr.Rajiv Nayar, Sr.Advocate […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-64905","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nM\/S Patel Engineering Ltd. vs Union Of India & Anr. on 2 August, 2011 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ms-patel-engineering-ltd-vs-union-of-india-anr-on-2-august-2011\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"M\/S Patel Engineering Ltd. vs Union Of India & Anr. on 2 August, 2011 - 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