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M/s. Khushee Construction through its Power of Attorney Holder, namely Shree Rajeev Kumar, District Patna v/s The State of Bihar through the Secretary, Public Health Engineering Department, Govt. of Bihar, Patna & Others

    Civil Writ Jurisdiction Case No. 2833 of 2020

    Decided On, 16 October 2020

    At, High Court of Judicature at Patna

    By, THE HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH

    For the Petitioners: P.K. Sahi, Senior Advocate, Vikas Kumar, Advocate. For the Respondents: Alok Ranjan, AC to AAG-5.



Judgment Text

Oral Judgment1. The present writ petition has been filed for quashing the letter dated 25.01.2020, issued by the Executive Engineer, Public Health Division, Supaul (respondent no. 7), whereby and whereunder the Letter of Acceptance of all 39 groups, pertaining to notice inviting tender no. MNI-24(R-1)/ 2019-20, has been cancelled. The petitioner has also prayed for directing the respondents-authorities, particularly the respondent no. 7 to execute agreements with the petitioner with regard to the work of all the 39 groups, for which Letter of Acceptance was issued.2. The brief facts of the case, according to the petitioner are that the Office of the Executive Engineer, Public Health Division, Supaul had issued a notice inviting tender bearing tender notice no. MNI-24(R-1)/2019-20 for Work Design, Construction, Supply, Testing of Commissioning of Water Supply Schemes with Electrical Driven Pumps and Iron Removal Treatment Plant having CSIR technology or any other technology approved by the Government of India. The petitioner is stated to have participated in the aforesaid NIT issued by the respondent no. 7 and he was declared successful in the technical bid as also was found to be the lowest tenderer in the financial bid, as such he was declared successful in all the 39 groups, pertaining to the tender notice in question. Accordingly, the respondent no. 7 had allotted the work in question to the petitioner on 31.12.2019 and had issued 39 Letters of Acceptance in favour of the petitioner. The aforesaid Letters of Acceptance postulated furnishing of Performance Security by the petitioner, as detailed in paragraph no. 31.1 of the Instructions to Bidders along with Additional Performance Guarantee within a period of 15 days having a validity of 72 months, failing which it was stipulated that action would be taken as per paragraph no. 31.4 of the Instructions to Bidders.The petitioner is stated to have already deposited the Performance Security along with the tender documents, hence he was only required to furnish the Additional Performance Guarantee, thus the petitioner is stated to have prepared Additional Performance Guarantees for all the 39 works in the form of Fixed Deposit issued by the IDBI Bank dated 01.01.2020, whereafter all the F.Ds. in the shape of Additional Performance Guarantees were deposited in the office of the respondent no. 7. It is the case of the petitioner that after retaining the aforesaid F.Ds. for 7-8 days, the respondent no. 7 had called upon the petitioner and returned all the F.Ds. as also had told him that he was being pressurised from the higher authorities not to execute the agreement with the petitioner. The representative of the petitioner is stated to have visited the Office of the respondent no. 7 again, but to no avail, however, all of a sudden a show cause notice was issued to the petitioner on 21.01.2020, wherein it was mentioned that despite issuance of Letter of Acceptance on 31.12.2019, the Additional Performance Guarantees have not been deposited till date, hence show cause reply be filed as to why L.O.As. be not cancelled.The petitioner had then submitted a detailed reply dated 23.01.2020 stating the aforesaid facts and had also annexed photocopies of the Fixed Deposits dated 01.01.2020, whereafter, without any reason, the Letter of Acceptances of all the 39 groups were cancelled by the impugned order dated 25.01.2020, as per Clause 31.3 and 33 of the Model Bidding Document (MBD).3. The learned Senior counsel for the petitioner has submitted that the case of the petitioner neither falls under Clause 31.3 nor under Clause 33 of the Model Bidding Document, inasmuch as the petitioner had already prepared the requisite fixed Deposits for submission, by way of Additional Performance Guarantees, on 01.01.2020 itself, however the same was not accepted by the respondent no. 7 and moreover, the petitioner has admittedly neither indulged in any corrupt or fraudulent practices. It is further submitted that a bare perusal of the impugned order dated 25.01.2020 would show that the same is non-speaking, unreasoned and has not taken into consideration the reply filed by the petitioner, hence on this short ground alone, the present petition is required to be allowed and the impugned order dated 25.01.2020 is fit to be quashed.4. Per contra, the learned counsel for the State by referring to the counter affidavit filed in the present case, has submitted that a notice inviting tender was published by the office of the Executive Engineer, Public Health Division, Supaul vide tender notice no. MNI-24(R-1)/2019-20 for Work, Design, Construction, Supply, Testing, Commissioning of Water Supply Schemes with Electrical Driven Pumps and Iron Removal Treatment Plant having Technology (Absorption/ Nano Technology) of CSIR or any other technology endorsed/ approved by the Government of India in the Iron affected Habitations/ Wards of Districts of Bihar, on Turn key basis with 03 months Trial Run after Commissioning and Comprehensive Operation and Maintenance of 60 months after successful completion of trial run period under the "Mukhya Mantri Nischaya Yojna", for different Wards/ Panchayats of Supaul District situated within the State of Bihar. The petitioner had also participated in Tender no. MNI-24(R-1)/2019-20 and he was declared successful in the technical bid as well in the financial bid, as such the respondent no. 7 had issued total number of 39 L.O.As. in favour of petitioner vide different letters of the P.H. Division, Supaul dated 31.12.2019. Along with all the Letters of Acceptance, there was a direction to the petitioner, in terms of Para 31.1 of the Instructions to Bidders, to furnish Additional Performance Security/ Guarantee within 15 days which should have validity for 72 months, failing which action would be taken in terms of Paragraph no. 31.3 of the Instructions to Bidders.5. The learned Counsel for the answering respondents has submitted that the petitioner has made a wrong submission to the effect that it had prepared the Additional Performance Guarantees of all the 39 works, by way of fixed deposits issued by the IDBI Bank dated 01.01.2020 and had deposited the same in the office of Executive Engineer, PH Division, Supaul. In this regard, it is further submitted that the petitioner has never submitted the Additional Performance Security in the office of the Executive Engineer, PH Division, Supaul inasmuch as no receiving of the same, by way of proof, has been filed along with the present writ petition. It is stated that since the petitioner had failed to submit the Additional Performance Security, the Executive Engineer, PH Division, Supaul, vide letter no. 116 dated 22.01.2020, had issued a show cause notice to the petitioner and directed him to file a reply within 48 hours. In the meantime, it was found that the term deposits which were submitted by the petitioner as earnest money, purportedly issued from Mithapur Sub-Post Office, were forged, as such, the same were cancelled and a recommendation was sent by the Executive Engineer, PH Division, Saharsa for blacklisting the petitioner. In light of the aforesaid recommendation, the petitioner has been blacklisted for five years, with immediate effect, vide departmental Order no. 7 contained in Memo no. 70 dated 10.01.2020, issued under the signature of the Chief Engineer (Civil), PHED.6. The learned counsel for the State has further submitted that the reply filed by the petitioner dated 23.01.2020, to the show cause notice dated 21.01.2020, has been duly considered by the Tender Committee, whereupon the same was found to be not acceptable and only then the impugned order dated 25.01.02020 has been issued by the respondent no. 7, cancelling all the L.O.As. issued in favour of the petitioner, in terms of Clause 31.3 and 33 of the Model Bidding Document. It is also submitted that as far as the prayer of the petitioner to direct the respondent-authorities to execute agreement with the petitioner for the work of all 39 groups is concerned, the same is not tenable in the eyes of law since the petitioner has already been blacklisted vide order dated 10.01.2020, hence no agreement can be entered into with a company which has been blacklisted by the respondent-Department. Lastly, it is submitted that the tender/LOAs in question have been cancelled after providing ample opportunity to the petitioner to present his case and moreover, the petitioner is guilty of submitting forged term deposit as earnest money, hence the petitioner is not entitled to any relief by this Court. The learned counsel for the respondent has relied on an order dated 21.11.2019, passed by a Co-ordinate Bench of this Court in C.W.J.C. no. 6412 of 2019 (M/s. Surendra Prasad & Co. Vs. The State of Bihar & Ors.), relevant paragraphs whereof are being reproduced herein below:"Learned Senior Counsel for the petitioner submits that the forfeiture of earnest money deposited by the petitioner in terms of instruction to bidders of CMBD/SBD is wholly illegal, arbitrary and bad in law. However, after going through Clause C-25 of the SBD which relates to settlement of disputes and arbitration, learned Senior Counsel submits that given the mechanism provided under the SBD, the petitioner shall seek his remedy in accordance with the provisions of the Arbitration and Conciliation Act, 1996.Learned Senior Counsel has, however, expressed his apprehension that in view of the conditions stipulated in Clause 25, it is only the Engineer-in-Chief or the administrative head of the department who can appoint an Arbitrator and now, in view of the amendments brought in the Arbitration and Conciliation Act, 1996 w.e.f. 23rd October, 2015, the Engineer- in-Chief or the administrative head of the department would come within the category of ineligible person who not appoint an Arbitrator.Learned Senior Counsel, therefore, submits that if the petitioner seeks his remedy under the provisions of the Arbitration and Conciliation Act, 1996 as provided under Clause C 25, respondents-State must agree to a common name and the Arbitrator be appointed with the consent of the parties. Learned counsel representing the State submits that in view of the amendments brought in the Arbitration and Conciliation Act, 1996 as provided under Clause C 25, respondents-State must agree a common name and the Arbitrator be appointed with the consent of the parties.Learned counsel representing the State submits that in view of the amendments brought in the Arbitration and Conciliation Act, 1996, now the Engineer-in-Chief or the Administrative Head of the Department shall not appoint Arbitrator and the arbitration proceeding shall be conducted by an arbitrator on whose name, parties may agree.In view of the stand taken on behalf of the State-respondents, this Court while disposing of the writ application, grants liberty to the petitioner to seek his remedy against the forfeiture of bid security in a duly constituted Arbitration Proceeding under Clause C 25 of the S.B.D.The writ application stands disposed off accordingly."It is thus submitted by the Ld. Counsel for the respondents that the present writ petition is not maintainable, in as much as the contract itself provides for a mode of settlement of disputes arising from the contract, thus the petitioner would be well advised to follow and adopt the said remedy and not invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution of India.7. The learned counsel for the respondent-State has also referred to the supplementary counter affidavit, wherein the minutes of meeting dated 25.01.2020 of the Tender Committee has been brought on record which clearly shows that the petitioner had not submitted the Additional Performance Guarantee, as required under Clause-31.1 of the instruction to bidders under the Model Bidding Document, within the stipulated time. It is also submitted that the term deposit submitted by the petitioner, claimed to have been issued from the Mithapur Sub-Post Office, by way of earnest money, has also been found to be forged.8. I have heard the learned Senior Counsel for the petitioner and the learned counsel for the respondent-State. At this juncture, it would be relevant to reproduce herein below, Clause 31.1 and Clause 31.3 of the Instruction to bidders:"31.1 Within 15 (Fifteen) days of receipt of the Letter of Acceptance, the successful Bidder shall deliver to the Employer a Performance Security for an amount equivalent 2% of the Contract price including earnest money plus additional security for unbalanced Bids in accordance with the Clause 29.5 of ITB and the provisions of Bihar Financial Rules.31.3 Failure of the successful Bidder to comply with the requirements of Sub- Clause 31.1 shall constitute sufficient grounds for cancellation of the award and forfeiture of the Bid Security."It would also be relevant to reproduce Clause 25 of the General Conditions Of Contract, herein below:"Clause - 25 (Settlement of Disputes & Arbitration) Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in-before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim right matter or thing whatsoever in any way arising out of or relating to contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter.i) If the contractor considered any work demanded of him to be outside the requirements of the contract, or dispute any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 7 days request the Superintending Engineer in writing for written instruction of decision.Thereupon, the Superintending Engineer shall give his written instructions of decision within a period of fifteen days from the receipt of the contractor's letter. If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may, within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the later so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (i) above disputes or difference shall be referred for adjudication through arbitrator appointed by Engineer-in-Chief or the administrative head of the said PHED. If the arbitrator so appointed is unable or unwilling to act or resign his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute along with the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.It is also a term of this contract that no person other than a person appointed by such Engineer-in-Chief or the administrative head of the department as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitrator at all. It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 45 days of receiving the intimation from the Engineer-in- Charge that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) or any statutory modifications or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause.It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties.It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date the issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid.All arbitration shall be held at patna and at no other place."9. This Court finds, from the discussion made herein above in the preceding paragraphs, that a serious dispute has arisen in the present case with regard to submission/ non-submission of the Additional Performance Guarantee, required to be furnished by the petitioner in connection with Tender No. MNI-24(R-1)/2019-20, as per Clause 31.1 of the Instruction to bidders. Thus, admittedly, the present writ petition involves serious disputed question of facts which cannot be adjudicated in a writ petition under Article 226 of the Constitution of India, hence on this ground alone, the present writ petition is fit to be dismissed. In this regard, it would be apt to refer to a judgment rendered by the Hon'ble Apex Court, reported in (2015) 7 SCC 728 (Joshi Technologies International Inc. v. Union Of India & Ors.), paragraph no 69, 70.3 to 70.11 and 71 whereof are being reproduced herein below:"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:69.1. The Court may not examine the issue unless the action has some public law character attached to it.69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc.70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.70.5. Writ petition was not maintainable to avoid contractual obligation.Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.71. Keeping in mind the aforesaid principles and after considering the arguments of the respective parties, we are of the view that on the facts of the present case, it is not a fit case w

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here the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded."10. Considering the facts and circumstances of the case, the law laid down by the Hon'ble Apex Court in the case of Joshi Technologies International Inc. (supra) and for the reasons mentioned in the preceding paragraphs, this Court holds that since the present writ petition, admittedly, involves serious disputed question of facts which cannot be adjudicated in a writ petition under Article 226 of the Constitution of India, the present case is not a fit case where this Court is required to exercise its original, extraordinary and discretionary jurisdiction under Article 226 of the Constitution of India, hence the present petition, being devoid of any merit, stands dismissed.11. Yet another aspect of the matter is that the contract itself provides for a mode of settlement of disputes arising from the contract, under Clause-25 of the General Conditions Of Contract (part of the Standard Bidding Documents), whereunder, the petitioner can seek recourse to Arbitration for the purposes of settlement of disputes, hence, in view of the availability of an efficacious alternative remedy to the petitioner, the present writ petition is not maintainable. In this regard, reference be had to a judgment rendered by the Hon'ble Apex Court, in the case of Zonal Manager, Central Bank of India vs. Devi Ispat Limited and others, reported in (2010) 11 SCC 186, paragraph No. 28 whereof is reproduced hereinbelow:"28. It is clear that (a) in the contract if there is a clause for arbitration, normally, a writ court should not invoke its jurisdiction; (b) the existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article 226; and (c) if the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the Constitution of India in its contractual or statutory obligation, writ petition would be maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or arbitrary, writ courts can exercise their power. In the light of the legal position, writ petition is maintainable even in contractual matters, in the circumstances mentioned in the earlier paragraphs."12. Having regard to the facts and circumstances of the case and for the reasons mentioned hereinabove, I do not find any merit in the present writ petition, hence the same stands dismissed.
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