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Judgment
T.R.Ravi, J
This writ petition is filed challenging Ext.P16 order, whereby the petitioner has been blacklisted from participating in tenders floated by the 1st
respondent for a period of one year with effect from 05.01.2017 and the EMD of Rs.50,000/- has been forfeited.
Heard Sri M.A.Abdul Hakhim on behalf of the petitioner and Smt.K.V.Rashmi, Standing Counsel for respondents 1 and 2.
The petitioner, which is a registered firm, is involved in undertaking electrical works from Governmental and semi-Governmental institutions. The
petitioner had undertaken the electrical contract of the building named “Thejaswini†situated in the 1st respondent Techno Park and the same was
completed during 2006-2009, as can be seen from Ext.P1. As part of expansion, the respondents wanted to install two additional diesel generators in
the said building. The 2nd respondent issued Ext.P6 dated 29.06.2016 inviting tenders for supply, installation, testing and commission of two numbers
of diesel generator sets and modification of electrical panel, etc. Ext.P6 shows that the period of completion was three months and earnest money
deposit of Rs.50,000/- was to be deposited and Rs.5,000/- plus tax at 5% was to be deposited towards cost of tender documents. The last date for
submission of the e-tender was 20.07.2016. A pre-bid meeting was scheduled on 05.07.2016 at Park Centre Building, Technopark. The date of
opening of the techno-commercial bid was 25.07.2016 and the tenderers were expected to give a firm period of 120 days for the tender from the date
of opening of the bid. The petitioner participated in the tender process. The petitioner who submitted a bid for Rs.1,62,59,440/- was the lowest
tenderer. On 17.11.2016, the 1st respondent sent Ext.P9 mail to the petitioner, requesting them to submit an additional bank guarantee for
Rs.35,20,000/- (16% of Rs.2.2 crores) within 10 days to enable them to issue the work order. Respondents had relied on clause 4.6 of the instructions
to the tenderer. On 18.11.2016, the petitioner sent Ext.P10 reply stating that they had already pointed out during discussions that rates were quoted
without taking into account the requirement for additional performance guarantee. It was stated that since the notice inviting tender did not specify the
PAC, there was no way in which they could have known whether the offer that they are making was 25 % less than the PAC and that they would be
liable to provide an additional performance guarantee. On 28.11.2016 the respondents wrote to the petitioner stating that they are yet to receive a
response regarding the submission of additional performance guarantee for Rs.35,20,000/- and granting them 10 more days for submission of such
guarantee. On 01.12.2016, the petitioner informed that they had already sent a letter on 18.11.2016 explaining their position with regard to
performance guarantee. Thereafter the respondents issued Ext.P13, wherein they informed the petitioner that the EMD for Rs.50,000/-submitted
along with the e-tender will be forfeited and further action shall be taken regarding the tender, as per the procedure. On 20.12.2016, the petitioners
wrote Ext.P14 letter in reply to Ext.P13 objecting to the decision to forfeit the EMD, pointing out that clause 4.4 of tender conditions does not permit
such an action. It was also pointed out that the respondents had intimated the PAC as Rs.2.2 Crores only in Ext.P9 e-mail and that prior to the notice
inviting tender and at the time of submitting the tender, there was no way in which the petitioner could have known the PAC. It was also pointed out
that this vital information regarding the tender was concealed, which is against the CPWD norms. In Ext.P14, the petitioner had also made a
suggestion that since the major item of the tender is the DG set, they will construct the necessary foundation and unload the DG set in the site within
15-20 days thereby assuring that the major item is already at site, which is a sufficient guarantee and that the balance value of the work would only be
Rs.69,84,580/-. It was pointed out that such a course of action will assure a guaranteed completion. It was again requested that if the above
suggestion was not agreeable, the EMD may be refunded. On 03.01.2017, the respondents sent Ext.P15 letter to the petitioner stating that even
though the respondents had arranged a pre-bid meeting, the petitioner failed to attend the same and if he had attended, he could have sought
clarification regarding the PAC even before the submission of the bid. Thereafter, on 10.01.2017, the respondents issued Ext.P16 to the petitioner,
whereby the petitioner was informed of the decision to forfeit the EMD and to blacklist the petitioner from participating in the tenders floated by the
Technopark, for a period of one year with effect from 05.01.2017. The petitioner challenges Ext.P16 in this writ petition.
The Standing Counsel for the respondents has filed a statement wherein it is stated that the petitioner did not choose to attend the pre-bid meeting
and that it was his fault that he did not seek any clarification regarding the PAC from the respondents. It is stated that normally respondents do not
specify the PAC, since they want to get more competent rates and that no bidder has asked any clarification regarding the PAC during the pre-bid
meeting. According to the respondents, the petitioner had quoted the work at the rate of 26% below the estimated value and hence under clause 4.6 of
the tender conditions, the petitioner was bound to provide additional performance guarantee. It is stated that the additional performance guarantee is to
ensure that a person does not underquote the work and would ensure completion of the work.
The petitioner has submitted a reply affidavit producing Ext.P17 tender notice dated 18.01.2017, which was issued within six months after Ext.P6
tender notice, in which the respondents had specified the PAC. Exts.P7 and P8 issued during 2014 are also instances where the respondents had
specified the PAC in the notice of tender. The petitioner has thereafter produced Ext.P18 along with I.A.No.1 of 2021, which is the copy of the notice
inviting tender for the very same work covered by Ext.P6. It can be seen therefrom that the respondents had specified the PAC. The respondents
have produced Annexure R1(A) containing the relevant pages of the conditions of tender, which was notified as per Ext.P6. Reference is made to
clauses 4.4 and 4.6, which are extracted below, to justify the actions taken by the respondents.
4.4Â EMD/SECURITY DEPOSIT/RETENTION MONEY
Earnest Money Deposit prescribed shall be remitted in line with the online payment feature stipulated. EMD of the unsuccessful tenderer will be refunded without
any interest on finalisation of contract. E.M.D may be forfeited
I. If a bidder withdraws his bid during the period of validity specified.
II. If the successful bidder fails within the time limit to sign the contract document or fails to furnish the required security deposit.
4.6 ADDITIONAL PERFORMANCE GUARANTEE
Additional performance guarantee will be required to be submitted by the successful contractor if the works are quoted between 11% to 25 % below the estimated
rate. This additional performance guarantee shall be equal to the unbalanced price in the estimate PAC and quoted PAC. This will be released only after satisfactory
completion of the work without any interest.â€
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A Learned Single Judge of this Court in M/s K.V.Joseph & Sons Private Ltd., Kochi and another vs Principal Secretary to
Government, Thiruvananthapuram and others reported in 2017 KHC 170, considered the requirement to provide additional performance guarantee. On
the facts of that case, the learned judge held that the bidder was bound to provide additional performance security and that as long as the grievance of
the bidder was addressed, he cannot challenge an action for not providing additional performance guarantee on the ground of violation of any
principles of natural justice. The counsel for the petitioner pointed out that the facts on which the above judgment was rendered are totally different
from the facts involved in the case on hand. It can be seen from paragraph 19 of K.V.Joseph(supra) that there is a specific clause in the contract
between the parties, which provided that the failure to provide the additional performance guarantee would result in forfeiture of the EMD as well as
an annulment of the award. It is pointed out that there is no such clause available in the contract involved in this case. It is further pointed out that in
K.V.Joseph(supra), the estimate PAC was known to the bidders and hence the bidders knew whether the quoted PAC is falling between the range of
11% and 25%, warranting the provision of additional performance guarantee. Since the estimate PAC was not revealed in the tender document, it is
the contention of the Counsel that there is no justification for either blacklisting the petitioner or for forfeiture of EMD. A reading of the above
judgment would clearly show that many of the clauses which were available in the contract between the parties, on an interpretation of which the
judgment was delivered, are not available in the contract involved in the case on hand. I am hence of the opinion that the judgment in K.V.Joseph
(supra) cannot be applied to the facts of this case.
The counsel for the petitioner relied on the decision of the Hon'ble Supreme Court in Suresh Kumar Wadhwa v. State of M.P., reported in (2017)
16 SCC 757 and contended that a forfeiture of the EMD could have been resorted to only if there is a specific clause in the agreement between the
parties, which permitted the same. The Hon'ble Supreme Court has in the above said judgment held that as per Section 74 of the Contract Act, 1872,
if there is no stipulation in the contract for forfeiture, there is no such right available to the party to forfeit the EMD. On the question of publishing the
material aspects relating to the contract, the Hon'ble Supreme Court held in the above said judgment that the object behind publishing all material terms
is to make the same known to the contracting parties/bidders, so that they can be aware of their rights, obligations and liabilities qua each other and
also of the consequences in the event of their non-compliances and also to empower the State to enforce any such term against the bidder in the event
of any breach committed by the bidder and to bind the bidder to the express terms in the contract/public notice. A similar view was taken by the
Hon'ble Supreme Court in the decision in Union of India v. Vertex Broadcasting Co. (P) Ltd., reported in (2015) 16 SCC 198. In the absence of
disclosure of estimate PAC in the tender document, the demand for additional performance guarantee cannot hence bind the petitioner. The
circumstances in which EMD can be forfeited has been specified in clause 4.4 extracted above. Failure to provide Additional performance guarantee
is not a reason stipulated in the said clause. Moreover, since the estimate PAC was not revealed in the notice calling for tender, the petitioner cannot
be found fault with for not being aware that his bid was 26 % below the estimate PAC. As such, there is no justification whatsoever, to withhold the
EMD provided by the petitioner.
Coming to the question of blacklisting of the petitioner, the Hon'ble Supreme Court has in Erusian Equipment & Chemicals Ltd. v. State of W.B.
Reported in (1975) 1 SCC 70 held that the blacklisting order involves civil consequences and casts a slur and that it creates a barrier between the
persons blacklisted and the Government in the matter of transactions. It was held that the blacklists are “instruments of coercion†and it 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
Hon'ble Supreme Court 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 blacklist. In Patel Engg. Ltd. v. Union of India, reported in (2012) 11 SCC 257, the Hon'ble Supreme Court held that the
authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and
making of contracts for any purpose and that the only legal limitation upon the exercise of such an authority is that the State is to act fairly and
rationally without in any way being arbitrary. The Hon'ble Supreme Court further held that the bid document is not a statutory instrument and that the
failure to mention blacklisting to be one of the probable actions that could be taken against the delinquent bidder does not, by itself, disable the State
from blacklisting a delinquent bidder, if it is otherwise justified. However, Patel (supra) was a case in which the person who was blacklisted was put
on notice and given an opportunity of hearing. Admittedly, in the case on hand the petitioner was not put on notice regarding the blacklisting nor was
he heard. The period of blacklisting was for one year. This Court had stayed the operation of the order of blacklisting. The period for which the
petitioner was blacklisted has expired. It is fairly submitted by the counsel for the respondents that the petitioner had been permitted to enter into
contracts with the respondents during the period when this writ petition has been pending consideration of this Court. Even though there is no
consequence to follow after the passage of four years, nevertheless, it has to be held that the blacklisting of the petitioner without putting him on notice
is bad in law. The Standing Counsel for the respondents submitted that the petitioner was granted sufficient time to comply with the requirement to
furnish additional performance guarantee. Since I have already held that the demand for additional performance guarantee cannot bind the petitioner,
the fact of granting sufficient time is not relevant.
In the result, the Writ petition is allowed. Exhibit P16 order issued by the Respondents is quashed. It is declared that the blacklisting of the petitioner as
per Exhibit P16 is not in accordance with law. The Respondents were directed to release the EMD which has been forfeited by the Respondents,
within one month from the receipt of a copy of the judgment. The parties shall bear their respective costs.