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Judgment
The present writ petition has been filed for quashing the letter as contained in Ref. No. TA/REV/RB/2017/2019-338 dated 16.08.2019 (Annexure-
14 to the writ petition) issued under the signature of the respondent no. 3-the Deputy General Manager, T.A. Division, Heavy Engineering Corporation
Ltd. (HEC) whereby the Letter of Intent No. HQ/BDC & Disp/NRB-NIT/2016-187 dated 31.10.2016 issued in favour of the petitioner, has been
terminated with immediate effect and it has also been directed to vacate the premises and to clear the pending dues as well as to complete the
formalities relating to handing over the premises to the respondent-HEC on or before 14.09.2019. Further prayer has been made for issuance of
direction upon the respondents to execute a formal agreement/contract of lease for a period of ten years commencing from 31.10.2016 with respect to
Rajendra Bhawan, Sector-II, HEC.
The factual background of the case as stated in the writ petition is that a Notice Inviting Tender (NIT) was floated by the respondent-HEC on
18.04.2016 inviting applications from intended bidders for leasing out nine buildings of diverse nature with associated land in HEC Township. The
petitioner participated in the said tender and furnished the bid for three non-residential buildings and it was declared technically qualified. However,
after opening the price bids, the petitioner was not allotted any non-residential building on the ground that the price quoted by it did not match the
reserve price set by the respondents. Thereafter, the respondents floated another tender for leasing out six non-residential buildings with associated
land in the HEC Township vide Tender No. HQ/BDC & Disp./NRB-NIT/2016/06 dated 05.09.2016. The petitioner again participated in the second
tender process and quoted the bid only for one non-residential building i.e. Rajendra Bhawan, Sector-II, HEC with its associated land. The technical
bid of the petitioner was found responsive and thereafter when the financial bid was open, the petitioner was declared successful with respect to its
bid for Rajendra Bhawan, Sector-II, HEC along with its associated land. The Senior D.G.M.(BCD & Disposal) issued Letter of Intent (LoI) in favour
of the petitioner vide letter as contained in Reference No. HQ/BDC & Disp/NRB-NIT/2016-187 dated 31.10.2016 for a period of 10 years which
was renewable for another 10 years on the decisions and terms and conditions of the management of the respondents-HEC. The respondents also
handed over the possession of the said building in favour of the petitioner vide letter dated 20.03.2017. Pursuant to the tender notice and its terms and
conditions, the petitioner deposited a total amount of Rs. 2,21,21,000/- and service tax of Rs.33,18,150/- on 30.11.2016. It also paid a sum of
Rs.3,48,405/- on 30.03.2017 towards annual rent which was accepted by the respondents without any objection. The petitioner further paid the
required rent for the financial year 2018-19 and 2019-2020 to the respondents and the same was also accepted without any demur. The petitioner
invested Rs.4.7 crores during the period between 29.11.2016 to 20.08.2019. The respondent no. 2 issued a notice vide letter dated 20.10.2017
indicating inter alia that some irregularities might have been done towards the allotment of the said building i.e. Rajendra Bhawan, Sector-II, HEC, in
favour of the petitioner and the petitioner was advised not to continue with any construction/activity in the said building/complex as the investigation of
matter was going on at appropriate level. The petitioner approached the then C.M.D. of H.E.C. who conveyed the petitioner that it may resume the
renovation/construction work after one week. The respondent no. 2 however issued a notice vide letter dated 08.11.2017 mentioning inter alia that the
construction/renovation work of the said building/complex was still going in spite of the direction to discontinue any construction/renovation activities
and thus the petitioner was again asked to comply the directions as issued earlier. The petitioner submitted its reply to both the earlier notices on
11.11.2017 stating that it had already deposited the required amount as mentioned in the tender document and thereafter invested huge amount of
money in order to fulfil the terms and conditions as mentioned in the tender notice. The petitioner made requests to the respondents to allow it to
continue the construction/renovation work and thereafter to execute the agreement with it as huge recurring loss was being suffered every day. The
respondent no. 2 vide letter dated 29.09.2018 again issued a notice directing the petitioner to submit all the relevant documents on the basis of which
three affidavits were given in favour of the petitioner. The petitioner submitted its reply on 09.10.2018, however the respondent no. 3 again issued a
show cause notice to it on 22.10.2018 and directed it to submit its reply on or before 22.11.2018 bringing on record all the required documents failing
which suitable action as per the terms and conditions of the tender/LoI and existing laws/rules, would be initiated including cancellation of
LoI/allotment. The petitioner submitted the reply to the said show cause notice on 21.11.2018 stating inter alia that it never breached any terms and
conditions as put forth by the respondents. It was also stated that the petitioner had already submitted all the documents as per the requirement of
NIT. However, after nine months of submitting the reply, the respondent no. 3 issued letter as contained in Ref. No. TA/REV/RB/2017/2019-338
dated 16.08.2019 whereby the Letter of Intent dated 31.10.2016 issued in favour of the petitioner was terminated with immediate effect and it was
directed to vacate the premises, clear the dues and complete the formalities relating to handing over the said premises to the respondents on or before
14.09.2019. Hence the present writ petition.
Learned counsel for the petitioner submits that the purpose of leasing out the non-residential building with associated land by issuance of tender was
limited. The sole object of the tender was to release the non-residential building with associated land and the scope of enquiry was only to see the
purpose for which the said premises was being used by the tenderer and to examine whether the proposed activity could be permitted to be carried out
by it. The petitioner’s bid was found to be technically qualified twice and therefore to ask it to furnish the documents at such a belated stage,
which were not required at the time of submission of bid, appears to be nothing but a malicious and unwarranted initiation of proceeding. It is a settled
law that sole proprietorship firm has no separate legal existence from its proprietor. The owner and the business is the same thing in the eye of law
and public obligations of business must be considered as the obligations of the sole owner. The petitioner had completed the renovation work prior to
issuance of the show cause notice. The petitioner never breached any terms and conditions put forth by the respondents and had submitted all the
required documents in terms with the NIT. The petitioner was declared technically qualified twice by the respondents only after being fully satisfied
with the documents submitted by the petitioner and thereafter Letter of Intent was issued to it. It is further submitted that after taking possession of
the said building, the petitioner invested more than Rs.4.7 crores and as such the respondent, after about a year, cannot be allowed to turn around and
declare the petitioner as ineligible as per the terms and conditions of the tender notice. The petitioner is using the said premises for the same purpose
which was mentioned by it in its vision and mission document as submitted along with the tender. The Technical Evaluation Committee accepted the
documents as submitted by the petitioner and after issuance of the LoI, the same cannot be terminated by the said Technical Evaluation Committee
which is wholly unjust and illegal. Even assuming that the petitioner had not submitted any document as required in the tender notice, the respondents
during evaluation of the documents should have issued show cause notice and asked the petitioner for submission of the required documents. The LoI
issued to the petitioner is a concluded contract between it and the respondents and the respondents cannot be permitted to terminate the LoI, unless
there is a violation of the terms of the said LoI. The respondents had issued the LoI in favour of the petitioner with an intention to enter into a contract
which was to take place after all other formalities were completed by it. The respondents have evaluated all the documents submitted by the petitioner
and thereafter by way of concluded contract, issued LoI for a period of 10 years and renewable for 10 years thereafter. The petitioner has paid the
rent up to the year 2020 and the respondents have also accepted the same without any demur. One of the grounds of termination of LoI is alleged
violation of the purported instruction to stay the construction/renovation work of the building, however the same cannot be a ground for recalling the
contract/LoI as it does not fit into any of the grounds of cancellation of contract, as mentioned in Clause 6(f) of the LoI. Moreover, the respondents in
terms with the LoI, specially Clause 6(d), has no authority to issue any order asking the petitioner to stay the renovation work. Further, the petitioner
had complied the instructions of the respondents and had stopped the renovation work, however he resumed the same only when the C.M.D. of
H.E.C. permitted it to do so. Though the said instruction was oral, yet after resuming the renovation work, the respondents never objected to the
same. It is also submitted that neither at the time of issuing show cause notice nor in the said termination letter, the respondents have mentioned any of
the six situations whereby the respondents had reserved their right for cancellation of the contract. It would be evident from perusal of the show cause
notice/the impugned letter that the petitioner has not violated any terms and conditions of the NIT as the LoI was issued to the petitioner only after the
Technical Evaluation Committee was fully satisfied with the documents submitted by the petitioner. The alleged breach will not affect any public
interest or cause loss to the public exchequer or lead to public mischief. As per the show cause notice dated 22.10.2018, the petitioner had again
furnished the required documents but without considering the same and without assigning any specific reason or accepting the said explanation, the
respondents have issued the impugned letter dated 16.08.2019 for cancellation of LoI with immediate effect.
On the contrary, Mr. Anil Kumar Sinha, learned Senior Counsel for the respondents, submits that the tenderers had submitted affidavits with the
tender document claiming that all the informations furnished by it with respect to fulfilment of eligibility criteria and information given in the tender
were complete, correct and true. Therefore, the proceeding of the tender was not kept on hold to verify each and every information given by the
tenderers. The informations submitted by the tenderers were required to be verified internally at an appropriate time. As such, the need to insist or to
direct all the bidders for submitting any other document was not a pre-requisite to move on the next stage of the bid proceeding. The financial part of
the bid was processed when the techno-commercial part of the same submitted by the bidders were prima facie found with supporting documents.
The opening of the price bid does not signify that the technical bid had become sacrosanct which could not be cross-checked to verify the correctness
and authenticity of the same. The LoI issued to the petitioner was not a final allotment, rather a lease agreement was required to be executed. The
LoI was only a provisional conveyance of the outcome of the tender process issued by the respondent- HEC in favour of the successful bidder. The
act of depositing requisite fee/bid price with or without subsequent act of depositing annual rent to the HEC without having the complete eligibility,
does not mean that any unfulfilled eligibility criteria would be waived. It was clearly mentioned in terms and conditions of Clause-7 of the NIT dated
05.09.2016 titled as “Detailed Tender Notice†that the successful bidder may make the premises suitable as per its requirement at its own cost. It
was also mentioned that the lessee would maintain the halls and the buildings properly and it would be allowed to renovate the existing structure to go
along with allotted period of 10 years which was renewable for further 10 years on the decision and terms and conditions of HEC management. The
respondent-HEC had written a letter no. COT/PS/Rev/2017-161 dated 20. 10.2017 informing the petitioner about many irregularities made while
making the allotment of the said premises to the petitioner, hence till the matter is investigated, the renovation work should not be carried out. A
reminder was again sent to the petitioner vide letter dated 08.11.2017 informing that in spite of the direction conveyed to it, the renovation/construction
work was going on in full swing. The petitioner did not abide by the said direction of the respondent-HEC and as such the respondents have been
constrained to take stern action against the petitioner including cancellation of the LoI/allotment. The petitioner has not supported its claim mentioned
in letter dated 21.11.2018 with respect to spending Rs.2.5 crores (mentioned as Rs.4.7 crores in the writ petition) on renovation of the said premises.
Moreover, if the figure of expenditure is considered to be true, then the changes made in the structure of the existing building must be more than mere
renovation work. The petitioner issued several letters to the respondent- HEC and pleaded to withdraw its direction to stop the construction in the said
premises. The petitioner first requested for lifting of the said ban on the construction and thereafter changed his request for execution of the lease
agreement. However in the meantime, the petitioner continued with the construction and after completing the same, it started pursuing for execution of
lease agreement. The ill-motive of the petitioner behind the said correspondences is self-evident. The respondent-HEC vide letter dated 29.09.2018
asked the petitioner to submit all the relevant documents in support of the three affidavits given in its favour relating to three of its associates, but it
failed to submit the same, rather the petitioner vide its letter dated 09.10.2018 only mentioned the submission of the aforesaid three affidavits and
requested to execute the lease agreement. The respondent-HEC issued a notice dated 22.10.2018, in terms with Clauses 6 and 7 of the NIT dated
05.09.2018 titled as “General Terms & Conditions†as well as sub-clause (f) of Clause No. 6 of Letter of Intent dated 31.10.2016 titled as
“Cancellation of Contract†for cancellation of the LoI issued to the petitioner. The petitioner was asked to submit its response as to why the
process of cancellation of Letter of Intent/allotment should not be initiated considering all the five breaches as mentioned in notice dated 22.10.2018. It
is also wrong to say that the petitioner replied all the show cause notices in all counts. The petitioner did not submit any document in support of its
claim of having five years’ experience in the field for which it had proposed to take the said premises. The submissions of affidavits wherein
different entities such as Shaswat Institution of Teachers Education, Shiva Construction and Chennai Kitchen Restaurant had made supportive
statements in favour of the petitioner, were without any supporting document of respective partnership deeds. As such the statements made under
respective affidavits have no legal sanctity. The petitioner had no valid and effective partnership with the aforesaid entities on the date of submission
of the bid i.e. on 12.09.2016 in order to establish its competency to avail the experience of other entities. The petitioner also did not mention the
correct PAN number, rather the same was in the name of the proprietor as an individual. The petitioner also did not file any document showing its
experience as depicted in its vision and mission statement which indicates that it was having no experience in the field of hotel, amusement park,
health club/banquet hall etc. Instead of submitting the copies of the registered partnership deeds and certificate of registration of its business concerns,
it provided the copies of different correspondences made with the other business concerns which could not have been termed as proper document.
Heard learned counsel for the parties and perused the material available on record.
The petitioner participated in the said tender by submitting its bid for the said building/premises. The bid of the petitioner was declared technically
qualified and thereafter its financial bid was opened and finally the LoI was issued to it. Pursuant to the conditions of the tender, the petitioner
deposited an amount of Rs.2,21,21,000/- in addition of payment of service tax of Rs.33,18,150/- and Rs.3,48,405/-towards annual rent. The possession
of the said building was handed over to the petitioner and thereafter it started renovation work of the said building. The case of the respondents is that
the bid of the petitioner was subsequently verified wherein several irregularities were found in the allotment of the said premises in favour of the
petitioner. Accordingly, specific direction was issued to the petitioner to stop any further renovation work of the building till the matter is investigated.
However, the petitioner failed to comply such direction. Further case of the respondents is that the petitioner was repeatedly directed to furnish certain
documents, however it failed to comply the said direction as well.
Before coming to the merit of the case of the respective parties, it would be relevant to go through the judgment rendered by the Hon’ble
Supreme Court in the case of Jagdish Mandal Vs. State of Orissa & Ors. reported in (2007) 14 SCC 517, paragraph 22 of which reads as under:-
“22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its
purpose is to check whether choice or decision is made “lawfully†and not to check whether choice or decision is “soundâ€. When
the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in
mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of
equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will
not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is
made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to
decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful
tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural
violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such
interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may
increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial
review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
or
Whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no
responsible authority acting reasonably and in accordance with relevant law could have reachedâ€;
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal
consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and
franchises) stand on a different footing as they may require a higher degree of fairness in action.â€
It is a trite law that by way of judicial review, the High Court under Article 226 of the Constitution of India is not expected to perform as a court of
appeal while examining an administrative decision and to record a finding as to whether any such decision in the given context could not have been
taken. The Writ Court while making the judicial review, should ordinarily refrain from examining the details of the terms of the contract which has
been entered by the State/its functionary. The Writ Court has a inherent limitation in making roving enquiry, however, the writ court can certainly
examine as to whether the decision making process of the State/ its functionary is unreasonable, irrational, arbitrary and violative of the Article 14 of
the Constitution of India. Once the procedure adopted by any State authority in the matter of contract is held to be against the mandate of Article 14
of the Constitution of India, the Writ Court cannot ignore such an action on the pretext that the state authority should have some latitude or liberty in
taking decision in the contractual matters and any such interference by the Writ Court would amount to encroachment over such exclusive right of the
state authority in taking particular decision.
To appreciate the contentions of the learned counsel for the parties, I have perused the impugned letter dated 16.08.2019 issued by the respondent
no. 3, the relevant part of which is quoted as under:-
“With reference to the above all, it is conveyed to you that you were served a notice and given you an opportunity to give your written
submission within a notice period of 30 days as per Sub-Clause No. (f) titled as “Cancellation of Contract†of Clause No. 6 titled as
“Terms and Conditions†mentioned in the Letter of Intent dated 31.10.2016. Consequently, the copy of your correspondences with your
associates you have submitted do not substantiate your claimed experience.
Keeping in view of the series of conducts you displayed in the past, the violations you demonstrated by disrespecting to our instructions to
stay the constructions and inadequate submissions, as such, Letter of Intent No. HQ/BDC&Disp/NRB-NIT/2016-187 dtd 31.10.2016 issued
in favour of M/s The Base Enterprises, Ground Floor, Ram Janki Enclave, Obaria Road, Hatia, Ranchi Jharkhand stands as terminated
with immediate effect. Consequently, you are requested to vacate the premises and clear the pending dues accordingly and complete the
formalities related to handing-over the premises to us on or before date 14.09.2019.â€
It would be evident from the aforesaid part of the letter that the respondent no.3 alleged against the petitioner regarding the violation of Sub-
Clause (f) titled as “Cancellation of Contract†of Clause 6 as mentioned in the Letter of Intent dated 31.10.2016. It is further alleged that the
copies of the correspondences of the petitioner with its associates do not substantiate the experience claimed by it. Moreover, the petitioner has
violated the direction of the respondents for staying the construction work.
So far the allegation of violating the direction issued by the respondent no.2 to the petitioner is concerned, the learned counsel for the petitioner has
submitted that prior to issuance of show cause notice, the renovation work of the said building/premises was already completed. However, it is evident
from the letters dated 20.10.2017 and 8. 11.2017 that the respondents had informed the petitioner regarding irregularities in allotment of the said
building/premises in its favour, which was being investigated and direction was given to stop the renovation work. The petitioner in response to the said
direction, vide its letter dated 11.11.2017 informed the respondents that such order to stop the renovation work was causing financial loss to it. The
petitioner further demanded the details of irregularities alleged to have been committed by it. It would therefore be evident that the renovation work of
the building/premises was going on while the respondents issued the aforesaid letters to the petitioner directing not to continue with any
construction/renovation activities. Further vide e-mail dated 10.01.2018, the petitioner had requested the respondents to allow it to re-start the
renovation work so that the project could commence and be opened for public.
Thus, I find substance in the argument of the learned Senior Counsel for the respondents that in spite of the direction issued by the respondents to
the petitioner to stay the renovation work, the petitioner continued with the said work and only after its completion, it started insisting for execution of
the agreement. Though, the petitioner has claimed that the then C.M.D. of H.E.C. had orally permitted it to continue with the renovation work, the
said claim cannot be accepted in view of various letters issued to the petitioner by the respondent authorities directing it to stop the renovation work.
Thus, it prima facie appears that the petitioner has violated the said direction of the respondents.
Further contention of the learned counsel for the petitioner is that the queries of the respondents were substantially met by the petitioner, however
the respondents arbitrarily issued the impugned letter of termination of LoI. So far as the said issue is concerned, the impugned letter of termination
was issued by the respondents alleging that the copies of petitioner’s correspondences with its associates did not substantiate the experience
claimed by it. The petitioner was informed vide letter dated 22.10.2018 that it disrespected the direction issued to it through letter dated 29.09.2018 to
provide relevant documents based on which three affidavits furnished in its favour by the said deponents claiming themselves to be the associates and
the petitioner in response to the same, vide its letter dated 21.11.2018 stated as follows:-
“ In your point no. 4 of your Notice you have stated that BASE has not provided relevant documents based on which the Three Affidavits
were given in our favour.
To its reply we again mention that there is family/friend relationship among the owners of the companies/firm/institution mentioned above. In
addition, the basis of those notarised affidavit is the exchange of personal letters among the Base Enterprises and Chennai Kitchen,
Shashwat Institute of Teachers’ Education and M/s Shiva Construction respectively. However, those documents being purely documents
and exchange of word between two companies, BASE did not deem fit to bring those letters in public domain. H.E.C themselves being a huge
Enterprises, do understand the importance of privacy and confidentiality within/between the companies.
However, to satisfy you, we are hereby annexing the photocopies of the below mentioned letter and the MOU that was signed between BASE
and Chennai Kitchen with a request to not to disclose it in front of any unrelated or not necessary entity/person (May be marked as
Annexure-II Series) ----------------“
It would thus be evident that though the petitioner was quite aware of the queries made by the respondents, yet it did not supply the documents to
the respondents on the basis of which, the said affidavits were furnished, assigning the reason that the said letters were personal in nature and the
same could not have been brought on record so as to make those public.
So far the question as to whether the plea of the petitioner regarding non-supply of the required documents was justified or not, cannot be
adjudicated under the writ jurisdiction. It is not the case of the petitioner that there was infirmity in the process adopted by the respondents while
issuing the impugned letter, rather the learned counsel for the petitioner has vehemently assailed the merit of the decision taken by the respondents. It
is a settled law that the writ court has to examine the lawfulness of the any administrative decision and not its soundness.
The contention of the learned counsel for the petitioner that even if it is assumed that the petitioner has violated the direction of the respondents,
the same cannot be a ground for cancellation of the LoI. To appreciate the said contention, the relevant part relating to “cancellation of contractâ€
as mentioned in sub-clause (f) of the Clause 6 titled as “Terms and Conditions†contained in LoI dated 31.10.2016, is reproduced hereinbelow:-
“(f). Cancellation of Contract:- HEC reserves the right to cancel the contract in full or in part, in the following cases:-
----
(ii) If the lessee commits default/breach in complying with any of the terms and conditions of the contract and do not remedy it or fails to
take effective steps for the remedy to the satisfaction of the Officer-in-charge, then on the expiry of the period as may be specified by the
Officer-in-charge in a notice in writing.
(iii) If the lessee obtains a contract with the Lessor as a result of ring tendering or other non-bonafide methods of competitive tendering.
(iv) If the lessee shall offer or give or agree to give any person in the service of the Lessor or to any other person on his behalf any
valuable gift or consideration of any kind as an inducement or reward for act/acts of favour or disfavor in relation to the obtaining or
execution of this or any other contract for HEC.
---
(h) Agreement
The Lessee shall enter into an agreement as per the “Proforma for Execution of Agreement†as per annexure-VI of the NIT within one
month time from the date of issue of the LOI. All expenditure regarding the agreement will be borne by the Lessee.â€
The petitioner while submitting is bid had filed an affidavit mentioning in para-6 that all the information furnished by it in respect of fulfillment of
eligibility criteria and the information given in the said tender is complete, correct and true. Further, it was mentioned in para -9 that if any information
or statement or document submitted by it is found to be false/incorrect, the department may cancel the lease agreement and take action against it as
deems fit including termination of the contract and forfeiture of all dues along with earnest money. The allegation against the petitioner is that in spite
of the repeated demand of documents showing required experience of the petitioner, it failed to submit the same and it completed the renovation work
in violation of the direction of the respondents. Thus, the petitioner appears to have committed breach of the terms and conditions of the contract.
Hence, the respondents cannot be said to be unjustified in issuing the impugned letter. I find no substance in the argument of the learned counsel for
the petitioner that breach committed by the petitioner is not the ground for cancellation of the LoI.
Learned counsel for the petitioner has also contended that if the LoI resulted into a concluded contract, the respondents cannot be allowed to
cancel the same. On the contrary, learned Senior Counsel for the respondents has contended that it was stated in the sub-clause (h) of Clause-6 of the
LoI itself that the lessee shall enter into an agreement as per the “Proforma for Execution of Agreement†and as such, the said contract cannot
be treated as the concluded one.
Both the parties have referred judgments of the Hon’ble Supreme Court in support of their respective cases.
In the case of Sunita Gupta Vs. Union of India & Others reported in (2014) 15 SCC 60 1as has been relied upon by the learned counsel for
petitioner, the appellant of the said case was initially found eligible and was called for the interview. After the interview, she was shown as selected,
however subsequently she was disqualified on the ground that the consent letters of the co-owners were not submitted before the due date along with
the application, rather much later and as per the said clause, no addition/deletion or alteration was permitted in the application, once the same was
submitted. The Hon’ble Supreme Court in the said factual context, has held that the said approach of the respondent was erroneous. The
Corporation, being an instrumentality of the State acted unfairly in cancelling the selection of the appellant for the retail outlet dealership in question
and not issuing the letter of intent to her.
However the factual background of the present case is entirely different from the said case relied upon by the learned counsel for petitioner.
Since in the present case, the respondents have alleged that the petitioner violated the specific direction given to it as well as that there were several
irregularities in the tender documents submitted by the petitioner, the said case cannot be applied in the present situation.
The learned counsel for the petitioner has also put reliance on Para 107.2 and 107.3 of the judgment rendered by the Hon’ble Supreme Court
in the case of ITC Ltd. Vs. State of Uttar Pradesh & Others reported in (2011) 7 SCC 49 3wherein the Hon’ble Supreme Court has held as
under:-
“107.2. The aforesaid exercise may seem to be cumbersome, but is absolutely necessary to protect the sanctity of contracts and transfers.
If the Government or its instrumentalities are seen to be frequently resiling from duly concluded solemn transfers, the confidence of the
public and international community in the functioning of the Government will be shaken. To save the credibility of the Government and its
instrumentalities, an effort should always be made to save the concluded transactions/transfers wherever possible, provided (i) that it will
not prejudice the public interest, or cause loss to public exchequer or lead to public mischief, and (ii) that the transferee is blameless and
had no part to play in the violation of the regulation.
107.3. If the concluded transfer cannot be saved and has to be cancelled, the innocent and blameless transferee should be reimbursed all
the payments made by him and all expenditure incurred by him in regard to the transfer with appropriate interest. If some other relief can be
granted on grounds of equity without harming public interest and public exchequer, grant of such equitable relief should also be
considered.â€
I respectfully agree to the proposition laid down in the aforesaid case. However, the same would apply in a situation where any concluded
contract is cancelled without any fault of the awardee of the contract. The facts situation of the present case is that the petitioner has willfully violated
the direction of the respondent authorities and has not acted fairly in dealing with the respondents.
In the case of Rishi Kiran Logistics Private Ltd. Vs.Board of Trustees of Kandla Port Trust & others reported in (2015) 13 SCC 23, 3the
Hon’ble Supreme Court has held as under:-
“43. --------------- In view of this material on record and factual position noted in earlier paragraphs we are of the opinion that
observations in Dresser Rand S.A. v. Bindal Agro Chem Ltd. [(2006) 1 SCC 751 ]would be squarely available in the present case, wherein
the Court held that: (SCC p. 773, paras 39-40)
“39. … a letter of intent merely indicates a party's intention to enter into a contract with the other party in future. A letter of intent is not
intended to bind either party ultimately to enter into any contract. …
It is no doubt true that a letter of intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not
uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the
offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is
issued to the contractor, though it may be termed as a letter of intent, it may amount to acceptance of the offer resulting in a concluded
contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future
or whether it is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of
the letter.â€
When the LoI is itself hedged with the condition that the final allotment would be made later after obtaining CRZ and other clearances, it
may depict an intention to enter into contract at a later stage. Thus, we find that on the facts of this case it appears that a letter with
intention to enter into a contract which could take place after all other formalities are completed. However, when the completion of these
formalities had taken undue long time and the prices of land, in the interregnum, shot up sharply, the respondent had a right to cancel the
process which had not resulted in a concluded contract.â€
In view of the aforesaid judicial pronouncements, it would emerge that an LoI issued to any successful bidder is merely a party’s intention to
enter into a contract with the other party in future. However, there are instances where the successful bidders are directed to commence the work
with stipulation that the detailed contract would be drawn subsequently. In such cases, the LoI amounts to acceptance of the offer resulting in a
concluded contract and therefore, the LoI cannot be cancelled without any fault of the awardee.
In the case of Rajasthan Cooperative Dairy Federation Ltd. Vs. Mahal Laxmi Mingrate Marketing Service Pvt. Ltd and Others reported in (1996)
10 SCC 405, the Hon’ble Supreme Court has held as under:-
“7. The High Court was also not right in importing the doctrine of audi alteram partem in these circumstances. If the conduct of
Respondent 1 was such that it did not inspire any confidence in the appellant, the appellant was entitled to decline entering into any legal
relationship with Respondent 1 as its selling agent. The Letter of Intent merely expressed an intention to enter into a contract. If the
conditions stipulated in the Letter of Intent were not fulfilled by Respondent 1, and if the conduct of Respondent 1 was otherwise not such as
would generate confidence, the appellant was entitled to withdraw the Letter of Intent. There was no binding legal relationship between the
appellant and Respondent 1 at this stage and the appellant was entitled to look at the totality of circumstances in deciding whether to enter
into a binding contract with Respondent 1 or not.â€
Thus, if the conduct of the successful bidder is such which does not inspire confidence of the authority, it is entitled to decline from entering into
any legal relationship with the successful bidder. If the conditions stipulated in the LoI are not fulfilled and if the conduct of the bidder is found
otherwise so as not to inspire confidence, the authority is entitled to withdraw the LoI.
Reverting back to the facts of the present case, the LoI was issued to the petitioner on 31.10.2016 with a clear stipulation that within one month
from the date of issuance of the said LoI, an agreement, as per the Proforma for Execution of Agreement, will be executed. Both the parties were
under the legitimate expectation that a formal agreement would be executed thereafter. However, the agreement was not executed and in the
meantime, the possession of the building/premises was handed over to the petitioner as appears from the occupancy report dated 20.03.2017 and the
petitioner started making renovation of the said building/premises. In the meantime, the respondents informed the petitioner that there was irregularities
towards allotment of Rajendra Bhawan, Sector-2 in favour of the petitioner and as such asked it to stop the renovation work till the final decision is
taken after investigation. However, the said direction was not complied by the petitioner and he continued with the renovation work and completed the
same. Thereafter, the petitioner started insisting the respondents to execute the agreement. However, the respondents finally cancelled the LoI on two
counts, firstly violation of the direction of the authority and secondly the petitioner failed to substantiate the claimed experience.
In the case of Kisan Sahkari Chini Mills Ltd.& Others Vs. Vardan Linkers & Others reported in (2008) 12 SCC 50, 0the fact was that a tender
notice was published by the Kisan Sahkari Chini Mills Ltd. inviting offers from bonafide consumers to purchase of ‘B’ grade molasses produced
by the other five sugar mills. The Assistant Cane Commissioner (ACC) informed the first respondent, who was one of the tenderers, that on the
approval of the Commissioner, it was permitted to lift a total quantity of 85,000 quintals of molasses from the five sugar mills at a price of Rs.127/- per
quintal. In the meantime, the State Government received several reports that the prevailing price of molasses was much higher. Thereafter, the
Secretary, Cane Development and Sugar Industries, stayed the operation of such order issued by the ACC. When, the first respondent challenged the
said order before the High Court, it was held that there was a concluded contract between the parties and in view of the doctrine of part performance,
legitimate expectation, estoppel and acquiescence, the said order of the Secretary was unsustainable in law. When the matter travelled to the Supreme
Court, Their Lordships held that the main issue in the said writ petition should have been as to whether the order of cancellation passed by the
Secretary was arbitrary and unreasonable and the issue as to whether there was a concluded contract and breach thereof was secondary. If the High
Court exercising the writ jurisdiction found that the power exercised by the Secretary in passing the order of cancellation was not arbitrary and
unreasonable, it should have normally desisted from giving any finding on disputed and complicated question of facts as to whether there was a
concluded contract, rather should have relegated the petitioner to avail the remedy of civil suit. Even in such cases where the High Court finds that
there is a valid contract, if the impugned administrative action by reasons of which the said contract is cancelled, is found reasonable and justified, it
should still refuse to interfere with the same leaving the aggrieved party to work out its remedy before the competent court of civil jurisdiction.
Even if it is assumed that the said contract was a concluded one, the same would not help the case of the petitioner since the LoI has been
cancelled by the respondent authority with the specific allegations as mentioned hereinabove. The petitioner was issued show cause notices and it
submitted its reply which also considered before issuing the impugned letter. Hence, I do not find any arbitrariness, unreasonableness or malafide in
the decision making process adopted by the respondents. If the argument of the learned counsel for the petitioner is accepted, the same would lead to
a conclusion that authorities are helpless and cannot take action against the erring bidder even if certain irregularities are subsequently found in its
tender document. Every bidder is supposed to comply the terms and conditions of the bid documents and if it falls short of such requirements, it would
certainly be liable for action to be taken in accordance with law.
Under the aforesaid facts and circumstance, I do not find any infirmity in the impugned letter dated 16.08.2019 whereby the LoI issued to the
petitioner has been cancelled. However, the petitioner is at liberty to seek appropriate remedy under the law of contract claiming damages from the
respondents in this regard, if so advised.
It is made clear that the factual observations made hereinabove are confined to the present writ proceeding only and the same shall not prejudice
the case of the petitioner before the competent court of civil jurisdiction, if the petitioner chooses to avail the said remedy.
The writ petition is dismissed with the aforesaid observation.
I.A. No. 11851 of 2019 also stands dismissed.