*THE HON’BLE SRI JUSTICE N.V. RAMANA +WRIT PETITION NO.3589 OF 2009 %Dated 26.06.2009 # M/s.Nagarjuna Construction Co. Ltd. rep. By its authorized signatory K.J.B.V.Subrahmanyam and another ..... PETITIONERS VERSUS $ Infrastructure Corpn. of A.P., Hyderabad rep. By its Vice Chairman & Managing Director K.V.Reddy and two others .....RESPONDENTS ! Counsel for Petitioners: SRI S.RAVI ^ Counsel for Respondent No.1: Counsel for Respondent Nos.1 and 2: ADVOCATE GENERAL < GIST: > HEAD NOTE: ? Cases referred: 1. AIR 1991 SC 537 2. AIR 1996 SC 11 3. (2004) 3 SCC 553 4. AIR 2008 SC 1101 5. AIR 1987 Bom 308 6. AIR 2000 Del. 1 7. AIR 2008 Cal 207 8. AIR 2002 Pat 179 9. (2008) 1 SCC 544 10. (1994) 6 SCC 651 HON’BLE SRI JUSTICE N.V. RAMANA W.P. No. 3589 of 2009 O r d e r: Invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, the petitioners, namely M/s. Nagarjuna Construction Company Limited and M/s. NCC Infra Holdings Limited, which have formed into a consortium, have filed this writ petition praying to grant the following relief: The Hon’ble Court may be pleased to issue a writ, direction or order especially in the nature of writ of mandamus declaring that the 1st and 2nd respondents have failed to comply with the conditions precedent contained in paragraph 3.5 of the Request for Proposal and, consequently, declare that the petitioners are not in default of the terms and conditions contained in the Request for Proposal and Letter of Award dated 06.10.2008 for the Development of AP Bhavan in New Delhi and, consequently, set aside G.O. Ms. No. 8, Infrastructure and Investments (IID-2) Department, dated 20.02.2009 cancelling the Letter of Award and pass such other order (s) as the Hon’ble Court deem fit and proper in the circumstances of the case. Respondent No.2, namely, the Government of Andhra Pradesh, have in their possession an extent of Acs. 22.222 cents of land in and around A.P. Bhavan, New Delhi. Out of the said extent, they have earmarked an extent of Acs. 12.568 cents (comprising A.P. Bhavan and Old Nursing College Hostel) for “institutional use”, and the balance extent of land i.e. Acs. 7.564 cents (Pataudi House) for “residential use”. The petitioners have to execute the project by development of lands belonging to the Government of Andhra Pradesh situated in and around Andhra Pradesh Bhavan, on Build, Operate and Transfer (BOT) basis. For developing those lands, respondent No.2, vide G.O. Ms. No. 423, dated 14.09.2005, nominated respondent No.1, namely M/s. Infrastructure Corporation of Andhra Pradesh Limited (INCAP) as their “Executing Agency” for development of the project called “Development of Andhra Pradesh Centre at New Delhi” under Public-Private Partnership mode. Respondent No.2 further decided to constitute a “Special Empowered Committee” consisting of experts and high-ranking officials, to guide and monitor the progress of the project. Thereafter, vide G.O. Ms. No. 436, dated 23.09.2005, respondent No.2, constituted the “Special Empowered Committee”. On 20.06.2006, respondent No.1 addressed a letter to respondent No.2 to constitute a “Technical Advisory Committee”. Acting on the said letter, respondent No.2, issued orders in G.O. Ms. No. 6, dated 12.07.2006, constituting Technical Advisory Committee, for advising on matters encompassing all activities, such as, pre-design, legal, construction management, evaluation of conceptual models, architectural designs and evaluation of construction drawing with respect of amenities like Water supply, Sanitary, Electricity, Fire Fighting, Lighting, etc. and recommend appropriate guiding principles at all steps of the project. While so, on 07.11.2007, respondent No.1 notified “Expression of Interest-cum-Request for Qualification” fixing the last date for submission of tenders as 30.11.2007. Responding to the same, 14 developers, including the petitioners submitted their tenders. The Technical Advisory Committee, having considered the qualifications, on 06.02.2008, qualified the names of ten developers, for the purpose of issuance of Request for Proposal - Technical Document. Thereafter, respondent No.1, vide letter dated 23.04.2008, informed those ten developers, including the petitioners that they are selected for issuance of Request for Proposals, and accordingly they were given the Request for Proposals. On 14.05.2008, respondent No.1 conducted the pre-bid meeting, and claims to have cleared the doubts raised by six developers, including the petitioners. The petitioners’ technical bid qualified when it was opened on the last date of submission of Request for Proposal on 31.05.2008. The Technical Advisory Committee, after considering the Request for Proposal of the petitioners, who agreed to accept and abide by the terms and conditions and also gave bank guarantee for Rs. 5.00 crores on 24.06.2008, recommended for issuance of Request for Proposal – Financial Document. Thereafter, based on the recommendations made by the Special Empowered Committee, for issuance of Letter of Award in favour of the petitioners, respondent No.2, issued G.O. Ms. No. 38, dated 20.09.2009, approving the petitioners’ bid and directing respondent No.1 to take further action. The said G.O. reads as follows: The Vice Chairman & Managing Director, INCAP has therefore requested the Government (1) to approve the concept of construction of (a) A.P. International Centre with main Convention Hall, Guest rooms, Art Gallery with Food courts, Club house (b) an Office Complex, an Auditorium Complex, Conference Halls, Function/Banquet Hall, Staff quarters for exclusive use of the Resident Commissioner and staff (c) Cottages for His Excellency Governor and Hon’ble Chief Minister as against the earlier proposal of development of Five Star hotel at Pataudi House site approved vide G.O.Ms.No.4, dated 4.4.2007 (2) to ratify the action taken by INCAP for the development of the Project as per the revised model, in anticipation of Government orders (3) to approve the highest bid of Consortium of M/s. Nagarjuna Construction Limited and NCC Infra Holdings Ltd. After careful consideration and based on the recommendations of the Special Empowered Committee, Government hereby accord approval to the Revised concept of the A.P. Bhavan Project, New Delhi, as indicated in para-5 above under BOT basis through PPP mode and also approve the highest bid of M/s. Nagarjuna Construction Company Limited – NCC Infra Holdings Ltd. Consortium with agreed payment of annual minimum guaranteed amount and revenue share to the State Government as mentioned in para-5 above. The licence period of the project is for 30 years from Commercial Operation Date. The Concessionaire shall construct and complete the project within 30 months from the date of signing Development Agreement, which includes six months period for getting project clearances. Government hereby also ratify the action of the Vice Chairman & Managing Director, INCAP in implementing the Revised Concept Plan as per the recommendations of the Special Empowered Committee, in anticipation of the Government orders. In pursuance of the above G.O., respondent No.1, on 06.10.2008, issued Letter of Award in favour of the petitioners. The petitioners, vide letter dated 21.10.2008, communicated their unconditional acceptance of the award duly consenting to all the terms and conditions specified therein. In pursuance of the Letter of Award, the petitioners state that they approached respondent No.3, namely Syndicate Bank, their bankers, informing them about the need to fund for the project development and performance security. Responding to the same, respondent No.3 called upon the petitioners to furnish title documents with respect to A.P. Bhavan along with title verification report to process their request. Thereafter, the petitioners on 21.10.2008, submitted their acceptance of the Letter of Award, unconditionally agreeing to pay Rs. 30.00 crores being the project development fee, and enclosed cheque for Rs.5.00 crores and promised to pay the balance amount of Rs.25.00 crores at the time of executing the Development Agreement. On 04.11.2008, the petitioners are said to have addressed letter to respondent No.1 to consider accepting the project development fee within 30 days from the date of execution of the Development Agreement or within 30 days from 30.10.2008, which ever is later. On 18.11.2008, respondent No.1, addressed letter calling upon the petitioners to attend meeting on 25.11.2008 to discuss the provisions of the Development Agreement and the operational guidelines in consultation with Project Consultants. Having received the same, the petitioners state that on 21.11.2008, they raised several issues with respect to the project, including the issue of documents pertaining to the land, to facilitate verification by an Advocate and emphasizing that without the said documents, it would be difficult for them to achieve the financial closure from their bankers. On 29.11.2008, respondent No.1 claims to have addressed letter to the Government of India, enclosing all the documents with a request to issue NOC. The petitioners state that on 05.12.2008, they have incorporated a Special Purpose Vehicle by name M/s. NCC International Convention Centre Limited as part of their consortium. After that, on 18.12.2008, the petitioners requested respondent No.1 to grant time beyond 60 days for execution of the Development Agreement and Licence Agreement i.e. beyond 20.12.2008. Having considered the request of the petitioners, respondent No.1 vide letter dated 20.12.2008, extended time by 15 days. However, on 02.01.2009, the petitioners again requested for extension of time by 15 days, which request, respondent No.1 by letter dated 03.01.2009, rejected. After expiry of the extended period, respondent No.1 states that by operation of Clause 15 of the Letter of Award, the Letter of Award stands cancelled, which the petitioners denied. Vide letter dated 05.01.2009, the petitioners while requesting extension of time, are said to have requested respondent No.1 to issue title deeds and bankable documents to facilitate financial closure of the project. On 06.01.2009, respondent No.1 addressed letter to respondent No.2, narrating the developments. On 09.01.2009, the petitioners addressed letter requesting respondent No.1 to furnish the land documents and title deeds. Thereafter, on 11.02.2009, the petitioners informed respondent No.1 that they are keen to execute the Development and Licence Agreement, and sent draft Development Agreement and Licence Agreement duly incorporating the proposed changes and incorporated various details with respect to the project, project company etc. While the matters stood thus, respondent No.2 issued G.O. Ms. No. 8, dated 20.02.2009, cancelling the Letter of Award dated 06.10.2008, which by letter dated 20.02.2009 of respondent No.1, was communicated to the petitioners. Questioning the said G.O., the petitioners filed this writ petition to declare the same as being illegal and arbitrary. The learned counsel for the petitioners submitted that the petitioners have not committed any default of the terms and conditions of the Letter of Award dated 06.10.2008, much less the events of default pointed out by respondent No.2, and as such, the action of respondent No.2, in issuing the impugned G.O., cancelling the Letter of Award, on the ground that the petitioners have committed six events of default as detailed therein, is illegal and arbitrary. He submitted that before entering into Development Agreement, conditions precedent as contained in Clauses 3.4 and 3.5 of the Request for Proposal, are required to be fulfilled both by the petitioners as well as respondent Nos.1 and 2 respectively, and unless the conditions precedent are fulfilled, the Development Agreement cannot be entered into or executed. He submitted that it is not the petitioners, but respondent Nos.1 and 2, who have committed default of the conditions precedent contained in Clause 3.5 of the Request for Proposal. He submitted that the conditions precedent date and the zero date are entirely different, and have no connection to each other. The conditions precedent fulfillment date, referred to in Clause 3.5(b) of the Request for Proposal, is with reference to the conditions precedent contained in Clauses 3.4 and 3.5 of the Request for Proposal, while the zero date as defined in Request for Proposal, is with reference to Clauses 2.6.2.8, 2.6.2.10, 3.1.7, 3.1.11(b), 3.8.6, 3.9.1.6 and 4.3 of the Request for Proposal. He submitted that the zero date, referred to in the said Clauses, which is linked to the period of time mentioned therein, is in relation to performance related issues, and the said date has nothing to do with the execution of the Development Agreement. He submitted that as per Clause 3.5 of the Request for Proposal, respondent Nos.1 and 2 are required to complete the documentation with respect to title related matters of the project sites before Development Agreement is entered into, and non-completion of the same, amounts to default by respondent Nos.1 and 2 as per Clause 4.4 of the Request for Proposal. However, respondent Nos.1 and 2, without settling the title related issues with the Government of India and without furnishing the title related documents to the petitioners, as required by Clause 3.5 of the Request for Proposal, have cancelled the Letter of Award by issuing the impugned G.O. alleging certain defaults of the terms and conditions of the Request for Proposal, which is illegal and arbitrary. He submitted that as per Clause 3.5 of the Request for Proposal, respondent Nos. 1 and 2 are required to settle and furnish the title related documents before entering into Development Agreement, and now they cannot contend that they are entitled to furnish the title deeds by the start of the zero date. He further submitted that the project is to be executed on Build, Operate and Transfer basis and as lot of money is required for executing the same, the petitioners have to bank on financial institutions for financial assistance, and unless title related issues are settled, the financial institutions would not come forward to advance loans and thereby disable the petitioners from obtaining financial closure. He further submitted that the bankers of the petitioners are insisting upon production of title deeds relating to the project site for providing financial closure and more so, when Clauses 3.13.2 and 3.13.3. of the Request for Proposal provide that the finances raised by the petitioners are subject to the right of respondent Nos.1 and 2 to take reposition of the land, thereby relegating the right of the bankers to a subordinate position. He contended that the issue of title deeds and furnishing thereof raised by the petitioners is not an after-thought, and submitted that the petitioners are very much conscious of the need on the part of respondent Nos.1 and 2 to provide the title deeds of the land and to substantiate their contention that after receiving Letter of Award they had requested respondent Nos.1 and 2 to provide the title related documents, relied on the minutes of the meeting of the pre-bid conference held on 16.05.2008 and the letters, dated 21.11.2008, 05.01.2009 and 09.01.2009. He further submitted that in the Letter of Acceptance dated 21.10.2008 it is clearly stated that they would pay the balance amount of Rs.25.00 crores at the time of execution of Development Agreement and that performance security will be paid upon achieving the financial closure. He further submitted that even though the Request for Proposal and the Letter of Award do not speak about non-refundable of Rs.5.00 crores paid towards Project Development Fees, respondent Nos.1 and 2, contrary thereto have for the first time in the counter have taken a stand that the Project Development Fee paid by them is non-refundable. He submitted that this Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, can entertain writ petitions arising out of contractual matters particularly when there are no disputed questions of fact involved, and since no disputed questions of fact are involved, the petitioners are entitled to maintain this writ petition arising out of a contract and in support of this argument, he relied on the judgments of the apex Court in Kumari Shrilekha Vidyarthi vs. State of U.P.[1], Tata Cellular vs. Union of India[2], ABL International Ltd. vs. Export Credit Guarantee Corporation of India Limited[3] and Food Corporation of India v. SEIL Ltd.[4], of the Bombay High Court in Kirloskar Pneumatic Co. Ltd. vs. National Thermal Power Corporation Ltd.[5], of the Delhi High Court in Basic Tele Services Ltd. vs. Union of India[6], Central Bank of India vs. Gour Nitya Industries Ltd.[7] and of the Calcutta High Court in Satav Infrastructure Pvt. Ltd. vs. Union of India[8]. The learned counsel for the petitioners while trying to explain the terms and conditions of the Request for Proposal contended that it is not the petitioners but respondent Nos.1 and 2 who have committed default of the conditions precedent and submitted that since the petitioners have not committed any default of the conditions, they are entitled to plead and ask the relief of their willingness to execute the project. The learned Advocate General appearing on behalf of respondent Nos.1 and 2 submitted that as per the Letter of Award, the petitioners have to execute the Development Agreement within a period of 60 days. However, on the request made by the petitioners, time was extended by 15 days. The petitioners instead of executing the Development Agreement before the expiry of the said date, again make a request for extension of time which was refused. As the petitioners despite extending the time, did not execute the Development Agreement and again sought time, respondent No.1, by operation of Clause 15 of the Letter of Award, cancelled the Letter of Award and no fault can be found with the impugned G.O. issued by respondent No.2, which merely reiterated the events of default committed by the petitioners, as highlighted by respondent No.1. He submitted that respondent Nos.1 and 2, as per Clause 3.5 of the Request for Proposal, are under an obligation to comply with the conditions precedent as on the conditions precedent fulfillment date, which date he contends has to be understood in the light of the definition of zero date. He submitted that the petitioners were required to execute the Development Agreement within 60 days from the date of Acceptance of Letter of Award, which was extended by 15 days and from that date zero date can fall within nine months but not later than nine months. He submitted that the difference between zero date and conditions precedent fulfillment date is only fifteen days, and by such calculation, respondent Nos.1 and 2 will have time up to 18.09.2009 to perform their obligation as per Clause 3.5 of Request for Proposal. He further submitted that the question of fulfillment of obligation on the part of respondent Nos.1 and 2 as per Clause 3.5(b) of Request for Proposal would arise only upon receipt of response from the Government of India with regard to payment of fee, and which fact was already brought to the notice of the petitioners vide Letter dated 29.11.2008 wherein they have expressed their readiness and willingness to pay the fee upon receipt of notice from the Government. Hence, he submitted that the petitioners cannot interlink the conditions precedent to be complied by them with that of the conditions precedent to be complied with by the respondents. He submitted that the petitioners have raised the dispute with respect to title deeds only on 05.01.2009 i.e. a day after the Letter of Award stood cancelled, and therefore, the said letter has no validity. He submitted that the person who accepted the Letter of Award namely K.J.B.B. Subrahmanyam is not an authorized signatory. He submitted that only two letters dated 20.11.2008 and 21.11.2008 which are not signed by the authorized signatory have raised title related issued. At any rate, he submitted that once the petitioners have accepted the Letter of Award unconditionally, they are not entitled to raise unnecessary and untenable issues, which are beyond the scope of Letter of Award and Request for Proposal, and have nothing to do with the performance of obligations by the petitioners as per the Letter of Award. He submitted that since the Letter of Award stood cancelled, the question of the petitioners expressing their readiness and willingness to go ahead with the project either on the same terms and conditions or as per the altered conditions. He further submitted that as per Clause 3.17.2, respondent No.1 is entitled to invoke the bid security. He submitted that as per Clause 3 of the Letter of Award, the petitioners are required to deposit Rs.30.00 crores as project development fee, while they have paid only Rs.5.00 crores, which is a significant event of default. He further submitted that the petitioners have not submitted the Memorandum and Articles of Association of the Special Purpose Vehicle for approval of respondent No.1 and they submitted the said documents for the first time only in the Court. He submitted that though this Court can examine non-statutory contractual matters, but having regard to the law laid down by the apex Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India Limited and Food Corporation of India v. SEIL Ltd., this Court is not entitled to entertain the present writ petition, which involves examination of disputed questions of fact. In the absence of fraud and equity pleaded by the petitioners, they are not entitled to question the invocation of bank guarantee, and in support of this argument, he relied on judgment in Vinitec Electronics (P) Ltd. Vs. HCL Info Systems Ltd.[9]. Heard the learned counsel for the petitioners and the learned Advocate General for the respondents. The principal question that arises for consideration in this writ petition is whether there is any arbitrariness or favouritism or mala fides in the action of respondent Nos. 1 and 2 in cancelling the Letter of Award issued to the petitioners? To consider this question, some of the facts, which are not in dispute, may be noted, and they run thus: Respondent No.2 owns land in an extent of Acs. 19.84 cents in and around A.P. Bhavan in New Delhi comprised in three sites – A.P. Bhavan site Acs. 8.42 cents; Old Nursing Hostel site Acs. 3.78 cents and Pataudi House site Acs.7.64 cents. They have decided to develop the same into Andhra Pradesh International Centre on Build, Operate and Transfer basis through Public Private Partnership Mode. For the purpose of developing those lands, respondent No.2 vide G.O. Ms. No. 423, dated 14.09.2005, nominated respondent No.1, namely M/s. Infrastructure Corporation of Andhra Pradesh Limited (INCAP) as their executing agency. Thereafter, respondent No.2, vide G.O. Ms. No. 436, dated 23.09.2005 constituted “Special Empowered Committee”. Thereafter, on the request made by respondent No.1, respondent No.2, issued G.O. Ms. No. 6, dated 12.07.2006 constituting a Technical Advisory Committee, for advising on matters of developing the project. On 07.11.2007, respondent No.1 notified “Expression of Interest- cum-Request for Qualification”. In response thereto, 14 developers, including the petitioners submitted their tenders. The Technical Advisory Committee, which considered the tenders, qualified the names of ten developers, including the petitioners for the purpose of issuance of Request for Proposal – Technical Document. Subsequently, the Technical Advisory Committee also selected them for issuance of Request for Proposal. Accordingly, the petitioners and others were issued Request for Proposal. After issuing the Request for Proposal, respondent No.1 conducted pre-bid meeting and claims to have cleared the doubts raised by the participants. The technical bids were opened on 31.05.2008, and the petitioners bid having been qualified, were recommended by the Technical Advisory Committee for issuance of Request for Proposal – Financial Document. Thereafter, based on the recommendations made by the Special Empowered Committee, respondent No.2 issued G.O. Ms. No. 38, dated 20.09.2009, approving issuance of Letter of Award in favour of the petitioners. In pursuance thereof, respondent No.1 issued Letter of Award dated 06.10.2008 in favour of the petitioners. The petitioners having received the Letter of Award, communicated their acceptance of the same vide their letter dated 21.10.2008. As per the terms and conditions of the Letter of Award, the petitioners were required to pay Rs.30.00 crores towards Development Fee upon acceptance of the Letter of Award and enter into Development Agreement and Licence Agreement within a period of 60 days from the date of acceptance of the Letter of Award. As the petitioners, among others, are said to have not paid the entire Development Fee and failed to execute the Development Agreement and Licence Agreement, despite extending time for execution by 15 days, respondent No.1 invoked Clause 15 of the terms and conditions of the Letter of Award and cancelled the same, and respondent No.2, reiterated the cancellation of the Letter of Award vide G.O. Ms. No. 8, dated 20.02.2009, impugned