Case: Knowledge Infrastructure Systems Private Limited &amp; Another Vs. Maharashtra Power Generation Company Limited &amp; Others

5. The petitioner No.1 is a company incorporated under the Companies Act, 1956 with petitioner No.2 as its shareholder, is engaged in trading of coal amongst other activities. Respondent No.1 is a company incorporated under the Companies Act, 1956 and is in the business of generation of electricity in the State of Maharashtra and thus a State instrumentality within the meaning of Article 12 of the Constitution.6. On 20th March, 2010 respondent No.1 published a notification inviting bids for tender for the supply of 3.35 metric tonnes of coal of foreign origin for its plants. In response to the said bid eight parties including the petitioner had submitted their offers. The petitioner No.1 company along with the bid had submitted five bank guarantees for an amount aggregating to Rs. 16,75,00,000/as bid security for its bid and as required under the tender terms. On 29th May, 2010, thebids of the parties were openedand the bid submitted by the petitioner company was found to bevalid and accepted and the physical support documents were opened on 3rd June, 2010 as scheduled. It appears that two letters dated 22nd July, 2010 in a sealed envelope were submitted by the petitioner No.1 company to the respondent No.1 on 23rd July, 2010 and were delivered in the mail receiving section at about 10.45 a.m. The first letter offered an unconditional discount of 3.5% on the price offered at all locations/plants under the tender and the second letter stated that since the respondent No.1 had allowed various bidders to amend/change/modify their technical documents (even after opening of the technical bids) the petitioner believed that it should be treated similarly and hence it should be allowed to offer adjustments to its unopened price bid.7. The bids were opened on 23rd July, 2010 at about 1.00 p.m. and the letters dated 22nd July, 2010 inwarded by the petitioner company on 23rd July, 2010 at about 11.00 were not before the Bids Opening Committee at that time and thus the unconditional discount offered or adjustment offered so proposed by the petitioner company were not known to the Committee when the bids were opened. The petitioner company was not a successful bidder, in any case. However, a show cause notice dated 17th August, 2010 was received by it calling upon the company to explain as to why the bid security amount should not be forfeited in terms of the tender conditions i.e. clause No.7.1(i) and 12.2 of Section 1 of the tender. The said show cause notice was replied by the petitioner on 7th September, 2010 pointing out that there was no deviation from the tender conditions and the discount so offered did not in any manner influence the tender committee when the tenders were opened on 23rd July, 2010 at about 1.00 p.m. The petitioners received yet another letter dated 18th September, 2010 calling upon it to furnish its detailed reply to the show cause notice and such a reply was again submitted on 20th September, 2010. In the meanwhile by letter dated 28th September, 2010 the petitioner was called upon to extend the bid security/bank guarantees as the case regarding forfeiture of bid security was under process and vide its letter dated 29th September, 2010 the petitioner company informed the respondent No.1 that the bid security was extended till 29th September, 2010. Finally by the impugned order dated 27th October, 2010 the respondent No.1 informed the petitioner company that the earnest money stood forfeited. The said letter dated 27th October, 2010 reads asreference to the above, it is clarified that, the bidders including you have submitted post bidding documents in response to the additional clarifications called by Mahagenco regarding bid. Mahagenco has never asked for submission of revised prices on any account. The modification in prices cannot bewith post bidding correspondence. As such, your statement regarding acceptance ofpost bidding documentation is not in order. The submission of revised price bid was within the validity of offer. As per tender terms, the modification in prices during validity period is ground for forfeiture of Bid Security. The circular of Railways regarding recommended port for respective TPS was issued in March 2010 much earlier than bid closing date and it is bidders responsibility to arrange all logistics following all rules, regulations and circulars issued by concerned authorities viz. Railways, ports and offer the price accordingly. Therefore, submission of the revised prices on this account is not relevant and it does not ensure any purpose in view of public interest. In all it is observed that, the reply to the Show Cause Notice vide letter dated 7th September 2010 referred at Sr. No.3 above, is not relevant. As such, in terms of tender, your bid had rendered invalid and is declared as invalid and five nos. of bank guarantees preferred above towards Earnest Money Deposit are forfeits.

Court's reasoning:
15. Thus it is not in dispute that when the bids were opened on 23rd July, 2010 at about 1.00 p.m., the letters inwarded by the representative of the petitioners at about 10.45 a.m., on the very same day were not before the bid opening committee and consequently, these letters in no way have influenced the decision making for accepting the successful bidder. Even on other points this petition does not involve any disputed questions of fact and all that we are required to examine is whether as per the bid terms the respondent No.1 company would be justified in forfeiting the security deposit amount of Rs.16.75 crores as per the impugned order dated 27th October, 2010. In the peculiar facts of this case we do not agree with the submissions made by Mr. Thorat that the petitioners are required to be relegated to the remedy of a civil suit and this petition filed under Article 226 of the Constitution should not be entertained.It is thus seen that the bids security forfeiture is provided only under Clause 7.7. The show cause notice dated 17th August, 2010 has purportedly sought to invoke Clause No.7.7(i) and Clause 12.12 reproduced above. As per clause 12.12 bids can be made only through theplatform and no physical price bid shall be submitted. In case a bidder submits physical price bids such bids shall be summarily rejected. If it is the case of the respondent No.1 company that the letters inwarded on 23rd July, 2010 amounted to submission of physical price bids, then the only implication that the petitioners would suffer is rejection of their bid and, therefore, this clause does not support the decision to forfeit the security deposit amount. It is nowhere provided that if the bid is rejected, bid security amount is liable to be forfeited. On the other hand as per clause 19.2, after the execution of the contract with the successful bidder the bid security (EMD) will be returned to the respective bidders, with the exception of the successful bidder and in the instant case the contract with L1 has been executed on 7/9/2010. As per clause19.3 the bid security (EMD) of the successful bidder will be returned only after furnishing of the SecurityPerformance Guarantee Bond and signing of the Contract and, therefore, this clause is not applicable in the instant case as the petitioner No.1 is not the successful bidder. As per clause 7.7(i) if the bidder withdraws/modifies his bid within the bid validity specified in the Bid Specification, the bid submitted by him shall be declared invalid and the bid security shall be forfeited. On the other hand the reasons set out in the impugned order dated 27th October, 2010 in support of the forfeiture of the bid security read ase to the above, it is clarified that, the bidders including you have submitted post bidding documents in response to the additional clarifications called by Mahagenco regarding bid. Mahagenco has never asked for submission of revised prices on any account. The modification in prices cannot beh post bidding correspondence. As such, your statement regarding acceptance ofpost bidding documentation is not in order. The submission of revised price bid was within the validity of offer. As per tender terms, the modification in prices during validity period is ground for forfeiture of Bid Security.The circular of Railways regarding recommended port for respective TPS was issued in March 2010 much earlier than bid closing date and it is bidders responsibility to arrange all logistics following all rules, regulations and circulars issued by concerned authorities viz. Railways, ports and offer the price accordingly. Therefore, submission of the revised prices on this account is not relevant and it does not ensure any purpose in view of public interest. In all it is observed that, the reply to the Show Cause Notice vide letter dated 7th September, 2010 referred at Sr. No.3 above, is not relevant. As such, in terms of tender, your bid had rendered invalid and is declared as invalid and five nos. of bank guarantees preferred above towards Earnest Money Deposit are forfeited.In the above reproduced reasonings set out in the impugned order the gist of para 1 is that thehas resorted to modification in prices during the valid period and, therefore, forfeiture of bid security was justified under Clause 7.7(i) of the contract terms. We do not agree with these conclusions and on the face of the facts that when the tenders are opened on 23/7/2010 at about 1.00 p.m., the alleged modification letters inwarded by the petitioneraround 11.45 a.m. on that date were not within the knowledge of the respondentand in the bids so opened, the petitioners bid was no where in the reckoning. L1 was already known and it was only after 3 p.m. that the Chief General Manager opened the envelops inwarded by the petitioner no.We, therefore, hold that in these peculiar circumstances, Clause 7.7(i) of the contract terms cannot be invoked so as to penalize petitionerby forfeiting the security deposit of Rs.16.75 crores. We have already dealt with the other grounds taken, relying upon Clause No.12.12 of the contract terms and even if the bid had rendered invalid, as alleged, there is no provision for forfeiture of the earnest money deposits in such eventualities. The petitioners bid was already out of consideration after 1.00 p.m. on 23/7/2010. Viewed in any manner, the decision taken by the respondentto forfeit five bank guarantees is unsustainable and the impugned order is illegal, arbitrary and appears to have been passed in colourable exercise of its power by respondent no.