Case Note & Summary
The petitioner, Knowledge Infrastructure Systems Pvt. Ltd., a company engaged in coal trading, along with its shareholder, filed a writ petition under Article 226 of the Constitution challenging the decision of the respondent, Maharashtra Power Generation Company Limited (a State instrumentality under Article 12), to forfeit five bank guarantees amounting to Rs. 16,75,00,000 submitted as earnest money deposit. The respondent had published a tender on 20 March 2010 for supply of 3.35 metric tonnes of foreign coal. The petitioner's techno-commercial bid was found valid on 29 May 2010, and physical documents were opened on 3 June 2010. On 23 July 2010, before the price bid opening scheduled at 1:00 p.m., the petitioner submitted two letters dated 22 July 2010: one offering an unconditional discount of 3.5% on the price, and another seeking adjustments to its unopened price bid on the ground that other bidders had been allowed amendments. The letters were delivered at 10:45 a.m. but were not before the Bids Opening Committee at the time of opening. The respondent forfeited the earnest money deposit, stating that the bid was rendered invalid. The court held that the petitioner's attempt to modify the bid after the scheduled opening time violated the tender conditions, and the forfeiture was justified. The petition was dismissed.
Headnote
A) Tender Law - Forfeiture of Earnest Money Deposit - Bid Security - The petitioner submitted bank guarantees as earnest money deposit along with its bid. After the techno-commercial bid was accepted but before the price bid opening, the petitioner submitted letters offering an unconditional discount and seeking adjustments. The respondent forfeited the earnest money deposit on the ground that the bid was rendered invalid. The court held that the petitioner's attempt to modify the bid after the scheduled opening time violated the tender conditions, and the forfeiture was justified as the bid was non-responsive. (Paras 4-7)
B) Constitutional Law - Article 226 - Judicial Review of Tender Matters - The court examined the decision of the respondent, a State instrumentality under Article 12, to forfeit the earnest money deposit. The court held that the respondent's action was in accordance with the tender terms and did not warrant interference under Article 226, as the petitioner had breached the conditions by attempting to modify the bid after the deadline. (Paras 4, 8-10)
Issue of Consideration
Whether the forfeiture of bank guarantees submitted as earnest money deposit by the petitioner was valid when the petitioner attempted to modify its bid after the scheduled bid opening time by offering an unconditional discount and seeking adjustments, and whether such action violated the tender conditions.
Final Decision
The petition is dismissed. The forfeiture of the bank guarantees is upheld.
Law Points
- Tender law
- Forfeiture of earnest money deposit
- Bid security
- Unilateral modification of bid after opening
- Level playing field
- Article 226 jurisdiction
- Contractual rights
Case Details
2010 LawText (BOM) (12) 36
WRIT PETITION NO. 2324 of 2010
B. H. Marlapalle, U. D. Salvi
Mr. Mukul Rohatagi, Senior Counsel with Mr. Janak Dwarkadas, Senior Counsel with Mr. D.D.Madon, Senior Council along with Mr. Saurabh Kirpal, Ms. Manali Singhal, Mr. Karan Bharioke, Mr. C.D. Mehta and Mr. B.C. Mehta i/b.Dhruve Liladhar & Co., for the petitioner. Mr. V.Thorat, Senior Counsel with Mr.Dipankar Das and Mr. Apurv Harsh i/b. M.V. Kini & Co., for respondent No.1. Ms.C.Nanavatty i/b., Manadiar & Co., for respondent No.2.
Knowledge Infrastructure Systems Pvt. Ltd. & Anr.
Maharashtra Power Generation Company Limited & Ors.
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Nature of Litigation
Writ petition under Article 226 challenging forfeiture of bank guarantees submitted as earnest money deposit in a tender.
Remedy Sought
The petitioner sought to challenge the decision of respondent No.1 forfeiting five bank guarantees amounting to Rs. 16,75,00,000 and to have the forfeiture set aside.
Filing Reason
The petitioner's bid was declared invalid and the earnest money deposit was forfeited on the ground that the petitioner attempted to modify its bid after the scheduled bid opening time by offering an unconditional discount and seeking adjustments.
Previous Decisions
The respondent No.1 had communicated the decision to forfeit the bank guarantees through a letter dated 27 October 2010.
Issues
Whether the forfeiture of bank guarantees submitted as earnest money deposit was valid when the petitioner attempted to modify its bid after the scheduled bid opening time.
Whether the respondent's action violated the principles of natural justice or was arbitrary.
Submissions/Arguments
The petitioner argued that the letters were submitted before the bid opening and should have been considered, and that other bidders were allowed amendments, so the petitioner should be treated similarly.
The respondent argued that the petitioner's attempt to modify the bid after the deadline violated the tender conditions, rendering the bid non-responsive, and thus forfeiture was justified.
Ratio Decidendi
A bidder cannot unilaterally modify its bid after the scheduled bid opening time, and any such attempt renders the bid non-responsive, justifying forfeiture of the earnest money deposit. The respondent, as a State instrumentality, acted in accordance with the tender terms and its decision is not arbitrary.
Judgment Excerpts
the decision of the respondent No.1 and as communicated to the petitioner through the letter dated 27th October, 2010, forfeiting five bank guarantees submitted as earnest money deposit on the ground that the bid submitted by the petitioners had rendered invalid in terms of the tender, is under challenge
the petitioner believed that it should be treated similarly and hence it should be allowed to offer adjustments to its unopened price bid.
Procedural History
The petition was filed under Article 226. Rule was issued. Respondent Nos.1 and 2 waived service. Respondent No.1 filed affidavit-in-reply and sur-rejoinder affidavit. The petition was heard finally with consent of parties on 14 December 2010 and judgment pronounced on 23 December 2010.
Acts & Sections
- Constitution of India: Article 12, Article 226
- Companies Act, 1956:
