Debarment from tenders quashed for violating natural justice principles, bank guarantee direction sustained for equity

The HC partially allowed the writ petition challenging debarment from tenders for three years and non-encashment of bank guarantee. The court held that by amending the purchase order and reducing transformer quantities, the opposite parties waived their right to enforce original contract conditions and were estopped from taking coercive action. The debarment order was quashed as it violated principles of natural justice by not providing prior notice or opportunity to be heard. However, for balancing equity, the court sustained the direction regarding bank guarantee amount while quashing the debarment from future tenders.

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Issues:
Challenge to order debarring participation in tenders and bank guarantee encashment

Analysis:
1. The petitioner, a private limited company, challenged an order debarring it from future tenders and seeking release of pending bills. The company failed to supply transformers as per the purchase order timeline, leading to a notice for cancellation and forfeiture of performance security. The company offered to supply reduced quantities, which were accepted by the Corporation. Dispute arose when the Corporation sought to encash the bank guarantee despite the company's offer to pay via demand draft.

2. The petitioner contended that no show cause notice was given before debarring it, and the Corporation had amended the purchase order terms by accepting reduced quantities, thus debarring the petitioner without opportunity violated principles of natural justice. Legal precedents were cited to support the argument against arbitrary debarring without due process.

3. The Corporation argued that time was essential in the contract, and the petitioner's failure to supply on time justified the bank guarantee encashment and debarring. The Corporation viewed the amended purchase order as a separate contract, not an extension, justifying their actions. Legal precedents were cited to support the Corporation's position.

4. The Court analyzed the contract terms, including the provision for extension of delivery time and the subsequent amended purchase order. It found that the Corporation had waived the original contract terms by accepting the reduced quantities, estopping them from further action against the petitioner.

5. Relying on legal principles of waiver and estoppel, the Court concluded that debarring the petitioner without following due process was unjustified. The Court quashed the debarring order but upheld the bank guarantee encashment due to the petitioner's offer to pay in lieu of the original bank guarantee.

6. The Court directed the Corporation to clear the pending bills of the petitioner within two months and sustained the amount equivalent to the bank guarantee already paid. The order debarring the petitioner from future contracts was quashed, balancing equity between the parties.

7. The judgment highlighted the importance of following due process, waiver, and estoppel principles in contractual disputes, emphasizing the need for fairness and adherence to legal principles in such matters.

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