2016 (5) TMI 1622 - HC - Companies Law

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

TELSA Transformers Limited Versus Odisha Power Transmission Corporation Limited and Ors.

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 ... Debarring for a period of three years from participating in future tenders and not to encash the bank guarantee - seeking a direction to release the amount of pending bills in respect of transformers already supplied and received by the Corporation - HELD THAT:- In Basheshar Nath v. Commissioner of Income Tax, Delhi and Rajasthan, [1958 (11) TMI 1 - SUPREME COURT], Mademsetty Satyanarayana v. G. Yelloji Rao, [1964 (11) TMI 112 - SUPREME COURT], Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh, [1967 (12) TMI 66 - SUPREME COURT] and Sikkim Subba Associates v. State of Sikkim, AIR [2001 (5) TMI 949 - SUPREME COURT], the Apex Court held that even in case of mandatory provision, under specific circumstances, a party can waive its right. Waiver means relinquishment of one's own right. It is referable to a conduct signifying intentional abandonment of right. It may be express or may even be implied but should be manifest from some overt act. Waiver involves a conscious, voluntary and intentional relinquishment or abandonment of a known existing legal right. Thus, benefit, claim or privilege, which, except for such a waiver, the party would enjoy. Even in a case if a plea is taken and evidence is not led, it would amount to be a waiver. Applying the said principle to the present context, it appears that by amended purchase order dated 20.04.2015 by reducing the quantity of transformer to be supplied by the petitioner, the opposite parties had waived the condition of initial purchase order dated 18.06.2014 with regard to the quantity to be supplied pursuant to the initial contract, and as such the opposite parties had acted upon with the amended purchase order by accepting the supply of reduced quantity of transformers. Therefore, the opposite parties are estopped from taking any further coercive action against the petitioner. On perusal of the impugned order, it appears that before debarring the petitioner to participate in future tender for a period of three years, no notice of opportunity was given to him before passing such order. Even otherwise, no notice or opportunity was ever given to the petitioner before passing any such order, and merely reference of the same has been made in the impugned order dated 14.09.2015, wherein it is stated that by resolution dated 21.08.2015, the petitioner has been debarred from participating in any Tender for a period of three years. In the facts of the present case, such resolution could not have been passed without giving opportunity to the petitioner. Such portion of the order dated 14.09.2015, by which the petitioner has been debarred, is liable to be quashed, and is accordingly quashed. For balancing equity between the parties, it is directed that the amount equivalent to the bank guarantee already paid by the petitioner in lieu of return of the original bank guarantee is sustained, and the direction given in the order dated 14.09.2015 with regard to debarring the petitioner from participating in any future contract of the opposite party-Corporation, is quashed - writ petition stands allowed in part. Issues:Challenge to order debarring participation in tenders and bank guarantee encashmentAnalysis: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.