AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 707
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay a premium in the form of revenue share and / or upfront payment, as the case may be," to R-2 for award of the concession. 3. The petitioner, a company, was one of the 14 persons, who submitted bids. Petitioner quoted a premium of Rs.190.53 crores per year and was declared the highest bidder. By a letter dated 17-01-2011, R-2 informed the petitioner that its bid had been accepted and the petitioner was called upon to confirm its acceptance within 7 days [as required under Clause 3.3.5 of the Request for Proposal (RPF), volume 1]. By a letter dated 24-01-2011 the petitioner company expressed its inability to confirm its acceptance on the ground that its bid was found not commercially viable on a second look. The petitioner stated in the said letter that minutes of the pre-bid meeting, which included several amendment / queries, were published on website of NHAI on 07-01-2011 and the bid had to be submitted within three days thereafter, i.e., on 10-01-2011, thereby leaving insufficient time to consider and assess impact of the clarifications published by R-2 on its website on 07-01-2011. 4. R-2 issued a show-cause notice on 24-02-2011 calling upon the petitioner to explain as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....learned counsel conceded that such a refusal by the bidder would render him liable for payment of damages in terms of Clause 2 of the bid document. He further submitted that, as a matter of fact, bid security amount deposited by the petitioner to the tune of Rs.13.97 crores has, in fact, been forfeited by the 2nd respondent and the petitioner did not raise any dispute regarding the legality of such forfeiture. 7. The learned counsel also submitted that assuming for the sake of arguments that it is legally permissible to blacklist the petitioner on the ground that it declined to enter into a valid contract after it had been declared as the successful bidder by the 2nd respondent, such a decision is required to be taken only after complete compliance with the requirements of the principles of audi alteram partem and the petitioner should have been given an oral hearing before the impugned decision was taken. 8. Lastly, the learned counsel submitted that the punishment of blacklisting (for a period of one year) is disproportionate to the wrong committed by the petitioner as it would have the effect of not only debarring the petitioner to deal with the 2nd respondent for a period o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on." and took note of the constitutional provision (Article 298) Article 298. Power to carry on trade, etc.- The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose: Provided that - (a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and (b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament., which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right ei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the case on hand, the bid document stipulated various conditions, which seek to regulate the relationship between the 2nd respondent and the bidders, such as the petitioner herein. Relevant in the context are Clauses 2 and 4 of the bid document. Clause 2.2 and the various sub-clauses thereunder deal with the bid security; the method and the manner of providing such bid security; and, by whom it should ultimately be appropriated. It stipulates that a bidder would require to deposit a bid security of Rs.14-00 crores either by way of demand draft or in the form of bank guarantee acceptable to the 2nd respondent in a format contained at Appendix-II of the bid document. It is further stipulated that a bidder, by submitting a bid, "shall be deemed to have acknowledged and confirmed" that the 2nd respondent will "suffer loss and damage on account of withdrawal" of the bid or "for any other default by the bidder during the period of bid validity". It also stipulates that under the various contingencies specified thereunder the 2nd respondent would be entitled to forfeit and appropriate the bid security amount "as mutually agreed genuine pre-estimated compensation and damages payable to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpressions "corrupt practice", "fraudulent practice", etc., mentioned above are specifically defined under Clause 4.3. 16. These two Clauses become relevant in the context of the second submission made by the learned counsel for the petitioner that as per the bid document, the power to blacklist is available only in the cases of the commission of any or some of unacceptable practices by the bidder or his agents, etc., but not in the case, where the successful bidder declines to enter into a contract on being declared as a successful bidder. No doubt, the bid document expressly declares that in the case of the commission of a corrupt practice, etc., the bidder shall not be eligible to participate in any tender issued by the 2nd respondent for a period of two years from the date on which it is found that a corrupt practice has been committed. Such an express stipulation is not to be found in the bid document, in the context of the failure of the successful bidder to execute the necessary documents to conclude the contract. In our opinion, that is not determinative of the authority of the 2nd respondent to blacklist a bidder, such as, the petitioner herein, who declines to execute t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... person legally capable of entering into contracts. 18. The next question that is required to be considered is whether the 2nd respondent is justified in blacklisting the petitioner in the facts and circumstances of the case. The necessary facts are already mentioned and they are not in dispute. Failure of the petitioner to conclude the contract by executing the necessary documents, admittedly, resulted in a legal wrong. Whether the 2nd respondent should have been satisfied with the forfeiture of the bid security amount or should have gone further to also blacklist the petitioner after forfeiting the bid security, is a matter requiring examination. In other words, the issue is one of the proportionality of the action taken by the 2nd respondent. 19. The reason given by the 2nd respondent in its showcause notice dated 24-02-2011 for proposing to blacklist the petitioner is as follows: "It needs to be appreciated that the projects being undertaking by NHAI are of huge magnitude and both in terms of manpower and finance besides being of utmost National importance, striking at the root of economic development and prosperity and general public and a nation as a whole, the NHAI ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as in the 19th century in Russia and was later adopted by Germany, France and other European countries as has been noticed by this Court in Om Kumar v. Union of India. 46. By proportionality, it is meant that the question whether while regulating exercise of fundamental rights, the appropriate or least restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. Under the principle, the court will see that the legislature and the administrative authority "maintain a proper balance between the adverse effects which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve". 22. Tested in the light of the abovementioned principle, we are required to examine; (1) the purpose sought to be achieved by the impugned decision of the 2nd respondent to blacklist the petitioner; and (2) the adverse effects, the impugned action may have on the rights of the petitioner. 23. From the impugned order it appears that the 2nd respondent came to the concl....