2002 (7) TMI 823 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the respondents could claim damages against the appellant for failing to execute the agreement.
2. Whether the procedure prescribed in Clause 15.9.7 of the P.W.D. Manual was followed.
3. Whether the revenue recovery proceedings initiated against the appellant were justified.
4. The validity of the blacklisting order and the forfeiture of the earnest money deposit.

Issue-wise Detailed Analysis:

1. Claim of Damages Against the Appellant:
The court examined whether the respondents could claim damages against the appellant for his failure to execute the agreement. Clause (3) of the notice inviting tender, incorporated into the contract, required all works to be done in conformity with the specifications and conditions of the Harbour Engineering Wing. Clause (13) stated that if the successful tenderer failed to execute the work, the earnest money deposit and security deposit would be forfeited, and fresh tenders would be called for. The court found that the respondents did not follow the prescribed procedure, as they awarded the contract to the second lowest tenderer without retendering, thus failing to justify the losses claimed.

2. Procedure Prescribed in Clause 15.9.7 of the P.W.D. Manual:
The court emphasized the importance of following Clause 15.9.7 of the P.W.D. Manual, which mandates negotiating with the next two lowest tenderers before awarding the contract or retendering if necessary. The court noted that the respondents did not attempt to negotiate with the next two lowest tenderers and directly awarded the contract to the second lowest tenderer at a much higher rate. This failure to follow the procedure invalidated the respondents' claim for damages against the appellant.

3. Justification of Revenue Recovery Proceedings:
The court analyzed whether the revenue recovery proceedings initiated against the appellant were justified. The court found that the respondents had not followed the binding procedure prescribed in Clause 15.9.7 of the P.W.D. Manual. The court held that the respondents should have either followed the procedure or sued the appellant for damages, allowing him to raise defenses. The revenue recovery proceedings were deemed unjustified.

4. Validity of Blacklisting Order and Forfeiture of Earnest Money Deposit:
The court examined the blacklisting order and the forfeiture of the earnest money deposit. The court acknowledged that the earnest money deposit of Rs. 50,000 could be forfeited as per the notice inviting tenders. However, the court found that the respondents' failure to follow the prescribed procedure and the arbitrary awarding of the contract to the second lowest tenderer invalidated the blacklisting order and the subsequent revenue recovery actions. The court set aside the blacklisting order and allowed the appellant to challenge the quantification of his liability.

Conclusion:
The court set aside the judgment of the learned single Judge in O.P. No. 1822 of 1994, quashed the order dated 5th January 1994 (Ext. P-10), and allowed O.P. No. 4921 of 1997, quashing the order dated 12th February 1997 (Ext. P-13). The court held that the State Government could recover any losses suffered by suing the appellant in a court of law, if permissible. The appeal and original petition were accordingly allowed.