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2017 (7) TMI 1341 - HC - Indian LawsForfeiture of Earnest Money Deposit (EMD) - debarring the petitioner from participating in any tender / RFP of DTIDC for the current financial year and the next four financial years - legality of addendum to the notice inviting tender issued by DTIDC - Advance License fee not deposited - service of notice - principles of natural justice - HELD THAT - Concededly, the petitioner had failed to deposit the advance licence fee, other applicable charges as well as the security deposit when called upon to do so in terms of the LOA. The NIT expressly provided for forfeiture of the EMD in the event the bidder did not accept the allotment - In the present case, the petitioner‟s bids were accepted and the LOAs were issued to the petitioner. Thus, in terms of the NIT, the petitioner was required to make the necessary payments and take possession of the shops in question. Concededly, the petitioner did not do so and sought further time of 20 days to fulfil the formalities on account of his ill health. It is clear from the record that DTIDC did not take any steps for cancellation of the allotment till 11.01.2017. This was more than 20 days after 21.12.2016 (the date of the petitioner‟s letter requesting for such further time). It is also relevant to note that even during the course of the present proceedings, DTIDC had offered to allot the shops to the petitioner on the terms of the bid submitted by him - it is apparent that the petitioner is not willing to stand by his bids. It is plainly evident that the petitioner either had second thoughts regarding his bids or otherwise did not have the necessary funds to make the payments; in either event, the petitioner cannot escape the liability as expressly indicated in the NIT. Thus, DTIDC was well within its right to forfeit the EMD in terms of the NIT. It is also well settled that the bidder cannot challenge the tender conditions after it has participated in the tender. Whether DTIDC was required to give any notice before debarring the petitioner from further contracts or blacklisting the petitioner? - HELD THAT - On this question, the law is well settled. In M/s Erusian Equipment 1974 (11) TMI 89 - SUPREME COURT , the Supreme Court had authoritatively held that fundamentals of fair play require that a person should be given an opportunity to represent his case before he is blacklisted. Indisputably, blacklisting a bidder or debarring him from participating in further tenders has serious civil consequences for his business - In the present case, the NIT provides for a bidder, who either withdraw his bid within the validity period or defaults in paying the amounts in terms of the LOA, to be visited with the consequences of forfeiture of EMD / bid security and also be debarred from participating in tenders/RFPs issued by DTIDC for a period exceeding four years (the current financial year and four succeeding financial years). Ex facie such provision of debarring a bidder is harsh and may in certain circumstances be wholly inequitable. The period of blacklisting is also significantly long. The decision of DTIDC to debar the petitioner for the financial year 2016-17 and four further financial years is set aside. DTIDC is at liberty to blacklist and debar the petitioner from participating in future tenders; however, it would be necessary for DTIDC to issue a notice indicating its intention to impose such punishment and take a final decision to do so after considering the petitioner‟s response, if any, and following the principles of natural justice. Petition disposed off.
Issues Involved:
1. Forfeiture of Earnest Money Deposit (EMD) 2. Debarring the petitioner from participating in tenders 3. Validity of the Notice Inviting Tender (NIT) clauses 4. Principles of natural justice in blacklisting Detailed Analysis: 1. Forfeiture of Earnest Money Deposit (EMD): The petitioner challenged the forfeiture of the EMD by DTIDC, arguing that the action was arbitrary and unreasonable since the petitioner had requested additional time to complete the formalities due to illness. The DTIDC had issued a Letter of Acceptance (LOA) for two shops, requiring the petitioner to furnish a security deposit and other charges within seven days. The petitioner failed to comply within the stipulated time, leading DTIDC to forfeit the EMD and debar the petitioner from future tenders. The court examined the terms of the NIT, which clearly stated that failure to deposit the required amounts within the specified period would result in forfeiture of the EMD. The court found that the petitioner was bound by these terms and had failed to fulfill the payment obligations. Consequently, the court upheld the forfeiture of the EMD, stating that DTIDC was within its rights to do so as per the NIT. 2. Debarring the petitioner from participating in tenders: The petitioner also contested the decision to debar him from participating in future tenders for the current and next four financial years. The court acknowledged that blacklisting or debarring a bidder has serious civil consequences and must adhere to principles of natural justice, including providing an opportunity to be heard. Although the NIT specified that defaulting on payment would lead to debarment, the court emphasized that such measures should not be imposed mechanically without considering the proportionality and circumstances of each case. The court found that DTIDC had not provided the petitioner with an opportunity to explain his default before imposing the debarment. Therefore, the court set aside the decision to debar the petitioner, directing DTIDC to issue a notice and consider the petitioner's response before taking any final decision. 3. Validity of the Notice Inviting Tender (NIT) clauses: The petitioner argued that the NIT clauses allowing for forfeiture of the EMD and blacklisting without a hearing were arbitrary and unreasonable. The court reviewed the relevant clauses, which clearly outlined the consequences of failing to comply with the payment terms. The court held that the petitioner, having participated in the tender, was bound by these terms and could not challenge them post-facto. The court cited precedents where it was established that a bidder cannot contest the tender conditions after participating in the tender process. Thus, the court upheld the validity of the NIT clauses. 4. Principles of natural justice in blacklisting: The court reiterated the importance of adhering to principles of natural justice when imposing punitive measures such as blacklisting. Citing Supreme Court judgments, the court highlighted that blacklisting has significant repercussions and must be preceded by an opportunity for the affected party to present their case. The court found that DTIDC's automatic imposition of debarment without a hearing was contrary to these principles. The court concluded that DTIDC must provide notice and consider the petitioner's explanation before deciding on debarment, ensuring that the decision is proportionate and fair. Conclusion: The court upheld the forfeiture of the EMD but set aside the decision to debar the petitioner, directing DTIDC to follow principles of natural justice by issuing a notice and considering the petitioner's response before imposing any punitive measures. The court reaffirmed the validity of the NIT clauses while emphasizing the need for fair play and proportionality in blacklisting decisions.
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