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TMI Blog2018 (2) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... on on one hand, and corner contracts- in this case, in relation to parking lots cannot be undermined. The NDMC thus had a vital interest in ensuring that the group of individuals, who adopted the stratagem of ensuing that they “rotated” the contracts, through different entities, which came to light in the financial linkage between them – as well as controls through the same set of people does not hamper the transparency of the bidding process. This linkage was also evident from other materials such as common email identities of some of the entities; common premises and, in some cases, common directors or individuals controlling the entities. Further, the cancellation of the letters of intent by NDMC and thereby rejecting the tender bids of the Petitioners cannot be accepted to be arbitrary and malafide as such decision is based on concrete grounds, and opportunity was afforded to the petitioners to negate the same and make their stance when Show Cause Notices to that end were sent to them by the NDMC, as mentioned previously. - W.P.(C) 5891/2016 & C.M. APPL.24246/2016, W.P.(C) 7135/2016 And C.M. APPL.29365/2016 - - - Dated:- 18-1-2018 - MR. S. RAVINDRA BHAT AND MR. S. P. GARG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is was to be submitted alongwith the auction processing fee being equivalent to 1.25% of the MLF quoted by the Petitioner No. 1 and was to be paid through online mode, these terms were subsequently complied with by Honshu. 4. By means of the LoI, the NDMC also requested Honshu to pay an amount equivalent of two months MLF towards the security deposit alongwith three months licence fee payable in advance, within a period of 05 days from the date of acceptance of the LoI, but not later than on 31.05.2016. By the said LoI dated 17.05.2016 issued by NDMC, Honshu was also requested to execute a licence agreement within 10 days of the offer with the NDMC, in the prescribed format, and the allotment letter was to be issued to the petitioner only after completion of the formalities. 5. Honshu cites clause 22 of the terms and conditions of the NIT/E- auction issued by the NDMC, which is as follows: Existing display of media will be allowed up to date of maturity of existing contract. At the time of bidding, it will be assumed that all the sites are vacant and MLF of the existing contract shall be deducted from the MLF amount of successful bidder of cluster(s). After the maturit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such security deposits was premature and hypothetical. NDMC stated that it could not be considered. Therefore, the competent authority, by orders dated 10.06.2016, directed the advertiser to deposit the balance amount, in respect of Civil Line Zone Cluster No.04 amounting to ₹ 71,26,690/- alongwith interest @24% per annum from 01.06.2016 till the date of deposition, within a period of three days from issue of the letter, failing which the EMD deposited by them was going to be forfeited as per the terms and conditions of the cluster and the cluster would be re-auctioned without any further correspondence. 9. Honshu, after receipt of letter dated 16.06.2016 from the NDMC, by its letter dated 18.06.2016 informed them that the period of 22 Unipole sites for which adjustment was sought by Mr. Mohsin Anwar and Mr. Akram Khan in their individual capacity towards the advance licence fee and security deposit of Civil Line Zone Cluster No.04 to be paid by Honshu, had already expired on 16.06.2016 and as such their request to adjust the same was justified. By the said letter Honshu also confirmed of having submitted the original G-8 receipts of the security amount by its directors i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the NDMC on 04.07.2016 and having apprised the officer about the facts of the case. It, requested the NDMC to withdraw the Show Cause Notice dated 30.06.2016 being without any merit. The NDMC, on receipt of Honshu s reply, by the impugned letter dated 06.07.2016, (received by Honshu on 08.07.2016), cancelled the LoI dated 17.05.2016 issued to the Petitioner No. 1 and also forfeited EMD amount of ₹ 3,60,000/- deposited by the petitioner in respect of Cluster No.04 Civil Lines Zone. Honshu is aggrieved by the actions of the NDMC, and has preferredW.P. (C)- 5891/2016 alleging that the cancellation is arbitrary and mala fide. 12. Reihen Infosolutions Private Limited ( Reihen ), is also an incorporated company with its office at C-52 /17, Street No. 5, C Block, Gamri Extension, Delhi-110053; Shri Yogesh Kumar is its Director. The NDMC, by Notice Inviting Tender dated 08.06.2016, invited e-tenders for e-auction for allotment for display of advertisement rights through Kiosk on Lamp Poles/ Street Light Poles located in the central verge of commercial and MLU roads in Karol Bagh Zone and City Zone in the jurisdiction of North DMC for a period of one year (further exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by online mode. 15. By the aforesaid LoI dated 28.06.2016, NDMC requested Reihen to pay an amount equivalent to three months MLF towards security deposit alongwith three months licence fee payable in advance, and the payment was to be made within a period of 07 days from the date of acceptance of the LoI, but not later than on 08.07.2016. By the LoI, Reihen was also required to execute an agreement within 10 days of the issue (of the LoI), with NDMC, in the prescribed format, before allotment of advertisement rights (for display of the media through Kiosk on Lamp Posts / Street Light Posts in central verge of commercial and MLU Roads maintained by PWD or MCD). The allotment letter was to be issued only after completion of the formalities. Reihen signed the said LoI and uploaded the same on the portal of NDMC as token of its acceptance on 28.06.2016. 16. After issuance of the LoI, NDMC informed Reihen that the Letter of Intent issued, dated 28.06.2016 towards the display of media through pole kiosks in Karol Bagh Zone stood withdrawn with immediate effect as the matter was stated to be under technical examination. After the withdrawal letter was issued, the NDMC by its Show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es without any proximity and/or relationship with the petitioners. None of the said companies and/or their directors are directors and/or share-holders in the petitioner company and vice-versa. It is argued that there is no basis to infer the alleged nexus. As regards bank-transactions it is stated the petitioners had explained that such transaction pertained to loans that they had taken in course of its business and its refund, and there is no other financial transaction between the two. It is stated that in course of their regular business the petitioners availed loan facilities from the said companies, which have been disbursed and re-paid from time to time as reflected in the bank statement. Petitioners assert that apart therefrom there is no other entry and/or transaction of any kind with the said companies or entities. 20. It is submitted besides, that the three concerns with which Honshu is alleged to have nexus and be the benami or shadow concern of (according to NDMC) i.e. Trigen Electronics Pvt Ltd, USB Enterprises Pvt Ltd and Ashima Infrastructure (P) Ltd, the fact is that such concerns are continuing to transact business and file returns. Besides, they too have ongoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding that the nexus was dubious and contrary to the tender conditions that spelt out eligibility because some of those concerns were defaulters (in payments to NDMC) and were set up by either the same individual, or a group of individuals, with a view to engage in monopolistic practices. 23. Learned counsel submitted that the material on record established that the nexus was in the form of common directors, common addresses, and financial relationship between the concerns in their commercial dealings. This violated the tender eligibility conditions; besides, it was against public interest to keep awarding contracts to the same individuals or group, who through camouflage and dubious subterfuge, portrayed distinct corporate entities. The NDMC, it was urged, could pierce the corporate veil, to discern the reality and conclude that Honshu and Reihen were part of a network of concerns, controlled by the same group of individuals, to corner all parking lot contracts within its jurisdiction, undermining public interest and competition. 24. It was submitted that NDMC cancelled tenders in which Ashima Infrastructure Pvt. Ltd. and Anuradha Sharma, having close nexus with Ashima Infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, notice for cancellation of the contract will be issued by giving time of another 7 days. If even then dues are not paid contract will be cancelled immediately. On delayed payment, interest@24 %per annum on entire outstanding amount will be levied up-to the date of clearing the dues or date of cancellation. 27. The above clauses of the NIT and the license agreement (signed by Honshu) were reiterated in the LoI by the NDMC, the amounts equivalent of two months MLF towards the security deposit along-with three months MLF payable in advance, were to be paid by Honshu, the bidder within a period of 05 days from the date of acceptance of the LoI, but not later on 31.05.2016. However, instead of making the deposits accordingly, Honshu requested for an adjusted remission for the same by seeking that the security deposit / licence fee paid for a previous allotment by its directors be modified in a way that the security amount of ₹ 72,09,330/- of the previous allotment (that was about to expire) be adjusted towards the advance licence fee and security deposit of Civil Line Zone Cluster No. 04 by letters dated 30.05.2016. However, NDMC urges that there is no provision for adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been blacklisted for breach of terms and conditions of the agreement, shall not be eligible for offering bid and the individual / partnership firm / Public Limited Company / Pvt. Limited Company/sole proprietor firm/consortium firm/shall be required to furnish an undertaking to this effect along with e-auction form.' c. Any person/ party/ firm or registered advertiser/sole proprietor firm/consortium who is disqualified or ineligible to participate in the e-auction according to the aforesaid conditions shall not be qualified to offer the bid in the name of its associate concern subsidiaries/ principals/ front and the commissioner/authorized officer on his behalf may declare the e-auctioneer disqualified on this ground, if he is of the opinion that the said e-auctioneer/bidder is acting in collusion with for. the benefit of any other party who would have been disqualified to participate in e-auction. d. Benami transition not allowed. e. if there is an individual who has an interest in whatsoever form, in more than one company/firm etc. then he cannot submit bids of both the companies for the same auction. 31. In the case of Honshu, the copies of bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accorded due regard in the following words: 47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. As held in Ramana Dayaram Shetty the terms of the NIT cannot be ignored as being redundant or superfluous. They must be given a meaning and the necessary significance. As pointed out in Tata Cellular there must be judicial restraint in interfering with administrative action. Ordinarily, the soundness of the decision taken by the employer ought not to be questioned but the decision making process can certainly be subject to judicial review. The soundness of the decision may be questioned if it is irrational or mala fide or intended to favour someone or a decision that no responsible authority acting reasonably and in accordance with relevant law could have reached as held in Jagdish Mandal followed in Michigan Rubber. 35. Thus, when the State invites tender bids, it ought to adhere to the terms of the NIT, and ideally not waver from complying with the conditions set forth in the NIT. This was highli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Devikishan Computed Pvt. Lt. and Ors. AIR 2016 SC 3585). In Bakshi Security (supra) it was stated that the Court ought not to interfere at the instance of the unsuccessful bidder in respect of a procedural violation in the following words: Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made lawfully and not to check whether choice or decision is sound . When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase document in favour of the Petitioner subject to fulfilment of certain conditions. However, in absence of issuance of allotment letter, the said letter of intent cannot be enforced in the court of law. The Apex Court in Dresser Rand S.A. v. Bindal Agro Chem Limited and Ors. (supra) clearly stated that a letter of intent merely indicates a party's intention to enter into a contract with the other party in future. Such a letter of intent is not intended to bind either party ultimately to enter into any contract. Even in Speech and Software Technologies (India) Pvt. Ltd. v. Neos Interactive Limited (Supra), the Apex Court clearly held that an agreement to enter into an agreement is not enforceable nor does it confer any right upon the parties. 40. The same point was highlighted in Rajasthan Co-operative Dairy Federation Ltd. v. Shri Mahal Laxmi Mingrate Marketing Service Pvt. Ltd. and Ors. AIR 1997 SC 66 as follows: The Letter of Intent merely expressed an intention to enter into a contact. If the conditions stipulated in the Letter of Intent were not fulfilled by respondent No. 1 and if the conduct of respondent No. 1 was otherwise not such as would generate confide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not provided for in the NIT, in the case of Honshu), and engaging in business relationships with black-listed companies in violation of the conditions of the NIT. As seen above in Central Coalfields Limited (supra), the terms of the NIT cannot be ignored, hence, neither can be their violation. Such violation of the NIT conditions tempered the decision of withdrawal of the LoIs by the NDMC. Further, in light of judicial precedence, particularly, Jagdish Mandal v. State of Orissa (supra), Tata Cellular v Union of India (supra) and Bakshi Security and Personnel Services Pvt. Ltd. (supra), this Court in appreciation of the judicious exercise of judicial review, given the facts and circumstances of the present writ petitions, finds no reason to interfere with the decisions of the NDMC. The decision to award a public contract is not premised merely on fulfillment of technical qualification and financial viability of the offer of a given bidder; the larger public interest is a necessary condition which invariably informs every decision of the executive authority or agency that is to award the contract. The vital public interest in ensuring that contracts are awarded to genuine bidders, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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