AI Structured Summary
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Judgment
,Mandatory Criteria,
,Technical Criteria,Documents Required to be scanned and uploaded
1.0,xxx,xxx
2.0,xxx,xxx
3.0,xxx,xxx
4.0,"Net Worth: Firm/Company have minimum of
Rs.5 crore on 31.03.2019","Certificate for net worth issued by Charted
Accountant.
Award and limited the challenge to the decision of the appellant/IRCTC of forfeiting the Security Deposit and the Licence Fee and banning it for a,,
period of three years from participating in the future projects of the appellant/IRCTC.,,
After hearing both sides, the learned Single Judge concluded that the punishment imposed on the respondent/company for a bona fide mistake, was",,
shockingly disproportionate and could not be sustained and thus set aside the impugned order dated 20.12.2019, save and except for the forfeiture of",,
the EMD of Rs.10 lakhs deposited by the respondent/company at the time of submission of the bid. Aggrieved thereby, the appellant/IRCTC has",,
preferred the present appeal.,,
Mr. Nikhil Majithia, learned counsel for the appellant/IRCTC contended that the learned Single Judge has erroneously concluded that while",,
submitting its bid, the mis-information provided by the respondent/company in respect of its net worth, was a bona fide mistake as the documents on",,
record clearly established otherwise. He pointed out that there were in fact, two Resolutions of the respondent/company of the same day and the date",,
and time of the alleged meetings held pursuant to the two Meeting Notices of the same date, reflecting two different figures, was also the same, which",,
goes to show that the documents in question were fabricated. He submitted that the initial share capital of the respondent/company was only Rs.1,,
crore. The certified copy uploaded by the respondent/company alongwith Form No.SH-7 on the website of the Registrar of Companies was of a,,
resolution adopted by the shareholders in the EGM held on 30.03.2019, where the following was resolved: -",,
“RESOLVED that the Authorized Share Capital of the Company be increased from Rs.100,00,000/- to Rs.150,00,000/- by the creation of",,
additional 5,00,000 Equity Shares of Rs.10/-each.â€",,
The Notice dated 15.03.2019 for this meeting, copy whereof is placed at page No.191 of the appeal paper-book, records the following Agenda: -",,
“1. To consider and if thought fit to pass with or without Notification, the following Resolutions as an ordinary Resolution:",,
RESOLVED that the Authorized Share Capital of the Company be increased from Rs.100,00,000/- to Rs.150,00,000/-by the creation of",,
additional 5,00,000 Equity Shares of Rs.10/-each.â€",,
It is submitted that there was no scope of erroneously certifying these copies as the originals would have been available with the,,
respondent/company even at the time of filling Form No. SH-7 and they were correctly uploaded. This clearly showed that the attempt made on the,,
part of the respondent/company was to appear to have fulfilled the requirements on paper before the last date for submission of the bids, i.e.",,
14.09.2019, which was extended to 15.09.2019. That was why Form No.SH-7 was uploaded on 12.09.2019, declaring the authorized share capital of",,
the respondent/company to be Rs.5,25,00,000/- while the Memorandum of Articles reflected the authorized share capital as Rs.1.5 crores only. It was",,
submitted that an attempt was made by the respondent/company to misrepresent that the net worth of the company was what was claimed as on,,
30.03.2019, by fabricating the Resolution and the EGM Notice for enhancement of the authorised share capital of the company from Rs.1 crore to",,
Rs.5.25 crores, which unfortunately bore the same date as the earlier Resolution and EGM Notice whereby the authorized share capital of the",,
company was to be increased only to Rs.1.25 crores.,,
Learned counsel for the appellant/IRCTC further contended that though ordinarily, blacklisting is done only for a period of one year, this project",,
being the first of its kind for the appellant/IRCTC and being very prestigious, in an effort to ensure transparency and honest disclosure, such an",,
onerous condition was placed of not only forfeiting the Security Deposit and Licence Fee, but also of blacklisting the defaulter for three years.",,
Therefore, the learned Single Judge erred in limiting the penalty to a mere forfeiture of the EMD of Rs.10 lakhs deposited by the respondent/company.",,
On the other hand, Mr. Neeraj Malhotra, learned Senior Advocate appearing for the respondent/company contended that there is no reason why",,
this mix-up should be described as mala fide. It was submitted that when the respondent/company had submitted Form PAS-3 on 18.09.2019, the paid-",,
up share capital of the respondent/company was disclosed as Rs.429.53 lakhs. Since the Ministry of Corporate Affairs had accepted the details,,
uploaded on its website on increase of the authorized share capital vide the Form No.SH-7, on 12.09.2019, the respondent/company had no clue about",,
the bona fide mistake committed while uploading the details of the Resolution passed for enhancement of the authorized share capital, which was in",,
fact enhanced to Rs.5,25,00,000/-. It was only after the complaint of M/s. Brandavan Food Products was forwarded by the appellant/IRCTC to the",,
respondent/company for seeking an explanation, that this discrepancy was noted. It was in reply to the Show-Cause Notice dated 11.12.2019, issued",,
on the basis of the discovery made during the Forensic Audit, that the respondent/company sought to explain that an error had taken place in uploading",,
the correct Resolution and that the Meeting Notice dated 15.03.2019 had called for a meeting to resolve that the authorized share capital was to be,,
increased to Rs.5.25 crores and not Rs.1.5 crores and the said Resolution was also passed on 30.03.2019. It was further submitted that the wrong,,
uploading was a bona fide mistake and the learned Single Judge had rightly observed so and had further tested the decision of the appellant/IRCTC on,,
the anvil of fairness and proportionality to limit the penalty imposed to Rs.10 lakhs. In the said circumstances, it was contended that the judgment did",,
not deserve interference.,,
We have heard the arguments advanced by learned counsel for the parties and have perused the record. We find force in the contention of the,,
learned counsel for the appellant/IRCTC that existence of two sets of Notices and two sets of Resolutions, both dated 15.03.2019 and 30.03.2019,",,
respectively raises serious doubts as to the bona fides of the respondent/company in uploading the details on the website of the Registrar of,,
Companies, as it did on 12.09.2019, after the pre-bid meeting had taken place on 09.09.2019, but before closure of the bids on 14/16.09.2019. An",,
erroneous uploading of the Resolutions may by itself be a bona fide error, provided that there was only one Resolution reflecting the correct value of",,
the enhanced authorized share capital. In the instant case, the respondent/company has not been able to satisfactorily explain as to why were there",,
two sets of Notices, both dated 15.03.2019, one for calling the EGM to resolve that the authorized share capital be enhanced from Rs.1 crore to",,
Rs.1.5 crores and the other for resolving that the authorized share capital of the company be enhanced from Rs.1 crore to Rs.5.25 crore. There is also,,
no explanation coming forth as to why were there two sets of Resolutions of the same date i.e. 30.03.2019, one resolving that the authorized share",,
capital be enhanced from Rs.1 crore to Rs.1.5 crores and the other resolving that the authorized share capital of the company be enhanced from Rs.1,,
crore to Rs.5.25 crores.,,
Ex facie, it does appear that since Clause 4 of the bid document, as extracted hereinabove, required that as per the Technical Criteria, the net",,
worth of the Firm or Company had to be a minimum of Rs.5 crores, as on 31.03.2019, an effort was made to antedate the documents so as to reflect",,
an enhanced net worth, for being eligible for bidding. Thus, there is no ground to hold that the termination order, which in any case has not been",,
challenged by the respondent/company, is bad in law.",,
Holding that the respondent/company had furnished incorrect information bona fidely, the learned Single Judge elected to limit the penalty imposed",,
to forfeiture of the EMD of Rs.10 lakhs. We are however unable to subscribe to the said view, particularly in the light of the observations made",,
hereinabove that there did not appear any surrounding circumstances for this court to believe that a bona fide mistake was committed by the,,
respondent/company. However, the question of proportionality of the penalty has to be considered so as to determine as to whether forfeiture of the",,
Security Deposit of Rs.2 crores, Licence Fee of Rs.2.96 crores and blacklisting for a period of three years from participating in the future projects of",,
the appellant/IRCTC, was the appropriate penalty to be imposed on the respondent/company.",,
The Supreme Court in Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL & Ors., (2014) 14 SCC 731 has",,
observed as below:-,,
“25. Suffice it to say that “debarment†is recognized and often used as an effective method for disciplining deviant,,
suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of",,
records and other breaches of the regulations under which such contracts were allotted. What is notable is that the “debarment†is,,
never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring,,
contractor.â€,,
We are in agreement with the submission made by learned Senior Counsel for the respondent/company that blacklisting would have serious,,
consequences as it amounts to civil death. At the same time, the appellant/IRCTC is well entitled to insist on transparency, as commercial transactions",,
require stringent standards of disclosure and the said approach cannot be faulted. It is also within the right of the appellant/IRCTC to impose onerous,,
conditions on bidders to discourage suppression of material facts or fraudulent disclosures. In that light, the penalty of forfeiture of the EMD of Rs.10",,
lakhs, as imposed by the learned Single Judge, does not appear to be proportionate.",,
Debarment, for any period, would have to be assessed on its proportionality that ought to be commensurate with the nature of the offence",,
committed by the erring contractor. Though the Supreme Court in Kulja Industries Ltd. (supra) has observed that the court ought not to determine the,,
period of blacklisting, in the present case, on a query posed to the appellant/IRCTC, learned counsel had informed the learned Single Judge that the",,
appellant/IRCTC was not inclined to modify the period of blacklisting and therefore, it was held that there would be no useful purpose in remanding",,
the matter back to the appellant/IRCTC for reconsideration.,,
Be that as it may, since the quantum of punishment is subject to judicial review for the court to examine its fairness and proportionality, on the",,
facts of this case, we find that mere forfeiture of the EMD of Rs.10 lakhs would not suffice. In our opinion, a reasonable amount, enough for the",,
respondent/company to feel the pinch ought to be recovered for the improper disclosure of material facts and the same need not be limited to,,
forfeiture of the EMD of Rs.10 lakh. In our opinion, to balance the equities, discourage the respondent/company from future infractions and send a",,
message to other bidders that they must make honest disclosures, recovery of four times of the EMD of Rs.10 lakhs would be just and fair.",,
The appeal is thus partly allowed. The impugned judgment is modified and the appellant/IRCTC is held entitled to recover a sum of Rs.40 lakhs,,
that shall include the EMD of Rs.10 lakhs, already deposited by the respondent/company. The said amount shall be deposited by the",,
respondent/company with the appellant/IRCTC within four weeks from today.,,
The appeal alongwith the pending application is disposed of on the above terms while leaving the parties to bear their own expenses.,,