M/S. Aretpl-At (Jv) vs M/s. Central Coalfields Limited And Ors

The present writ petition has been filed for quashing the letter no. GM(B&K)/SO(M)/CT/AKK OCP/OB/DEBARRING/179 dated 12.10.2017

issued by the Staff Manager (Mining) of M/s Central Coalfields Limited (respondent no. 5) whereby the Letter of Acceptance in favour of the

petitioner vide LOA No. CCL/GM(CMC)/B-K/2017/51/57 dated 15.08.2017 and work order no. GM(B&K)/SO(M)/CT/AKK OCP/OB/WO/107

dated 29.08.2017 have been cancelled and imposed penalty by way of forfeiture of earnest money of Rs.50,00,000/- deposited by the petitioner and

also debarred the petitioner for a period of three years from participating of future tenders of Central Coalfields Limited (hereinafter referred to as

“the CCLâ€) in individual capacity or as joint venture. Further prayer has been made for issuance of direction upon the respondents to execute

formal contract between the parties in terms of Clause 23 of the Instructions to Bidders with respect to Tender of “Hiring of HEMM for removal

of OB at outsourcing patch of Konar part of AKK OCP of B-K Area for a period of four yearsâ€​.

The factual background of the case as stated in the writ petition is that the respondent no. 1 published an e-Tender Notice being NIT No. CCL/

GM(CMC)/B-K/2017/51 dated 15.05.2017 inviting bids for the Hiring of HEMM for removal of OB including blast hole drilling, blasting, excavation

loading and transportation of all kinds of soil, rocks, broken rocks, hard rocks, extraneous materials including mixed soil, mixed hard soil, clay soil,

pebbles, stone etc. and dumping outside the working zone including spraying at haul road face at dump yard. The job involves making access

trench/haul road with dozing grading maintenance and water sprinkling as may be required, face pumping or excavation operation as per instruction of

the engineer-in-charge of AKK OCP Mine of B&K Area for a period of four years. The petitioner found itself eligible for the work and submitted its

bid on 30. 05.2017 and in financial bid it was found L-1 bidder. The respondent intimated the petitioner on 15.08.2017 via email that it has been

awarded the work and served it a letter of acceptance vide Ref. No. CCLGM(CMC)/B-K/2017/51/57 dated 15.08.2017. As per the Letter of

Acceptance, the petitioner had to deposit the Performance Guarantee of Rs. 2,04,04,894/- in the forms as detailed in clause no. 24 of the Instructions

to Bidders and to submit additional performance security of Rs. 16,06,24,850/- alongwith normal performance security as per clause 20.2 of the

Instruction to Bidders within a period of 28 days from date of issuance of Letter of Acceptance. The petitioner duly applied for the Bank Guarantee

on 16.08.2017 to the satisfaction of the Banking authorities before the bank namely State Bank of India SME Branch, Dhanbad. The project site was

handed over to the petitioner by the respondents vide letter dated 18.08.2017 for starting of work with immediate effect. Thereafter the petitioner

deputed its man and machinery and arranged finance to start the work. The work order being No.GM(B&K)/SO(M)/CT/AKK OCP/OB/WO/107

dated 29. 08.2017 was also issued in favour of the petitioner. The Respondent No.5 also informed vide letter dated 06.09.2017 received on 12.09.2017

by the petitioner for furnishing performance security and additional performance security alongwith normal performance security within time. The

Bank Guarantee was delayed by the Bank and accordingly the Bank vide email dated 08.09.2017 informed the respondent no. 3 that the Bank is under

process of issuing the Bank Guarantee in favour of the respondent-CCL on request of the petitioner and the same will be issued shortly in terms with

above Letter of Acceptance dated 15.08.2017. The petitioner, vide letter dated 12.09.2017 also informed the respondent no. 3 about the said delay on

the part of the Bank in handing over the Bank Guarantee to the petitioner and thus the petitioner sought extension of three days from the respondent

for submitting the Bank Guarantee. However, the respondent did not respond to the said letter of the petitioner. On 15.09.2017, the petitioner

submitted four Bank Guarantees executed with effect from 11.09.2017 for a period of four years three months vide forwarding letter dated

14.09.2017, however, the petitioner was not allowed to start the work and accordingly vide letters dated 26.09.2017 and 27.09.2017 requested the

respondent no. 3 to accept the Bank Guarantee and allow the petitioner to start the work. It further informed that the man and machinery is lying idle

at the site, however, the respondent no. 3 did not respond to the said letter. Thereafter, the petitioner approached the Chief Vigilance Officer, Central

Coalfields Limited vide letter dated 29.09.2017 and requested to look into the issue and further visited the office of the respondent-CCL on 12.10.2017,

however, all went in vein. Suddenly on 13.10.2017, vide e-mail, the petitioner was in receipt of a letter dated 12.10.2017 whereby the respondent no. 5

cancelled the Letters of Acceptance dated 15.08.2017 and imposed penalty of forfeiture of earnest money of Rs.50,00,000/- deposited by the

petitioner and also debarred it for a period of three years from participating in future tenders of CCL relying upon clause 23 of Instructions to bidders

and on clause 4 of the General Terms and conditions of the Contract. During the pendency of the writ petition, the respondent-CCL floated fresh

tender being NIT No. CCL/GM(CMC)/B-K/2017/81 dated 12.12.2017 with respect to the work in question and as such, the petitioner sought to add

the additional prayer in the writ petition for quashing the fresh tender by filing I.A. No. 9824/2017 and vide order dated 08.01.2018, the respondents

were directed not to finalize the subsequent tender.

Mr. Anil Kumar Sinha, the learned Senior Counsel for the petitioner, submits that the impugned order dated 12.10.2017 has been passed in violation

of the principles of natural justice as no any opportunity of hearing was given to the petitioner before passing the impugned order. It is further

submitted that the impugned order has been passed on no fault of the petitioner as delay caused in depositing Bank Guarantee was beyond control of

the petitioner, rather it was caused due to non-availability of the sanctioning authority of the Bank. It is further submitted that the petitioner has already

deputed men and machineries at the work site and impugned order will cause irreparable loss to it. While referring to Annexures-7 and 8 to the writ

petition, learned senior counsel appearing for the petitioner submits that the State Bank of India, SME Branch, Bank More, Dhanbad vide letter dated

8th September, 2017 informed the General Manager (CMC), Central Coalfields Limited, Ranchi inter alia that the request of the petitioner for issuance

of bank guarantee is under active consideration and the same is under process and the bank guarantee is likely to be issued shortly in terms with the

Letter of Acceptance dated 15th August, 2017. On 12th September, 2017, the petitioner also wrote a letter to the General Manager (CMC), Central

Coalfields Limited, Ranchi, informing that the Bank has agreed to sanction the bank guarantee in the form of the performance bank guarantee within

the specified period, but the same could not be formally issued due to absence of Deputy General Manager of the Bank, who is the signing authority

for issuance of bank guarantee/performance bank guarantee for the contract in question.

It is further submitted that after issuance of the letter of termination dated 12.10.2017, the petitioner sent a legal notice to the respondent for

revoking of the order and further for allowing him to start the work, however, no any reply was received. It is also submitted that though there was

delay of two days in depositing the Bank Guarantee, the validity period of the Bank guarantee was well within the period of said 28 days from the date

of letter of acceptance dated 15.08.2017. The petitioner was acting diligently and there was no fault on its part. The bid of the petitioner was declared

as L-1 being most competitive bidder and the purpose behind insisting on furnishing performance security by the awardee of the contract is apparently

to secure the performance of the contract especially the delivery cycle. On bare reading of Clause 14.5 of the Instruction to Bidders, it would be clear

that so far as forfeiture bid security/earnest money of the petitioner is concerned, the word “may†has been used, thus the same is not mandatory,

rather discretionary/directory on the part of the respondent-CCL and such discretion has to be exercised judiciously considering the facts and

circumstances of each case. It is further submitted that the bank guarantee was duly submitted on time as the Letter of Acceptance dated 15.08.2017

was received only on 26.08.2017, hence the period of 28 days would be calculated from 26.08.2017 i.e., the date of receipt of the letter of acceptance

dated 15.08.2017. Neither in the letter of acceptance dated 15.08.2017 nor in the letter of information/reminder dated 06.09.2017, it was mentioned as

to when the period of 28 days would expire. The period of 28 days would be calculated from the date of receipt of the Letter of acceptance and not

from the date of issuance of Letter of acceptance. It is further submitted that the respondent-CCL and other subsidiaries of Coal India Limited in

other cases have duly accepted the bank guarantee of the successful bidders inspite of delay in submitting the performance security and have allowed

them to proceed with the work. It is also submitted that the Bank Guarantee is valid w.e.f. 11.09.2017 as mentioned in the Bank Guarantee itself and

the effective date as mentioned in SFMS details is the date it was fed in its system.

Learned Senior Counsel for the petitioner, while referring to the letter contained in Ref. No.1662 dated 14th January, 2017, issued under the

signature of the General Manager, Hazaribagh Area, Charhi, submits that the respondents in another case have relaxed the period of submission of

performance security deposit within a period of 28 days of issuance of Letter of Acceptance. Thus, the relevant Clause 20.2 cannot be said to be

mandatory in nature, rather the same is directory, which has also been relaxed earlier considering the exigencies.

Learned Senior Counsel has also refers to various letters issued from the different subsidiaries of Coal India Limited (Annexure-16 series to the

rejoinder filed by the petitioner) and submits that on previous occasions, the authorities of various subsidiaries of the Coal India Limited have relaxed

the aforesaid condition of depositing the performance security within a period of 28 days from the date of issuance of Letter of Acceptance.

However, in the present case, the performance guarantee/additional performance guarantee was prepared by the petitioner well within time i.e. on

11th September, 2017 and the same was submitted before the concerned authority of respondent-Central Coalfields Limited on 15th September, 2017

i.e. after two days’ delay. Since Letter of Acceptance was issued to the petitioner on 15th August, 2017, which was a National Holiday, for

counting the period of 28 days, the said date is also required to be exempted.

It is further contended that the letter dated 01.11.2017 issued by the Staff Officer, (Mining) B&K Area would itself suggest that the Bank

Guarantee was already deposited by the petitioner before the CCL which was also accepted by it and, therefore, it would be presumed that the CCL

has waived the delay in submission of Bank Guarantee. Thus subsequent return of the same would amount to an arbitrary action on the part of the

CCL.

Learned Senior Counsel for the petitioner also submits that the latter part of Clause 13 of the General Terms and Conditions of the Contract, so far

as it relates to settlement of dispute through arbitration is concerned, the same will not be attracted in the present case, as the petitioner did not invoke

Clause 13, rather at the time of admission of the writ petition, the said Clause was referred at the instance of learned counsel for the respondents by

making a submission that the petitioner should first take recourse of said alternative forum for redressal of the dispute with the respondent-Central

Coalfields Limited. Now vide order dated 13.1.2018 passed by the Area General Manager (B & K) of Central Coalfields Limited, the said settlement

endeavours through alternative mode is now over, however, it will not mean that the petitioner cannot invoke the writ jurisdiction of this Court against

the arbitrary action of the respondents.

Learned Senior Counsel appearing for the petitioner puts reliance on a judgment rendered by a Division Bench of Delhi High Court in the case of

“M/s. Aurochem (India) Private Limited Vs. The Union of India & Ors.â€, reported in 1994 (29) DRJ (DB) 49 a2nd submits that merely because

time is limited for the performance of the contract or any part thereof, it does not necessarily become of the essence.

The learned Senior Counsel puts further reliance on the judgment rendered by the Hon’ble Supreme Court in the case ofâ €œB.S.N Johsi &

Sons Ltd. Vs. Nair Coal Services Ltd. & Ors.†reported in (2006) 11 SCC 54 8and submits that the power of relaxation at the instance of the

employer must be found out not only from the terms of the notice inviting tender, but also from the general practice prevailing. For the said purpose,

the court may consider the practice prevailing in the past.

Per contra, the learned counsel for the respondents submits that the action of the respondents is strictly in accordance with law and also in

conformity with the terms and condition of the NIT. All the parties are bound by the terms and conditions of the NIT and since the petitioner has

failed to comply the terms and conditions of the NIT, it is not entitled to any relief. In a private contract between the parties where the consequence of

each default is defined in the NIT itself, the question of additional opportunity of hearing does not arise. It is further submitted that the petitioner never

deployed any man or machinery to commence the work. Admittedly the petitioner has made default in furnishing the bank guarantee in time and as

such, it has to face the consequence. There is no clause in the documents permitting waiver of the said condition or permitting extension of time and

as such the bank guarantee furnished by the petitioner was returned to the banker vide letter dated 01.11.2017. The respondents have performed their

part as per the tender and handed over the site to the petitioner on 18.08.2017 and also issued a formal work order on 29.08.2017, however, the

petitioner delayed in depositing the bank guarantee in spite of the reminder of the respondents dated 06.09.2017. The Bank guarantee furnished by the

petitioner was verified through SFMS (Structured Financial Machine System) and it was found that the validity period of the Bank Guarantee is from

13.09.2017 to 10.12.2021 and not with effect from 11.09.2017 as mentioned in the Bank Guarantee. It is further submitted that the request made by

the petitioner vide letter dated 26.09.2017 could not have been entertained as there is no enabling clause permitting the respondents to deviate from the

terms and conditions of the NIT and allow the petitioner to submit the Bank Guarantee belatedly. As per the instructions issued by the Contract

Management Cell (in short CMC) from time to time, strict compliances of the terms and conditions of the contract have been insisted upon with

further instruction that under no circumstances any condition mentioned in the tender documents can be allowed to be diluted nor can any deviation be

permitted. There are several instances where even a Chairman-cum-Managing Director of the other subsidiaries of the Coal India Limited has been

charge-sheeted through the Chief Vigilance Commissioner for allowing deposit of performance security after expiry of 28 days.

Learned counsel for the respondent-Central Coalfields Limited puts reliance on the judgments of the Hon’ble Supreme Court in the case of

“Central Coalfields Limited & Anr. Vs. SLL-SML (Joint Venture Consortium) & Ors.â€, reported in (2016) 8 SCC 62 2and “Rajasthan State

Industrial Development and Investment Corporation & Anr. Vs. Diamond & Gem Development Corporation Limited & Anr.â€, reported in (2013) 5

SCC 470.

Heard the learned counsel for the parties and perused the materials available on record. The petitioner was awarded a contract by the

respondents being a L1 bidder. As per the condition of contract, the petitioner had to furnish the bank guarantee within a period of 28 days from the

date of issuance of letter of acceptance i.e., till 13.09.2017. The petitioner furnished the bank guarantee on 15.09.2017 i.e., after 2 days from the due

date of submission of bank guarantee. Vide letter dated 12.10.2017 which was received by the petitioner on 13.10.2017 through e-mail, the respondent

no. 5 cancelled the tender awarded to the petitioner and imposed penalty of forfeiture of earnest money of Rs.50,00,000/- deposited by the petitioner

and also debarred it for a period of three years from participating in future tenders of CCL relying upon Clause 23 of the Instructions to bidders and on

Clause 4 of the General Terms and conditions of the Contract. The petitioner has challenged the impugned order mainly on the ground that the same

has been passed in violation of the principles of natural justice and also on the ground that whatever the delay has occasioned in furnishing the bank

guarantee was not intentional, rather the same was caused due to some technical default of the bank for which the petitioner could not be penalized.

On the contrary, the stand of the respondents is that one of the specific conditions of the tender was that the petitioner was required to submit the

performance guarantee within 28 days of the issuance of letter of acceptance and since the same was admittedly deposited after the prescribed

period, the concerned authority has cancelled the tender awarded to the petitioner, imposed the penalty of forfeiture of security deposit and also

blacklisted it for three years.

From the aforesaid factual context, it appears that the present issue involves a contractual dispute involving alleged violation of the terms and

conditions of the contract which resulted into the termination of the contract along with forfeiture of the security deposit and also debarment of the

petitioner for three years.

So far as the issue of jurisdiction of a Writ Court in contractual matter is concerned, the learned Senior Counsel for the petitioner puts reliance on

a judgment rendered by the Hon’ble Supreme Court in the case of “ABL International Limited & Anr. Vs. Export Credit Guarantee

Corporation of India Limited & Ors.â€, reported in (2004)3 SCC 553, and submits that in absence of any disputed question of fact, availability of

alternative forum is not a bar to invoke an extra ordinary jurisdiction of the High Court under Article 226 of the Constitution of India.

Per contra, the learned counsel for the respondents submits that in the present case, an alternative mode of settlement has provided through the

means of arbitration and as such the present writ petition is not maintainable. To substantiate the argument, the learned counsel for the respondents

puts reliance on the judgment of the Hon’ble supreme Court in the case of “Joshi Technologies International INC Vs. Union of India & Ors.â€​,

reported in (2015) 7 SCC 728. Learned counsel for the respondents further submits that during pendency of the writ petitioner, the petitioner moved

the Area General Manager (B & K) Area of Central Coalfields Limited in terms with Clause 13 of the General Conditions of Contract, which failed in

terms with the order dated 13th January, 2018 (Annexure-D to I.A. No.852 of 2018). Thus, in terms with the further provisions of Clause 13 of the

General Conditions of the Contract, the dispute attracts the provisions of Arbitration and Conciliation Act, 1996.

The learned counsel for the respondents puts further reliance on a judgment of the Hon’ble Supreme Court in the case of “Global Energy

Ltd. & Anr. Vs. Adani Exports Ltd. & Ors.†reported in (2005) 4 SCC 435 and submits that the terms of the NIT are not amenable to judicial

scrutiny and the courts cannot whittle down the terms of the tender as these are in the realm of contract unless the same are wholly arbitrary,

discriminatory or actuated by malice.

It is further submitted by the learned counsel for the respondents that in the case of “Kisan Sahkari Chini Mills Limited & Ors. Vs. Vardan

Linkers & Ors.†reported in (2008) 12 SCC 500, the Hon’ble Supreme Court held that the remedy for a party complaining breach of contract is

before the Civil Court and in such cases public law remedy by way of writ petition under Article 226 of the Constitution of India cannot be invoked.

To appreciate the rival contentions of the parties on the issue of maintainability of the writ petition, it would be appropriate to discuss the law laid

down by the Hon’ble Apex Court on the said issued.

In the case of “Verigamto Naveen Vs. Govt. of A.P. and othersâ€, reported in (2001) 8 SCC 344, the Hon’ble Supreme Court held as

under:-

On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the

High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the

Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. and the decisions of this Court in Har Shankar v. Dy. Excise &

Taxation Commr., Radha Krishna Agarwal v. State of Bihar, Ramlal & Sons v. State of Rajasthan5, Shiv Shankar Dal Mills v. State of

Haryana6, Ramana Dayaram Shetty v. International Airport Authority of India and Basheshar Nath v. CIT. Though there is one set of cases

rendered by this Court of the type arising in Radha Krishna Agarwal case much water has flown in the stream of judicial review in

contractual field. In cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of

natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the

contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in

Dwarka Das Marfatia & Sons v. Board of Trustees of the Port of Bombay, Mahabir Auto Stores v. Indian Oil Corpn. And Shrilekha

Vidyarthi (Kumari) v. State of U.P. Where the breach of contract involves breach of statutory obligation when the order complained of was

made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the

sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with

anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in

cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls

purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely

out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected.

In the case of “Noble Resources Ltd. Vs. State of Orissaâ€​, reported in (2006) 10 SCC 236, the Hon’ble Supreme Court held as under:-

It may, however, be true that where serious disputed questions of fact are raised requiring appreciation of evidence, and, thus, for

determination thereof, examination of witnesses would be necessary; it may not be convenient to decide the dispute in a proceeding under

Article 226 of the Constitution of India.

On a conspectus of several decisions, a Division Bench of this Court in ABL International Ltd. opined that such a writ petition would be

maintainable even if it involves some disputed questions of fact. It was stated that no decision lays down an absolute rule that in all cases

involving disputed questions of fact, the party should be relegated to a civil court.

In Mahabir Auto Stores v. Indian Oil Corpn. this Court observed: (SCC p. 761, para 12)

“It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of

the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even

though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not

entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice,

equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case.â€​

In State of U.P. v. Vijay Bahadur Singh a Division Bench of this Court held that the Government cannot be denied to exercise its

discretionary power provided the same is not arbitrary.

Interplay between writ jurisdiction and contractual disputes has given rise to a plethora of decisions by this Court. See, for example,

Dwarkadas Marfatia & Sons v. Board of Trustees, Port of Bombay and Mahabir Auto Stores.

In Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai6 this Court stated: (SCC p. 235, paras 16-17)

“16. The position of law is settled that the State and its authorities including instrumentalities of States have to be just, fair and

reasonable in all their activities including those in the field of contracts. Even while playing the role of a landlord or a tenant, the State and

its authorities remain so and cannot be heard or seen causing displeasure or discomfort to Article 14 of the Constitution of India.

It is common knowledge that several rent control legislations exist spread around the country, the emergence whereof was witnessed by

the post-World War scarcity of accommodation. Often these legislations exempt from their applicability the properties owned by the

Government, semi-government or public bodies, government-owned corporations, trusts and other instrumentalities of State.â€​

Non-statutory contracts have, however, been treated differently. (See Bareilly Development Authority v. Ajai Pal Singh.)

A distinction is also made between performance of a statutory duty and/or dealing of a public matter by a State and its commercial

activities. (See Indian Oil Corpn.Ltd. v. Amritsar Gas Service8 and LIC of India v. Escorts Ltd.)

In ABL International Ltd. this Court opined that on a given set of facts, if a State acts in an arbitrary manner even in a matter of

contract, a writ petition would be maintainable. It was opined: (SCC p. 570, para 23)

“23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party to the contract, it has

an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by

the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of

the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the

arbitrary actions of the first respondent.â€​

Contractual matters are, thus, not beyond the realm of judicial review. Its application may, however, be limited

In the case of “Joshi Technologies International Inc. Vs. Union of India and othersâ€​, reported in (2015) 7 SCC 728, it is held as under:-

The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have

pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or

where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which

under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, “normallyâ€, the Court

would not exercise such a discretion:

69.1. The Court may not examine the issue unless the action has some public law character attached to it.

69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion

under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be

resorted to through the means of arbitration.

69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.

69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional

circumstances.

Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to

contracts entered into by the State/public authority with private parties, can be summarised as under:

70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discrimination.

70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to

be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and

require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination

and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the

Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc.

70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation

voluntarily incurred.

70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in

performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the

parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can

challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.

70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of

the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.

70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality

before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and

violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.

70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and

there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law

rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.

70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been

totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is

not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case

and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be

examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a

particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the

High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or

agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into

the decision-making process or that the decision is not arbitrary.

70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but

failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a

legitimate expectation forms part of the principle of non-arbitrariness.

70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in

doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely

contractual disputes.

Keeping in mind the aforesaid principles and after considering the arguments of the respective parties, we are of the view that on the

facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the

Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.

Having gone through the aforesaid judgments of the Hon’ble Supreme Court, it may be construed that there is no absolute bar in entertaining a

writ petition in a contractual matter where some disputed question of facts are involved. However, if the dispute involved in a matter is so complex

which can only be determined after thorough long drawn adjudicatory process by leading evidences, the writ petition should not be entertained. Each

and every case is to be dealt with on its own facts. If the materials on record are clearly evincible, the writ court may exercise the power of judicial

review.

The power under Article 226 of the Constitution of India is plenary in nature and is not subjected to any of the other provisions of the Constitution.

The High Court has discretion to exercise or not to exercise such discretion having regard to the facts of each case. However, the High Courts have

imposed self-restraints in such exercise of extraordinary jurisdiction of the High Court to issue a prerogative writ will not normally be exercised by the

Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the

constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction.

In the case of SLL-SML (Joint Venture Consortium) & Ors. (supra), cited by the learned counsel for the respondent-CCL, the Hon’ble

Supreme Court held that the party issuing the tender (the employer) has the right to punctually and rigidly enforce the terms of the contract.

Learned counsel for the respondents also puts reliance on the judgment of the Hon’ble Supreme Court in the case of Rajasthan State

Industrial Development and Investment Corporation & Anr. (supra) and submits that neither the matters relating to contract can be agitated nor the

terms of the contract can be enforced through writ jurisdiction under Article 226 of the Constitution of India. The writ court cannot be a forum to seek

any relief based on terms and conditions incorporated in the agreement between the parties. The terms of the contract have to be construed strictly

without altering the nature of the contract as it may affect the interest of either of the parties adversely.

It is true that by way of judicial review, the High Court is not expected to act as a court of appeal while examining an administrative decision and

to record a finding whether any different decision could have been taken in the facts and circumstances of the case. By way of judicial review, the

Writ Court should ordinarily refrain from examining the details of the terms of the contract which have been entered into by the public bodies or the

state. The Writ Courts have inherent limitations on the scope of any such enquiry. However, the Courts can certainly examine whether “decision

making process†is unreasonable, irrational, arbitrary and violative of Article 14 of the Constitution of India. Once the procedure adopted by an

authority in the matter of a contract is held to be against the mandate of Article 14 of the Constitution, the Writ Court cannot ignore such action on the

pretext that the authorities concerned must have some latitude or liberty in contractual matters and any interference by the Writ Court would amount

to encroachment on the exclusive right of the authority to take such decision.

Before coming to the merit of the case, it would be appropriate to go through the relevant provisions of the conditions of contract based on which

the respondent terminated the contract of the petitioner.

Performance Security/Security Deposit

4.1 ----------------------------------------------------------------------

4.2 Performance Security (first part of security deposit) should be 5% of annualized value of contract amount and should be submitted

within 28 days of issue of LOA by the successful bidder in any of the form given below:

---------------------------------------------------------------------------

Failure of the successful bidder to comply with the requirement as above shall constitute sufficient ground for cancellation of the award of

work and forfeiture of the bid security.

Additionally the company reserves the right as follows:-

“a. All such defaulting parties who fail to deposit Performance Guarantee or Security Deposit in time shall be blacklisted/de-barred for

participating in future tenders for a period of 3(three) years.

b. in addition, all such individual firms/companies/associates/JVs who are the persons as defined in section 40A(2)(b) of the Income Tax Act,

1961 of such blacklisted/debarred party, wherein the words “assesses†to be replaced with the words “blacklisted/debarred partyâ€

shall also remain blacklisted/debarred for a period of 3(three) years.

c. In case of party has been blacklisted/debarred and it is found that such blacklisted party or any person as mentioned in clause (b) above

has already participated in a tender which is yet to be awarded, the same participant shall not be considered and shall be rejected

forthwith.â€​

The aforesaid condition of the contract speaks that the first part of security deposit in terms of Performance Security should be submitted within

28 days of issuance of Letter of Acceptance. In case the successful bidder fails to comply with the said requirement, it will be a sufficient ground for

the company to cancel the awarded work and forfeit of the bid security. Apart from the cancellation of the awarded work and forfeiture of the

security deposit, additional right is reserved with the company to blacklist/debar the bidder in future tenders for a period of three years in case of

default in depositing the performance security in time.

In my considered view, the conditions referred herein above are not the mandatory conditions, rather the same are the discretionary power of the

respondent-CCL by exercising the same, the contract of a bidder may be cancelled with consequential forfeiture of security and blacklisting.

On perusal of the impugned order dated 12.10.2017 it appears that the same has been passed solely on the ground that the successful bidder (the

petitioner herein) furnished the bank guarantee on 15.09.2017, whereas the time fixed for furnishing the same was 12. 09.2017 which according to the

respondents is violative of Clause 23.3 of Instruction to Bidder and Clause 4.2 of Conditions of Contract. The tender awarded to the petitioner has

been cancelled with other consequential punishments as has been enumerated in Clause 4.2 of the Condition of the Contract.

There appears to be two parts of the impugned order. First is the cancellation of tender with forfeiture of security deposit and the second is the

order of blacklisting/debarment which power has been additionally reserved with the respondent-CCL in case of such failure of the successful bidder.

Order of blacklisting

The petitioner has challenged the order of blacklisting on the ground that the same has been passed in violation of the principles of natural justice.

The respondents have also not stated that before passing the order of blacklisting, any show-cause notice was given to the petitioner.

In the case of “Kulja Industries Ltd. Vs. Chief General Manager, Western Telecom Project BSNL and anotherâ€, reported in (2014) 14 SCC

731, the Hon’ble Supreme Court held as under:-

That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any

other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically

conferred by statute or reserved by contractor. That is because “blacklisting†simply signifies a business decision by which the party

affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private

parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to

contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State

or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of

natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition

for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and

proportionate to the gravity of the offence is similarly examinable by a writ court.

The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment &

Chemicals Ltd. v. State of W.B. where this Court declared that blacklisting has the effect of preventing a person from entering into lawful

relationship with the Government for purposes of gains and that the authority passing any such order was required to give a fair hearing

before passing an order blacklisting a certain entity. This Court observed: (SCC p. 75, para 20)

“20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the

Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to

have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his

case before he is put on the blacklist.â€​

Subsequent decisions of this Court in Southern Painters v. Fertilizers & Chemicals Travancore Ltd.4; Patel Engg. Ltd. v. Union of India5;

B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd.6; Joseph Vilangandan v. Executive Engineer (PWD) among others have followed the

ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a

contractor.

Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in

Radha Krishna Agarwal v. State of Bihar; E.P. Royappa v. State of T.N.; Maneka Gandhi v. Union of India; Ajay Hasia v. Khalid Mujib

Sehravardi; Ramana Dayaram Shetty v. International Airport Authority of India and Dwarka Das Marfatia and Sons v. Port of Bombay

have ruled against arbitrariness and discrimination in every matter that is subject to judicial review before a writ court exercising powers

under Article 226 or Article 32 of the Constitution.

It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and

the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of

fairness, relevance, natural justice, non-discrimination, equality and proportionality. All these considerations that go to determine whether

the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system

that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the

subject. A reference to the following passage from the decision of this Court in Mahabir Auto Stores v. Indian Oil Corpn.should, in our

view, suffice: (SCC pp. 760-61, para 12)

“12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed

by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article

32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of

Bihar. … In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the

Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is

arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an

action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be

the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a

governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would

be unreasonable.

… It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of

the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even

though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not

entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice,

equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case.â€​

In the case of “Gorkha Security Services Vs. Govt. (NCT of Delhi) and anotherâ€, reported in (2014) 9 SCC 10, 5the Hon’ble Supreme

Court held as under:-

It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded

and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity

to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many

civil and/or evil consequences follow. It is described as “civil death†of a person who is foisted with the order of blacklisting. Such an

order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award

of government contracts.

Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., highlighted the necessity of giving an

opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind

of the authority contemplating blacklisting of such a person. This is clear from the reading of paras 12 and 20 of the said judgment.

Necessitating this requirement, the Court observed thus: (SCC pp. 74-75)

“12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade

and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive

function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of

the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to

matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can

choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the

effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to

enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the

Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a

person it has to be supported by legality.

Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the

Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to

have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his

case before he is put on the blacklist.â€​

Again, in Raghunath Thakur v. State of Bihar the aforesaid principle was reiterated in the following manner: (SCC p. 230, para 4)

“4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of

the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the

contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle

of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to

be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person

concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order

should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order

insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of

the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the

cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the

appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with

law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State

Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear

that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus

disposed of.â€​

Recently, in Patel Engg. Ltd. v. Union of India speaking through one of us (Justice Chelameswar, J.) this Court emphatically reiterated

the principle by explaining the same in the following manner: (SCC pp. 262-63, paras 13-15)

“13. The concept of ‘blacklisting’ is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under:

(SCC p. 75, para 20)

‘20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the

Government for purposes of gains.’

The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case and took note

of the constitutional provision (Article 298), 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 either to enter or not to enter into a contract with any person is subject to a constitutional

obligation to obey the command of Article 14. Though nobody has any right to compel the State to enter into a contract, everybody has a

right to be treated equally when the State seeks to establish contractual relationships. The effect of excluding a person from entering into a

contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar

activity.

It follows from the above judgment in Erusian Equipment case that the decision of the State or its instrumentalities not to deal with

certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called

blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The

authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the

business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon

the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitraryâ€" thereby such a

decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case

can vary depending upon various factors.â€​

Thus, there is no dispute about the requirement of serving show-cause notice. We may also hasten to add that once the show-cause

notice is given and opportunity to reply to the show-cause notice is afforded, it is not even necessary to give an oral hearing. The High

Court has rightly repudiated the appellant’s attempt in finding foul with the impugned order on this ground. Such a contention was

specifically repelled in Patel Engg.

In the aforesaid judgments, the Hon’ble Supreme Court held that when a contract is entered between two private parties, then in case of any

breach by one party the other party has every right to blacklist the defaulter and such right is unqualified. However, in a situation where an order of

blacklisting has been passed by the State or its instrumentalities, then such order is within the realm of power of judicial review of the Writ Court and

the same has to be tested in the touchstone of the principle of natural justice, doctrine of proportionality, reasonableness and fairness. The order of

blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. Blacklisting has the effect of preventing a

person from the privilege and advantage of entering into lawful relationship with the government/government agencies for the purposes of gains. Thus,

before taking such a harsh decision, the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The

show cause must not be mere formality, rather the same should specifically mention the grounds according to which the department necessitates the

action and also the proposed action so that the person aggrieved may explain the circumstances properly.

On perusal of the impugned order dated 12.10.2017, it appears that the order of cancellation of tender coupled with forfeiture of security deposit

and blacklisting has been passed without describing any cogent or strong reason of the same. The order cancelling the awarded work is one aspect

and the order of blacklisting is another. The order of cancellation of contract is passed merely on violation of any mandatory terms and conditions of

the contract, however, the order of blacklisting debars any person from dealing with the government instrumentality for the time mentioned in the

order. Thus, before passing the order of blacklisting, it is a sine-qua-non to hear the alleged delinquent so as to satisfy as to whether the default is

intentional or has been caused under the situation beyond one’s control. In the present case, the respondent-CCL has not called upon the petitioner

to explain the circumstances under which the delay has been caused. The impugned order has been passed merely on the ground that in case of

default, the respondent-CCL has the discretion to pass any order. It is a settled position of law that the State or its instrumentality while dealing with

any private individual shall exercise the said discretion in fair and equitable manner.

For the aforesaid reason, I am of the view that the decision making process of the respondent-CCL in blacklisting the petitioner vitiates as the

same has been passed in violation of the principles of natural justice i.e., without affording any opportunity to the petitioner to explain the reasons of

alleged default.

Cancellation of tender and forfeiture of security deposit

The learned Senior Counsel for the petitioner submits that the condition of submitting the bank guarantee as performance security within a fixed

period of 28 days of issuance of Letter of Acceptance is not a mandatory condition and the delay may be condoned having taken into consideration of

the facts and circumstances of the case. It is further submitted that other Subsidiaries of Coal India Limited in several cases have duly accepted the

performance security in form of bank guarantee of the successful bidder in spite of delay and have allowed them to proceed with the work. On

perusal of the record, it appears that the petitioner has committed 2 days delay in submitting of the Bank Guarantee. The question here is that the

delay of 2 days on the part of the petitioner was required to be condoned by the respondents in view of the present facts and circumstances of the

case.

I have perused the judgment of the Hon’ble Supreme Court rendered in the case of “Poddar Steel Corporation Vs. Ganesh Engineering

Work & Ors.â€​ reported in (1991) 3 SCC 271, wherein the Hon’ble Supreme Court held thus,

………… the requirements in a tender notice can be classified into two categories - those which lay down the essential conditions of

eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the conditions. In the first case the

authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and

not to insist upon the strict literal compliance of the condition in appropriate cases. …………â€​

Subsequently, relying on the judgment of “Poddar Steel Corporation†(supra), a Bench of Delhi High Court in the case of “M/s

Aurechemâ€​ (supra) held as under:-

The contract as provided therein has to be interpreted in accordance with the law of the purchaser's country. Sections 55 and 63 of the

Indian Contract Act become relevant and applicable. According to Section 63 every promisee may dispense with or may remit wholly or, in

part, the performance of the promise made to him or may extend the time for such performance or may accept instead of it any satisfaction

which he thinks fit. According to Section 55 when time for performance to do a certain thing is fixed by the contract, even if the time be of

essence, the failure to perform does not automatically avoid the contract; it only renders the contract voidable at the instance of the

promisee. If the time be not of essence, the promisee is entitled to compensation from the promisee for any loss occasioned to him by such

failure. If belated performance is accepted, the contract cannot be avoided nor compensation claimed. Merely because time is limited for the

performance of the contract or any part thereof, it does not necessarily become of the essence. Time is of the essence of the contract only in

the following three cases;

(1) Where the parties have expressly stipulated the time for performance to be exactly complied with;

(2) Where the circumstances of the contract or the nature of the subject matter indicate that the fixed date must be exactly complied with;

and

(3) Where time though not of essence of the contract originally, on delay being occurred, the other party has given notice of limiting the

performance within a reasonable time.

It is true that the State being State even while dealing with the private parties in the realm of contractual rights, when it proposes to

exercise its discretion in the field left open or permitted by statutory law, it has to exclude arbitrariness and be fair and reasonable in its

action.

(57.1) In Food Corporation of India vs. M/s Kamdhenu Cattle Feed Industries AIR 1993sc 160,1 their Lordships have held: ""in contractual

sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-

arbitrariness is a significant facet.

(57. 2) Their Lordships also dealt with the doctrine of legitimate expectation and its operation in contractual matters. Their Lordships held

'to satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the

reasonable or legitimate expectations of the persons-likely to be affected by the decision. Whether the expectation of the claimant is

reasonable or legitimate is a question of fact in each case. Whenever the question arises, it is to be determined not according to the

claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have

been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the

requirement of non-arbitrariness and withstand judicial scrutiny."" (emphasis supplied)

(57. 3) It was a case of tender. Their Lordships approved of the State considering the amount in public fund and observed: ""procuring the

highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund"".

What was the purpose behind insisting on furnishing performance security by the awardee of the contract? Apparently to secure the

performance of the contract specially the delivery cycle. Inspite of the delay in furnishing the performance security, the contract was being

performed. The performance security was nevertheless furnished and became available for securing performance of the remaining part of

the contract much before any occasion for any breach could have arisen. Cancelling the award of the contract would have simply created

complications and given rise to litigation, at the cost of, sacrificing the laudable object behind the contract financed by the World Bank -

the upkeep of the health of pregnant mothers and recently bom children.

In every contract some terms and conditions are invariably mentioned, however all those conditions are not mandatory in nature. Some conditions

are regarded as mandatory however some are ancillary to the main conditions. Violation of ancillary conditions does not always warrant cancellation

of awarded work. Though some condition of the tender are mandatory violations of which cannot be condoned, however, there are some conditions

which are ancillary to the main condition whose violations are not fatal in nature. It is to be kept in mind that in any contract where the State or its

instrumentality is dealing with a private party, the State/its instrumentality stands in upper pedestal and the conditions are fixed by it where the other

party has no option but to accept the same. Under such situation, it is the bounden duty of a State/its instrumentality to act fairly and in equitable

manner.

On perusal of the facts of the present case it appears that the Letter of Acceptance was issued to the petitioner on 15.08.2017 with a condition to

submit the bank guarantee/performance security within 28 days from the date of issuance of Letter of Acceptance. The respondent-CCL vide letter

dated 06.09.2017 informed the petitioner to submit the bank guarantee within time. Thereafter, vide letter dated 08.09.2017 the S.B.I informed the

respondent-CCL that the Bank is under process of issuing the Bank Guarantee/Performance Security which will be issued shortly. Vide letter dated

12.09.2017, the petitioner also intimated the respondent-CCL that the sanctioning authority of the Bank is not available and as such, it requested for

extension of time for submitting the Bank Guarantee. The petitioner thereafter submitted the Performance Security by way of Bank Guarantee on

15.09.2017. The letter of termination of contract dated 12.10.2017 was issued.

From the aforesaid facts, it appears that the petitioner as well as its Banker had intimated to the respondent-CCL to extend the time before expiry

of the time for furnishing the performance security, however, the respondent-CCL neither allowed nor rejected the request of the petitioner. In the

meantime, before issuance of the impugned order, the petitioner submitted the bank guarantee just after 2 days of time limit. The entire circumstance

shows that the petitioner was vigilant to furnish the bank guarantee but the same could not be furnished due to non-issuance of the bank guarantee by

the bank in time. The contention of the respondent-CCL is that when there is a specific time frame mentioned in the tender document, no deviation

whatsoever is permissible and the petitioner having delayed in submitting the bank guarantee is thus liable to face the consequences as provided under

the terms and conditions of the contract. However, it appears from the record that the time frame for furnishing the Performance Security is directory

in nature, extension of which should have been considered by the respondent-CCL keeping in view the aforesaid circumstances. Since the delay in

furnishing the performance security was only for two days, the delay was required to be condoned in view of the fact that the circumstance was

beyond the control of the petitioner which finds support from the letter issued by the bank to the respondent-CCL. Moreover, the petitioner has

brought on record some of the instances where the respondent-CCL and the subsidiaries of the CCL have condoned the delay in furnishing the Bank

Guarantee in certain cases.

The contention of the learned counsel for the respondent-CCL is that the Board of Directors of the respondent-CCL, in its 434th meeting took a

decision that they would adhere to strict compliance of the requirement of submission of performance guarantee within 28 days of issuance of Letter

of Acceptance and following that decision all the allotment of work of the defaulting contractors have been cancelled with forfeiture of earnest money

and debarment in conformity with Clause 14.5 of the tender documents along with Clause 4.2 of the General Terms and Conditions of the Contract. It

is further contended that on 06.01.2017 the Board of Directors of the respondent-CCL in its meeting specifically decided that no relaxation of time

frame given in the tender documents would be allowed henceforth to any tenderer under any circumstances. The decision taken by the Board of

Directors of the CCL dated 06.01.2017 (Annexure-E to the additional counter-affidavit dated 24.02.2018 filed on behalf of the CCL) would show that

the action against a contractor namely, M/s HSCL i.e., blacklisting/debarring from participating in future tenders for three years was taken on the

ground that the said contractor failed to execute the awarded work in different projects and also failed to deposit the security money in time putting the

CCL to a substantial loss.

I have also perused Annexure-G series to the counter-affidavit dated 24.02.2018, which are the cancellation orders passed in relation to other

tenderers. It appears that all those cancellation orders were passed alleging that in spite of the repeated request, neither the works were commenced

nor the performance securities were deposited. In some of the instances referred by the respondent-CCL such as of M/s BPPL-UCC-VSSPL(JV)

and M/s International Commerce Limited, wherein even after lapse of 28 days, the concerned tenderers were given notice to deposit the performance

security which itself dilutes the own version of the CCL. In the case in hand, the sole ground for cancellation of the Letter of Acceptance and the

work order of the petitioner is the delay of 2 days in deposit of performance security. Further, the factual context of the present case would also

indicate that the bank guarantee was already submitted by the petitioner (i.e., after delay of two days) much before passing of the impugned order

which was accepted by the respondent-CCL. Moreover, there is nothing on record to suggest that the CCL has been put to any loss for such a

meagre delay of two days in submitting the bank guarantee. It was not the situation in the instances cited by the respondent-CCL. Thus, the case of

the petitioner cannot be equated with the instances referred by the respondent-CCL.

Moreover, on perusal of the letter dated 14.01.2017 (Annexure- 20 ), it appears that the respondent-CCL in the matter of another contractor

namely, M/s TIPL-MTC(JV) has allowed it to receive back the FDR and submit the bank guarantee after about three months i.e., much beyond the

period of 28 days fixed for depositing the bank guarantee. The respondent-CCL cannot treat the contractors/bidders in different manner, thereby

making discrimination among the class of contractors working with the respondent-CCL. In view of the judgment of “B.S.N Johsi†(supra) the

past prevailing practice exercised by the respondent-CCL is also a relevant factor by which the extension of time was granted for furnishing bank

guarantee having taken into consideration the fact of the case and thus, the case of the petitioner should have been considered in the factual context of

the present case.

The respondents have also tried to contend before this court other reasons also for cancelling the tender so as to justify their action. It has been

argued on behalf of the respondents that the petitioner has not started the preparatory work with the stipulated time. The said ground appears to be a

portrayed one as the sole ground mentioned in the impugned order is the delayed deposit of the performance security.

During the pendency of the present case, the recourse to resolve the dispute out of court was taken in view of clause 13 of the General Terms

and Conditions of the Contract, but the same failed. Learned counsel for the respondents submits that the print out of Structural Financial Messaging

System (SFMS) of the State Bank of India, Commercial Branch, Ranchi (Annexure-B to the counter affidavit) indicates that the bank guarantee in

question was prepared by the concerned bank on 13th September, 2017 and not on 11th September, 2017, as claimed by the petitioner. The said

contention of the respondent-CCL that SFMS indicates that the bank guarantee was valid from 13th September, 2017 also cannot be accepted in view

of the specific period mentioned in the bank guarantee/performance security issued by the State Bank of India, SME Branch, Bank More, Dhanbad,

which clearly shows that the same is valid from 11th September, 2017 to 10th September, 2021.

One of the contentions of the respondent-CCL is that in some cases, Chairman-cum-Managing Director(s) of the other subsidiary coal companies

of the Coal India Limited have been charge sheeted through the Chief Vigilance Commissioner for allowing deposit of performance security after

expiry of 28 days. However, in the factual context of the present case, there appears to be no latches on the part of the petitioner in furnishing the

performance security in time which eventually could not be furnished within the stipulated period of 28 days from the date of issuance of Letter of

Acceptance due to the situation beyond control of the petitioner. There appears to be some procedural delay by the Bank (SBI) due to which the

performance security could not be furnished in time and the intimation to that effect was also given by the Bank vide letter dated 8. 09.2017 to the

respondent-CCL. Nevertheless, only after two days of the prescribed period, the Bank Guarantee/Performance Security was furnished before the

respondent-CCL. The petitioner being the L1 bidder was allotted the work and considering the peculiar facts of the case, the delay of 2 days in

furnishing the bank guarantee is required to be condoned more so when the respondent company has not been put to any prejudice. The respondent-

CCL is the instrumentality of the State and thus while taking such decision(s), it is required to act in a fair and judicious manner.

For the reasons as aforesaid, the present writ petition is allowed. The impugned letter no. GM(B&K)/SO(M)/CT/AKK

OCP/OB/DEBARRING/179 dated 12.10.2017 issued by the Staff Manager (Mining) of M/s Central Coalfields Limited is quashed with a direction to

the respondents to proceed further with the petitioner as per the terms of the Instructions to Bidders with respect to the tender in question.

Pending I.A. No. 8511 of 2017, I.A. No. 9860 of 2017 and I.A. No. 852 of 2018 stand disposed of.