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Judgment
B.P. DHARMADHIKARI, J
Looking to the nature of controversy and by consent, we have issued Rule, and made it returnable forthwith. We have heard Shri S.S. Shingane,
learned Counsel for the petitioner and Shri N. Lambat, learned Counsel for respondents, accordingly.
This Court has issued notice in the matter on 13.07.2018, and parties were directed to maintain statusÂquo in relation to recovery from petitioner.
After filing of reply, we have heard parties again on 24.08.2018, and because of some confusion, then prevailing, we accommodated respective
counsel by adjourning the matter to today.
Only contention of petitioner before this Court is, petitioner cannot be subjected to recovery of amount of Rs. 69,59,262/Â, which represents the
Security Deposit and Performance Guarantee.  Petitioner does not challenge the order terminating the contract with him.
Learned counsel for the petitioner Company contends that Company does not desire to enter into contract and is also ready and willing to suffer
forfeiture of full earnest money in terms of tender condition. He is relying on paragraph nos. 8 and 9 of NIT for said purpose.
He submits that as this amount is not paid, on 01.06.2018, respondents have written to their counter parts elsewhere for adjusting this amount from
bills claimed by the petitioner in ongoing contracts with those establishments.
Learned counsel for respondents relies upon the proviso to Clause 8 of NIT to urge that the course of action followed by respondents is as per law.
Thus, only question is, if a successful bidder refuses to enter into a formal contract and backs out, whether the earnest money and performance
security deposited by him can be forfeited ?
Parties submit that this aspect is squarely covered by Clause 8 of NIT.
Clause 8 of NIT reads as under :
“8. Execution of Contract Document : The Tenderer whose tender is accepted shall be required to appear in person at the office of the General
Manager/General Manager (Construction), Chief Administrative Officer (Construction), Divisional Railway Manager or concerned Engineer, as the
case may be, or if a firm or corporation, a duly authorized representative shall so appear and execute the contract documents within 7 days after
notice that the contract has been awarded to him. Failure to do so shall constitute a breach of the agreement effected by the acceptance of the
tender in which case the full value of the earnest money accompanying the tender shall stand forfeited without prejudice to any other rights or
remedies.
In the event of any tenderer whose tender is accepted shall refuse to execute the contract document as here in before provided, the Railway may
determine that such tenderer has abandoned the contract and there upon his tender and acceptance thereof shall be treated as cancelled and the
Railway shall be entitled to forfeit the full amount of the Earnest Money and to recover the damages for such default.â€
Thus, substantive part of Clause 8 contemplates a situation in which there is failure on the part of bidder to enter into and to execute necessary
contract. The consequences of such failure is a breach of agreement and the penalty stipulated is forfeiture of full value of earnest money
accompanying the tender. Thus, this amount stands forfeited without prejudice to other rights of the employer â€" respondent.
Proviso again envisages same situation, and it empowers respondent Railways to determine the contract by treating the same as 'abandoned' and
to cancel the acceptance of tenderer. It entitles Railways to forfeit full amount of earnest money and also to recover damages for default.
Here respondents have not pointed out that in exercise of powers given to them under said proviso, they have determined any damages and that
their effort is to recover it. They are simply forfeiting the amount of security deposit and performance guarantee. As that amount is not in deposit
and contract has not been entered into, by the impugned communication dated 03.04.2018, they have called upon petitioner to deposit that amount
i.e. total amount of Rs. 69,59,262/Â.
This amount is to be deposited after formal contract is entered into between the parties. As there is no formal contract and petitioner has
backed out, the respondents Railways in exercise of powers given to it under proviso to Clause 8 can work out the damages sustained by it and
recover it. No clause or power permitting it to call upon petitioner to deposit the amount of earnest money or performance security is pointed
out to us.
The consequential communication dated 01.06.2018, therefore, directs other Railway Establishment to help respondents in recovering that amount
from petitioner by deducting it from Petitioners' bill amounts in relation to other contracts. As there cannot be any demand for security deposit or for
performance security in present matter, the communication dated 03.04.2018, to that extent and further advise issued by respondents to other Railway
departments on 01.06.2018, to deduct that amount from bills payable to petitioner is, unsustainable. The same is accordingly quashed and set aside.
Needless to mention that it is open to respondents to proceed in accordance with the provisions in Clause 8.
Writ Petition is thus, partly allowed and disposed of. Rule is made absolute in aforesaid terms with no order as to costs.