Onkar Yadav vs State of M.P. and Others

Prakash Shrivastava, J.—This order will govern the disposal of W.P. No. 5241/2012 and W.P. No. 10432/2011 since it has been submitted by learned counsel for both the parties that these writ petitions involve identical issue in the same fact situation. For convenience facts have been taken from W.P. No. 10069/2011.

The petitioner is aggrieved by the communications dated 9.11.2011 (Annexure P/5) and 5.12.2011 (Annexure P/8) requiring the petitioner to deposit 12% performance security, failing which the earnest money is directed to be forfeited.

In brief the petitioner, who is a registered "A-Civil" Class contractor, had submitted tender for upgradation of Barwai, Bhawati, Morkatta, Borkhedi road in Barwani district in response to the NIT dated 27.6.2011. The percentage rate tender submitted by the petitioner after depositing earnest money was found to be lowest being 22% below of relevant SOR of road and bridge work issued by Engineer-in-Chief, and the same was accepted on 1.11.2011 but the said acceptance was not unconditional. The respondent no. 3 Chief Engineer had issued the communication dated 9.11.2011 requiring the petitioner to deposit 12% amount of P.A.C. as an additional performance security to execute the contract document stating that on failure to do so the earnest money will be forfeited. The petitioner objected to it, vide communication dated 16.11.2011, and requested for deleting the said condition or to return the earnest money. The respondent no. 3, vide communication dated 16.11.2011, had conveyed to the Secretary, Public Works Department that in the NIT there is no such condition, therefore, the condition of deposit of 12% performance security be reconsidered and deleted and in case of adverse decision, the refund of the earnest money be considered. Thereafter by the impugned communication dated 5.12.2011 the petitioner was again informed by the respondent no. 4 to deposit the performance security of 12% within 7 days, failing which earnest money would be forfeited.

Learned counsel appearing for the petitioner submits that in the NIT there is no condition requiring deposit of 12% performance security. He further submits that no concluded contract has come into existence in the absence of unconditional acceptance by the respondents and in the changed circumstances, the petitioner is not inclined to enter into the contract, therefore, the respondents be directed to refund the earnest money. He has further submitted that as per the contract the offer was valid for 120 days and thereafter offer has come to an end. He has also submitted that even condition of deposit of 2.5% performance security is not acceptable and such a communication also does no result into the concluded contract.

Learned counsel appearing for the respondents has submitted that the bid submitted by the petitioner was accepted with the condition of deposit of 12% performance security, therefore, the concluded contract has come into existence and failure on the part of the petitioner to take steps in pursuance to the contract has resulted into forfeiture of earnest money. She further submits that even otherwise the condition of deposit of 2.5% performance security was within the knowledge of the petitioner and the respondents subsequently have taken the stand that instead of 12%, the petitioner can give 2.5% performance security, which has resulted into concluded contract.

We have heard the learned counsel for the parties and perused the record.

It is undisputed before this Court that the petitioner''s bid was found to be lowest. The percentage rates and tender submitted by the petitioner was @ 22% below SOR of road and bridge work issued by Engineer-in-Chief. It is also undisputed that in the tender document there is no condition requiring successful bidder to deposit any performance security. Clause 1 and 3.5 of the conditions of contract relates to the security deposit and provide as under:-

Clause 1 - The person whose tender may be accepted (hereinafter called the contractors, which expression shall unless excluded by or repugnant to the context, include his heirs, executers, administrators, representatives and assigns) shall permit Government at the time of making any payments to him for the value of work done under the contract to deduct the security deposit as under:

The Security Deposit to be taken for the due performance of the contract under the terms and conditions printed on the tender form will be the earnest money plus a deduction of 5 percent from the payment made in the running bills, till the two together amount to 5 percent of the cost of work put to tender or 5 percent of the cost of works executed when the same exceeds the cost of work put to tender.

3.5 Security Deposit - (a) The Security Deposit shall be recovered from the Running Bills @ 5% percent as per Clause - 1 of the agreement read with para 3.5 of the N.I.T.

(b) The amount of the Earnest Money shall not be adjusted when value of work done reaches the limit of the amount of contract or exceeds the probable amount of the contract.

Admittedly the performance security as demanded by the respondents is not covered by these clauses. It is also undisputed that in pursuance to the tender conditions, the petitioner has deposited the earnest money.

The material clause which is relevant for the purpose of the present controversy is Clause 8.1.1 of the detailed NIT which provides for execution of agreement and forfeiture of earnest money, and reads as under:-

8.1.1 Execution of Agreement - The tenderer whose tender has been accepted hereinafter referred to as the contractor, shall produce an appropriate solvency certificate, if so required by the Executive Engineer and will execute the agreement in the prescribed form, within a ten days of the date of communication of the acceptance of his tender by competent authority. Failure to do so will result in the earnest money being forfeited to Govt. of M.P. and tender being cancelled.

Under the aforesaid clause after communication of acceptance of tender if the successful party fails to execute the agreement within the prescribed period of 10 days, then the earnest money deposited by him is forfeited and tender is cancelled.

Section 7 of the Indian Contract Act, 1872 (for short "the Act") provides that in order to convert a proposal into the promise, the acceptance must be absolute and unqualified. u/s 5 a proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer.

In the present case there was no condition in NIT requiring a successful bidder to deposit any performance security. Since the respondent has imposed such a condition at the stage of acceptance offender and before the execution of the agreement, therefore, such an acceptance of tender by respondent can not be held to be unconditional acceptance offender. The bid which was submitted by the petitioner was not accepted by the respondents unconditionally. The acceptance was not absolute and unqualified but while accepting the petitioner''s bid, the respondents had imposed the condition of deposit of 12% of P.A.C. as an additional performance security, therefore, no concluded contract had come into existence. Such a condition of deposit of 12% additional performance security was missing in the tender document and was imposed by the communication dated 9.11.2011. Since the tender of the petitioner was not accepted absolutely and unqualifiedly in terms of Section 7 of the Act, therefore, it can not be treated to be an acceptance and Clause 8.1.1 will not come into operation empowering the respondents to forfeit the earnest money.

The counsel for the respondent has submitted that the petitioner was aware of the communication of the State addressed to the Chief Engineer dated 11.3.2011 containing the guideline relating to deposit of 2.5% additional security. We have given out thoughtful consideration to this argument. In the present matter such a condition was not incorporated in the tender document nor the petitioner had submitted the bid agreeing to such a condition and there is also no communication by the respondents on record accepting the petitioner''s bid on the condition of deposit of 2.5% additional security. The endorsement in Annexure R/3 dated 22.12.2011 in this regard at a later stage was made subject to the final outcome of the writ petition. Though the O.I.C. has filed an affidavit before this Court dated 5.3.2012 stating that the State has agreed for charging 2.5% amount as additional performance security but the learned counsel for the petitioner has made his stand clear that with the lapse of time it is not possible for the petitioner to perform the contract at this stage, therefore, even the condition of furnishing additional 2.5% security can not be accepted. Counsel for the petitioner has also referred to Clause 4.7 of the detailed NIT relating to validity of the offer which provide that the tender will remain open up to 120 days from the date of receipt of tender and earnest money will be forfeited on withdrawal of offer before that period and submitted that after expiry of 120 days offer had lapsed. The Chief Engineer had also sent communication dated 16.11.2011 to the Secretary, Public Works Department stating that in the NIT there is no condition for deposit of the additional security, therefore, the said issue be reconsidered and the condition of deposit of 12% additional security be deleted.

The Supreme Court in the matter of Badri Prasad Vs. The State of Madhya Pradesh and Another, has settled that in the absence of unconditional acceptance the concluded contract does not come into existence. The Delhi High Court in the matter of Union of India Vs. Uttam Singh Dugal and Co. (Pvt.) Ltd., has also taken the view that acceptance must be absolute and if there is variance between the offer and acceptance even in respect of any material term, acceptance can not be said to be absolute and unqualified and the same will not result in the formation of a legal contract. In the matter of Suraj Besan and Rice Mills Vs. Food Corporation of India, it has been held that a person can withdraw or modify his offer or tender before communication of the acceptance is complete as against him that is before its acceptance is intimated to him and that the acceptance under law should be absolute and unconditional. The Government by merely providing a clause to the contrary in the tender notice could not take away the legal right of a person. The Bombay High Court in the matter of Kilburn Engineering Ltd. Vs. Oil and Natural Gas Corporation Ltd. and Another, referring to Section 7 of the Act has held that the offer and acceptance must be based or founded on three components; certainty, commitment and communication. If any one of the three components is lacking either in offer or in acceptance, there can not be a valid contract.

Keeping in view the aforesaid relevant aspect of the matter, we are of the considered opinion that since the petitioner''s tender was not accepted unconditionally, therefore, no concluded contract had come into existence. In view of this Clause 8.1.1 of the NIT will not be attracted. The respondents are not justified in taking action for forfeiture of the earnest money deposited by the petitioner, hence the impugned action of the respondents in respect of forfeiture of earnest money as contained in communication dated 9.11.2011 (Annexure P/5) and 5.12.2012 (Annexure P/8) is set aside. For the same reasons the similar impugned action of the respondents in W.P. No. 5241/2012 and W.P. No. 10432/2011 is also set aside.

Writ petition is allowed to the extent indicated above. The signed order be kept in the file of W.P. No. 10069/2011 and copy thereof be kept in the file of W.P. No. 5241/2012 and W.P. No. 10432/2011.