@JUDGMENTTAG-ORDER
S.K. Gangele, J.@mdashThe petitioner has filed this petition against the orders dt. 2141-2012, 1-12-2012, 4-12-2012 and 7-12-2012, by which
the contracts of the petitioner in regard to transportation and handling of food grains have been cancelled. The respondent Corporation invited
tenders for appointment of regular handling and transport contractors for foodgrains at Railhead and other storage centres. 16 tenders of the
petitioner were accepted by respondent No. 3, out of which three tenders were for RTC and 13 for handling transport contract. The petitioner
firm timely deposited the Bank Guarantees of six tenders of six locations i.e. (1) Mandideep, (2) Gosalpur (3) Vidisha (4) Salamtpur (5)
Ganjbasoda and (6) Sagar, but the petitioner firm failed to deposit Bank Guarantees for remaining ten locations within time mentioned in the tender
document within stipulated time limit. The respondent Corporation issued letters to the petitioner in regard to deposit of requisite security amount
and Bank Guarantees on 26-5-2012, 13-6-2012, 21-6-2012, 22-6-2012, 23-6-2012, 19-7-2012, 20-7-2012, 30-7-2012, 6-8-2012, 21-8-
2012, 22-8-2012 and 4-9-2012, cumulatively marked as Annexure R/2. When the petitioner did not deposit the same, a show cause notice was
issued to the petitioner on 14-9-2012. It is mentioned in the show cause notice that in accordance with Clause IX (b), the petitioner did not
deposit the Security Deposit amount within stipulated time and it is further mentioned that the petitioner also did not deposit Bank Guarantees on
due dates, hence, the petitioner was directed to show cause why the contracts be not cancelled. The petitioner filed reply dt. 21st November,
2012 (Annexure P/7) to the show cause notice and admitted the fact that there was delay in depositing Bank Guarantees in regard to 10 locations
beyond stipulated time. It is mentioned in the reply to the show cause notice that a dispute was pending before the State Bank of India in regard to
applicability of stamp duty on enhancement of loan amount and the matter was referred to Registrar of Bhopal and after enhancement of bank loan,
the Bank guarantees shall be furnished. The petitioner further mentioned that it was willing to start work on mutually agreed terms on locations. The
petitioner prayed that it be granted time for depositing Bank guarantees. However, the Dy. General Manager vide impugned orders dt. 21-11-
2012, 1-12-2012, 4-12-2012 and 7-12-2012, cumulatively marked as Annexure P/9 along with petition, terminated the contracts in exercise of
powers conferred on him under the contract documents.
2. Learned senior counsel for the petitioner has contended that the delay in depositing the Bank Guarantees was due to unavoidable circumstances
because the Registrar had observed that different stamp duty would be payable on the Bank Guarantee document and when the Registrar had
pronounced his decision, the Bank Guarantees were issued in favour of the petitioner and consequently the petitioner firm was willing to submit the
Bank Guarantee. Hence, termination of contract is arbitrary and illegal. In support of his contentions, the learned senior counsel relied on the
following decisions :-
(i) M/s. Poddar Steel Corporation Vs. M/s. Ganesh Engineering Works and others, (ii) Tejas Construction and Infrastructure Pvt. Ltd. Vs.
Municipal Council, Sendhwa and Another (iii) Hindustan Petroleum Corpn. Ltd. and Others Vs. Super Highway Services and Another, , (iv) Gyan
Singh Sisodia Vs. State of M.P. and Others, (v) Kulwant Kaur and Others Vs. Gurdial Singh Mann (dead) by Lrs. and Others etc., , (vi)
Management of Coimbatore District Central Co-operative Bank Vs. Secretary, Coimbatore District Central Co-operative Bank Employees
Association and Another,
3. Contrary to this, learned counsel for the respondents has submitted that the petitioner has failed to perform its part of contract. It was obligatory
on the part of the petitioner to submit Bank Guarantees within stipulated time in accordance with the terms and conditions of contract. The
petitioner did not submit the same, even though the petitioner did not apply to the higher authority for extension of time, hence, the contract has
been terminated because the petitioner violated the mandatory terms and conditions. The learned counsel further submitted that the petition is not
maintainable in contractual matter. The petitioner has alternative remedy and even it can claim damages. In support of his contentions, learned
counsel has relied on the judgment of the Hon''ble Supreme Court in the case of Puravankara Projects Ltd. Vs. Hotel Venus International and
Others,
4. The question for consideration before this Court is that in the event of violation of terms and conditions of contract i.e. not depositing the Bank
Guarantees within time, whether the corporation has acted fairly in terminating the contracts of the petitioner.
5. It is an admitted fact that the petitioner did not deposit the Security Deposit and Bank Guarantees within stipulated time. The details have been
mentioned in regard to delay in depositing the security deposit and bank guarantee in the return at page 10, which are as under :-
6. The aforesaid position has not been disputed by the petitioner. Clause IX (a) (i) & (ii) of Model Tender Form prescribes terms and conditions in
regard to security deposit for handling transport contract and for road transport. The relevant clause is as under :-
IX. Security Deposit:
(a) The successful Tenderer shall furnish within fifteen working days of acceptance of his tender, a Security Deposit for the due, proper and
complete discharge of all their obligations under the Contract. The Security Deposit will comprise of the total of the amounts specified in following
clauses (i) (ii) and (iii).
(i) a sum equivalent to 5% of the value of the Contract in the form of Demand Draft or Pay Order issued by a scheduled bank or through
Electronic Clearing System (ECS)/Other Electronic Means in favour of the General Manager, Food Corporation of India. The contractor at his
option may deposit 50 (fifty) percent of this amount within fifteen working days of acceptance of his tender while the balance 50 (fifty) percent may
be paid by the contractor by deductions at the rate of 10 (ten) per cent from the admitted bills. The Security Deposit shall not earn any interest. (ii)
another sum equivalent to 10% of the value of Contract, in the form of an irrevocable and unconditional Bank Guarantee issued by State Bank of
India Bank or its Associate Banks or by other Public Sector Banks in the format prescribed in Appendix-IV which shall be enforceable till six
months after the expiry of contract period.
7. In accordance with the aforesaid clause, it was mandatory on the petitioner to deposit 5% of the value of the Contract as Security Deposit in the
form of Demand Draft and he had an option to deposit 50 (fifty) per cent within 15 working days of acceptance of his tender and balance 50 (fifty)
per cent by deductions @ 10% from the admitted bills. It was also mandatory on the petitioner to deposit 10 (ten) per cent of the value of the
Contract, in the form of irrevocable and unconditional Bank Guarantee issued by the State Bank of India and or by its Associate Banks or by
other Public Sector Banks. It is also mentioned in sub clause (b) of Clause IX that in failure to deposit the amount within 15 working days of
acceptance of tender, further extension of 7 working days could be ""given by GM (R) subject to levy of penalty @ 1% of Security Deposit.
Admittedly, the petitioner failed to comply the aforesaid terms and conditions of the contract.
8. Sub-clause (e) of Clause IX of Model Tender Form gives power to the Corporation to terminate the contract if the contractor fails to deposit
security deposit by due date. The relevant clause is as under :-
(e) In the event of the Tenderer failure, after the communication of acceptance of the tender by the Corporation, to furnish the requisite Security
Deposit by the due date, his Contract shall summarily terminated besides forfeiture of the Earnest Money and the Corporation shall proceed for
appointment of another contractor. Any losses or damages arising out of and incurred by the Corporation by such conduct of the contractor will be
recovered from the contractor, without prejudice to any other rights and remedies of the Corporation under the Contract and Law. The contractor
will also be debarred from participating in any future tenders of the Corporation for a period of five years. After the completion of prescribed
period of five years, the party may be allowed to participate in the future tenders of FCI provided all the recoveries/dues have been effected by the
Corporation and there is no dispute pending with the contractor/party.
9. The petitioner put forward an explanation in not depositing the aforesaid amount within time that there was a dispute with State Bank of India
regarding applicability of stamp duty on enhancement of loan amount and the matter was referred to the Registrar of Bhopal and the matter was
not decided within time, hence, the Bank Guarantees were not released by the State Bank of India. It is mentioned in the letter dt. 21st November,
2012 written by the petitioner in reply to show cause notice that once the bank clear the bank guarantee, it would be submitted to the Corporation.
10. The petitioner also filed a letter of the bank dt. 13-7-2012 written to the petitioner. It is in regard to enhancement of credit facilities and stamp
duty on equitable mortgage. It is mentioned in the letter that the credit facilities of Rs. 830.60 lakhs sanctioned by the Bank to the petitioner firm
was referred to the Collector of Stamps, Bhopal for seeking instructions and senior District Registrar, Bhopal vide letter dt. 11-7-2012 advised
that the total stamp duty payable would be Rs. 4,15,300/- on entire limit of Rs. 830,60 lacs. From the aforesaid letter, it is clear that the petitioner
had to pay a stamp duty of Rs. 4,15,300/-. Another letter written by the State Bank of India to the petitioner dt. 6-8-2012 has been filed by the
petitioner along with the petition. Following are the contents of the aforesaid letter :-
We advise that the Speed Logistics a partnership is enjoying various credit facilities from the Bank. Recently at the request of the firm, the Bank
has sanctioned Bank Guarantees limits to the firm on 8-6-2012. The enhanced limits could not be released as there was a dispute on payment of
stamp duty. The matter was therefore referred to the Collector (Stamp) for clarification and seeking the instructions. On the receipt of the
clarification/instruction from the Collector (Stamps) on...illegible... has paid the Stamp duty and executed the documents on 13-7-2012.
After...illegible... the BGs have been issued on 14-7-2012 at the request of the firm.
11. From the letter of the Bank dt. 6-8-2012, it is clear that the documents were executed on 13-7-2012. It means that the petitioner could have
furnished the bank guarantee immediately after that period, but admittedly the petitioner furnished the Bank Guarantees on different dates i.e. 9-8-
2012, 11-9-2012, 3-6-2012, 14-7-2012, 30-7-2012, 9-8-2012, 4-6-2012 and 5-9-2012. No explanation has been offered by the petitioner for
this undue delay.
12. Hon''ble Supreme Court in the case of Puravankara Projects Ltd. Vs. Hotel Venus International and Others, has quoted the earlier decision of
the Court in the case of New Bihar Biri Leaves Co. and Others Vs. State of Bihar and Others, , where the Court has held as under :-
31. In New Bihar Biri Leaves Co. vs. State of Bihar it was observed at para 48 as follows : (SCC 558)
48. It is a fundamental principle of general application that if a person of his own accord, accepts a contract on certain terms and works out the
contract, he cannot be allowed to adhere to and abide by some of the terms of the contract which proved advantageous to him and repudiate the
other terms of the same contract which might be disadvantageous to him. The maxim is qui approbate non reprobat (one who approbates cannot
reprobate). This principle, though originally borrowed from Scots law, is now firmly embodied in English common law. According to it, a party to
an instrument or transaction cannot take advantage of one part of a document or transaction and reject the rest. That is to say, no party can accept
and reject the same instrument or transaction (per Scrutton, L.J., Verschures Creameries Ltd. vs. Hull & Netherlands Steamship Co.; see Douglas
Menzies vs. Umphelby, AC at p.232; see also Stroud''s Judicial Dictionary, Vol. I, p.169, 3rd, Edn.).
13. Hon''ble Supreme Court of India further in the case of Puravankara Projects (supra) has held as under in regard to power of the Court to
postpone the time for furnishing bank guarantee :-
29. The difference between administrative law and contractual law was succinctly stated in Indian Oil Corpn. Ltd. vs. Amritsar Gas Service. It was
noted in paras 9, 10 and 11 as follows : (SCC pp. 540-42)
9. The arguments advanced by Shri Harish Salve on behalf of the appellant Corporation to the validity of the award are these. The first contention
is that the validity of the award has to be tested on the principles of private law and the law of contracts and not on the touchstone of constitutional
limitations to which the Indian Oil Corporation Ltd., as an instrumentality of the State may be subject since the suit was based on breach of
contract alone and the arbitrator also proceeded only on that basis to grant the reliefs. It is urged that for this reason the further questions of public
law do not arise on the facts of the present case. The next contention is that the relief of restoration of the contract granted by the arbitrator is
contrary to law being against the express prohibition in sections 14 and 16 of the Specific Relief Act. It is urged that the contract being admittedly
revocable at the instance of either party in accordance with Clause 28 of the agreement, the only relief which can be granted on the finding of
breach of contract by the appellant Corporation is damages for the notice period of 30 days and no more. It was then urged that the reasons given
in the award for granting the relief of restoration of the distributorship are untenable, being contrary to law. Shri Salve contended that the
propositions of law indicated in the award and applied for granting the reliefs disclose an error of law apparent on the face of the award. It was
also urged that the onus of proving valid termination of the contract was wrongly placed by the arbitrator on the appellant Corporation instead of
requiring the plaintiff-Respondent 1 to prove that the termination was invalid. It was also contended that the failure of the arbitrator to consider and
decide the appellant Corporation''s counter-claim when the whole suit was referred for decision constitute legal misconduct.
10. In reply, Shri Sehgal on behalf of Respondent 1 contended that there is a presumption of validity of award and the objections not taken
specifically must be ignored. This argument of Shri Sehgal relates to the grievance of the appellant relating to placing the onus on the appellant
Corporation of proving validity of the termination. This contention of Shri Sehgal must be upheld since no such specific ground is taken in the
objections of the appellant. Moreover, there being a clear finding by the arbitrator of breach of contract by invalid termination, the question of onus
is really of no significance. The other arguments of Shri Sehgal are that the termination of distributorship casts stigma on the partners of the firm;
counter-claim of the appellant Corporation was rightly not considered since it was not made before the order of the reference; The reference made
being of all disputes in the suit, the nature of relief to be granted was also within the arbitrator''s jurisdiction; and interest also must be awarded to
the respondent.
11. We may at the outset mention that it is not necessary in the present case to go into the constitutional limitations of Article 14 of the Constitution
to which the appellant Corporation as an instrumentality of the State would be subject particularly in view of the recent decisions of this Court in
Dwarkadas Marfatia and Sons vs. Board of Trustees of the Port of Bombay, Mahabir Auto Stores vs. Indian Oil Corpn. and Shrilekha Vidyarthi
vs. State of U.P. This is on account of the fact that the suit was based only on breach of contract and remedies flowing therefrom and it is on this
basis alone that the arbitrator has given his award. Shri Salve is, therefore, right in contending that the further questions of public law based on
Article 14 of the Constitution do not arise for decision in the present case and the matter must be decided strictly in the realm of private law rights
governed by the general law relating to contracts with reference to the provisions of the Specific Relief Act providing for non-enforceability of
certain types of contracts. It is, therefore, in this background that we proceed to consider and decide the contentions raised before us.
In essence, it was held that tender terms are contractual and it is the privilege of the Government which invites its tenders and Courts did not have
jurisdiction to judge as to how the tender terms would have to be framed.
30. By observing that there was implied term which is not there in the tender, and postponing the time by which the bank guarantee has to be
furnished, in essence the High Court directed modification of a vital term of the contract.
14. Queen''s Bench Division in the case of Bunge Corpn. vs. Trandax SA, reported in (1981) 2 All ER 513 has held as under in regard to breach
of stipulation of time :-
The buyers'' appeal would be dismissed for the following reasons -
(a) Stipulations as to time in mercantile contracts were generally to be treated as conditions (breach of which, no matter how minor, entitled the
innocent party to treat the contract as at an end) and not as intermediate or innominate terms, because the reason for such a clause was to enable
each party to organise his affairs to meet obligations arising in the future under the contract and not merely to determine, with the benefit of
hindsight, the appropriate remedy when a breach occurred. Furthermore, the need for certainty, especially when there was a string of contracts
involved, required such a clause to be strictly adhered to (see p 540 j, p 541 f to j, p. 542 ab d to j, p. 543j to p 544 c and j to p 545 b and g to p
546 e, p 549 h to p 550 e, p 551 d to g and p 554 d, post); dictum of Diplock LJ in Hong Kong Fir Shipping Co. Ltd. vs. Kawasaki Risen
Kaisha Ltd. (1962) I All ER 485 : 489 distinguished.
15. Hon''ble Supreme Court of India in the case of Michigan Rubber (India) Ltd. Vs. The State of Karnataka and Others, has held as under in
regard to powers of the Court to interfere in contractual matters :-
(a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness is essence and substance is the heartbeat of fair
play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically
for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national
priorities;
(b) Fixation of a value of the tender is entirely within the purview of the executive and the Courts hardly have any role to play in this process except
for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity within certain
healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State
authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not
warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to
successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very
restrictive since no person can claim a fundamental right to carry on business within the Government.
16. In the present case, it is clear from the facts that the petitioner failed to comply the terms and conditions of the contract. It did not deposit the
Bank Guarantee within time and it is also clear from the letter of the bank that the petitioner deliberately did not deposit the Bank Guarantees as
required under the terms and conditions of the contract.
17. Hon''ble Supreme Court of India in the case of Puravankara Projects (supra), quoted above, clearly observed that the High Court could not
modify the vital terms and conditions of the contract by postponing the time by which the bank guarantee had to be furnished. Apart from this, it
has clearly been observed that time limit has to be interpreted strictly so that the contracted party could not get undue advantage. It is in
consonance with the public policy. The respondent corporation had given sufficient time to the petitioner to deposit the bank guarantee. Letters
were issued to the petitioner but the petitioner failed to comply the terms of the contract. In such circumstances, in our opinion, the action of the
authority is not malicious or misuse of its power father it is fair and in accordance with law. It appears from the facts of the case that the petitioner
had no capacity to submit the bank guarantee within time and it wanted to buy the time. Hence, we do not find any merit in this petition. It is hereby
dismissed. No order as to costs.