Power And Instrumentation Gujarat Limited vs. The State Of Assam And 3 Ors

Held

The Court held that the Assam Power Distribution Company Limited (APDCL) could not unilaterally change the terms of payment stipulated in the Invitation of Bids (Appendix-1) when issuing the Letter of Award (LOA). The Petitioner had accepted the original terms by submitting its bid. The Court found that the APDCL's action of altering the payment procedure in the LOA, making the release of 60% payment contingent on physical progress instead of supply and acceptance, was an imposition of new terms to which the Petitioner had not agreed. Consequently, the Petitioner was justified in revoking the LOA for business reasons. The Court further held that the actions of APDCL in imposing these altered terms and subsequently invoking the Bank Guarantee were arbitrary, unreasonable, and illegal, violating the mandate of Article 14 of the Constitution. The Court declared the invocation of the Bank Guarantee illegal, arbitrary, unreasonable, and irrational. The Respondent Company was directed to refund the forfeited amount of Rs. 25,00,000/- to the Petitioner within 20 days of the judgment's certified copy submission.

Facts

The Assam Power Distribution Company Limited (APDCL) invited bids for various projects, including Package No. 6. The Petitioner, Power and Instrumentation Gujarat Limited, submitted a bid for Package No. 6. The Notice Inviting Bids (NIB) stipulated that 60% of the payment would be made against the supply of items, including 100% GST, upon receipt and acceptance of materials. However, the Letter of Award (LOA) issued to the Petitioner on November 12, 2021, changed this payment term, making the release of the 60% installment dependent on the physical progress of the work as of that date. The Petitioner, considering this a unilateral change in terms, revoked the LOA on December 4, 2021, and requested the release of their Earnest Money Deposit (EMD). APDCL, in response, terminated the LOA and invoked the Bank Guarantee of Rs. 25,00,000/- submitted by the Petitioner as EMD.

Key Issues

1. Whether the Respondent APDCL could unilaterally change the terms and procedure of payment stipulated in the Invitation of Bids while issuing the Letter of Award, thereby imposing new conditions on the Petitioner? (Question of law turning on principles of contract law and fair tender processes). 2. Whether the invocation of the Bank Guarantee and forfeiture of the EMD by APDCL, based on the Petitioner's revocation of the LOA due to the altered payment terms, was arbitrary, unreasonable, and illegal, violating Article 14 of the Constitution? (Question of law turning on Article 14 of the Constitution and principles of administrative law). Petitioner's arguments: The Petitioner contended that APDCL unilaterally changed the agreed-upon payment terms from the NIB to the LOA. They argued that this alteration, which made payment contingent on physical progress rather than supply and acceptance, was not agreed to and therefore invalid. Consequently, the Petitioner was justified in revoking the LOA and demanding the return of their EMD. They further argued that the subsequent invocation of the Bank Guarantee was arbitrary and illegal. Respondent's arguments: The Respondent APDCL did not present arguments recorded in the judgment regarding the unilateral change of terms or the legality of invoking the bank guarantee.