Premier Energies LTD. vs. Assam Power Distribution Company Limited And 2 Ors

Held

The Court held that APDCL, as the employer and an instrumentality of the State, acted arbitrarily and unfairly by unilaterally altering the payment terms in the Letter of Acceptance (LoA) for Package No. 8 without any enabling provision in the tender documents. The Court found no justification for APDCL to insist on the petitioner's unconditional acceptance of these altered terms. The petitioner's refusal to accept the LoA with modified conditions was not a breach of contract, as it was a response to APDCL's counter-proposal. Consequently, the forfeiture of the petitioner's Bid Securities (EMDs) and the encashment of bank guarantees were deemed unfair and arbitrary actions, violating the principles of fairness and non-arbitrariness mandated by Article 14 of the Constitution. The Court directed APDCL to refund the Bid Securities (EMDs) deposited by the petitioner for Package No. 8, along with four other packages (Package No. 5, 9, 10, and 11) where similar issues were present, within fifteen days. The Court expressly left undecided the broader question of whether Article 14 applies to all executive actions at the threshold of contract formation.

Facts

The petitioner, Premier Energies Ltd., filed five writ petitions challenging actions by the Assam Power Distribution Company Limited (APDCL). APDCL had issued a Notice Inviting Tender (NIT) for an off-grid rural electrification project. The petitioner was the successful bidder (L1) for Package No. 8. However, APDCL issued a Letter of Acceptance (LoA) with altered payment terms (Annexure-A) instead of the original terms (Annexure-1) stipulated in the tender document. The petitioner did not unconditionally accept this altered LoA, considering it a counter-proposal. APDCL subsequently forfeited the Bid Securities (EMDs) deposited by the petitioner for Package No. 8, and encashed the bank guarantees. The petitioner argued that APDCL's unilateral alteration of contract terms was arbitrary and unfair, violating Article 14 of the Constitution. The dispute pertains to the forfeiture of EMDs for Package No. 8.

Key Issues

1. Whether the Assam Power Distribution Company Limited (APDCL), as an instrumentality of the State, acted arbitrarily and unfairly in unilaterally altering the terms and conditions of the proposed contract for Package No. 8, specifically the Terms and Procedures of Payment, after the petitioner was declared the successful bidder? 2. Whether the petitioner's refusal to unconditionally accept the altered Letter of Acceptance (LoA) constituted a breach of the tender conditions, justifying the forfeiture of its Bid Security (EMD)? Petitioner's Arguments: The petitioner contended that APDCL, being an instrumentality of the State, is bound by Article 14 of the Constitution to act fairly and reasonably, even in contractual matters. They argued that APDCL had no enabling power in the NIT or tender documents to unilaterally alter the payment terms. The petitioner asserted that their non-acceptance of the LoA with altered terms was not a breach but a refusal to accept a counter-proposal, and that APDCL's action of forfeiting the EMD was unfair and arbitrary. They relied on precedents like Kumari Shrilekha Vidyarthi and UNITECH Limited. Respondent's Arguments: The respondent APDCL argued that it was empowered to insert Annexure – A (Terms and Procedures of Payment) in the LoA and that the petitioner's failure to convey unconditional acceptance of the LoA with altered terms amounted to a breach, justifying the forfeiture of the Bid Securities.