M/ S Zephyr-Vepl-Kcl (Jv) vs. South Eastern Coalfields Limited

Facts

The petitioner, M/s Zephyr-VEPL-KCL (JV), filed a writ petition challenging the termination order dated June 19, 2021, issued by South Eastern Coalfields Limited (SECL). The petitioner was awarded a work contract for excavating and transporting materials based on a Notice Inviting Tender (NIT) dated June 28, 2020. The petitioner was the lowest bidder (L-1) and received a Letter of Intent (LOI) on October 27, 2020, with an awarded value of Rs. 239,38,18,394.10 including GST. The petitioner deposited Rs. 50 lakhs as earnest money. However, the petitioner failed to submit the performance guarantee and execute a formal agreement within the stipulated time, citing the COVID-19 pandemic. SECL issued a show cause notice, which the petitioner replied to, requesting an extension. Despite further requests for extensions, the petitioner did not commence work or deposit the performance security, leading to the termination order.

Held

The Court held that a concluded contract came into existence between the petitioner and the respondent-SECL. The Court found that Clause 23 of the NIT explicitly states that the award of work constitutes the formation of a contract. Furthermore, Annexure 'B' of the e-NIT, which the bidder accepts during online submission, signifies acceptance of all bid conditions. Therefore, the petitioner's contention that a work order was necessary for a concluded contract was incorrect. The LOI dated October 27, 2020, was deemed to be the award of work, concluding the contract. The petitioner's failure to commence work, submit the Performance Security Deposit (PSD) within 21 days of the LOI as per Clause 24.2 of the NIT, and sign an agreement within 28 days of the LOI as per Clause 23.3 of the Instructions to Bidders (ITB) constituted a default. The Court noted that the petitioner did not attend the personal hearing offered after a notice dated November 27, 2020, for default and violations. Despite subsequent requests for extensions, the petitioner failed to honor the terms. Consequently, SECL's decision to terminate the work, forfeit the EMD, and impose a ban and penalty was in accordance with the contract terms and did not warrant interference. The Court dismissed the writ petition.

Key Issues

1. Whether a concluded contract came into existence between the petitioner and the respondent-SECL based on the Notice Inviting Tender (NIT) and the Letter of Intent (LOI), considering the petitioner's failure to submit the performance guarantee and execute a formal agreement. (Question of law) Petitioner's arguments: The petitioner contended that no concluded contract existed as the performance guarantee was not deposited and a formal agreement was not executed. They argued that Clause 6.1 of the General Terms and Conditions (GTC) was inapplicable without a concluded contract and that the COVID-19 pandemic provided a reasonable cause for delay. They relied on the definition of 'Contract' in Clause 1(viii) of the NIT, which includes a formal agreement. Respondent's arguments: The respondent-SECL argued that Clause 23 of the NIT specifically states that the award of work constitutes the formation of a contract. They asserted that the petitioner accepted all bid conditions by participating in the e-tender, making the LOI a concluded contract. They pointed out the petitioner's repeated failures to commence work and submit the performance security within stipulated times, despite requests for extensions, justifying the termination under Clause 6.1 of the GTC.