East African (INDIA) Overseas vs. Govt. Of National Capital Region Of Delhi And Anr.

Held

The Court found that the petitioner had indeed submitted an undertaking that empowered the respondent to blacklist them upon withdrawal of a bid, a power recognized by the Supreme Court in Kulja Industries Ltd. vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Ltd. & Ors. (2014) 14 SCC 731. However, the Court disagreed with the respondents' submission that the three-year suspension was justified. The Court noted that the petitioner withdrew the bid within seven days of acceptance, offered to submit the EMD, and quoted the same price with and without GST, suggesting a genuine mistake. The respondents had accepted the EMD deposit and only issued the show cause notice thereafter. The Court held that the suspension period must be proportionate to the default and not arbitrary, referencing the Supreme Court's observation in Kulja Industries Ltd. that the period of debarment depends on the nature of the offense. The Court remanded the matter to Respondent No. 2 to reconsider the period of suspension, taking into account the attendant facts and circumstances, including whether forfeiture of EMD would have been a sufficient penalty. The respondents were directed to take a fresh decision within four weeks.

Facts

The petitioner, East African (India) Overseas, challenged an order dated 14.08.2019 by Respondent No. 2, suspending them from bidding on Government of NCT of Delhi contracts for three years from 22.07.2019. The petitioner had submitted a bid for a tender, which was accepted on 02.11.2017. However, on 09.11.2017, they withdrew the bid, stating they quoted a price without GST. The respondent initially called for a sum of Rs. 6,58,854/- as Earnest Money Deposit (EMD) to be forfeited, which the petitioner deposited on 28.03.2019. Subsequently, a show cause notice was issued for blacklisting, leading to the impugned suspension order. The EMD demand draft was returned to the petitioner on 07.08.2019.

Key Issues

1. Whether the respondent No. 2 was justified in suspending the petitioner from participating in future tenders for a period of three years, despite the tender conditions primarily stipulating forfeiture of EMD for bid withdrawal? 2. Whether the period of suspension for three years is disproportionate to the alleged default, considering the facts and circumstances of the case? The petitioner argued that the tender conditions (Clause 1.1 read with Clause 1.2 of Section IV) only permitted forfeiture of EMD upon bid withdrawal, and blacklisting was reserved for product failure in quality tests. They contended that having accepted and forfeited the EMD, the respondent could not then resort to suspension. The petitioner also argued that even if suspension was permissible, three years was disproportionate. The respondents relied on Clause 4 of the e-tender invitation, which included a notarized undertaking by the bidder that failure to deposit EMD upon withdrawal could lead to a three-year suspension. They argued this undertaking granted them the power to suspend the petitioner.