M/S R.P. Jaiswal vs. South Eastern Coalfields Limited

Held

The Court held that the cancellation of the tender and the debarment of the petitioner from participating in future tenders, along with the forfeiture of their EMD, were arbitrary and violative of the principles of natural justice. The Court found that the respondents failed to provide any evidence that the petitioner was given an opportunity of hearing before being debarred and having their EMD forfeited. Citing the Supreme Court judgments in Erusian Equipment & Chemicals Ltd. and Gorkha Securities Services, the Court emphasized that blacklisting or debarment has civil consequences and requires adherence to the audi alteram partem rule. The Court also noted that the respondents did not adequately consider the justification provided by the petitioner for their low rates and that the decision-making process appeared to be influenced by Respondent No. 4, who had retired shortly before the cancellation. Given the petitioner's undertaking not to seek advance/part payment and to supply specified brands, the Court decided to give a quietus to the issue by directing the respondents to proceed with the award of the contract to the petitioner. The Court quashed the rejection of the petitioner's financial bid, the debarment order, the forfeiture of EMD, and the fresh NIT. The respondents were directed to issue the work order within three weeks after completing necessary formalities.

Facts

The petitioner, M/s R.P. Jaiswal, participated in a tender process initiated by South Eastern Coalfields Limited (SECL) for the replacement of cables and supply/installation of street lights. The petitioner emerged as the lowest bidder (L-1). SECL sought price justification, which the petitioner provided, assuring quality, quantity, and timely labor payments. However, the petitioner alleged that Respondent No. 4 demanded personal gratification, and upon refusal, the tender was cancelled on July 22, 2022, the petitioner was debarred from future tenders, and their Earnest Money Deposit (EMD) was forfeited without a hearing. A fresh NIT was issued the next day. The petitioner's representation for review was unsuccessful, leading to the present writ petition challenging the cancellation, debarment, and forfeiture.

Key Issues

1. Whether the cancellation of the tender and the subsequent debarment of the petitioner from participating in fresh tenders, along with the forfeiture of EMD, were arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution of India, particularly in light of the petitioner's lowest bid and provided price justification? 2. Whether the decision to debar the petitioner and forfeit EMD was passed in violation of the principles of natural justice, specifically the audi alteram partem rule, as no opportunity of hearing was provided? Petitioner's Arguments: The petitioner argued that the cancellation of the tender and the decision-making process were arbitrary, lacked application of mind, and were influenced by the personal demands of Respondent No. 4, constituting a malafide exercise of discretion. They contended that their price justification was based on prevailing market rates and that the respondents failed to conduct a proper market analysis to deem the bid unbalanced. They also asserted that alternative remedies within the company were not applicable as no contract was yet formed. Respondents' Arguments: The respondents (SECL) argued that they were not bound to accept the lowest bid as per Clause 36 of the tender conditions and could reject any tender without assigning reasons. They claimed the petitioner did not provide adequate item-wise rate justification for all items and expressed suspicion about the 'no profit no loss' justification, fearing the petitioner might not complete the work or supply sub-standard material. They also raised the issue of alternative remedies available within the company, including an arbitration clause.