Sterling And Wilson Private Limited vs. The Tripura State Electricity Corporation Limited And Ors

Held

The Court declined to interfere with the notice dated 18.06.2021 terminating the contract and forfeiting the petitioner's EMD. The Court reasoned that the petitioner's own communications dated 31.03.2021 and 08.05.2021 indicated a desire to cancel the contract and claim a refund of EMD, demonstrating an unwillingness to execute the work. The Court found that TSECL had informed the petitioner that the proposal for reducing performance security was under consideration and requested the petitioner to execute the work. Despite repeated requests, the petitioner did not mobilize resources or attend meetings, causing delays and losses to TSECL. Therefore, the plea of not being served an appropriate notice was not accepted. However, the memorandum dated 23.06.2021, blacklisting the petitioner for 5 years, was quashed and set aside. The Court found this action to be illegal as the petitioner was not given an opportunity to represent their case before being blacklisted. The writ petition was disposed of in terms of these findings.

Facts

The petitioner, Sterling & Wilson Private Limited, challenged a notice dated 18.06.2021 by Tripura State Electricity Corporation Limited (TSECL) terminating their awarded contract and forfeiting Earnest Money Deposit (EMD) of Rs. 2,73,83,153/-. They also challenged a memorandum dated 23.06.2021 blacklisting them from TSECL tenders for 5 years. The petitioner was awarded a contract for upgrading a substation. A Government of India memorandum dated 12.11.2020 reduced performance security from 5-10% to 3%. The petitioner sought this reduction, but TSECL insisted on 10% and terminated the contract for alleged failure to adhere to schedules and complete formalities, leading to project delays and losses. The petitioner argued they were not issued a show cause notice before termination and blacklisting.

Key Issues

1. Whether the termination of the contract and forfeiture of EMD by TSECL, without issuing a show cause notice to the petitioner, is illegal, considering the petitioner's plea that the reduction of performance security to 3% was under consideration and their communication dated 31.03.2021 and 08.05.2021 indicated a desire to cancel the award or seek EMD refund. 2. Whether the memorandum blacklisting the petitioner for 5 years is illegal, given the petitioner's contention that they were not afforded an opportunity to represent their case before being blacklisted. Petitioner's arguments: The petitioner contended that the termination and forfeiture were illegal as they were not given a show cause notice, and the insistence on 10% performance security despite the Government of India's memorandum reducing it to 3% was unjustified. They also argued that the blacklisting was illegal due to the lack of a prior opportunity to be heard. Respondents' arguments: TSECL argued that the petitioner failed to perform contractual formalities, including signing the agreement and furnishing performance security, despite several reminders and meetings. They stated that the proposal for reducing performance security was under consideration, but the petitioner did not proceed with the work. They further contended that the petitioner's letters indicated an unwillingness to execute the contract, causing significant loss and delay to a priority project, thus justifying the termination, forfeiture, and blacklisting as per the bid document.