Allowed

M/S. Laqshya Media Pvt.Ltd v. M/S. Bangalore Metropolitan Transport

Karnataka HC8 Jul 2022WP/51150/2014

Case brief

AI extract

What is this about?

The Court allowed the Writ Petition challenging the Respondent's order forfeiting an Earnest Money Deposit (EMD). The Respondent was directed to refund the deposit along with interest, as the forfeiture was unjustified due to lack of deliberate delay and a supervening government order banning advertisements on the buses.

What did the court decide?

The impugned order forfeiting the EMD is quashed. The Respondent is directed to refund Rs. 20.00 lakhs within three months along with simple and compound interest.

M/S. Laqshya Media Pvt.Ltd Vs M/S… — Contract and Commercial Disputes | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 08^TH DAY OF JULY, 2022 BEFORE

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THE HON’BLE MR. JUSTICE C.M. POONACHA

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W.P.No.51150/2014(GM-RES)

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BETWEEN

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M/S. LAQSHYA MEDIA PVT.LTD HAVING ITS REGISTERED OFFICE AT: LAQSHYA HOUSE, NEXT TO RAMESHWAR TEMPLE, SARASWATI BAUG, SOCIETY ROAD, JOGESHWARI (EAST) MUMBAI -400060

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HAVING ITS REGIONAL OFFICE AT NO.29/1, SECOND FLOOR, MALIK’S BUILDING, BOWRING HOSPITAL ROAD, SHIVAJINAGAR, BANGALORE -560001 REPRESENTED BY ITS CHIEF MANAGER MR. D.PURUSHOTAM

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...PETITIONER

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(BY SRI MANEESHA KONGOVI, ADVOCATE) AND

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M/S. BANGALORE METROPOLITAN TRANSPORT CORPORATION, SHANTINAGAR, KH ROAD,

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BANGALORE 560027 REPRESENTED BY ITS MANAGING DIRECTOR

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…RESPONDENT

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(BY SRI R V JAYAPRAKASH, ADVOCATE)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RESPONDENT'S ORDER DT.28.1.2014 (AT ANNX-V) AND ETC.,

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THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 24.06.2022, COMING ON FOR 'PRONOUNCEMENT OF ORDER' THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

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The present Writ Petition is filed challenging the order bearing No.BMTC/CO/TR/COM/ADVT/5108/2013-14, dated 28.01.2014 passed by the Respondent.

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Brief facts of the case are as under;

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It is the case of the Petitioner that the Respondent, vide Notification dated 18.12.2008 had called for Tenders in respect of advertising rights in 40 Vajra Volvo buses operated by the Respondent. The Petitioner participated in

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the Tender by paying an Earnest Money Deposit (hereinafter referred to as ‘EMD’ for short) of Rs.20.00 lakhs and quoted Rs.7,19,000/- as licence fee per bus, per annum. The Respondent informed the Petitioner on 09.02.2009 that it was the successful bidder and requested the Petitioner to enter into an agreement on requisite stamp paper within seven days. To certain clarifications sought for by the Petitioner regarding stamp duty, the Respondent vide letter dated 04.03.2009 called upon the Petitioner to provide stamp paper for the value of Rs.29,62,679/-, as per the Karnataka Stamp Act, 1957 (hereinafter referred to as the “Act” for short) for the purpose of entering into an agreement. The Petitioner raised certain issues/queries with regard to the stamp duty payable. The Respondent, subsequently, vide letter dated 08.04.2009 called upon the Petitioner to pay stamp duty of Rs.8,83,470/-, failing which, the Petitioner was informed that the allotment would be cancelled and the EMD amount would be forfeited. The Petitioner, vide letter dated 18.04.2009, requested the Respondent to cancel the

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allotment and return the EMD amount. Accordingly, the Respondent vide letter dated 06.05.2009 cancelled the allotment and forfeited the EMD amount on the ground that the Petitioner had violated the Tender conditions. The Petitioner addressed various communications to the Respondent seeking for refund of the EMD amount. The Respondent having failed to refund the EMD amount, the Petitioner preferred W.P.Nos.20787-788/2010 and this Court, vide order dated 22.10.2013 disposed off the Writ Petitions directing the Respondent to consider the request of the Petitioner for refund of the EMD amount having regard to the order passed in W.P.Nos.7759-60/2010 between the same parties.

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Subsequent to the said order dated 22.10.2013 passed in W.P.Nos.20787-788/2010, the Petitioner made a representation to the Respondent seeking for refund of the EMD amount. However, the Respondent, vide order bearing No. No.BMTC/CO/TR/COM/ADVT/5108/2013-14, dated

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28.01.2014, informed the Petitioner that the said EMD amount of Rs.20.00 lakhs cannot be refunded in accordance with clause 8(d) of the terms and conditions of the Tender. Being aggrieved by the same, the present Writ Petition is filed.

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The Respondent has filed its statement of objections as well as additional statement of objections contending, inter alia, that it is the Petitioner who has violated the terms and conditions of the Tender and it was justified in forfeiting the EMD amount, thereby justifying its action in passing the impugned order.

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The learned Counsel for the Petitioner put forth the following contentions;

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a) consequent to the Petitioner being the successful tenderer and paying the EMD amount of Rs.20.00 lakhs, a genuine issue with regard to the stamp duty payable on the agreement to be executed had arisen, as a result of which the Petitioner sought for cancellation

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of the allotment. Hence, the Petitioner was entitled to refund of the EMD amount deposited;

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b) notwithstanding the issue of stamp duty, the Transport Authority, vide order dated 25.02.2009 prohibited the Respondent from carrying out any advertising activity on its buses; that although the said order was communicated to the Respondent on 19.06.2009, it is clear that the Petitioner could not have proceeded with the activity contemplated under the Tender and hence, the Respondent was not justified in forfeiting the EMD amount;

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(c) mere acceptance of a tender cannot be deemed that the parties having entered into a contract and in the absence of a formal contract and in the absence of a specific clause for forfeiture in the said contract, the respondent was not justified in forfeiting the EMD amount; and

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(d) having regard to the order dated 24.09.2012 passed by this Court in W.P.Nos.7759-60/2010, the

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Respondent was not justified in issuing the impugned Communication forfeiting the EMD amount.

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In support of her contentions, the learned

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Counsel for the Petitioner relied upon the following decisions;

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i) ABL International Ltd., & Ors., v. Export Credit Guarantee Corporation of India Ltd., and Ors¹ ;

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ii) Union of India (UOI) and ors., v. N.K.Private Limited and Ors² ; iii) Davecos Garments Factory and Ors., v. State of Rajasthan³ ; and iv) Maula Bux v. Union of India⁴ .

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Per contra, learned counsel for the Respondent put forth the following contentions;

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(a) the transaction between the Petitioner and the

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Respondent being a contractual once, the Petitioner was not entitled to file a Writ Petition and seek for refund of the

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1 (2004) 3 SCC 553

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2 (1972) 3 SCC 388

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3 (1970)3 SCC 874

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4 1969(2) SCC 554

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EMD amount and ought to invoke other civil remedies for suitable reliefs;

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(b) it was the Petitioner who violated the terms and conditions of the Tender and hence, the Respondent was justified in forfeiting the EMD amount;

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(c) as a result of refusal of the Petitioner to pay the stamp duty payable in accordance with law, the Respondent has also incurred a loss due to the Petitioner not implementing the terms and conditions as contemplated under the Tender. Under the circumstances, the Respondent was entitled to forfeit the EMD amount; and

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(d) this Court, vide Order dated 22.10.2013 passed in W.P.No.20787-788/2010, merely directed the Respondent to consider the request of the Petitioner, which it did and issued the impugned Communication.

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In support of his contentions, the learned Counsel for the Respondent relied upon the following decisions;

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i) Pimpri Chinchwad Municipal Corporation and Others v. Gayatri Construction Company and another⁵ ; ii) State of Kerala and others v. M.K.Jose⁶ ; iii) Jagdish Mandal v. State of Orissa and others⁷ .

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Having regard to the contentions put forth by the learned counsel for the parties, the question that arises for consideration in this Writ Petition is, “Whether the Respondent was justified in passing the order dated 28.01.2014 and forfeiting the EMD amount deposited by the Petitioner ?”

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It is not in dispute that the Petitioner was the lowest bidder for the Tender dated 18.12.2008 issued by the Respondent for selection of an agency for advertising rights on Vajra Volvo buses having offered to pay a sum of Rs.7,19,000/- as licence fee per annum, per bus, in respect of 40 Vajra Volvo buses. An EMD of Rs.20.00

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5 (2008) 8 SCC 172

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6 (2015) 9 SCC 433

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7 (2007) 14 SCC 517

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lakhs was paid by the Petitioner. It is further not in dispute that the agreement consequent to the Tender was not signed. The Petitioner, vide its letter dated 18.4.2009 withdrew the bid and requested the Respondent to cancel the allotment and return the EMD amount. It is to be noticed that the Petitioner was also a successful bidder in respect of another Tender for selection of an agency for advertising rights in buses run by the Respondent. Due to various disputes that had arose in respect of the other Tender, the Petitioner filed W.P.No.7759-60/2010, which petitions were disposed off by this Court vide order dated 24.09.2012, whereunder, the Respondent was directed to refund the security deposit made by the Petitioner after deducting the licence fee and other legally refundable charges of the Petitioner.

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When the Respondent refused to refund the EMD amount of Rs.20.00 lakhs in respect of the Tender in question, the Petitioner preferred W.P.Nos.20787788/2010, which petitions were disposed of by this Court

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on 22.10.2013, whereunder, this Court, taking note of the orders passed in W.P.Nos.7759-60/2010, directed the Respondent to consider the request of the Petitioner for refund of the EMD amount within three months. The request made by the Petitioner after the disposal of W.P.Nos.20787-788/2010 was also rejected by the Respondents vide order dated 28.01.2014, which is impugned in the present Writ Petition.

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There is force in the contention of the Petitioner that mere acceptance of the bid by the Respondent and in the absence of the parties having entered into an express contract, there is no formal agreement between the parties and also since there is no express clause entitling the respondent to forfeit the EMD, it is not entitled to do so.

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Per contra, learned counsel for the Respondent has vehemently contended that the clauses in the tender itself entitled the respondent to forfeit the EMD. The Respondent justifies the forfeiture of EMD by relying upon

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clauses 8(d), 10(b) and 16 of the Tender conditions, which are extracted hereunder for ready reference;

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“ 8d. The EMD of the successful bidder shall stand forfeited if he fails to remit security deposit, enter in to agreement or comply with any other terms and conditions as stipulated herein.

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10b The accrual of license fee shall start from the date of signing the agreement, which shall be within 15 days of the selection of successful licensees. In case of any deliberate delay in signing the agreement by the successful bidders, their EMD/Security Deposit will be liable for forfeiture.

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16. The bids/offers made under this auction cum tender shall be valid for a period of three months. The bidder shall not withdraw or revise the tender during this period. In case of bidder revises or withdraws his tender during this period, the EMD/security deposit remitted by him shall be forfeited in addition to other remedies open to the Corporation in respect of loss which may be caused due to such withdrawal or revision.”

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It is not in dispute that pursuant to the Petitioner being declared as the successful bidder on

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deposit of EMD amount, the agreement which the parties were required to be entered into was not executed. As per clause 10b of the Tender conditions, the agreement was required to be signed within 15 days of selection of agency and in the event of any “deliberate” delay in signing the agreement by the successful bidder, the EMD amount was liable to be forfeited. It is forthcoming from the correspondence exchanged between the parties that a genuine and bona fide issue arose with regard to the stamp duty, which finally culminated in the Petitioner withdrawing the bid amount and requesting for cancellation of the allotment and return of the EMD amount. Hence, it is clear that there was no deliberate delay on the part of the Petitioner in not coming forward to execute the agreement with the Respondent. Under the circumstances, the Respondent is not entitled to forfeit the EMD amount by invoking the terms of the Tender.

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The other terms of the Tender i.e., clause 8d and clause 16 also will not come to the aid of the

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Respondent to forfeit the EMD amount, inasmuch as the same contemplated other situations and the Petitioner, vide letter dated 18.04.2009 sought to cancel the allotment and return the EMD amount. In any event, the Respondent vide its letter dated 28.01.2014 relied on clause 8d of the Tender conditions to forfeit the EMD amount.

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Notwithstanding the finding that there was no deliberate delay on the part of the Petitioner, it is also forthcoming that, the Transport Authority, vide order dated 04.03.2009, had decided to stop advertisement in the buses run by the Respondent. The said order dated 04.03.2009 was communicated to the Respondent vide letter dated 19.6.2009. Hence, it is clear that even if the agreement had been entered into between the parties, the purpose for which the Tender was issued i.e., for advertisement rights in the buses run by the Respondent itself could not have been undertaken as contemplated under the Tender dated 18.12.2008. This is the other

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circumstance where it would be just and proper for the Respondent to refund the EMD amount to the Petitioner.

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The learned Counsel for the Respondent vehemently contended that it is not open for the Petitioner to invoke the writ jurisdiction of this Court to seek for refund of the EMD amount and the Petitioner ought to invoke the other civil remedies available with it for the purpose of seeking refund of the EMD amount. The said contention put forth by the Respondent is liable to be rejected inasmuch as the same contention was put forth in W.P.Nos.7759-60/2010 and this Court vide order dated 24.09.2012 relying on the judgments of the Apex Court in the case of ABL International Ltd¹ ., and in the case of Noble Resources Ltd., v. State of Orissa and Another⁸ , negatived the contention of the Respondent.

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In the case of N.K. Private Ltd² . , the Apex Court was considering the question as to ‘whether there is concluded contract as per the mandatory requirement

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8 AIR 2007 SC 119

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under Article 299 of the Constitution’. The said aspect need not be gone into in the present Writ Petition since the Respondent is justifying the act of forfeiture based on the terms of the Tender itself.

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In the case of Maula Bux⁴ , the Apex Court was dealing with a case wherein the contract expressly provided for forfeiture and a stipulation in the nature of penalty for such forfeiture vis-à-vis Section 74 of the Contract Act, 1872. The said aspect need not be gone into for adjudication of the present lis .

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20. In the case of Pimpri Chinchwad Municipal

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Corporation⁵ , the Apex Court had considered a case where the High Court had interfered with a contract for work of improvement and widening of a road, whereunder the contract was not completed by the Tenderer and the remaining work was required to be completed by issuing an other Tender. The Apex Court had interfered with the order passed by the High Court, since by virtue of the order of the High Court the implementation of the Tender

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was stayed in the face of there being an urgency in the implementation of the Tender. The facts of the said case are wholly inapplicable to the facts of the present case.

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In the case of M.K. Jose⁶ , the Apex Court has held that the Writ Court should not ordinarily entertain a writ petition for breach of contract involving disputed questions of facts. The said judgment will not come to the aid of the Respondent as in the present case there are no disputed questions of facts involved for the purpose of deciding the matter in issue.

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In the case of Jagadish Mandal⁷ the Apex Court had considered the case of judicial review relating to tenders or award of contract and as to when the Writ Court ought to interfere with the award of contract. The said case is wholly inapplicable to the facts of the present case.

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It is noticed that pursuant to the refusal by the Respondent to refund the EMD amount, the Petitioner had filed W.P.Nos.20787-788/2010 which Writ Petitions were

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disposed of vide order dated 22.10.2013 by noting the order dated 24.09.2012 passed in W.P.Nos.7759-60/2010 and a direction was issued by this Court to the Respondent to consider the request of the Petitioners for refund of the EMD amount within a period of three months. Despite the said direction issued by this Court, vide order dated 22.9.2013, the Respondent vide impugned order dated 28.01.2014 rejected the request of the Petitioner for refund of the EMD amount. The action of the Respondent, which is a State run Corporation to reject the request of

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the Petitioner for refund of the EMD amount despite the direction given by this Court, vide order dated 22.10.2013 passed in W.P.Nos.20787-788/2010 by noting the order dated 24.09.2012 passed in W.P.Nos.7759-60/2010 is untenable.

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24. Hence, I pass the following:

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i) The Writ Petition is allowed;

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ii) The order bearing No. No.BMTC/CO/TR/COM/ ADVT/5108/2013-14, dated 28.01.2014 passed by the Respondent, is hereby quashed;

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iii) The Respondent is directed to refund the EMD of Rs.20.00 lakhs to the Petitioner within three months from today.

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iv) The Respondent shall also be liable to pay simple interest at 6% p.a., from 28.01.2014 up to the expiry of three months from today.

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v) In the event of further delay in refunding the EMD amount of Rs.20.00 lakhs, the Respondent shall be liable to pay interest at 12% compounded quarterly for the further period till date of payment.

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vi) No order as to costs.

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sd/JUDGE

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M/S. Laqshya Media Pvt.Ltd v. M/S. Bangalore Metropolitan Transport

Case brief

What is this about?

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M/S. Laqshya Media Pvt.Ltd v. M/S. Bangalore Metropolitan Transport

Case brief

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