Allowed

Bhaktha Kumar Shetty v. the Karnataka State Road Transport Corporation

Karnataka HC24 Mar 2023WP/45869/2018

Case brief

AI extract

What is this about?

High Court of Karnataka allowed two writ petitions challenging forfeiture of earnest money and blacklisting against a second-highest bidder who refused to accept the tender terms of the highest bidder. The court quashed the orders directing return of money with interest, finding the Corporation's action arbitrary.

What did the court decide?

Impugned orders quashed; Respondent directed to return EMD amount with 6% interest per annum within 30 days.

Bhaktha Kumar Shetty Vs the Karnataka State… — Public Procurement and Tenders | Karnataka HC (2023)

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WP No. 45869 of 2018 C/W WP No. 45870 of 2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24^TH DAY OF MARCH, 2023

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BEFORE

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THE HON'BLE MR JUSTICE RAVI V HOSMANI WRIT PETITION NO. 45869 OF 2018 (GM-TEN)

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C/W

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WRIT PETITION NO. 45870 OF 2018 (GM-RES)

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BETWEEN:

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BHAKTHA KUMAR SHETTY, S/O. NARAYANA SHETTY, AGED ABOUT 56 YEARS, R/O. KRISHNA HERITAGE, DOOR NO. 110, B.C. ROAD, JODUMARGA POST, B. MOODA VILLAGE, BANTWAL TALUK - 574 219,

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DAKSHINA KANNADA DISTRICT. …PETITIONER

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(COMMON)

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(BY Ms. ANANYA RAI, ADV., FOR SRI. VISHWAJITH RAI M., ADV.,)

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AND:

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THE KARNATAKA STATE ROAD TRANSPORT CORPORATION, REP. BY ITS DIVISIONAL CONTROLLER, DIVISIONAL OFFICE, MUKRAMPADI, PUTTUR 574 202, D.K. DISTRICT. …RESPONDENT

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(COMMON)

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(BY SRI. HARISHA R., ADVOCATE FOR SRI. P.D.SURANA, ADVOCATE)

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Digitally signed by GEETHAKUMARI PARLATTAYA S Location: High Court of Karnataka

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THESE W.Ps. ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DATED 6.9.2018 PASSED BY THE RESPONDENT VIDE ANNEXURE-A, QUASH THE ORDER DTD 23.04.2018 PASSED BY THE RESPONDENT VIDE ANNEXURE-B AND ETC.,

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THESE PETITIONS, COMING ON FOR PRELIMINARY HEARING B-GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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Since both these writ petitions involve similar questions

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of law based on similar facts, for sake of convenience and in

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WP No. 45869 of 2018 C/W WP No. 45870 of 2018

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order to avoid repetition, reference shall be confined to W.P.no.45869/2018.

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Challenging order dated 06.09.2018 in

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no.KaRaSa/Pu.V/Sam/Vaa/199/17-18 vide Annexure - 'A' and order dated 23.04.2018 in no.KaRaSa/Pu.V/Sam/Vaa/265/1819 vide Annexure - 'B' passed by respondent and seeking for writ of mandamus directing respondent to return EMD amount paid by petitioner, this writ petition is filed.

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Ms.Ananya Rai, learned counsel appearing for Sri Vishwajith Rai M., learned counsel for petitioner submitted that in response to tender notification dated 27.09.2017 at Annexure - 'C', petitioner submitted his bid in respect of item no.5 i.e., for running Canteen at Bus Stand at B.C. Road, Bantwal, Mangalore. Upon opening tenders, petitioner’s bid was for Rs.55,000/- per month was found to be second highest bid (‘H2’ for short), with highest bid for Rs.95,431/- ('H1' for short). It was further submitted that at time of submitting his bid, petitioner had deposited Rs.1,43,145/- as EMD.

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As petitioner was H2 bidder and not entitled for tender, he sought return of EMD vide letter dated 17.11.2017. But, petitioner was informed by letter dated 07.04.2018 that H1 bidder had not come forward for signing tender agreement

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and action for blacklisting was being taken and called petitioner who was H2 bidder for discussion/allotment of tender at H1 bid to petitioner.

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After petitioner failed to attend negotiation meeting on 12.04.2018, letter dated 23.04.2018 was issued stating that in case petitioner failed to come forward to execute tender agreement for H1 bid, EMD amount would be forfeited. In reply, given through his advocate, petitioner stated that petitioner was not interested in tender at H1 bid and expressing inability to accept tender, sought for return of EMD. Thereafter show-cause notice dated 18.07.2018 was issued to petitioner calling upon him to show-cause why petitioner shall not be blacklisted for two years and also forfeiture of EMD. Though petitioner did not reply same, as earlier reply would hold good, without considering same, respondent proceeded to pass impugned order forfeiting EMD amount and blacklisting petitioner. It was submitted that as per tender conditions, petitioner could not be compelled to accept tender at H1 bid. As there was no offer by respondents to petitioner to come forward to accept tender at H2 bid, merely on ground of refusal to accept tender at H1 bid would not justify impugned action forfeiting EMD amount and blacklisting. Same was therefore,

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arbitrary and illegal, hence sought for quashing impugned order.

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On other hand, Sri. Harish R., advocate appearing for Sri. P.D. Surana, learned counsel for respondent - Corporation sought to justify impugned order. It was submitted that Para XI of General Standing Order ('GSO' for short) dated 26.11.2017 provides that in case of refusal by H1 bidder, tender could be offered to H2 bidder and H1 bid. Corporation had right to select H2 bidder to accept tender. Sub. Clause (5) of para XI provided that after issuing proposal to H2 bidder to accept tender at H1 bid. And, in case of refusal, consequence of forfeiture of EMD and blacklisting was clearly mentioned and therefore action taken for refusal to accept tender was justified.

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Heard learned counsel for parties and perused writ petition papers.

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From above submission, it is not in dispute that petitioner was H2 bidder in respect of item no.5. While his bid was for Rs.55,000/-, H1 bid was for Rs.95,431/-. Respondents called upon petitioner to come forward to execute tender agreement at H1 bid as per Annexures - 'R2' and 'R3', threatening him with consequence of forfeiture and blacklisting. There is no dispute that petitioner refused said offer.

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Question that would arise for consideration would be, legality of treating refusal by petitioner to accept tender at H1 bid, as withdrawal of his bid and consequent validity of forfeiture of EMD and blacklisting of petitioner.

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On perusal of Annexures-R2 and R.3, it is clear that respondent had informed petitioner about H1 bid for Rs.95,431/- and called upon him to sign tender agreement. Respondents never offered/called upon petitioner to accept tender at H2 bid.

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Careful perusal of Para XI of GSO dated 26.07.2017 would indicate that upon refusal of H1 bidder to accept tender, respondent would be entitled to forfeit his EMD, reserving liberty to offer tender to H2 bidder at H1 bid. Sub-clause (5) and (6) of Para XI of GSO provides that proposal for offering tender to H2 bidder at bid quoted by H1 bidder ought to be sent to Head of Commercial Division and after obtaining permission tender could be offered to H2 bidder. Said clauses merely enable Corporation to make such offer, but do not compel H2 bidder to accept tender at H1 bid. Such being case, Annexures- 'R2' to 'R4' issued calling upon petitioner to accept bid and amount quoted by H1 bidder would not be justified. Consequently refusal by petitioner to accept tender at price

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quoted by H1 bidder would be justified. There is no clear offer made by respondents to petitioner to accept tender at H2 bid.

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Under these circumstances, order of forfeiture of EMD amount and blacklisting of petitioner would not be justified and interference as sought for would be warranted.

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In W.P.no.45870/2018 facts and circumstances are similar as that of W.P.no.45869/2018, except fact that bid therein was in respect of item no.1 of tender notification and bid amounts were different.

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In view of above discussion, W.P.no.45870/2018 and W.P.no.45869/2018 are allowed. Impugned orders dated 06.09.2018 in no.KaRaSa/Pu.V/Sam/Vaa/199/17-18 vide Annexure – 'A', and orders dated 23.04.2018 in no.KaRaSa/Pu.V/Sam/Vaa/265/18-19 vide Annexure - 'B' passed by respondent against respective petitioners are quashed.

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Respondent is directed to return EMD amount paid by petitioners with interest at 6% per annum within 30 days.

Sd/JUDGE

Psg*

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RVHJ:

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28.03.2023

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'ORDER ON BEING SPOKEN TO'

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Matter was disposed of on 24.03.2023. Before signing order, learned counsel for respondent moved matter "For being spoken to' on ground that certain aspects of matter were not taken note of while disposing of writ petitions.

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Learned counsel submitted that as per petitioner's letter at Annexure-F, even before invocation of procedure contemplated under Clauses (5) and (6) of Para XI of GSO at Annexure-R1, petitioner withdrew his bid. Therefore, consequence of withdrawal for forfeiture and blacklisting followed. It was submitted that said action was justified as per law laid down by Hon'ble Supreme Court in :

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i) State of Maharastra & Ors. Vs. A.P. Paper Mills Ltd., reported in AIR 2006 SC 1788.

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ii) H.U.D.A. & Anr. Vs. Kewal Krishan Goel & Ors. reported in (1996) 4 SCC 249

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iii) Villayati Ram Mittal (Pvt) Ltd., vs. Union of India & Anr. reported in AIR 2011 SC 301

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Learned counsel further submits that in case of

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contractual matters, scope of judicial review would be limited and writ petition, in facts and circumstances of case would not

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be maintainable, by relying upon decision in Bharat Coking

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Coal Limited & Ors. Vs. AMR Dev Prabha & Ors.¹

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Heard.

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On perusal of letter dated at Annexure - 'F' and letters/notices issued by respondent at Annexures - 'R2' and 'R3', it is seen that despite letter at Annexure - 'F', respondent had not acted upon same and intimated petitioner to accept tender at H1 bid.

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Submission of learned counsel for respondent that failure to appear in meeting for negotiation would amount to retraction from tender does not appeal to reason. GSO referred to above clearly stipulates that in case H2 bidder does not accept offer at H1 bid, matter was required to be placed before tender committee and after obtaining approval further action was required to be taken either for accepting tender at H2 bid or for calling fresh tender. There is no material placed on record to indicate that said procedure was followed.

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This would also indicate that at time of issuing impugned letters/notices at Annexures - 'R2' to 'R4', respondents did not contemplate offering petitioner to accept tender at H2 bid. Such

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