Smt. Namita Paul v. Food Corporation of India and Ors

Judgment and Order (Oral)

By means of filing the instant writ petition, the petitioner has challenged the impugned order dated 09.06.2023 issued by the respondent no.2, the General Manager, Food Corporation of India, NEF Region, Shillong, whereby and whereunder the claim of the petitioner for refund of Earnest Money Deposit(for short, EMD) amounting to Rs.10,10,000/- with interest was rejected.

2.

The petitioner has prayed for following reliefs:

i) As to why a Writ in the nature of Mandamus should not be issued quashing the Order vide No.Cont/Legal/NEFR/WP(C) 118/2022/NP/21688 dated 09.06.2023 issued by the Respondent No.2 whereby the respondents

rejected the claim of the petitioner for refund of Earnest Money Deposit amounting to Rs. 10,10,000/-.

(ii) As to why a Writ in the nature of Mandamus should not be issued directing the Respondents to refund Earnest Money Deposit amounting to Rs.10,10,000/- along with interest at the rate of 12% per annum w.e.f

17.11.2011 till the date of payment in respect of Contract No. Cont.50/NEFR/ TE/2010 dated 01.07.2010 for transportation of food grains/sugar/allied materials from Rly. Siding Changsari/CWC Godown Amingaon/RH FSD Guwahati to Godown Complex, Agartala.

AND

(iii) As to why such other order/orders should not be passed so as to give full relief to the Petitioner and, upon causes shown, to make the Rule absolute"

3.

Brief fact of the case is that the petitioner is a Government contractor and supplier by occupation and having expertise on that field for several years, she had participated in a Notice Inviting Tender(for short, NIT) vide No.Cont.50/NEFR/TE/2010 dated 01.07.2010 floated by the respondents-Food Corporation of India(here-in-after referred to as "FCI") for transportation of food-grains/sugar/allied materials from Rly. Siding Changsari/CWC Godown Amingaon/RH FSD Guwahati to Godown Complex, Agartala. In terms of the NIT, the petitioner had deposited requisite earnest money of Rs.10,10,000/- by way of two demand drafts vide No.674073 dated 01.09.2010 amounting to Rs.6,62,000/- and No.674074 dated 01.09.2010 amounting to Rs.3,48,000/- in favour of the FCI which has been confirmed by the Branch Manager, Canara Bank by issuing a letter dated 10.08.2023(Annexure-25 to the writ petition).

3.1. Subsequently, the petitioner came to know that she was not selected for the said tender. The petitioner issued a letter dated 10.08.2017 to the respondent no.2 for releasing the EMD, but, after receipt of the said letter, the respondents neither gave any reply nor returned the said EMD to the petitioner. Being aggrieved, again on 04.09.2017 and 12.04.2018 the petitioner issued reminder letters to the respondent no.2 (Annexures-4 and 5

respectively to the writ petition). The petitioner requested the respondents-FCI by issuing several communications on different dates for releasing the said EMD, but the respondents-FCI did not give any reply to the petitioner. Subsequently, the petitioner through email dated 27.11.2020, 04.12.2020 and 10.12.2020 requested the respondents-FCI for releasing the said EMD and finally, the respondents-FCI vide letters dated 29.10.2020 and

24.12.2020 informed the petitioner that the said EMD of Rs.10,10,000/- is kept in abeyance due to pendency of Court case. Being aggrieved, the petitioner filed writ petition being WP(C) No.118 of 2022 before this Court praying for setting aside the communications dated 29.10.2020 and

24.12.2020. After hearing the learned counsel appearing for the parties, the learned Single Judge had disposed of the writ petition vide judgment and order dated 11.04.2023 on being observed thus: "7. The impugned order dated 29.10.2020 and 24.12.2020, is only a communication from the respondent company to the petitioner indicating that his request for return of Rs.10,10,000/- cannot be entertained. This Court is unable to support the case of the respondent's letters dated 29.10.2020 and 24.12.2020 since the same is an unreasoned communication and it is not fair on the part of the respondents to withhold the EMD deposited by the petitioner herein stating that the same is kept abeyance until the final outcome of the Court case/in view of the pendency of the Court case. The same amount to arbitrary action. In any event, if the respondents think that the petitioner is not entitled, it is the prima facie duty of the respondents to indicate under what provision of law her EMD cannot be returned. In the event, if it is to be forfeited a separate proceeding needs to be issued, or in the event if there is any resultant loss that has been suffered by the respondents, on account of the petitioner's contract, it is not just on the part of the respondents to withheld the EMD without there being any expressed order forfeiting her EMD. Withholding the EMD of the petitioner without giving any opportunity to the petitioner amounts to violation of the principle of natural justice and is also against the principle of ad alteram partem as clearly indicated herein above.

¶8In view of the above discussion, the impugned letter of the respondents dated 29.10.2020 and 24.12.2020 is set aside and the respondents are directed to reconsider the request of the petitioner in accordance with the law within a period of 2(two) months from the date of receipt of the copy of this order."

3.2. The petitioner submitted a representation before the respondents enclosing a copy of the aforementioned judgment and order dated 11.04.2023 requesting to refund the withheld EMD amounting to Rs.10,10,000/-. Without considering the said representation in the light of the direction of the aforementioned judgment and order, the respondents issued a show-cause notice against the petitioner seeking explanation as to why the EMD submitted by the petitioner was not liable to be set off/reimbursed/forfeited under Clause XII(b) and XII(e) of the tender document against the losses suffered by them due to alleged negligence and unworkmanlike performance of the petitioner(Annexure-20 to the writ petition) relating to other contract works. On receipt of the show-cause notice the petitioner submitted reply and without considering the reply of the petitioner to the show-cause notice, the respondent vide order dated

09.06.2023 rejected the claim of the petitioner on the ground that the EMD amount was never remitted into the account of the FCI against the said tender(Annexure-22 to the writ petition).

3.3. The petitioner vide letters dated 06.06.2023 and 27.06.2023 requested the Branch Manager, Canara Bank to provide confirmation regarding the payment of demand draft No.674073 dated 01.09.2010 amounting to Rs.6,62,000/- and D.D. No.674074 dated 01.09.2010 amounting to Rs.3,48,000/- ,which was subsequently confirmed by the Branch Manager, Canara Bank by issuing a letter dated

10.08.2023(Annexure-25 to the writ petition).

3.4. It is the grievance of the petitioner that the respondents violating the directions passed in the impugned judgment and order of this Court issued the order dated 09.06.2023, which is not sustainable in law.

Furthermore, the respondents most illegally and arbitrarily relying upon other contracts rejected the claim of the petitioner. The petitioner had approached the respondents on several occasions to release the withheld EMD, but the respondents did not return the said amount in favour of the petitioner compelling the petitioner to file the present writ petition before this Court.

4.

On the aforesaid background of facts, I have heard Mr. Raju Datta, learned counsel appearing for the petitioner as well as Mr. Ratan Datta, learned counsel appearing for the FCI.

5.

At the very outset, learned counsel for the petitioner has drawn my attention to a communication dated 24.12.2020(Annexure-15 to the writ petition) whereby and whereunder the petitioner was informed that the refund of the claimed amount against the EMD of Rs.10,10,000/- was kept in abeyance in view of the pendency of court's case where the Corporation had suffered huge losses. Learned counsel for the petitioner drawing my attention to another communication dated 08.07.2022 submits that the competent authority of the FCI had informed the petitioner that the EMD deposited by the petitioner amounting to Rs.10,10,000/- in NIT under reference No.Cont.50/NEFR/TE/2010 dated 20.08.2010 inviting tender for certain transportation contract was set off since the FCI had suffered huge losses in terms of additional expenditure towards risk and cost in executing transport contracts awarded vide Cont.9/NEFR/TC/CHNG-AGT/2008, Cont.9/NEFR/TC/CBZ-CDR/2009 and Cont.9/NEFR/TC/CBZ-ADNR/2009 in terms of Clause XII(b) and XII(e) of the tender document(Annexure-16 to the writ petition).

6.

I have perused the aforesaid communications.

7.

Learned counsel appearing for the petitioner has submitted that the setting off of the aforesaid amount of Rs.10,10,000/- which was furnished at the time of submission of tender no.Cont.50/NEFR/TE/2010 is illegal and arbitrary and is liable to be set-aside and quashed.

8.

On the other hand, Mr. Ratan Datta, learned counsel appearing on behalf of the FCI has contended that the EMD deposited relating to tender No.Cont.50/NEFR/TE/2010 dated 20.08.2010 was set off by way of invoking sub-clause (b) and sub-clause (e) of the Clause XII of the tender document.

Second fold of submission of Mr. Ratan Datta, learned counsel for the FCI is that the petitioner had not deposited any EMD against the tender No.Cont.50/NEFR/TE/2010 dated 01.07.2010 and it relates to "other contract work" and for that reason the said DD was/is not traceable.

9.

To a query made by this Court, Mr. Ratan Datta, learned counsel appearing for the FCI has failed to justify his submission exactly against which tender number or "other contract work" the said EMD was deposited.

10.

I have considered the submissions of learned counsel appearing for the parties.

11.

From the records/documents annexed to the writ petition and counter affidavit, particularly, from the communications dated 24.12.2020 and 08.07.2022(Annexure-15 and 16 respectively, to the writ petition) it becomes apparent that the FCI had forfeited and set off the EMD amounting to Rs.10,10,000/- deposited against the tender No.Cont.50/NEFR/TE/2010 dated 20.08.2010 due to the alleged losses it had to bear as additional expenditure towards risk and cost caused while executing transport contracts

awarded in favour of the same petitioner vide Cont.9/NEFR/TC/CHNG-AGT/2008, period 24.11.2008 to 23.11.2010, Cont.9/NEFR/TC/CBZ-CDR/2009, period 01.05.2009 to 30.07.2011 and Cont.9/NEFR/TC/CBZ-ADNR/2009, period 16.11.2009 to 15.02.2012 in terms of Clause XII(b) and XII(e) of the contract agreement. So, according to me, it is an admitted fact that the FCI had set off the EMD of Rs.10,10,000/- for their alleged losses relating to other contract works.

Furthermore, the second contention of Mr. Ratan Datta, learned counsel appearing for the FCI that the petitioner had not deposited any EMD against the tender No.Cont.50/NEFR/TE/2010 dated 01.07.2010 has no legs to stand and accordingly, the said submission is repelled.

12.

At this juncture, the principal question centers around whether the FCI could adjust or forfeit the EMD which was a condition precedent to submit her tender for alleged losses suffered by the FCI in relation to other contracts entered into with the petitioner.

13.

Admittedly, the FCI denied to refund the EMD and forfeited the sum by invoking Clause XII(b) and XII(e) of the tender document/agreement. It leads me to peruse Clause XII(b) and XII(e) of the tender document laying down certain terms and conditions which are reproduced here-in-below: "Clause XII. Liability of Contractors for losses etc. suffered by Corporation:

(a)****

(b) The Corporation shall be at liberty to reimburse themselves of any damages, losses, charges, costs or expenses suffered or incurred by them due to contractors negligence and un-workmanlike performance of service under the contract or breach of any terms thereof. The total sum claimed shall be deducted from any sum than due or which at any time hereafter may become due to the contractors under this or any other contract with the Corporation. In the event of the sum which may be due from the Corporation as aforesaid being insufficient the balance of the total

sum claimed and recoverable from the contractors as aforesaid shall be deducted from the security deposit furnished by the contractors as specified in Para XI. Should this sum also be not sufficient to cover the full amount claimed by the Corporation, the contractors shall pay to the Corporation on demand the remaining balance of the aforesaid sum claimed.

(c)****

(d)****

(e) A set off any sum of money due and payable to the contractors(including security deposit returnable to them) under this contract may be appropriated by the Corporation and set-off against any claim of the Corporation for the payment of any sum of money arising of this or under any other contract made by the contractors with the Corporation."

13.1. On careful reading of the provisions of Clause XII(b) and XII(e) extracted here-in-above, in my considered view, before invoking set-off Clause under Clause-XII, it must be proved that the Corporation suffered loss due to "negligence or un-workmanlike performance" of the contractor in execution of any work under any contract. Further, in the instant case, there is no material on records as to how the respondents have suffered loss in execution of any other contract work.

13.2. On bare perusal of Clause XII(b) and XII(e), it is crystal clear that respondent-Corporation had taken the advantage of the expression "any other contract" embodied in Clause XII(b) and XII(e). Clause XII(b) makes a provision providing liberty to the Corporation to reimburse any sum of money out of any loss or damage they suffer or incur due to contractor's negligence or failure in performance of the contract to the satisfaction of the Corporation from any sum including the security deposit due or payable to the contractor under the ongoing contract work or any other contract executed by the same contractor in future under the Corporation.

13.3. In the instant case, admittedly, the respondents having taken the recourse of the expression "any other contract" forfeited the EMD of

Rs.10,10,000/- deposited by the petitioner in the NIT No. Cont.50/NEFR/TE/2010.

13.4. In my opinion, the expression "any other contract" means and connotes that there must be a contract to be entered into between two intending parties on certain terms and conditions enforceable in law.

13.5. Section 2(h) of the Indian Contract Act, 1872 defines the word "contract" that connotes "an agreement enforceable by law".

13.6. In the case in hand, FCI-Corporation only floated the tender inviting applications from the intending parties and such parties only submitted their respective bids/offers. But, it was not proceeded further as the petitioner was not successful. So, it would not just and proper to say that there was existence of any contract entered into between the respondents-Corporation and the petitioner which was enforceable in law. In that case, FCI had no authority to reimburse any amount or set-off EMD amount deposited at the time of submission of offer by the contractor. Such set-off/forfeiture of EMD amount is illegal, arbitrary and dehors the terms and conditions stipulated in tender documents and thus, the FCI-respondents is liable to return/refund the EMD amount with interest to the petitioner.

14.

Now, the question is whether the respondents are liable to pay interest for denying the refund of EMD to the petitioner. Mr. Ratan Datta, learned counsel for the respondents to justify his submission that interest will not be payable out of the delayed refund of EMD, has relied upon Clause 4 of the tender document. Clause 4 may be reproduced hereunder: "4. Earnest Money:

Each tender must be accompanied by an Earnest Money of Rs.7,68,000/-(Rupees Seven Lakh Sixty Eight Thousand) only in form of a Demand Draft/Pay Order issued by a Scheduled Bank in favour of the General Manager, Food Corporation of India, Shillong and payable at

Shillong. Tenders not accompanied by earned money in the form prescribed above shall be summarily rejected.

The earnest money shall be liable to forfeiture if the tenderer after submitting his render resiles from or modifies his offer and or the terms and conditions thereof in any manner, it being understood that the tender documents have been made available to him and he is being permitted to tender in consideration of his agreement to this stipulation. The earnest money is also liable to be forfeited in the event of the tenderers failure, after the acceptance of his tender, to furnish the requisite security deposit by the due date without prejudice to any other rights and remedies of Corporation under contract and law. The earnest money will be returned to all unsuccessful tenderers as soon as practicable after decision on tenders and to a successful tenderer, after he has furnished a security deposit, if the successful tenderer does not desire the same to be adjusted towards the security deposit. No interest shall be payable on the amount of earnest money, in any case."

14.1. I have meticulously perused the said clause of the tender document and also have considered the submission of learned counsel for the FCI. On careful reading of the Clause 4, in the opinion of this Court, it has three components. First part speaks about deposit of earnest money along with the tender as a condition precedent to submit his/her bid/offer.

The second part is about the situations under which the FCI can forfeit the EMD accompanying the tender submitted by the bidder/contractor. Under this second part it is clearly stated that the EMD can only be forfeited if the tenderer/contractor after submitting his tender resiles from or modifies his offer and/or the terms and conditions thereof in any manner whatsoever since stipulations mentioned in the tender documents are binding on the bidders. It is further stated that the earnest money is also liable to be forfeited in the event of the tenderer's failure after the acceptance of his tender, to furnish the requisite security deposit by the due date without prejudice to any other rights and remedies of Corporation/FCI under the contract and law. The first and the second part do not create any such contingency giving liberty to the FCI to forfeit or set off the EMD for the loss it suffered/incurred from other contracts entered into

with the contractor due to the non-performance or unsatisfactory performance of the contract works by the said contractor.

The third part deals with the FCI's obligation to return/refund the EMD. The third part stipulates that the EMD would be returned to all unsuccessful tenderers as soon as practicable after decision on tenders and to a successful tenderer after he has furnished a security deposit, if the successful tenderer does not desire the same to be adjusted towards the security deposit. However, in such cases, the contractor cannot claim interest on the amount of earnest money deposited with the FCI.

So, on plain reading of Clause 4 above, it can safely be said that in absence of any of the contingencies mentioned in the second part of the said clause, the FCI/Corporation has no right to withhold or to set it off or forfeit the EMD and the Corporation is under obligation to return the EMD to the unsuccessful bidders.

14.2. In the instant case, there was no fault of the tenderer/contractor i.e. the petitioner in submitting her tender. The petitioner had fulfilled all the essentialities mentioned in "Instruction of bidders". Neither the contractor resiled from nor modified the terms and conditions made at the time of submitting the tender. The petitioner only participated in the tender process and was unsuccessful. Furthermore, the respondents denied to refund the EMD despite repeated requests and demand notices served by the petitioner, and, forfeited the same on the ground that the respondents had suffered huge loss due to the failure of the contractor in execution of other contracts by invoking Clause XII(e) of the tender document/agreement.

14.3. In my opinion, failure to return the EMD to the petitioner after she was unsuccessful is unreasonable, arbitrary and contrary to Clause 4

stated above. As such, the FCI-Corporation is liable to pay interest for its failure to fulfill its solemn obligation to return the EMD to the petitioner as stipulated at the third part of Clause 4 analysed here-in-above. In this circumstance, the EMD amount shall definitely fetch interest for its erroneous and arbitrary exercise of power under the garb of Clause XII(b) and XII(e) of the contract.

15.

In view of the above analysis on law and facts and for the reasons recorded here-in-above, the impugned order dated 09.06.2023 issued by the respondent no.2 whereby the claim of the petitioner for refund of the EMD was rejected is hereby set aside and quashed. The FCI is directed to return/refund EMD with interest at the rate of 6% per annum payable from the date when the earnest money was deposited by the petitioner till its refund. The entire process shall be completed within a period of 30(thirty) days from the date the copy of this judgment shall be received by the FCI authority at Agartala.

The instant writ petition stands allowed in the above terms.

JUDGE

Snigdha

SAIKAT KAR by SAIKAT KAR Date: 2024.06.20 16:22:06 +05'30'

HIGH COURT OF TRIPURA AGARTALA WP(C) No.613 of 2023 Smt. Namita Paul, W/o Sri Swapan Kumar Paul, resident of B.K Road, PO- Agartala, PS-East Agartala, District-West Tripura .....Petitioner Versus 1. Food Corporation of India, represented by its Managing Director, having its Head Office at 16-20 Barkhamba Lane, New Delhi-110001. 2. The General Manager, Food Corporation of India, NEF Region, Mawlai, Mawroh, Shillong-793008. 3. Assistant General Manager (Cont.), Food Corporation of India (RO:NEF), Mawlai, Mawroh, Shillong-793008. 4. The Divisional Manager, Food Corporation of India, Colonel Chowmuhani, Agartala, P.S-West Agartala, District-West Tripura …..Respondents For the Petitioner(s) : Mr. Raju Datta, Advocate Mr. Kundan Pandey, Advocate For the Respondent(s) : Mr. Ratan Datta, Advocate Date of hearing & delivery : 14.05.2024 of judgment & order Whether fit for reporting : HON'BLE MR. JUSTICE ARINDAM LODH