Rajesh Babu v. BSNL and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE V.G.ARUN** **MONDAY, THE 29TH DAY OF JUNE 2020 / 8TH ASHADHA, 1942** ## **WP(C).No.9777 OF 2020(V)** ## **PETITIONER/S:** **RAJESH BABU AGED 41 YEARS S/O. M.V BABU, PROPRIETOR, UNIVERSAL TELESERVICES, ST. GEORGE BUILDING, PULAMON (PO) KOTTARAKKARA, KOLLAM DISTRICT, PIN 691 531** **BY ADVS. SRI.M.V.THAMBAN SRI.R.REJI SMT.THARA THAMBAN SRI.B.BIPIN** ## **RESPONDENT/S:** **1 THE CHIEF GENERAL MANAGER TELECOM BHARAT SANCHAR NIGAM LIMITED, KERALA CIRCLE, DOORSANCHAR BHAVAN, PMG JUNCTION, THIRUVANANTHAPURAM PIN 695 033 2 THE PRINCIPAL GENERAL MANAGER TELECOM, BHARAT SANCHAR NIGAM LIMITED, THRISSUR, BSNL SANCHAR BHAVAN, THRISSUR, PIN 680 222 3 THE ASSISTANT GENERAL MANAGER (PLANNING) OFFICE OF THE GENERAL MANAGER, TELECOM, BHARAT SANCHAR NIGAM LIMITED, THRISSUR, BSNL, SANDAR BHAVAN, THRISSUR, PIN 680 222** **R1-3 BY SRI.MATHEWS K.PHILIP, SC, BSNL** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22-06-2020, THE COURT ON 29-06-2020 DELIVERED THE FOLLOWING:** _**WP(C).9777/2020**_ 2 ## **V.G.ARUN, J. ----------------------------------------------W.P(C).No.9777 of 2020 ----------------------------------------------Dated this the 29[th] day of June, 2020** ## **JUDGMENT** The petitioner is aggrieved by the rejection of his tender, for which Letters of Intent (LOI) were issued to him for awarding the contract of maintenance of landline and broadband connections in Kodungallur, Perinjanam and Cherpu Clusters in Thrissur Business Area of the Bharat Sanchar Nigam Limited (BSNL). By the decision under challenge, the petitioner has also been banned from participating in future tenders of the BSNL within the Thrissur Business Area for a period of three years from 9.4.2020. 2. The essential facts, necessary for adjudication of the dispute raised in the writ petition, are as follows; The petitioner had participated in the tender conducted by the 3rd respondent based on Exhibit P1 notice dated 11.2.2020. Being the lowest bidder, the 3rd respondent decided to award the contract to the petitioner and LOIs were issued with respect to the three clusters, requiring the petitioner to pay the requisite security deposit and execute the agreement before 15.3.2020. Though the agreement was executed on 13.3.2020, only 25% of the amount to be remitted as security deposit was provided by way of bank guarantee. The agreement and bank guarantee were sent through registered post on 19.3.2020. On 3.4.2020, the 3rd respondent issued Exhibit P2 email requesting the _**WP(C).9777/2020**_ 3 petitioner to remit the security deposit on or before 6.4.2020 and informing that, failure to provide the security deposit will entail action under Clause 13 of Section V of the tender document. In the meanwhile, the Government had imposed the nationwide lockdown from 24.3.2020 onwards. By Ext. P3 dated 6.4.2020 the petitioner replied that due to the lockdown he could not obtain stamp papers for executing bank guarantee towards security deposit and assured that he will furnish bank guarantee as and when stamp paper is obtained. Thereupon, by Exhibit P4 communication dated 9.4.2020, the petitioner was informed that the competent authority had decided to cancel the LOIs and reject his tender for failure to pay the security deposit. It was informed that a decision had also been taken to ban the petitioner's firm from participating in future tenders of BSNL within the Thrissur Business Area for a period of three years from 9.4.2020. 3. Heard Sri.R.Reji, learned counsel for the petitioner and Sri.Mathews K.Philip, learned Standing Counsel for BSNL. 4. The learned counsel for the petitioner assails the rejection of tender by contending that, the lockdown having come into effect within the time granted for providing security deposit (6.4.2020), the 3rd respondent could not have rejected the tender alleging non-compliance of the condition. It is submitted that the condition had become impossible to perform. Relying on Exhibit.P8, it is contended that the condition of providing bank guarantee along with the agreement has been waived by the BSNL. In support of this contention, it is submitted that the petitioner has been awarded a similar tender in the _**WP(C).9777/2020**_ 4 Pathanamthitta Business Area of the BSNL and that Exhibits. P10 to P13 would prove that the petitioner was permitted to proceed with that work without insisting on prior payment of security deposit, accepting the petitioner’s undertaking that he would furnish the bank guarantee later. It is hence contended that the reason stated for rejection of the tender is unsustainable and the action of the 3rd respondent, arbitrary and irrational. Finally it is contended that in any event, blacklisting of the petitioner’s firm without being put on notice about the proposed action is patently illegal and unsustainable. 5. Explaining the circumstances which culminated in Exhibit.P4, the learned Standing Counsel submits that, initially a notice inviting tender for the 26 clusters in Thrissur Business Area was published by the 3rd respondent on 4.1.2020. After processing, the tender for 21 clusters was finalised. For the remaining five clusters, re-tender was notified on 24.2.2020 and after due process, the petitioner's bid was accepted for the Kodungallur, Perinjanam and Cherpu clusters. Exhibits R1(a),(b) and (c) are pointed out to be the LOIs issued to the petitioner, the terms of which required the petitioner to remit the security deposit and execute the agreement on non-judicial stamp paper on or before 15.3.2020. As per Section V Clause 13 of the tender document, it was incumbent upon the tenderer to deposit an amount equal to 5% of the total contractual value inclusive of GST at 18% as security deposit within seven days from the date of acceptance of the tender. On the petitioner failing to remit the security deposit within the time limit, he was repeatedly contacted over the phone and the petitioner had assured that he will submit the bank guarantee in a day or two. _**WP(C).9777/2020**_ 5 6. Since the petitioner failed to keep his promise, Exhibit R1(e) mail was sent on 20.3.2020, pointing out that the petitioner was yet to pay the security deposit and informing him that maintenance works of the exchanges under the three clusters was badly hit due to the delay in commencement of the outsourced contract. The petitioner did not respond to Ext. R1(e). 7. While so, nationwide lockdown was imposed from 24.3.2020 onwards. Since the petitioner had informed the third respondent that he had arranged bank guarantee towards security deposit, Exhibit P2 was sent, requesting him to pay the security deposit on or before 6.4.2020 and to show cause for the delay in payment. By Exhibit. P2 petitioner was also put on notice that failure to provide security deposit within the extended time, will result in action as per clause 13 of Section 5 of the tender document. The petitioner having failed to furnish security deposit even within the extended time, the LOIs were cancelled, the tender rejected and the petitioner banned from participating in future tenders. Thereafter, the work was awarded to another contractor on 12.5.2020 pursuant to a re-tender. 8. The learned Standing Counsel argues that the petitioner had time till 15.3.2020 for providing the security deposit and having failed to do so, he cannot project the lockdown imposed on 24.3.2020 as an excuse for his failure to do the needful within even the extended time limit. It is submitted that having entered into the contract with open eyes and having violated the terms of the contract, the petitioner cannot seek refuge in an event which had occurred several days after the time limit originally prescribed and some days into the _**WP(C).9777/2020**_ 6 extended time limit. It is contended that, by his own conduct, the petitioner has rendered himself disentitled for any discretionary relief. 9. In answer to the contention based on Exhibit. P8, it is submitted that, Exhibit. P8 pertains to a different work and moreover the communication was issued after imposition of the lockdown, which compelled some changes to be brought about to the terms of contract. It is pointed out that the time granted to the petitioner under Exhibit P10, for the work awarded to him in the Pathanamthitta Business Area, was up to 18.4.2020, which again was during the lockdown period and that is the reason for relaxing the condition regarding furnishing of security deposit. 10. I find substantial force in the submissions made by the learned Standing Counsel. The parties to the contract are bound by its terms and any deviation can only be at the volition of both the contracting parties. Here, the LOIs stipulated 15.3.2020 to be the time limit within which the agreement was to be executed and security provided. The petitioner failed to abide by the condition and the 3rd respondent was gracious enough to extend the time limit till 6.4.2020. Having failed to comply with the conditions even within the extended time limit, the petitioner cannot cite the lockdown as reason for non-compliance. In this context it is relevant to note that the tender document and LOI provides for payment of security deposit by way of Demand Draft, Post Office Savings Bank Deposit, Fixed Deposit Receipt and Bank Guarantee. There was no impediment for payment of the security deposit in any of these modes before 15.3.2020, the date originally fixed, or prior to 24.3.2020, when the lockdown was imposed. The _**WP(C).9777/2020**_ 7 petitioner cannot adopt the stand that the time limit, for complying with the condition, having been extended till 6.4.2020, he had waited till the last moment and in the meanwhile lockdown was imposed making it impossible to comply with the condition. 11. Viewed from the perspective of the respondents, they had every right to cancel the LOI, on the petitioner failing to provide security deposit within the extended time. Being a public authority, it was imperative for the respondents to have made alternative arrangements for carrying out the work of maintenance and upkeep of landline and broadband connections, especially in the present scenario, when the public is apprehensive about spread of the Coronavirus, which require many of them to remain at home, and the only means of communication and contact with the outside world for such persons being the telephone and internet. 12. The Honourable Supreme Court has time and again cautioned the writ courts from interfering with contractual matters, especially when one of the contracting parties is the Government and larger public interest is at stake. In ## _**Municipal Corporation, Ujjain and Another v. BVG India Limited and Others**_ [(2018) 5 SCC 462), after exhaustive reference to precedents, the Apex Court made the following observation at Paragraph 35: “ _35. Evaluating tenders and awarding contracts are essentially commercial transactions/contracts. If the decision relating to award of contract is in public interest, the Courts will not, in exercise of the power of judicial review, interfere even if a procedural aberration or error in awarding_ _**WP(C).9777/2020**_ 8 _the contract is made out. The power of judicial review will not be permitted to be invoked to protect private interest by ignoring public interest. Attempts by unsuccessful bidders with an artificial grievance and to get the purpose defeated by approaching the Court on some technical and procedural lapses, should be handled by Courts with firmness. The exercise of the power of judicial review should be avoided if there is no irrationality or arbitrariness. In the matter on hand, we do not find any illegality, arbitrariness, irrationality or unreasonableness on the part of the expert body while in action. So also, we do not find any bias or mala fides either on the part of the corporation or on the part of the technical expert while taking the decision. Moreover, the decision is taken keeping in mind the public interest and the work experience of the successful bidder.”_ 13. The facts and circumstances under which the decision referred to in Exhibit P4 was issued, do not project any case of arbitrariness or irrationality and on the other hand, fully justify the action of the respondents. 14. Even if the cancellation was justified, could the respondents have gone on to blacklist the petitioner is the other issue. It is settled law that before blacklisting a person, an opportunity to show cause against the proposed action should be provided. In _**Erusian Equipment & Chemicals Ltd. v. State of W.B.**_ **,** **[(1975) 1 SCC]** , the effect of blacklisting by the Government was considered and the legal position succinctly explained in the following words: “ _17. The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. This privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats_ _**WP(C).9777/2020**_ 9 _privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation._ _**18.** Exclusion of a member of the public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in the goods in discriminating against him in favour of other people. The State can impose reasonable conditions regarding rejection and acceptance of bids or qualifications of bidders. Just as exclusion of the lowest tender will be arbitrary, similarly exclusion of a person who offers the highest price from participating at a public auction would also have the same aspect of arbitrariness._ _19. Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It will depend upon the nature of the interest to be affected, the circumstances in which a power is exercised and the nature of sanctions involved therein._ _20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist._ ” _**WP(C).9777/2020**_ 10 15. No opportunity having been granted to the petitioner before banning him from participating in future tenders, the decision conveyed through Exhibit. P4, to the extent it has the effect of blacklisting the petitioner, is quashed. In result, the writ petition is allowed in part by dismissing the challenge against rejection of the petitioner’s tender and setting aside the ban imposed on the petitioner from participating in future tenders. The parties shall suffer their respective costs. Sd/- **V.G.ARUN, JUDGE** _vgs_ _**WP(C).9777/2020**_ 11 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** - **EXHIBIT P1 TRUE COPY OF THE EXTRACT OF TENDER NO. AGM PLG/TCR/RETENDER /EXTL PLANT MTCE/OUTSOURCING/2019-20/3 DATED 11-02-2020 ISSUED BY THE THIRD RESPONDENT** - **EXHIBIT P2 TRUE COPY OF THE LETTER DATED 03-04-2020 BY THE 3RD RESPONDENT** - **EXHIBIT P3 TRUE COPY OF THE LETTER SENT TO THE 3RD RESPONDENT DATED 06-04-2020** - **EXHIBIT P4 TRUE COPY OF THE LETTER NO. AGM PLG/TCR/TETENDER/EXTL PLANT MTCE/OUTSOURCING/2019-20/21 DATED 09-042020 OF THE 3RD RESPONDENT** - **EXHIBIT P5 TRUE COPY OF THE AGREEMENT DATED 02-03-2020 IN RESPECT OF PERINJANAM CLUSTER.** - **EXHIBIT P6 TRUE COPY OF THE PERFORMANCE BANK GUARANTEE DATED 13-03-2020 IN RESPECT OF PERINJANAM CLUSTER** - **EXHIBIT P7 TRUE COPY OF THE EXTRACT OF TENDER NO. PLG/TCR/RETENDER/3 CLUSTERS/EXTL PLANT MTCE/OUTSOURCING/2019-21/2 DATED 09-04-2020 ISSUED BY THE 3RD RESPONDENT** - **EXHIBIT P8 TRUE COPY OF THE LETTER DATED 27-03-2020 OF THE GENERAL MANAGER, CORPORATE OFFICE, NEW DELHI** - **EXHIBIT P9 TRUE COPY OF THE LETTER BY THE 1ST RESPONDENT** - **EXHIBIT P10: COPY OF LETTER OF INTENT DATED 3.4.2020 EXHIBIT P11: COPY OF UNDERTAKING DATED 18.4.2020. EXHIBIT P12: COPY OF BANK GUARANTEE EXECUTED BY THE PETITIONER DATED 4.5.2020. EXHIBIT P13: COPY OF INVOICE PERFORMA DATED 13.6.2020 HAVING CLUSTER I KLPTA013**