The submission of forged bank guarantees constitutes a serious breach of contract, justifying termination under the General Conditions of Contract, as fraud vitiates all transactions.

JUDGMENT :

(Amit Borkar, J.)

1. The petitioner, invoking the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India, challenges the notice of termination dated 30 October 2024, issued by the respondents. The termination pertains to the contract awarded to the petitioner in furtherance of a tender process concerning the provision of Goods Shed facilities, construction of buildings, and the development of critical railway infrastructure.

2. The relevant facts and circumstances leading to the filing of this writ petition are summarized below to provide context to the dispute.

On 1 June 2023, the respondents issued e-Tender Notice No. CAOC-12-2023, inviting bids for a comprehensive railway infrastructure development project. The project encompassed the provision of Goods Shed facilities, construction of a track machine rest house, construction of an E1 building, platform surfacing work, supply of ballast, completion of balance earthwork in ANG, VLD, and RRI yards, and the construction of four major bridges at the Manmad entry arrangement in connection with the Daund-Manmad Doubling Project.

3. The petitioner, being one of the bidders, was awarded the contract after meeting the eligibility criteria and completing the tender formalities. In compliance with the contractual requirements, the petitioner furnished a performance bank guarantee on 9 November 2023 for an amount of Rs.7,66,63,700/- issued by IDBI Bank Ltd. This guarantee was verified by the respondents through their communication dated 21 November 2023. Subsequently, the petitioner submitted additional bank guarantees issued by Yes Bank Ltd., details of which are as follows: Rs.8,43,30,100/- dated 16 April 2024; Rs.15,33,230/- dated 17 May 2024; and Rs. 8,58,63,330/- dated 17 May 2024.

4. All these guarantees were subjected to the respondents’ standard verification procedures and were confirmed to be genuine at that stage. Upon completion of these formalities, the petitioner commenced the execution of the work, deploying resources, machinery, and manpower at the designated project sites. According to the petitioner, the progress of the work was satisfactory and exceeded the cumulative value of all the submitted bank guarantees. The petitioner asserts that it adhered to all contractual terms and complied with the work schedules and timelines stipulated under the contract.

5. On 18 September 2024 and 20 September 2024, the respondents issued letters to IDBI Bank and Yes Bank seeking re-verification of the bank guarantees submitted by the petitioner. This was done despite the fact that these guarantees had already been verified during the initial stages of the project.

6. Subsequently, based on material received by the respondents, a show-cause notice dated 25 September 2024 was issued to the petitioner. The show-cause notice alleged that the bank guarantees submitted by the petitioner were forged and fabricated documents. It was contended that these guarantees had been fraudulently submitted by the petitioner to fulfill the performance guarantee and mobilization advance requirements under the contract. The respondents relied upon Clause 62 of the General Conditions of Contract (GCC), which mandates the submission of valid performance guarantees and authorizes the respondents to terminate the contract, forfeit the bid security, and recover other dues in case of non- compliance. The notice further warned the petitioner that the alleged forgery constituted a serious breach of trust and misrepresentation, which rendered the petitioner ineligible to continue with the project. The respondents also invoked the relevant provisions of the contract to debar the petitioner from participating in any re-tender process for the same work.

7. In response, the petitioner submitted a preliminary reply dated 27 September 2024. It was stated that due to the arrest of its director by investigation agency, the verification of the genuineness of the bank guarantees was