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2020 Supreme(Pat) 438

IN THE HIGH COURT OF JUDICATURE AT PATNA
BIRENDRA KUMAR, J.
M/s Khushee Construction through its Power of Attorney Holder, namely Shree Rajeev Kumar – Appellant
Versus
The State of Bihar – Respondent
Civil Writ Jurisdiction Case No.3963, 4020 of 2020
Decided on : 03-09-2020

Advocates:
Advocate Appeared:
For the Appellant : Mr.P.K.Shahi, Sr. Adv with Mr.Vikas Kumar, Adv
For the Respondent: Mr.Anjani Kumar, Sr.Adv and A.A.G.

Headnote:

Government Contract – Tender – Cancellation of contracts mainly on the ground that petitioner had obtained contract by producing false papers of postal deposits which was against provisions contained in scheme of tender and affidavit of petitioner – When a public authority makes an order affecting right and interest of others, aggrieved person must have reasonable opportunity of hearing before order is passed – Likewise impugned order must reflect application of mind by authority and brief reasons in support of orders supported by material on record – If aggrieved party has raised certain issues for consideration before authority concerned and issues raised were likely to affect consideration, authorities were duty bound to consider those issues while passing orders – No reasonable opportunity of hearing (only 3 days time was given) was allowed to petitioner before passing impugned order – Record does not reveal that show cause notice was ever served on petitioner before due date – Impugned order was passed in violation of principles of audi alteram partem – Impugned order does not show that authority had passed impugned order on application of its own mind rather impugned order was passed on dictate of superior authority – Impugned orders are not sustainable in law. (Paras 10, 13 and 15)

Government Contract – Tender – Cancellation of contracts – Fraud vitiates every solemn act – Party pleadings fraud must prove it – There is no case of indulgence of petitioner in corrupt practices in obtaining contract – Requirement to prove allegation of fraud is that there must be intention to deceive – Intention cannot be attributed unless there is material to establish that petitioner had knowledge that documents produced by him were false documents – Petitioner cannot be alleged to be indulged in fraudulent act – Any such stipulation in any agreement or otherwise contrary to mandates of Contract Act would be non-est to that extent – Respondents have failed to prove that petitioner obtained contract by practicing fraud or representation of nature which would justify cancellation of agreements – As such, act of respondents has infringed valuable legal right of petitioner in illegally loosing contract work – Impugned orders quashed. [Sections 17 and 19 of Contract Act, 1872]. (Paras 16, 17, 21, 22, 25 and 30)

Estoppel – Doctrine of promissory estoppel is applicable against Government actions as well – Estoppel by conduct includes act or omission on part of one party giving assumption to other party to act taking omission as employed acceptance – Petitioner submitted unknowingly false document of deposit in post office alongwith tender papers as earnest money – Respondents did have verify genuineness of postal papers before acceptance of lowest bid of petitioner – Inaction/omission on part of respondents and issuance of work order by respondents in pursuance of tender in favour of petitioner as well as communication to petitioner regarding acceptance of tender would amount to conduct of respondents giving reasonable belief to petitioner that his papers were in order – Conduct of respondents clearly makes out a case of application of estoppel by conduct against respondents inasmuch as inaction/omission of respondents at different stages made petitioner to assume about correctness of everything and consent of respondents to proceed with work – In the circumstance, cancellation of agreements unilaterally by respondents was arbitrary one affecting legal right of petitioner to proceed with performance of contract. (Paras 26, 28 and 29)

JUDGMENT :

Since both the writ applications, under Article 226 of the Constitution of India, have been brought by the same petitioner raising same questions of law to be adjudicated and the respondents have defended the impugned orders on common grounds, hence, both have been heard together and are being disposed off by this common judgment.

Facts of CWJC No.3963 of 2020.

2. The petitioner is a partnership firm engaged in the business of Govt. contract, registered as Class-I contractor. Respondent No.8, the Executive Engineer, PHED, Saharsa Division floated tenders on 15.06.2019. The technical bids of tenders were opened on 16.08.2019 and financial bid in July-August, 2019. Since the petitioner was the lowest bidder, its bid was accepted by the respondent No.8 and work order was issued in favour of the petitioner in between 19.09.2019 to 18.12.2019 for execution of different contracts, total 118 signed between the parties. A list of contract between the parties are at Annexure-4 series.

3. The petitioner had submitted earnest money in the form of certificate of deposits in the post-office which was adjusted against the 2% performance security submitted at the time of agreements. In pursuance of the agreements aforesaid, the petitioner started execution of the work. Thereafter, the papers of post-office deposit were sent for verification and it was reported that the same were not genuine. The respondent No.8 informed to the petitioner about that and the petitioner submitted papers of fixed deposits in the IDBI Bank and substituted the same with the postal securities and respondent No.8 returned the postal securities to the petitioner and kept the deposits of IDBI Bank as part of the performance security money. The respondent No.8 got the Bank papers verified and the same were found genuine.

4. Thereafter, show cause notice was issued to the petitioner on 28.12.2019 and the reminder on 04.01.2020. In compliance of the aforesaid show cause, the petitioner submitted its reply on 07.01.2020. Thereafter, all the abovementioned 118 contracts were cancelled by the impugned order dated 21.01.2020 vide order No.4 contained in Memo No.221 dated 21.01.2020 at Annexure-1.

5. The contracts were cancelled by the respondent No.8 mainly on the ground that the petitioner had obtained the contract by producing false papers of postal deposits which was against the provisions contained in the scheme of tender and affidavit of the petitioner.

Facts of CWJC No.4020 of 2020.

6. The same petitioner had entered into 26 agreements, being the lowest bidder, with respondent No.7-the Executive Engineer, PHED, Purnea Division. Copies of the agreements are at Annexure-3 series. In this case also, the petitioner had deposited earnest money in the form of deposits in the same post-office at Mithapur Branch, Patna. Here also, the documents of postal deposit were not found genuine and the petitioner substituted the same with the term deposits document in the IDBI Bank which are at Annexure-4 series and the respondents accepted the substitution of the document before issuance of show cause notice to the petitioner on 10.01.2020. On consideration that the documents of the earnest money in the form of deposit in the post-office were not genuine, by the impugned order dated 22.01.2020 contained in Order No.9 and Memo No.398 dated 22.01.2020 at Annexure-1. All the Twenty Six agreements were cancelled by the respondent No.7.

7. Mr. P.K. Shahi, learned senior counsel for the petitioner submits that both the impugned orders have been passed in a mechanical manner without assigning any reason. As such, the impugned orders are bad in law. Learned senior counsel submits that the reasons cannot be supplanted by counter affidavit or supplementary counter affidavit. Moreover, the impugned orders would reveal that the same have been passed on the dictate of superior authority. As such, the same are not based on personal satisfaction of the competent authority and for this reason also,

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