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2015 Supreme(Cal) 714
HIGH COURT OF CALCUTTA
Joymalya Bagchi, J.
Prasanta Ghosh - Petitioner
Versus
State of West Bengal & Ors. - Respondents
W.P. No. 7659 (W) of 2015
Decided On : 21-12-2015
For the Petitioner: Mr. Kaushik Dey
For the Respondent: Mr. Bodhisatho Biswas
For the State : Mr. Saugata Bhattacharya
The power of a tendering authority to forfeit bid security is limited to the circumstances specified in the tender document and cannot be exercised arbitrarily.
Headnote:
BID SECURITY FORFEITURE - AUCTION OF ROAD SIDE TREES - WEST BENGAL HIGHWAY DEVELOPMENT CORPORATION LIMITED - TENDER CONDITIONS - INTERPRETATION - FORFEITURE OF INITIAL BID SECURITY - POWER OF TENDER AUTHORITY - STRICT CONSTRUCTION OF FORFEITURE CLAUSE - NO POWER TO FORFEIT INITIAL BID DEPOSIT FOR FAILURE TO DEPOSIT REMAINDER OF BID SECURITY - FORFEITURE CLAUSE TO BE EXERCISED STRICTLY IN TERMS OF TENDER CONDITIONS.
Fact of the Case:
Petitioner submitted a bid along with bid security money for an auction of roadside trees. The highest bidder, the petitioner was issued a provisional acceptance letter and was required to submit the balance security money within 10 days. The petitioner failed to make the deposit within the stipulated time and requested an extension, which was denied. The initial bid security was forfeited by the respondent authority.
Finding of the Court:
The court held that the power of the tendering authority to forfeit the bid security or part thereof shall arise only if the tenderer fails to pay the full bid price and not when he has failed to pay the remainder of the security. The court found that the impugned letter of forfeiture categorically mentioned that the forfeiture was made under the tender terms and that the authority cannot be permitted to make out a different case.
Issues: Whether the tendering authority had the power to forfeit the initial bid security for failure to deposit the remainder of the bid security.
Ratio Decidendi: The court held that the forfeiture clause being in the nature of a penalty ought to be construed strictly. The court found that the tender document categorically provided in clause 4 the circumstances under which forfeiture may be made, and that the power of forfeiture is to be exercised strictly in terms of the said clause and not otherwise.
Final Decision: The court quashed the impugned letter dated 20.01.2014 forfeiting the initial bid security and directed the respondent authority to refund the initial deposit of Rs.3 lac within 10 days from the date of communication of the order.
Joymalya Bagchi, J.
Decision of the tendering authority to forfeit a part of the bid security is under challenge. The respondent/tendering authority had issued a notice inviting tender dated 29.10.2013 for auction of road side standing trees. The relevant terms of the said tender are as follows:-
“2. Bid shall remain valid for a period of 30(thirty) days after the date of bid opening. In exceptional circumstances the bidder may be requested to extend the bid validity period by Managing Director, WBHDCL. Bid after submission cannot be modified.
3. All bids must be accompanied by a Bid security (Earnest money) Rs.3,00,000.00 (Three lac only) in the form of demand draft/BG payable at Kolkata on any nationalized bank or on any scheduled bank in favour of the “Managing Director, West Bengal Highway Development Corporation Limited”. Bid security shall be submitted in a separate sealed envelope inside the outer envelope and shall be marked “Bid Security” & also bear the above identification.
4. Bid security (Earnest money) shall be forfeited & credited to government as per govt. Rule in the following cases:-
a. If the Bidder withdraws his Bid during the period of Bid validity.
b. If the successful Bidder fails to deposit full Bid price (highest Bid value) within the stipulated time (as decided by the tendering authority) after issuance of acceptance letter.
5. Bid security of the successful bidder will be returned after the successful Bidder deposits the total offered price or immediately after the Bid validity which is earlier. Bid security (Earnest money) which will be converted or Earnest Money of the successful bidder will be returned after felling the standing trees & removal of the trees duly observing the condition laid in Sl 16 i) to v) & other forest rules as amended time to time.
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12. The successful Bidder shall have to deposit the full additional amount to cover the Bid Security @ 10% of Bid value separately in the form of Bank draft payable at Kolkata on any scheduled Bank drawn in favour of the “Managing Director, West Bengal Highway Development Corporation Limited” positively within 10(ten) days from the date of issue of the letter of acceptances stipulated in acceptance letter. The Earnest Money of the successful bidder will be kept as Security Money till removal of Stumps & roots of the standing trees fully as condition laid as per term & condition in the Auction notice. No interest is payable on Bid security.
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16. Norms of cutting & lifting of the standing trees after auction are as follows:-
i. The auctioned trees shall have to be cleared from road side (both left & right) by cutting, uprooting, removal of stumps & roots thoroughly & lifting the same including refilling the area with suitable earth (specification decided by tendering authority) at their own cost. The said work will be started as per schedule as laid in lifting order/work order within 30(thirty) days positively from the date of lifting/work order for the interest of Govt. works as well as public works.
ii. During lifting the purchaser shall have to abide by the provisions of the relevant Indian Forest Acts/different rules as issued by the Forest Deptt. & the West Bengal forest produce transit Rule 1959 & as amended time to time.
iii. the purchaser or his duly authorized agent only will have the authority for lifting logs & other portion of trees. The letter of authority must declare that the purchaser shall be held responsible for any irregularity committed by his authorized agent.”
2. In terms of the aforesaid tender, the writ petitioner submitted his bid along with bid security money to the tune of Rs.3 lac. The price quoted by the petitioner being the highest a provisional acceptance letter was issued by the respondent authority dated 25.11.2013 in his favour whereupon the respondent authority called upon the writ petitioner to submit balance security money (8% of the bid reserved price to the tune of Rs.12 lac) within 10(ten
