The authority's right to forfeit bid security amount and debar a bidder for withdrawal from a contract was upheld as a prudent commercial decision.

Sanjay Kishan Kaul, J.

1. The National Highways Authority of India (for short "NHAI?)/Respondent No. 1, issued a request for qualification in November, 2010 for a six-laning project of Dhankuni-Kharagpur Section of NH-6 from 17,600 to 1,29,000 in the States of West Bengal and Orissa under the National Highway Development Projects Phase-V on design, build, finance, operate, transfer and toll basis. The Petitioner, a public limited company, submitted its bid on 10.01.2011. The bid submitted by the Petitioner and other bidders were processed and by a letter of award dated 17.01.2011, Respondent No. 2 informed the Petitioner that its bid had been accepted and that the Petitioner should execute the relevant documents in that regard.

2. It is the say of the Petitioner that on account of various factors including amendments, perceived insufficient time etc., the bid submitted by the Petitioner was significantly higher than it should have been and thus the Petitioner came to the conclusion on 24.01.2011 that the bid made by it was commercially unviable. This fact was intimated to Respondent No. 2 on 24.01.2011 within the period of 7 days prescribed for the Petitioner to execute the necessary documents.

3. As a sequitur to this, Respondent No. 2 informed other bidders, and ultimately the contract was awarded to M/S. Ashoka Buildcon Limited at a much lower premium of Rs 126.06 crores. We may notice at this stage that the Petitioner had specified a premium of Rs 190.53 crores.

4. All the bidders were to submit a bid security amount of Rs. 13.97 crores. Part "D? deals with the bid security amount. Clause 2.20.6 envisages forfeiture of bid security amount in the following terms:

2.20.6 The Authority shall be entitled to forfeit and appropriate the Bid Security as Damages inter alia in any of the events specified in Clause 2.20.7 herein below. The Bidder, by submitting its Bid pursuant to this RFP, shall be deemed to have acknowledged and confirmed that the Authority will suffer loss and damage on account of withdrawal of its Bid or for any other default by the Bidder during the period of Bid validity as specified in this RFP. No. relaxation of any kind on Bid Security shall be given to any Bidder.

5. The aforesaid amount was agreed as a genuine pre-estimate of compensation in respect of the eventuality set out in the Clause 2.20.7. The facts of the case fall within such an eventuality where a contractor fails to sign and return a duplicate copy of the LOA. Clause 2.20.7 reads as under:

2.20.7 The Bid Security shall be forfeited and appropriated by the Authority as mutually agreed genuine pre-estimated compensation and damages payable to the Authority for, inter alia, time, cost and effort of the Authority within prejudice to any other right or remedy that may be available to the Authority hereunder or otherwise, under the following conditions:

a) If a Bidder submits a non-responsive Bid, "subject however that in the event of encashment of bid security occurring due to operation of para 2.20.7 (a), the damage so claimed by the authority shall be restricted to 5% of the value of the bid security.;

b) If a Bidder engages in a corrupt practice, fraudulent practice, coercive practice, undesirably practice or restrictive practice as specified in Clause 4 of this RFP;

c) If a Bidder withdraws its Bid during the period of Bid validity as specified in this RFP and as extended by mutual consent of the respective Bidder(s) and the Authority;

d) In the case of Selected Bidder, if it fails within specified time limit -

i) To sign and return the duplicate copy of LOA;

ii) To sign the Concession Agreement; or

iii) To furnish the Performance Security within the period prescribed therefore in the Concession Agreement; or

e) In case the Selected Bidder, having signed the Concession Agreement, commits any breach thereof prior to furnishing the Performance Security.

6. It is in view of the aforesaid facts and circumstances that Respondent No. 2 took a decision to en