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IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, J.
The Indian Hotels Company Ltd. - Appellant
Versus
Union Of India & Ors. - Respondents
W.P.(C) 8779/2019, CM APPLs. 36308/2019 & 44738/2019
Decided On : 31-03-2022
The Delhi High Court quashed the impugned orders of the respondents forfeiting the bid security of the petitioner, a leading hotelier, on the grounds that the action was ultra vires, manifestly arbitrary, and not justified by the facts of the case.
Fact of the Case:
The petitioner, a leading hotelier, participated in an e-auction process conducted by the respondent for the development of a five-star hotel at the International Exhibition Cum Convention Center (IECC) at Pragati Maidan, New Delhi. The petitioner submitted a bid in the e-auction but did not submit a bid higher than the existing bid amount as submitted by another qualified bidder. The respondent subsequently forfeited the petitioner's bid security, claiming that the petitioner had withdrawn from the bidding process. The petitioner challenged the forfeiture of its bid security by filing a writ petition in the Delhi High Court.
Finding of the Court:
The Delhi High Court found that the respondent's action of forfeiting the petitioner's bid security was ultra vires, manifestly arbitrary, and not justified by the facts of the case. The Court held that the RFP did not contemplate a forfeiture of bid security in the event that a bidder failed to submit a price offer higher than the prevailing bid. The Court also held that the respondent's clarification during the pre-bid queries process did not become an integral part of the RFP so as to bind parties. Additionally, the Court found that the petitioner's failure to submit a higher bid did not amount to a withdrawal from the bidding process, as the e-auction process did not permit bidders to submit equivalent offers.
Issues: 1. Whether the respondent had the jurisdiction and authority to forfeit the bid security in terms of the provisions made in the RFP and the pre-bid queries which were addressed? 2. Whether the forfeiture was justified in the facts of the present case?
Ratio Decidendi: 1. The Court held that the RFP did not contemplate a forfeiture of bid security in the event that a bidder failed to submit a price offer higher than the prevailing bid. The Court also held that the respondent's clarification during the pre-bid queries process did not become an integral part of the RFP so as to bind parties. 2. The Court found that the petitioner's failure to submit a higher bid did not amount to a withdrawal from the bidding process, as the e-auction process did not permit bidders to submit equivalent offers.
Final Decision: The Delhi High Court quashed the impugned orders of the respondents forfeiting the bid security of the petitioner, a leading hotelier, on the grounds that the action was ultra vires, manifestly arbitrary, and not justified by the facts of the case. The respondents in consequence are hereby directed to refund the forfeited amount of Rs. 20 crores to the petitioner forthwith.
JUDGMENT
1. The writ petitioner has approached this Court aggrieved by the action of the second respondent in forfeiting the bid security which was submitted by it in the course of a process for award of contract initiated by that respondent. The challenge essentially is to the communication of 18 March 2019 & 28 May 2019 pursuant to which the second respondent apprised the petitioner of its decision to forfeit the bid security which had been submitted.
2. The second respondent had invited Requests For Proposal[1] for selection of developer cum operators of a proposed five-star hotel at the International Exhibition Cum Convention Center [IECC] at Pragati Maidan, New Delhi. The proposals were invited on terms which are set forth in the RFP which stands placed as Annexure P-6. The RFP was published on 06 December 2018.
[1] RFP
3. A process of pre-bid queries was initiated soon thereafter and on 20 December 2018 while addressing queries raised by a prospective bidder, the second respondent, while responding to that query, apprised all bidders that no refund of bid security would be permitted in case the bidder chose to withdraw from further participation after opening of technical bids. It becomes relevant to note that in terms of the provisions of the RFP, the bid security was prescribed to be Rs. 20 Crores. The relevant clause of the RFP dealing with Bid Security is extracted herein below: -
"3.3 RFP Fee and Bid Security
(a) As a part of the Proposal the interested Bidders will have to pay a non-refundable amount of INR 1,00,000 (Rupees one lakh only) plus Goods & Services Tax @ 18% (Eighteen Percent) as non-refundable processing fee ("RFP Fee") for the RFP through e- bidding portal's electronic payment gateway, details of which are provided in Annexure 7.
(b) The Bidder shall be required to submit bid security amounting to INR 20,00,00,000 (Rupees twenty crore only) through e-payment via e-bidding portal's electronic payment gateway ("Bid Security") at the time of RFP submission. Proposals received without specified bid security will be summarily rejected.
(c) Leasing authority will not be liable to pay any interest on the bid security. Bid security of unsuccessful bidders shall returned, without any interest within two months of signing the lease deed with the successful bidder or when the selection process cancelled by leasing authority. The bid security of the successful bidder will be returned after signing of lease deed or special purpose company as applicable and after receipt of performance guarantee."
4. The response as tendered by the second respondent with respect to the aforenoted query is extracted herein below: -
| S.No. | Clause Refer in the RFP | As per RFP | Query | Reply |
| 12. | Section 3, Clause 3.3 (c) | Leasing authority will not be liable to pay any interest on the bid security. Bid security of unsuccessful bidders shall be returned, without any interest within two months of signing the lease deed with the successful bidder or when the selection process cancelled by leasing authority. The bid security of the successful bidder will be returned after signing of lease deed or special purpose company as applicable and after receipt of performance guarantee. | i) The Bid Security of INR 20 crores should be refunded to any unsuccessful bidder within 7 working days from the declaration of the Successful Bidder. The RFP may be suitably amended incorporating this change. ii) The RFP should allow refund of the said Bid Security of INR 20 Crores to the entity submitting the same in case it wishes to withdraw from further participation, i.e., in the second stage of the bidding process. This refund should be made within 7 working days of the entity (bidder) informing the authority of its intention to not participate further in the bidding process. | Agreed- Bid Security of IN |
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