The court established that retention of a forfeited bank guarantee is unjustified when the basis for forfeiture is invalidated by subsequent findings, underlining the jurisdiction of courts in contractual disputes involving state entities.

JUDGMENT :

SACHIN DATTA, J.

1. The present petition has been filed by the petitioner being aggrieved by the encashment/forfeiture of the Bank Guarantee towards the Earnest Money Deposit (hereinafter referred as “EMD-BG”) amounting to Rs. 47,50,000/- by the respondent no.1/Ramagundam Fertilizers and Chemicals Ltd. The said EMD-BG was furnished on 16.12.2015 (with a validity up to 27.12.2016) by the petitioner while participating in a tender dated 09.11.2015 floated by the respondent no.2/Engineers India Ltd (EIL) for the work of “cooling tower and CWTP packages for revival of Ramagundam Fertilizers and Chemicals project”.

2. The petitioner is a company engaged in the business of manufacturing and supplying of cooling equipments including cooling towers. Respondent no.1 is a Joint Venture (JV) company of EIL/respondent no.2 (an engineering consultancy and EPC company under the ownership of the Ministry of Petroleum and Natural Gas, Government of India), National Fertilizer Ltd (NFL) and Fertilizer Corporation of India Ltd (FCIL) formed for setting up gas-based Urea manufacturing plant at Ramagundam, Telangana. Respondent no.2/EIL was awarded the detailed engineering and project management for revival of Fertilizer Plant at Ramagundam, Telangana and in pursuance of the same, floated a tender dated 19.11.2015 for supply, erection and construction of FRP cooling tower.

3. Pursuant to the scrutiny/verification of the requisite documents submitted by the petitioner for the aforementioned tender, a Show Cause Notice (SCN) dated 14.10.2016 came to be issued against the petitioner proposing suspension and debarment of its business on account of alleged submission of forged document/certificate for satisfying the bidder qualification criteria. The said SCN reads as under:

4. The aforementioned allegations were also communicated vide a letter dated 17.10.2016 to the respondent no.1 by the respondent no.2. The same reads as under:

xxx xxx xxx

5. Subsequently, respondent no.1 issued a letter dated 20.12.2016 to the bank of the petitioner for forfeiture of the EMD-BG. On 22.12.2016 the EMD-BG was released in favour of respondent no.1 by the concerned bank.

6. In the meantime, vide an email dated 21.12.2016, the respondent no.2, also intimated the petitioner that the competent authority of respondent no.2 has decided to put the petitioner on “holiday list of the EIL Construction Contractor” for a period of 3 years w.e.f. 14.12.2016.

7. Against said decision dated 21.12.2016, the petitioner preferred a representation dated 11.01.2017 before the Appellate Authority of respondent no.2. Vide an order dated 26.05.2017, the aforementioned decision dated 21.12.2016 came to be revoked by the Appellate Authority with immediate effect. The said order dated 26.05.2017 reads as under:

8. In the circumstances, considering that the ban imposed upon the petitioner has been revoked by the Appellate Authority of the respondent no.2 vide an order dated 26.05.2017, the petitioner between 2017 and 2020 made various representations to the respondents seeking refund of EMD-BG retained by respondent no.1. However, it is submitted that the respondents failed to respond/act upon the said representations.

9. Consequently, the petitioner issued a legal notice dated 10.02.2021 to respondent no.1 seeking for refund of the EMD-BG retained by them. However, again, the respondent no.1 failed to respond.

10. In the aforesaid