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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
AVNEESH JHINGAN, BHUWAN GOYAL, JJ.
The Rajasthan State Co-Operative Bank Limited, Jaipur Through Managing Director - Appellant
Versus
D.O.E.A.C.C. Centre - Respondent
D.B. Civil First Appeal No. 1109 of 2019
Decided on : 01-05-2025
(A) Contract Law - Memorandum of Understanding - The appellant, a Co-operative Bank, sought recovery of administrative charges paid to the respondent for consultancy services related to procurement of computer hardware, which was dismissed by the Commercial Court. The court found that the respondent fulfilled its obligations under the MoU and that the forfeiture clause for earnest money was not applicable as no purchase order was issued. (Paras 1, 7, 12, 14)
(B) Administrative Charges - The court ruled that the administrative charges were payable even if the bank did not place a final order for procurement, as per the agreed terms. (Paras 12, 13)
Facts of the case:
The appellant paid Rs.17,15,000/- to the respondent as administrative charges for consultancy services related to procurement of computer hardware but sought a refund after rejecting the price bid from the lowest bidder.
Findings of Court:
The court concluded that the respondent complied with all obligations and the appellant failed to prove any default on the part of the respondent.
Issues: The main issues were whether the respondent failed to fulfill its obligations and the applicability of the forfeiture clause for earnest money.
Ratio Decidendi: The court held that the respondent had complied with the MoU and that the forfeiture clause was not triggered as no purchase order was issued.
Result: Appeal dismissed.
JUDGMENT :
AVNEESH JHINGAN, J.
1. This appeal is directed against the judgment dated 06.09.2019 of the Commercial Court No.2, Jaipur Metropolitan, dismissing the suit for recovery.
2. The appellant-plaintiff is a Co-operative Bank (herein after referred to as ‘bank’). In pursuance to the decision taken by the Government for computerization of Co-operative Banks, the bank approached respondent No 1 (for brevity ‘respondent’) for rendering consultancy services for procurement of computer hardware. A proposal was made by the respondent vide communication dated 01.12.2004 and after negotiation vide letters dated 11.01.2005 & 11.02.2005, the administrative charges were capped to Rs.24,50,000/-. The appellant on 03.06.2005 accepted the offer and paid Rs.6,00,000/- to the respondent. Parties entered into Memorandum of Understanding. It was agreed that the respondent will provide following services:-
“Activities of DOEACC Centre, Chandigarh:-
1. Preparation of tender document for purchasing Hardware, allied peripherals and system software, etc. 2. Publication of Tender following two-bid system -
Technical and Commercial Bids.
3. A pre bid conference will be scheduled a week's time before the last date of submission of bids.
4. Processing and Evaluation of Technical bids of those vendors who meet the pre qualification criteria.
5. Short-listing of technically qualified vendors and negotiating terms and conditions.
6. Opening of commercial bids.
7. Preparation of Commercial Comparative statements.
8. Price Negotiations.
9. Placement of purchase order on behalf of RSCB.”
2.1. The schedule of payment of administrative charges is reproduced below:-
| S.No. | Total Cost of Hardware, Equipment and system etc. to be purchased | Administrative charges (percentage of Total Cost of Hardware, Equipment and system software etc. to be purchased) | Subject to the Minimum Charges |
| 1. | Up to 50.00 Lac | 10% | Rs.5.00 Lac |
| 2. | 50.00 lac to 1.00 crore | 9% | Rs.8.00 Lac |
| 3. | Between 1.00 crore to 1.50 crore | 8% | Rs.9.00 Lac |
| 4. | Between Rs.1.50 crore and Rs.2.00 crore | 7.5% | Rs.12.00 Lac |
| 5. | Above Rs.2.00 crore | 7% | Rs.15.00 Lac |
“Note: RSCB will pay the minimum of the administrative charges to DOEACC as per the payment terms given below. In case RSCB does not place final order for procurement of H/W and any of the equipment, this center will charge the minimum amount for the complete process. In case RSCB releases any repeat / subsequent order(s) for any of the item(s) either direct or through this center on the short listed vendors, RSCB will be liable to pay the agreed charges to this center.
Payment Terms
➤ RSCE will release 40% payment of the minimum administrative charges depending upon the above stated slabs to DOEACC, in advance, along with the acceptance of this proposal.
➤ RSCB will release the next installment of 30% of the administrative charges within one week of the publication of tender notice.
➤ RSCB will release the balance actual amount due to DOEACC towards the administrative charges within two weeks after the release of purchase order.
➤ RSCB will release the payment the hardware supplier as per the agreed upon terms and conditions directly.
➤ Service tax and other taxes, if applicable, would be charged extra.”
2.2. The respondent twice issued Notice Inviting Tender(for brevity ‘NIT’); pre bid conference was held; after evaluating the technical bids M/s CMC Limited (hereinafter referred to as ‘L1’) was found to be eligible and lowest bidder; after negotiation and preparation of the comparative statements the bid was forwarded to the bank; the clarification given by L1 vide communication dated 27.02.2006 was forwarded by respondent to the bank; and the bank on 26.05.2006 showed willingness to accept the bid price dated 22.02.2006 for Schedule I(a)&(b) and for Schedule II but it stipulated four conditions.
2.3 After discussions and negotiation with the L1, the bank in the meeting held on 30.05.2006 rejected the price bid. As per the schedule of payment, the bank had made payment of Rs.17,15,000/- to the responde
The court affirmed that administrative charges are payable even if no purchase order is issued, as per the terms of the Memorandum of Understanding.
The NIT stipulated that tenderers who resile before the validity period shall be liable for forfeiture of EMD. The action of the respondents in seeking change of the rate offered bid amounted to resi....
Effective acceptance occurs upon dispatch, making a concluded contract binding; additional penalty clauses imposed post-acceptance invalidate forfeiture claims without proof of actual loss.
The main legal point established in the judgment is that the forfeiture of earnest money deposit must be reasonable and in compliance with the tender conditions, and the court's decision was influenc....
The main legal point established in the judgment is that the contract stood concluded upon acceptance of the bid, and the subsequent signing of documents was only for formal documentation. The court ....
Forfeiture of earnest money is justified for willful suppression of material facts in tender process; disclosure obligations extend beyond quality-related matters; Section 74 of Indian Contract Act d....
The court held that forfeiture of earnest money without prior notice violates principles of natural justice, and a reasonable timeframe must be given for executing tender agreements.
The excess amount paid by the petitioner, beyond 25% of the bid amount, could not be considered as a deposit under Rule 9, and any retention of amount by the respondent without authority of law would....
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