Tender clauses permit EMD forfeiture and contract cancellation without notice for failing performance security; debarment requires specific prior show cause notice per natural justice principles due to its stigmatic consequences.

JUDGMENT :
G.S. Sandhawalia, Chief Justice

The challenge in the present writ petition is to the order dated 21.03.2025 (Annexure P-8), whereby the respondents forfeited the EMD amount and debarred the petitioner from participating in the tender of the Department of Health and Family Welfare Govt. for a period of three years. Further directions were also issued to the indenting officers not to issue supply orders to the petitioner-firm and to initiate action as per Clause 5 of the tender document.

2. The arguments which have been put forth by the counsel for the petitioner are that in pursuance of the tender process dated 27.04.2023 (Annexure P-2), e-tenders were invited for supply of medicines and drugs for the period of a rate contract of one year, the last date of which was 15.05.2023. It is his case, that he had been found L-1 for five medicines, which is clear from the reply on behalf of the respondents and from letter dated 19.02.2024 (Annexure P-4).

3. It is argued that on account of the delay as on the hands of State, the bid validity had been extended beyond the prescribed limit of 180 days from the date of the award of the contract and the agreement came to be signed on 24.02.2024 (Annexure R-2/IV).

4. A request has been made in pursuance of the communication dated 14.05.2024 (Annexure P-5) for furnishing the requisite irrevocable bank guarantee, that the amount be deducted from the sale supply bills which will be produced by the authorized distributor as per the previous practice. It is thus submitted that the said request had been repeated on 06.06.2024 (Annexure P-7) and only after a period of nine months, the impugned order was passed. The petitioner had continued to supply goods during the period of contract and therefore, it is submitted that the order was not liable to be sustained as such for canceling the contract and forfeiting the EMD and further directing that the petitioner who was debarred for a period of three years without issuing of notice as such which was not justifiable. It was further submitted that the performance security was duly furnished also on 29.03.2025 immediately after the cancellation but had been wrongly returned and therefore a writ should be issued directing the acceptance of the performance guarantee.

5. Learned counsel for the State on the other hand has brought to our notice that apart from the letter dated 14.05.2024 (Annexure P-5), whereby specifically the performance guarantee to the tune of Rs.4,41,613/- had to be furnished in the prescribed format Annexure-K of the tender document by 27.05.2024, the petitioner had been put to notice that suitable action as per tender notice would be initiated. It is submitted that reminders were issued on 14.06.2024 (Annexure R-2/V) and on 20.07.2024 (Annexure R- 2/VI) and it was only thereafter the action was taken and therefore, the petitioner can have no such grouse.

6. Reliance has been placed upon relevant terms of the tender conditions, to contend that the needful had to be done after the award and that there was such a power that in case the bidder failed to sign the agreement and to deposit the performance security as prescribed, the earnest money was to be refunded after the signing of the agreement and deposit of performance security by the successful bidder. There was also a provision that the debarment could take place for a period of three years. It is accordingly submitted that the respondent had the power to annul the award, forfeit Bid Security and take other punitive action as per the terms of the contract and the performance guarantee had not been executed which has to be