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 does not apply prior to contract formation.

ORDER :

A. The Writ Petition:

1. This Writ Petition is filed by PST Engineering Construction, represented by its Managing Partner (hereinafter 'PST'), for the issuance of a Certiorari to call for the records relating to the impugned order dated 07.02.2025 in Ref.No.HSCC/DMER-MHA/MPGIMER/NASHIK/EPC/PST, passed by the first respondent, HSCC (India) Limited (hereinafter 'HSCC'), and the consequential letter dated 07.02.2025 in Ref.No.HSCC/Banking/BG-2025. By the first impugned order dated 07.02.2025, HSCC declared that PST had submitted false information while making its bid, thereby violating the undertaking submitted by it. Consequently, it ordered the forfeiture of the earnest money deposit (EMD) amounting to Rs. 3,28,40,000/- and invoked the bank guarantee, stating that steps would be taken for the encashment of the bank guarantee. By the second impugned order, a letter was issued to the bank for the encashment of the bank guarantee.

B. The Factual Background:

2. The brief facts under which this Writ Petition arises are that the second respondent, namely the Department of Medicine, Government of Maharashtra, sought to establish a Medical College and Hospital in Nasik, Maharashtra. The hospital is to be a 430-bedded facility with all the necessary infrastructure to accommodate 100 medical seats per year. The buildings and infrastructure were to be on a comprehensive design, engineering, procurement, and construction basis. Additionally, the hospital is to be maintained throughout the defect liability period. HSCC, acting on behalf of the second respondent, issued a tender on 09.09.2024, calling for bids as stated above on an EPC basis. PST submitted its bid for the tender on 30.09.2024. The value of the tender is Rs.318.40 Crores. Participants are required to deposit an EMD of Rs.3,28,40,000/-. PST submitted a bank guarantee for this amount through the thi respondent bank, Indian Bank, with Bank Guarantee No.0365324IPG000024 rd along with an undertaking dated 30.09.2024, which is valid until 29.03.2025.

2.1. On 01.10.2024, the technical bids (Cover – I) were opened, and PST was declared 'In the Competition’. On 05.10.2024, HSCC requested an explanation from PST via email, noting that in Form – N (Litigation History) submitted by PST with its bid, PST indicated that no quality-related matters, court cases, investigations, or arbitration were pending for any projects executed by PST. However, during bid evaluation, HSCC learnt that PST had filed a case bearing C.S.No.108 of 2021 in the High Court of Madras and also filed O.A.No.775 of 2021. Consequently, PST was asked to inform HSCC with supporting documents whether the above cases are still pending in court and, if not pending, to provide copies of the judgments or orders. On the same day, 05.10.2024, PST responded that the case was still pending, and the latest court order was enclosed for reference.

2.2. It was further stated by PST that the suit was filed against the arbitrary action (demanding repair of the damages caused) of the Tamil Nadu Urban Habitat Development Board. In fact, it is further stated that the Hon'ble High Court of Madras, having been prima facie satisfied with the case presented by PST, was pleased to grant an order of interim injunction, which remained in effect and was extended periodically. The latest injunction order was also attached. PST's failure to mention the particulars of the pending suit is neither willful n