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Honshu Buildcon Private Limited And Riehen Infosolutions Private Limited Versus North Delhi Municipal Corporation

2018 (2) TMI 847 - DELHI HIGH COURT

E-auction - non-deposit of the security money and request for “adjustments” - withdrawal of LOIs - Held that:- The impugned letters of the NDMC withdrawing the LoIs is based on justifiable grounds, inter alia: violation of the conditions of the NIT by the Petitioners (such as, non-deposit of the security money and request for “adjustments” not provided for in the NIT, in the case of Honshu), and engaging in business relationships with black-listed companies in violation of the conditions of the .....

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myriad devices to keep out true competition on one hand, and corner contracts- in this case, in relation to parking lots cannot be undermined. The NDMC thus had a vital interest in ensuring that the group of individuals, who adopted the stratagem of ensuing that they “rotated” the contracts, through different entities, which came to light in the financial linkage between them – as well as controls through the same set of people does not hamper the transparency of the bidding process. This linka .....

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en Show Cause Notices to that end were sent to them by the NDMC, as mentioned previously. - W.P.(C) 5891/2016 & C.M. APPL.24246/2016, W.P.(C) 7135/2016 And C.M. APPL.29365/2016 - Dated:- 18-1-2018 - MR. S. RAVINDRA BHAT AND MR. S. P. GARG, JJ. For The Petitioners. : Sh. Rajesh Gupta with Sh. Harpreet Singh, AdvocatesMs. Mini Pushkarna, Standing Counsel with Ms. Vasundhara Nayyar and Ms. Anushruti, Advocates, for NDMC. And Ms. Renu Jagdev, Addl. Commissioner, NDMC ORDER MR. JUSTICE S. RAVINDRA BH .....

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a local National Capital territory (NCT) statutory corporation formed that provides and maintains civic amenities and, inter alia, maintains various parking lots, advertisement sites etc within its jurisdiction in the NCT of Delhi. 3. The NDMC, through a Notice Inviting Tenders (NITs)/E-Auction Notice dated 22.04.2016 invited e-tenders for allotment for cluster-wise display of advertisement in its jurisdiction on payment of an advance monthly licence fee on quarterly basis for a period of three .....

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a monthly licence fee ( MLF ) of ₹ 18,50,000/-. After the closing of the e-bidding process by the NDMC on 13.05.2016, it issued a Letter of Intent ( LoI ) bearing No. ADC (Advtt.)/NDMC/2016/D-3021 dated 17.05.2016 to Honshu, being the successful (H1) bidder in respect of e-auction for allotment of advertisement rights for various advertisement site(s) of NDMC on Cluster Basis as described previously, and requested Honshu to download the Letter of Intent, sign the same in acceptance and upl .....

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ble in advance, within a period of 05 days from the date of acceptance of the LoI, but not later than on 31.05.2016. By the said LoI dated 17.05.2016 issued by NDMC, Honshu was also requested to execute a licence agreement within 10 days of the offer with the NDMC, in the prescribed format, and the allotment letter was to be issued to the petitioner only after completion of the formalities. 5. Honshu cites clause 22 of the terms and conditions of the NIT/E- auction issued by the NDMC, which is a .....

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letters dated 30.05.2016 informed the NDMC that 22 Unipole sites had been previously allotted to them in their individual capacity on a quarterly licence fee basis by the Respondent through e-auction dated 25.02.2016 and in respect thereof, the security deposit/licence fee had been paid. The period of allotment of the 22 Unipole sites was to expire on 16.06.2016. Both of them, i.e., Mr. Anwar and Mr. Khan requested for adjustment of the security amount of ₹ 72,09,330/- towards the advance .....

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cluster after adjustment of ₹ 72,09,330/- being the security deposit of the 22 Unipole sites already having been supposedly deposited by the directors in their individual capacity. Honshu, through letter, dated 02.06.2016 requested the NDMC to issue an allotment letter in respect of Civil Line Zone Cluster No.4. Mr. Mohsin Anwar and Mr. Akram Khan by their letters (both dated 15.06.2016) reiterated to the NDMC of their request to adjust the security deposit of ₹ 72,09,330/- mentioned .....

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deposit was payable, because the contract for which these security deposits had been made, were still operating and had not been terminated. Hence, any proposal to consider refund of such security deposits was premature and hypothetical. NDMC stated that it could not be considered. Therefore, the competent authority, by orders dated 10.06.2016, directed the advertiser to deposit the balance amount, in respect of Civil Line Zone Cluster No.04 amounting to ₹ 71,26,690/- alongwith interest @ .....

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r and Mr. Akram Khan in their individual capacity towards the advance licence fee and security deposit of Civil Line Zone Cluster No.04 to be paid by Honshu, had already expired on 16.06.2016 and as such their request to adjust the same was justified. By the said letter Honshu also confirmed of having submitted the original G-8 receipts of the security amount by its directors in their individual capacity and also having submitted affidavits stating therein, that they would not claim the said sec .....

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n the balance amount w.e.f. 01.06.2016 till the date of deposit, was unsupported on any provision in the terms and conditions of the NIT/E-auction/agreement. Honshu denied its liability to deposit any interest; it, therefore, requested the NDMC to withdraw the letter, dated 16.06.2016 and adjust the security amount and refrain from taking any coercive action against it. 10. Honshu received a Show Cause Notice dated 30.06.2016 from the NDMC, by it (the NDMC) while referring to clause 1(i) of NIT, .....

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or the Civil Line Zone Cluster No.04 should not be cancelled and further action not be initiated against them for submission of facts as per the Delhi Municipal Corporation Act. Honshu was also asked by the NDMC also informed that in case it wished to be heard, appearance was to be effected before the ADC (Advtt.) on 01.07.2016 or 04.07.2016, failing which further necessary action was to be initiated against it without further notice. 11. On receipt of the Show Cause Notice Honshu confirmed that .....

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reply, by the impugned letter dated 06.07.2016, (received by Honshu on 08.07.2016), cancelled the LoI dated 17.05.2016 issued to the Petitioner No. 1 and also forfeited EMD amount of ₹ 3,60,000/- deposited by the petitioner in respect of Cluster No.04 Civil Lines Zone. Honshu is aggrieved by the actions of the NDMC, and has preferredW.P. (C)- 5891/2016 alleging that the cancellation is arbitrary and mala fide. 12. Reihen Infosolutions Private Limited ( Reihen ), is also an incorporated co .....

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bmitted its bid in respect of the Karol Bagh Zone and deposited requisite EMD (25% of the minimum reserved price) as stipulated in NIT/E-auction Notice. During the course of online e-bidding on 22.06.2016, Reihen offered to pay a monthly licence fee of ₹ 22,70,000/- in respect of Karol Bagh Zone. 13. After closing the e-auction bidding process on 22.06.2016, the NDMC, instead of issuing the Letter of Intent, issued a letter dated 24.06.2016 and informed that Reihen had emerged as H-1 bidde .....

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id letter dated 24.06.2016 from NDMC, Reihen by its letter dated 27.06.2016 informed the former that in view of clause 1(c) of the e-tender document, intending bidders were not directed/required to submit any such affidavit as being demanded, but in order to avoid any controversies, Reihen furnished an affidavit verifying that the information/statement /details sought by NDMC. By that letter Reihen asked NDMC to acknowledge the affidavit it enclosed as required and issue the LoI in respect of th .....

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y PWD or MCD in the jurisdiction of North DMC at a monthly licence fee of ₹ 22,70,000/- in respect of the Karol Bagh Zone and requested Reihen to download the LoI, sign it in acceptance and upload it to the portal as token of acceptance within 03 days of issue of letter by 01.07.2016 alongwith the auction processing fee being equivalent to 1.25% of the MLF by online mode. 15. By the aforesaid LoI dated 28.06.2016, NDMC requested Reihen to pay an amount equivalent to three months MLF toward .....

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Roads maintained by PWD or MCD). The allotment letter was to be issued only after completion of the formalities. Reihen signed the said LoI and uploaded the same on the portal of NDMC as token of its acceptance on 28.06.2016. 16. After issuance of the LoI, NDMC informed Reihen that the Letter of Intent issued, dated 28.06.2016 towards the display of media through pole kiosks in Karol Bagh Zone stood withdrawn with immediate effect as the matter was stated to be under technical examination. Afte .....

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d substantial financial relations/interests in these two companies. 17. Reihen, on receipt of the Show Cause Notice dated 01.07.2016, replied on 05.07.2016 clarifying that the allegation that Mr. Jitender Singhal was a partner in the concern, was misplaced and that he was one of its chartered Accountants/ Auditors, not a partner and/ or director. It also informed to the NDMC that it did not have substantial relations / interest in the two companies, i.e. M/s Ashima Infrastructures Pvt. Ltd and M .....

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en approached this High Court by way of writ petition W.P. (C) 5881/2016; however, it was withdrawn as the final order was not passed on the Show Cause Notice dated 01.07.2016.Reihen was permitted to approach the Court in case a final order, adverse to it, was made. 18. Thereafter, the NDMC cancelled the LoI bearing No. AD (Advtt.)/NDMC/20l6/D-3160 dated 28.06.2016 issued to Reihen and also forfeited the EMD amount of ₹ 2,37,500/- deposited by it in respect of the Karol Bagh Zone. Being ag .....

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e petitioners. None of the said companies and/or their directors are directors and/or share-holders in the petitioner company and vice-versa. It is argued that there is no basis to infer the alleged nexus. As regards bank-transactions it is stated the petitioners had explained that such transaction pertained to loans that they had taken in course of its business and its refund, and there is no other financial transaction between the two. It is stated that in course of their regular business the .....

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Ashima Infrastructure (P) Ltd, the fact is that such concerns are continuing to transact business and file returns. Besides, they too have ongoing contract with the NDMC. In these circumstances, the latter cannot say that there is some secret understanding or financial nexus, based on stray or isolated borrowings inter se. 21. It is submitted on behalf of Reihen by Mr. Gupta that the concerns which are alleged to have nexus with it (M/s. Ashima Infrastructures Pvt. Ltd., M/s. Manoj Computer Wor .....

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oncerned, counsel submitted that nothing adverse can be found or concluded; they are only surmises and allegations. In any case, they did not lead to any prosecution or definitive conclusions, much less a charge sheet in any criminal proceeding. NDMC could not have denied the contract to Reihen, based merely on such sketchy and inconclusive material. Therefore, NDMC s actions are utterly whimsical and unjustified. 22. Ms. Mini Pushkarna, learned counsel for NDMC, produced the original files in r .....

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and other concerns is not justified. Counsel submitted that Honshu as well as Reihen were issued a Show Cause Notice alleging its nexus and connection with the other concerns, such as Ashima Infrastructure, M/s. Trigen Electronics Pvt. Ltd., M/s. USB Enterprises, Shri Sai Nath Enterprises and Manoj Computer World; its replies and protests were unsatisfactory. The materials available, argued learned counsel, showed a clear relationship Honshu and the said concerns. The NDMC, as a state authority .....

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ween the concerns in their commercial dealings. This violated the tender eligibility conditions; besides, it was against public interest to keep awarding contracts to the same individuals or group, who through camouflage and dubious subterfuge, portrayed distinct corporate entities. The NDMC, it was urged, could pierce the corporate veil, to discern the reality and conclude that Honshu and Reihen were part of a network of concerns, controlled by the same group of individuals, to corner all parki .....

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sposed off the said writ petitions, when the NDMC adjusted the amounts deposited by those parties towards dues payable for parking sites operated by their companies. The learned counsel relied upon the office orders adjusting amounts deposited by those two entities, (with the Land & Estate Department) by the RP Cell of NDMC for dues towards parking sites. Ms. Pushkarna submitted that the materials on record, in the form of bank statements of Honshu, sufficiently pointed to very significant f .....

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Ltd and Shri Sai Nath Enterprises (all dated 28.03.2015). Analysis and Conclusions 25. In the NIT issued by the NDMC in respect of the allotment of cluster- wise display of advertisement in the jurisdiction of North Delhi Municipal Corporation, the clause that speaks about interest free security deposit (in the NIT to which Honshu submitted its bid), is as follows: 17.1 The selected Bidder shall deposit an amount equivalent to 02 months quoted MLF as security deposit within 5 (five) days from th .....

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date, a notice will be issued to the Licensee/ Advertiser to pay his dues within 7days, if dues are not cleared in that period, notice for cancellation of the contract will be issued by giving time of another 7 days. If even then dues are not paid contract will be cancelled immediately. On delayed payment, interest@24 %per annum on entire outstanding amount will be levied up-to the date of clearing the dues or date of cancellation. 27. The above clauses of the NIT and the license agreement (sign .....

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ts directors be modified in a way that the security amount of ₹ 72,09,330/- of the previous allotment (that was about to expire) be adjusted towards the advance licence fee and security deposit of Civil Line Zone Cluster No. 04 by letters dated 30.05.2016. However, NDMC urges that there is no provision for adjustment and no prescribed mode of payment by adjustments in the NIT/licence agreement. Thus, the directions that Honshu should deposit the balance amount, in respect of Civil Line Zon .....

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ment arising from the NIT/ license agreement. 28. NDMC alleges to have discovered that Honshu and Reihen had relations with certain defaulter companies/ entities, which is in violation of the terms and conditions of the NIT, in both the issues. The relevant clauses from the NIT stating the same, in the two cases, are as follows. 29. The relevant condition in the NIT, advertised by the NDMC calling for parking contract bids, reads as follows in Honshu s case: (c) The Bidder, whose license has bee .....

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itions of the agreement signed with any Central/ State Government Department/ Autonomous Bodies anywhere in India, shall not be eligible for participating in this e-Auction process of North D.M.C. The Bidder shall furnish an undertaking to this effect along with e-auction form. 30. In the case of Reihen, the relevant tender condition was as follows: b. Any individual / partnership firm / public limited company / private limited company /sole proprietor firm/consortium etc., whose license has bee .....

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tion form.' c. Any person/ party/ firm or registered advertiser/sole proprietor firm/consortium who is disqualified or ineligible to participate in the e-auction according to the aforesaid conditions shall not be qualified to offer the bid in the name of its associate concern subsidiaries/ principals/ front and the commissioner/authorized officer on his behalf may declare the e-auctioneer disqualified on this ground, if he is of the opinion that the said e-auctioneer/bidder is acting in coll .....

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tions with defaulter companies such as: M/s Balaji & Sons, M/s Ashima Infrastructure Pvt. Ltd,, M/s Manoj Computer Word, M/s USB Enterprises Pvt, Ltd, M/s Trigen Electronics Pvt. Ltd,, M/s Shri Sai Nath Enterprises. This is directly in violation of clause 1(i) of the NIT as highlighted above. The same observation arises in case of Petitioner No. 2 from its bank account statements that also showed regular transactions with defaulter and black-listed companies (Annexure R-1 in W.P.(C)7135/2016 .....

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ny reason thereof and without incurring any liability to the affected Bidder(s) or any obligation to inform the affected Bidder(s) of the grounds of such decision. 33. The final call with respect to acceptance or rejection of the bids is reserved by the NDMC. The Petitioners accepted that condition when they lodged their bids. Therefore, what is in issue is the power exercised by NDMC, as a public tendering agency, to not enter into contract with any bidder. The decision of a public agency to en .....

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arbitrary and irrational, and whether the public interest is affected; if the answers are in the negative, there should be no interference in the decision by the court. The Supreme Court went on to highlight how the decision of the authority must be accorded due regard in the following words: 47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point .....

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may be questioned if it is irrational or mala fide or intended to favour someone or a decision "that no responsible authority acting reasonably and in accordance with relevant law could have reached" as held in Jagdish Mandal followed in Michigan Rubber. 35. Thus, when the State invites tender bids, it ought to adhere to the terms of the NIT, and ideally not waver from complying with the conditions set forth in the NIT. This was highlighted in the Supreme Court decision of Harminder Si .....

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s principle. Hence, as a state agency, the NDMC has invited tenders extended through the respective NITs, and has carried out the bidding process accordingly; and due regard ought to be given to such decision making process. 36. The scope of judicial review in the award of tender of a contract by the State or a state agency has the subject of discussion in a number of Supreme Court decisions (Tata Cellular v Union of India 1994 (6) SCC 651; Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpora .....

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istrative matters, the scope of judicial review is limited and the judiciary must exercise judicial restrained in such matters, as held by this Court in Tata Cellular v. Union of India: AIR 1996 SC 11 : (1994) 6 SCC 651. Moreover, the view of Prasar Bharti also appears reasonable because Prasar Bharti has to pay the amount inclusive of sales tax, since there is no concessional forms. If Prasar Bharti has taken up one possible interpretation, the High Court should not have intervened. The scope o .....

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nce of the unsuccessful bidder in respect of a procedural violation in the following words: Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features shoul .....

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d to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interf .....

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same standard in the present cases. Public and state contracts involve expenditure of substantial public money. Therefore, it is quite crucial to ensure that no anomaly arises that could jeopardise such expenditure. The fact that the petitioners were found to have relations with black-listed companies not only violates the clauses of the NIT, but also emerge as red flags to the safe and effective implementation of public resources. These considerations have been given due regard by the administr .....

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Intent was issued and this expressed an intention of the parties to enter into a contract but no concluded contract ultimately fructified nor there was any promise given by the Port Trust. The Court reproduced the following discussion from its earlier judgment in Nikhil Adhesives Limited: The letter of intent issued by the Respondent Port Trust on 12.1.2006, at best, can be said to be an agreement to issue the allotment letter and to execute the lease document in favour of the Petitioner subjec .....

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are Technologies (India) Pvt. Ltd. v. Neos Interactive Limited (Supra), the Apex Court clearly held that an agreement to enter into an agreement is not enforceable nor does it confer any right upon the parties. 40. The same point was highlighted in Rajasthan Co-operative Dairy Federation Ltd. v. Shri Mahal Laxmi Mingrate Marketing Service Pvt. Ltd. and Ors. AIR 1997 SC 66 as follows: The Letter of Intent merely expressed an intention to enter into a contact. If the conditions stipulated in the L .....

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o be the basis on which the NDMC cancelled the letters of intent, the Court observes that the petitioners have merely denied the grounds of the respective Show Cause Notices, without countering them substantially. Particularly, in light of the bank statements that clearly indicate a strong financial relationship between the Petitioners and a list of black-listed companies, a mere denial of such association cannot be accepted. This was highlighted in Rishi Kiran (supra) as follows: 22. In so far .....

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dly be a ground to test the validity of a decision in administrative law. For the sake of argument, even if you presume that there a concluded contract, mere termination thereof cannot be dubbed as arbitrary. A concluded contract if terminated in a bonafide manner, that may amount to breach of contract and certain consequences may follow thereupon under the law of contract. However, on the touch stone of parameters laid down in the administrative law to adjudge a decision as are arbitrary or not .....

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request for adjustments not provided for in the NIT, in the case of Honshu), and engaging in business relationships with black-listed companies in violation of the conditions of the NIT. As seen above in Central Coalfields Limited (supra), the terms of the NIT cannot be ignored, hence, neither can be their violation. Such violation of the NIT conditions tempered the decision of withdrawal of the LoIs by the NDMC. Further, in light of judicial precedence, particularly, Jagdish Mandal v. State of .....

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