Mr. Sakal Bhushan, Mr. Vasu Bhushan and Mr. Nipun Bhushan, Advocates v. BHARAT SANCHAR NIGAM LIMITED

Judgment

1. This petition is filed on behalf of the Petitioner under Section 34 of Arbitration and Conciliation Act, 1996 (‘1996 Act’) laying a challenge to Arbitral Award dated 23.06.2023 to the extent it rejects Petitioner’s claim for refund of Earnest Money Deposit (‘EMD’) of Rs.2 crores along with interest and costs. For the sake of convenience, M/s Himalaya Communications Pvt. Ltd. is referred to as the Petitioner while BSNL is O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 referred to as the Respondent, hereinafter, in both the petitions. 2. Case of the Petitioner is that by way of Notice Inviting Tender (‘NIT’) dated 24.06.2016, Respondent/BSNL invited sealed tenders from eligible bidders for procurement of inter alia 16,000 km of 24F Optical Fiber Cable (‘OFC’) and 50,000 km of 48F OFC. In terms of Clause 4.1.2(c) of Section-1, Part A, persons who had applied for Technical Specification Evaluation Certificate (‘TSEC’) for their products in QF-103 form (Registration) were also eligible for participating in the tender. On

03.08.2016, Petitioner applied to the Quality Assurance Circle, Bangalore (‘QAC’) in specified form QF-101 for obtaining TSEC and the application was registered successfully. 3. is averred It in August, 2016, Petitioner submitted techno-commercial and financial bids along with requisite EMD of Rs.2 crores by way of Bank Guarantee to BSNL in terms of Clause 12.1, Section-4, Part A. On 28.09.2016, Petitioner was declared as L-1 bidder for 24F and 48F OFCs. Samples of 24F and 48F OFCs sent by the Petitioner for testing on 07.09.2016, were rejected by the Government Laboratory on

20.10.2016. On 20.10.2016 and 25.10.2016, BSNL Laboratory rejected the samples of two raw materials, i.e. Impregnated Glass Fibre Reinforcement (‘IGFR’) and Rip Cord bought by the Petitioner from BSNL’s approved vendors and sent for testing on 22.09.2016. On 27.10.2016, Respondent resent counter samples of IGFR and Rip Cords for retesting to CACT Laboratory, which were rejected on 29.01.2016. 4. It is stated that on 28.10.2016, BSNL placed two Advance Purchase Orders (‘APOs’) on the Petitioner for partial quantities of 24F (6,400 kms) and 48F (20,000 kms) OFCs. Petitioner was called upon to accept the APOs O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 unconditionally and furnish Performance Bank Guarantees (‘PBGs’). The APOs incorporated terms which specified: (i) the precise quantities of cables and the rates at which they were to be supplied; and (ii) the lead period of two months for preparation and total delivery period of 6 months, both starting to run from the date of issuance of the APOs. On 10.11.2016, BSNL Laboratory rejected the counter samples of IGFR and Rip Cord. 5. It is averred that vide email dated 16.11.2016, BSNL called upon the Petitioner once again to unconditionally accept the two APOs and submit the PBGs, in response to which vide letter dated 17.11.2016, Petitioner sought 3-4 weeks’ extension. By another letter dated 21.11.2016, BSNL advised the Petitioner to submit the application for type-approval after improving the product, i.e., the cables. BSNL accepted Petitioner’s request for extension and vide letter dated 29.11.2016 extended the time for accepting the APOs and furnishing PBGs up to 02.12.2016. On the same day, Petitioner requested BSNL to give time till 12.12.2016 to respond BSNL’s letter dated

29.11.2016 as its Directors were out of station and this request was accepted by BSNL granting time till 12.12.2016, vide letter dated 09.12.2016. 6. It is stated that on 19.12.2016, pursuant to BSNL’s letter dated

21.11.2016 Petitioner re-manufactured the 24F and 48F OFCs by procuring fresh raw materials from other approved vendors of BSNL and after internal testing, samples were offered along with testing reports and demand draft with the prescribed fee within the lead time period of two months from the date of the issue of the APOs i.e. 28.10.2016. However, owing to the failure of the Petitioner to give unconditional acceptance to the APOs and non- submission of PBGs, BSNL withdrew the APOs on 09.01.2017 and on

11.01.2017 refused to further process Petitioner’s application for type- O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 approval. The demand draft was returned back the Petitioner. Consequently, BSNL addressed a letter to Chief Manager, Corporation Bank on 27.01.2017 and invoked the EMD Bank Guarantee of Rs.2 crores. 7. It is stated that compelled by the forfeiture of EMD, Petitioner preferred W.P. (C) No.2012/2017 before this Court on 06.03.2017, however, the same was withdrawn on 02.08.2018 owing to the objection of the BSNL

to the maintainability of the writ petition in light of the arbitration agreement between the parties. Vide notice dated 12.07.2019, Petitioner invoked arbitration and called upon BSNL to consent to the appointment of an Arbitrator. On failure of BSNL to consent, Petitioner approached this Court and filed a petition under Section 11(6) of the 1996 Act being ARB. P. No.701/2019, which was allowed and vide order dated 21.11.2019, Sole Arbitrator was appointed to adjudicate the disputes between the parties. 8. It is further stated that Petitioner filed its Statement of Claim (‘SoC’) with supporting documents seeking refund of EMD with interest and costs while BSNL filed its reply to the SoC as also counter claims, to which Petitioner filed its reply. The learned Arbitrator pronounced and published the Arbitral Award dated 23.06.2023, rejecting Petitioner’s claim for refund of EMD as also rejecting BSNL’s counter claims holding that BSNL had failed to prove any loss and even otherwise, the loss claimed in the pleadings was too remote and not a direct result of any act or omission of the Petitioner. Petitioner challenges the award to the extent the Arbitrator has rejected its claims for refund of EMD and interest thereon and costs. CONTENTIONS ON BEHALF OF THE PETITIONER: 9. Learned Arbitrator has erroneously rejected Petitioner’s claim for refund of forfeited EMD of Rs.2 crores with interest and costs and in O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 essence, has allowed BSNL to retain Petitioner’s substantial amount contrary to a categorical finding in favour of the Petitioner that no loss had been proved by BSNL and even otherwise, the loss claimed in the pleadings was too remote and not a direct result of any act or omission of the Petitioner. Thus, the award has resulted in unjust enrichment of BSNL and suffers from ‘patent illegality’ going to the root of the matter, being self-contradictory. 10. The impugned award is also against ‘fundamental policy of Indian law’ since it disregards the binding dictum of the Supreme Court in the decision in Kailash Nath Associates v. Delhi Development Authority and Another, (2015) 4 SCC 136, which in turn is based on the judgment of the Supreme Court in Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC 49, holding that proof of damage or loss caused is a sine qua non for forfeiture of earnest deposit or imposition of penalty. Kailash Nath (supra) was a decision which involved forfeiture of EMD and the Supreme Court held that Section 74 of the Contract Act, 1872 will apply to cases of forfeiture of earnest money under a contract and the only exception to the rule is EMD deposit in case of public auctions, which is not the case here. Therefore, BSNL’s action of forfeiture of the EMD, without any proof of loss is in the teeth of these judgments, which were cited by the Petitioner during hearing and were referred to in the written submissions filed before the Arbitrator. It needs no reiteration that disregarding the binding effect of judgments of superior Courts, has been judicially recognized as violation of ‘fundamental policy of Indian law’ [Ref.: Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644; Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49; and Ssangyong Engineering O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131]. 11. This Court has taken a consistent view that proof of loss is necessary before damages can be awarded for breach of contract in light of provisions of Section 74 of the Contract Act. In R.B. Enterprises v. Union of India, 2023 SCC OnLine Del 8321, relying on the decisions in Kailash Nath (supra), Fateh Chand (supra) and Maula Bux v. Union of India, (1969) 2 SCC 554, this Court concluded that an award which upholds the grant of damages even pertaining to stipulated liquidated damages, without the party claiming damages proving the actual loss caused, warrants interference. In Union of India and Another v. Indian Agro Marketing Co-operative Ltd., 2023 SCC OnLine Del 4621, Court observed that proof of actual damages or loss is a sine qua non for grant of damages under Section 74 and Petitioners having failed to produce any material to demonstrate risk purchase or actual loss suffered, could not be allowed to unduly enrich themselves by retaining the amount appropriated by them by encashing the Bank Guarantee. 12. Reliance placed by the Arbitrator on the judgments in State of Haryana and Others v. Malik Traders, (2011) 13 SCC 200; National Highway Authority of India v. Ganga Enterprises and Another, (2003) 7 SCC 410; H.U.D.A. and Another v. Kewal Krishan Goel and Others, (1996) 4 SCC 249; Villayati Ram Mittal Private Limited v. Union of India and Another, (2010) 10 SCC 532; and National Thermal Power Corporation Limited v. Ashok Kumar Singh and Others, (2015) 4 SCC 252, is wholly misplaced as these cases are distinguishable on facts. In all these cases, successful bidders had withdrawn or changed their respective O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 bids before acceptance, resulting in forfeiture of EMD under contractual stipulations and then sought refund, which was rightly declined. Contrary thereto, in the instant case, Petitioner neither withdrew nor altered its bid as a matter of record and instead it was always willing to perform its obligations arising out of the contract and continued to send samples for testing and re-testing. 13. Finding and conclusion of the Arbitrator that no concluded contract was executed between the parties is a perverse finding and renders the award patently illegal. Having come to this erroneous conclusion, the Arbitrator upheld the action of BSNL of withdrawing the APOs and forfeiting the EMD. In fact, the APOs were concluded contracts between the parties and BSNL was not empowered to forfeit the EMD, which could only be forfeited if the bid was withdrawn or any terms of the bid documents were violated, at this stage prior to the conclusion of contracts. Clearly, BSNL’s NIT dated 24.06.2016 was an ‘invitation to offer’ and Petitioner’s bid was an ‘offer’. Once the BSNL declared the Petitioner as L-1 bidder and issued the APOs on 28.10.2016, it amounted to acceptance of the offer and concluded contracts for supply of cables came into existence. 14. Arbitrator’s finding that the APOs were only Letters of Intent, whereby BSNL expressed its intent to enter into a contract, is perverse and is based on the wrong stand of BSNL that forfeiture of EMD was in accordance with terms and conditions of Tender Inquiry Document/ Agreement since despite many opportunities, Petitioner refused to submit unconditional acceptance to the two APOs and evaded its obligations on one pretext or the other. This stand is contrary to the terms of NIT. Note 1 of Section 1, Part A of NIT provided that issuance of APO was award of O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 contract. Note 1 reads ‘The quantity stated above are estimated and BSNL reserves the right to vary the quantity to the extent of -25% to +25% of specified quantity at the time of award of the contract i.e. APO without any change in unit price or other terms and conditions.” Definition of the term ‘Purchase Order’ in Section-4, Part A of NIT reads ‘…….The Purchase Order shall be deemed as “Contract” appearing in the document’. Use of word ‘deemed’ clearly shows that parties did not intend that the Purchase Order would form the contract and it was understood that issuance of APOs, which were acceptance of the offer made by the Petitioner, would form a concluded contract, in light of the provisions of the Contract Act, dealing with invitation to offer, offer and acceptance of offer. Arguendo, even if APOs are treated as LOIs, as held by the Supreme Court in the decision in Dresser Rand S.A. v. Bindal Agro Chem Ltd. and Another, (2006) 1 SCC 751, an LOI can be construed as a letter of acceptance resulting in a concluding contract between the parties. Ratio of this judgment is squarely applicable in the present case as APOs were actually in the nature of Letter of Acceptance since they clearly specified the precise quantities and firm rates at which the cables were to be supplied as also the lead period of two months for preparation and the total delivery period of six months, both starting from the dates of issuance of the APOs. Even though, the Arbitrator takes note of this judgment cited by the Petitioner, he has not rendered any finding on the existence and effect of the specific clauses in the APOs or the contention of the Petitioner that the judgment covered its case on all fronts. 15. For the sake of arguments, even if it is assumed that no formal contract was executed between the parties because the Petitioner did not accept the APOs, then also one cannot lose sight of the fact that furnishing O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 of EMD and its receipt/acceptance by BSNL was in itself a limited contract albeit a contract not for supply but for enabling the Petitioner to participate in the tender process under Section 2(h) of the Contract Act, which provides ‘an agreement enforceable by law is a contract’. This position of law comes from the decision of the High Court of Calcutta in MBL Infrastructure Ltd. v. Rites Limited and Others, 2020 SCC OnLine Cal 478 and has been overlooked by the Arbitrator. 16. Even otherwise, for application of Section 74 of the Contract Act, which is premised on the principle against unjust enrichment, which is a facet of public policy, formation of a concluded contract is not necessary. It cannot be a proposition of law that a party which invests time and money in a contract at the instance of the other party, can be deprived of its money and the other party can be permitted to retain the EMD only by a mere pleading of violation of terms of bid conditions by the first party. 17. Independent of all other arguments, Petitioner cannot be held liable for breach of the terms of NIT/contract in question. Arbitrator has completely erred in holding that by not accepting the APOs and not furnishing PBGs within 14 days of issuance of APOs, as stipulated in Clause

27.2 of NIT or the extended period, Petitioner is in breach. It is settled law that every failure to accept the APO or furnish PBG cannot qualify as a fundamental breach entailing forfeiture of EMD. [Ref.: Avdel Tools & Services v. Trufit Fasteners, MANU/MH/1001/2008; Lakhmi Chand v. Reliance General Insurance, (2016) 3 SCC 100; and Hiedelberg Cement India Ltd. v. Indure Pvt. Ltd., 2020 SCC OnLine Del 2220]. It is only if the Petitioner had violated one or more of the fundamental conditions going to the root of the contract, EMD could have been forfeited such as: (a) it did O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 not accept the APO and furnish the PBG even after obtaining TSEC for its products; and (b) it failed in getting TSEC within two months from issuance of the APOs due to its own fault. In the instant case, none of these breaches have occurred and therefore, forfeiture of EMD was completely illegal. 18. Arbitrator has glossed over a very crucial factual aspect of this matter. BSNL was entitled to issue purchase orders for supply of cables only to those bidders who had received TSEC/Type Approval Certificate (‘TAC’). Petitioner’s application in form QF-103 seeking type-approval was pending with BSNL and it was thus not yet eligible to supply cables at that time and no Purchase Orders could be placed. It was, therefore, completely unwarranted for BSNL to insist on acceptance of APOs or furnish PBGs. As per Clause 6.2.4 of NIT, raw material for the cables had to be obtained from BSNL approved sources/vendors only. Petitioner manufactured first batch of cables using raw materials from approved vendors and submitted the same for testing to BSNL on 07.09.2016 for obtaining TSEC/TAC. On 21.11.2016, BSNL informed the Petitioner that samples had failed and test results reflected that this was owing to quality of raw material supplied by BSNL’s approved vendors and not due to any fault by the Petitioner. Without any reason, this important aspect had been sidelined by the Arbitrator by simply observing ‘noted only for rejection’. 19. Learned Arbitrator has committed patent illegality in overlooking that on 21.11.2016 BSNL had instructed the Petitioner to either explain the reason for failure of the sample test or alternatively submit furnish QF-103 after improvement in the product, while intimating about the failure of samples of first batch and acting on these instructions, Petitioner obtained O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 fresh raw material from other BSNL approved vendors, re-manufactured new cables, got them tested at its own level and as a matter of record, submitted fresh form QF-103 on 19.12.2016 along with demand draft, detailed test report and sample for testing to BSNL to obtain TSEC. Arbitrator overlooked that as per Note-3 and Clause 3 as also Clause 2(i) of NIT, time period of two months was available to the Petitioner to get TSEC from the date of APOs, i.e. from 28.10.2016. Two months period was to expire on 28.12.2016 and well before that on 19.12.2016, fresh form was submitted by the Petitioner. However, instead of re-testing the product and issuing TSEC/TAC, BSNL arbitrarily kept the process pending and belatedly on 11.01.2017 returned the demand draft refusing to test the cables. Significantly, in this letter there was no mention of any breach and the only reason spelt out was that second application for the same product against the same tender cannot be considered. This clearly shows that the stand of BSNL that there was no concluded contract or that the Petitioner was in breach was only an after-thought. CONTENTIONS ON BEHALF OF THE RESPONDENT: 20. No ground for interference by this Court in the Arbitral Award is made out exercising power under Section 34 of 1996 Act. Petitioner is unable to substantiate any patent illegality in the award that goes to the root of the matter. Petitioner is virtually calling upon the Court to examine the award as an Appellate Court, which is impermissible in law. Arbitrator is the final arbiter of facts and his finding of facts cannot be interfered with or substituted by this Court. Arbitrator has carefully considered the terms of NIT dated 24.06.2016 and APOs dated 28.10.2016 and taken a plausible and possible view that the EMD was rightly forfeited and it is not the domain of O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 this Court to interpret the provisions of the NIT/APOs and come to a different finding. 21. Arbitrator has rightly held that Petitioner is not entitled to refund of EMD amount of Rs.2 Crore, in light of Clauses 12.3, 12.7, 27, 28 and 29 of ‘General Instructions to the Bidders’ (‘GIB’) and Serial No.3 of Appendix-I to Section 4, Part-A of NIT. Clause 22 of APOs clearly required unequivocal and unconditional acceptance of the APOs by furnishing PBGs within 14 days from the date of issuance of the APOs and Petitioner was under an obligation to communicate its acceptance of the APOs and also furnish PBGs within the stipulated time. Failure of the Petitioner to comply with the mandatory requirements has correctly resulted in forfeiture of the bid security. 22. Petitioner had wrongly set up a case before the Arbitrator that the APOs were concluded contracts and communication of acceptance thereto was a mere formality. This argument is in the teeth of the judgment of the Supreme Court in South Eastern Coalfields Limited and Others v. S. Kumar’s Associates AKM (JV), (2021) 9 SCC 166, wherein the Supreme Court inter alia held that in order to determine the issue whether there was a concluded contract between the parties or not, the NIT and LOI have to be examined. In light of this position of law, the Arbitrator rightly examined the clauses and concluded that Clauses 27 and 28 of NIT and Clause 22 of APOs categorically provided that the APOs were merely Letters of Intent and Purchase Orders issued after acceptance of APOs by the Petitioner would be the ‘contract’. 23. Respondent granted a number of extensions to the Petitioner to obtain TSEC/TAC for its products and on each occasion, it put the Petitioner to O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 notice to submit the PBGs and accept the APOs within the extended timelines. This is evident from e-mails dated 16.11.2016 and letters dated

29.11.2016 and 09.12.2016. Despite this, Petitioner kept on seeking extensions without complying with the requisite conditions on frivolous grounds such as ‘Banking Turmoil’ or the Director being out of Delhi. No fault can be found in the finding of the Arbitrator that acceptance of APOs and furnishing of PBGs was fundamental to the formation of the contract and was independent of two months’ period for obtaining TSEC/TAC which was only essential for making supplies under the APOs. Despite multiple extensions, Petitioner did not comply with the terms and Arbitrator rightly observed that Respondent could not have been expected to wait indefinitely for the Petitioner to obtain TSEC/TAC and that too, in the absence of any commitment from the Petitioner towards performance of the contact by accepting APOs. 24. Arbitrator has not committed any patent illegality in insisting that Petitioner ought to have accepted the APOs and furnished the PBGs. It is true that one of the pre-conditions for bidding was having applied/obtained TSEC/TAC. NIT was issued on 24.06.2016 and admittedly, Petitioner had applied for TSEC/TAC prior to bidding and was thus eligible to bid. This had no implication on acceptance of the APOs, as both were parallel procedures. Petitioner’s contention that its products failed to meet specifications due to faulty raw materials supplied by approved vendors is misleading. Petitioner had an option of sourcing the raw materials from any other approved vendors of BSNL and also had sufficient time from the date of its first application from TSEC valuation made on 03/04.08.2016. Petitioner was declared L-1 bidder on 28.09.2016 and APOs were placed a O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 month later only on 28.10.2016. Had the Petitioner accepted the APOs, BSNL would have been assured of its seriousness and may have granted further time for obtaining TSEC/TAC. Therefore, the situation that the Petitioner finds itself in today is its own creation of violating the required procedures. Moreover, the onus to obtain TSEC/TAC within a reasonable time was on the Petitioner and BSNL cannot be held responsible for its failure. 25. Petitioner wrongly contends that it had offered fresh samples for testing on 19.12.2016. Record shows that it had re-applied for TSEC registration with BSNL’s QAC Wing, Bangalore, while its previous application submitted at the time of bidding was still pending. In this fact situation, the said office had no option but to return the subsequent application as the first one was not decided. Petitioner ought to have either submitted fresh samples under previous application or in the alternative should have requested to close the chapter in respect of its first application, before submitting fresh samples. 26. Learned Arbitrator has rightly held that acceptance of APOs and obtaining TSEC/TAC were two independent processes and Petitioner was well-aware of this position. Petitioner never intimated the APO issuing authority about the failure of its samples to meet the quality check by the QAC Wing, from the date of issuance of APOs till withdrawal of the same. Significantly, at no point in time, Petitioner communicated BSNL that it was not submitting PBG or not accepting the APOs due to failure of its products to meet the quality specifications. In fact, Petitioner continued to seek extensions for extraneous reasons and erroneously linking the two distinct processes. O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 ANALYSIS AND FINDINGS: 27. Facts to the extent they are not in dispute are that NIT was issued by the Respondent for procurement of 24F and 48F OFCs. On 04.08.2016, Petitioner applied to QAC Bangalore for issuance of TSEC basis, which it became eligible to participate in the tender process. In August, 2016, Petitioner submitted techno-commercial and financial bid along with EMD of Rs. 2 crores. On 07.09.2016, Petitioner sent the samples of 24F and 48F OFCs for evaluation and validation to a Government laboratory nominated by the Respondent and on 22.09.2016, samples of raw material were sent for TSEC approval by Respondent’s QAC. On 28.09.2016, Petitioner was declared as L-1 Bidder. On 20.10.2016, samples of 24F and 48F OFCs were rejected by the third party Government laboratory and on 19.10.2016/

20.10.2016, Respondent rejected samples of raw materials. Subsequently, on 25.10.2016, Petitioner’s samples for Rip Cord were also rejected. On 27.10.2016, counter samples of IGFR and Rip Cord were re-sent by the Respondent to its own lab for retesting. 28. On 28.10.2016, two APOs for partial quantities of 24F and 48F OFCs were issued by the Respondent in favour of the Petitioner and Petitioner was required to accept the same and furnish PBG in terms of the NIT and APOs. Post this, Respondent rejected the counter samples of IGFR and Rip Cord on

10.11.2016 and time limit of 14 days to furnish performance security also expired. Correspondence was exchanged between the parties, wherein Petitioner sought extension of time for different reasons, which was granted, however, since Petitioner failed to accept the APOs and furnish PBG even during the extended time, Respondent withdrew the APOs vide letter dated

09.01.2017 in terms of Clause 22 of the APOs. Disputes arose between the O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 parties and recourse was taken to arbitration as the agreed disputes resolution mechanism and the learned Arbitrator passed the Arbitral Award dated 23.06.2023, whereby claims of the Petitioner for refund of EMD of Rs. 2 crores with interest and cost as also counter claims of the Respondent for loss suffered and interest/costs were rejected. 29. Before proceeding to examine the rival contentions on merits, I may allude to the law on the scope of interference in an Arbitral Award under Section 34 of the 1996 Act. It is trite that in a petition under Section 34, the powers of the Court are circumscribed and restricted and there can be no review of the merits of the dispute. [Ref: OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited and Another, 2024 SCC OnLine SC 2600; MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163; Bharat Coking Coal Limited v. Annapurna Construction, (2023) 8 SCC 154; Ssangyong (supra); and MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd., (2004) 9 SCC 619]. 30. Under the unamended Section 34(2) of the 1996 Act, as it stood prior to Amendment Act, 2016, inter alia interference in an Arbitral Award was envisaged if it was in conflict with Public Policy of India and the Supreme Court in Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 and Associate Builders (supra), held that an award will be contrary to Public Policy of India if it was: (a) contrary to fundamental policy of Indian law; or (b) contrary to interest of India; or (c) contrary to justice or morality; or (d) patently illegal. ‘Patent illegality’ was recognized as a ground to interfere in Arbitral Award in several judgments of the Supreme Court including McDermott International Inc. v. Burn Standard Co. Ltd. and Others, (2006) 11 SCC 181. O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35

31. Arbitration and Conciliation (Amendment) Act, 2016 was introduced with effect from 23.10.2015 and the expression ‘Public Policy of India’ was by Explanation I, restricted to cases where the award was: (i) induced or affected by fraud or coercion; (ii) violative of Section 75; (iii) violative of Section 81; (iv) in contravention with Public Policy of Indian Law; or (v) in conflict with most basic notions of morality and justice. This, however, did not entail review of the award on merits of the dispute. In Ssangyong (supra), the Supreme Court held as follows:- “34. What is clear, therefore, is that the expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of Indian law” as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to “Renusagar” understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court’s intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .

35. It is important to notice that the ground for interference insofar as it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.

36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 law, as understood Indian in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or secondly, that such award is against basic notions of justice or morality as understood to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with. in paras 36

37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator’s view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).

41. What is important to note is that a decision which is perverse, as in paras 31 and 32 of Associate Builders [Associate understood O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. illegality” ground

42. Given the fact that the amended Act will now apply, and that the “patent international commercial arbitrations will not apply, it is necessary to advert to the grounds contained in Sections 34(2)(a)(iii) and (iv) as applicable to the facts of the present case.” for setting aside arbitral awards

32. In PSA SICAL (supra), the Supreme Court referring to the earlier judgments on the issue, including in Associate Builders (supra), Ssangyong (supra), MMTC Limited (supra), etc. held that it is more than settled legal position that in an application under Section 34, Court is not expected to sit as an Appellate Court and re-appreciate evidence. Scope of interference will be limited to grounds provided under the said provision and interference will be warranted if the award is in violation of ‘public policy of India’, which has been held to be ‘fundamental policy of Indian law’. Judicial intervention on account of interfering on merits in the award would not be permissible albeit principles of natural justice contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act would continue to be grounds of challenge. A decision which is perverse, though would not be a ground for challenge under public policy of India, would certainly amount to patent illegality and a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on ground of patent illegality. 33. It would also be useful to refer to the judgment of the Supreme Court O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 in State of Jharkhand and Others v. HSS Integrated SDN and Another, (2019) 9 SCC 798, where the Supreme Court held that Arbitral Tribunal is the master of evidence and findings of fact arrived at, based on appreciation of evidence, are not to be scrutinized as if the Court was sitting in appeal. To the same effect is the judgment of the Supreme Court in Maharashtra State Electricity Distribution Company Limited v. Datar Switchgear Limited and Others, (2018) 3 SCC 133. Recently, in Hindustan Construction Company Limited v. National Highways Authority of India, (2024) 2 SCC 613, the Supreme Court re-stated that Courts should not customarily interfere with the Arbitral Award which is well-reasoned and view of the Arbitrator is a plausible view. Relevant passages from the judgment are as follows:- to necessarily choose “26. The prevailing view about the standard of scrutiny — not judicial review, of an award, by persons of the disputants’ choice being that of their decisions to stand — and not interfered with, (save a small area where it is established that such a view is premised on patent illegality or their interpretation of the facts or terms, perverse, as to qualify for the path of least interference, courts have interference, except when absolutely necessary). By training, inclination and experience, Judges tend to adopt a corrective lens; usually, commended for appellate review. However, that lens is unavailable when exercising jurisdiction under Section 34 of the Act. Courts cannot, through process of primary contract interpretation, thus, create pathways to the kind of review which is forbidden under Section 34. So viewed, the Division Bench’s approach, of appellate review, twice removed, so to say (under Section 37), and conclusions drawn by it, resulted in displacing the majority view of the tribunal, and in many cases, the unanimous view, of other tribunals, and substitution of another view. As long as the view adopted by the majority was plausible — and this Court finds no reason to hold otherwise (because concededly the work was completed and the finished embankment was made of composite, compacted matter, comprising both soil and fly ash), such a substitution was impermissible.

27. For a long time, it is the settled jurisprudence of the courts in the country that awards which contain reasons, especially when they interpret contractual terms, ought not to be interfered with, lightly. The proposition was placed in State of U.P. v. Allied Constructions [State of U.P. v. Allied Constructions, (2003) 7 SCC 396] : (SCC p. 398, para 4) O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 “4. … It was within his jurisdiction to interpret Clause 47 of the Agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for the arbitrator to determine (see Sudarsan Trading Co. v. State of Kerala [Sudarsan Trading Co. v. State of Kerala, (1989) 2 SCC 38]). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law.””

34. At this stage, it would be useful to allude to the issues framed by the learned Arbitrator for determination, which are as follows:- O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35

35. Learned Arbitrator decided Issues 1, 2 and 3 together and answered all the three questions in favour of the Respondent. It was held that the APOs were only Letters of Intent and not concluded contracts. The contract was to come into existence only after Petitioner accepted the APOs and submitted PBGs and Purchase Orders were issued. It was further held that acceptance of APOs and furnishing of PBGs were components of the formation and performance of the contracts and not a mere formality. In respect of the third issue, it was held that Respondent was justified in withdrawing the APOs and forfeiting EMDs of the Petitioner in light of Clause 12.7 and Clause 3 Appendix 1 Section 4 Part A of GIB, which provide for forfeiture of EMD in case of non-acceptance of APOs by the Petitioner within the stipulated period. Relevant paragraphs of the award are as follows:- “21. From the above provisions and other provisions to be noted hereafter it would be seen that the TSEC / TAC was only a pre-condition to be eligible for the supply and not pre-requisite for acceptance of APOs by the bidder and formation of contract. And that APO is placed upon successful bidder, whereas, PO is placed on the one who had met all the criteria including acceptance of APOs, deposit of PBG, obtaining of TSEC/TAC type approval etc. The process of testing and obtaining TSEC / TAC was independent of issuing and acceptance of APOs. Both the conditions had no nexus whatsoever and cannot be intertwined.

22. The Ld. Counsel for the Claimant contends that the Respondent in para 6 of SOD had admitted that parties entered into an agreement and also that Note I Section 1 Part A NIT states that issuance of APOs is award of contract, and therefore, APOs is to be taken as contract between the parties. It is noted that, it is neither so admitted by the Respondent in its Statement of Defense nor provided in Note 1 Section I part A NIT. We cannot read the word ’agreement’ in isolation of the rest of the averments of SOD. Note 1 Section 1 Part A nowhere stipulates that APO is a contract. This relates to estimated quantity and the Respondent’s right to vary the same at the time of award of contract. We have noticed above that APO and PO are specifically defined under clauses 1.0 (e) and 1.0 (f) Section 4 Part A GIB. In any case, the word ’APO’ used in this Note 1 cannot be read in isolation of the rest of the provisions of the tender documents. O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35

24. There is no quarrel with regard above proposition regarding LOI, but it would be seen that in the present case APOs issued is only LOI and not the contract. It is not the final acceptance of Bid, but was to become contract only on the compliance of condition of acceptance of APOs and submission of PBGs by the Claimant.

25. Then, the Ld. Counsel for Claimant contends that in terms of Clause 24.1 Section 4 Part A of tender documents, the Respondent could have placed order on the Claimant for commercial supplies of OFC only once the same were type approved by QAC, and since the product of the Claimant and also raw materials (Rip Cord and IGFR) submitted by it had not been approved, the Claimant did not proceed further by accepting APOs. In this regard it has been noted above that acceptance of APOs was not linked with the Claimant having obtained or not TSEC/TAC for its products.

27. The letter dated 21.11.2016 of the Respondent on which much reliance is placed by the Claimant was nothing but intimation to the Claimant about its product’s failure to meet the standards and seeking explanations as to what improvements have been made by the Claimant. It only suggested to the Claimant to make fresh application as an alternative after making necessary changes. Be that as it may, the fact remains that the Claimant having failed to accept the APOs and furnish PBGs within 14 days that is by 10.11.2016, was reminded to comply these conditions by the Respondent vide its email dated 16.11.2016. And that admittedly the claimant vide its letter dated 17.11.2016 communicated that it was unable to accept the said APOs due to current banking turmoil and sought 3-4 weeks’ time. The Respondent vide its letter dated 29.11.2016 while granting extension to the Claimant to do the needful till 02.12.2016, categorically informed that no further time shall be given for the said compliance. However, the Claimant again vide its letter dated 29.11.2016 sought further extension for accepting APOs and furnishing PBG on the ground that one of its directors was out of station and the other was out of country. The Respondent once again vide its letter dated 09.12.2016 granted additional time for compliance till 12.12.2016. It is pertinent to note that while seeking extensions not even once did the Claimant indicate any apprehension or possibility of non-acceptance of APOs because of rejection of its samples by QA department, which fact is admitted by the Claimant in para 3(e) of its reply to Counter Claim.

29. Before adverting to the above decisions cited by the Ld. Counsel of the Claimant, it will be worth noting that the Ld. Counsel for the Claimant has argued about condition fundamental to the performance of the contract, O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 whereas in the present case we are considering the fundamental condition requisite to the formation of contract. Submission of bid with security deposit or earnest money as also acceptance of APOs and submission of PBGs are fundamental conditions to the formation of contract and non- compliance of which entailed independent consequences like forfeiture, which is different than the condition of performance of contract, the non- compliance of which may have different consequences. Further, it settled law that no words can be ignored or made redundant or added or substituted in the terms of the agreement or tender documents. Thus the addition of above two conditions in the above provisions (Clauses 27.2, 4.1, 4.3, Section 7 (B), Clause 3 Appendix 1), emphasized by the Ld. Counsel for the Claimant, is not permissible. It is in the light of this proposition that the contention of the Ld. Counsel of the Claimant is to be examined. In this regard reliance is placed on the decision of Supreme Court in Afcons Infrastructure Ltd. VS Nagpur Metro Rail Corporation Ltd. and Ors. (2016)16 SCC 818. In this case it was held as under:

14. “We must reiterate the words of caution that this Court has stated right from the time when Ramana Dayaram Shetty v. International Airport Authority of India MANU /SC/0048/1979 : (1979) 3 SCC 489 was decided almost 40 years ago, namely, the words used in the tender documents cannot be ignored or treated as redundant or superfluous – they must be given meaning and their necessary significance...”

33. It is true that as per section 5 of the Contract Act, a proposal may be revoked at any time before communication of its acceptance is complete against the proposer. In the present case, the Claimant instead of accepting the APOs and furnishing PBGs within the stipulated period of 14 days from issue of APOs sought time twice for compliance, but finally failed to do the needful. In this way, the Claimant failed to comply with the fundamental conditions of tender of acceptance of APOs and furnishing of PBGs. The Claimant had submitted its bid on the condition that bids security could be forfeited in case it did not accept APOs and furnish PBGs within the stipulated period of 14 days of APOs.

34. The provisions of Clause 4 also clarify that the bidders having obtained TSEC / TAC or having applied for the same are eligible to bid, and that in the event of the bidder having not obtained TSEC / TAC till the time of bidding, but only applied for the same, would be entitled to make supplies of their approved OFC products. This requirement of TSEC / TAC and the products being type approved was only a condition for supply, and not for the formation of the contract. Whereas acceptance of APOs and furnishing of PBGs are components of the formation and performance of contract. By any means it cannot be said that compliance of these conditions was a mere formality. The lead period of two months from issue O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 of APO is provided to enable the bidder to obtain TSEC / TAC for being eligible to give the supplies. It was nowhere linked with the fundamental requirement of acceptance of APOs and furnishing of PBGs by the bidder within the prescribed period of 14 days from the date of issue of APO. Clause 24.1 GIB which provides for placement of order, states that the order for commercial supplies shall be considered by the purchaser (Respondent) only on those eligible bidders whose offers have been found technically, commercially and financially acceptable and whose goods have been type approved / validated by the purchaser. This also clarifies that acceptance bid and type approval of products are two different conditions under the tender documents. Both these requirements are independent and not intertwined or contingent of each other. The statement of Respondent witness RWI to the fact that the acceptance of APOs was independent of TSEC / TAC certificates and both the requirements were to be complied by the Claimant being successful bidder for two packages, has remained un-assailed. Therefore, the contentions of the Ld. Counsel for the Claimant that since the Claimant could not obtain TSEC / TAC for its products and so was not eligible to make supplies, APOs could not have been issued by the Respondent or that the Claimant being not so eligible to supply, was not required to accept APOs and submit the PBGs, are entirely untenable being contrary to the provisions of the tender documents. Also, the contentions that the Claimant never refused to accept APOs or furnish PBGs but only sought time and was always willing to perform its obligation, are also untenable. We have noticed that the Claimant submitted its bid being well aware of the terms of the tender documents, and also sought extension for acceptance of APOs and submission of PBGs twice and also despite reminder and being made cautious that no further extension will be granted, did not come forward to accept APOs and furnish PBGs. On the other hand, the Claimant has taken the pleas that not only the issue of APOs was not warranted and was arbitrary, but the acceptance of the same and furnishing of PBGs by the Claimant was only a formality. This conduct of the Claimant negates its contentions that it never refused to accept APOs end furnish PBGs. The contention of the Ld. Counsel for the Claimant that the failure of the products was not attributable to the Claimant but to Respondent since the products were procured from the approved vendors and tested in the approved laboratories, is noted only for rejection. It was not the responsibility of the Respondent to ensure or provide any assistance to the Claimant with regard to the material etc. It was the Claimant’s obligation to obtain TSEC / TAC to be eligible to make supplies of its type approved products.

37. In the cases of Housing Urban Development Authority vs Kewal Krishan Goel & Others AIR (1996) SC 1981 and Villayati Ram Mittal (Pvt.) Ltd. Vs. Union of India (UOI) & Others (2010) 10 SCC 532, the O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 Supreme Court reiterated the legal principles relating to Earnest Money, stating that it is a part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reason of the fault or failure of the giver.

38. In National Thermal Power Corporation Ltd. vs. Ashok Kumar Singh and Ors. (2015) 4 SCC 252, reliance was placed on the cases of Ganga Enterprises (supra) and Malik Traders (supra) and it was observed in para 9 as under: “9. On behalf of the appellant-corporation it was contended that the submission of the bid itself was subject to the condition that it shall be accompanied by an earnest money deposit which was liable to be forfeited in the event of the withdrawal of the bid. Opening of the bid or acceptance thereof terms of Section 5 of the Contract Act, 1872 was, in that view, wholly immaterial and irrelevant to the validity of the forfeiture ordered by the appellant-corporation”.

39. We have noticed that the terms of the tender documents clearly stipulates APOs (LOI) requiring its unconditional acceptance and submission of PBGs by the bidder, and it is only thereafter that the purchase order is to be issued which constitutes the award of contract on the bidder and requires signing of the contract. The conditions of acceptance of APOs and submission of PBGs were part of bid and tender documents and if the same was not complied by the Complainant, there remains nothing for the formation of contract. And in the light of above decisions of Supreme Court as reiterated in Ganga Enterprises (supra), earnest money / bid security amount was liable to be forfeited.

40. Before proceeding further it may be pertinent to note that the Claimant while admitting having sent email dated 17.11.2016 seeking extension of time for 3- 4 weeks, in its rejoinder para 5(e) denied that the extension was sought due to banking turmoil. This was a denial made by the Claimant of the contents of its own letter dated 17.11.2016 which reads "Due to the current banking turmoil, kindly give us 3-4 weeks more on the subject matter.” This has been noted only to see the demeanor and conduct of the Claimant. Likewise, the plea that grant of extension of time by the Respondent would illustrate the fact that acceptance of APOs etc. was not a fundamental condition but only a formality or that the Claimant never refused to accept the APOs or submit PBGs, are also contrary to the various provisions of the Claimant’s own tender documents and communications.

41. The fact that some extensions were granted by the Respondent to the Claimant for doing the needful in this regard at the request of the Claimant cannot be taken to mean that the compliance in this regard by the Claimant was only a formality. We have noticed above that the terms of tender documents provided for consequential provision for non- acceptance of APOs and furnishing of PBGs by the Claimant within the O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 prescribed 14 days period from the date of issue of APOs. The Claimant was very well aware about these provisions and sought time for doing the needful without any objections or reservations. The Claimant is not rustic or novice, but a professional company engaged in the business of manufacturing various types of cables used for communications and has been a supplier to various organizations including the Respondent for the past several years. The Claimant witness CWI stated that Mr. Shailesh Choudhary, the Director of Claimant who had 30 years’ experience in cable industry was looking after the subject tender and that no objection was raised or any clarification sought by the Claimant regarding terms and conditions of tender. He admitted that after the bidding the second step was acceptance of APO. He stated that this was their first big tender of optical fiber and that as they were not eligible to supply cable, they could not accept APO. The parties entered into commercial transactions being very well aware of the terms thereof including their obligations and consequences etc.

42. We have noticed that the Claimant having failed or refused to accept APOs and furnish PBGs till the extended time of 12.12.2016, and there being no further step taken by the Claimant towards compliance of these conditions, the Respondent vide its letter dated 09.01.2017 withdrew the APOs and invoked Clause 22 of APO as also Clause 3 Appendix I Section 4 Part A GIB and proceeded to forfeit EMD. We have seen above that Clause 12.7 GIB and Clause 3 Appendix I specifically provide for forfeiture of EMD in case of non-acceptance of APO by the Claimant within the stipulated period. The Respondent submits, and to which there is no reason to disagree, that the Respondent could not have been expected to keep waiting and giving opportunities to the Claimant to obtain TSEC for its repeatedly failed products, even without getting any commitment by acceptance of APOs. And that had the Claimant given its acceptance of APOs and deposited PBGs in accordance with tender conditions and then sought further extension of time for obtaining TSEC, the Respondent could have considered giving extension of time beyond the stipulated period of two months from issuance of APOs for it to obtain TSEC. In such fact scenario and conduct of the Claimant, the Respondent had no other option except what it did vide its letter dated 09.01.2017. The Respondent could not be said to be unjustified in forfeiture and encashment of EMD. In such fact situation, the Claimant had no right to claim that its security deposit could not be forfeited and need to be returned to it.

43. In view of the above discussions these questions are answered accordingly: (i) the issue of APOs was only LOI and not the contract. (ii) Acceptance of APOs and furnishing of PBGs by the Claimant are fundamental requirements for the formation of contract. (iii) The Respondent was not unjustified in withdrawing APOs and forfeiting EMDs of the Claimant.” O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35

36. The first question that arises for consideration is whether the APOs were concluded contracts between the parties. To determine this issue, it would be pertinent to refer to the relevant clauses of the NIT and GIB. Clauses 1.0 (e) and 1.0 (f) Section 4 Part A of GIB define ‘Advance Purchase Order’ and ‘Purchase Order’ as follows:- “1.0 DEFINITIONS (a).... (b).... (c).... (d).... (e) “The Advance Purchase Order” or “Letter of Intent” means the intention of Purchaser to place the Purchase Order on the bidder. (f) “The Purchase Order” means the order placed by the Purchaser on the Supplier signed by the Purchaser including all attachments and appendices thereto and all documents incorporated by reference therein. The Purchase Order shall be deemed as “Contract” appearing in the document.”

37. Clause 27.1 Section 4 Part A of GIB provides that ‘the issue of an Advance Purchase Order shall constitute the intention of the purchaser to enter into contract with the bidder’ and Clause 28.1 provides that ‘the issue of Purchase Order shall constitute the award of contract on the bidder’. From the definition of APO and Purchase Order, it is evident that the APOs were only Letters of Intent indicating the intention of the Respondent to place the Purchase Orders, which were to be issued after Petitioner accepted the APOs and furnished the PBGs within 14 days from the date of issue of APOs. As per Clause (f), it was the Purchase Order which was deemed as a contract. This is further clear from Clause 27.1, which in no uncertain terms provided that issue of APO shall constitute the intention of the purchase to enter into a contract with the bidder as also Clause 28.1, which provided that O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 the issue of Purchase Order shall constitute the award of contract on the bidder. Therefore, it was rightly held by the Arbitrator that APOs did not form concluded contracts between the parties. 38. Petitioner argued that the NIT was an ‘invitation to offer’ and the bid submitted was an ‘offer’ under the Contract Act and therefore once the APOs were issued, the offer was accepted and concluded contracts came into existence. This argument overlooks the precise definitions of APO and Purchase Orders in the GIB as also Clauses 4.1 and 4.3 of GCC read with Section 7 (B) of bid document, which mandated the Petitioner to accept the APOs and furnish PBGs as pre-conditions to place the Purchase Orders. It is only after these twin conditions were satisfied that the contracts came into existence and not merely by issue of APOs, which were mere than Letters of Intent to place the Purchase Orders on the bidder. 39. Reliance of the Petitioner on paragraph 6 of the SoD to argue that Respondent had admitted that parties had entered into an agreement and Note 1 of Section 1, Part A of NIT, which allegedly states that issuance of APOs was award of contract, is misplaced. As rightly held by the Arbitrator the Respondent did not admit in the SoD that the parties had entered into an agreement and the Petitioner was reading the word ‘agreement’ in isolation bereft of the other averments in the paragraph and out of context. Paragraph 6 of SoD/reply to SoC of the Petitioner contains no admission that a concluded contract came into existence between the parties. It is averred by the Respondent that forfeiture of EMD was in accordance with terms and conditions of Tender Enquiry Document and after entering into the agreement, Petitioner, despite various opportunities refused to submit unconditional acceptance of the APOs and evaded its obligations on one O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 pretext or the other. The use of the term ‘agreement’ cannot be read to connote a concluded contract in the context it was used. Similarly, Note 1 does not stipulate that APO was a contract and only stipulated that the quantities stated in the table placed above the Note in the NIT, were the estimated quantities and BSNL reserved the right to vary the quantity to the extent of -25% to +25% of specified quantity at the time of award of the contract i.e., APO without any change in the unit price or other terms and conditions. Again, Petitioner is reading the term ‘APO’ out of context overlooking that the term has been specifically defined in Clause 1.0 (e), as above mentioned. Thus, this Court finds no infirmity in the finding of the Arbitrator that the APOs were not concluded contracts between the parties. This issue will have a bearing on the aspect of forfeiture of EMD, which I shall advert to in the later part of this judgment. 40. Coming to the second question as to whether unconditional acceptance of APOs and submission of PBGs by the Petitioner was a fundamental requirement for concluded contracts to come into existence or was it only a formality. Clause 4.1 read with Clause 4.3 of Section 5 Part A of GIB provided that all suppliers shall furnish performance security to the purchaser for an amount equal to 5% of the value of APO within 14 days from the date of issue of the Order in the form of a Bank Guarantee, issued by a Scheduled Bank and in the proforma provided in Section 7 (B) of the Bid Document. Clause 4.4 provided that Performance Security Bond will be discharged by the purchaser after completion of the supplier’s performance obligations, including any warranty obligations under the contract. Further, it was clearly stipulated in the APOs that they were likely to be converted into a detailed Purchase Order after receipt of bidder’s unequivocal/ O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 unconditional acceptance of terms and conditions of the APO along with PBG. Clause 22 of the APOs ordained the bidder to unconditionally accept the APOs, failing which the APOs shall be deemed to be withdrawn automatically at the risk and responsibility of the bidder, without any assigning any further reason and in the event of withdrawal, subsequent claim of the supplier for placement of Purchase Order shall not be entertained. Relevant paragraph and Clause 22 of one of the APOs illustratively, are extracted hereunder, for the ease of reference:- “Subject:- Advance Purchase Order for the supply of 6400 Km 24F Metal free Optical Fibre Cable with double HDPE Sheath (G.6522D Fiber) under Package-‘A’. ……. ……. On behalf of CMD BSNL, an Advance Purchase Order (APO) on the terms and conditions of the above referred tender enquiry is hereby placed for the supply of 6400 Km 24F Metal free Optical Fibre Cable with double HDPE Sheath (G.6522D Fiber) under Package-‘A’, ie 40% of the total SOR Qty being the L-1 bidder. The APO is likely to be converted into detailed Purchase Order after the receipt of your unequivocal/ unconditional acceptance of all the terms and conditions of this APO along with Performance Bank Guarantee (PBG) for an amount of Rs. 1.025 Crore. The Bank Guarantee to be furnished should be strictly in BSNL format issued by an Indian Nationalized / Scheduled Bank. The Bank Guarantee should be valid for a minimum period of Three (03) years and is to be submitted in duplicate (one original copy + one Photo Copy). Clause 22 22 An unconditional / unequivocal acceptance of the APO along with required PBG must received with in the prescribed period of 14 days from the date of issue of this APO and other documents as desired by BSNL if any. In case if you failed to furnish the PBG and unconditional acceptance of the APO in question shall be deemed to be withdrawn automatically at your risks and responsibilities without assigning any further reason. In the event of withdrawal of the APO, subsequent claim of supplier for placement of Purchase Order shall not be entertained by this.”

41. In light of these provisions of the APOs, no infirmity can be found with the finding of the Arbitrator that unconditional acceptance of APOs and O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 furnishing of PBGs within 14 days from issuance of APOs was a fundamental condition requisite to formation of a contract and was not a mere formality, with consequences of failure to comply with these conditions detailed in the APOs and the GIB. This also fortifies the stand of the Respondent that sans the unconditional acceptance of APO and furnishing of PBGs, there was no concluded contract and APOs were never intended to be a contract but only Letters of Intent. 42. Counsel for the Petitioner placed reliance on the judgment of Dresser Rand (supra), to contend that even an LoI can be construed as a Letter of Acceptance. This proposition of law is beyond debate but whether or not the LoI was intended to be a contract/Letter of Acceptance or a mere intent to enter into a contract, would depend on the facts of each case and this is what is observed by the Supreme Court and I quote:- “39. It is now well settled that a letter of intent merely indicates a party’s intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. This Court while considering the nature of a letter of intent, observed thus in Rajasthan Coop. Dairy Federation Ltd. v. Maha Laxmi Mingrate Marketing Service (P) Ltd. [(1996) 10 SCC 405] : (SCC p. 408, para 7) “The letter of intent merely expressed an intention to enter into a contract. … There was no binding legal relationship between the appellant and Respondent 1 at this stage and the appellant was entitled to look at the totality of circumstances in deciding whether to enter into a binding contract with Respondent 1 or not.”

40. It is no doubt true that a letter of intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a letter of intent, it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether it is a final acceptance of the offer O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. Chitty on Contracts (para 2.115 in Vol. 1, 28th Edn.) observes that where parties to a transaction exchanged letters of intent, the terms of such letters may, of course, negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold that the parties are bound by the document; and the courts will, in particular, be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it. Be that as it may.”

43. In the instant case, as noted above, reading of the definitions of ‘APO’ and ‘Purchase Order’ as also other clauses in NIT/GIB, leaves no doubt that the APOs were not intended to be concluded contracts but were merely an expression of intent to enter into contracts, subject to fulfilment of pre- conditions of acceptance of APOs and furnishing of PBGs and therefore this judgment will not inure to the advantage of the Petitioner. 44. Coming to the next question as to whether the Respondent was justified in withdrawing the APOs and forfeiting the EMD, in my view, even on this score, the finding of the Arbitrator warrants no interference. Clause 12 of GIB mandated that the bidder shall furnish, as part of its bid, a bid security as mentioned in Section 1. Clause 12.3 provided that the bid security was required to protect the purchaser against the risk of bidder’s conduct, which would warrant forfeiture of bid security as provided in Clause 12.7. Clause 12.7 provided that a bid security may be forfeited inter alia if the bidder did not accept the APOs and/or did not submit PBGs. To the same effect is Clause 3 Appendix 1 Section 4 Part A GIB. Relevant clauses are extracted hereunder:- “Clauses 12.1/12.3/12.4/12.6/12.7

12.0 BID SECURITY/EMD

12.1 The bidder shall furnish, as part of its bid, a bid security as mentioned in Section-1(DNIT). O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35

12.3 The bid security is required to protect the purchaser against the risk of bidder’s conduct, which would warrant the forfeiture of bid security pursuant to Para 12.7.

12.4. A bid not secured in accordance with Para 12.1 & 12.2 shall be rejected by the Purchaser being non-responsive at the bid opening stage and archived unopened on e-tender portal for e-tender and returned to the bidder unopened (for manual bidding process).

12.6 The successful bidder’s bid security will be discharged upon the bidder’s acceptance of the advance purchase order satisfactorily in accordance with clause 27 and furnishing the performance security, except in case of L-1 bidder, whose EMBG/EMD shall be released only after the finalization of ordering of complete tendered quantity in pursuance to clause no. 24.4 & 27.3 of this section.

12.7 The bid security may be forfeited: a) If the bidder withdraws or amends its bid or impairs or derogates from the bid in any respect during the period of bid validity specified by the bidder in the bid form or extended subsequently; or b) If the bidder does not accept the APO/AWO and/or does not submit PBG & sign the contract/agreement in accordance with clause 28. NOTE:- The bidder shall mean individual company/firm or the front bidder and its technology/consortium partner, as applicable. Clause 3 Appendix 1 Section 4 Part A GIB S. No. 3. Defaults of bidder / vendor. Action to be taken Non-receipt of acceptance of APO/AWO and SD/PG by L-1 bidder within time period specified in APO/AWO Forfeiture of EMD.

45. Learned Arbitrator has rendered a finding that Petitioner failed to accept the APOs and furnish PBGs even during the extended time till

12.12.2016 and the Respondent acted rightly in withdrawing the APOs invoking Clause 22 of the APO and forfeiting EMD in terms of Clause 3 Appendix 1 Section 4 Part A of GIB as also Clause 12.7 of GIB, which enabled forfeiture of EMD in case of non-acceptance of APOs within the O.M.P. (COMM) 391/2023 and connected matter Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:27.09.2025 18:43:35 stipulated period. Clause 29 of GIB enforces the mandate of furnishing bid security and resultant forfeiture due to non-compliance. Clause 3 Appendix 1 Section 4 Part A GIB, categorically provides that non-receipt of acceptance of APOs/furnishing of PBGs by L-1 Bidder within the specified time, will result in EMD forfeiture. 46. This finding of the Arbitrator is based on provisions of GIB and finds strength from the law laid down by the Supreme Court that forfeiture of earnest money, when it is on account of breach of auction/tender conditions at the pre-contractual stage, when no contract has yet come into existence, does not infringe any statutory right under the Contract Act, since earnest/ security is given and taken in such cases to ensure that a contract comes into existence. In Villayati Ram (supra), the Supreme Court observed that if the transaction or the contract does not come through due to fault or failure of tenderer, party inviting the tender is entitled to forfeit earnest money furnished by the tenderer. Relevant paragraphs of the judgment are as follows:- “10. The legal principles relating to “earnest money” are well settled. In Chiranjit Singh v. Har Swarup [AIR 1926 PC 1] the Judicial Committee of the Privy Council held: (AIR p. 2) “Earnest money is part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.” These observations of the Judicial Committee have been quoted (at SCC p. 531, para 20) in the judgment of this Court in Shri Hanuman Cotton Mills v. Tata Air Craft Ltd. [(1969) 3 SCC 522] in which the principles relating to earnest money have been laid down.