High Court · 2009

3. The tenders so submitted by the petitioners were accepted by the respond ent Board to be the best viable bids in their own judgments and consequently the respondent Board issued Letters Of Award (LOA) to the writ petitioners for supp ly of equipments, construction and installation of the transformers and providin g service connections on turnkey basis. These Letters Of Award were issued to th e writ petitioners by the respondent Board by various orders dated 30.01.2009. T he further admitted position of facts emerging out of the pleadings are that the writ petitioners were required to furnish Contract Performance Guarantees, here inafter referred to as (cid:28)CPGs (cid:29) in favour of the respondent Board within 20 days f rom the date of issuance of LOA as per clause 41.0, Section - INB and Clause 32. 0, Section- GCC of conditions of contract Volume 1 & 1A and also as per Conditio n of Contract (supply) clause 1.1 and Clause 12.1.1 (Erection Contract). Accordi ng to the respondent Board, LOAs having been issued on 30.01.2009, the writ peti tioners were required to furnish the CPGs within 19.02.2009, i.e. within 20 days from the date of issuance of LOAs. It is further on record that on failure of t he writ petitioners to furnish the CPGs within the stipulated period of 19.02.20 09, they were asked by the Board to submit Agreement papers within 31.03.2009 an d before signing the Agreement they were asked to submit the CPGs. Accordingly, the Contract Agreements were ultimately signed on 6.04.2009 after submission of CPGs by the respective writ petitioners by 27.03.2009. The said CPGs were issued by the Union Bank of India, TF Gole Market, Swahid Bhagat Singh Place, New Delh i- 1. However, the writ petitioners came to learn that the Contract Performance Guarantees issued in the name of Union Bank of India were in fact fake and on co ming to know of the fraud committed in this respect by a so called service provi der namely M/s SS Capitals and Financial Services in collusion with some officer s of the Union Bank of India, the writ petitioners immediately informed the resp ondent Board on 23.04.2009 that the Bank Guarantees submitted by them were fake. It is further revealed that complaints were also lodged in this connection by t he writ petitioners with the Deputy Commissioner of Police, Economic Offences Wi ng, New Delhi on 25.04.2009. Thereafter, the writ petitioners arranged fresh Ban k Guarantees from Federal Bank Limited and submitted the same to the respondent Board as a replacement of the earlier CPGs. The submission of the fresh bank gua rantees by the writ petitioners from Federal Bank Limited is not disputed by the respondent Board. However, on 24.04.2009, the respondent Board issued Show Caus e Notices to the writ petitioners asking them to show cause as to why the contra ct agreements executed with them should not be terminated and as to why they sho uld not be debarred from future business with the respondent Board in addition t o further actions that might be taken against the writ petitioners. The response s of the writ petitioners were asked to be submitted to the Board within 7 days from the date of issue of the said notice. For better appreciation, the contents of the show Cause Notices dated 24.04.09 issued in respect of the writ petition ers in one of the writ petition viz. W.P.(C) 1990/2009 is reproduced herein belo w :- (cid:28) & & & & & &with reference to the above, this is to inform you that the contract Perf ormance Guarantee furnished by you vide the Bank Guarantees (referred in 2.3.4 & 5) against RGGVY Nagaon District Package NGN-3 have been disowned by the Union Bank of India, Field General Managers Office, Shaheed Bhagat Singh Place, IIIrd floor, Bangla Sahib Marg, Gole Market, New Dehli- 110001. This act of submission of fraudulent documents is against the interest of the Assam State Electricity Board. Therefore, you are to show cause as to why the abovementioned contract Agreement s shall not be terminated and you shall not be debarred from future business wit h Assam State Electricity Board in addition to any other action that may be take n against you. Your reply should reach the undersigned within 7 (seven) days fro m the date of issue of this notice. & & & & & & & &.. (cid:29) Further reproduction of the portion of the show cause notices in respect of the remaining three writ petitions is not required as they are identical in all relevant aspects.

4. The writ petitioners accordingly submitted their replies to the responde nt Board defending their position. Thereafter, the respondent Board issued furth er notices summoning the writ petitioners for personal hearing and after affordi ng such personal hearing, impugned orders dated 13.05.2009 were communicated to the writ petitioners inter alia rescinding the contracts given to the petitioner s. In addition to rescinding the contracts the respondent Board through its Chai rman issued further orders in all four writ petitions separately as follows : (cid:28) & & & & &. as far as the request of the Union Bank of India with regard to filing o f criminal case against the firm, as also decision of the issue as to whether th e firm should be debarred from any further business with ASEB, the order will re main reserved till the outcome of the investigation being carried out by the Del hi Police. Chief General Manager (RE), ASEB will maintain correspondence with De lhi Police to get report from time to time so as to take a decision with regard to filing of criminal case and barring the firm from future business with ASEB a nd its successor companies. (cid:29)

5. The respondent Board by filing affidavits-in-opposition in all the writ petitions had taken a preliminary objection to the maintainability of the writ p etitions in view of the provisions of Arbitration Clause in the Letters of Award . The relevant Arbitration Clauses No. 19 and 19.1 are quoted herein below:- (cid:28)19.0- Settlement of Disputes and Arbitration. 19.1- All the differences or disputes arising out of this contract shall be se ttled through the process of (cid:28)Settlement of Disputes (cid:29) and (cid:28)Arbitration (cid:29) as per c lause 47.0 & 48.0, Section- GCC, Conditions of Contract Vol.,- 1 of the Bidding Documents. The Arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The p lace of arbitration shall be Guwahati. (cid:29) Although, initially objection was raised regarding maintainability of th 6. e writ petition by placing reliance on the arbitration clause, however, the same was neither argued nor pressed on behalf of the respondent Board at the time of hearing of the writ petitions. This Court in order to satisfy itself had peruse d the relevant connected clauses 47 and 48 of the GCC pertaining to the settleme nt of disputes which specifically provides that the power of adjudication of dis putes by way of arbitration is limited to the scope of (cid:28)Performance of Works (cid:29). H ence, the disputes involving the present nature is prima facie beyond the scope of the said process of settlement of disputes. A copy of the general terms and conditions of contract, containing above said clauses 47 and 48 has been annexed as Annexure ’P’ to the affidavits-in-re ply filed by the petitioners in WP(C) No.1990/2009 as well as in other writ peti tions.

7. The respondent Board has sought to justify its action contained in its i mpugned orders dated 13.05.2009 by taking a stand in the affidavits-in-oppositio n that the writ petitioners informed the Board on 23.04.2009 only regarding the fraud committed in respect of CPGs issued in the name of Union Bank of India onl y after receipt of letter from the bank authority and visit of the bank personne l to the office of the Board by which the matter has become known to all. Theref ore, it has been contended that the petitioners might have delivered the informa tion of being defrauded with an intention to prove their innocence and ignorance about the fraud.

8. The respondent Board has further taken a stand that the petitioner’s Com pany could have submitted earlier bank guarantees from their regular banker, i.e . Federal Bank Limited. But, inspite of being able to furnish the bank guarantee from their regular banker as per documents submitted with the bid, the petition er approached the outside agency, i.e. M/s S.S. Capital & Financial Service for acquiring bank guarantees without going through the authenticity of the firm. Th us from the conduct of the Petitioner’s Company, it appears that fake bank guara ntees were submitted with an ulterior motive of deceiving the Assam State Electr icity Board authorities and to make profit unscrupulously by the petitioner’s co mpany. Further stand of the Board as stated in Paragraph 20 of the affidavit-in-opposit ion in WP(C) No.1990/22009 is quoted hereunder: (cid:28)....it is the duty of the Petitioner Company to submit authentic Bank Guarantee s by observing the formalities of the issuing Bank which is the normal practice of any Bank. The same having not been done, the action on the part of the petiti oner’s company in securing Bank Guarantee worth of Rs. 33,51,27,531.00 against f our works as reflected in W.P.(C) No. 1997/09, W.P.(C) No. 1998/09, W.P.(C) No. 1999/09 and in the present writ petition on payment of Rs. 98.90 Lakhs to M/s S. S. Capital & Financial Service who allegedly cheated the petitioner’s company is exfacie not tenable and the entire circumstances leads to only one conclusion t hat the petitioner company in collusion with M/s S.S. Capital & Financial Servic e attempted to commit fraud on the Assam State Electricity Board and such fraudu lent company is not entitled to do any work under Assam State Electricity Board. ...... (cid:29). Hence, the Board viewed the act of the writ petitioners in submitting fake bank guarantees with a view to deceive the Assam State Electricity Board authorities which has led to the cancellation of the Letter of Awards and the agreements in reference and the impugned orders dated 13.05.2009 were passed after considering all the facts and materials on record and in public interest.

9. I have heard Mr. N Dutta, learned Senior counsel assisted by Mr. I Choud hury, learned counsel appearing for the writ petitioners. Also heard Mr. BD Das, learned Standing Counsel, ASEB appearing for respondent Nos.1, 2 and 3 and Mr. RK Bora, learned Additional Senior Govt. Advocate, Assam appearing for responden t No.4.

10. Mr. Dutta, learned Senior counsel appearing on behalf of the petitioners would strenuously urge that the petitioners have been victims of fraud of immen se proportion perpetuated on them under the circumstances contained in the plead ings. It is submitted that similar INVs were issued by Power Grid Corporation of India as well as Government of Nagaland and the petitioners were issued LOA by both of them. Bank Guarantees procured through the same Agency (M/s SS Capital a nd Financial Services) were also furnished to Power Grid Corporation and the Gov ernment of Nagaland. After coming to know the fraud committed upon them the peti tioners informed all about the fake Bank Guarantees. Thus the very actions of th e writ petitioners in informing the respondent Board, Power Grid Corporation of India as well as the Govt. of Nagaland immediately on coming to know of the said fraud as well as informing the police at Delhi without any delay prove the bona fide intentions of the writ petitioners. It is further argued on behalf of the writ petitioners that while the Show Cause notices dated 24.4.2009 served on wri t petitioners charging them to the effect that the act of submission of fraudule nt documents is against the interest of the Assam State Electricity Board, in th e impugned orders dated 13.05.2009 the respondent Board went ahead to hold the p etitioners guilty of acts for which no charges were framed or communicated to th em, inasmuch as, the petitioners were originally charged with the act of submitt ing fraudulent documents which was adequately explained by them in their reply. In the impugned orders dated 13.5.2009, petitioners have been held to be guilty of having believed the (cid:28)the unscrupulous elements (cid:29) and of (cid:28)greed (cid:29). Although, no specific finding of committing fraud has been recorded, clause 7 of the guidelin es for procurement of goods and services for implementation of Rural Electrifica tion Project relating to fraud and corruption has been relied on. At paragraph 1 2 of the affidavit-in-opposition filed in WP(C) No.1990/2009 as well as in other writ petitions, the impugned action has been sought to be substantiated on grou nds of avoiding their regular banker, i.e. Federal Bank Ltd and submitting fake bank guarantees with an ulterior motive of (cid:28)deceiving ASEB (cid:29) and (cid:28)to make profit unscrupulously (cid:29). Again at paragraph 20 of the counter, it has been stated that (cid:28) the entire circumstances lead to the only conclusion that the petitioners in col lusion with M/s SS Capitals and Financial Services attempted to commit fraud on the Assam State Electricity Board and such fraudulent company is not entitled to do any work under (cid:28)Assam State Electricity Board (cid:29). However, the petitioners wer e never charged with either avoiding the Federal Bank Ltd or with committing fra ud. Learned counsel has, therefore, submitted that had there been a specific cha rge to such effect, the petitioners would have certainly produce the letter date d 3.3.2009, annexed as Annexure-R to the affidavit-in-reply filed by the petitio ners in WP(C) No.1990/2009 as well as in other writ petitions, letter dated 3.3. 2009 sent to the writ petitioners by the authority of Federal Bank Ltd. informin g the petitioners to the effect that (cid:28)since you need the bank guarantees within 31st March, 2009, it will not be possible on our part to provide required bank g uarantee until and unless sanction is accorded for the proposed limit from HO (cid:29). In that case, the petitioners could have explained their position clearly regard ing their innocence on the charge of fraud. But the documents on which the entir e case of the ASEB has been built up were never made available to the petitioner s. Thus, submitted Mr. Dutta that the principles of fairness and reasonableness which have been held to be important facets of Article 14 of the Constitution of India have been divorced from the entire decision making process. Mr. Dutta wou ld further submit that discrimination, non-application of mind and colourable ex ercise of powers are writ large on the face of the record. The established princ iples of natural justice have been violated with all impunity as has been amply demonstrated by the act of the authorities. In support of the contentions advan