Private Company Conceals Info About Blacklisting In Tender Case: Delhi HC Imposes ₹12.5 Crores Cost To Be Utilised For Installation Of Smog Tower In City

Update: No Smog Tower Installation In Delhi As High Court Corrects Arithmetic Error In Order Imposing 12.5 Cr Cost

The Delhi High Court today imposed a hefty cost of Rs. 12.5 crores on a private company namely SARR Freights Corporation, for concealing the information about its blacklisting in a tender matter and directed that the said cost shall be utilized for installation and operationalization of a smog tower before the advent of winter season in the city.

A division bench comprising of Acting Chief Justice Vipin Sanghi and Justice Jasmeet Singh directed that the amount of Rs. 12.5 crores shall be deposited by the company with the Registrar General of the High Court within 2 weeks.

The Court said that the smog tower shall be based on the same working and operational guidelines as the Connaught Place smog tower.

"The Registrar General will call all the stakeholders and ensure that the smog tower is installed (maybe of a lesser capacity) at a suitable place where it will contribute towards reducing the AQI levels of Delhi. The Registrar shall take steps on a war footing to ensure the installation and operationalization of the smog tower before the advent of winter season as the situation further aggravates during winter months," it added.

The Court also said that it expects the Delhi Government to provide suitable space for the smog tower and added that incase of a financial shortfall, it will make up the shortfall and will look after its repair, maintenance and cost of running.

The plea was filed by CJDARCL Logistics Limited, a company engaged in the business of logistics and transportation of goods across India by Road and Rail, seeking directions to RITES Ltd., a government of India Enterprise, to cancel the bids of the private company and, consequently, for awarding the tender to the petitioner on account of being the L1 bidder.

The Bench also directed RITES Ltd., to pay cost of Rs 25 lacs to the petitioner, for improper due diligence in awarding the tender to the private company.

RITES Ltd had floated an E- Tender dated 30.08.2021, for engagement of freight forwarder for transportation of export project (cargo consisting of 34 Passenger Coaches on CIF basis). The petitioner participated in the tender. The terms and conditions laid down in clause 2 of the tender document provided certain grounds for disqualification, even for those bidders who may otherwise meet the qualification criteria as laid down in the tender document.

It was the case of the petitioner that in order to win the tender, respondent No.3 had deliberately suppressed the two banning orders, and submitted a false declaration as per clause 2 of the Tender document. It was added that despite the respondent No.1 being made aware of the said suppression and misdeclaration by respondent No.3, the respondent No.1 had still cleared the technical bid of the respondent No.3; declared them as the L1 bidder in contravention to their own tender conditions, and; proceeded to award the contract to respondent No.3.

The question before the Court was therefore that whether the private company in question had furnished false and self- serving undertakings in the declaration form, and if so, whether the furnishing of the correct information would have lead to its disqualification in terms of Clause 2 of the qualification Criteria?

"A plain reading of the disqualification clause shows that all bidders were required to disclose any contract, where the award was determined i.e., cancelled. The termination of the contract by respondent No.3, and the subsequent termination letter date 08.05.2021 tantamounted to determination of the contract. It is fallacious for respondent No.3 to contend that even after it had been declared the L-1 bidder, there was no binding obligation created on it qua the said tender, and it could walk out of the tender on the specious plea of committing a mistake in submitting its bid," the Court observed.

Noting that it was nothing short of "determination" and blacklisting, the Court said that the same was squarely covered within the disqualification criteria of clause 2, and should have been disclosed in its declaration by the said company.

The Court was of the view that the company was bound to disclose all their banning orders, and non- disclosure by them, at least, of the two banning orders, was clearly an attempt to hide the true correct factual position with an intent to steal a march, despite being disqualified, and upset the level playing field.

"The respondent was obligated to disclose the existence of status quo orders. In any case, the respondent No.3 made no endeavor to disclose the facts – either by filling an affidavit, or to seek clarifications during the pre- bid meeting. It appears to us that the respondent No.3 has adopted its own self-serving and convenient interpretation of the Declaration, which is contrary to the plain language, and all canons of commercial prudence, equity and fair play," it added.

It thus opined that costs or damages should be imposed on the private company as it had obtained the tender by concealment and in violation of tender conditions. It added that RITES Limited should also be directed to pay costs for improper due- diligence; belated communications, and; proceeding with the award of work to the said company despite being informed of its disqualification.

Noting that the contract value was of 125 crores, the Court said that it was reasonable to expect that the private company would make, at least, 10% as profits. i.e., about 12.50 crores.

"Had the respondent No. 3 been clean and disclosed its blacklisting, or the chequered history of its contracts, it would not have had the opportunity to make a gain of 12.50 crores as profit. The course that commends to us is that respondent No.3 should be disgorged of Rs. 12.50 crores and the said amount should partly go to the petitioner, and mainly ploughed back into the society. We, therefore, direct respondent No.3 to deposit in this Court an amount of Rs.12.50 crores within 4 weeks thereof," the Court directed.

It added "We are of the view that the amount of Rs. 12.5 crores must be ploughed back into society."

At the outset, the Court noted that the city was gasping for breath on account of high levels of air pollution. It added that the Air Quality Index (AQI) level during Covid-19 period showed a decline due to lockdown and halting of industrial activities.

The Court also took noted of the chart shared by Delhi Pollution Control Committee (DPCC) showing that a large number of poor, very poor and severe AQI days were increasing.

"The number of days of „good‟ and „satisfactory‟ air quality level is miniscule," it said.

"Now that the commercial activities are going back to the pre-covid level, we are on the same path of the air quality becoming „very poor‟ and „severe‟. This requires urgent preventive, adaptive, and mitigative steps to be taken for the purposes of inter-generational equity. We are of the view that this amount of Rs. 12.5 crores should be ploughed back to the society for reducing the air pollution levels."

The Court also referred to an article published by the Indian Express newspaper which highlighted that the DPCC had signed an agreement with Tata Projects and NBCC to install, operate, and maintain Connaught Place smog tower and that Rs. 20 crore was the amount which wAs required to install the tower and the amount was paid to Tata Project and National Buildings Construction Corporation (NBCC).

Accordingly, while imposing the cost on the respondents, the Court disposed of the plea.

Advocates Anil Goel and Aditya Goel appeared for the petitioner. Advocates GS. Chaturvedi and Shrinkar Chaturvedi appeared for RITES Limited. Senior Advocate Rajshekhar Rao along with Advocates Nakul Mohta, Parminder Singh, Misha Rohatgi Mohta, Raghav Kacker, Pranjit Bhattacharya, and Moghna appeared for respondent no. 3.

Case Title: CJDARCL LOGISTICS LTD. v. RITES LTD AND OTHERS

Citation: 2022 LiveLaw (Del) 52 7

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