Delhi HC imposes a cost of ₹12.5 crore to be used for installing a smog tower in the city

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The Delhi High Court today imposed a hefty cost of Rs. 12.5 crores on a private company, namely SARR Freights Corporation, for concealing its blacklisted information in a tender case and ordered that the said cost be used for the installation and commissioning of a smog tower before the advent of the winter season in the city.

A dividing bench made up of Acting Chief Justice Vipin Sanghi and Justice Jasmeet Singh ordered that the amount of Rs. 12.5 crores be deposited by the company with the Registrar General of the High Court within 2 weeks.

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

“The Registrar General will call on all stakeholders and ensure that the smog tower is installed (perhaps of lesser capacity) at a suitable location where it will help reduce Delhi’s AQI levels. The Registrar will take war-footed measures to ensure the installation and operationalization of the smog tower before the onset of the winter season, as the situation worsens further during the winter months,” he added.

The Court also said that it expects the Delhi government to provide suitable space for the smog tower and added that if there is a financial shortfall, it will make up the shortfall and arrange for its repair, its maintenance and operating cost.

The plea was filed by CJDARCL Logistics Limited, a company specializing in logistics and transportation of goods across India by road and rail, seeking instructions from RITES Ltd., an India Enterprise Government, to cancel the bids from the private company and, therefore, to have awarded the bid to the petitioner as the L1 bidder.

The bench also ordered RITES Ltd. to pay a fee of Rs 25 lacs to the applicant, for improper due diligence in awarding the tender to the private company.

RITES Ltd had launched an electronic call for tenders dated 30.08.2021, for the engagement of a freight forwarder for the transport of an export project (cargo consisting of 34 passenger cars on the CIF basis). The petitioner participated in the tender. The terms and conditions set out in clause 2 of the bidding document provided certain grounds for disqualification, even for bidders who might otherwise meet the qualification criteria set out in the bidding document.

It was the case of the Petitioner that in order to win the tender, Respondent #3 had deliberately removed the two restraining orders and submitted a false declaration in accordance with clause 2 of the tender document . It was added that although Respondent #1 had been made aware of the said deletion and misrepresentation by Respondent #3, Respondent #1 had nevertheless authorized the technical offer of Respondent No. 3; declared them as an L1 bidder in violation of their own bidding conditions, and; proceeded to award the contract to Respondent No. 3.

The question before the Court was therefore whether the private company in question had provided false and self-serving undertakings in the declaration form and, if so, whether the provision of correct information would have resulted in its disqualification under the 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. voided. Respondent #3’s termination of the contract and subsequent termination letter dated 08.05.2021 amounted to It is misleading for Respondent #3 to claim that even after being declared an L-1 Bidder, no binding obligation was created for him with respect to said offer, and he could withdraw from the call for tenders on the specious exception of having made an error in the submission of his offer,” observed the Court.

Noting that this was nothing less than a “determination” and a blacklist, the Court said this was squarely covered by the criteria for disqualification in clause 2 and should have been disclosed in its declaration by said company.

The Court held that the company was required to disclose all of its restraining orders, and the failure by them to disclose, at least, the two restraining orders, was clearly an attempt to hide the true correct factual position in the intent to steal a march, despite being disqualified, and upset the level playing field.

“Respondent was obligated to disclose the existence of standstill orders. In any event, Respondent #3 made no effort to disclose the facts – either by filing an affidavit or by requesting clarifications at the pre-tender meeting It appears to us that Respondent #3 has adopted his own self-serving and convenient interpretation of the Declaration, which is contrary to plain language and all canons of commercial prudence, fairness and fair play“, he added.

He therefore considered that costs or damages should be imposed on the private company because it had obtained the offer by concealment and in violation of the conditions of the tender. He added that RITES Limited should also be required to pay the costs of improper due diligence; late communications, and; proceed with the award of the work to the said company despite having been informed of its disqualification.

Noting that the value of the contract was 125 crore, the Court said it was reasonable to expect the private company to make at least 10% profit. i.e. around 12.50 crores.

“If Respondent #3 had been clean and disclosed his blacklist, or his checkered contract history, he would not have had the opportunity to earn 12.50 crores as profit. The course recommending to us is that Respondent No. 3 3 should be disgorged with Rs. 3 to file in this Court an amount of Rs. 12.50 crores within 4 weeks of that,” the Court ordered.

He added “We are of the opinion that the amount of Rs. 12.5 crores should be reinvested in the company.”

Initially, the Court noted that the city was on its last legs due to high levels of air pollution. He added that the Air Quality Index (AQI) level during the Covid-19 period showed a decline due to the lockdown and shutdown of industrial activities.

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

“The number of days of ‘good’ and ‘satisfactory’ air quality levels is very small”, It said.

“Now that business activities are returning to pre-covid levels, we are on the same path of air quality becoming ‘very poor’ and ‘severe’. This requires urgent prevention, adaptation and mitigation measures. mitigation to be taken for the purposes of intergenerational equity.We are of the opinion that this amount of Rs. 12.5 crores should be reinvested in society to reduce the levels of air pollution.

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

Consequently, while imposing the costs on the respondents, the Court ruled on the plea.

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

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

Quote: 2022 LiveLaw (Delete) 52 7

Click here to read the order


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