Page No.# 1/11 GAHC020006332024 undefined THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) KOHIMA BENCH Case No. : WP(C)/231/2024 M/S B.K ENTERPRISES REPRESENTED NY ITS PROPRIETOR SHRI GURUMAYUM BIMALKUMAR SHARMA S/O (L) G. GOURACHANDRA SHARMA, A RESIDENT OF SOIBAM LEIKAI OLD CHECKON BAZAR P.O. IMPHAL AND P.S. POROMPAT IMPHAL EAST, MANIPUR-795001 VERSUS THE FOOD CORPORATION OF INDIA AND 4 ORS REPRESENTED BY ITS MANAGING DIRECTOR FOOD CORPORATION OF INDIA HAVING ITS OFFICE/HEADQUARTER 16-20, BARAKHAMBA LANE, NEW DELHI-110001 2:THE EXECUTIVE DIRECTOR (NE) FOOD CORPORATION OF INDIA ZONAL OFFICE (NE) B.S. ROAD ULUBARI GUWAHATI-781007 3:THE GENERAL MANAGER (R) FOOD CORPORATION OF INDIA REGIONAL OFFICE (NAGALAND) H/NO. 105 BANK COLONY DIMAPUR NAGALAND-797112 Page No.# 2/11 4:THE AREA MANAGER FCI DP DIMAPUR/IMPHAL REGIONAL OFFICE (NAGALAND) H.NO. 105 BANK COLONY DIMAPUR NAGALAND-797112 5:THE DEPUTY GENEREAL MANAGER (R) FCI REGIONAL OFFICE MANIPUR HAVING ITS OFFICE AT OLD ASSEMBLY COMPLEX IMPHAL MANIPUR-79500 Advocate for the Petitioner : N JOTENDRO SINGH, M SOLO,S. MURTAZA AHMED Advocate for the Respondent : ALEMWAPANG AO, M ANYEI,Y S PHOM BEFORE HON'BLE MR. JUSTICE SANJAY KUMAR MEDHI For the Petitioner : Shri N. Jotendro Singh, Sr. Advocate; Shri S. Murtaza Ahmed & Shri M. Solo, Advocate. For the Respondents : Shri Alemwapang Ao, SC, FCI & Shri Y.S. Phom, Advocate. Date of Hearing : 04.12.2025. Date of Judgment : 04.12.2025. Page No.# 3/11 JUDGMENT & ORDER (Oral) The decision of the respondent-FCI to make recovery followed by invocation of two Bank Guarantees from the petitioner is the subject matter of challenge in this writ petition instituted under Article 226 of the Constitution of India. 2. The facts in brief are that a Notice Inviting Tender (NIT) No. 1/2019 was issued on 24.01.2019 in which, the petitioner had participated and its bid was accepted vide communication dated 29.03.2019. The petitioner had deposited 50% of the Security Deposit (SD) amounting to Rs.30,61,703/- and thereafter, the Bank Guarantee was to be submitted. However, due to certain reasons, the petitioner had submitted a representation on 20.11.2019 for refund of the SD and expressed its inability to perform the work in question. As no action was taken, the petitioner had filed WP(C)/226/2019 in which this Court, vide order dated 22.11.2019 had directed to consider the representation of the petitioner. In terms of the aforesaid direction, the representation of the petitioner was considered and there was an approval for refund of the SD which was accordingly done. Immediately thereafter, vide an order dated 07.01.2020 issued by the respondent Corporation, the petitioner was blacklisted for 5 years with forfeiture of Earnest Money Deposit (EMD). Against the same, the petitioner had approached the Grievance Redressal Committee (GRC), FCI which had rejected vide order dated 01.05.2020. The same was the subject matter of challenge in the second writ petition filed by the petitioner, namely, WP(C)/75/2020 which was, however, dismissed by this Page No.# 4/11 Court vide the order dated 25.03.2021. The said order was also upheld by the Hon’ble Division Bench of this Court in WA/165/2021. It also transpires that the petitioner had approached the Hon’ble Supreme Court with Special Leave Petition (Civil) Diary No.23129/2022 which, however, was withdrawn vide order dated 26.08.2022. So far as the work was concerned, a new e-Tender was floated on 02.07.2020 and accordingly, the work was allotted to a third party. Thereafter, there was a communication dated 16.07.2021 to assess the loss which was suffered by the respondent Corporation in connection with the previous publication of the NIT of 24.01.2019 and vide the impugned order dated 22.07.2021, an amount of Rs. 40,27,369/- has been quantified to be recovered from the petitioner. It is this action which is followed by the invocation of the two bank guarantees which are the subject matters of challenge in this writ petition. 3. I have Heard Shri N. Jotendro Singh, learned Senior Counsel assisted by Shri S. Murtaza Ahmed, learned counsel for the petitioner appearing online, who is also assisted by Shri M. Solo, learned counsel. I have also heard Shri Alemwapang Ao, learned Standing Counsel, FCI. 4. Shri Singh, learned Senior Counsel for the petitioner has formulated his arguments in the following manner: i) The impugned action amounts to double jeopardy inasmuch, as a penalty has already been imposed vide the order dated 07.01.2020; Page No.# 5/11 ii) The aspect of refund of the Security Deposit was the subject matter in WP(C)/226/2019 in which, an order was passed on 22.11.2019 pursuant to which, the appropriate authority had directed for refund and therefore, the impugned action is unsustainable in law; iii) Before the recovery is made by invocation of the bank guarantees, no opportunity of any nature was given to the petitioner; iv) The petitioner cannot be penalised on the plea that certain errors were committed by officials of the FCI inasmuch, as such decision was consciously taken by the Corporation pursuant to the direction of this Court to consider the representation of the petitioner. 5. On the aspect that once penalty is imposed, no further recovery can be done, he has relied upon the decision of the Hon’ble Supreme Court in the case of Hind Construction Contractors Vs. State of Maharashtra, reported in (1979) 2 SCC 70. By submitting that no actual loss has been suffered and therefore, the recovery is unlawful, he has relied upon the case of ONGC Vs. Saw Pipes Ltd., reported in (2003) 5 SCC 705 wherein, the aspect of proof of loss has been emphasized. He has also cited the case of State of Punjab Vs. Davinder Pal Singh Bhullar, reported in (2011) 14 SCC 770 to buttress the point that once the order of refunding the Security Deposit has attained finality, the same cannot be reversed. 6. Terming the action to be arbitrary, the learned Senior Counsel has submitted that the same cannot withstand the test of Article 14 of the Page No.# 6/11 Constitution of India. To buttress this point, he has drawn the attention of this Court to certain similarly situated cases of Seppa and Pasighat in the State of Arunachal Pradesh where no subsequent action for recovery was made. In this regard, he has cited the case of E.P. Royappa Vs. State of Tamil Nadu, reported in (1974) 4 SCC 3. 7. On the aspect of the clause of the contract which has been sought to be relied upon, Shri Singh, learned Senior Counsel for the petitioner has submitted that there was no concluded contract so far as the NIT dated 24.01.2019 is concerned and in any case, the impugned action is in gross violation of the principles of natural justice and therefore, unsustainable in law. He has drawn support from the case of State of Punjab Vs. Gurdial Singh, reported in (1980) 2 SCC 471. 8. Per contra, Shri Ao, learned Standing Counsel, FCI has submitted that the decision to refund the SD pursuant to the order dated 22.11.2019 which was only to consider the representation was erroneously taken by an official of the Corporation. He has submitted that in this regard, action was taken against the said officer and thereafter a decision was taken to assess the loss which the Corporation had suffered due to action of withdrawing from the tender process by the petitioner qua the NIT dated 24.01.2019. The learned Standing Counsel has submitted that the amount of Rs.40,27,369/- was arrived at by taking into consideration all the relevant factors and the same is quantified as the loss suffered by the Corporation due to action of the petitioner. With regard to the aspect of invocation of the Bank Guarantees for which, communications dated Page No.# 7/11 05.08.2021 and 06.08.2021 were issued to the UCO Bank, the learned Standing Counsel has tried to justify the action by stating that it is the same party and therefore, invocation of such Bank Guarantees is permissible in law. He has also submitted that there may not be a strict requirement to put the party into notice for invocation of a Bank Guarantee as the same is the prerogative of the Corporation. He has also submitted that the earlier writ petition filed by the petitioner, viz, WP(C)/75/2020 was dismissed which was also upheld by the Hon’ble Division Bench as well by the Hon’ble Supreme Court and therefore, the present challenge is not maintainable. 9. Shri Singh, learned Senior Counsel for the petitioner, in his rejoinder, has submitted that the subject matter of WP(C)/75/2020 was entirely different and the same decision will not have any bearing in the present challenge. 10. The rival submissions have been duly considered and the materials placed before this Court have been carefully examined. 11. As per the facts noted above, the impugned action of recovery is connected with the NIT dated 24.01.2019 in which the petitioner had submitted its bid and was accepted. It, however, appears that due to certain reasons, the petitioner had withdrawn from the process and prayed for refund of the SD. This Court vide the order dated 22.11.2019 passed in WP(C)/226/2019 had directed for consideration of such representation. It is noted that there was no Mandamus as such, to refund Page No.# 8/11 and the matter was left to the discretion of the Corporation. It, however, appears that the representation was considered and thereafter, the SD was refunded. In continuation of the said NIT dated 24.01.2019, further action was taken against the petitioner vide an order dated 07.01.2020 whereby the petitioner was blacklisted for 5 years and the EMD was directed to be forfeited. The said action was unsuccessfully challenged by the petitioner in WP(C)/75/2020 which was also upheld by the Hon’ble Division Bench of this Court and subsequently, the SLP preferred by the petitioner was also withdrawn vide order dated 26.08.2022. Though the writ petition was dismissed, the subject matter which appears from the order is the impugned action of debarring participation of the petitioner in future works for 5 years and forfeiture of the EMD taken vide the order dated 07.01.2020. 12. The present action has emanated from a decision of the Corporation on 16.07.2021 to assess the loss qua the NIT dated 24.01.2019 which might have been incurred by the Corporation. It also appears that such decision has been taken on a legal opinion by the Counsel of the respondent-Corporation. Accordingly, vide the communication dated 22.07.2021, an amount of Rs.40,27,369/- was directed to be recovered. For ready reference, the break-up of the amount to be recovered is extracted hereinbelow: Particulars Amount in Rs. Expenditure incurred in publication of 4 NITs Rs. 3,20,533/- Page No.# 9/11 Expenditure incurred in Litigation (WP(C)/75/2020) Rs. 2,05,259/- TA/DA of officials engaged in the legal proceedings Rs. 50,000/- 2nd penalty @ 2% of total Security deposit to be recovered from the firm Rs. 4,89,874/- Security Deposit refunded Rs. 30,61,703/- Grand Total Rs. 40,27,369/- 13. Pursuant to the aforesaid decision, the Corporation has issued two communications to the UCO Bank on 05.08.2021 and 06.08.2021 for encashing two amounts, namely, Rs. 10,54,200/- and Rs. 14,97,500/-, respectively. A bare perusal of the aforesaid communications dated 05.08.2021 and 06.08.2021 would reveal that such Bank Guarantees were made by the petitioner in connection with certain other works. Though the learned Standing Counsel can be correct in contending that the aspect of invocation of bank guarantee is the prerogative of the Corporation, such prerogative can be exercised only in connection with the work in which such Bank Guarantee was submitted. In the instant case, it, however, appears that the decision to encash is in connection with some other works. Further, while there may not be an absolute bar for recovery, it does not appear that any manner of notice or show cause was given to the petitioner before the impugned recovery was made. At this stage, Shri Ao, learned Standing Counsel, FCI has drawn the attention of this Court to a communication dated 09.08.2021 given by the UCO Bank to the petitioner. Page No.# 10/11 14. This Court has, however, noted that such communication is on the aspect of invocation of the Bank Guarantees and cannot be deemed to be giving any opportunity before such invocation. In any case, a bank guarantee is in the form of as escrow account where the bank is to act as per the direction of the Corporation. 15. With regard to the aspect of the subject matter in WP(C)/75/2020, this Court is of the firm opinion that the subject matter in the said writ petition which was dismissed is wholly different from the subject matter of the present case. In the said case, the challenge was qua the action of black listing and forfeiture of SD. 16. This Court has also considered the case laws relied upon by the learned Senior Counsel for the petitioner and the present action appears to be unreasonable and also in violation of the principles of natural justice. 17. In view of the aforesaid discussions and the case laws which have been relied upon, this Court is of the opinion that the impugned action of encashing the Bank Guarantees vide the communications dated 05.08.2021 and 06.08.2021 is unsustainable in law and is accordingly set aside. It is, however, made clear that the present interference is only on the aspect of violation of the principles of natural justice and if at all the Corporation is to make any recovery, it has to be done strictly by following the process of law and by giving adequate opportunity to the petitioner to make its representation. Such action has to be supported by properly worked out calculation as to how the amount of Rs.40,27,369/- has been Page No.# 11/11 arrived at. In other words, the process has to be fair and transparent which is the hallmark of the mandate enshrined in Article 14 of the Constitution of India. 18. Consequently, it is directed that the amounts contained in the Bank Guarantees which are the subject matter of the communications dated 05.08.2021 and 06.08.2021 are to be refunded to the petitioner within a period of 45 days from today. 19. The writ petition is allowed in the manner indicated above. 20. Cost made easy. JUDGE Comparing Assistant