Withholding Earnest Money Deposit Without Reasons Is Arbitrary: Delhi HC Dismisses NTPC's Appeal Against Emami & OSAPL

The Delhi High Court recently dismissed an appeal filed by the National Thermal Power Corporation (NTPC) challenging the order passed by the bench of Single Judge which had held that Emami and OSAPL are not “affiliates” or “group companies” as defined under Article 2 of the RFS and there was no prohibition for both to submit their separate bids and that the withholding the monies and the blacklisting was unjustified, arbitrary and without reasons.

The Divison Bench of Justice Najmi Waziri and Justice Sudhir Kumar Jain found no reason to interfere with the impugned order and held that "The appellant's contention that Emami and OSAPL were group companies and had colluded to cause loss to the appellant is baseless and rejected. No loss was proven to have been caused to the appellant. Their alleged collusion practice was never established. The applications for bids were withdrawn and no financial bids were made either by Emami or the OSAPL."

The Divison Bench also observed that "The period for the validity of the bids had expired by the time NTPC rejected their application for bids. Therefore, the said rejection was of no consequence. Consequently, there would be no occasion for forfeiture of the EMD". Advocate Puneet Taneja appeared for the NTPC, Advocate Abhimanyu Bhandari assisted by Advocate Harshit Khanduja represented Emami, and Advocate Avishkar Singhvi appeared for the OSAPL.

Background: Emami and OSAPL had approached the Delhi High Court submitting that had applied for bidding in an auction and deposited the EMD but much before the bid could take place the application was withdrawn and yet, for the reasons best known to the NTPC, the latter declined to return the EMD and went on to blacklist both Emami and OSAPL. It was said that the Ministry of New and Renewable Energy too blacklisted both of them.

On the other hand, it was alleged by the NTPC that they had indulged in collusive practice which constitutes a fraudulent practice. It was stated that both Emami and OSAPL submitted their bids under a common signatory which implies that both of them had knowledge of each other’s bids. It was further submitted by the NTPC that both companies are group companies and the agreement/arrangement between them was to cartelize which would have caused a loss of 21.20 crores if both the companies had been successful in the technical evaluation stage.

Disagreeing with the submissions of the NTPC, the Single Judge Bench held that NTPC in its reply has not been able to establish how this had caused any wrongful gain to the petitioners or any wrongful loss to NTPC or any other competitor. The Court also stated that some common shareholding had been established but there is no material to conclude that petitioners are the one and the same entity.

Single Judge had further held that merely because the initial bids made by the petitioners were known to each other does not establish that they had entered into an anticompetitive agreement or arrangement to establish prices at anti-competitive levels. Being aggrieved by the same, NTPC approached the Delhi High Court in the present appeal.

The Divison Bench on going through the merits of the matter held that: "The impugned judgment has set aside the blacklisting done by the MNRE. Half a decade has passed, and the MNRE has not filed an appeal against the said order. It can be assumed that MNRE has accepted the setting aside of the blacklisting and that the blacklisting should be treated as non-est."

It further held that "That being the position, there cannot be any cause for presuming that they were alter egos of each other or one and the same company or that they had colluded in the bid, let alone caused any harm to the appellant." High Court also observed that "One individual being named as a common signatory for both the companies has been held to be a mistake."

Founding the appeals without merit, the High Court dismissed the matter and directed the Appellants to release the deposited monies to Emami and OSAPL along with the interests accrued thereon.

Cause Title: NTPC Ltd v. Emami Power Ltd & Anr [LPA 96/2018 & LPA 100/2018]

Click here to read/download the Order