Legal provisions involved: Relevant clauses of the RFP and EPC Agreement; Article 226 of the Constitution of India; provisions relating to fraud and forgery.
Judgement by: Karnataka High Court
Judge/Bench: Justice Suraj Govindaraj
Facts
The petitioner company submitted bank guarantees while participating in a government tender. These guarantees later turned out to be fake. The company stated that it had taken the guarantees through third-party agents and was not aware that they were forged. After discovering the fraud, the petitioner itself filed a criminal complaint against the persons who arranged the fake guarantees. Even so, the authorities threatened to impose liquidated damages and to bar the company from future tenders.
Key legal provisions
- Relevant clauses of the Request for Proposal – Clause 4.1 and 4.2
- Engineering Procurement and Construction Agreement (EPC) – Clause 7.1.2
- Article 226 of the Constitution of India
Issues raised
Whether the petitioner could be punished when it had no role in arranging fake bank guarantees, and how such frauds can be prevented in future.
Arguments of the case
The petitioner argued that it was a victim of fraud and had not conspired with the accused persons. The respondents relied on the tender conditions to justify penalties.
Judgement
The High Court held that there was no allegation or evidence showing the petitioner’s involvement in the fraud. It quashed the notice for liquidated damages and debarment. The Court also suggested digital verification methods, such as QR codes and unique identification numbers, to prevent fake bank guarantees.
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