Petitioner M/s DRN Infrastructure Pvt. Ltd cleared of involvement in fraudulent bank guarantees; systemic issues in verification highlighted.
In a significant decision, the Karnataka High Court has quashed the imposition of liquidated damages and the debarment of M/s DRN Infrastructure Pvt. Ltd in connection with a case involving fake bank guarantees. The judgment, delivered by Justice Suraj Govindaraj, found that the petitioner was not involved in the fabrication of the fraudulent bank guarantees, which were instead linked to third parties who defrauded the company.
The court heard two writ petitions filed by the petitioner seeking relief from the consequences of the alleged fraudulent activity. The petitioner company had unknowingly submitted fake bank guarantees arranged through intermediaries, which later turned out to be fraudulent. The court noted that the petitioner had filed a complaint against the fraudsters, leading to a charge sheet filed against the main accused, thus establishing the petitioner's bona fides.
Justice Govindaraj emphasized that there was no evidence implicating the petitioner in any fraudulent activities and that the company had been misled by third parties. The court, however, upheld the termination of the tender and the forfeiture of the bid security, acknowledging that the fabrication came to light before any contract execution.
Furthermore, the court drew attention to systemic vulnerabilities in the verification of bank guarantees, noting the need for more robust mechanisms to prevent such frauds. The judgment highlighted suggestions for digital verification systems and secure authentication tools, urging the Ministry of Finance to implement improved verification systems within a stipulated time.
The court's decision underscores the necessity of addressing systemic issues in public procurement processes to safeguard public funds and institutional trust. The case is set to be reviewed in March 2026 to evaluate the implementation of new verification systems by the authorities.
Bottom Line:
Quashing of levy of liquidated damages and debarment from future tenders where petitioner was not involved in fraudulent acts related to fake bank guarantees.
Statutory provision(s): Sections 316(2), 316(5), 318(4), 338, 336(3), 340(2) r/w Section 61 of the Bharatiya Nyaya Sanhita, 2023.
M/s DRN Infrastructure Pvt. Ltd v. Union of India, (Karnataka) : Law Finder Doc Id # 2831819
