HC junks BSNL's decision to withhold telecom work from Starnet

State telecom major Bharat Sanchar Nigam Ltd's (BSNL) decision against awarding its contract to a private firm for setting up a wireless broadband network in Haryana due to failure to give its performance guarantee from an Indian scheduled bank, has been struck down by the Delhi High Court.

While setting aside BSNL's decision to withdraw its Letter of Intent (LoI) for awarding the work to Starnet Communications Pvt Ltd, a bench of justices Sanjay Kishan Kaul and Rajiv Shakdher also imposed a cost of Rs 50,000 on the state enterprise.

"We are of unequivocal view that the action of the respondent terminating the LoI of the petitioner on the ground of non-furnishing of a Performance Bank Guarantee (PBG) from an Indian Scheduled Bank is clearly unsustainable and has to be quashed," the bench said.

The court gave its order on the firm's plea against cancellation of the LoI, saying the LoI nowhere stipulated that PBG had to be given from an Indian scheduled bank only.

The bench also said once a company is successful in the tender, the terms of the bid cannot be modified as it would amount to an "ambush".

"We are of the view that once the terms of a tender are finalised, the parties must strictly be bound by the same," the bench added.

In its plea, Starnet had contended that BSNL had encashed its bid security of Rs 20 lakh, despite the telecom major finding its PBG unacceptable.

The court directed BSNL to refund Rs 20 lakh to Starnet, saying "encashment of bid security amount and return of the PBG are invalid" and inconsistent.