Madhya Pradesh High Court
M/S Link Utsav Auto System Pvt.Ltd Local ... vs The State Of Madhya Pradesh on 5 August, 2014
W.P.No.3654/2014 1
M/s Link Utsav Auto Systems Pvt. Ltd.
Vs.
State of M.P. and others
05/08/2014
Shri R.N.Singh and Shri K.N.Gupta, Sr.
Advocates with Shri Ankur Mody and Shri Siddharth
Seth, Advocates for the petitioner.
Shri M.P.S.Raghuvanshi, Additional Advocate
General for the respondents/State.
Heard.
2. The petitioner has filed this petition against the order dt.19.06.2014 (Annexure P/18) issued by the respondent No.2, by which the contract awarded to the petitioner earlier has been cancelled.
3. The petitioner is a company incorporated under the provisions of Companies Act. The respondent No.1 invited tenders from private entrepreneurs for installation of HSRP. The petitioner company submitted its tender and after evaluation, being the lowest bidder the petitioner company was awarded contract. It entered into an agreement for installation of HSRP in the State of Madhya Pradesh. The petitioner deposited the performance guarantee. Hon'ble Supreme Court issued a direction in W.P.No.510/2005 to all the States to install HSRP. The petitioner was granted contract for a period of fifteen years. As per the petitioner, it had been performing the contract in accordance with the terms and conditions of the contract.
W.P.No.3654/2014 24. A notice was issued to the petitioner on 1.3.2014, a copy of the same has been filed as Annexure R/6. It is mentioned in the notice that the petitioner did not comply the directions issued by the Hon'ble Supreme Court in SLP No.16064/2012, nor the petitioner complied with the directions issued by the Transport Headquarters, hence, why the contract of the petitioner be not terminated in terms of para 15.3 (a) (I) of the agreement.
5. Another show cause notice was issued on 14.3.2014 and 5.2.2014. In the notice dt.5.2.2014, it is mentioned that prima facie it was found that the petitioner had violated the terms and conditions of the contract, hence, why the action be not taken against the petitioner in terms of the contract. The petitioner was directed to submit reply within a period of thirty days. The petitioner submitted detailed reply of the notice on 22nd March 2014 and mentioned in detail that he had not violated any terms and conditions of the notice. Thereafter, a meeting was held in the Chamber of Principal Secretary Transport Department, Vallabh Bhawan, Bhopal on 16.4.2014. In the aforesaid meeting the following persons were present :-
1. Shri Pramod Agrawal, Principal Secretary Transport.
2. Shri Sanjay Choudhary, Commissioner Transport.W.P.No.3654/2014 3
3. Shri R.K.Choudhary, Additional Commissioner Transport (Enforcement).
4. Shri O.P.Shrivastava, Dy.Secretary Transport
5. Shri Praveen Sharma, Joint Commissioner Transport (Finance).
6. Shri G.M.Pathak, Dy.Commissioner Division Bhopal.
7. Shri Ajay Gupta, Area Transport Officer, Bhopal
8. Shri Vivek Nagpal, Adviser, Link Utsav Co.
9. Shri Mahesh Malhotra, CEO, Link Utsav Co.
10. Shri Ravi Goyal, In charge Director, Link Utsav Co.
Following decisions had been taken in the aforesaid meeting :
dz- fo"k; lanHkZ ppkZuqlkj fu.kZ;@funsZ'k 1 ekuuh; UkksfVl dEiuh izfrfuf/k;ksa }kjk fnuakd lokSZPp dzeakd 1294 10-10-2013 dks 24 Mhyjksa ds fu;qfDr U;k;ky; }kjk fnuakd dh tkus ls voxr djk;k x;k ysfdu SLP 01-03-2014 vkjVhvks Hkksiky ,oa laHkkxh; mik;qDr 16064/ 12 Hkksiky }kjk Mhyjkasa dh fu;qfDr esa ikfjr eksVj;ku vf/kfu;e ds vuq:i uk gksus funsZ'k vuqlkj ckcr~ voxr djk;k x;k A izeq[k lfpo HSRP yxkus ifjogu }kjk funsZf'kr fd;k x;k fd gsrq Mhyjksa dh dEiuh vf/kd`r okgu fodzsrk ,oa mlds fu;qfDr A vf/klwfpr odZ 'kki esa gh uEcj IysV yxk,xh A bl dk;Z gsrq lHkh vkSipkfjdrk;s rhu ekg vof/k esa iw.kZ djus ds funsZ'k fn;s x;s A W.P.No.3654/2014 4 2 vuqca/k ds uksfVl 1- dEiuh }kjk voxr djk;k x;k fd izko/kku dk dzeakd 282 muds la;qDr midze Hkkxhnkjksa ds chp ikyu u fd;s fnuakd fookn lekIr gks pqdk gS ,oa mRlo tkus ds lEca/k 05-02-2014 dEiuh dk TAC dk fuyEcu lekIr gks esa fcUnqokj pqdk gS ftlds dkj.k eSllZ fyad ppkZ A bUQzkLVz~Dpj ds TAC dks ekU; djus ds vuqjks/k i= ij vc dk;Zokgh vko';d ugha gSA dEiuh }kjk lHkh vkilh f'kdk;rksa dks okfil ysus lEca/kh i= Hkh izLrqr fd;k x;k gS A dEiuh izfrfuf/k;ksa dks [kkyh IysVksa dk izR;sd ftys esa Ik;kZIr LVWkd ,d ekg vof/k esa j[kk tkuk lqfuf'pr djus ds funsZ'k izeq[k lfpo ifjogu }kjk fn;s x;s ftlls le; lhek esa HSRP yxkuk lqfuf'pr fd;k tk lds A 2- rhljh uEcj IysV u yxkus dh f'kdk;rksa ds lEca/k esa dEiuh }kjk ftyk ifjogu dk;kZy;ksa ls dksbZ ,slk izdj.k yfEcr u gksus ckcr~ izkIr izek.k i= izLrqr fd;k x;k A lkFk gh dEiuh }kjk vk'oklu fn;k x;k fd iwoZ esa LVWkd miyC/k u gksus o'k ;fn fdlh okgu esa rhljh uEcj IysV u yxus dk dksbZ izdj.k muds /;ku esa yk;k tkrk gS rks mlesa rRdky rhljh IysV fu'kqYd yxkbZ tk;sxh A 3- le; lhek esa uEcj IysV yxk;s tkus ds lEca/k esa dEiuh }kjk vk'oklu fn;k x;k fd ,d ekg vof/k esa leLr yafEcr izdj.kksa dk fujkdj.k dj fn;k tk,xk A izeq[k lfpo ifjogu }kjk funsZf'kr fd;k x;k fd fu;r le;
vof/k esa IysV yxokus gsrq izR;sd okgu Lokeh dks SMS Hkstuk lqfuf'pr fd;k tkos A W.P.No.3654/2014 5 4- izeq[k lfpo ifjogu }kjk dEiuh dks HSRP Qhl dysD'ku ,oa vkuykbZu tkudkjh miyC/k djkus gsrq dEiuh ds iksVZy dks foHkkxh; iksVZy ls tksMus dk funsZ'k fn;k x;k A dEiuh }kjk ,d ekg vof/k esa ;g dk;Z iw.kZ djus dk vk'oklu fn;k x;k A 5- vDVwcj 2013 ds iwoZ dEiuh }kjk izkIr dh xbZ 'kqYd jkf'k ij 'kklu dks ns; 5 izfr'kr jk;YVh dk ftyk okj ys[kk la?kfjr djus ,oa foyEc ls Hkqxrku dh xbZ jk;YVh ij isukYVh 'kqYd tek djkus gsrq dEiuh dks funsZf'kr fd;k x;kA dEiuh }kjk foHkkx dh eWakx vuqlkj isukYVh jkf'k tek djkus ij lgefr O;Dr dh xbZ ,oa ekg okj jk;YVh dh tkudkjh izLrqr djus dk vk'oklu fn;k x;k A 6- iqjkus okguksa ij HSRP yxkus ds lEca/k esa dEiuh }kjk vfrfjDr le;
dh eWakx dh xbZ izeq[k lfpo ifjogu }kjk leLr O;oLFkk, lqn`< dj rhu ekg vof/k esa ;g dk;Z izkjEHk djus ds funsZ'k fn;s A 7- HSRP MkVk ifjogu foHkkx ds loZj esa LFkkuakrfjr fd;s tkus bl lEca/k esa dEiuh }kjk voxr djk;k x;k fd mUgksus viuk loZj Xokfy;j LFkkfir dj fn;k gSA izeq[k lfpo ifjogu }kjk nksuks loZj dks ,d ekg vof/k esa fyad dj SYNCHRONISE djus ds funsZ'k fn;sA 8- ftyk dk;kZy;ksa esa nj lwph iznf'kZr djus] deZpkjh dk fooj.k izLrqr djus ,oa lwpuk cksMZ yxokus tkus ds lEca/k esa dEiuh }kjk voxr djk;k x;k fd ;g dk;Z iw.kZ djk;k tk pqdk gS ,oa bl vk'k; ds QksVksxzkQ izLrqr fd;s x;s A W.P.No.3654/2014 6 9- vuqca/k vuqlkj MIS iz.kkyh gsrq fu/kkZfjr tkudkjh ds izi= lh&,Q esa miyC/k djkus gsrq dk;Zokgh lkr fnol esa iw.kZ djus ds funsZ'k dEiuh dks fn;s x;s A lkFk gh ;g Hkh funsZf'kr fd;k x;k fd MIS FORMATS dh ,d izfr ifjogu vk;qDr ,oa izeq[k lfpo ifjogu dks Hkh i`LBakfdr dh tkos A 10- izeq[k lfpo ifjogu }kjk vU;
fofHkUu fcUnqvksa ls lEcaf/kr vuqca/k ds izko/kkuksa dk ikyu 15 fnol vof/k esa iw.kZ djus ds funsZ'k dEiuh dks fn;s x;s ,oa dk;kZy;ksa es uxn tek dkmUVjksa dh O;oLFkk dk iqu% vkdyu dj lq/kkj gsrq Hkh funsZf'kr fd;k x;k A 3 Addition of UkksfVl dEiuh }kjk voxr djk;k x;k fd TAC dzeakd 1573 muds la;qDr midze Hkkxhnkjksa ds chp Holder fnuakd fookn lekIr gks pqds gS ,oa eSllZ 14-03-14 mRlo lsQ~Vh flLVe dk TIC izek.k i= dk fuyEcu l{ke vf/kdkjh }kjk lekIr fd;k tk pqdk gS ftlds dkj.k vc bl lanHkZ esa mUgs dksbZ dk;Zokgh visf{kr ugha gS A dEiuh }kjk mudk vuqjks/k i= uLrh c) fd;s tkus dk vuqjk/k fd;k x;k gS A 4 fyad mRlo UkksfVl dEiuh }kjk la;qDr midze Hkkxhnkjksa ds daiuh ds dzeakd 1572 chp fd;s x;s vuqca/k fnuakd 'ks;j gksfYMax fnuakd 19-03-2014 ds rgr mRlo lsQ~Vh iSVuZ esa 14-03-14 flLVe dh leLr ysunkjh ,oa nsunkjh ifjoRkZu ds dk vf/kxzg.k fd;k x;k gS A izeq[k laca/k esa lfpo ifjogu }kjk vuqca/k ds izko/kku dk ikyu ,d ekg vof/k esa lqfuf'pr djus gsrq funsZf'kr fd;k x;k A W.P.No.3654/2014 7
6. Thereafter, it was agreed that from seven days to three months the petitioner shall rectify the mistakes. The Principal Secretary further directed that the Company to follow the instructions in regard to implementation of ERP system, SMS, fixation of HSRP at dealer point and online information of HSRP. It is further agreed that the further action in the matter shall be taken within the prescribed limit after revaluation of the progress.
7. The petitioner on 19.6.2014 submitted a detailed report in regard to implementation of the decisions taken in the meeting. Thereafter, vide order dt.19.6.2014 the contract of the petitioner was terminated. It is mentioned in the order of termination of contract that there was no progress in the working of the petitioner and decisions taken in the meeting were not followed.
8. In the return filed by the respondents, it is pleaded that the petitioner did not implement the decision taken in the meeting and after considering the progress report a decision was taken in the meeting and after considering the progress report a decision was taken to terminate the contract of the petitioner.
9. Learned senior counsel appearing on behalf of the petitioner has contended that the termination of the contract of the petitioner is arbitrary and illegal.
W.P.No.3654/2014 8The petitioner was granted three months time in the meeting held on 16.4.2014 to correct the defects and the period was up to 16.7.2014, however, one month before vide order dt.19.6.2014 the contract of the petitioner was terminated, hence, no proper opportunity was granted to the petitioner in the event of termination of contract. It is further submitted by the learned senior counsel that in spite of the provisions of Arbitration clause under certain circumstances the court has power to interfere in the contractual matters. In support of his contentions, learned senior counsel relied on the following judgments :
(i) Union of India Vs. Tantia Construction Pvt. Ltd. -
(2011) 5 SCC 697.
(ii) Zenit Mataplast Pvt. Ltd. Vs. State of Maharashtra & Ors. - (2009) 10 SCC 388.
(iii) ABL International Ltd. Vs. Export Credit Guarantee Corporation of India Ltd. & Ors. - (2004) 3 SCC 553
(iv) Harbans Lal Sahnia Vs. Indian Oil Corporation Ltd. & Ors. - (2003) 2 SCC 107
(v) Kumari Shrilekha Vidyarthi Vs. State of U.P. -
(1991) 1 SCC 212
10. Contrary to this, learned Additional Advocate General appearing on behalf of the respondents has contended that enough opportunity was afforded to the petitioner. After considering the performance of the petitioner it was found that the petitioner had violated many terms and conditions of the contract. Apart from W.P.No.3654/2014 9 this, it was also found that the petitioner had submitted some forged documents in the meeting held on 16.4.2014. The petitioner played a fraud, hence, the petitioner is not eligible for any relief. In support of his contentions, learned Additional Advocate General has relied on the following judgments :-
(i) Rajasthan State Industrial Development & Investment Corpn. Vs. Diamond & Gem Development Corpn. Ltd. - (2013) 5 SCC 470
(ii) Jagdish Mandal Vs. State of Orissa - (2007) 14 SCC 517
(iii) K.D.Sharma Vs. SAIL - (2008) 12 SCC 481
(iv) Food Corporation of India Vs. Harmesh Chand -
(2006) 7 SCC 654
11. Learned Additional Advocate General admitted the fact that the contract has not been awarded to any person and tenders for inviting consultants have been floated and after appointment of consultants further tenders for award of contract shall be floated and near about three months time would be required to award the contract to another person.
12. Hon'ble Supreme Court in Jagdish Mandal Vs. State of Orissa reported in (2007) 14 SCC 517 has held as under in regard to the factors which would be taken and the principles which would be applied by the courts interfering in the tenders or contractual matters in exercise of judicial review :-
W.P.No.3654/2014 10"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to W.P.No.3654/2014 11 itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";
(ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/ contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."
13. Hon'ble Supreme Court in Union of India Vs. Tantia Construction Pvt. Ltd. reported in (2011) 5 SCC 697 has held s under in regard to maintainability of the writ petition in the event of existence of arbitration clause in the terms of the contract :-
"33. Apart from the above, even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that W.P.No.3654/2014 12 without exhausting such alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution.
34. We endorse the view of the High Court that notwithstanding the provisions relating to the arbitration clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the writ petition filed on behalf of the respondent Company. We, therefore, see no reason to interfere with the views expressed by the High Court on the maintainability of the writ petition and also on its merits."
14. The other decisions of the Hon'ble Supreme Cuort in Zenith Mataplast Pvt. Ltd. (supra), ABL International Ltd. (supra) and Harbans Lal Sahnia (supra) are on the same lines, hence, it is not necessary to consider all the judgments in the present case.
15. Clause 15.3 of the agreement provides termination of the contract, which reads as under :-
"15.3 Termination
(a) The Authority shall have the right to cancel the Contract if the Service Provider causes any material breach of any or all conditions or any material breach of the Contract. Material breach of contract shall include, but is not W.P.No.3654/2014 13 limited to the following :
I. Failure of the Service Provider to correct such defects/irregularity within a reasonable period of time pursuant to the notice received from the Transport Commissioner, Gwalior. If defects/irregularities are noticed repeatedly or there are repeated complaints against the Service Provider, the Transport Commissioner shall have the right to terminate the contract and forfeit the Performance Security;
II. Upon the Service Provider being knowingly or intentionally involved in distribution of duplicate High Security Registration Plates without authority letter from the Registering Authority and/or are leaking the security features;
III. Failure of the Service Provider to submit valid Certificate of "Conformity of Production"
periodically as per the guidelines of the approved Test Agency, to the Authority;
IV. Any document submitted by the Service Provider as part of the bid is found to be incorrect/not authentic; V. In case there are complaints of overcharging/poor quality of High Security Registration Plates.
(b) In case of material breach of the contract by the Service Provider for any of the above reasons, the Authority shall have the right to terminate the contract and enforce the Performance Security. No Termination Payment shall be made by the Authority to the Service Provider in the event of such Termination.
W.P.No.3654/2014 14(c) Further, The Authority shall also reserve the right to impose penalty and ask the Service Provider to continue till alternative arrangements are made and also reserves the right to enter into contract with any one as deemed fit by the Authority. The Service Provider shall handover reports and databases maintained to the Authority for continuity of operations. In no case, such data/information maintained by the Service Provider shall be exploited or sold to third party for any gain or otherwise.
(d) Upon Termination of this Contract for any reason, whatsoever;
I. The Service Provider shall remove all its machinery, equipment, furniture, fixtures or any other belongings excluding the computing equipment set up to establish and maintain the Online Data Warehouse within a period of 30 (thirty) days; and II. The Service Provider and any person claiming through or under the Service Provider shall not enter any part of the premises of any Registering Authority beyond a period of 30 (thirty) days from the date of Termination Notice.
(e) Notwithstanding anything to the contrary contained in this Contract, any Termination pursuant to the provisions of this Contract shall be without prejudice to accrued rights of either Party including its right to claim and recover money damages and other rights and remedies, which it may have in law or Contract. All rights and obligations of W.P.No.3654/2014 15 either Party under this Contract shall survive the termination of this Contract to the extent such survival is necessary for giving effect to such rights and obligations.
(f) On termination the Service Provider shall :
I. Pass on IPR and software alongwith the Source Code to Transport Commissioner, Madhya Pradesh. II. Handover the possession of all computing equipment, data asset to Transport Commissioner, Madhya Pradesh;
III. Hand over the possession of
premises provided by the
Registering Authorities to the
Service Provider for affixation of plates on motor vehicles;
IV. Clear all charges for utilities like electricity, water etc. in respect of the premises provided by the Registering Authorities.
(g) The Authority shall be at liberty to appoint any other manufacturer/ vendor to manufacture, sell, distribute or affix high security registration plates after termination of this Contract."
16. From the terms of the contract, it is clear that the authority has a right to terminate the contract if there was any material breach of the terms and conditions of the agreement. In the present case, after issuance of show cause notice, the petitioner submitted its reply. Thereafter a meeting was held on 16.4.2014. In the aforesaid meeting it was agreed that the petitioner shall remedy all the deficiencies pointed W.P.No.3654/2014 16 out by the department from seven days to three months. It was further agreed that for the purpose of further action after expiry of the period another review would be held and after review of the situation appropriate action shall be take. In the present case before expiry of the period i.e. 16.7.2014 the contract was terminated on 19.6.2014. It is not mentioned in the order that what were the reasons that before expiry of the period the contract was terminated. It is also a fact that in terms of the meeting another review was not held. It means that the petitioner was denied the opportunity to show cause that there were any defects or not. Once the respondents agreed to provide an opportunity to the petitioner for a period of three months to remedy the defects, termination of contract before the said period is arbitrary and against the principle of law and it is covered under the clause (i) of the judgment of the Hon'ble Supreme Court in Jagdish Mandal (supra) that the decision is such that no reasonable authority acting reasonably and in accordance with relevant law could have reached and
(ii) that whether public interest is affected.
17. We would also like to consider another aspect of the termination of the contract. After termination of the contract no machinery has been provided by the State to implement the directions issued by the Hon'ble Supreme Court in regard to fixing of HSRP. It W.P.No.3654/2014 17 is an important direction and it was issued by the Hon'ble Supreme Court in view of the security of the country.
18. Learned Additional Advocate General himself admitted that minimum three months time would be required for awarding contract to a new agency. He further admits the fact that up to that period the new owners of the vehicles have to fix the plates after purchasing the same from open market and after award of new contract they have again to pay amount for fixation of HSRP. It means that the consumer has to bear double burden i.e. fixing of ordinary plates and thereafter HSRP. In such circumstances, in our opinion, it would be just and in the public interest that the petitioner be permitted to continue the contract for a period of three months with certain conditions and the respondents be also given a liberty to conduct a detailed enquiry in regard to the fact of breach of contract by the petitioner and thereafter the respondents would be at liberty to pass appropriate order after considering all the facts in regard to termination of the contract of the petitioner.
19. Consequently, the writ petition is disposed of with the following directions :-
(i) That the impugned order dt.19.06.2014 (Annexure P/18) issued by the respondent No.2 regarding termination of contract of the W.P.No.3654/2014 18 petitioner is hereby quashed.
(ii) The respondents are given liberty to issue fresh show cause notice or they can insist the earlier show cause notice given to the petitioner and the petitioner is also given a liberty to reply show cause notices and rebut the charges and the respondents are further given liberty to verify the fact that whether the petitioner produced any forged document or committed forgery. The respondents are also at liberty to pass a fresh order if they think it necessary in regard to termination of contract if it is necessary within a period of three months.
(iii) Up to that period the petitioner is permitted to continue the work as per the terms of the contract in regard to fixing of HSRP. The representatives of the department shall supervise the work of the petitioner. If it is found that the petitioner has not performed the work up to the satisfaction of the department during the aforesaid period, the department shall be at liberty to impose penalty as per the terms and conditions of the contract.
No order as to costs.
(S.K. Gangele) (S.K.Palo)
Judge Judge
SP