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Jayanta Kumar Ghosh Outdoor Catering ... vs The State Of Maharashtra & Ors on 6 October, 2022

                            $~22
                            *       IN THE HIGH COURT OF DELHI AT NEW DELHI
                            +       CS(COMM) 1263/2016
                                    JAYANTA KUMAR GHOSH OUTDOOR CATERING PVT
                                    LTD                                    ..... Plaintiff
                                            Through: Mr. Sandeep Sethi, Sr. Advocate and
                                                     Mr. Kirti Uppal, Sr. Advocate with
                                                     Mr. Ashutosh Dubey, Mr. Abhishek
                                                     Chauhan, Mr. Amit P. Shahi,
                                                     Mr. Amit Kumar, Ms. Riya Gulati and
                                                     Mr. Chandan Sinha, Advocates.

                                                      versus

                                    THE STATE OF MAHARASHTRA & ORS. ..... Defendants
                                             Through: ASG Balbir Singh, Sr. Advocate with
                                                      Mr. Siddharth Dharmadhikari,
                                                      Mr. Aaditya Pandey, Mr. Raghav
                                                      Sharma, Mr. Naman Tondon and
                                                      Mr. Samarvir Singh, Advocates
                                                      (Ph. 8527066461, e-mail:
                                                      [email protected])

                                    CORAM:
                                    HON'BLE MS. JUSTICE MINI PUSHKARNA
                                                      ORDER

% 06.10.2022

1. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) for interim measures.

2. By way of the present petition, the following prayers have been made:

"(a) Pass an order or direction quashing and setting aside the impugned termination notice/ order dated 04.10.2022 issued by the Resident Commissioner, Maharashtra Sadan, New Delhi; and

(b) Stay the operation and implementation of notice/ order dated 04.10.2022 issued by the Resident Commissioner, Maharashtra Sadan, New Delhi;

(c) Restrain the respondent Nos. 1 to 4 from causing any disturbance or hindrance in peaceful running of the Maharashtra Sadan Canteen (Old and New) by the petitioner during the pendency of the present petition;

(d) Ad-interim orders in terms of prayer (b) and (c)"

3. As per the petitioner, it is duly registered Private Limited Company having made a special place in catering business by its efficiency and upto date business policy. The petitioner company was initially started as a proprietorship firm in the year 1989 by Mr. Jayanta Kumar Ghosh. The same was later converted to Private Limited Company in the year 2015-16 by the name of M/s Jayanta Kumar Ghosh Outdoor Catering Private Limited. The petitioner company had taken over the business of the proprietorship firm and has been running independently as a separate distinct legal entity.

4. Mr. Jayanta Kumar Ghosh continued as Director of the petitioner company till his resignation on 15.09.2021. He was later re- inducted as Director and continued till his resignation again on 22.09.2022.

5. Name of the petitioner company has now been changed to Araha Hospitality Private Ltd with effect from 14.07.2022 as per certificate of incorporation dated 14.07.2022 issued by Office of Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 2 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 Registrar of Companies, Kolkata.

6. Respondent Nos. 1 to 4 issued an e-tender on 03.12.2020 to run the canteen in Old and New Maharashtra Sadan in two part bidding system (technical and financial bid) for catering of food and non- alcoholic beverage services at the New and Old Maharashtra Sadan. It is submitted that the petitioner as well as respondent No. 5 participated in the same.

7. Petitioner emerged as the highest bidder in the tender process. Thus, contract was awarded in favour of the petitioner herein and it started running the canteens in the Maharashtra Sadan in terms of the contract.

8. It is the case of the petitioner that by order dated 04.10.2022, the contract of the petitioner has been terminated. Thus, the present petition has been filed under Section 9 of the Act for interim relief.

9. Mr. Sandeep Sethi, learned Senior Counsel appearing on behalf of the petitioner has contended that the contract has been terminated on the ground that in terms of the e-tender notice dated 03.12.2020, bidder was under the legal obligation to submit a declaration specifically stating that there is no vigilance/ CBI or court case pending against the firm. However, subsequently it has come to the knowledge of the respondent that Mr. Jayanta Kumar Ghosh has been convicted by the Special NIA Court for charges under various Sections of Indian Penal Code, Unlawful Activities (Prevention) Act, 1967 along with offences under Section 25(1) (B) of the Arms Act. He has been sentenced to rigorous imprisonment for ten years under Section 120B of the IPC and further rigorous imprisonment for ten Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 3 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 years for offences under Section 17 of Unlawful Activities (Prevention) Act, 1967 by the Special Judge, NIA Court, Asam, Gauhati. It is submitted that the said reasoning is totally erroneous, since the petitioner was required to give declaration qua the firm and not any particular director.

10. It is further submitted that the respondent No. 1 has illegally and arbitrarily terminated the contract dated 14.09.2021 awarded to the petitioner upon representation dated 26.11.2021 of M/s Cuisines Caterers and Hospitality Services.

11. It is further submitted that the Principles of Natural Justice have not been followed and no notice of 30 days has been given to the petitioner in terms of Clause 13 of the e-tender notice dated 03.12.2020. It is further contended that Mr. Jayanta Kumar Ghosh had already resigned from the post of director on 22.09.2022 and that the petitioner company was under the share-holding of Amar Thakkar and Preeti Thakkar, who together hold 100% share in the petitioner company. Further, it is submitted that the respondent No. 1 has completely lost sight of the fact that a company is a legal entity itself and a director is separate from the company. Thus, it is contended that when the contract has been awarded to the company, it cannot be made liable for any act/ offence committed by its director which was in no way related to the day-to-day affair/ business of the company.

12. In support of its submissions, following judgments have been relied on behalf of the petitioner:-

(i) Hindustan Petroleum Corporation Ltd and Ors Vs Super Highway Services and Anr., (2010) 3 SCC 321.

(ii) BACS Yamuna Power Ltd Vs Talupula Engineering Company, MANU/DE/1414/2015.

(iii) Softline Media Ltd., Softlines Vs Delhi Transport Corporation, 2002 SCC OnLine Del 90.

(iv) Old World Hospitality Pvt Ltd Vs India Habitat Centre, 1996 SCC OnLine Del 580.

13. On the other hand, Mr. Balbir Singh, Senior Advocate, learned ASG while vehemently opposing the present petition, has submitted on behalf of the respondents that various notices were issued to the petitioner viz notices dated 02.09.2021, 20.12.2021 and 24.12.2021, as mentioned in the termination letter dated 04.10.2022. It is submitted that the petitioner company was initially a proprietorship company of Mr. Jayanta Kumar Ghosh. Subsequently, the said company was converted into a private limited company and the said Mr. Jayanta Kumar Ghosh continued as Director of the petitioner company. The respondents received representation from authorized representative of Cuisines Caterers and Hospitality Services, by which it was informed that Mr. Jayanta Kumar Ghosh had been convicted by the special NIA Court for charges under Section 120-B, 121, 121-A read with Section 16, 17, 18 and 20 of Indian Penal Code, Unlawful Activities (Prevention) Act, 1967 along with offences under Section 25(1)(B) of The Arms Act by the Special Judge, NIA Court Assam, Guwahati and that he has been sentenced to rigorous imprisonment for 10 years under Section 120(B) of IPC and further rigorous imprisonment for 10 years under Section 17 of the Unlawful Activities (Prevention) Act, 1967. Thus, it is submitted that the present contract was taken by the Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 5 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 petitioner by submitting a false declaration. It was submitted that as per the tendered document declaration was to be given that there was no pending case against the firm. However, the fact regarding cases against one of the Directors i.e. Mr. Jayanta Kumar Ghosh or his conviction thereof was never disclosed by the petitioner.

14. It was further submitted that in terms of Clause 13 of the General Conditions of Contract (GCC) and Clause 9 of Special Conditions of Contract (SCC), the respondent had the right to terminate the contract. It was submitted that Clause 9(a) of the SCC specifically provides in sub-clause VIII that if the contractor brings in bad name to Maharashtra Sadan by his/her acts and deeds, the contract shall be liable for termination.

15. It is vehemently argued that representation dated 26.11.2021 was received from Cuisines Caterers and Hospitality Services, which was H-2 in the tender process. Thus, on the basis of information received, various notices were issued to the petitioner, which were also responded to by the petitioner. Extensive inquiry was carried out for one year and due process was carried out. Thus, complete process was followed by the respondent before terminating the contract of the petitioner. It is further submitted that in the agreement dated 20.04.2017 entered between M/s Jayanta Kumar Ghosh Outdoor Catering Ltd. i.e. the petitioner herein and Mr. Jayanta Kumar Ghosh, the registered address of the company i.e. petitioner herein and Mr. Jayanta Kumar Ghosh, is the same.

16. Responding to the submissions of petitioner that Mr. Jayanta Kumar Ghosh had already resigned as Director of petitioner-company Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 6 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 on 22.09.2022, it was submitted on behalf of respondents that the said resignation was given only after incorporation of the petitioner company pursuant to change of name, which had been incorporated on 14.07.2022. Further, it is submitted that Mr. Jayanta Kumar Ghosh was the Director in the petitioner company at the time of participation in the tender process as well as the time of award of contract in favour of the petitioner company.

17. In rejoinder, learned senior counsel for the petitioner submits that Cuisines Caterers and Hospitality Services was not H-2 and that it was not a bidder in the tender process. Attention of this Court has been drawn to order dated 03.09.2021 passed by a Coordinate Bench of this Court in WP (C) No. 9583/2021, M/s Cuisines Caterers and Hospitality Services Vs The State of Maharashtra and Ors. It is further submitted on behalf of the petitioners that the contract was awarded to the petitioner company and that the company was a separate entity and distinct legal entity separate from its Directors.

18. I have considered the submissions made on behalf of counsels for the parties.

19. Clause 13 of the General Conditions of Contract is reproduced as under:-

"13. TERMINATION This Contract may be terminated forthwith by either party by giving written notice to the other If:

13.1. The other party is in material breach of its obligations under this Agreement and / or, in the case of such breaches capable of being remedied, fails to remedy that breach within\ thirty days of receiving notice of such breach. The termination Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 7 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 shall take effect Ninety Days after the mandatory opportunity of thirty days.

13.1.1. There shall be a Performance Monitoring Committee comprising of Asst. Resident Commissioner (Protocol), Manager Maharashtra Sadan, Assistant Accounts Officer, Resident Engineer, Assistant Manager (Canteen)/ In-charge of Canteen, Representative of MTDC, Director or representative of the Institute of Hotel Management and catering Technology, New Delhi or nominee of ITDC who will assess the performance and make necessary recommendations either to continue the mentioned contract with rectification of defects if any or to cancel the contract. This committee will also be responsible for making recommendations for continuation of the contract after every calendar year. The senior most officer in attendance would be presiding the Committee. The benchmark of assessment of the Committee shall be as per ITDC norms applicable for 3 star rated hotels. 13.2. The Contract may be terminated forthwith by the Client by giving written notice to the Contractor, if:

13.2.1. In case of breach of any of terms and conditions of the Contract by the Contractor, the Competent Authority of the Client shall have the right to cancel the Contract without assigning any reason thereof, and nothing will be payable by the Client and in that/event the security deposit in the form of performance Bank Guarantee shall be forfeited and encashed.

13.2.2. The Contractor does not provide Food & Non-Alcoholic Beverage Services at New Maharashtra Sadan, Kasturba Gandhi Marg and Copernicus Marg, New Delhi satisfactorily as per the requirements of the Client or/and as per the Schedule of Requirements.

13.2.3. The Contractor goes bankrupt and becomes Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 8 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 insolvent."

20. A reading of the aforesaid clauses of the GCC would show that contract may be terminated forthwith by either party by giving written notice to the other if the other party is in material breach of its obligations under the agreement. In case such breaches are capable of being remedied and party fails to remedy that breach within 30 days of receiving notice of such breach, the termination shall take effect 90 days after the mandatory opportunity of 30 days. Further, in case of breach of any terms and conditions of the contract by the contractor, the competent authority of the respondent shall have the right to cancel the contract without assigning any reason thereof.

21. It is the case of the petitioner that no such stipulated notice of termination of the contract as prescribed in Clause 13 of the GCC has been given to the petitioner. The respondent passed the impugned order dated 04.10.2022 without issuance of any show cause notice or without affording any opportunity of hearing to the petitioner. The said order of termination of contract was pasted by the respondents on the entry gate of Maharashtra Sadan without service to the petitioner. Though respondents have submitted that various notices dated 02.12.2021, 20.12.2021 and 24.12.2021 were issued to the petitioner time and again and that a detailed inquiry was carried for over a year before issuance of the termination order dated 04.10.2022, the said notices have not been produced on behalf of the respondents at the time of hearing. Even otherwise, respondents have not been able to establish or satisfy this Court that the procedure as envisaged in Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 9 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58 Clause 13 of the GCC has been carried out.

22. Further, respondent has relied upon Special Conditions of Contract, Clause 9(a), in particular sub-clause VIII. Clause 9(a) of the SCC is reproduced as below :-

"9. (a) TERMINATION CLAUSE (EXPANSION). The contract shall be liable for termination due to following reasons.

I. Poor performance.

II. Interruption of Service.

III.Poor quality of food items.

IV. Irregular payment of dues to Maharashtra Sadan.

V. Misbehavior of Contractor's Staff VI. Misuses of premises.

VII. If the Contractor sublets the work or the space to another agency.

VIII. If the Contractor brings in bad name to Maharashtra Sadan by his/her acts and deeds."

23. A reading of the aforesaid clause shows that the contract shall be liable for termination amongst other reasons if the contractor brings in bad name to the Maharashtra Sadan by his/her acts and deeds. However, in the present case, the contractor is the petitioner company, which at present is under 100% shareholding of one Mr. Amar Thakkar and his wife Ms. Priti Thakkar. Mr. Jayanta Kumar Ghosh is not even a Director in the petitioner company at present. He had resigned as Director from the company on 22.09.2022. It is seen from the document produced before this Court that the name of the petitioner company has been changed to Araha Hospitality Pvt. Ltd. by way of certificate of incorporation dated 14.07.2022 issued by the Office of Registrar of Companies, Kolkata, West Bengal.

24. It is well settled that a company is a distinct juristic entity which is separate from its Directors. Thus, if one of the ex-directors of the company has been convicted, the petitioner company cannot be penalized for such actions, being a legal entity distinct from its members.

25. In view of the aforesaid discussion, I am of the opinion that the petitioner has made out a prima facie case in its favour and accordingly the respondent is restrained from giving effect to the impugned termination notice dated 04.10.2022 till the next date of hearing.

26. Issue notice to the respondents.

27. Counter affidavit be filed within four weeks with advance copy to the learned counsel for the petitioner, who may file rejoinder thereto, if any, within two weeks thereof.

28. List on 05.12.2022.

MINI PUSHKARNA, J OCTOBER 6, 2022 PB/c Signature Not Verified Digitally Signed By:PURAN CS(COMM) 1263/2016 Page 11 of 11 SINGH TARIYAL Signing Date:10.10.2022 10:33:58