Delhi High Court - Orders
Prince Facility Management Services ... vs Container Corporation Of India Limited on 2 June, 2021
Author: C.Hari Shankar
Bench: C.Hari Shankar
$~16(Original Side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 168/2021, I.A. 6965/2021 & I.A.
6966/2021
PRINCE FACILITY MANAGEMENT SERVICES PRIVATE
LIMITED ..... Petitioner
Through: Mr. Ujjwal Jha, Adv.
versus
CONTAINER CORPORATION OF INDIA LIMITED
..... Respondent
Through: Mr. Rishi K Awasthi, Adv.
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
ORDER
% 02.06.2021
(Video-Conferencing)
I.A. 6965/2021 & I.A. 6966/2021
1. Exemptions allowed subject to all just exceptions.
2. These applications stand disposed of.
O.M.P.(I) (COMM.) 168/2021
1. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking pre-arbitral interim reliefs.
2. On 27th October, 2020, a contract, for providing housekeeping and mechanised conservancy services at the Inland Container Depot, Tughlakabad (ICD, TKD), was awarded to the petitioner by the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 1 of 9 Signing Date:12.06.2021 19:15:18 respondent, which was followed by a Letter of Intent ("LOI")/ work order dated 3rd November, 2020, for a period of two years from the date of commencement of the contract. The work was to commence from 10th November, 2020; ergo, the terminus ad quem of the contract was 9th/10th November, 2022.
3. The contract required the petitioner to deploy three skid steer loader machines of not more than five years vintage, capable of cleaning a minimum area of 10,000 sq. mtrs./hr. and 44 persons, to provide conservancy and housekeeping services. In this context, Clause 1(a) of the Special Conditions of the Contract (SCC), may be reproduced thus:
"3 (Three) nos. of owned equipments (Skid Steer Loader with attachments required for cleaning, loading and sweeping) are required for parking area & Custom bonded area separately and additional machine can be asked from contractor if required. Vintage of equipment's[sic] should not be more than 05 years old and tenderer should submit proof of ownership of equipment.
The contractor should provide at least 3 owned Ride on with swept collection bucket and shovel bucket type machines which should have sweeping and scrubbing attachments to sweep and scarify the dirty floor/yard area. The machine should be capable of clearing a minimum area of 10,000 Sq. mtrs. per hour.
One (1) number of owned tractor/trolley/dumper/truck with the capacity of 5 tonne or above for the carriage of garbage.
The contractor should submit specification/certification from manufacturer of the equipment in support of the capacity of the machine. The bidder will have to submit registration certificate/insurance police/invoice/sale deed etc. in support of ownership."
(Emphasis supplied) Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 2 of 9 Signing Date:12.06.2021 19:15:18
4. The petition asserts that all requisite documents, as per the LOI, along with requisite security deposit, was furnished by the petitioner and that the documents were examined by a two member committee, after notice by the respondent to the petitioner in that regard on 18th November, 2020. The notice specifically stated that the respondent "had nominated a two member committee on 18.11.2020 to inspect the machines and vehicle to be deployed". The petition further avers that it was only after the respondent had satisfied itself regarding the machines and the documents accompanying the machines that, on 20th December, 2020, the agreement was executed between the parties.
5. According to the averments in the petition, though the petitioner was diligently discharging its duties under the aforesaid contract, it was visited, all of a sudden, with a Show Cause Notice dated 13th May, 2021, which read thus:
"Dear Sir, The contract for providing Housekeeping and Mechanized conservancy services (Yard) at ICD/TKD was awarded ·to you vide GeM Contract order no. GEMC- 511687763243043 dated 27.10.2020. In this regard this is to inform that as per tender conditions you have deployed 03 skid steer loader machines, however it is observed during preventive check by the vigilance dept. that you have not been able to show the proof of ownership documents of 3 Skid steer loader machines or any financial transaction in this regard. You have been given adequate opportunity for production of various document during the vigilance check. The documents submitted by you were found to be dubious, hence eligibility criteria have not been fulfilled by you & have not performed your obligations which is considered as breach of contract by the competent authority.
In view of above, you are directed to explain within 07 days of the receipt of this show cause notice that why your contract Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 3 of 9 Signing Date:12.06.2021 19:15:18 should not be terminated."
6. The petitioner replied to the Show Cause Notice on 18th May, 2021. It was pointed out, inter alia, that the machines as well as the documents submitted by the petitioner already stood verified by officials of the respondent. Especial attention was invited to Clause 1(a) of the SCC and the specific requirement, therein, for the petitioner to submit Registration Certificate/Insurance Policy/Invoice/Sale Deed, in support of ownership. As such, it was pointed out, in the reply to the Show Cause Notice, that requisite proof of ownership had been submitted by the petitioner, failing which there was no question of the contract having been awarded to it. The allegation, in the Show Cause Notice, that the documents submitted by the petitioner were "found to be dubious", it was submitted, was bereft of any supportive material and was, ex facie, merely employed as a ruse to terminate the contract.
7. On 27th May, 2021, a further notice was issued to the petitioner by the respondent, terminating the contract w.e.f. 31st May, 2021. It read thus:
"Dear Sir, This has reference to the show cause notice of even no. dated 13.05.2021 & your reply no. nil. dated 18.05.2021. In this regard this is to inform that your reply is not considered as satisfactory, hence it is decided by the competent authority to terminate the contract for providing Housekeeping and Mechanized conservancy services (Yard) at ICD/TKD w.e.f. 31.05.2021 and further it is directed to forfeit the E- performance Bank Guarantee of Rs. 44,76,000/-
In view of above your contract stands terminated w.e.f. 31.05.2021 in terms of clause 19 of GTC and your EPBG Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 4 of 9 Signing Date:12.06.2021 19:15:18 shall be forfeited.")
8. Clause 19 of the General Terms and Conditions of the contract provided for termination thereof and read as under:
"19. Termination for Default:
If the Seller does not perform its obligations within the Delivery Period/Date mentioned in the Contract, the same would constitute the breach of the Contract and the Buyer shall have the right to Cancel or withdraw the Contract for the unsupplied portion after the expiry of the original or re-fixed delivery date or period stipulated in the Contract. Such cancellation of contract on account of non -performance by the Seller would entitle the Buyer to forfeit the performance security besides other actions such as downgrading the Seller's rating or debarment from the GeM for specified period as decided by GeM on merits."
9. A bare reading of the aforesaid Clause 19 discloses, prima facie, that the contract was determinable only if the seller did not perform its obligations within the delivery period/date mentioned therein, which was deemed to constitute breach of the contract. This position is underscored in further stipulation, in Clause 19, that in such event, the respondent would have the right to cancel or withdraw the contract for the unsupplied portion after the expiry of the original.
10. Mr. Ujjwal Jha, learned Counsel for the petitioner, points out that, apart from the fact that, even on facts, the allegation of the documents reflecting the ownership, of the petitioner, over the machines deployed in the premises of the respondent, being dubious, was completely unsubstantiated and unsustainable, this could not constitute a valid basis for terminating the contract in the light of the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 5 of 9 Signing Date:12.06.2021 19:15:18 specific words contained in Clause 19 thereof.
11. No default or even laxity, in discharge of the petitioner's contractual obligations, submits Mr. Jha, was ever pointed out by the respondent.
12. These submissions, prima facie, carry weight.
13. This petition was filed before the Court on 28th May, 2021. Advance notice was served on the respondent prior thereto.
14. It appears that the respondent has not only terminated the contract with the petitioner with effect from 31st May, 2021, but has awarded the contract, "on emergent and ad hoc basis" (as learned counsel for the respondent would submit on instructions) to another contractor, the new contract to come into effect at the stroke of midnight between yesterday and today. No procedure, known to law, appears to have been followed in awarding the contract to the new contractor.
15. Prima facie, being aware of the fact that this petition was coming up for hearing today, the act of the respondent appears to be lacking in bona fides. At the very least, the respondent ought to have awaited the outcome of the proceedings today.
16. The impression regarding want of bona fides also stand supported by the fact that the termination of the contract has been Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 6 of 9 Signing Date:12.06.2021 19:15:18 effected on grounds which are totally foreign to Clause 19. Even on facts, it is, prima facie, difficult to believe that, in view of the specific covenants contained in Clause 1(a) of the SCC, the contract would have been awarded to the petitioner without verification of the ownership of the machines. That a two-member Committee was constituted in this regard stands admitted by the respondent itself, in writing. The Show Cause Notice dated 13th May, 2021, merely states that the documents of the petitioner were "found to be dubious". The Show Cause Notice is totally silent as to why the documents were found to be dubious. It cannot, therefore, even be said that the Show Cause Notice meets the requirements of the principles of natural justice, which would require disclosure, to the petitioner, of the material against it, so as to enable the petitioner to reply to the Show Cause Notice specifically.
17. At this juncture, Mr. Awasthi intercepts the dictation of the order to submit that the proof of ownership submitted by the petitioner was found to be dubious by a Vigilance Committee which had examined the documents. The submission entirely begs the issue at hand. Irrespective of whether the Vigilance Committee, or any other committee, had found the documents to be dubious, the respondent, as a Public Sector Undertaking, was expected to follow the principles of natural justice, which would include disclosure to the petitioner of the material against it, so as to enable the petitioner to meaningfully respond to the Show Cause Notice. This has not been done.
18. In order to satisfy itself in this regard, the Court queried Mr. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 7 of 9 Signing Date:12.06.2021 19:15:18 Awasthi as to the exact particulars regarding the ground on which the ownership submitted by the petitioner were found to be dubious, Mr. Awasthi is unable to enlighten the Court in this regard, beyond submitting that there was probably some invoice mismatch. He submitted that he would place the particulars on record if an opportunity to file a reply to the petition is granted.
19. It would remain to be considered as to whether particulars, which find no place in the Show Cause Notice or in the order terminating the contract, but which may be now reflected in a reply filed by the respondent can justify the impugned action, given the law laid down by the Supreme Court in as far as back in Mohinder Singh Gill v. Chief Election Commissioner 1.
20. Be that as it may, the Court is satisfied, prima facie, that the act of terminating the contract was not justified either on facts or on the anvil of the contractual provisions. The manner in which the contract has later been awarded is also far from satisfactory, despite the justification sought to be advanced in that regard by Mr. Awasthi.
21. In view thereof, issue notice returnable on 5th July, 2021.
22. Reply to this petition be filed positively within three weeks from today, with advance copy to learned Counsel for the petitioner, who may file rejoinder thereto, if any, before the next date of hearing.
1(1978) 1 SCC 405 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 8 of 9 Signing Date:12.06.2021 19:15:18
23. No extension of time to file reply or rejoinder shall be granted, as the project in question is a public project, and according to Mr. Awasthi, a new contract stands awarded last midnight.
24. However, in view of the above facts, till the next date of hearing, the respondent is restrained from proceeding against the performance securities furnished by the petitioner or invoking the bank guarantees given in that regard.
25. Any work taken from the new contractor before the next date of hearing shall also be subject to the outcome of these proceedings, and shall not be as cited as a ground to urge any equities on behalf of the respondent. The awarding of the contract to the new contractor shall also remain subject to the decision taken by this Court in the present proceedings, and the respondent is directed to intimate the new contractor in writing accordingly.
26. Re-notify for hearing and disposal at the end of the Board, subject to part-heard matters, if any, on 5th July, 2021.
C.HARI SHANKAR, J JUNE 2, 2021 ss Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O.M.P.(I) (COMM.) 168/2021 Page 9 of 9 Signing Date:12.06.2021 19:15:18