Calcutta High Court (Appellete Side)
M/S. India Government Mint & Ors vs M/S. Shreebhumi Steel Pvt. Ltd. & Ors on 4 October, 2010
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose, Asim Kuamr Ray
1
MAT 359 of 2010
With
CAN 3276 of 2010
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
M/S. INDIA GOVERNMENT MINT & ORS.
VS.
M/S. SHREEBHUMI STEEL PVT. LTD. & ORS.
BEFORE:
The Hon'ble Mr. Justice PINAKI CHANDRA GHOSE
A N D
The Hon'ble Mr. Justice ASIM KUAMR RAY
For Appellant : Mr. Raja Basu Chowdhury, Adv.
Mr. Saswati Chatterjee, Adv.
For Respondents : Mr. Pratap Chatterjee, Sr. Adv.
Mr. Samit Talukdar, Sr. Adv.
Mr. Subhasis Chakraborty, Adv.
Mr. Srijib Chakraborty, Adv.
Heard on : 07.07.10, 09.07.10 and 12.07.10
Judgment on : 04.10.2010.
PINAKI CHANDRA GHOSE, J. : This appeal is directed against an order
dated 22nd September, 2009 passed by the Hon'ble Single Judge in W.P. No.
28100 (w) of 2008.
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This writ petition was filed against the action of 'MSTC' for not extending
the time for depositing the balance sale value of plant, machinery and material of
India Government Mint, Calcutta offered to be purchased by the petitioner
through E-auction.
The facts of the case briefly are as follows :
A notice was issued for sale of plant, machinery and other materials of the
appellant through MSTC. Some of the terms and conditions of sale are set out
hereunder :
"2.VALIDITY
2.1 VALIDITY OF BIDS : All bids will be valid for acceptance by
MSTC/Seller for a period of 30 days from the date of closing of e-Auction,
excluding the date of closing. In case the 30th day falls on a holiday or
remains closed for MSTC, such Bids will be deemed to be automatically
extended to be valid upto the next working day of MSTC.
3. PAYMENT OF EXD/SD :
........
3.4 UPON ISSUANACE OF ACCEPTANCE LETTER/SALE ORDER, FULL MATRIAL VALUE PAYMENT FOR EXISTING QUANTITY IS TO BE MADE.
3.5 Non-submission of EDM within the stipulated time will lead to deactivation upto six months and deregistration of the concerned buyer and the registration fees shall be forfeited.
4. PAYMENT OF BALANACE SALE VALUE WITH TAXES AND DUTIES: 3
4.2 In case, the last day of payment happens to be Closed Holiday for MSTC or the Banking Institutions, the next working day will be taken as the day of payment without late payment charge.
4.3 In case of default in making payment within the time limits specified herein above, the due payments maybe made together with additional charge at one per cent per week or part thereof on the material value, within a period of 14 Calendar days from the date of the expiry of the free-payment time. However, PRINCIPAL reserves the right to accept or not to accept sale value with additional charges after expiry of 14 days as mentioned above.
7. FORFEITURE OF EMD/SALE VALUE :
7.1 In case the whole or any part of the goods sold remain uncleared, even after the authorized period stated in the delivery schedule, the purchaser shall have no claim whatsoever on the goods remaining uncleared and the amount paid to IGMK including EMD shall stand forfeited at the expiry of the said period. IGMK shall have the right to dispose of such goods in any manner it likes. The purchaser will have no right whatsoever to any compensation.
7.2 In case of non-submission of balance material value, the EDM shall be forfeited without further notice and the defaulting bidder will be deregistered and deactivated and the registration fee shall be forfeited.
......
NOTE If the successful highest Bidder (Confirmed or Provisional/Subject to Approval) fails to pay the EMD/Security Deposit in time from the date of issue of Sale Intimation Letter by email, then he shall be DEBARRED for a minimum period of 6(six) months from participating in all e-Auctions and disposal sales by MSTC on behalf of this Principal and, his Registration Fee will be forfeited."
, 4 The petitioner became the highest bidder at the E-auction conducted by MSTC on 22nd August, 2008.
The writ petitioner/respondent forwarded a Demand Draft being No. 950332 dated 3rd August, 2008 drawn on the Rajasthan Bank Ltd., Howrah for Rs.1,51,101/- towards initial payment for the materials.
Subsequent thereto, on different dates the writ petitioner/ respondent herein duly deposited a sum of Rs.12,07,00,029/-. The particulars of such payment are set out hereunder :
DD/Po/Chq. Date Bank/Branch Amount
No.
678195 30-08-2008 PNB 1200000
678196 30-082008 PNB 1200000
888303 30-08-2008 FEDERAL BANK 4000000
888304 30-08-2008 FEDERAL BANK 4000000
950333 30-08-2008 BANK OF 2300029
RAJASTHAN
The MSTC duly acknowledged receipt of the said amount from the writ petitioner/respondent. Thereafter, the writ petitioner/respondent was requested to deposit a further sum of Rs.3,88,47,814/- by demand draft in favour of India 5 Government Mint. Such payment was directed to be paid on or before 11th September, 2008.
By a letter dated 4th September, 2008 the writ petitioner/respondent requested the authorities to extend the time for depositing of the balance consideration. On 11th September, 2008, the MSTC directed the petitioner to make payment of the balance consideration in two equal instalments, the first of which was to be paid on 24th September, 2008 and the second to be paid within 9th October, 2008. The writ petitioner/respondent filed a writ application challenging the action of the appellant's authorities in extending the time granted to the writ petitioner/respondent and the writ petitioner/respondent did not make any further payments on the ground that the entire money of the writ petitioner/respondent would get blocked.
In these circumstances, the India Government Mint instructed MSTC to take suitable action against the writ petitioner/respondent for not depositing of first instalment.
On 3rd November, 2008 MSTC wrote a letter to the petitioner/respondent. The relevant part whereof is extracted hereinbelow:
"You have acted upon the said Acceptance Letter issued by us & deposited Rs.1,27,07,029/- as and towards EMD/SD under the cover of your letter dated 01.09.2008.6
However, at your request, our Principal (India Govt. Mint) agreed to allow you installment facility by which the entire material value were required to be paid in two equal installment within one month from 10.09.2008. Accordingly, as advised by our Principal, we informed you about such installments to be paid by you by our letter dated 11.09.2008 in terms of which you were required to pay inter alia, the first installment towards material value latest within 24.09.2008 including VAT, TCS, Service Charge.
Admittedly, you have failed to pay the required installment within the stipulated time aforesaid, as per our letter dated 11.09.2008, i.e. within 24.09.2008 or any time thereafter till now.
Your conduct is in clear breach of the Terms & Conditions of the E- Auction and contract pursuant to the Acceptance Letter dated 02.09.2008 stands repudiated by your breach aforestated. We accept the repudiation & treat the contract as terminated by your breach. Accordingly, without prejudice to our other rights of action against you, we are constrained, in exercise of powers conferred to us under Clause No. 7.2. of the Terms & Conditions of the subject E-Auction, to forfeit the EMD/SD amount aforesaid, submitted by you."
In these circumstances, the question arose before the Court is whether by reason of failure to pay Rs.3,88,47,813/- within 11th September, 2008, the earnest deposit of the petitioner/respondent amounting to Rs.1,27,00,029/- could have been forfeited by the authorities. The Hon'ble First Court after narrating the said facts came to the conclusion on the ground that there is nothing on record to justify the forfeiture of the entire earnest deposit and no steps were taken by the said authorities to estimate the possible damage that might have been suffered by the authorities. The further question decided by the 7 Court that whether at all the terms and conditions of the sale authorized the forfeiture of the earnest money deposited by the writ petitioner/respondent and the Court answered to the aforesaid question is in the negative. After perusing clauses 7 and 7.2 which provides for forfeiture of earnest money deposited and the said clauses provides as follows :
"Clause 7 : Clause 7 provides for forfeiture of earnest money deposit in case the whole or part of the goods sold, remain uncleared even after the authorized period stated in the delivery schedule and in case of non-submission of balance material value.
Clause 7.2 : Clause 7.2 provides for forfeiture of earnest money deposit in case of non-submission of balance material value. The contract does not provide for forfeiture of earnest money merely upon delay in making payment of earnest money deposit."
The Court further held that the time for depositing the balance consideration was not of essence to the contract and in fact the respondents themselves extended the time for making balance consideration and further no notice was ever served on the writ petitioner/respondent giving a warning to forfeit the earnest money on default of payment within the stipulated time and further the Court held that no direction was given by the India Government Mint to forfeit the earnest money and further held that a penal clause for providing the forfeiture has to be strictly construed.
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In these circumstances, the Court came to the conclusion that the forfeiture of the earnest deposit of the writ petitioner/respondent is totally arbitrary, high handed, discriminatory and against norms of justice and fair play.
Being aggrieved, this appeal has been preferred by the appellants. Mr. Raja Basu Chowdhury, learned Advocate appearing on behalf of the appellants contended that the contract entered into between the writ petitioner/respondent and the appellants is a non-statutory contract and therefore, it cannot be enforced by way of invoking writ jurisdiction of this Hon'ble Court.
He further contended that the step which was taken by the appellants was in consonance of the breach committed by the writ petitioner/respondent. He further contended that the writ petitioner/respondent was interested to back out from the contract and seek refund of the earnest money deposit and the steps which have been taken by the authority by forfeiting the earnest money cannot be said to be an arbitrary action on the part of the appellant.
He further contended that there was no high handedness on the part of the appellant to give effect to the terms of the contract. He further contended that the terms of contract provide forfeiture of earnest deposit which is contingent in nature. Therefore, whether such contingency had been fulfilled, could not have 9 been decided by the Hon'ble First Court while exercising the authority under Article 226 of the Constitution of India. Hence, he submitted that the said order should be set aside and the writ petition should be dismissed.
On the contrary, it was submitted on behalf of the respondent that the learned Trial Court correctly came to the conclusion that the action on the part of the respondent would show the arbitrariness and high handedness on the part of the appellant authorities. He relied upon a decision in the case of Kumari Shrilekha Vidyarthi & Ors. Vs. State of U.P & Ors. reported in 1991 (1) SCC 212.
Mr. Raja Basu Chowdhury, learned Advocate appearing in support of the appellant relied upon a decision in the case of Puravankara Projects Ltd. Vs. Hotel Venus International & Ors. reported in (2007) 10 SCC 33 and submitted that there is a vital distinction between administrative and contractual law. The concept of administrative law and fairness should not be mixed up with fair or unfair terms of the contract. Duty to act fairly which is sought to be imported into a contract to modify and/or alter its term and/or to create obligation upon the State Government which is not there in the contract is not covered by any doctrine of fairness or reasonableness. The duty to act fairly and reasonably is a doctrine developed in administrative law field to ensure the rule of law and to prevent failure of justice when the action is administrative in nature. The doctrine of fairness is evolved to ensure fair action when the function is 10 administrative. But the said principle cannot be invoked to amend, alter or vary the expressed terms of the contract between the parties.
He further contended that the Hon'ble Supreme Court in the said decision also held that Tender terms are contractual and it is the privilege of the Government which invites its tenders and Courts do not have jurisdiction to judge as to how the tender terms should be framed. The High Court cannot direct modification of a vital term of the contract. Accordingly, he submitted that the Hon'ble First Court did not consider the said question. He further relied upon the decision in the case of Kisan Sahkari Chini Mills Ltd. & Ors. Vs. Vardan Linkers & Ors. reported in (2008) 12 SCC 500 where the Hon'ble Apex Court held that the remedy for breach of contract being purely in the realm of contract are dealt with by Civil Courts. The public law remedy, by way of a writ petition under Article 226 of the Constitution, is not available to seek damages for breach of contract or specific performance of contract. However, where the contractual dispute has a public law element, the power of judicial review under Article 226 may be invoked and he submitted that the Court should not have applied the writ jurisdiction in the facts and circumstances of this case.
He further relied upon a decision in the case of Kerala State Electricity Board & Anr. Vs. Kurien E. Kalaathil & Ors. reported in (2000) 6 SCC 293. In support of his submission he submitted that the writ petition was not maintainable and the disputes relating to the terms of the contract with the 11 statutory object cannot be given a right to the Court to interfere with the matter in writ jurisdiction. The contractual or commercial activities of a statutory body need not necessarily raise issues of public law and the Hon'ble Supreme Court held that whether there is any amount was actually due where materials for allocation by a Civil Court. Therefore, the assumption of jurisdiction in writ cannot be entertained.
He further relied upon a decision in the case of Bareilly Development Authority Vs. Vrinda Gujarati & Ors. reported in (2004) 4 SCC 606 and submitted that the authority or its agent after entering into the field of ordinary contract acts purely in its execution capacity. The Hon'ble Supreme Court further held that once the respondents have entering into the realm of concluded contract pure and simple with the authority they cannot step out of the terms of the contract unless some statute steps in and confers some special statutory obligation on the authority in the contractual field and he submitted that the Hon'ble First Court should have considered the said position and should have refused the prayer of the writ petitioner/respondent.
In the case of Kumari Shrilekha Vidyarthi (Supra) where the Hon'ble Supreme Court held that the Constitution of India does not envisage or permit unfairness or unreasonableness in the State actions in any sphere of its activity contrary to the professed ideals in the Preamble. The total exclusion of Article 14 in contractual matters is not permissible in Constitutional scheme. The scope 12 and permissible agreement in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite pubic element for this purpose is present in contractual matters. The recently public element for the purpose is also present in contractual matters. Therefore, it would be difficult and unrealistic to exclude the State action in contractual matters. Even cases involved purely contractual issues the settled law is whether the statutory provision of public law are involved, writ will still lie. (See Md. Hanif Vs. State of Orissa AIR 1970 SCC
177).
In the case of Purvankara Projects Ltd. (Supra) where the Hon'ble Supreme Court held that the tender terms are contractual and it is the privilege of the Government which invites its tenders and courts do not have jurisdiction to judge as to how the tender terms should be framed. The principles of natural justice ensure fair decision where function is quasi judicial, the doctrine of fairness is evolved to ensure fair action when the function is administrative. But the said principle cannot be invoked to amend, alter or vary the expressed terms of the contract between the parties. So far as the principles relating to implied terms are concerned, the position has been stated in Chitty on Contracts, 28th Edn., Chapter 13 which reads as follows :
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"A term will not, however, thus be implied unless the court is satisfied that both parties would, as reasonable men, have agreed to it had it been suggested to them... the court will only imply a term if it is one which must necessarily have been intended by them, and in particular will be reluctant to make and implication where the parties have entered into a carefully drafted written contract containing detailed terms agreed between them.
A term ought not to be implied unless it is in all the circumstances equitable and reasonable. But this does not mean that a term will be implied merely because in all the circumstances it would be reasonable to do so or because it would improve the contract or make its carrying out more convenient. "The touchstone is always necessity and not merely reasonableness"...... A term will not be implied if it would be inconsistent with the express wording of the contract." (emphasis in original).
In the case of Kisan Sahkari Chini Mills Ltd. & Ors. (Supra) where the Hon'ble Apex Court held that ordinarily the remedy available for a party complaining of breach of contract lies for seeking damages. He will be entitled to the relief of specific performance, if the contract is capable of being specifically enforced in law. The remedies for a breach of contract being purely in the realm of contract are dealt with by civil courts. The public law remedy, by way of a writ petition under Article 226 of the Constitution of India, is not available to seek damages for breach of contract or specific performance of contract. However, where the contractual dispute has a public law element, the power of judicial review under Article 226 of the Constitution of India may be invoked.14
After considering the facts of this case, it appears to us that the Hon'ble First Court after assessing the facts came to the conclusion that the Court has power to decide whether the provision is in fact in delay or represents a reasonable opportunity estimate of penal and after assessing the facts the Court came to the conclusion that there is nothing on record to justify the forfeiture of the entire earnest deposit. Moreover, the Court found that the authority has no right to forfeit the earnest money deposited by the petitioner and the Court after taking into account the fact that the time for depositing the balance consideration was not the essence of the contract and the appellant themselves extended the time for making balance consideration. There was no prior notice served on the petitioner warning the writ petitioner that earnest money would be forfeited. On the contrary, admittedly a writ petition was pending challenging the extended time granted to the petitioner to pay the balance consideration.
In these circumstances, the Court further found that the appellant by its letter dated 26th November, 2008 directed MSTC to take action in accordance with the law. There was no specific direction to forfeit the earnest money.
In these circumstances, the Court held as follows :
"A penal clause providing for forfeiture has strictly to be construed. There is a difference between non-submission of balance consideration and delay in submission of balance consideration, and more so when there is justification for the delay.15
The threat of forfeiture and/or forfeiture of earnest deposit of the petitioner is in the facts and circumstances of this case, totally arbitrary, high handed, discriminatory and against norms of justice and fair play".
In these circumstances, the writ petition was allowed. After considering the facts and circumstances of this case and after analyzing the facts of this case and the decision cited before us, we found that the Court has come to such conclusion on the basis of the given facts and in our opinion the Hon'ble First Court rightly came to such conclusion that no notice was served for forfeiture on the writ petitioner. The time was extended by the authorities and furthermore the writ petition was pending before the Court. Therefore, such actions on the part of the writ petitioner cannot be held to be deliberate to avoid the payment.
On the contrary, we find that the steps taken by the authority can be termed as unreasonable and arbitrary in nature. Accordingly, we affirm the order so passed by His Lordship.
In our considered opinion, there is no illegality and/or irregularity in respect of the said order so passed by His Lordship.
For the reasons stated hereinabove, the appeal is dismissed. Since the appeal is dismissed, the connected application for stay being CAN No.3276 of 2010 has become infructuous and the same is dismissed. 16
Photostat certified copy of this order, if applied for, be supplied to the parties.
(PINAKI CHANDRA GHOSE, J.) I agree.
(ASIM KUMAR RAY, J.)