Rajasthan High Court - Jodhpur
Municipal Council vs Century Sales (2025:Rj-Jd:1573-Db) on 9 January, 2025
Author: Madan Gopal Vyas
Bench: Madan Gopal Vyas
[2025:RJ-JD:1573-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Misc. Appeal No. 1577/2024
Municipal Council, Sri Ganganagar, through Commissioner.
----Appellant
Versus
Century Sales, 29- B Block, Sri Ganganagar Through Owner
Harpal Singh son of Sardar Harbans Singh, resident of G-12,
Ambika City, Sri Ganganagar
----Respondent
For Appellant(s) : Mr. Ayush Gehlot
For Respondent(s) : Mr. Vinay Jain
Mr. Darshan Jain
HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
HON'BLE MR. JUSTICE MADAN GOPAL VYAS
JUDGMENT
09/01/2025 Per, S. Chandrashekhar, J:
To challenge the judgment dated 15 th September 2023, in Regular Civil Case No.99/2021, the Municipal Council, Sri Ganganagar has filed this Civil Misc. Appeal under section 13(1A) of the Commercial Courts Act, 2015.
2. The claim made by M/s. Century Sales (hereinafter referred to as claimant-firm) was for a decree of Rs.92,00,000/- with interest thereon at the rate of 18% per annum. The amount of Rs.92,00,000/- was deposited by the claimant-firm with the Department pursuant to the award of a tender in its favour; claimant-firm being the highest bidder. The tender notice was issued under the Advertisement Bye laws of 1976 and open auction was conducted for display of advertisements within the jurisdiction of U.L.B. at Sri Ganganagar for the year 2016-17 with (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (2 of 10) [CMA-1577/2024] a provision for extension upto two years. On 15 th June 2016, the claimant-firm deposited the advance fee which was 25% of Rs.1,78,20,000/-. Under condition no.11 of the N.I.T., the remaining 75% amount was to be deposited within 30 days. Under the condition no.12, the claimant-firm was required to sign a contract deed on a stamp paper of Rs.5,000/- within 10 days of the award of work. According to the Department, the appellant failed to execute the contract deed and a notice dated 24 th June 2016 was issued to it. Besides that, the claimant-firm did not deposit the entire contract amount and a final notice was issued to it on 14th October 2016. Challenging this notice, the claimant-firm approached the High Court in S.B. C.W.P. No.14323/2016 and an interim order was passed in his favour by the High Court. The further stand of the Department is that the claimant-firm was required to deposit 25% of the total contract amount within two months for renewal of the contract and a notice was issued to the claimant-firm on 11th May 2017. This notice was also challenged by the claimant-firm in the High Court vide S.B. C.W.P. No.5881/2017 and no interim order was passed by this Court. Lastly, the contract was cancelled and the claimant-firm was blacklisted vide order dated 28th August 2017. This order was challenged by the claimant-firm in S.B. C.W.P. No.1963/2018 which was dismissed as withdrawn by an order dated 05th September 2019.
3. On the other hand, the claimant-firm pleaded that there was inordinate delay on the part of the Department to issue the final order and the allotment of site was considerably delayed and no license was issued by the Department. Notwithstanding that, the (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (3 of 10) [CMA-1577/2024] claimant-firm made deposits of Rs.20,00,000/- on 20 th July 2016, Rs.10,000,00/- on 16th September 2016 and Rs.15,00,000/- on 17th October 2016. The claimant-firm further pleaded that a Committee was constituted to look into the dispute and it was observed by the said Committee that the Municipal Council failed to discharge its responsibilities under the contract which caused financial losses to the claimant-firm. The Committee further observed that the failure on the part of the Municipal Council to manage the sites, issue licenses and to remove illegal holdings caused serious prejudices and hardships to the claimant-firm. On 03rd March 2021, the Municipal Council made a recommendation to the Director, Local Bodies for the refund of the total amount deposited by the claimant-firm but no final decision was taken by the Department and therefore the claimant-firm approached the Commercial Court seeking the aforementioned reliefs.
4. The Municipal Council has challenged the judgment and decree in Case no.99/2021 titled "Century Sales v. Municipal Council, Sri Ganganagar" rendered by the Commercial Court at Bikaner raising the following grounds: (i) the Commercial Court did not consider the evidence tendered on behalf of the employer,
(ii) the counter claim made by the employer has been rejected in a mechanical manner without even adverting to the pleadings of the parties and the evidence laid in support thereof, (iii) the claimant-firm has been found forging a document and the writ Court declined to interfere with the notice dated 14 th October 2016 issued to the claimant-firm, (iv) the claim made before the Commercial Court by the claimant-firm was not entertainable in view of specific provisions under the contract and (v) the decision (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (4 of 10) [CMA-1577/2024] dated 4th December 2020 of a Committee on which the claimant- firm placed reliance was already cancelled by the Chairman of the Municipal Council at Sriganganagar by the order dated 10 th April 2021 and was not even approved by the State Government.
5. Per contra, Mr. Vinay Jain, the learned counsel for the claimant-firm submits that this is not the law on the subject that the appellate Court should interfere even on minor issues raised by the appellant to challenge the judgment under Appeal. The learned counsel further submits that even otherwise it was just and proper that the Commercial Court ordered refund of Rs.92,00,000/- which was deposited by the claimant-firm with the Department and therefore no interference is warranted in this case.
6. In "Santosh Hazari v. Purushottam Tiwari (deceased) by L.R.s" (2001) 3 SCC 179, the Hon'ble Supreme Court held that the appellate Court has jurisdiction to reverse or affirm the findings of the trial Court. The Hon'ble Supreme Court further observed that a First Appeal is a valuable right of the parties and unless restricted by law, the whole case would be open for rehearing both on the questions of fact and law and therefore while reversing a finding of fact, the appellate Court must come into close quarters with the reasoning assigned by the trial Court and then assign its own reasons for arriving at a different finding. We have considered the rival contentions both on the questions of law and fact and come to a conclusion that the Commercial Court rendered the judgment on correct appreciation of the materials laid in Regular Civil Case No.99/2021.
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7. Having gone through the materials on record, we find that in support of its claim, the claimant-firm produced as many as 65 documents and out of those documents a few were relied upon by the Department. We further find that the Commercial Court referred to the orders passed by the Rajasthan High Court and the decision of the Committee which were laid in evidence vide exhibit nos.33 and A-33. While discussing the issue no.1, the Commercial Court also referred to the objection taken by the Municipal Council to the decision dated 04th December 2020 of the Committee. This is a matter of record that the Committee was constituted by the Municipal Council and the interference by the Commissioner with the said decision was not approved by the State Government till the Commercial Court rendered its final decision. We further find that under the condition no.26, it is provided that the decision of the Committee of the Municipal Council/Board shall be final with respect to any dispute arising out of the conditions of license. As to delay in providing sites and issuing licenses, the stand taken by the Department that the post of the Commissioner remained vacant for a long time is quite relevant inasmuch as it stands admitted by the Department that it did not issue the work order and provided sites and, thus, had committed breach of the terms of the contract. Furthermore, the findings recorded by the Commercial Court that no final decision was taken and the work order was issued by the Department are not under challenge and such defaults are sought to be justified by pleading the aforementioned facts.
8. The power of the Chairman of the Municipal Council is provided under section 48(1A) of the Rajasthan Municipal Council (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (6 of 10) [CMA-1577/2024] Act which clearly lays down that the resolution of a Municipality or of any of its Committees if found against the interest of the Municipality or inconsistent with the provisions of the Act or the rules made thereunder, the Chairperson shall record its opinion on such resolution and refer the matter to the State Government for its decision. Under section 48(1A), the decision of the State Government on such resolution shall be final and binding on the Municipality. The discussion by the Commercial Court on this issue proceeds on the following lines :-
English Translation :-
"In the defence, the argument on behalf of the respondent, that the conclusion of the above-mentioned Committee of the respondent was revoked by the Chairman of the Municipal Council, Sri Ganganagar on 04-12-2020. Therefore, the conclusion of the Committee dated 04-12-2020 has no significance. Therefore, it would be appropriate to mark the effective part of the conclusion passed by the Chairman of the Municipal Council, Sri Ganganagar on 10-04-2021, which is as follows:-
Therefore, in my humble opinion, the formation of the Committee of the Municipal Council and the proceedings passed in the meeting of this Committee dated 04/12/2020 is completely illegal, against the law, contrary to the resolution passed in the board meeting, abusing the position and causing loss to the revenue. Which is liable to be cancelled with immediate effect and its information should be immediately sent to the Department of local self government, Jaipur and action should be taken to cancel the meeting proceedings of the Municipal Council dated 04/12/2020 and in this sequence, letter No. 7197 dated 3/03/2021 of the Municipal Council and for this, Shri Vishwas Godara, In-charge, Advertisement Branch, Secretary, Municipal Council should be directed to take a copy of it himself and present it in the Department of local self government, Jaipur and bring it to the notice of the Director, so that the revenue interest can be protected.
Accordingly, the Commissioner is informed that since this is a case related to revenue, he should take personal interest and (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (7 of 10) [CMA-1577/2024] get the case resolved as mentioned above and in the same manner, a reply to the application of the contractor firm Century Sales should be prepared and after the reply is prepared, the said reply should be approved by the undersigned, so that the actual situation can be revealed before the Hon'ble Court and the revenue interest can be protected.
In continuation of this, it would be appropriate to mention here the condition no. 26 of the document Exhibit 2 / Exhibit A-2 related to the revised condition of the tender invited by the defendant, which is as follows:-
Condition no. 26 - If there is any dispute between the parties regarding the conditions of the licensee, then its final decision will be of the competent Committee / board of the Municipal Council, which will be valid.
Regarding the relevance of the above context, it would be appropriate to mention here the relevant portion of letter No. 7179 dated 03-03-2021 Exhibit 49/ Exhibit A-37 sent by Municipal Council, Sri Ganganagar to Director and Senior Secretary, Department of local self government, Jaipur, which is as follows:-
After the instructions of letter No. 3421 dated 20.8.18 of the Directorate, the Council sent the information through letter No. 2855 dated 27-08-2019 that a total amount of Rs 92 lakh was deposited by the firm in the Council Fund. Due to the post of Commissioner being vacant, permission to set up the site could not be issued to the firm. (Copy is enclosed) The Directorate had ordered to send a factual report in this regard by letter no. 748 dated 03-03-2020, a detailed report of which was sent by this office to the Directorate by letter no. 576 dated 23-04-2020. (Copy is enclosed) In the said report, it was clarified that the firm had deposited 25 percent of the amount within the time limit, but on pursuing the files, it was found that no final decision could be taken regarding setting up of the site for the contractor firm to start its work, nor was any work order issued.
In the factual report of the Council Dated 26.12.2018, submitted by this office earlier also, it is clear that after the contractor firm deposited the amount of 25 percent, no final decision could be taken on the permission to set up the desired sites. (Copy is enclosed) In this context, it would be pertinent to refer to the relevant portion of Section 48(1A) of the Rajasthan Municipalities (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (8 of 10) [CMA-1577/2024] Act regarding powers of the Chairman of Municipality, Municipal Council, as follows:-
Functions of Chairman and Vice-Chairman-
'[(1A)] Where any resolution of a Municipality or of any of its Committees is against the interest of the Municipality or inconsistent with the provisions of this Act and the rules made thereunder, the Chairperson shall record his opinion on such resolution and refer the matter to the State Government for its decision and the decision of the State Government on such resolution shall be final and binding on the Municipality.' In the course of the above discussion, if the material present on record is perused for the settlement of issues No. 1 to 3, then the plaintiff is seeking declaratory relief in relation to declaring the notices Dated 28-08-2017, Dated 06-04-2018 and Dated 12-02-2019 issued by the respondent as illegal and void and consequently, the plaintiff wants to receive the amount deposited by him with the respondent-Department. In view of the above discussed documentary evidence and legal system, if the provisions of Section 48 (1A) of the Rajasthan Municipality Act are seen, then if any decision is taken by the Committee constituted in the Municipality (Nagar-Palika), Municipal Council (Nagar- Parishad) or Municipal Corporation (Nagar-Nigam), then the Chairman has the power to give his opinion by establishing a contrary opinion against the decision of such Committee and approval of the opinion concluded by the Chairman is necessary by the competent government. The decision passed by the Committee can be changed if the opinion of the Chairman is approved by the competent Government.
If we peruse the last paragraph of the decision Dated 04- 12-2020 passed by the respondent's Committee in respect of the parties to this pending dispute, the Committee was constituted on the basis of resolution no. 19(1) of the meeting of the general body of the respondent, Nagar-Parishad Dated 06-11-2020 and the Committee passed its decision Exhibit 33/Exhibit A33. Regarding the decision of the Committee Exhibit 33/Exhibit A33, the Chairman of the respondent Nagar Parishad had passed his conclusion Exhibit A75 and the Chairman had ordered to send his conclusion i.e. opinion to the competent government for approval, but till the date of decision of this case, the approval of the State Government accepted or rejected in relation to the Chairman's conclusion is not present, due to which the conclusion of the respondent's Committee Exhibit 33 automatically becomes (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (9 of 10) [CMA-1577/2024] effective and the Committee has fully supported the relief sought by the plaintiff in the plaint in its conclusion Exhibit 33/Exhibit A33.
Apart from this, if the above mentioned part of the letter Dated 03-03-2021 sent by the respondent Nagar Parishad itself to the Director and Special Secretary, Local Self Government, Jaipur is also observed, then no work of any kind was done by the plaintiff under the tender accepted in his favor, that is, the plaintiff did not earn any profit by placing advertisements in the order of the accepted tender. The facts of the respondent's own document Exhibit 33 / Exhibit A 33 and Exhibit A 49 clearly prove that the plaintiff did not earn profit by doing the work of placing advertisements for profit after the acceptance of the tender."
9. The aforesaid findings by the Commercial Court are emanating from the records. Moreover, the conditions of contract regarding payment of the contract consideration cannot be enforced against the claimant-firm in view of the breach of contract by the Department. Therefore, the claimant-firm is entitled for refund of the security deposit and other subsequent deposits by it even on keeping aside the decision of the Committee. Anson on the Law of Contract (28th Edition) writes that: "Differing terminology has been used by the Courts to describe the test to be applied, the most common being that the breach must go to 'the root of the contract'. It has also been said that the breach must be 'fundamental', that it must 'affect the very substance of the contract' or 'frustrate the commercial purpose of the venture'. The use of these and similar expressions emphasizes that the breach must be far-reaching in its effect in order to justify discharge. A test which is nowadays frequently applied is that stated by Diplock L.J. in Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd.: 'Does the occurrence of the event deprive the party who has further undertakings to perform (Downloaded on 31/01/2025 at 10:15:09 PM) [2025:RJ-JD:1573-DB] (10 of 10) [CMA-1577/2024] of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?'"
10. Though the Department did not perform its obligations under the contract, the claimant-firm must be deemed always ready and willing to perform its part of the contract as it had deposited substantial amount in three installments after the deposit made by it immediately on the award of tender. The plea of loss suffered by the Department has no basis and the suggestion of profit earned by the claimant-firm could not have been accepted on superficial plea raised by the Department. In view of the claim of the claimant-firm being allowed, the counter-claim was liable to be refused.
11. In view of the aforesaid discussions, D.B. Civil Miscellaneous Appeal No.1577 of 2024 is dismissed.
(MADAN GOPAL VYAS),J (SHREE CHANDRASHEKHAR),J S-170-Arjun (Downloaded on 31/01/2025 at 10:15:09 PM) Powered by TCPDF (www.tcpdf.org)