Jharkhand High Court
Hindustan Steelworks Construction Ltd ... vs Central Coalfields Ltd Through Its ... on 8 January, 2015
Equivalent citations: AIR 2015 (NOC) 689 (JHAR.), 2015 (1) AJR 725
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 2861 of 2014
Hindustan Steelworks Construction Ltd. (HSCL),
a Government of India Undertaking under the
Ministry of Steel, Government of Indian incorporated
under Companies Act, 1956, having its registered office
at P34 A, Gariahat Road (South), PO & PS Gariahat,
District Kolkata, West Bengal and one of its unit at
Bokaro Steel City, PO & PS Bokaro Steel City, District
Bokaro, through its Unit Head (Projects), I/c Sri K.K.
Gangogopadhyay, S/O Late N. B. Gangogopadhya,
R/O Qr. No. Seci/B, B.S.C.T, PO, PS & Dist. Bokaro
... Petitioner
Versus
1. Central Coalfields Ltd. through its
ChairmancumManaging Director, Dharbhanga House,
PO Ranchi University, PS Gonda, District Ranchi
2. The Director (Tech./Oprn), Central Coalfields Ltd.,
Dharbhanga House, PO Ranchi University, PS Gonda,
District Ranchi
3. General Manager (CMC), Central Coalfields Ltd.,
Dharbhanga House, PO Ranchi University, PS Gonda,
District Ranchi
4. General Manager, Dhori Area, Central Coalfields Ltd.,
PO & PS Dhori Dist. Bokaro
5. General Manager (Operations), Dhori Area,
Central Coalfields Ltd., PO & PS Dhori Dist. Bokaro
6. Project Officer, Kalyani Project, Dhori Area,
Central Coalfields Ltd., PO & PS Dhori Dist. Bokaro
... Respondents
CORAM : HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
For the Petitioner : Mr. R. S. Mazumdar, Sr. Advocate
: Mr. Rohit Roy, Advocate
For the RespondentC.C.L: Mr. J. Dhankar, Sr. Advocate
Mr. A. K. Das, Advocate
08/08.01.2015Aggrieved by order dated 06.06.2014 whereby the contract awarded to the petitioner M/s Hindustan Steelworks Construction Ltd. (HSCL) has been terminated, the petitioner has preferred the present writ petition.
2. Briefly stated the facts of the case are summarised thus:
Pursuant to Notice Inviting Tender (NIT) dated 2 18.08.2012 for the work of "hiring of HEMM such as shovels, tippers, drills, dosers, graders and water sprinkler etc. for removal of strata including top soil earth, alluvium soil, various rocks, blasted rocks and blast hole drilling in all kinds of strata, excavation, loading, transporting, dumping, spreading and dozing of specified places, haul road maintenance and water spraying on haul road as per instruction of engineer at SDQ1, outsourced patch for a period of one year", the petitioner participated in the tender process and its bid was found most suitable and hence, the same was accepted vide communication contained in letter dated 17.01.2013. Though, the petitioner commenced the work, due to certain reasons it was not completed within the schedule completion period and accordingly, the last measurement was taken on 14.11.2013. The respondentC.C.L vide order dated 24.01.2014 extended the period for completion of work till 25.07.2014. Thereafter, few letters were issued by the respondentC.C.L to the petitionercompany for improving performance and finally, vide letter dated 28.04.2014 the respondentC.C.L threatened penal action. The agreement was terminated vide order dated 06.06.2014, challenging the same the petitionercompany has approached this Court.
3. A counteraffidavit has been filed stating that, since the petitioner failed to discharge its obligation under the agreement, the contract was terminated vide order dated 06.06.2014. The petitioner itself admitted that it has removed and transported about 8.20 lacs Cubic Meter of Over Burden till December, 2013 out of the total awarded quantity of 14.99 lacs Cubic Meter. Termination order dated 06.06.2014 does not suffer from irregularity or infirmity. Since the petitioner failed to perform the work under the contract even after extension of time, the agreement was terminated. Sufficient opportunity was granted to the petitioner vide letters dated 20.03.2014, 08.04.2014, 28.04.2014 and 15.05.2014 however, the petitioner did not respond to the same and in terms of Clause 6 of 3 NIT, a penalty of Rs. 4,54,363/ was imposed upon the petitioner upto 14.11.2013. The final measurement would be taken in terms of Clause 8.2 of General Terms and Conditions and the contractor is required to submit interim bill on the basis of the measurement. The petitioner has signed the agreement and after accepting the same it cannot be permitted to retract from the same. Since the petitioner has raised joint bill based on last survey dated 31.03.2014 and since no joint survey has been conducted after 14.11.2013, no further payment has been made to the petitioner. The bill can be raised only on the basis of measured quantity and not on the basis of reported quantity. In these facts the writ petition is resisted by the respondentC.C.L
4. Heard the learned counsel appearing for the parties.
5. Mr. R.S. Mazumdar, the learned Senior counsel appearing for the petitioner submits that, the impugned letter of termination dated 06.06.2014 which was communicated to the petitioner vide letter dated 07.06.2014 has been issued in gross violation of rules of Natural Justice. The petitionercompany is a Government of India Undertaking which was executing the work for the respondentC.C.L and in middle of the extended period for completion of contract, the agreement was terminated vide letter dated 06.06.2014 which cannot sustain scrutiny in law. It is further submitted that since the period of completion for the work under the agreement was extended till 25.07.2014, the respondentC.C.L was under a duty to grant hearing to the petitioner and the respondentC.C.L on its own could not have terminated the contract before the extended schedule completion period was over.
6. Per contra, Mr. J. Dhankar, the learned Senior counsel appearing for the respondentC.C.L submits that, the petitioner has approached this Court raising a grievance against the termination of agreement for which, generally writ petition under Article 226 of the Constitution is not maintainable. Since the matter involves disputed 4 questions of fact, the writ petition is not the proper remedy for the petitionercompany. It is further submitted that in terms of Clause 12 of the General Terms and Conditions (GTC) which provides dispute resolution machinery, the writ petition is not maintainable. It is further submitted that, since the petitioner has failed to execute the work in terms of the agreement, the respondentC.C.L is entitled to invoke bank guarantee. In view of Clause 9 of the General Terms and Conditions, the agreement has been terminated and necessary communication has been issued to the petitioner intimating that penalty would be realised from dues of existing contract and balance amount would be realised from other contract of the contractor, if any.
7. In reply, Mr. R. S. Mazumdar, the learned Senior counsel for the petitioner submits that, in the impugned letter dated 06.06.2014 it has not been indicated that the respondentC.C.L would invoke the bank guarantee. It is further submitted that, though the writ petition was filed on 18.06.2014 and an interim order was passed by this Court on 30.06.2014, no further action was taken by the respondentC.C.L in terms of impugned letter dated 06.06.2014 and therefore, the petitioner which is a Government Undertaking is entitled for protection from this Court till the dispute is finally adjudicated.
8. I have carefully considered the submissions of the learned counsel for the parties and perused the documents on record.
9. A perusal of the General Terms and Conditions would indicate that in case of breach, termination of contract under the following circumstances is permissible:
9. TERMINATION, SUSPENSION, CANCELLATION, FORECLOSURE OF CONTRACT: The company shall in addition to other remedial steps to be taken as provided in the conditions of contract be entitled to cancel the contract 5 in full or in part, if the contractor;
a. makes default in proceeding with the works with due diligence and continues to do so even after a notice in writing from the Engineer in charge, then on the expiry of the period as specified in the notice or b. commits default/breach in complying with any of the terms and conditions of the contract and does not remedy it or fails to take effective steps for the remedy to the satisfaction of the Engineer in charge, then on the expiry of the period as may be specified by the Engineer in charge in a notice in writing or c. fails to complete the work or items of work with individual dates of completion, on or before the date/dates of completion or as extended by the company, then on the expiry of the period as may be specified by the Engineer in charge in a notice in writing or d. shall offer or give or agree to give any person in the service of the company or any other person on his behalf any gift or consideration of any kind as an inducement or reward for act/acts of favour in relation to the obtaining or execution of this or any other contract for the company or e. obtains a contract with the company as a result of ring tendering or other nonbonafide method of competitive tendering or f. transfers sublets assigns the entire work or any portion there of without the prior approval in 6 writing from the Engineer in charge. The Engineerincharge may be giving a written notice, cancel the whole contract or portion of it in default.
(g) The work shall, throughout the stipulated period of contract, be carried out with all due diligence on the part of the contractor. In the event of termination or suspension of the contract, on account of default on the part of the contractor, as narrated hereinbefore, the security deposit and their dues of this work or any other work done under this company shall be forfeited and brought under the absolute disposal of the company provided, that the amount so forfeited shall not exceed 10% of the contract value.
9.1 The contract shall stand terminated under the following circumstances:
a. If the contractor being an individual in the case of proprietary concern or in the case of a partnership firm any of its partners is declared insolvent under the provisions of insolvency act for the time being in force, or makes any conveyance or assignment of his effects or composition or arrangement for the benefit of his creditors amounting to proceedings for liquidation or composition under any insolvency act.
b. In the case of the contractor being a company, its affairs are under liquidation either by a resolution passed by the company or by an order of court, not being a voluntary liquidation proceedings for the purpose of amalgamation or reorganization, or receiver or manager is appointed by the court on the application by the debenture holders of the company, if any.
c. If the contractor shall suffer an execution being levied on his/their goods, estates and allow it to be 7 continued for a period of 21 days.
d. On the death of the contractor being a proprietary concern or of any of the partners in the case of a partnership concern and the company is not satisfied that the legal representative of the deceased proprietor or the other surviving partners of the partnership concern are capable of carrying out an completing the contract. The decision of the company in this respect shall be final and binding which is to be intimated in writing to the legal representative or to the partnership concern.
10. I further find that under Clause 12 of the General Terms and Conditions there is a provision for settlement of dispute which provides that the settlement with Government Agency shall be dealt with as per Guidelines issued by the Ministry of Finance, Government of India in this regard. The learned Senior counsel Mr. J. Dhankar appearing for the respondentC.C.L. has referred to Office Memorandum dated 12.06.2013 by which a Permanent Machinery of Arbitration (PMA) has been constituted by the Ministry of Heavy Industries and Public Enterprises, Department of Public Enterprises. The learned Senior counsel submits that, in view of availability of alternative remedy to the petitioner, the present writ petition is liable to be dismissed. In "State of U.P. v. Bridge & Roof Co. (India) Ltd." reported in (1996) 6 SCC 22, the Hon'ble Supreme Court has held as under:
21. "There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration (clause 67 of the contract). The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy -- in this case, provided in the contract itself -- is a good ground for the court to 8 decline to exercise its extraordinary jurisdiction under Article 226. The said article was not meant to supplant the existing remedies at law but only to supplement them in certain wellrecognised situations. As pointed out above, the prayer for issuance of a writ of mandamus was wholly misconceived in this case since the respondent was not seeking to enforce any statutory right of theirs nor was it seeking to enforce any statutory obligation cast upon the appellants.
Indeed, the very resort to Article 226 -- whether for issuance of mandamus or any other writ, order or direction -- was misconceived for the reasons mentioned supra."
11. I further find that in the present proceeding, the petitioner has raised a factual dispute with respect to the termination of agreement vide letter dated 06.06.2014. Such factual dispute can be decided only after leading evidence, oral as well as documentary. In "Rajasthan State Industrial Development & Investment Corpn. & Anr. Vs. Diamond & Gem Development Corpn. Ltd. & Anr." reported in (2013) 5 SCC 470, the Hon'ble Supreme Court has held as under:
21. "It is evident from the above that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ of mandamus is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice (ex debito justitiae). The grant or refusal of the writ is at the discretion of the court. The writ cannot be granted unless it is established that there is an existing legal right of the applicant, or an existing duty of the respondent. Thus, the writ does not lie to create or to establish a legal right, but to enforce one that is already established. While dealing with a writ petition, the court must exercise discretion, taking into consideration a wide variety of circumstances, inter alia, the facts of the case, the exigency that warrants such exercise of discretion, the consequences of grant or refusal of the writ, and the nature and extent of injury that is likely to ensue by such grant or refusal."
12. In view of the judgment in "State of U.P. Vs. Bridge & Roof Co. (India) Ltd." (supra), I am of the opinion that this writ petition is liable to be dismissed with liberty to the petitioner to approach the Secretary, Department of Public Enterprises for 9 reference to Permanent Machinery of Arbitration. Mr. J. Dhankar, the learned Senior counsel for the respondentC.C.L submits that, though there is a limitation of two months for referring the dispute to PMA, in view of the liberty granted to the petitioner to approach the PMA, the limitation of two months provided under Office Memorandum dated 12.06.2013 would not come in way of the petitioner to seek redressal through Permanent Machinery of Arbitration.
13. In so far as, the submission raised on behalf of the respondentC.C.L for invoking bank guarantee is concerned, I find substance in the submission of the learned Senior counsel for the petitioner that the impugned letter dated 06.06.2014 does not indicate invocation of bank guarantee and since the respondentC.C.L has not taken any action in terms of General Terms and Conditions for more than 20 days, the petitioner is entitled for a limited protection. In so far as, realisation of penalty in terms of Clause 6.2 and 9.2 of GTC is concerned, it is sufficiently indicated in impugned letter dated 06.06.2014 and therefore, the submission made on behalf of the respondentC.C.L that it should be permitted to invoke bank guarantee, is not justified. However, I find that neither under Clause 6.2 nor under clause 9.2 of GTC under which the penalty is sought to be imposed vide impugned letter dated 06.06.2014, refers to invocation of bank guarantee. I further find that interim order passed on 30.06.2014 has been accepted by the respondentC.C.L by not filing any appeal against the said order and the said order continued for about 5 months. I am of the opinion that it would serve the interest of justice if the petitioner is granted liberty to approach the Permanent Machinery of Arbitration as indicated in Office Memorandum dated 12.06.2013 within a period of two weeks from 13.01.2015 and a direction is issued to the respondentC.C.L not to take coercive action in this respect against the petitioner till two weeks after the Arbitrator enters upon the reference.
14. In view of the aforesaid facts and circumstances of the 10 case, this writ petition is dismissed with the aforesaid liberty and protection to the petitioner. However, it is made clear that this Court has not expressed any opinion on the merits of the case and therefore, dismissal of this writ petition would not prejudice the case of either party. It is submitted by the learned Senior counsel for the respondentC.C.L that the original bank guarantee be handed over by the petitioner to the respondentC.C.L. Ordered accordingly.
15. Accordingly, I.A. No. 5786 of 2014 also stands dismissed.
(Shree Chandrashekhar, J.) Amit/N.A.F.R