Telangana High Court
Lakshmi Narsimha Transport vs Vice Chariman Md Cs And Anothers on 21 August, 2018
THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO
WP.No.8870 of 2017
ORDER:
The petitioner herein is a registered Partnership Firm engaged in the trade and business of executing transport contracts and it has transport lorries to execute its business activity.
2. The Telangana State Civil Supplies Corporation (for short, 'the Corporation') issued tenders for Stage-I contract for transportation of essential commodities in ten (10) Districts for the year 2016-17 in Telangana through a tender notification dt.14.03.2016.
3. In respect of Warangal District, three tenders were filed. After completion of tender process, i.e., the technical and financial bid of the petitioner was found to be lowest, i.e., (-) 30.92% on the existing rates of 2015-16.
4. The petitioner was then appointed as Stage-I Contractor for the Warangal District and proceedings were issued on 11.04.2016 by the 1st respondent.
5. After the petitioner furnished security deposit, bank guarantee and complied with other formalities, he was issued a Work Order on 13.04.2016. The petitioner contended that a release order MSR,J ::2:: wp_8870_2017 dt.21.05.2016 was also issued to the petitioner directing it to place transport lorries at the disposal of the Corporation.
6. The petitioner contended that it placed lorries at the consignment point and expected the 2nd respondent to issue instructions with regard to loading of food grains into the transport lorries; but the 2nd respondent started insisting that the petitioner should pay the hamalie / handling charges, and when the petitioner refused to do so, the 2nd respondent issued proceedings dt.27.05.2016 stating that if the petitioner did not bear such hamalie charges and handling charges for loading and unloading of food grains, its bank guarantee and security deposit would be forfeited and petitioner would be black-listed without any further notice.
7. In the said show-cause notice, the 2nd respondent placed reliance on Clause (2)(I) of the agreement between the parties which stated as under :
"2. Rate of Transport and payment :
.........
I. Rates include all incidentals connected with the work entrusted to the contractor under this agreement. In other words the Corporation shall not be liable to pay to the Contractor for any reason whatsoever any remuneration, costs, expenditure on establishment or any other incidentals whatsoever except the sum due at the rates accepted by the V.C. & Managing Director as stated above.
(ii) Example : If the rate quoted upto 16 KMs is Rs.17.50 per M.T. (flat rate) and beyond 16 KMs is Rs.0.50 per M.T. per K.M. and if the total distance moved from FCI Depot is 56 KMs.
56 KMs - 16 KMs = 40 KMs.
First 16 KMs= Rs.17.50 per MT.
Remaining Distance, i.e., 40 KMs x Rs.0.50 = Rs.20.00 MSR,J ::3:: wp_8870_2017 Total Transport charges payable = Rs.17.50 + Rs.20.00 = Rs.37.50 per MT."
8. According to petitioner, it is not a handling and transport contractor but only a transportation contractor and under the contract awarded to it, there is no requirement that the petitioner undertake the work of loading and unloading operations. It contends that after the food grains are loaded into it's transport lorries, and petitioner would transport the goods to the destination point, and unloading operations are to be taken care of by the consignor only. It contended that there are handling and transport contractors at every warehousing godown of the Telangana State Warehousing Corporation or Central Warehousing Corporation or the Food Corporation of India, and it is such contractor attached to that godown who is obligated to take up the work of loading and unloading of food grains and incur the hamali/handling charges.
9. It pointed out that no food grains would be stored in the Office of the 1st respondent-Corporation and transportation of food grains has to commence from the godowns of Telangana State Warehousing Corporation or Central Warehousing Corporation or the Food Corporation of India; and therefore, as a transport contractor, it has no obligation to make arrangement or payment of hamalies / handling charges towards loading and unloading operations of food grains.
10. The petitioner contended that the said clause 2(I), on its plain reading, does not require the transport contractor to bear loading and MSR,J ::4:: wp_8870_2017 unloading charges for the hamalies and the 2nd respondent is insisting the petitioner to do something beyond the scope and ambit of the transport contract by threatening to forfeit the bank guarantee and security deposit given by it, apart from black-listing it if such charges are not paid, and this is impermissible. According to the petitioner, the bank guarantee furnished by the petitioner to the 1st respondent is for Rs.36 lakhs and E.M.D. amount given by it is Rs.50 lakhs.
11. The petitioner contended that even in the contractual sphere of action, State and its instrumentalities are required to be fair and transparent as held in Noble Resources Ltd. v. State of Orissa1 and the respondents cannot insist petitioner to bear the handling charges by making the above threats.
WP.No.16991 of 2016
12. It is not in dispute that petitioner filed WP.No.16991 of 2016 in this Court seeking relief that the respondent should not insist upon the petitioner to bear the handling charges / hamalies charges for loading and unloading of food grains at the Telangana State Warehousing Corporation or Central Warehousing Corporation or the Food Corporation of India godowns; that this Court passed order on 02.06.2016 in WPMP.No.20922 of 2016 in WP.No.16991 of 2016 directing the respondents not to take any coercive action against the petitioner if it did not bear the handling charges or hamali charges at the time when the food grains are loaded or unloaded into its lorries at 1 2006 (10) SCC 236 MSR,J ::5:: wp_8870_2017 the said godowns, as per instructions of the 2nd respondent. But in spite of the same, orders were passed on 09.08.2016 by the 1st respondent terminating the transport contract of the petitioner with immediate effect.
WP.No. 37128 of 2016
13. The petitioner challenged the order dt.09.08.2016 terminating its contract in WP.No. 37128 of 2016. The petitioner contended that the order of termination of the contract is patently illegal and irrational, that after terminating the petitioner's contract, the Corporation entrusted the work to another transport contractor by name M/s.New Balaji Lorry Transport, Warangal on 24.10.2016, and also entered into agreement with the said party. Order dt.26.12.2016 in WP.No.16991 and 37128 of 2016
14. On 26.12.2016, they were disposed of as the petitioner stated that the cause of action in WP.No.16991 and 37128 of 2016 did not survive giving the petitioner one (01) week time to file a representation for refund of E.M.D. to the respondents and the respondents were directed to consider the objections raised by the petitioner, record a finding and communicate the decision within three (03) weeks to the petitioner.
THE IMPUGNED ORDER DT.28.02.2017
15. Subsequent thereto, the impugned order dt.28.02.2017 was passed directing forfeiture of security deposit and bank guarantee and MSR,J ::6:: wp_8870_2017 stating that even the said amount would not cover the entire loss sustained by the 1st respondent, but further proceedings for realization of the said loss or black-listing would not be taken.
16. The contents of the said order dt.28.02.2017 revealed that as per Clause 26(b) installation of G.P.S. (Global Positioning System) devices by a transport contractor is necessary, but after the Work Order dt.11.05.2016 was given to petitioner, in order to avoid installation of G.P.S. to its vehicles, the petitioner had raised a dispute about payment of tea expenses to hamalies and did not undertake transportation of goods on flimsy and baseless ground of non-liability to pay tea mamools to hamalies; and this was a deliberate and intentional attempt to avoid the contract.
17. It is also stated that under Clause 2(I) of the agreement, the rate quoted by a contractor would include all incidentals connected with the work entrusted to the contractor under the agreement; that petitioner was aware that hamalie charges would be borne by the Corporation where the goods are loaded through its handling and transport contractor but not the transport contractor; that hamalies, after loading, would ask the contractor to pay some amount for tea, and this expenditure has to be borne by the contractor; that it would be in the nature of incidental expense covered under Clause 2(I) of the agreement.
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18. It is stated that petitioner entered into the agreement knowing fully well the terms and conditions, that they are binding on him, and violation thereof entitles the Corporation to invoke penal clause incorporated therein.
19. It is also stated that for non-installation of G.P.S. devices, a notice dt.25.05.2016 was issued to petitioner, but he did not reply to it; and therefore, notice dt.27.05.2016 was issued to petitioner by the 2nd respondent asking the petitioner to bear the charges covered by Section 2(I) of the agreement; and since the petitioner failed to do so, the 1st respondent was informed of the same and further action was initiated against the petitioner for breach of the said agreement.
20. It is stated that petitioner's failure to install G.P.S. as per the clause in the tender is not proper and action taken by the Corporation against the petitioner is justified; that the petitioner quoted less prices to knock away the contract and thereafter started raising untenable and unnecessary disputes just to threaten the Corporation and compel the Corporation to pay more price than what was quoted in the agreement; that the Corporation already spent an amount of Rs.90.67 lakhs extra since the petitioner did not lift the stock as per Release Orders; it had to make alternative arrangements and some more amount was likely to be spent up to 31.03.2017; and so, its security deposit and bank guarantee to the tune of Rs.86 lakhs will be adjusted towards the said loss.
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21. Assailing the order dt.28.2.2017, this Writ petition is filed. Contentions of petitioner in this W.P
22. It is the contention of petitioner that the Corporation cannot withhold the amount of Rs.86 lakhs (bank guarantee for Rs.36 lakhs and E.M.D. of Rs.50 lakhs, both of which are forfeited by the Corporation) and has to return the same to petitioner since the petitioner is not at fault and the termination of the contract was only on account of insistence by the respondents that petitioner bear the hamalie charges for loading and unloading food grains which is not within the scope and ambit of the contract. It is also contended that the termination order was passed by the respondents contrary to the interim order granted by the High Court in WPMP.No.20922 of 2016 in WP.No.16991 of 2016 dt.02.06.2016, and the interpretation sought to be made by the respondents on Clause 2(l) is incorrect.
23. Reliance is also placed on the decision of the Supreme Court in State of Karnataka v. Shree Rameshwara Rice Mills2, ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd.3, apart from Govind Sahai v. State of Uttar Pradesh4. Stand of the Corporation
24. Counter-affidavit is filed by the Corporation justifying its action and contending that under Clause 2(I) of the agreement, incidental expenditure should be borne by the contractor; that handling charges 2 AIR 1987 SC 1359 3 (2004) 3 SCC 553 4 AIR 1968 SC 1513 MSR,J ::9:: wp_8870_2017 to hamalies for unloading of food grains at M.L.S. Points would be borne by the Corporation, but after issuance of Work Order by the 2nd respondent, the Corporation is not liable to pay the contractor incidental expenses; that a notice dt.27.05.2016 was issued and served on petitioner asking him to install G.P.S. devices and also to meet incidental charges as per the agreement and to start movement of the food grains as per the release orders issued by the District Manager, T.S.C.S.C.L., Warangal (1st respondent), but the petitioner refused to bear the handling charges, though it was an old contractor and had agreed to pay the same under the terms of the agreement.
25. It is contended that since the petitioner did not commence transportation of food grains, the petitioner's contract was terminated by proceedings dt.09.08.2016 which was challenged by the petitioner in WP.No.37128 of 2016, that the said Writ Petition was disposed of on 26.12.2016, asking the petitioner to give representation for refund of the E.M.D. amount; that petitioner gave such representation on 02.01.2017, and after an elaborate examination of the same, the impugned order was passed.
26. It is also contended that the said Writ Petition is not maintainable and that petitioner has a remedy to go for arbitration, which the petitioner has not invoked.
THE CONSIDERATION BY THE COURT
27. In view of the rival contentions, the points for consideration is :
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(a) Whether the Writ Petition filed by petitioner challenging the proceedings dt.28.02.2017 refusing to release the Security Deposit and Bank Guarantee amount of Rs.86 lakhs is maintainable ?
(b) If so, whether the petitioner is entitled to any relief in the Writ Petition ?
Point (a) :
28. No doubt, in the agreement between the parties, Clause 24 provides for arbitration, which stated as under :
"24. Arbitration :
(i) The Transport Contractor shall prefer a demand, if any, in writing to the C.C.S & Managing Director for arbitration in respect of any claim under this agreement within three months from the date of termination or completion of the agreement, failing which the demand shall be deemed to have been waived absolutely time barred and the Corporation shall be discharged and released of all liabilities under this agreement in respect of such demand.
(ii) On receipt of a demand from the Transport contractor within the prescribed time, disputes and differences arising out of or in any way touching or concerning this agreement, except such matters, the decision of which is expressly provided for in the agreement shall be referred to the Arbitration as per Arbitration and Conciliation Act, 1996.
(iii) The Arbitration shall deemed to have commenced on the date the arbitrator issued notice to both the parties fixing the date of first hearing.
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(iv) The Arbitrator(s) may pass their award within two months and from time-to-time with the consent of the parties enlarge the time for making the award.
(v) The venue of arbitration shall be fixed by the Arbitrators in their sole discretion in consultation with the V.C. & Managing Director.
(vi) The Arbitrator(s) shall give separate award in respect of each dispute or difference referred to him
(vii) The award of the Arbitrator(s) shall be final and binding on the parties to this Agreement, subject to the provisions of the Arbitration and Conciliation Act, 1996.
(ix) Subject to the aforesaid provisions, the Arbitration and Conciliation Act, 1996 shall apply to the Arbitration proceedings under this provision."
29. The question is "whether presence of such arbitration agreement is a bar for filing the Writ Petition ?".
30. This issue has been considered by the Supreme Court in Union of India v. Tantia Construction (P) Ltd.5. The Court held that in that case that even existence of arbitration clause is not an absolute bar to the invoking of Writ jurisdiction and the constitutional powers vested in the High Court cannot be fettered by any alternative remedy available to the authorities and whenever and wherever injustice takes place it has to be struck down as an anathema to the Rule of Law and the provisions of the Constitution. The Court upheld the decision of the High Court which entertained the Writ Petition notwithstanding 5 (2011) 5 SCC 697 MSR,J ::12:: wp_8870_2017 the existence of arbitration clause. This was reiterated in Ram Barai Singh & Co. v. State of Bihar6.
31. Therefore, the contention of respondents that the Writ Petition is not maintainable in view of existence of arbitration clause between the parties, is rejected.
32. Point (a) is answered accordingly.
Point (b):
33. I will first discuss the scope of judicial review by Courts exercising power under Art.226 of the Constitution of India in relation to contractual matters.
34. In ABL International Ltd. (3 supra), the Supreme Court held that if the State acts in an arbitrary manner even in a matter of contract, the aggrieved party can approach the Court by way of a Writ Petition under Article 226 of the Constitution of India and the Court, depending on facts, is empowered to grant relief. It held that there is no rule that in matters of contract, the Court's jurisdiction under Article 226 of the Constitution of India is ousted. It held that even if there are disputed questions of fact, in all cases, parties need not be relegated to a Civil Court; that the High Court is not deprived of its jurisdiction to entertain a petition under Article 226 of the Constitution of India merely because in considering petitioner's right to relief, questions of fact may fall to be determined, and it has 6 (2015) 13 SCC 592 MSR,J ::13:: wp_8870_2017 jurisdiction to determine questions of fact, even if they are in dispute. It declared that merely because a question of fact is raised, the High Court will not be justified in requiring the party to seek relief by the somewhat lengthy, dilatory and expensive process of a Civil Suit against a public body, particularly when the questions of fact raised are elementary. It declared that a State or its instrumentality, where it is a party to a contract, has obligation in law to act fairly, justly and reasonably as per Article 14 of the Constitution of India, and if the repudiation of claim of a party by the State entity is in contravention of the above requirement of Article 14, a Writ Court can issue suitable directions to set right the arbitrary action of such entity.
35. Similar view has been taken in Noble Resources Ltd. (1 supra). It was reiterated that while exercising contractual powers also, the Government bodies may be subject to judicial review in order to prevent arbitrariness or favoritism on their part. The Court reiterated the position of law that State and its authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts and that contractual matters are not beyond the realm of judicial review.
36. What exactly is the reason for termination of the transportation contract on 09.08.2016 by respondents, is to be seen next.
37. The petitioner's contention is that as per the terms of the contract he need not undertake the work of loading and unloading MSR,J ::14:: wp_8870_2017 operations as it is not a 'handling and transport contract' but is only a transportation contract; that such work of loading and unloading is to be done by the handling and transport contractor only at the godowns of the Telangana State Warehousing Corporation or Central Warehousing Corporation or the Food Corporation of India, and the petitioner has no obligation to make payment of hamali charges / handling charges towards loading and unloading operations of food grains. According to petitioner, Clause 2(I), does not obligate the petitioner to bear the loading and unloading charges payable to the hamalies.
38. In the counter-affidavit filed by 1st respondent, it is denied (in the last 3 lines in para 2) that petitioner should not bear the handling charges. Thus they suggest that it is the petitioner who has to bear the handling charges. Reference is also made to the duty of the petitioner to install G.P.S. devices in its vehicles and it is also appears that failure of the petitioner to do so is another reason for terminating the petitioner's contract.
39. It is important to note that in the proceedings dt.09.08.2016 terminating the petitioner's contract, there is no reference to the failure of petitioner to install G.P.S. devices on its vehicles at all. In the 1st paragraph of the said proceeding, it is stated that petitioner did not agree to move the stocks by paying additional expenditure incurred at the time of loading and unloading of food grains.
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40. In the impugned order dt.28.2.2017, however, a new reason is given that the petitioner declined to pay tea expenses to hamalies, that such tea expenses are incidental expenses which the petitioner should bear. This new reason cannot be taken note of and appears to be purely an after-thought.
41. It is admitted in the impugned order dt.28.02.2017 that there is a practice that hamali charges would be borne by the Corporation where goods are loaded and that a handling and transport contractor would pay the same but not the transport contractor. It is stated that after loading hamalies would ask the contractor to pay some amount for tea and he should pay it treating it as incidental expenditure covered by Clause (2)(I) of the agreement and it is this tea expenses that the petitioner did not want to pay.
42. Reference is made in the impugned order also to the failure of the petitioner to install G.P.S. devices, but as pointed out above, failure of the petitioner to install G.P.S. devices was not the ground to terminate the contract vide the order dt.09.08.2016, but it's refusal to bear the handling charges / hamali charges for loading and unloading was the only reason.
43. For the above reasons, I am of the opinion that the termination of contract of petitioner by 1st respondent on 09.08.2016 was only on the ground that petitioner refused to bear the handling charges / hamali charges, and the reason now assigned in the impugned order MSR,J ::16:: wp_8870_2017 that petitioner also declined to place G.P.S. devices or refused to pay tea expenses to the hamalis are new reasons created as an after thought to support the termination of contract of petitioner.
44. Clause 2(I) of the agreement, no doubt, requires the contractor to bear incidental expenses. But, the said incidental expenditure could only be the expenditure connected with the work entrusted to the contractor in the sense that it would include cost of petrol, wages of drivers or cleaners of the transport vehicles provided by it, etc. It cannot be extended to cover expenditure which would be incurred in loading and unloading food grains on the petitioner's vehicles i.e hamali/handling charges. Such expenditure has to be borne by the respondents in the absence of any duty cast on the petitioner under the contract to bear such expenditure. In fact, in the impugned order dt.28.02.2017, this is admitted by the 1st respondent by saying that hamali charges will be borne by the Corporation as per the practice involved and not by a transport contractor.
45. Therefore, I hold that it is not the petitioner, but the respondents, who committed breach of the agreement between the parties by unreasonably directing petitioner to pay the hamali/handling charges which it was not obligated to pay under the terms of the agreement; and the respondents did not act fairly and reasonably in terminating the petitioner's agreement and in encashing the Bank guarantee of Rs.36 lakhs given by the petitioner or forfeiting the E.M.D. of Rs.50 lakhs; and they have thus acted in violation of MSR,J ::17:: wp_8870_2017 Art.14 and 300-A of the Constitution of India. Therefore they are liable to refund the sum of Rs.86 lakhs with interest.
46. In this view of the matter, the Writ Petition is allowed; the impugned order dt.28.02.2017 passed by the 1st respondent is set aside; and the respondents are directed to refund Rs.86 lakhs, (representing the Bank guarantee amount of Rs.36 lakhs and E.M.D. of Rs.50 lakhs), which they have unlawfully and arbitrarily withheld from the petitioner after terminating the contract of the petitioner on 09.08.2016 within 2 weeks from the date of receipt of copy of this Order with interest at 9% p.a from the date of encashment/forfeiture till date of repayment. The respondents shall also pay costs of Rs.20,000/- to the petitioner.
47. As a sequel, miscellaneous petitions pending if any in this Writ Petition, shall stand closed.
__________________________________ JUSTICE M.S.RAMACHANDRA RAO Date: 21.08.2018 Ndr/*