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Madhya Pradesh High Court · body

2009 DIGILAW 1199 (MP)

BITS AND BYTES v. STATE OF M P

2009-10-14

K.K.LAHOTI, P.K.JAISWAL

body2009
Judgment ( 1. ) CHALLENGE in these writ petitions filed under Articles 226 and 227 of the Constitution of India, the order dated 18. 3. 2009 passed by respondent no. 3, whereby learned authority prematurely terminated the contract of the petitioners in all the three writ petitions w. e. f. 31. 3. 2009. In this batch of writ petitions, common questions arise for decision and, therefore, they were heard analogously and are being decided by this common order. ( 2. ) FOR the sake of convenience the brief facts necessary for disposal of the three writ petitions are taken from W. P. No. 4781/2009. ( 3. ) THE petitioner is claiming the following relief in clause 7 of the writ petition which reads as under :- i. A writ, order or direction in the nature of certiorari thereby quashing the order dated 18/03/2009 (Annexure P/6) issued by respondent No. 3. ii. A writ order or direction in the nature of mandamus thereby directing the respondents to allow petitioner firm to continue as per terms of the contract agreement dated 15. 9. 2009 and make payment of the entire period of contract to the petitioner firm, including payment for the months of June, July and August, 2008. iii. Any other appropriate writ, order or direction which the Honble Court may deem just and proper in the nature and circumstances of the case. ( 4. ) THE facts briefly stated are that the petitioner firm was awarded contract for the job of making data entries relating to the implementation of the Madhya pradesh Employment Guarantee Scheme and display them on the website. Earlier in the year 2006, the respondent No. 3 had issued Notice Inviting Tender for the said job. The petitioner being the lowest in the said bid was awarded the contract of data entry for a period of one year commencing from 3. 6. 2006 to 2. 6. 2007. During the said period the work of the petitioner was found satisfactory and, therefore, on completion of the period of contract the work was extended for a further period of one year commencing from 3. 6. 2007 to 2. 6. 2008 vide letter dated 8. 6. 2007 (Annexure P/1 ). After completion of the contract, a fresh NIT on 20th march, 2008 was issued by the respondent No. 3 for the entire district Mandla which consists of nine blocks. 6. 2007 to 2. 6. 2008 vide letter dated 8. 6. 2007 (Annexure P/1 ). After completion of the contract, a fresh NIT on 20th march, 2008 was issued by the respondent No. 3 for the entire district Mandla which consists of nine blocks. The bids were to be submitted separately in respect of each block. During the intervening period, the petitioner was asked to continue the work till finalization of the fresh contract. The petitioner being the lowest bidder his tender in respect of all the five blocks was accepted by respondent No. 3 vide order dated 2. 9. 2008 and contract agreement to this effect was executed vide Annexure P/3 on 15. 9. 2008 for a period of one year commencing from 5. 9. 2008 to 4. 9. 2009. As per terms of the contract, the work of MIS data entries for their recording in the computer were to be made available to the petitioner firm by the concerned Janpad Panchayat. The work of the petitioner was not satisfactory and for which complaints were being made by different Janpad Panchayats/gram panchayats and therefore notice was given to the petitioner on 17. 9. 2008 (Annexure R-3/1 ). ( 5. ) CLAUSE 3. 5, 3. 6 and 3. 7 of contract agreement dated 15. 9. 2008 (Annexure P-3) is relevant which reads as under:- As per clause 3. 5, 3. 6 and 3. 7 of the contract agreement, time was essence of the contract. The petitioner had to complete the work of MIS data entry within a period of one year from the date of agreement. As per clause 3. 5 maximum extension of 15 days is permissible, subject to the fine. As per clause 3. 6, if the work is completed for a period of more than 15 days, from the date of expiry of original period, the security amount will be forfeited and the contract will be terminated. The authorities also received complaints from Janpad: Panchayat, narayanganj, Janpad Panchayat Mohgaon and Janpanchayat Bijadandi wherein it has been stated that the work of the petitioner was very slow and he had not shown sufficient interest in making the data. After receiving complaints from different Janpad Panchayats, the respondent No. 3 terminated the contracted vide impugned order dated 18. 3. The authorities also received complaints from Janpad: Panchayat, narayanganj, Janpad Panchayat Mohgaon and Janpanchayat Bijadandi wherein it has been stated that the work of the petitioner was very slow and he had not shown sufficient interest in making the data. After receiving complaints from different Janpad Panchayats, the respondent No. 3 terminated the contracted vide impugned order dated 18. 3. 2009 and also pointed out that up to February, 2009 the petitioner has completed only 1/3rd of the total work awarded to him. The work of the petitioner was not found satisfactory and in spite of notice there was no improvement and, therefore, the work was restricted till 31. 3. 2009. By the said order all the three contracts were terminated by respondent No. 3. It is this action which is impugned in all the three writ petitions. ( 6. ) SHRI K. C. Ghildiyal, learned counsel for the petitioner drew our attention to the terms and conditions of the contract agreement dated 15. 9. 2008 and had submitted that the termination order has been passed without affording any opportunity of hearing to the petitioner firm nor any show cause notice was issued prior to passing of the impugned order. It is also submitted that prior to termination of contract no physical verification was made and conclusion of the department that the petitioner firm had not shown sufficient interest in making entries of data is incorrect and contrary to the facts of the case. It is submitted that the petitioner firm can make entry of only those details in the computer which are supplied to it by the concerned Janpad Panchayats. It is further submitted that on 18. 3. 2009 the Janpad Panchayats were asked to supply the details of the entry made in the computer by the contractors to enable them to release the payment to the contractors and on the other hand on the same day by the impugned order the work was terminated on the ground that the work of the petitioner firm was not found satisfactory, the respondent No. 3 acted contrary to the terms and conditions of the contract which has caused financial loss to the petitioner. It is lastly submitted that after cancellation of the contract, they met with the Collector of District Mandla and pointed out these facts but in spite of assurance given by the Collector, till nothing has been done by him and, therefore, the said action has been challenged in the present writ petition. ( 7. ) SMT. Vandana Shroti, learned counsel appearing for respondent No. 3 raised a preliminary objection regarding maintainability of the writ petition on the ground that clause 4. 2 of the contract agreement provides that in case any dispute arises between the parties, the aggrieved party shall file an application or raise a dispute before the Collector of concerned district and decision of the competent authority shall be binding on the authorities. She submits that as per clause 4. 2 of the agreement, the petitioner firm was required to make an application to the Collector against the impugned order dated 18 3. 2009. The petitioner without making such an application has filed the present writ petition which is not maintainable. She further submits that in view of the alternative remedy available under the terms of the contract, the present writ petitions are not maintainable. On merit, she submits that the petitioner firm was awarded contract of MIS data entry in the year 2006 for a period of one year whose work during that period was found satisfactory and therefore as per terms of the contract, the period was extended for a further period of one year and thereafter fresh tenders were invited for the period 2008-09. The petitioner being the lowest, his tender was accepted for a period of one year but his work was not found satisfactory and in spite of notice there was no improvement in the work and therefore the contract was terminated. It is also submitted that the work of the petitioner was not up to the mark and even after issuance of notice, the petitioner did not make any improvement in performing the work and number of complaints were being made against him, therefore the respondent No. 3 authority had no option but to cancel the contract. It is lastly submitted that during the pendency of this writ petition, the original period of the contract had expired on 4. 9. 2009 and therefore the present writ petition has become infructuous. It is lastly submitted that during the pendency of this writ petition, the original period of the contract had expired on 4. 9. 2009 and therefore the present writ petition has become infructuous. By the action of respondent No. 3, if the petitioner has suffered any loss, he can file a civil suit before the Civil Court for compensation which can be decided by the said Court. The authority is ready to release the payment of the work done by the petitioner and for that Shri K. K. Shrivastava, additional Chief Executive Officer, Jila Panchayat, Mandla has no objection in releasing the above payment to the petitioner but the said payment can be released only after quantifying the work done by the petitioner. ( 8. ) THE petitioner in its rejoinder denied the issuance of letter dated 17. 9. 2008 and submitted that no such letter was received by the petitioner. In respect of letter Annexure R-3/2, it is submitted that these are the internal correspondences between the respective Janpad Panchayat and Gram Panchayat and copies of these letters have not been issued to the petitioner nor on the basis of these letters any notice was issued to the petitioner. Considering these facts, this Court directed the Additional Chief Executive Officer to remain present along: with the original record and original letter dated 17. 9. 2008 issued to all the contractors and point out when this letter was issued to the petitioner. Shri K. K. Shrivastava, Additional chief Executive Officer was present along with the original record and Dispatch Register and pointed out that the letter; has been issued to the Contractor vide letter No. 2425. He further pointed out that on 6. 1. 2009 also reminder was issued to the contractor for completion of the work of MIS data entry with a request to complete the work expeditiously: This letter was received by the petitioner on 9. 1. 2009 as is evident from the Dispatch Register. ( 9. ) CONSIDERING these facts, the contention of learned counsel for the petitioner that the letter dated 17. 9,2008 was. not received by him is incorrect and contrary to die record of the case. ( 10. ) WE have heard learned counsel for the parties and perused the original record of the case. ( 11. ) THE contract between the parties is a contract in the realm of private law. 9,2008 was. not received by him is incorrect and contrary to die record of the case. ( 10. ) WE have heard learned counsel for the parties and perused the original record of the case. ( 11. ) THE contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act. Any dispute relating to breach of contract cannot be agitated in a writ petition. After expiry of the period of the contract, this Court cannot decide in this writ proceedings, whether due to the termination of the contract the petitioner has suffered any loss. The said question also cannot be agitated in or adjudicated upon in a writ petition nor there was any prayer for awarding, compensation by way of damages which could be granted by this Court in a proceeding under article 226 of the Constitution of India. That is a matter to be raised before the collector as per clause 4. 2 of the contract agreement or for the Civil Court, as the case may be. The prayer in the writ petition, viz, to issue a writ of certiorari to quash the impugned order dated 18/3/2009 when the term of the period is also expired cannot be made in favour of the petitioner. ( 12. ) CLAUSE 4. 2 of the contract agreement reads as under:- ( 13. ) THE contract in question contains a clause providing, inter-alia, for settlement of dispute by reference to the Collector, Mandla (clause 4. 2 ). 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 this Court under Article 226. The existence of any remedy, in this case, provided in the contract itself, is a ground, for this court to decline to exercise its extraordinary jurisdiction under Article 226 of the constitution of India. ( 14. ) THE Apex Court in the case of State of U. P. V. Bridge and Roof Co. The existence of any remedy, in this case, provided in the contract itself, is a ground, for this court to decline to exercise its extraordinary jurisdiction under Article 226 of the constitution of India. ( 14. ) THE Apex Court in the case of State of U. P. V. Bridge and Roof Co. (India) Ltd. ,19966 SCG 22, has held that Article 226 was not meant to supplant the existing remedies at law but only to supplement them in certain well recognized situations and held that the prayer for issuance of a writ of mandamus was wholly misconceived since the respondent had not invoked any remedy available to him under the terms and conditions of the contract. ( 15. ) THE scope of interference in judicial review of award of contract is limited only to cases where the decision is vitiated either by arbitrariness/irrationality or either by malafide/favouritism. ( 16. ) JUDICIAL review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to award of contracts, certain special features should be borne in mind. A contract is commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest or to decide contractual disputes. The contractor with a grievance can always seek damages in a civil court. ( 17. ) LEARNED counsel for the petitioner drew our attention to the decision of the apex Court in the case of Beg Raj Singh vs. State of U. P. and others, 2003 1 SCC 726 and submitted that original period of the contract for MIS data entry was up to 4th September, 2009 but the respondent No. 3 contrary to the terms and conditions prematurely terminated the contract on 18. 3. 2009. He immediately filed a writ petition on 4,5. 2009 and during the pendency of the writ petition the original period had expired and, therefore, the period of contract be extended for a further period of six months. 3. 2009. He immediately filed a writ petition on 4,5. 2009 and during the pendency of the writ petition the original period had expired and, therefore, the period of contract be extended for a further period of six months. In the case of Beg Raj Singh (supra) lessee was granted mining lease for a period of one year and before expiry of the term of the lease, the lessee sought renewal for another period of two years which was granted by the Collector vide order dated 20. 12. 2000 but in the meanwhile the State Government had taken a decision to hold an auction of the sand mining lease which was challenged by the lessee by filing a writ petition before the Allahabad high Court. The Allahabad High Court opined that the order of the Collector granting two years extension of mining rights to the lessee was justified and the state Government was not justified in interfering and setting aside the order of the Collector but it denied the relief to the lessee on the ground that auction would subserve public interest by fetching higher royalty to the State Government and further, because the period of three years calculated from the date of the original grant had in any case come to an end and therefore no relief could be allowed to the lessee. The Apex Court set aside the said judgment by holding that the delay in final decision cannot in any manner, be attributed to the lessee. No auction has taken place. No third-party interest has been created: The sand mine has remained unoperated for the. period for which the period of operation falls short of three years. The operation had to be stopped because of the order of the State Government intervening- which order has: been found unsustainable in accordance with stipulations contained in the Mining lease consistently with the; government order issued by the State of Uttar Pradesh. Merely because a little higher revenue can be earned by the State Government that cannot be ground for not enforcing the obligation of he State Government which it has incurred in accordance with its own policy decision and directed that the lessee shall be allowed to operate the mine for a full period of three years subject to adjustment for the period for which he has already operated:the decision of the Apex Court in the? case of Beg Raj Singh (supra) will not be applicable in the present facts and circumstances of the case and on the basis of the said decision, period of contract cannot be extended. In the present case, the work of the petitioner was found unsatisfactory and, therefore, his contract was terminated whereas in the case of beg Raj Singh (supra) after expiry of the original period of one year, the quarry was further renewed for- a period of two years by the granting authority which was upheld by the Allahabad High. Court and therefore the Apex Court directed that the lessee shall be allowed to operate the mine for a full period of three years. In the case of Beg Raj Singh (supra) the mining lease was granted under the terms and conditions of Mines and Minerals (Regulation and Development) Act, 1957 and the rules made thereunder and a statutory lease deed was executed by the sanctioning authority whereas in the present case, the contract between the parties is a contract in the realm of private law. It is not a statutory contract and, therefore, after the expiry of the original period no extension can be granted to the petitioner. ( 18. ) THE next submission of learned counsel for the petitioner was that in the case of M/s Subhash Projects and Marketing Ltd. v. West Bengal Power development Corporation Ltd. and others, AIR 2006 SC 116 the Apex Court awarded one crore to Landt out of the payment to be made to M/s Subhash Projects and Marketing Ltd. for the loss of profit suffered by Landt in not awarding the contract to him and therefore the petitioner be also directed to award compensation by way of damages in a proceeding under Article 226 of the Constitution of india. In the case of M/s Subhash Projects and Marketing Ltd. (supra) the power Corporation invited tenders for work of water intake and plant water system for units of Thermal Power Project. The Tender Evaluation Committee after evaluating the tender documents came to the conclusion that Landt with its reduced offer, was the lowest tenderer and it was recommended that the contract be awarded to Landt. The Tender Evaluation Committee after evaluating the tender documents came to the conclusion that Landt with its reduced offer, was the lowest tenderer and it was recommended that the contract be awarded to Landt. At this stage, M/s Subhash Projects and Marketing Ltd. handed over a letter to the Minister of State for Power in the Union Government, m person complaining that the placing of order with Landt as the lowest tenderer, was not justified and due to pressure of the Union Minister of State for Power, the contract way awarded to M/s Subhash Projects and Marketing Ltd. The said action was challenged in the High Court in which it was found that the award of contract to M/s Subhash Projects and Marketing Ltd. was at the undue pressure of the Union Minister of State for Power, and that though contract itself was not liable to be interfered with. M/s Subhash Projects and Marketing Ltd. which had secured the contract by dubious means, was liable to be compelled to disgorge at least a portion of the profits that it would have earned from working the contract. The same was assessed as Rs. 1 crore which was found would be less than 10 per cent of the profits that M/s Subhash Projects and Marketing Ltd. would have earned and directed its payment to Landt. The Apex Court affirmed the said finding and held that in case M/s Subhash Projects and Marketing Ltd. does not pay the amount of Rs. 1 crore with interest as ordered to Landt by way of draft or deposit the same in the Court within four weeks as originally undertaken by it, the amount of Rs. 1 crore will carry interest at the rate of 10 percent per annum from the date of the judgment of the Division Bench of the High Court till the date of its recovery. The facts in the present case are entirely different and, therefore the decision of apex Court cited by learned counsel for the petitioner in the case of M/s Subhash projects and Marketing Ltd. (supra) will not be applicable and on that basis the petitioner is not entitled for any compensation from respondent No. 3. ( 19. The facts in the present case are entirely different and, therefore the decision of apex Court cited by learned counsel for the petitioner in the case of M/s Subhash projects and Marketing Ltd. (supra) will not be applicable and on that basis the petitioner is not entitled for any compensation from respondent No. 3. ( 19. ) LASTLY, learned counsel for the petitioner drew our attention to the decision of Apex Court in the case of ABL International Ltd. and another vs. Export Credit Guarantee Corporation of India Ltd. and others, 2004 3 SCC 553 wherein the Apex Court, held that a writ involving serious disputed questions of facts which requires consideration of evidence which is not on record, will not normally be entertained by a court in the exercise of its jurisdiction under Article 226 of the Constitution, but there is no absolute rule that in all cases involving disputed questions of fact the parties should be relegated to a civil suit. This clearly shows that in an appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact. ( 20. ) RECENTLY the Apex Court in the case of Jagdish Mandal vs State of Orissa and others 2007 14 SCC 517 has held that when the power of judicial review is invoked in matters relating to award of contracts, certain special features should be borne in mind. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and and may increase the project cost manifold. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and and may increase the project cost manifold. Similar view has- been taken by the Apex Court in the case of Kisan Sahkari Chini Mills Limited and others vs. Vardan Linkers and others 2008 12 SCC 500 wherein it has been held that ordinarily, the remedy available for a party complaining of breach of contract lies for seeking damages. He would be entitled to the relief of specific performance, if the contract was capable of being specifically enforced in law. The remedy 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, 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. Para 23 is relevant which reads thus : "23. If the dispute was considered as purely one relating to existence of an agreement, that is, whether there was a concluded contract and whether the cancellation and consequential non-supply amounted to breach of such contract, the first respondent ought to have approached the Civil Court for damages. On the other hand, when a writ petition was filed in regard to the said contractual dispute, the issue was whether the Secretary (Sugar), had acted arbitrarily or unreasonably, in staying the operation of the allotment letter dated 26-3-2004 or subsequently cancelling the allotment letter. In a civil suit, the emphasis is on the contractual right. In a writ petition, the focus shifts to the exercise of power by the authority, that is, whether the order of cancellation dated 24-4-2004 passed by the Secretary (Sugar), was arbitrary or unreasonable. The issue whether there was a concluded contract and breach thereof becomes secondary. In a civil suit, the emphasis is on the contractual right. In a writ petition, the focus shifts to the exercise of power by the authority, that is, whether the order of cancellation dated 24-4-2004 passed by the Secretary (Sugar), was arbitrary or unreasonable. The issue whether there was a concluded contract and breach thereof becomes secondary. In exercising writ jurisdiction, if the High court found that the exercise of power in passing an order of cancellation was not arbitrary and unreasonable, it should normally desist from giving any finding on disputed or complicated questions of fact as to whether there was a contract, and relegate the petitioner to the remedy of a civil suit. Even in cases where the High Court finds that there is a valid contract, if the impugned administrative action by which the contract is cancelled, is not unreasonable or arbitrary, it should still refuse to interfere with the same, leaving the aggrieved party to work out his remedies in a Civil Court. In other words, when there is a contractual dispute with a public law element, and a party chooses the public law remedy by way of a writ petition instead of a private law remedy of a suit, he will not get a full fledged adjudication of his contractual rights, but only a judicial review of the administrative action. The question whether there was a contract and whether there was a breach may, however, be examined incidentally while considering the reasonableness of the administrative action. But where the question whether there was a contract, is seriously disputed, the high Court cannot assume that there was a valid contract and on that basis, examine the validity of the administrative action. ( 21. ) IN the present case,- the question that arose for consideration was whether the order dated 18. 3. 2009 passed by respondent No. 3 cancelling the contract was arbitrary or irrational or violative of any administrative law or principles. As stated herein above in the preceding paragraphs, the work of the petitioner was not found satisfactory and in spite of notice dated 17. 9. 3. 2009 passed by respondent No. 3 cancelling the contract was arbitrary or irrational or violative of any administrative law or principles. As stated herein above in the preceding paragraphs, the work of the petitioner was not found satisfactory and in spite of notice dated 17. 9. 2008 there was no improvement in the work and as per terms and conditions of the contract he was to complete the work within a period of one year from the date of contract agreement which he had failed to do and the question agitated by the petitioner is seriously disputed as we found that prior to termination of contract, notice was duly issued to the petitioner and in such circumstances we find that the order of respondent No. 3 is neither arbitrary nor unreasonable nor authorities with a malafide intention cancelled the contract. ( 22. ) ACCORDINGLY, the writ petition filed by the petitioner for issuance of writ of certiorari to quash the termination order are wholly misconceived. ( 23. ) FOR the reasons mentioned herein above, the writ petitions filed by the petitioners have no merit and are accordingly dismissed but without any order as to costs. It shall be open to the petitioners, if it is so chosen by them, to raise a dispute before the Collector as per clause 4. 2 of the contract agreement dated 15. 9. 2008 or to approach the civil court according to law, as the case may be. ( 24. ) WITH the aforesaid, all the three writ petitions are dismissed. No order as to costs. Petition dismissed.