Lord Shiva Construction Company Private Ltd. v. State of Haryana
2013-02-21
A.K.SIKRI, RAKESH KUMAR JAIN
body2013
DigiLaw.ai
Judgment A.K. SIKRI, J. Notice of motion. We have gone though the records produced by Mr. Kulvir Narwal, Addl. A.G. Haryana. He further submits that he is prepared to argue the matter finally on the basis of these records and no reply needs to be filed. We accordingly proceed to decide the matter finally at this stage. These three petitions arise under common facts and raise common question of law. For this reason, we have taken up these three petitions together. We may state at the out set that the matter pertains to termination of the contract agreement vide the impugned orders. The petitioners herein were awarded three contracts and since all are terminated, that is the reason for filing these three writ petitions. However, the events took place are almost at the same time in all the three writ petitions. For this reason, we propose to take the facts as they appear in Civil Writ Petition No.3471 of 2013. Respondent No.2, namely, Haryana Rural Roads & Infrastructure Development (hereinafter referred to as ‘the Development Agency’) had floated tenders for up-gradation of road from Madlauda to Bal Jattan via Khandra. The estimated cost of the work as specified in the NIT was `160.00 lacs and earnest money of `3.20 lacs was to be deposited. Bids were open and evaluated. The bid of the petitioner was accepted for the contract price of `1,96,03,941/- vide memo No.214 dated 14.1.2010. The petitioner-company was asked to submit performance security of a sum of `4,46,332/- and also additional performance security of another sum of `1,48,503/-, in addition to the earnest money of `3.20 lacs which was already deposited along with the bid submitted by the petitioner. Thereafter vide memo No.544 dated 4.2.2010, petitioner-company was instructed to proceed with the execution of work. According to the petitioner it mobilized all its resources including equipment & machinery, tool & plants, material and labour at the site for commencement of the work. However, the work could not be started by it at the desired pace as respondent No.3 did not get the estimate technically sanctioned before the issuance of the Memo dated 4.2.2010. Be that as it may, the work thereafter started however, it did not pick up the required momentum which was necessary for completion of the work within the time allotted.
Be that as it may, the work thereafter started however, it did not pick up the required momentum which was necessary for completion of the work within the time allotted. The respondent had issued notices to the petitioner from time to time asking the petitioner to speed up the work. On the other hand, while replying to these notices, the petitioner found some fault with the respondents in not carrying out corresponding obligation under the contract. It was also pleaded that because of closure of quarries, there was shortage of construction material which affected the construction works in the entire State of Haryana and it was not only the work of the petitioner which was lagging behind but only because of this at one stage the petitioner-company even sought discharge from the said contract expressing aforesaid difficulties which was coming in its way for execution of the work. At this stage, we would like to reproduce Clauses 52 & 53 of the General Conditions of Contract pertaining to the termination of contract, which reads as under: - “52. Termination 52.1 The Employer may terminate the Contract if the Contractor causes a fundamental breach of the Contract. 52.2 Fundamental breaches of Contract shall include, but shall not be limited to, the following: (a) the Contractor stops work for 28 days when no stoppage of work is shown on the current programme and the stoppage has not been authorized by the Engineer; (b) the Contractor is declared as bankrupt or goes into liquidation other than for approved reconstruction or amalgamation; (c) the Engineer gives notice that failure to correct a particular defect is a fundamental breach of Contract and the Contractor fails to correct it with in a reasonable period of time determined by the Engineer; (d) the Contractor does not maintain a security, which is required; (e) the Contractor has delayed the completion of the works by the number of days for which the maximum amount of liquidated damages can be paid, as defined in clause 44.1; (f) the Contractor fails to provide insurance cover as required under clause 13; (g) if the Contractor, in the judgment of the Employer, has engaged in the corrupt or fraudulent practice in competing for or in executing the Contract.
For the purpose of this clause, “corrupt practice” means the offering giving receiving, or soliciting of anything of value to influence the action of a public official in the procurement process or in contract execution. “Fraudulent Practice” means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the employer and includes collusive practice among Bidders (prior to or after bid submission) designed to establish bid process at artificial noncompetitive levels and to deprive the employer of the benefits of free and open competition. (h) If the Contractor has not completed at least thirty percent of the value of construction work required to be completed after half of the completion period has elapsed. (i) If the Contractor fails to set up a field laboratory with the prescribed equipment, within the period specified in the Contract Date; and (j) Any other fundamental breaches as specified in the Contract Data. (k) If the Contractor fails to deploy machinery and equipment or personnel as specified in the contract date at the appropriate time. 52.3 Notwithstanding the above, the Employer may terminate the contract for convenience. 52.4 If the contract is terminated, the Contractor shall stop work immediately, make the site safe and secure, and leave the site as soon as reasonably possible. 53. Payment upon Termination 53.1 If the Contract is terminated because of a fundamental breach of contract by the contractor, the Engineer shall issue a certificate for the value of the work done and Materials ordered less liquidated damages, if any, less advance payment received up to the date of the issue of the certificate and less the percentage to apply to the value of the work not completed, as indicated in the contract data. If the total amount due to the employer exceeds any payment due to the contractor, the difference shall be recovered from the security deposit, and performance security. If any amount is still left un-recovered it will be debit payable to the employer.
If the total amount due to the employer exceeds any payment due to the contractor, the difference shall be recovered from the security deposit, and performance security. If any amount is still left un-recovered it will be debit payable to the employer. 53.2 If the Contract is terminated at the employer’s convenience the Engineer shall issue a certificate for the value of the work done the reasonable cost of removal of equipment repatriation of the contractor’s personnel employed solely on the works and the contractor’s cost of protecting and securing the work and less advance payment received upto the date of the certificate, less other recoveries due in terms of the contract, and less taxes due to be deducted at source as per applicable law.” It is clear from the above that the respondents have reserved a right to terminate the contract if the petitioner committed fundamental breaches of contract. Clause 52.2 defines circumstances which could be treated as fundamental breaches. However, the contract can be terminated under two circumstances. In the first place, the employer has reserved a right with it to terminate the contract in case the contractor causes a fundamental breach of contract and a defined illustration of some of the breaches are given in Clause 52.2. That apart, even otherwise the employer has reserved a right with it to terminate the contract to ‘convenience’. Naturally, even if there is no fundamental breach on the part of the petitioner, but there are some other reasons which justify the termination, the respondents can invoke provision of Clause 52.3 and terminate the contract for ‘convenience’. In case the contract is terminated because of fundamental breach on the part of the contract as per Clause 53.1, the employer has right to get the remaining work executed from third party at the risk and cost of the contractor. On the other hand, if the work is terminated at the employer’s convenience, reasonable cost of removal of equipment, repatriation of the contractor’s personnel employed solely for the works and the contractor’s cost of protecting and securing the work, less advance payment received upto the date of the certificate less other recoveries due in terms of the contract and less taxes due to be deducted at source are to be given to the contractor.
It is clear from the above that consequences of terminating the contract because of the fundamental breach committed by the contractor and when the contract is terminated for convenience are materially different. In fact these are diametrically opposite consequences which flow either from the two actions which can be taken by the employer. In the present case, after considering the matter, the respondents issued Memo No.RS/2288 dated 30.4.2012 after giving brief background in which the contract in question was awarded and narrating that the pace of the said work executed by the petitioner was slow and had brought the department in a very awkward position to extend the time period etc. and also stating that the reason given by the petitioner, namely, shortage of material was not justified as some other contractor’s were able to do the work with required pace, intimating the decision to terminate the contract to the petitioner. Significantly, this order mentioned that the contract was terminated invoking Clauses 52.2 and 53 of the General Conditions of Contract. As mentioned above, Clause 52.3 empowers the employer to terminate the contract for ‘convenience’. Thus, for the reasons best known to the respondents even when the respondents imputed the delay in execution of the work on the part of the petitioner, the respondents did not invoke Clause 52.1 but instead chose to refer to Clause 52.2 while forwarding the copy of this order which was passed by the Superintending Engineer, Karnal and endorsed it to the Executing Engineer, Provisional Division, PWD(B&R), Branch Panipat, for information. It was also directed to issue certificate for the value of work done as per Clause 53.2 of the contract agreement so that further action can be taken accordingly. This order makes it clear that not only the contract was terminated for ‘convenience’ even the consequences for such a contract when it is terminated for convenience which was provided under Clause 53.2 were acted upon. However, by another Memo No.RS/2282 of the same date i.e. 30.4.2012, which again contained averments regarding breach of contract on the part of the petitioner in showing slow progress in the work, the contract was terminated as per Clauses 52.1, 52.2 & 53.1 of the General Conditions of Contract. Thus, the earlier memo was substituted by this memo and now the termination was on account of fundamental breach allegedly committed by the petitioner.
Thus, the earlier memo was substituted by this memo and now the termination was on account of fundamental breach allegedly committed by the petitioner. It is surprising to find that both the memos have same number and date. It is also not disputed that both the memos are sent to the petitioner and it was for this reason that we called for the original records. From the original records which have been produced, we find nothing on record. The another purpose for summoning the record was to find out as to whether a conscious decision was taken to treat the case as that of fundamental breach or that of ‘convenience’. However, we find from the record that there is hardly any ‘Noting’ on the file which would reflect the application of mind of the competent authority in this aspect. Both the office orders are on the file from which it cannot even be inferred as to whether first office order invoking provisions of Clause 52.3 i.e. terminating the contract for ‘convenience’ was because of typographical error which was sought to be corrected by substituting the Clauses 52.1 and 53.1. In a matter like this and when the respondents themselves sought to terminate the contract treating it as fundamental breach and at the same time for ‘convenience’, these orders cannot stand to judicial security. As already pointed out above, when the two kinds of termination have different consequences, the least that was expected from the respondents was to apply their mind and to take a decision as to whether the competent authority, keeping in view the entire circumstances, wanted the contract to be terminated for ‘convenience’ or wanted it to be treated as ‘fundamental breach’ and terminate the contract on that count. It would be relevant to reiterate that as per the petitioner there was shortage of material which led to slow progress. The petitioner had also requested for discharge from the contract, therefore, there is a possibility that this request of the petitioner was accepted and that was a reason for invoking the Clause of ‘convenience’, however, nothing is discernable from record when there cannot be situation where order of termination is passed invoking both the clauses, namely, fundamental breach and at the same time for ‘convenience’. Therefore, we have no option but to quash both these orders. We order accordingly.
Therefore, we have no option but to quash both these orders. We order accordingly. At the same time liberty is given to the competent authority i.e. the Superintending Engineer to apply his mind afresh to the entire issue and make up his mind as to under which clause the Superintending Engineer should propose to terminate the contract and on that basis, show cause notice would be given to the petitioner as also opportunity to the petitioner to submit reply thereto and if necessary oral hearing as well and thereafter final decision in the matter shall be taken. In view of the above, writ petitions are disposed of.