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2014 DIGILAW 152 (JK)

Associated Business Corporation v. State Of J&K

2014-04-02

JANAK RAJ KOTWAL

body2014
1. This is a writ petition. 2. Heard. I have perused the record. 3. Petitioners are two business concerns. Pursuant to online-NIT No.4 of 2012 dated 14.02.2012 for supply of uniform items for J&K Police, the tenders submitted by the petitioners were accepted and respondent No.5 issued following six supply orders to the petitioners from Police Headquarters, Jammu: Associated Business Corporation (Petitioner No.1) (i) No: Prov-1/UE-06/2013-14/14305-08 dated 22.03.2013. (ii) No: Prov-1/UE-06/2013-14/14285-88 dated 22.03.2013. (iii) No. Prov-1/UE-06/2013-14/14721-26 dated 23.03.2013. (iv) No. Prov-1/UE-06/2013-14/18182-85 dated 12.04.2013. (v) No.Prov-1/UE-06/2013-14/14715-20 dated 23.03.2013. M/s Osaka Industries (Petitioner No.2). No. Prov-1/UE-10/2013-14/14317-20 dated 22.03.2013 4. Term No. (vi) of "the broad terms and conditions of the supply and contract" incorporated in the supply orders provided the `period of delivery' as "within 90 days from the date of issue of supply order" for all the supply orders except supply order No.Prov-1/UE-06/2013-14/18182-85 dated 12.04.2013, in which period of delivery was provided as 60 days only. 5. Petitioners could not make the full supply within the stipulated period of 90 days and, as it is contended in para-8 of the petition, vide Ref. No.ABC/125-26/2013 dated 27.06.2013 addressed by petitioner No. 1 to respondent No.5, requested for extension of the delivery period up to 31.07.2013 in respect of supply order Nos. Prov-1/UE-06/2013-14/14305-08 dated 22. 3. 2013, Prov-1/UE-06/2013-14/14285-88 dated 22.03.2013, Prov-1/UE-06/2013-14/14721-26, Prov-1/UE-06/2013-14/14715-20 dated 23.03.2013. All these supply orders pertain to petitioner No.1 and in all of them stipulated delivery period was 90 days from the date of supply order. The delivery period in these supply orders had to expire on 20th/21st June, 2013 commencing from 22nd/23rd June, 2013. Petitioner No. 1 in his letter of request sought the extension on the ground that `due to power shortage, drought crises and scorching heat reasoning labour shortage in the country, the manufacturing process was delayed for some time'. According to petitioners, this request was followed by a representation also. Respondents, however, refused the extension of delivery period and in this regard respondent No.5 informed petitioner No.1 vide No.Pro-I/UE-44/2012-36697 dated 03.08.2013 and petitioner No.2 vide his No.Pro-I/UE-44/2012-36694 dated 03.08.2013. 6. Feeling aggrieved by the refusal of extension in the delivery period, petitioners have filed this writ petition seeking writ of mandamus commanding respondents to accord extension in delivery period in favour of petitioners on the same analogy it has been allowed/granted in favour of other suppliers including proforma respondents vide letter dated 11.07.2013 and 17.07.2013. 7. 6. Feeling aggrieved by the refusal of extension in the delivery period, petitioners have filed this writ petition seeking writ of mandamus commanding respondents to accord extension in delivery period in favour of petitioners on the same analogy it has been allowed/granted in favour of other suppliers including proforma respondents vide letter dated 11.07.2013 and 17.07.2013. 7. Besides, petitioners have alleged that the items which were to be supplied by them have been re-tendered by the respondents vide E-NIT Nos.13 of 2013, 14 of 2013 and 15 of 2013, all dated 21.06.2013 and have sought writ of certiorari quashing the said NITs to the extent of these items and mandamus commanding respondents not to proceed ahead with tendering process to that extent. 8. It is contended by the petitioners that major portion of supply was made by them though full supply could not be made within stipulated time due to unavoidable circumstances. It is contended further that the respondents had allowed extension in delivery period in first phase of the supply orders, extension had been granted qua the same NIT in favour of proforma respondents and other similarly situated suppliers and have alleged that extension to petitioners has been refused without any lawful criteria, arbitrarily, in colourable exercise and abuse of power, unfairly, unreasonably and in violation of legal, constitutional, statutory and fundamental rights of the petitioners. The reasons spelled out by the petitioners for their inability to make the full supply within stipulated time have not been accorded consideration by the respondents. Besides, it is contended by the petitioners that respondents have not even followed the terms and conditions detailed in the NIT for termination of contract of petitioners and without taking recourse to any exercise therefor have issued fresh NITs detrimental to the rights and interests of the petitioners. 9. Respondents have opposed the petition by filing reply/ objections supported by affidavit sworn in by Sh. S.P.Vaid (IPS), Additional Director General of Police, HQS, PHQ, J&K. It is contended that the supply orders had been issued in consonance with the Government Order No.22/F of 2003 dated 07.02.2003 whereby procurement calendar has been reckoned from 1st July to 30th June every year and the rate validity of E-NIT in question was also up to 30.06.2013. S.P.Vaid (IPS), Additional Director General of Police, HQS, PHQ, J&K. It is contended that the supply orders had been issued in consonance with the Government Order No.22/F of 2003 dated 07.02.2003 whereby procurement calendar has been reckoned from 1st July to 30th June every year and the rate validity of E-NIT in question was also up to 30.06.2013. It is contended further by the respondents that petitioners were given ample time of 90 days but they could make 40 to 50% of the supply only. As regards refusal of extension, it is contended by the respondents that "request of the petitioner for extension dated 27.06.2013, five days after expiry of delivery period was not considered by the department as petitioners have asked for extension up to 31.07.2013 (forty days more than the scheduled date of delivery) due to the fact that ample time was given to the petitioners for supply of various items in consonance with NIT stipulations duly agreed by petitioners, moreover, validity of tender was also expiring on 30.06.2013 and so do the department cycle for the year as per Government order mentioned earlier." Respondents, however, have denied to have allowed extension of delivery period to proforma respondents and sought to explain the position in this regard. This aspect may be taken up later herein. Without clearly denying petitioners' contention that the respondents have re-advertised the items not supplied by the petitioners, the respondents have contended that the fresh tenders have been issued for procuring the supplies for the year 2013-14, which have nothing to do with the supply orders issued to the petitioners. 10. Mr. Manzoor A. Dar, learned counsel for the petitioners, would say that extension of the delivery period was well contemplated and inbuilt in the NIT. While referring to clause 20 and 30(e) of the NIT No.4 of 2011, Mr. Dar sought to demonstrate that time was not of the essence of the contract and a reasonable extension could not have been refused as sufficient cause for petitioners' inability to complete the supply within stipulated period was stated by them in their letter of request. 11. Per contra, Mr. Dar sought to demonstrate that time was not of the essence of the contract and a reasonable extension could not have been refused as sufficient cause for petitioners' inability to complete the supply within stipulated period was stated by them in their letter of request. 11. Per contra, Mr. R. A. Khan, learned AAG, appearing for respondents, submitted that as per condition No. (vi) incorporated in the supply orders and the procurement calendar provided under Government order No.22/F of 2003 dated 07.02.2003, 90 days period was a fundamental condition of the contract and time being of the essence of the contract, extension could not have been granted. Mr. Khan submitted further that grant or refusal of extension is an absolute discretion of the department and being an administrative function of respondents, not subject to judicial review. 12. Before dealing with the question relating to respondents' refusal to extension of the delivery period on merits, I may first take up the question whether time is of the essence of the contract between the parties and in that the petitioners were bound to complete the supply within stipulated period of 90 days and extension was not possible? 13. In a three-Judge Bench decision in M/s Hind Construction Corporation v. State of Maharashtra, AIR 1979 SC 720 , Supreme Court has observed that "it cannot be disputed that question whether or not time was of the essence of the contract would essentially be a question of intention of the parties to be gathered from the terms of the contract." Their lordships have held in para-8 of the reporting: 8. It will be clear from the aforesaid statement of law that even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental; for instance, if the contract were to include clauses providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract" 14. To determine whether 90 days delivery period stipulated in the supply orders, in respect of which extension seems to have been sought and has been refused vide the above mentioned two communications of respondent No.5, was intended to be fundamental, condition no. (vi) in the supply order and clauses 20 and 30(e) of the NIT are relevant, which need to be read in juxtaposition and are copied accordingly: vi. Period of Delivery - within 90 days from the date of issue of supply order." 20. LIQUIDITY DAMAGES: Successful tenderer shall have to make the supplies within the stipulated period as would be mentioned in the supply order. In case the firm does not complete the supply within the delivery period, the liquidated damages will be charged @ 5% per month depending on the urgency & nature of the supply of the total cost of the stores, unsupplied on the last date of initial delivery period. However, period of delivery may be extended, at absolute discretion of this Hqrs provided the delay is attributable to reasons beyond his control/ force majeure and provided delay is communicated in writing justifying cause of delay. 30(e) If the successful tenderer fails to supply the goods of the prescribed specification or fails to deliver the goods within the stipulated period as specifically mentioned in the supply order, the department shall be at liberty to arrange supplies by re-tendering or otherwise at his risk and cost. The department may give 15 days' notice to the approved supplier in writing to make supplies good. The department may give 15 days' notice to the approved supplier in writing to make supplies good. In case of failure to supply the consignment on specified qualitative & quantitative terms, the department shall be lawfully entitled to forfeit the amount of the security money and take penal action to make good the loss sustained or excess cost incurred by the state in arranging of the supplies and other remedies that may be available to the department, under the law for the time being in force in the State; 15. In four out of the five supply orders issued to petitioner No.1 and the only supply order issued to petitioner No.2 stipulated supply period as per condition No. (vi) of the supply orders was 90 days and taking this aspect in isolation, it can be said that the time was of the essence of the contract. In the fifth supply order to petitioner No. 1, stipulated time was 60 days but that is not relevant here because in respect of that order the extension was neither sought nor refused. However, condition No. (vi) of the supply orders cannot be read in isolation and when read in juxtaposition with clause-20 and 30(e) of the NIT, it would be clear that stipulation as regards the period of delivery neither was intended as a fundamental condition nor of the essence of the contract. Undeniably, three options are contemplated in case of a supplier's failure to complete the supply within the stipulated period. Clause 20 of the NIT, firstly, renders the supplier/contractor liable to pay liquidated damages or secondly, gives discretion to the Police Headquarters to extend the period of delivery provided delay is attributable to reasons beyond the control of the contractor/ supplier and is communicated in writing justifying the cause of delay. Besides, clause 30(e) of NIT empowers the department to arrange supplies by re-tendering or otherwise at the risk and cost of the supplier but in that case too department may give 15 days' notice to the defaulting supplier to make supplies good, which makes it clear that even before re-tendering the supplies or arranging them otherwise the defaulting supplier can be given 15 days' time to make good the supplies. 16. 16. Clauses 20 and 31(e) of the NIT with lot of expressiveness had conveyed to all in general and successful tenderers/approved suppliers in particular the possibility of extension in the period of delivery to be stipulated in the supply order. Such expressiveness in the NIT dispels the impression that the time was of the essence of the contract and that the only consequence of the failure to complete the supplies within the stipulated period was termination of the contract with the end of the stipulated period. Had the intention been to make the stipulated period as of the essence of the contract, clauses 20 and 31(e) should not have been incorporated in the NIT. Contextual contention of Mr. Khan, learned AAG, that delivery period could not have been extended beyond the calendar of supply provided under Government order No.22-F of 2003 (supra) as the said order provided rate validity only up to 30th June of a year too does not hold water because, firstly, it has not been shown that the said Government Order even bars delivery after 30th of June and secondly, in case it was so, the possibility of extension of delivery period beyond 30thJune should have been ruled out in the NIT or the supply orders. 17. I would, thus, hold that the time, that is, 90 days' supply period, provided in the supply orders is not of the essence of the contract and possibility of extension of time was there. Refusal to extend the time will have to be looked into in this background. 18. Extension in this case has been refused. Refusal to petitioner No.1 was conveyed vide respondent No.5's communication No.Prov-I/UE-44/2012/36697 dated 03.08.2013 and to petitioner No.2 vide No.Prov-I/UE-44/2012/36694 dated 03.08.2013. Another question raised by Mr. Khan, learned AAG, which is important and calls for the attention before taking up the refusal to extension on merits, relates to the scope of judicial review of the said refusal. 19. It is contended in this behalf on one hand that refusal being an administrative decision of the respondents/ Police Headquarter, is not subject to power of judicial review of this Court and on the other that this Court has the power of judicial review of an administrative decision. Mr. 19. It is contended in this behalf on one hand that refusal being an administrative decision of the respondents/ Police Headquarter, is not subject to power of judicial review of this Court and on the other that this Court has the power of judicial review of an administrative decision. Mr. Dar, learned counsel for the petitioners, would say that this Court has the power to review and reconsider the refusal in extension of delivery period as the decision has been taken arbitrarily and discriminates the petitioners viz a viz private respondents and other similarly placed suppliers. Mr. Dar, submitted that extension has been refused without hearing the petitioners and assigning any reason and is therefore, not only arbitrary but violative of the principles of natural justice and Fundamental Right of the petitioners guaranteed under Article 14 of the Constitution. Learned counsel relied upon (2004) 11 SCC 213. 20. Scope and extent of judicial review permissible in administrative actions/decisions of the State including the conditions of contracts by the State or its instrumentalities is by now well settled and no longer res integra as far as this Court is concerned. Modern trend discernible from judicial pronouncements points to judicial restraint in administrative actions. Court cannot sit as a court of appeal but, nonetheless, can review the manner in which the decision was made. An administrative action must be free from unreasonableness, arbitrariness, discrimination and must not be affected by bias or actuated by mala fides and, if otherwise, would be subject to judicial review. 21. In Delhi Development Authority & anr. v. UEE Electrical Eng. (P) Ltd. & anr., (2004) 11 SCC 213 (supra), a three-Judge Bench of Supreme Court, while dealing with a question of the exercise of judicial review, has observed in paras 11 and 12 of the reporting: 11. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is "illegality", the second "irrationality" and the third "procedural impropriety". These principles were highlighted by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service (commonly known as CCSU case) 12. Courts are slow to interfere in matters relating to administrative functions unless decision is tainted by any vulnerability such as lack of fairness in procedure, illegality and irrationality. Whether action falls within any of the categories has to be established. Courts are slow to interfere in matters relating to administrative functions unless decision is tainted by any vulnerability such as lack of fairness in procedure, illegality and irrationality. Whether action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient." 22. Their Lordships in UEE Electricals (supra), while referring to two earlier decisions of the court, (1997) 7 SCC 463 and (2003) 4 SCC 579 , have held also that "in essence the test is to see whether there is any infirmity in the decision-making process and not in the decision itself". 23. Recently the Supreme Court in Michigan Rubber (India) Limited v. State of Karnataka & ors., (2012) 8 SCC 216 , while recapitulating some of the earlier decisions of the Court in the matter has held inter alia that, "the basic requirement of Article 14 is fairness in action by the State and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities". 24. Plea of the respondents as regards the refusal of extension to the petitioners is that "request of the petitioner for extension dated 27.06.2013, five days after expiry of delivery period was not considered by the department as petitioners have asked for extension up to 31.07.2013 (forty days more than the scheduled date of delivery) due to the fact that ample time was given to the petitioners for supply of various items in consonance with NIT stipulations duly agreed by petitioners, moreover, validity of tender was also expiring on 30.06.2013 and so do the department cycle for the year as per Government order mentioned earlier." 25. What is discernable as indisputable from the plea of the respondents is that the respondents had rejected the petitioners' request for extension of the delivery period without according consideration to the reasons the same was based upon. Outright Refusal of consideration to a request for extension, however, is not in consonance with and violates clause 20 of the NIT. What is discernable as indisputable from the plea of the respondents is that the respondents had rejected the petitioners' request for extension of the delivery period without according consideration to the reasons the same was based upon. Outright Refusal of consideration to a request for extension, however, is not in consonance with and violates clause 20 of the NIT. May it be, grant of extension is in the absolute discretion of the Police Headquarters but even an absolute discretion implies a covenant of good faith and fair deal and imposes an obligation to exercise such discretion fairly, reasonably and not arbitrarily. Clause 20 of the NIT not only contemplates the absolute discretion but provides also the criteria for exercising such discretion by laying down that the extension may be granted if the delay is attributable to reasons beyond the contractor's control/force majeure and provided the delay is communicated in writing justifying cause of delay. The authorised authority in the Police Headquarters was, therefore, required to accord consideration to the grounds on which the petitioners had sought extension and take decision on merits accordingly. If the alleged reasons were satisfactory, extension should have been granted unless there were some other good and compelling reasons to not do so. To say that ample time of 90 days was already granted or that extension for a long period of 40 days was sought were no grounds for refusing consideration because scope and possibility of seeking extension was open in the supply orders and only reasonable extension might be granted, notwithstanding the period it was sought for. It is thus held that by not according consideration to the request of the petitioners on merits, the respondents have not given fair deal to the petitioners and have acted arbitrarily and in violation of the criteria provided under clause 20 of the NIT. 26. Besides above, Petitioners' contention that in refusing extension, respondents have acted unfairly to them because similarly placed suppliers, including private respondents, were granted extension is borne out from the undisputed documents available on the record. In this context petitioners' counsel referred to annexures H-1 and H-2 to the writ petition. 26. Besides above, Petitioners' contention that in refusing extension, respondents have acted unfairly to them because similarly placed suppliers, including private respondents, were granted extension is borne out from the undisputed documents available on the record. In this context petitioners' counsel referred to annexures H-1 and H-2 to the writ petition. Annexure H-1 would show that respondent No.7, M/s M. B. Rubber Private Limited, had been issued a supply order dated 12.04.2013, that is, after the supply orders issued to the petitioners and period of supply on its request letter dated 28.06.2013 had been extended up to 31.07.2013. Likewise, annexure H-2 would show that respondent No.6, M/s Reckitt Benckiser India Limited, had been issued two supply orders; No.Prov-1/UE-15/2013-14/14345-48 and No.14293-96, both dated 22.03.2013, that is, analogous to the supply orders issued to the petitioners and period of supply on its request letter dated 24.06.2013 was extended up to 25.07.2013. In their response to respondents' reply to the writ petition, petitioners have also produced copy of the supply order No.I/UE-15/2013-14/14345-48 (supra) issued in favour of respondent No.6, which would show that, as in case of petitioners, he was also given 90 days period of delivery and, as said above, period was extended up to 25.07.2013. 27. Reply of the respondents as regards extension of time to proforma respondents is far from satisfactory. As regards respondent No.6, it is pleaded in the reply that "it had not participated in the tender process and boot polish has been procured from the OEM on lowest company rates applicable to Government Departments and not on tender basis." That, however, is not an issue. Fact of the matter remains that as per one of the supply orders produced by the petitioner (supra) respondent No.7 was ordered to supply boot polish worth more than 20 lakh rupees and 90 days period of delivery was extended up to 25.07.2013, that is, 25 days beyond 30.06.2013. Besides, extension was granted in respect of the other supply order whose details, however, are not available. As regards respondent No.7, it is stated in the reply that he was given only 60 days time to execute the contract which has been extended later. 60 days of 90 days, fact of the matter remains that period of delivery in his case was also extended up to 31.07.2013, that is, 31 days beyond 30. 6. 2013. 28. As regards respondent No.7, it is stated in the reply that he was given only 60 days time to execute the contract which has been extended later. 60 days of 90 days, fact of the matter remains that period of delivery in his case was also extended up to 31.07.2013, that is, 31 days beyond 30. 6. 2013. 28. Extension of delivery periods to respondents 6 and 7 negates respondents' plea that because of procurement calendar provided by the Government order No.22/F of 2003 (supra) extension beyond 30.06.2013 was not possible and shows that petitioners have been discriminated and not given a fair deal without assigning any reason, whatsoever. 29. For all what has been said and discussed above, the refusal of extension of the delivery (supply) period to the petitioners by the respondents smacks of arbitrariness, unfairness and discrimination violative of Article 14 of the Constitution of India. This petition therefore, has merit and is allowed. Impugned refusals conveyed to petitioner No.1 vide No.Prov-1/UE-44/2012/36697 dated 03.08.2013 and to petitioner No.2 vide No.Prov-1/UE-44/2012/36694 dated 03.08.2013 are quashed and respondents are directed to accord consideration to extension in light of the discussion made herein above for a reasonable period, which as per clause 31(e) may extend up to 15 days. Till the consideration is accorded and final decision taken, process involving re-tendering of the items covered under the above mentioned four supply orders issued to petitioner No.1 and the sole supply order issued to petitioner No. 2 shall remain in abeyance. 30. Disposed of along with all connected CMPs.