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2019 DIGILAW 942 (ALL)

Veekay General Industries v. Union of India

2019-04-12

RAJENDRA KUMAR IV, SUDHIR AGARWAL

body2019
JUDGMENT : 1. Heard Sri Abhijit Mukherji, learned counsel for petitioner and Sri Vivek Kumar Rai, Advocate for respondents. 2. This writ petition under Article 226 of the Constitution of India has been filed by sole petitioner-M/s. Veekay General Industries, praying for issue of a writ of certiorari quashing modification advice/notice dated 26.6.2018 (Annexure-17 to writ petition) amending date of delivery to 26.12.2018. Petitioner has also prayed for issue of a writ of mandamus commanding Re-spondents-2 to 4 to issue a fresh and reasonable last date of delivery to petitioner firm and also directing Respondent-2 to cancel Purchase Order No. 60155048178096 since drawing approval and site was not made ready in time before consuming four months time out of six months of delivery time. 3. By way amendment petitioner has also prayed for issue of a writ of certiorari quashing cancellation advise dated 5.2.2019, communication dated 6.2.2019 calling for penalty of forfeiture of security and consequential letter for encashment of bank guarantee. 4. Facts, in brief, giving rise to present writ petition are that petitioner is a partnership firm engaged in the business of making Escalators. North Central Railway, i.e., Respondents-2 and 3 floated a tender notice for installation of two Escalators, one at Aligarh Railway Station and another at Tundla Railway Station. Petitioner submitted bid dated 24.7.2017 (Annexure-1 to writ petition) stating in para 8 thereof that delivery period is within six months from the date of LOA/Purchase Order, prototype approval, GAD/manufacturing clearance by Railways/Consignee/Authorized Representative and subject to Site Readiness/Timely Clearances at Railway/Consignee End for execution of work, whichever is later. Tender was opened on 25.7.2017, vide letter dated 31.7.2017, Deputy Chief Material Manager (C), Allahabad (hereinafter referred to as "DCMM (C)") informed petitioner that he has not accepted delivery schedule as per tender. It advised petitioner to accept delivery schedule as per tender, i.e., within six months from the date of Purchase Order (PO). Petitioner was required to give reply within three days. Petitioner submitted reply vide letter dated 2.8.2017 and therein, besides other, with respect to delivery schedule it said, as under: "It is our endeavor to execute your work at the earliest and even before the delivery schedule. However, in practice we have found that there are several factors/agencies that are beyond our scope of work and/or control which pose challenges in timely completion of work, thereby resulting in requirement of extensions. However, in practice we have found that there are several factors/agencies that are beyond our scope of work and/or control which pose challenges in timely completion of work, thereby resulting in requirement of extensions. Thus we only sought to bring to your kind notice that there are possible reasons for the same. We remain committed on our endeavor to execute your work at the earliest and within your stipulated tender schedule of within 06 months. You may notice that earlier the Purchase Orders used to be in two parts i.e. one for supply portion and one for installation portion. After the introduction of GST the entire tender is now being evaluated as a single works contract. In your tender your have also specified that no price variation will be given on the installation portion, thus in order to ensure transparency we submitted this clause that our original purchase invoice be used to determine the final amount that becomes payable. We have also done back to back tie up with our principle manufacturer/supplier with the same price variation formula that you are offering us i.e. our purchase rates are fixed for escalators at 6m+/-0.6% change in price on every variation of 0.15 m. If you have a more suitable option for working out the final rate for supply of escalator please suggest/assist us on the same for incorporation in awaited Purchase Order to avoid any confusions later." 5. On 28.9.2017 North Central Railway from the Office of Principal Chief Materials Manager, Allahabad (hereinafter referred to as "PCMM") issued a letter of acceptance. The delivery schedule mentioned therein was six months. Petitioner submitted drawings for two Escalators at Aligarh and Tundla vide letter dated 31.10.2017. Railway vide letter dated 7.11.2017 required petitioner to submit documents till 23.10.2017 as per Research, Design and Standard Organization, Lucknow (hereinafter referred to as "RDSO") specifications mentioned in Clause 2.16.2, Annex-ure-3 of letter of acceptance. Petitioner also submitted bank guarantee. Railway issued Purchase Order No. 60155048178096 on behalf of President of India through PCMM on 9.11.2017. RDSO sent letter dated 10.11.2017 to PCMM stating that Purchase Order was released on 28.9.2017 but copy was not marked to RDSO as such it became aware of Purchase Order only on 24.10.2017 after receiving email from the Firm and hence one and half months has lost. RDSO sent letter dated 10.11.2017 to PCMM stating that Purchase Order was released on 28.9.2017 but copy was not marked to RDSO as such it became aware of Purchase Order only on 24.10.2017 after receiving email from the Firm and hence one and half months has lost. It also stated that Firm still has not submitted necessary documents as per list of submittals mentioned in RDSO specification. It should be advised to submit those documents by 23.11.2017 so that scrutiny of documents can be done for preparation of Work Test Certificate (hereinafter referred to as "WTC"). 6. Thereafter a joint inspection at Tundla Railway Station was carried on 21.10.2017. Petitioner submitted drawing to Senior Divisional Electrical Engineer of two Escalators at Aligarh and one at Tundla alongwith detailed Railway's Scope Work for Escalator Installation. On 28.11.2017 petitioner also sent drawings to Executive Director, RDSO. Pursuant to RDSO's letter dated 10/14.11.2017, PCMM vide letter dated 1.12.2017 requiring petitioner to submit all necessary documents to RDSO. Petitioner replied vide letter dated 13.12.2017 that it has submitted necessary Preliminary Design Documents vide letter dated 28.11.2017 and further said that petitioner is working on the balance required documents and/or calculations highlighted by RDSO and will submit shortly for approval, vide letter dated 20.12.2017 petitioner stated that due to pendency of approval from Railways it is not in a position to start manufacturing of Escalators, therefore, delivery of six months period be refixed from the date of WTC/Manufacturing Clearance. vide letter dated 29.12.2017 Senior Material Manager sent intimation for approval of drawings. On 12.1.2018 Railway wrote petitioner to confirm address of communication in order to ascertain delay. 7. Finally on 15.1.2018 approved GADs were received by petitioner, vide letter dated 2.2.2018, petitioner informed Senior Divisional Electrical Engineer that RDSO has informed petitioner to relocate Escalator Control Panel Location outside the truss. Petitioner submitted revised GAD (Rev. 2) in line with RDSO's requirement vide letter dated 2.2.2018, vide letter dated 5.2.2018 petitioner sent progress report and stated that since it was not in a position to start manufacturing of Escalators due to non availability of Work Test Certificate, therefore, considering delay in approval by Railway, delivery period of six months be refixed so as to commence from the date of Work Test Certificate/Manufacturing Clearance by Railway. 8. 8. Again vide letter dated 7.3.2018 petitioner informed Deputy Chief Electrical Engineer, Allahabad that GAD submitted vide letter dated 2.2.2018 is pending for approval at Railway/Consignee; all technical parameters have been freezed by RDSO to start manufacturing, therefore, Railway should refix delivery period of six months from the date of pending GAD approvals which is necessary for manufacturing of Escalators. It was also pointed out that top notches of both locations at Aligarh and Tundla were incomplete and that requires to be completed before the work of Escalators start. 9. On 12.3.2018 petitioner received amended drawings approved by Competent Authority. A copy of acknowledgment receipt and letter dated 12.3.2018 sent by petitioner acknowledging receipt of approved GADs is Annexure-16 to writ petition. Respondent-2, however, issued Modification Advice/Notice dated 26.6.2018 impugned in the present writ petition amending Purchase Order dated 9.11.2017 and delivery period from existing was amended as 26.12.2018. However, conditions No. 1 to 4 in the aforesaid letter read as under: "1. Please note that the above extension in delivery date is subject to recovery of an amount equal to full liquidated Damages for delay in supply of stores after the expiry of the Contract Delivery period notwithstanding the grant of the extension. You may now tender the stores (Balance of stores) for Inspection in terms of this letter and any stores already tendered by you for inspection but not inspected will be now inspected accordingly. 2. The above extension will also be subject to the following conditions: a. That no increase in price on account of any statutory increase in or fresh imposition in Customs Duty/Sales Tax/Freight or on account of any other Tax or Duty leviable in respect of the stores specified in the said Acceptance of tender which take place after..... shall be admissible on such of the stores as are delivered after the said date, and b. That notwithstanding any stipulation in the contract for increase in price on any other ground, no such increase which takes place after the said date shall be admissible on such of the stores as are delivered after.... shall be admissible on such of the stores as are delivered after the said date, and b. That notwithstanding any stipulation in the contract for increase in price on any other ground, no such increase which takes place after the said date shall be admissible on such of the stores as are delivered after.... c. But nevertheless the purchaser shall be entitled to benefit of any decease in price on account of reduction on or remission of customs duty, Excise Duty, Sales Tax or on account of any other Tax or Duty or on other ground as stipulated in the price Variation Clause which takes place after expiry of the above mentioned date viz,..... 3. Please intimate immediately your acceptance of this extension on the above condition. Please note that in the event of declining to accept the extension on the said conditions, the contract shall be cancelled and the outstanding quantity of stores shall be purchased at your risk and cost under the terms of the contract. 4. Please notice that no further extension would be granted. This is to be treated as final Notice and action for risk purchase will be arranged in the event of default without any further reference to you." (Emphasis added) 10. Petitioner vide letter dated 30.6.2018 informed that site is not ready as top notches and other proposed requirements are not complete so as to start civil work by petitioner. It, therefore, requested Senior Divisional Electrical Engineer to direct concerned authorities to complete work to be performed by Railway at the site so that petitioner may start its work. Further, vide letter dated 29.6.2018, petitioner requested PCMM to refix delivery period without LD/DC. On behalf of PCMM Deputy Chief Material Manager issued letter dated 3.8.2018 stating that DP extension with LD and DC up to 26.12.2018 was issued and petitioner was advised to supply material within extended delivery period, failing which action will be taken as per condition of contract. 11. Petitioner made a joint inspection with Senior Engineer and found that minimum civil work, i.e., top notches was not complete. Railway officials, however, informed that by the time Escalators material reached the site, required civil work would stand completed. Next joint inspection was made on 28.8.2018 and on 14.9.2018 but top notches still was not found complete. 11. Petitioner made a joint inspection with Senior Engineer and found that minimum civil work, i.e., top notches was not complete. Railway officials, however, informed that by the time Escalators material reached the site, required civil work would stand completed. Next joint inspection was made on 28.8.2018 and on 14.9.2018 but top notches still was not found complete. Ultimately top notches were ready on 10.10.2018 but due to barricading and collection of heavy debris etc. suitable measurement could not be made. Since Railway was not considering extension of delivery time though fault lay upon them, hence present writ petition has been filed. 12. A counter-affidavit has been filed by respondents wherein issue of Purchase Order dated 9.11.2017 and its amendment with respect of date of delivery vide letter dated 26.6.2018 is not disputed. It is said that letter of acceptance clearly stated delivery period as six months. Firm accepted this condition and on confirmation submitted security deposit of Rs. 10 lacs in the form of bank guarantee. Letter dated 31.7.2017 was issued reminding the Firm that it must accept delivery schedule as per tender schedule, i.e., six months from the date of Purchase' Order. Further, with respect to submission of documents to RDSO, petitioner himself delayed the matter. Petitioner having failed to comply with terms of contract cannot wriggle out thereof and in any case there is an arbitration clause in agreement and writ petition under Article 226 of the Constitution of India for modification of terms of contract or for enforcement of contract is not admissible. 13. Since during pendency of writ petition, delivery time expired, hence PCMM issued cancellation advise dated 5.2.2019, giving reason of failure to supply. It also imposed penalty of forfeiture of security deposit. By way of amendment aforesaid cancellation and forfeiture has also been challenged. 14. Facts stated above, ex facie, show that here is a case of simple enforcement of contract. Moreover, it is not a mere enforcement of contract but even terms of contract are sought to be modified by intervention of Court by invoking jurisdiction under Article 226 of the Constitution. Under the contract, earlier six months period of delivery was extended upto 26.12.2018 but petitioner wants it to be extended in his own terms. 15. Moreover, it is not a mere enforcement of contract but even terms of contract are sought to be modified by intervention of Court by invoking jurisdiction under Article 226 of the Constitution. Under the contract, earlier six months period of delivery was extended upto 26.12.2018 but petitioner wants it to be extended in his own terms. 15. Thus the question is, "whether for enforcement of a pure and simple commercial contract, jurisdiction under Article 226 of the Constitution of India should be exercised", and, secondly, "whether the terms and conditions of contract can be directed to be modified at the instance of one party, by Court in exercise of jurisdiction under Article 226 of the Constitution"? 16. It is true that remedy under Article 226 of the Constitution of India is not absolutely barred but it has been held repeatedly that in the matter of pure and simple commercial contract, extraordinary constitutional remedy under Article 226 is not a substitute for getting the contract executed or for allowing damages to a party for alleged breach of contract since remedy lies in common law by filing suit for enforcement of contract wherever it is permissible or for damages/compensation for alleged wrongful breach of contract. Reason being that such matters involves recording of evidence, oral and documentary, and remedy under Article 226 of the Constitution cannot be made a substitute of common law civil proceedings and parties must avail such remedy. 17. An exception has been carved out however in cases where contract is "statutory contract" but it has not been disputed before us by counsel for parties that agreement/contract, in the case in hand, is not a statutory contract. 18. In Bareilly Development Authority v. Ajai Pal Singh, AIR 1989 SC 1076 , Court held that if a person is aggrieved in respect of non statutory and purely contractual rights flowing from a contract, remedy under Article 226 of the Constitution is not available. Court said that no writ or order can be issued under Article 226 so as to compel the authorities to remedy a breach of contract, pure and simple. 19. In Kerala State Electricity Board and another v. Kurian E. Kalathil and others, 2000(6) SCC 293 , Court said that if a term of contract is violated, ordinarily remedy is not the writ petition under Article 226. 19. In Kerala State Electricity Board and another v. Kurian E. Kalathil and others, 2000(6) SCC 293 , Court said that if a term of contract is violated, ordinarily remedy is not the writ petition under Article 226. Disputes arising out of terms of such contract or alleged breaches have to be settled by ordinary principles of law of contract. Court said that such case is a matter for adjudication by a Civil Court or in arbitration if provided for in the contract. 20. Referring to Bareilly Development Authority v. Ajai Pal Singh (supra) and State of U.P. and others v. Bridge & Roof Co. (India) Ltd., AIR 1996 SC 3515 , Court in The Rajasthan State Industrial Development and Investment Corporation and another v. Diamond and Gem Development Corporation Ltd. and another, 2013(5) SCC 470 observed as under: "There can be no dispute to the settled legal proposition that matters/disputes relating to contract cannot be agitated nor terms of the contract can be enforced through writ jurisdiction under Article 226 of the Constitution. Thus, writ Court cannot be a forum to seek any relief based on terms and conditions incorporated in the agreement by the parties." (Emphasis added) 21. In Rajasthan State Industrial Development and Investment Corporation (supra), Court further said: "It is evident from the above, that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ of mandamus, is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice (ex debito justitiae). The grant or refusal of the writ is at the discretion of the Court. The writ cannot be granted unless it is established that there is an existing legal right of the applicant, or an existing duty of the Respondent. Thus, the writ does not lie to create or to establish a legal right, but to enforce one that is already established. While dealing with a writ petition, the Court must exercise discretion, taking into consideration a wide variety of circumstances, inter alia, the facts of the case, the exigency that warrants such exercise of discretion, the consequences of grant or refusal of the writ, and the nature and extent of injury that is likely to ensue by such grant or refusal." (Emphasis added) 22. In State of U.P. and others v. Bridge & Roof Co. (supra) Court said: "Firstly, 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 or, may be, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a Contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for Civil Court, as the case may be." (Emphasis added) 23. In Zonal Manager, Central Bank of India v. Devi Ispat Ltd. and others, 2010(11) SCC 186 , Court said: "It is settled law that the disputes relating to interpretation of terms and conditions of a contract could not be examined/challenged or agitated in a petition filed under Article 226 of the Constitution. It is a matter for adjudication by a Civil Court or in arbitration, if provided for in the contract or before the DRT or under the Securitization Act." 24. Reliance is sought to be placed on behalf of petitioner on Supreme Court's judgment in Union of India and others v. Tantia Construction Pvt. Ltd., 2011(5) SCC 697 , but we find that aforesaid judgment lends no help to petitioner in the case in hand. It was a case decided on its own facts. There was an agreement between Railway and Tantia Construction Pvt. Ltd. (hereinafter referred to as the "Contractor"). Railway insisted upon Contractor to execute certain additional work worth Rs. 36.11 crores under existing agreement for which Contractor did not agree. Railway then issued a notice requiring Contractor to execute enlarged/extended quantity of work contract which was challenged in writ petition stating that Contractor is ready and abide to work contract already executed and it cannot be forced to agree for additional work in respect of extended portion on same terms and conditions. Contractor in writ petition did not challenge terms and conditions of existing agreement but was aggrieved by action of railway whereby it was compelling Contractor to execute extended quantify of work contract/additional work contract for which Contractor was not ready. Contractor in writ petition did not challenge terms and conditions of existing agreement but was aggrieved by action of railway whereby it was compelling Contractor to execute extended quantify of work contract/additional work contract for which Contractor was not ready. A Single Judge of Calcutta High Court quashed letter issued by railway for additional/extended work contract and said judgment was upheld by Division Bench as well as Apex Court. Court observed that Contractor expressed its unwillingness to take extended work and agreed to complete balance work of initial contract and for extended work he cannot be compelled. It is in these facts and circumstances Court did find that writ petition was maintainable. 25. Learned counsel for petitioner than contended that entire fault lay with Railway and without giving any opportunity of hearing and notice it has cancelled contract, therefore, here is a case of violation of principle of natural justice also. 26. We find that the Railway issued contract on certain conditions which petitioner wanted to be modified to which Railway did not agree. It has been held time and again that principles of natural justice are not applicable when a contract in private law is terminated. Cancellation of contract in private law is not a quasi judicial act hence observance of principles of natural justice are not required and atleast cancellation of contract by either party cannot be challenged on the ground that it is in violation of principles of natural justice. 27. In State of Gujarat and others v. Meghji Pethraj Shah Charitable Trust and others, 1994(3) SCC 552 , it has been held: "We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alteram partem) is void. The termination is not a quasi-judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is not also an executive or administrative act to attract the duty to act fairly. It was - as has been repeatedly urged by Sri Ramaswamy - a matter governed by a contract/agreement between the parties. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, e.g., where the matter is governed by a non-statutory contract." (emphasis added) 28. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, e.g., where the matter is governed by a non-statutory contract." (emphasis added) 28. Following aforesaid decision in Pimpri Chinchwad Municipal Corporation and others v. Gayatri Construction Company and another, 2008(8) SCC 172 , Court has held that in the matter of non-statutory contract, High Court should not have entertained writ petition under Article 226 of the Constitution. 29. In view of above, we are clearly of the view that it is not a fit case where this Court must exercise its public law remedy available under Constitution which is extraordinary, discriminatory remedy and instead petitioner must be relegated to avail its alternative remedy by invoking arbitration clause in the agreement or avail common law remedy in Civil Court. 30. Writ petition is accordingly dismissed.