Laxmi Construction Company v. Vidarbha Irrigation Development Corporation, Nagpur
2020-02-14
A.S.CHANDURKAR, VINAY JOSHI
body2020
DigiLaw.ai
ORDER : 1. Heard finally considering the short issue involved. 2. The petitioner which is a partnership firm engaged in the business of construction was awarded work pursuant to a tender in respect of the Gosekhurd Left Bank Canal for the purposes of construction of Earth Work and Structures of Pauni Minor Branch No. 2. The tender submitted by the petitioner came to be accepted on 20.03.2009 after which on 22.07.2009 the petitioner was issued the concerned work order. The same indicated that the work was to be completed within a period of twenty four months and the value of the tender was Rs. 2,71,66,000/-. The total land that was required for the construction of the said canal concerning the petitioner was 11 Hectare 86 R. On 15.11.2016, the petitioner was issued a show-cause notice by the Executive Engineer of the Vidarbha Irrigation Development Corporation (for short, ' V.I.D.C.') stating therein that out of 11 Hectare 86 R land that was required for the work, only 3 Hectare 86 R land was acquired till the said date. The time stipulated in the contract had lapsed on 21.07.2011 and this time was extended by a period of about forty eight months. The petitioner was stated to have executed the work to the value of Rs. 15,20,000/- out of the total cost. It was then stated that the petitioner was awarded the said work at 21.80% above the estimated cost which was thereafter reviewed by the Wadnere Committee appointed by the State Government. On scrutiny, the said Committee had found that the rates in the tender had been escalated. The work had been partially completed on the land available and that land was now not available for completing the balance work. It was not known when the land acquisition process would be completed. Hence, the petitioner was asked to show cause why the agreement should not be terminated in public interest. The petitioner gave a reply to the aforesaid notice on 29.11.2016 in which it was stated that the work executed by the petitioner was as per the tender conditions and that the firm was always ready and willing to carry out the work at the tendered rate agreed. It was stated that the petitioner was not aware of the report of the Wadnere Committee and hence there was no reason to terminate the contract.
It was stated that the petitioner was not aware of the report of the Wadnere Committee and hence there was no reason to terminate the contract. Ultimately, on 23.01.2017 the Executive Engineer issued a communication to the petitioner stating therein that as the land was not available for undertaking the balance work, it was not in public interest to continue the contract further. In exercise of the powers under Clause 15 of the Contract, the Executive Engineer rescinded the contract. The petitioner was called upon to remain present to undertake joint measurement and for settlement of final accounts. Being aggrieved by the aforesaid communication terminating the contract, the petitioner has challenged the same and has prayed that it be permitted to complete the work in question pursuant to the work order issued by the Corporation. 3. Shri J.T. Gilda, learned Senior Advocate for the petitioner submitted that the termination of the contract on 23.01.2017 was illegal and not sustainable in law. Referring to the Maharashtra Public Works Department Manual and its various Clauses, it was submitted that it was the responsibility of the Corporation to have taken all necessary steps for acquiring the land on which the work in question was required to be carried out. The time was also required to be ascertained in advance if the said lands that were required to undertake the work had not been so acquired. Though the work in question was required to be undertaken on the land to the extent of 11 Hectare 86 R, only 3 Hectares 982 R of land had been acquired when the work order was issued. Since the Corporation found the work of the petitioner to be satisfactory, the time was thereafter extended to enable the petitioner to complete the work. For no fault of the petitioner, the contract was being terminated. It was then submitted that the petitioner was not made aware about the contents of the report of the Wadnere Committee and in that regard he referred to the information supplied by the Executive Engineer on 28.12.2016 to that effect. Since the contract was being terminated on the ground that some observations were made by the Wadnere Committee as regards escalation of rates in the contract in question, the petitioner ought to have been given information in that regard.
Since the contract was being terminated on the ground that some observations were made by the Wadnere Committee as regards escalation of rates in the contract in question, the petitioner ought to have been given information in that regard. Referring to the reply filed on behalf of the respondents dated 12.04.2017 and especially paragraph 20 thereof, it was submitted that the contract had been terminated at the instance of the State Government and the same was not permissible. The work order having been issued by the Corporation which was independent of the State Government, it was not open for the Corporation to act at the dictates of the State Government. Similarly, the reference to certain investigations being made by the Anti-Corruption Bureau were also not relevant since the same did not find any place in the show-cause notice that was issued to the petitioner. Reference was also made to the communication dated 15.01.2019 issued on behalf of the Water Conservation Department of the State of Maharashtra in that context. 4. The learned Senior Advocate further submitted that the Corporation was not justified in calling upon the petitioner to complete the work on the basis of the current schedule of rates as prevailing today especially when the petitioner's tender had been accepted by the Corporation itself on 20.03.2009. The parties were bound by the terms agreed and those terms could not now be modified.
The parties were bound by the terms agreed and those terms could not now be modified. The learned Senior Advocate placed reliance on the decisions in Pancham Chand & others v. State of Himachal Pradesh & others ( AIR 2008 SC 1888 ); Ravi Anandilal Umre & others v. Collector, Wardha & another (2008 (3) Mh LJ 758); Suzuki Parasrampuria Suitings Pvt. Ltd. v. Official Liquidator of Mahendra Petrochemicals Ltd. (In Liquidation) & others ( AIR 2018 SC 4769 ); ABL International Ltd. & another v. Export Credit Guarantee Corporation of India Ltd. & others ( (2004) 3 SCC 553 ); State of Karnataka & another v. All India Manufacturers Organisation & others ( (2006) 4 SCC 683 ): ( AIR 2006 SC 1846 ); Syed Maqbool Ali v. State of Uttar Pradesh & another ( (2011)15 SCC 383 ): ( AIR 2011 SC 2542 ); M/s. Punya Coal Roadlines & others v. M/s. Western Coalfield Limited & others ( (2014)4 ABR 243); Indian Explosives Ltd. & another v. Coal India Ltd. & others (AIR 2018 SC (Supp) 1445); Surya Constructions v. State of Uttar Pradesh & others and Civil Appeal Nos. 593-594 of 2020 (Reported in AIR 2020 SC 594 ) (M/s. Granules India Ltd. v. Union of India & others) in support of his contentions. It was thus submitted that the petitioner was entitled to the reliefs as prayed for in the writ petition. 5. Shri V.G. Palshikar, learned counsel for the respondents on the other hand opposed the aforesaid submissions. At the outset, he submitted that since the petitioner was seeking to enforce its contractual rights, the petitioner ought to approach the Civil Court for seeking the relief of specific performance. The prayers as made in the writ petition could not be entertained as the alleged dispute between the parties was based on the contract between them. Since disputed questions arose for adjudication, this Court should not entertain the writ petition. He then submitted that in the order terminating the contract, two specific reasons had been given. Firstly, the land on which the work was to be carried out was not available. Despite extension being granted to the petitioner, the process of acquisition of the required lands was not completed as a result of which no land on which the work could be carried out was available.
Firstly, the land on which the work was to be carried out was not available. Despite extension being granted to the petitioner, the process of acquisition of the required lands was not completed as a result of which no land on which the work could be carried out was available. The other ground was that the work order issued to the petitioner had been reviewed by the Wadnere Committee and that Committee-had found that the rates had escalated. On these counts, it was the Corporation which took the decision to terminate the contract in public interest. There was no question of the Corporation acting on the directions of the State Government. 6. The learned counsel for the respondents further submitted that the petitioner had been given an offer to complete the work on the basis of the current schedule of rates but the petitioner insisted on completing the work at higher rates as per the original agreement. This indicated that there was substance in the observations of the Wadnere Committee with regard to escalation of prices. He also referred to the affidavit dated 22.01.2020 that was filed alongwith a map indicating portions of land that were yet to be acquired as a result of which the work could not be carried out. Land admeasuring 3 Hectare 37 R was still to be acquired and therefore since no land was now available for completing the work, the contract was rightly terminated. The learned counsel placed reliance on the decisions in State of Bihar & others v. Jain Plastics and Chemicals Ltd. ( (2002) 1 SCC 216 ): ( AIR 2002 SC 206 ); State of U.P. & others v. Bridge & Roof Company (India) Ltd. ( (1996) 6 SCC 22 ) : ( AIR 1996 SC 3515 ); Bareilly Development Authority & another v. Ajai Pal Singh & others ( (1989) 2 SCC 116 ) : ( AIR 1989 SC 1076 ); Kerala State Electricity Board & another v. Kurien E. Kalathil & others ( (2000) 6 SCC 293 ): ( AIR 2000 SC 2573 ) and National Highways Authority of India v. Ganga Enterprises & another ( (2003) 7 SCC 410 ) : ( AIR 2003 SC 3823 ) and submitted that the petitioner was not entitled to any relief whatsoever. 7.
7. We have heard the learned counsel for the parties at length and we have gone through the relevant documents placed on record. The fact that the tender of the petitioner came to be accepted on 20.03.2009 after which it was issued a work order on 22.07.2009 is not in dispute. The petitioner had quoted the rates to the extent of 21.80% above the tender rates that were accepted. The total land on which the work was to be carried out was 11 Hectare 86 R. It is also not in dispute that for the work already done the petitioner has been paid the requisite amounts. The show-cause notice dated 15.11.2016 indicates two grounds being put forward by the Corporation for seeking to terminate the contract. It was stated that the work was awarded at 21.80% above the estimated cost of the tender and on review by the Wadnere Committee, it was found that the rates had been escalated while updating. Similarly, it was not known as to when the process of acquisition of land would be completed as per the tender. On that count, the petitioner was given a choice to exercise option under Clause 15(1) of the Contract. Said Clause 15 permits the Executive Engineer to rescind the contract for any reason whatsoever other than the fault on the part of the contractor. After considering the reply of the petitioner, the Corporation proceeded to terminate the contract by the order dated 23.01.2017. The grounds on which the petitioner was asked to show cause have been taken into account for rescinding the contract. 8. At the outset, the objection raised by the respondents to the tenability of the Contract may be considered. According to the respondents, since the petitioner was seeking enforcement of its contractual right under the work order, it ought to approach the Civil Court for obtaining necessary reliefs for breach of the contract. Since there were various disputed questions of fact and as an efficacious remedy was available to the petitioner, the writ petition under Article 226 of the Constitution of India was not liable to be entertained.
Since there were various disputed questions of fact and as an efficacious remedy was available to the petitioner, the writ petition under Article 226 of the Constitution of India was not liable to be entertained. On the other hand, according to the petitioner, there is no arbitration clause in the contract in question and since the action of terminating the contract is sought to be challenged as being illegal and without being based on sufficient grounds, the writ petition could be entertained under Article 226 of the Constitution of India. There was no bar for entertaining the writ petition even though the relief sought was of continuation of the contract in question. After considering the decisions relied upon by the learned counsel for the parties, we find that in an appropriate case, a writ petition against an instrumentality of the State or a Statutory Corporation arising out of a contractual obligation would be maintainable as held in paragraph 27 of the decision in ABL International Ltd. (supra). The High Court can having regard to the facts of the case exercise discretion to either entertain or not to entertain the writ petition in the light of recognized restrictions in the exercise of this power. Similarly, as held in paragraph 59 of the decision in State of Karnataka ( AIR 2006 SC 1846 ) (supra), if it is found that the Statutory Corporation has acted in an arbitrary manner or its decision is tainted with mala fides, the Court under Article 226 of the Constitution of India can consider the matter. Thus, in the light of the limited scope available in such matters, we have examined the respective contentions for considering whether the action on the part of the respondents in discontinuing the contract executed in favour of the petitioner suffers from arbitrariness or that such decision has been taken mala fidely. We do not intend to examine any disputed question of fact and the exercise is restricted to considering the reasons assigned by the respondents in the communication dated 23.01.2017 terminating the contract. 9. The principal ground for rescinding the contract appears to be the non-availability of land for completing the work as per the work order.
We do not intend to examine any disputed question of fact and the exercise is restricted to considering the reasons assigned by the respondents in the communication dated 23.01.2017 terminating the contract. 9. The principal ground for rescinding the contract appears to be the non-availability of land for completing the work as per the work order. The assertions made on behalf of the Corporation in the affidavit dated 22.01.2020 filed by the Executive Engineer of the Corporation clearly states that while the total land required for construction of the canal was 11 Hectare 86 R, land to the extent of 3 Hectare 37 R was yet to be acquired. This aspect is sought to be substantiated by filing a sketch map to indicate that various tracts of land which are required for the purposes of completing the work of the canal had not been acquired. This aspect is also not countered by the petitioner. Instead the petitioner seeks to rely upon the provisions of the Maharashtra Public Works Manual to urge that the exercise of acquisition of the required lands ought to have been completed by the Corporation prior to the issuance of the work order. Since at present there is no land available for carrying out the work and the Corporation is not in a position to indicate the time that would be required for completion of the process of acquisition, it has proceeded to rescind the contract in public interest. This decision to rescind the contract has also to be considered in the backdrop of the fact that the work order was issued on 22.07.2009 and a period of almost eight years has lapsed thereafter. The initial period for completion of the contract was twenty four months which period has already been extended once by a period of forty eight months. In the light of these admitted facts, namely non-availability of land to carry out work, it cannot be said that the decision on the part of the Corporation to rescind the contract is either arbitrary or is based on nonexistent grounds. 10. Another reason put forward by the Corporation is the report of the Wadnere Committee. The petitioner's tender was accepted at 21.80% rate above the cost of the tender. The said Committee on scrutiny has found the rates to be escalated.
10. Another reason put forward by the Corporation is the report of the Wadnere Committee. The petitioner's tender was accepted at 21.80% rate above the cost of the tender. The said Committee on scrutiny has found the rates to be escalated. According to the Corporation, the total cost that would be required to complete the work would be approximately Rs. 425.23 Lakhs as stated in the affidavit of the Executive Engineer dated 01.12.2019. According to the Corporation, if a fresh tender is now called the work would be completed at the cost of Rs. 312.25 Lakhs. In other words, by calling a fresh tender, public money of about Rs. 112.98 Lakhs would be saved. In this backdrop, in the meeting held on 28.11.2018 the petitioner was asked if it was ready to complete the remaining work under the agreement at the current schedule of rates in larger public interest. However, this proposal was not accepted by the petitioner. If these aspects are considered broadly then the stand taken by the Corporation of seeking to rely upon the report of the Wadnere Committee for rescinding the Contract cannot be said to be an unjustified stand. That the work order was issued at 21.80% above the cost of the tender is undisputed. This is the other ground that has prompted the Corporation to rescind the contract. Thus, even this ground cannot be said to suffer from any arbitrariness nor is the stand as taken unjustified. The same appears to be taken in larger public interest and the same has been mentioned in the impugned order. 11. Though it was urged on behalf of the petitioner that the decision to rescind the contract was taken at the dictates of the State Government, we do not find any sufficient material to record such a finding. It is found that the work order has been rescinded in terms of the show-cause notice by relying upon Clause 15 of the contract. Hence, even on this count, we do not find that the petitioner is entitled for any relief in that regard. 12. Thus, the order dated 23.01.2017 rescinding the contract is not liable to be interfered with.
It is found that the work order has been rescinded in terms of the show-cause notice by relying upon Clause 15 of the contract. Hence, even on this count, we do not find that the petitioner is entitled for any relief in that regard. 12. Thus, the order dated 23.01.2017 rescinding the contract is not liable to be interfered with. The same having been issued in exercise of the powers under Clause 15 of the contract by giving justifiable reasons, namely non-availability of land to complete the work and rates in the work order having been found to have been escalated by the Wadnere Committee, the challenge to that order fails. At the same time, it would be open for the petitioner to seek appropriate relief in the form of damages if so advised on account of the contract being rescinded by the Corporation. The liberty to that extent would stand reserved in favour of the petitioner. 13. In the light of the aforesaid adjudication, there is no reason to interfere in writ jurisdiction. The challenge to the order dated 23.01.2017 cannot succeed. The writ petition stands dismissed. Rule is discharged leaving the parties to bear their own costs. 14. At this stage, learned counsel for the petitioner prays that the interim order granted on 06.03.2017 be continued for further period of six weeks. This request is opposed by the learned counsel for the respondent. In the facts of the case as the interim order is operating since long, it is continued for further period of six weeks from today. It shall cease to operate automatically thereafter.