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2021 DIGILAW 436 (GAU)

Gayatri Projects Ltd. v. National Highways and Infrastructure Development Corporation of India Limited

2021-07-14

S.HUKATO SWU, SONGKHUPCHUNG SERTO

body2021
JUDGMENT : Songkhupchung Serto, J. 1. This is a petition praying for issuance of a writ in the nature of mandamus or any other appropriate writ or order or direction directing the respondent No. 1 to go for foreclosure of the agreement dated 22.04.2016 executed by both the petitioner and the respondent No. 1 for the work, four lanning of the existing Dimapur-Kohima road from design chainage Km 152.490 to 166.700 (existing Km 156.00 to 172.900) excluding Dimapur-Kohima Bypass, under SARDP-NE through Engineering, Procurement and Construction (EPC contract), for a contract price of NIR 340 crores in terms of the O.M. dated 09.03.2019, issued by the Ministry of Road Transport and Highway dealing with stuck projects and, other consequential reliefs. 2. Heard Mr. C.T. Jamir, learned Sr. counsel, assisted by Mr. Ram Babu and Mr. N. Khat for the petitioner. We have also heard Mr. D.K. Banerjee, learned Sr. counsel appearing for the NHIDCL (respondents No. 1 & 3), assisted by Mr. Moa Jamir and, Mr. Paul, Authority Engineer (respondents No. 10) in person and, Mr. K. Sema, learned Sr. Addl. Advocate General appearing for the State of Nagaland, assisted by Ms. Livika. 3. Mr. C.T. Jamir, learned senior counsel appearing for the writ petitioner submitted that as per paragraph 4 of the OM No. NH-24028/19/2018-H(Pt.), dated 9/3/2019 issued by the Government of India, Ministry of Road Transport and Highways, all projects undertaken or executed by the Ministry and other agencies like NHIDCL through various modes including EPC mode, should be foreclosed if the project is stuck and cannot be completed. Mr. C.T. Jamir referred to paragraph 2(i) of the guiding principle in support of his submission and the same reads as follows:- "(i) Stuck Projects awarded under EPC Mode: The projects awarded under the EPC mode, which qualify as Stuck Projects, recourse may be taken to fore-closure of the EPC Agreement vide a Supplementary Agreement mutually agreed and executed between the Parties. The Authority would pay for executed/completed work in terms of milestone payment criteria set forth in Schedule-H of the Agreement in the manner laid down in the concerned Agreement. As regards the executed work not meeting the aforementioned milestone payment criteria but determined to be usable by the Authority, payment for such work will be made as per the amount assessed by the Authority." Mr. As regards the executed work not meeting the aforementioned milestone payment criteria but determined to be usable by the Authority, payment for such work will be made as per the amount assessed by the Authority." Mr. C.T. Jamir, thereafter, submitted also that in view of the stated principle and as per clause 26.2 of the contract agreement, the parties were under a process to foreclose the agreement. And pursuant thereto, a conciliation meeting was held on 16/2/2012 and in that meeting, the NHIDCL asked the writ petitioner to surrender the work so that unfinished part of the project can be entrusted to another contractor for early completion. Accordingly, a draft for foreclosure was prepared by the respondents and the same was communicated to the writ petitioner through an e-mail, dated 24/2/2021. And on received of the same, the writ petitioner suggested some changes through an e-mail, dated 24/2/2021. The changes suggested were however, rejected by the respondents and instead, the writ petitioner was directed to complete the project by 31/5/2021. But, in another meeting held on 5/3/2021 between the employer and the contractor, an understanding was reached whereby, the writ petitioner agreed to surrender the project and the respondent was willing to take over the same. However, certain changes were made in the draft of foreclosure agreement by the respondent and, while the matter was pending at that stage, the respondent issued the notice dated 9/4/2021 for termination of the contract agreement. Thereafter, without considering petitioner's reply given through a letter dated 19/4/2021 the respondents, vide letter 1/6/2021 informed the petitioner that the contract agreement has been terminated forthwith in accordance with clause 23.1.2 of the contract agreement. This order of termination of the contract agreement, according to the learned counsel, is violative of the O.M., dated 9/3/2019, issued by the Government of India and it is also not in public interest as it would delay completion of the project. He also submitted that 72% of the project has been completed and, if the petitioner is allowed to continue, the whole project would be completed within a period of 2 to 3 months. Mr. He also submitted that 72% of the project has been completed and, if the petitioner is allowed to continue, the whole project would be completed within a period of 2 to 3 months. Mr. C.T. Jamir, at the end of his submission also submitted that the petitioner could not start the work in time as the right of way was given much later than the time that was in the agreement, and that has also contributed to the delay in completing the project. 4. Mr. Banerjee, senior counsel appearing for the respondent Nos. 1 and 3 (NHIDCL), submitted that in spite of project review meetings held regularly and repeated assurances given in such meetings by the writ petitioner, no much progress was made in the project and there was no hope of ever completing the same in time. The learned counsel further submitted that; in fact, due to financial difficulties, the writ petitioner had even expressed in one of the meetings that, he may not be able to complete the project. It was after taking all these into account that a foreclosure proceeding was initiated with the consent of both the parties. But, due to disagreement on certain clauses of the draft agreement the same failed. Therefore, keeping in view all the above, the public interest, the directions of this Court to complete the project within the time frame given, and the ground realities, the contract was terminated. The learned counsel further submitted that, in the PIL, through which this Court has been monitoring the progress of the project, the respondents Nos. 1 and 2 have been permitted to take stringent actions since the writ petitioner failed to keep the promises made. As such, there is nothing illegal in the actions taken which has resulted in the termination of the petitioner's contract. Mr. Baneerjee, submitted also that among the prayers given in the writ petition there is no mention of setting aside or quashing the termination order therefore, the writ petition, in strict sense, has not challenged the termination order. 5. We have perused the record and considered the submissions of the learned counsels. As per the record, and the submissions of the learned counsels, the facts and circumstances which lead to the termination of the contract of the writ petitioner are as follows; 5.1. 5. We have perused the record and considered the submissions of the learned counsels. As per the record, and the submissions of the learned counsels, the facts and circumstances which lead to the termination of the contract of the writ petitioner are as follows; 5.1. The writ petitioner was awarded a contract for construction of four lanes on the existing Dimapur-Kohima road, from design Chainage Km 152.490 to 166.700 (existing Km 156.00 to 172.900), excluding Dimapur-Kohima bypass by the respondent No. 1 and accordingly, an agreement was signed on 22.04.2016. As per the agreement, the contract amount was Rs. 340 crores and the work was to be completed on the 1095th day from the appointed date. The writ petitioner could not complete the work on the scheduled date. Seeing the inconveniences suffered by the people of the 'State of Nagaland' and people who commute through that road, this Court took up a PIL on Suo Moto on 18.10.2019 and, notice were issued to the stakeholders. On 06.12.2019, after hearing the parties this Court felt the necessity to implead the contractors who were awarded the LOA for construction of the four lanes on the National Highway. Therefore, notice was issued to the two contractors, including the petitioner in the instant writ petition as the respondent No. 9. 5.2. On 11.12.2019, the PIL was heard again and the Court was informed that the Project No. 3 i.e. the contract work in question, would be completed by February, 2020. But on 02.03.2020, it was submitted by the respondents No. 7 to 10 i.e. including the present petitioner that out of the pending project, only black topping of two lanes would be completed before 31st March, 2020. Accordingly, the respondents No. 7 to 10 were directed to file affidavits affirming the same. The matter came up for hearing once again on 16.03.2020, however, the affidavits were not filed. Therefore, the respondents were directed to file a comprehensive affidavit showing pragmatic plan for completion of the whole project within a time frame. They were also directed to complete black topping of the two lanes at least by 30.04.2020 as promised. Again on 13.05.2020, after hearing, the respondents were directed to file an affidavit stating as to when the project would be completed. They were also directed to complete black topping of the two lanes at least by 30.04.2020 as promised. Again on 13.05.2020, after hearing, the respondents were directed to file an affidavit stating as to when the project would be completed. In compliance thereof the respondents, No. 7, 8, 9 & 10 filed their respective affidavits stating that black topping of two lanes which were going on would be completed in the month of November, 2020 and the entire project by 20.03.2021. The same was noted by this Court in the order dated 03.06.2020, passed in the PIL. On 03.08.2020 when the case came up for hearing the respondents No. 8 & 9 i.e. the two contractors one of which is the writ petitioner (respondent no. 9), assured the Court once again that, the project would be completed within the time frame given by them in their affidavit. On the subsequent dates of hearing also i.e. on 07.10.2020 and on 29.10.2020, the respondents including the writ petitioner assured the Court that the project would be completed within the time frame stated in their affidavits. However, to make sure that progress of the work is maintained and the project is completed within the time frame given by the respondents, this Court requested two Senior Advocates, the Chief Engineer, National Highway, Government of Nagaland and the Registrar of this Bench to inspect the whole length of the project on a day convenient to them and to submit a report on the progress made so far and their assessment as to whether the work would be completed or not within the time frame stated above. One of the Senior counsels happens to be the leading counsel appearing for the petitioner in this writ petition. The team submitted their report and the same was placed before this Court on 27.11.2020. In the report, after noting the progress of the work in detail, the team observed that completion of the whole project may not be achievable within the time frame given by the respondents in their affidavit. However, they recorded the assurance given by the contractors that the project would be completed as per their assurance given earlier. On the same day the affidavit filed by respondent No. 10 was perused. However, they recorded the assurance given by the contractors that the project would be completed as per their assurance given earlier. On the same day the affidavit filed by respondent No. 10 was perused. In that it was stated that unless the contractors deploy more man power and machineries it would not be possible for them to complete the project within the time frame promised by them. Taking into consideration what was stated in the affidavit of respondent No. 10, the report of the team, and the submissions of the learned counsels of all the parties, the respondent No. 10 was once again directed to submit detail status report, on the next date fixed for hearing. On the next date i.e. 8/12/2020, the respondent No. 10, while submitting the report, submitted also that though it is possible that the respondent No. 9 (the writ petitioner) may complete the project (Project No. 3) within the time line promised i.e., completion of two lanning by 31st of December 2020 and the whole project by 31/3/2021, it would be possible only if machineries and materials are in place. He further mentioned that, the only hot mix plant installed by the contractor was out of order, and without it would be impossible to complete the project within the time line mentioned above. On that day Mr. Karan Khanna, learned counsel appearing for respondent No. 9 (the writ petitioner) assured the court that the whole project would be completed as promised but, there will be some problems as far as a stretch of 2.5 Km is concerned since there has been landslide in that area. He also assured the Court that, the hot mix plant would be restored in one or two days and, to supplement the same, drum mix plants would also be used to keep the time line for completion of the project. Accordingly, this Court directed the respondent No. 9 (the writ petitioner) to file an affidavit that the project would be completed within the time mentioned above. However, on the next date fixed for hearing i.e. on 18/1/2021, the learned counsel of the respondent No. 9 (the writ petitioner) prayed for more time to file the affidavit. Accordingly, time was granted; but on 2/2/2021, when the case came up for hearing, the learned Amicus Curiae Mr. However, on the next date fixed for hearing i.e. on 18/1/2021, the learned counsel of the respondent No. 9 (the writ petitioner) prayed for more time to file the affidavit. Accordingly, time was granted; but on 2/2/2021, when the case came up for hearing, the learned Amicus Curiae Mr. Taka Masa, senior counsel and respondent No. 10 submitted that, the progress in the Package-1 and 2 of the project are good though some delay has taken place due to land compensation issues, but on the Package-3, the two stone crushers have not been made operational and there was no much progress. Therefore, the Managing Director of the Company be directed to appear in person to explain as to why the assurance given in the affidavit filed on 11/12/2020 has not been kept. Taking into account the fact that despite assurances given in the affidavit filed on 11/12/2020, and the assurances given on different dates, nothing much has been done to complete the work in time, this Court, after recording own displeasure on the same, directed the Managing Director of 'Gayatri project' to appear in person on 11/2/2021. On 11/2/2021, the Managing Director of 'Gayatri Project Ltd.' (respondent No. 9) appeared through VC. At the very outset of that day's hearing, the respondent No. 10 submitted that, during the last 25 days progress of black topping in the package No. 3 was only to the extent of 480 meters, and the two stone crushers installed by the contractor at the work site are yet to be made operational. To this, the Managing Director, 'Gayatri Project Ltd.' submitted that, progress of the work has been slowed down due to the closure of the factory from where bitumen was ordered but now that it has been opened again they will procure the required amount of the same and the work on Package-3 will go on in full swing. He also assured that, the 2 lanning would be completed by the end of April 2021 and the whole project will be completed in the month of May 2021 except for the 2.5. Km where landslide had occurred. The Managing Director also requested for 2 weeks time so that he may be able to appear in person. He also assured that, the 2 lanning would be completed by the end of April 2021 and the whole project will be completed in the month of May 2021 except for the 2.5. Km where landslide had occurred. The Managing Director also requested for 2 weeks time so that he may be able to appear in person. After having heard the parties, this Court expressed concern on the slow progress at Package-3 of the project and asked the Managing Director to appear in person and explain as to why the promise given in the affidavit filed on 11/12/2020 have not been kept. But, on 17/3/2021 the Managing Director did not appear and the learned counsel appearing for respondent No. 9 (writ petitioner) explained the same by submitting that he could not do so due to tenderness over lumber spine and, at the same time prayed for another date. Considering the ground on which the prayer was made, this Court allowed the same, but directed the Managing Director to appear on the next date fixed. On that day, Mr. Banerjee, learned senior counsel appearing for NHIDCL (respondent No. 6 and 7 in this writ petition), submitted that respondent No. 9 (the writ petitioner) has failed to complete the work as per the promises or assurances given. On 24/3/2021, the matter came up for hearing again and after hearing the parties including the Managing Director, 'Gayatri Project Ltd.' who appeared in person, this Court passed the following order:- "Heard Mr. Taka Masa, learned Amicus Curiae assisted by Mr. Sentilong learned counsel, Mr. D. Banerjee, learned Sr. Counsel appearing for the respondent nos. 6 & 7, Ms. Livika, learned Government Advocate appearing for the respondent Nos. 3 to 5; Mr. K. Luikang Michael, learned counsel for the respondent no. 8 and Mr. Annand Kumar, learned counsel for the respondent No. 9. Pursuant to the order dated 17.034(sic).2021, Mr. Sandeep Reddy, the managing Director, Gayatri projects Ltd. (respondent No. 9) is present before this Court and he submitted that the process for foreclosure as contemplated under the NIT is being initiated between the Employer NHIDCL and the contractor. It is submitted by Mr. Reddy that because of financial hardships and other issues his company is unable to complete the balance work. He however, does not deny the undertaking given by the Company by way of the affidavit filed by Mr. It is submitted by Mr. Reddy that because of financial hardships and other issues his company is unable to complete the balance work. He however, does not deny the undertaking given by the Company by way of the affidavit filed by Mr. S. Venketaswara Rao, the Vice President of the Company. In terms of the affidavit in Para-5, the signatory of the affidavit, the Vice President of the respondent No. 9 had categorically undertaken to complete the four lane road works on or before 31st of March, 2020. The respondent No. 9 has been awarded Package-3 of the contract work starting from 152, 490 Km to 166.700 Km. The relevant paragraphs of the affidavit filed on 11.12.2020 by respondent No. 9 are extracted below: "4. That the answering respondent respectfully submits the brief summary of the progress of work on the ongoing work: a. As directed by this Hon'ble Court by order dated 08.12.2020, an Engineer has been brought from Andhra Pradesh and the hot-mix plant, which is stated to be severely damaged is under war-foot reparation. b. The remaining stretch of the two lane road left of blacktopping is 9.2 kilometres, out of which 2.5 kilometres stretch of land is a landslide area. It will be difficult to blacktop the remaining 6.7. kilometers on or before 31st December, 2020. c. Presently, the blacktopping of the 2 lane road is progressing at 250 metres per day. Therefore, as on today the 10.12.2020 till December 30, i.e., 20 days, the stretch of 5 kilometers 2 lane will be completed. There are areas where the blacktopping was done earlier by the answering Respondent. At such stretch of road, the damaged areas will be repaired. The answering respondent assures this Hon'ble Court that the 2 lane blacktopping will be completed on or before the 31st December 2020 as directed by this Hon'ble Court, except the 2.5. kilometers area of landslide. The answering respondent undertakes to keep the landslide area of 2.5 kilometers stretch in good condition for all types of vehicle. d. The area at KM. 0.160 which is yet to be cut is outside the existing 2 lane road, therefore, the existing 2 lane road will be blacktopped while the fresh cutting of the four lane road shall continue simultaneously. 5. d. The area at KM. 0.160 which is yet to be cut is outside the existing 2 lane road, therefore, the existing 2 lane road will be blacktopped while the fresh cutting of the four lane road shall continue simultaneously. 5. That unless due to unavoidable circumstance beyond the control of the answering Respondent, which will be brought to the knowledge of this Hon'ble Court, the answering Respondent undertakes to complete the blacktopping of 2 lane road on or before 31st December, 2020 except the landslide stretch of 2.5. kilometres and further undertakes to complete the four lane road on or before 31st March, 2020". Today Mr. Reddy appears in Court in person and submits that they are unable to execute the undertaking given by the Company. This Court is of the view that notices under the Contempt Act, 1971 be issued to Mr. Sandeep Reddy, Managing Director, Gayatri projects Ltd. and Mr. M. Venketaswara Rao, Vice President of the Gayatri projects as to why the proceedings contemplated under the Contempt of Court Act, 1971 should not be initiated in view of the undertaking given to the Court by way of an affidavit. The respondent No. 9 has not explained the circumstances or has not been able to convince the Court to take the view to the contrary that while giving the undertaking by way of an affidavit filed on 11.12.2020, the representative of the respondent No. 9 namely, Mr. M. Venketaswara Rao and Mr. Sandeep Reddy did not intend to comply the undertaking given by way of the affidavit. In view of the fact that specific undertaking given in the Court on behalf of respondent No. 9 is seen to have been deliberately not complied with, this Court had contemplated to register separate proceedings under the Contempt of Courts Act and issue notices on Mr. M. Venketaswara Rao, Vice President of the Gayatri projects and Mr. Sandeep Reddy, Managing Director, Gayatri projects Ltd., to show cause as to why the proceedings under Contempt of Court Act, 1971 read with Gauhati High Court Rules (Contempt of Courts) Act should not be initiated and appropriate orders thereto be passed. M. Venketaswara Rao, Vice President of the Gayatri projects and Mr. Sandeep Reddy, Managing Director, Gayatri projects Ltd., to show cause as to why the proceedings under Contempt of Court Act, 1971 read with Gauhati High Court Rules (Contempt of Courts) Act should not be initiated and appropriate orders thereto be passed. However the learned counsel for the respondent No. 9 has submitted that two weeks time be granted to file affidavit and to bring on record all facts necessary to satisfy this Court that there was every intention of complying with the undertaking given in the Court, but for reasons beyond their control, the undertaking to execute the work could not be complied with. In view of the submissions made by mr. A. Kumar, learned counsel on behalf of respondent No. 9, issuance of notices is deferred by two weeks enabling the learned counsel to bring on record their explanations in support of prayers made. Personal appearance of Mr. Sandeep Reddy is dispensed with until further orders. In so far as the NHIDCL is concerned, it is submitted in Court that notice of intention to terminate for failure to complete its work is contemplated to be issued to respondent No. 9. Accordingly, liberty is also granted to the NHIDCL to take steps forthwith in order to execute the balance work in respect of package-3 which could not be executed by respondent No. 9. Steps in this regard be taken by NHIDCL be brought on record by way of an affidavit. In so far as the respondent No. 8 is concerned, Mr. K.L. Michael, learned counsel submits that there are certain difficulties faced by the contractor in executing the works in terms of the time schedule like clearance of rock and soil after blasting and acquisition etc. It is, therefore, directed that the respondent No. 8 should file necessary application before this Court highlighting the issue in respect of which orders are sought for from this Court in order to enable respondent no. 8 to complete the work within the time schedule. The respondent No. 10, the technical Expert/Team leader is directed to file status report before this Court prior to date fixed showing the progress of the work carried on by the contractors in respect of all the packages henceforth. 8 to complete the work within the time schedule. The respondent No. 10, the technical Expert/Team leader is directed to file status report before this Court prior to date fixed showing the progress of the work carried on by the contractors in respect of all the packages henceforth. The State respondents are also directed to expedite the work on the alternative route in order to facilitate communication between Dimapur to Kohima. The Status of said work be also brought on record by way of affidavit filed. List again on 19.04.2021 for further order and for consideration of the issue of notices in respect of the proceedings under the Contempt of Court Act subject to the explanation being furnished by the respondent No. 9 in the form of an affidavit as directed. A copy of this order be furnished to all counsels appearing for the respective parties." 5.3. On the next date of hearing i.e. on 19/4/2021 this Court was informed that steps have already been initiated for taking stringent measures for expeditious execution of the work at package 3 including a proposal for termination of the contract agreement. 5.4. It appears from the submissions of the learned counsels and the contents of the writ petition that, an attempt was made by both the parties to foreclose the contract agreement but, since the same failed steps were taken by the respondents to terminate the contract. It also appears that, the writ petitioner had filed W.P.(C) No.82/2021 to prevent termination of the contract but, the same was dismissed by an order dated 29/4/2021, mainly on two grounds : (i) That since the contract has not been terminated, the writ petition is pre mature. (ii) That since the matter is pending before the PIL Court it would not be proper for a Single Judge to take up the matter. It also appears that, the writ petitioner had also filed an appeal (W.A. No. 6/2021) but, while the same was pending the contract agreement was terminated by an order dated 1/6/2021, issued by Executive Director NHIDCL, in accordance with Clause 23.1.2 of the contract agreement with immediate effect. And when the appeal was heard on 2/6/2021 it was also dismissed but, by granting liberty/leave to challenge the termination order before this Court. It is in pursuance of the leave granted that the petitioner is before this Court by filing the present writ petition. 6. And when the appeal was heard on 2/6/2021 it was also dismissed but, by granting liberty/leave to challenge the termination order before this Court. It is in pursuance of the leave granted that the petitioner is before this Court by filing the present writ petition. 6. It is clear from the facts and circumstances given above and from the contents of the termination order dated 1/6/2021 that the extreme action of contract termination was taken only after the writ petitioner failed to keep the terms and conditions given therein and the promises made before this Court through affidavits and oral submissions. Further, it is also clear from the record that the termination order was issued after the writ petitioner, on his own, admitted that it was not possible for him to complete the project and after the foreclosure proceedings failed to materialise or could not be signed due to differences between the parties on certain clauses in the draft agreement. Lastly, it can also be seen from the order dated 24/3/2021, passed in the PIL Suo Moto No. 2/2019 that, such action was taken only after this Court had given the liberty to NHIDCL to terminate the contract agreement considering the writ petitioner's (respondent No. 9) inability to complete the project in spite of the promises made, and only after he was asked to file affidavit explaining as to why a contempt proceeding should not be taken up for not keeping the promises made before this Court. Taking all these into consideration we are of the view that there is no room for any interference in the actions taken by the respondents which has resulted in the termination of contract. It is a settled principle of law that in matters of contract work involving public interest, it is the public interest itself which should be given paramount importance. In this case, we have seen the dismal performance of the writ petitioner in the execution of the project while monitoring the same through the PIL taken up Suo Moto. The petitioner has repeatedly failed to comply with the directions given by this Court and also failed to keep the promises made through affidavits and oral submissions. In the meanwhile, the public has suffered so much inconveniences and at the same time resources have also been wasted. The Court's leniency has a limit and it cannot be extended beyond a point. In the meanwhile, the public has suffered so much inconveniences and at the same time resources have also been wasted. The Court's leniency has a limit and it cannot be extended beyond a point. It should also not be taken for granted and as a matter of privilege. The road on which the project is taken up is a National Highway which serves two states having a population of about 5 million. This is also the road which connects India with 'South East Asian' countries. Therefore, it is not an ordinary one but of significant importance. The fact that this Court has also intervened is also because of the importance it holds. But the writ petitioner has shown least or scant regard for all these. A contractor taking up a project of such nature and importance is expected to know and respect the public interest involved. Profit making motive alone should not supersede the same. As stated above, having seen the performance of the petitioner closely for the past two years, that is, since our intervention, we are not impressed with the submission of the learned counsel of the petitioner that, given the chance and time the petitioner would be able to complete the project. The facts and circumstances narrated herein above bears testimony to this. As such, to allow the prayer of the petitioner would amount to ignoring the realities and the public interest which is paramount. In view of the above stated facts and circumstances, reasons and opinions expressed which are based on record and settled legal principles, we find no merit in the writ petition. Accordingly, it is dismissed.