Dismissed

M/S Gagan Deal Trade Private Limited v. the Union of India and 5 Ors.

Gauhati HC4 May 2019WP(C)/5955/2015

Case brief

AI extract

What is this about?

Tenderer awarded a contract for construction of an FCI godown failed to submit the promised land documents within the extended time, and the contract was terminated with the bank guarantee encashed and security deposit forfeited. Its writ petition challenging those actions on grounds of frustration, force majeure, arbitrariness and breach of natural justice was dismissed, the court finding no arbi

What did the court decide?

Writ petition dismissed; interim order, if any, vacated.

M/S Gagan Deal Trade Private Limited Vs the… — Public Procurement and Tenders | Gauhati HC (2019)

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GAHC010022192015

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THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

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Case No. : WP(C) 5955/2015

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1:M/S GAGAN DEAL TRADE PRIVATE LIMITED

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A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT 140, CR AVENUE 1ST FLOOR, KOLKATA700007, AND HAVING ITS GUWAHATI OFFICE AT GORCHUK, NH-37, GUWAHATI- 781035, ASSAM TO BE REP. BY SRI NISHANT AGARWAL, S/O SRI. B.L. AGARWAL, RESIDENT OF ANIL PLAZA 2ND FLOOR, G.S. ROAD, GUWAHATI - 781005.

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VERSUS

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1:THE UNION OF INDIA and 5 ORS

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REP. BY ITS CHAIRMAN and MANAGING DIRECTOR, HEAD QUARTER, KHADYA SADAN, 16-20 BARAKHAMBA LANE, NEW DELHI-01.

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2:THE FOOD CORPORATION OF INDIA REP. BY ITS CHAIRMAN and MANAGING DIRECTOR HEAD QUARTER KHADYA SADAN 16-20 BARAKHAMBA LANE NEW DELHI-01.

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3:THE DEPUTY GENERAL MANAGER STORE HEAD QUARTER KHADYA SADAN- 16-20 BARAKHAMBA LANE NEW DELHI-01.

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4:THE EXECUTIVE DIRECTOR NORTH EAST ZONE FOOD CORPORATION OF INDIA G.L. PUBLICATION BUILDING LACHIT NAGAR G.S. ROAD GUWAHATI- 781007.

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5:THE GENERAL MANAGER ASSAM REGION FOOD CORPORATION OF INDIA REGIONAL OFFICE ASSAM REGION G.S. ROAD PALTAN BAZAR GUWAHATI- 781008.

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6:THE BRANCH MANAGER HDFC BANK LT.D G.S. ROAD GUWAHATI - 781005

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Advocate for the Petitioner : MR.D SAIKIA

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Advocate for the Respondent : MR.S K CHAKRABORTYR-2 to 5

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B E F O R E

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HON’BLE MR. JUSTICE PRASANTA KUMAR DEKA

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For the petitioner : Mr. D. Saikia Sr. Advocate Mr. B. Gogoi Advocate

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For the respondents : Mr. P. K. Roy Advocate Mr. R. Chakraborty Advocate

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Date of Hearing : 09.08.2018

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Date of delivery of Judgment and Order : 04-05-2019

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JUDGMENT & ORDER (CAV)

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Heard Mr. D. Saikia, the learned Senior Counsel assisted by Mr. B. Gogoi for the petitioner and Mr. P.K. Roy, the learned Standing Counsel for Food Corporation of India(FCI), respondent No. 2 and other respondents No. 3 to 5, Mr. R. Chakraborty for respondent No.6 HDFC Bank.

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The petitioner company was awarded the contract of construction of 50,000 MT capacity road fed godown at Nagaon vide Letter of Memorandum (LOM) dated 11-09-2014. As per the terms of contract petitioner was required to submit land documents alongwith his offer in the technical bid. As he could not, petitioner submitted supplementary guarantee in the form of Bank Guarantee of Rs.50, 00,000/- @ Rs. 100/- per MT with obligation to submit ownership deed/lease deed of the land mentioned in the technical bid within 120 days from the date of issuance of acceptance of the LOM i,e. 08-01-2015, as per Clauses 6 and 8 of Model Tender Form (MTF). Petitioner could not submit the same and requested for extension of time. Petitioner was granted extension twice upto 31-03-2015 and again upto 07-07-2015. But the petitioner failed to deposit the land documents. In terms of Clause 8 of MTF, the Bank Guarantee of Rs.50, 00,000/- was encashed and the security deposit of Rs.20, 00,000/- was forfeited by the respondent No.2 and the contract was terminated. The termination letter of LOM was dated 30-04-2015 and keeping pending the said termination order, vide letter dated 08-07-2015 addressed to the Branch Manager, HDFC Bank, G.S. Road the Bank guarantee was encashed. The said two letters are challenged by the petitioner for setting aside terming as illegal and arbitrary by writ in the nature of Certiorari and writ of Mandamus for extension of time by 4 (four) months, return back the bank guarantee of Rs.50,00,000/- and a direction not to forfeit the security deposit of Rs.20,00,000/-.

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During the pendency of the writ petition, the General Manager Assam Region, FCI published on 22-12-2015 in the Assam Tribune the NIT issued vide No.19(2)/STG/PEG/DIBNGN/15-16 dated 21-12-2015 inviting sealed tenders for construction of godown with capacity of 30,000 MT for FCI storage requirements to be managed and supervised by the tenderer for a guaranteed lease of ten years on Build, own and operate basis in the district of

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Nagaon. IA 220/2016 was filed to stay the operation of NIT dated 21-12-2015 till final disposal of the present writ petition. The said IA 220/2015 was disposed of vide order dated 29-07-2016 holding that fresh NIT dated 21-12-2015 is subject to the result of this writ petition. But as submitted by Mr. Roy the godown in the subsequent NIT had already become operational and there is no question of further construction of another godown in terms of the earlier NIT.

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Mr. Saikia, the learned Senior Counsel accepting the said submission submits that the writ petition is confined to the extent of relief of refund of the bank guarantee and the security deposit. In order to support his contention that encashment of Bank Guarantee (BG) and forfeiture of Security Deposit (SD) are illegal, Mr. Saikia submits the sequence of events as follows:-

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(I) The NIT dated 10-04-2014 invited sealed tenders under two bid system from tenderer who owns land or holding under registered lease deed for a minimum period of 13 years with permission to construct godown or willing to acquire land by way of ownership/registered lease deed within 120 days from the date of acceptance of tender for construction of godown for FCI storage requirements to be managed and supervised by FCI for a guaranteed lease of ten years on Build, own and operate/lease basis storage of food grains at Revenue district Nagoan for 50,000 MT capacity. Clause 7 of the MTF stipulates that in case tenderer does not own land or hold it on registered lease but intends to acquire the same by way of ownership/registered lease within 120 days from the date of acceptance letter, he shall also furnish in addition to EMD, a supplementary guarantee in the form of BG @ Rs. 100 per MT issued by any Nationalized Bank valid for a minimum period of six months from the date of submission of tender. The same must be accompanied with the technical bid alongwith the EMD @ Rs. 20 per M.T. in the form of Demand Draft. The supplementary BG comes to Rs. 50, 00,000/-.

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(II) There were 14 tenderers and against the competitive bids the petitioner was successful as per his offer to construct and operate the godown over the land to

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be acquired at Village Ouguri, Kachamari, Nagaon Assam. The respondent No. 2 vide its LOM dated 11-09-2014 accepted the offer of the petitioner.

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(III) The petitioner faced hurdles in acquiring the land measuring 67 Bighas and odd for construction of the godown in the said village of Ouguri mainly because-

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(a) some persons including competitors in order to frustrate the intent of the LOM, purchased land proposed by the petitioner in the technical bid as the approach road for ingress and egress from the proposed land earmarked for construction of the godown;

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(b) backtracking by villagers who promised to sell land for the purpose of construction of godown;

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(c) stiff opposition raised by some student bodies and political parties against utilization of agricultural land for constructional purpose etc.

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(IV) Vide letter date 02-01-2015 terming the aforesaid hurdles as ‘fortuitous event’ under Force Majeure Clause as stipulated in Clause 59 of MTF the petitioner sought for the assent from the General Manager (Region), respondent No. 5 to change the site and permit the petitioner to arrange another suitable plot. Similar letters followed on 7-1-2015, 08-01-2015 and 28-01-2015.

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(V) Respondent Corporation vide letter dated 25-02-2015 informed the petitioner that the State Level Committee (SLC) extended the time period of submission of land documents till 31-03-2015.

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(VI) Petitioner sought for further extension of time for submission of land documents till 7-7-2015 which was the date sought for extension vide letter dated 8- 01-2015.

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(VII) Vide letter dated 30-04-2015 the respondent No. 5 terminated the contract awarded to the petitioner invoking Clauses 8, 9 and 57(B) of the MTF mainly on the ground of failure to submit land documents. The termination was with the liability of risk and cost of the petitioner.

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(VIII) An appeal for reviewing of the termination order was also requested vide letter dated 6-5-2015 and also for granting further extension as follows:-

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“1. …………………………we now desire to make up for the last time and hence it would be in the fitness of things and in accordance with the tenets of law to seek a further extension upto 7-12-2015 to compensate the lost period and during which period the procurement/purchase of land would be completed. And after the final purchase which has to be preceded by the grant of ‘sale permission’ by the office of the Deputy Commissioner of Nagaon, we would be in a position to submit the final sale deeds to you by then.”

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(IX) Vide letter dated 10-06-2015 addressed to the petitioner, the respondent No. 5 informed that the SLC granted extension for submission of land/lease documents by a majority decision upto 07-07-2015 subject to ratification by HLC and reduction in period of guarantee to the extent of delay. It was advised to make arrangement for purchase/lease deed of total 67 Bighas 4 Kathas 7 Lechas of land as per awarded contract within 07-07-2015. The termination order given effect was kept pending upto 07-07-2015.

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(X) Extension sought till 7-12-2015 by the petitioner as letter extending time period till 7-7-2015 was not issued till 11-06-2015 as decided in the meeting held in presence of representative of petitioner. Even if it was issued the same would not serve the purpose as such sought for extension upto 7-12-2015 vide letter dated 1106-2015 alongwith the request for withdrawal of coercive measures.

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(XI) Petitioner vide letter dated 06-07-2015 sought for intervention of the Joint

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Secretary, Food and Public Distribution, Govt. of India, New Delhi by granting at least 4 months extension to perform the contractual liability. The BG was extended till January 2016.

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(XII) Referring Minutes of agenda No. 1 of SLC meeting dated 14-05-2015, vide letter dated 06-07-2015 by the Dy. General Manager (Storage) cum Executive Director (Storage) to the respondent No. 5, drawing attention of Clause No. 31 of MTF providing a period of one year for construction of Non Railway Siding Godown which includes the 120 days time for production of land documents and delay of one year may be allowed with corresponding reduction of guarantee period it was pointed out that as LOM was issued to the petitioner on 11-09-2014, a reduction of guarantee period would come into effect after 10-09-2015. Thus it was opined that linking extension in period for submission of land document with reduction in guarantee period was not proper. Referring circular dated 20-08-2013 it was informed that SLC have been authorized to decide matters if there is delay in submission of required land documents beyond permissible time period of 120 days and as such requested to take action accordingly.

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(XIII) Vide letter dated 08-07-2015 issued by respondent No. 5 to the Branch Manager, HDFC Bank, G.S. Road requested to credit the amount of Rs. 50, 00,000/against the supplementary BG to the account of FCI in SBI, South Guwahati Branch.

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(XIV) Letter dated 09-07-2015 written to the respondent No. 5 by the petitioner protesting the encashment of BG as follows: “your goodself must appreciate that we have already sought extension on 6-5-2015 through our petition, upto 07-12-2015 but the same was not considered in the SLC meeting on 14-05-2015 and the extension was granted till 07-07-2015. Moreover, the letter dated 12-06-2015 for extension till 07-07-2015 was received by us through mail on 12-06-2015. Virtually, we got 25 days time for buying, lease the land, which you must understand as very short time period to materialize the land deal. Even to bring out the sale permission from the Deputy Commissioner’s Office itself takes one and half to two months.

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Moreover, the matter for extension was on the process through our written requests and to our utter surprise the above letter from your office for encashment of Bank Guarantee has been issued. Under the circumstances we request you and reiterate you to kindly withdraw the letter for encashment till the SLC decision.”

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(XV) Vide letter dated 21-07-2015 the petitioner wrote to the Executive Director (Storage) FCI (HQ) New Delhi seeking for approval of the following:-

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“In view of the facts narrated above it is requested to kindly give approval for the following:

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(a) Kindly give extension for at least 4 months more from the date of issuance of sanction letter as already requested by us in SLC as well as through various communications.

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(b) Modify the content of second para of your letter dated 10-06-2015 and kindly make it the land required as per MTF.

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(c) In case the extension could not be granted we request you to please refund the security deposit of 20 lacs and Bank Guarantee amount of Rs. 50 lacs.”

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Mr. Saikia submits that the petitioner was faced with the hurdles in acquiring land by way of sale for the reasons let known to the respondent corporation. The said hurdles were not for any self attribution on the part of the petitioner rather the situation was beyond the control of the petitioner. Referring Clause 59 of MTF it is submitted that the hurdles in purchasing the land were intimated to the respondent corporation as “fortuitous events” and falls under the scope of Force Majeure. The events were beyond the reasonable control of the affected party (petitioner). The said events are of incapacitating nature having material adverse effect on the obligations of the petitioner under the contract. The said events were intimated to the respondent corporation vide letter dated 02-01-2015. Referring Clause 7 of the MTF Mr. Saikia submits that encashment of Bank Guarantee can be done only if the petitioner resiled from his offer. But there is nothing on record to show any act of resiling from the offer made by the petitioner.

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The termination of the contract vide letter dated 30-04-2015 was kept in abeyance vide letter dated 10-06-2015 whereby extension of time limit for purchase/lease deed of land was allowed till 07-07-2015. Subsequent encashment of BG vide letter dated 08-07-2015 without taking a fresh decision by the SLC is totally illegal and arbitrary. Merely on the proposal of the Deputy General Manager cum Executive Director (Storage) vide letter dated 06-07-2015 the respondent No. 5 is not authorized to act without any decision by the SLC inasmuch as the extension upto 07-07-2015 was the decision by majority members of the SLC. Moreover before terminating the contract no notice was given to the petitioner and there is a clear violation of the principles of natural justice. Further there is no procedure to be followed for termination of the contract and as such the court can invoke the principles of equity in order to examine whether on the basis of the present factual matrix the termination of contract was proper alongwith encashment of BG and forfeiture of security deposit.

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Mr. Saikia submits owing to the hurdles faced by the petitioner the contract need not be performed on the principle of doctrine of frustration. The agreement was entered into by the petitioner in the right earnest to perform the promises made by the petitioner. But the subsequent hurdles faced by the petitioner which are not for any defaults on the part of the petitioner makes it onerous to the petitioner if the respondents insist for its performance. On the other hand, if the contract remains undissolved on the ground of doctrine of frustration it would cost the petitioner dearly if the respondents insist to go as per terms of the stipulations like encashment of BG and forfeiture of security deposit. In support of the contention Mr. Saikia relies Deokabai Vs. Uttam (1993) 4 SCC 181 and submits that in order to examine the said issue it is required to go through the whole contract without there being any compartmentalization. It is his contention that the prime consideration in the contract is the availability of land for the purpose of construction of the godown. The petitioner promised to provide the land at village Ouguri and to that effect confidently, the petitioner deposited the BG of Rs. 50,00,000/-. The security deposit of Rs. 20,00,000/- was also deposited with a positive assurance to perform the contract. But the subsequent events frustrated the performance so promised to perform by the petitioner for which the petitioner cannot be held liable.

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Relying Smt. Sushila Devi and Another –Vs.- Hari Singh and Others reported in 1971(2) SCC 288, it is submitted that the impossibility contemplated u/s 56 of the Contract Act, 1872 is not confined to something which is not humanly possible. If the performance of a contract becomes impractical or useless having regard to the object and purpose the parties had in view then it must be held that the performance of the contract has become impossible. But the supervening events should take away the basis of the contract and it should be of such a character that it strikes at the root of the contract. Mr. Saikia in support of his submission relies Energy Watchdog-Vs-Central Electricity Regulatory Commission and ors etc. reported in (2017) 14 SCC 80, Naihati Jute Mills Ltd. and khyaliram Jagannats reported in AIR 1968 SC 522.

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Mr. Roy the learned counsel for respondent corporation at the very outset submits that the issues involved in this writ petition requires evidence and the relation between the parties to this writ petition arose out of contractual obligations arising out of a contract which is a valid and concluded one. The issues and reliefs sought for are in the private law domain governed by the common law for which evidence is to be led by the party. In order to complete the series of events Mr. Roy relies on the affidavit-in-opposition and submits-

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(I) As against the request for change in location as per letter dated 02-01-2015, the respondent FCI vide its letter dated 06-01-2015 informed that as per Clause No. 43 and condition No 12 of MTF of the NIT dated 10-04-2014 the location of land specified in the tender cannot be changed at any stage under any circumstances. Further as per Clause No. 8 of MTF under heading Refund of EMD/Release of Bank Guarantee “it is the express term of the tender that any litigation, stay/injunction from any court, non performance of owner/seller of land, third party interest created or any other reason will not absolve the tenderer from his obligation to acquire the specified land and submit the documents within the stipulated 120 days.” As per LOM dated 11-09-2014 and reminder dated 26-12-2014 land/lease documents should be submitted within 0801-2015 failing which FCI is entitled to encash the BG, forfeit the security deposit and contract is to be terminated.

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(II) On 8-1-2015 the petitioner sought for extension of time to submit land documents. Vide circular dated 20-08-2013 the SLC was authorized to condone delay in submission of required documents for land beyond the permissible time period of 120 days. On the basis of the said authority the SLC discussed the request made by the petitioner for extension of such period by 120 days. Following precedence the SLC agreed to allow FCI authority to extend the time limit upto 31-03-2015 in public interest. Further it was advised to encash BG before expiry of the validity in case the party failed to handover the land documents.

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(III) The petitioner through its e-mail dated 10-04-2015 enclosed its representation dated 27-03-2015 seeking extension of time upto 07-07-2015 as there was considerable development in the procurement of land. The said letter/mail with the representation of the petitioner was requested to be placed before the SLC meeting for an early decision by the Executive Director (Storage) on 27-04-2015. On the other hand, the Executive Director (NE) was against the extension of time limit resulting termination of the contract on 30-04-2015. The petitioner appealed to FCI Hqrs and it advised to consider the appeal in SLC meeting. One Sri Vinod Agarwal, representative of petitioner company was heard who informed the SLC in the meeting held on 14-05-2015 that he had procured 12 Bighas out of 67 Bighas of land and he requested the extension upto 7-12-2015 Drawing precedence from other zones of FCI, the SLC, extended upto 7-7-2015 subject to reduction in period of guarantee to the extent of delay. A further observation made that if the petitioner failed to submit the land documents within 7-7-2015 the matter may be referred to HLC for consideration of extension upto 7-12-2015. On the basis of the said resolution of SLC, letter dated 10-06-2015 was issued to the petitioner extending the time upto 7-7-2015 keeping pending the termination order till 7-7-2015. By the said letter it was informed to the petitioner that extension upto 7-7-2015 does not confer right upon the petitioner to approach the HLC for further extension as HLC only ratify any decision taken in such cases by the SLC.

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Mr. Roy submits the change of site as sought for cannot be allowed as there were 14

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technically qualified tenderers and on competition the petitioner became successful. If the site is changed the other unsuccessful bidders would be affected inasmuch as many of the bidders proposed various other sites but after rejecting their bids the bid of petitioner was accepted. There is no arbitrariness or illegality while terminating the contract. The “fortuitous events” as submitted by Mr. Saikia does not qualify to fall within the Force Majeure Clause. Relying Industrial Finance Corporation of India Ltd. vs. Cannanore Spinnning & Weaving Mills Ltd. & Ors. reported in (2002)5 SCC 54, Mr. Roy submits that the words or expressions used in the covenant between the parties are to be looked into. A man may bind himself by an absolute contract to perform which subsequently becomes impossible for non performance. The act of non performance must be interpreted upon an unqualified undertaking where the event which causes impossibility was or might have been anticipated and guarded against in the contract. But where the event is of such a character that it cannot reasonably be supposed to have been in contemplation of the contracting parties when the contract was made, they will not be held bound by general words which, though in its wide meaning seems to include, were not used with reference to the possibility of any particular contingency which afterwards happened. If the said test is applied, as per Mr. Roy, the fortuitous events ought to have been guarded because it is the petitioner who became the successful bidder by quoting land of village Ouguri measuring 67 Bighas and odd. Not only that the petitioner even guaranteed that he could submit the land documents of the land shown in the technical bid. So the case of the petitioner does not fall within the Clause Force Majeure of the MTR. Mr. Roy also relies M/s. Alopi Parshad and Sons, Ltd. v Union of India a full bench decision reported in AIR 1960 SC 588 in support of his submission.

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Mr. Roy submits that the respondent FCI acted as per the terms stipulated in the contract and the same cannot be termed to be illegal and in support he relies A. Sarmah (M/S) vs. Oil and Natural Gas Corporation Ltd. And Ors. reported in 2006 (Supp.) GLT 104. Further it is submitted that issue involved is refund of the BG which was encashed by the respondent FCI and the security deposit forfeited as per terms of the contract. But for that evidence is required which is intricately involved in the issue. Relying Gujarat Maritime Boardvs Larsen Toubro Infrastructure Development Projects Limited reported in (2016) 10 SCC 46 submits that writ petition is not maintainable to avoid contractual obligations inasmuch as

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occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract where the parties entered into it with eyes wide open. Similar is in the case in hand and as such the writ petition is not maintainable.

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Mr. Saikia opposing the submission of Mr. Roy as regard to maintainability of the writ petition submits that the respondent FCI is a ‘State’ within the meaning of Article 12 of the Constitution of India and a writ against it would lie. Moreover action of such authority against the petitioner is in the public domain. In support of his contention Mr. Saikia relies K.K. Saksena Vs. International Commission on Irrigation and Drainage and others, reported in (2015)4 SCC 670.

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I have considered the submissions of the learned counsel. NIT dated 10-04-2014 was floated by the respondent FCI. The tender was subject to terms and conditions stipulated in the MTF. The petitioner offered his technical bid quoting the site for construction of the road fed Godown at village Ouguri. As required under the terms of tender the petitioner ought to have submitted the land documents like sale deeds/lease deeds alongwith the technical bid. But on the date of submitting the technical bid the said documents were not available entailing it to take the benefit under Clause 7 of the MTF which stipulates that in case the tenderer does not own land or hold it on registered lease but intends to acquire the same by way of ownership/registered lease within 120 days from the date of insurance of LOM, it shall also furnish in addition to EMD, a Supplementary Guarantee in the form of Bank Guarantee @ Rs. 100/- per MT issued by any Nationalized Bank valid for a minimum period of six months from the date of submission of Tender.

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On the basis of the said quotation and competitive bids, the petitioner was the successful bidder and letter of Memorandum dated 11.09.2014 was issued by respondent FCI and accepted by the petitioner on the following amongst other terms and conditions:-

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“5. You will produce necessary documents of ownership of the land/lease deed mentioned in your technical bid along with all requisite approvals for construction of

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godown within 120 days from the issue of this letter, failing which the contract will be cancelled and supplementary guarantee shall be invoked and security deposit would be forfeited. Also the bank guarantee amounting to Rs. 50,00,000.00/- submitted as supplementary bank guarantee valid till 19.11.2014 is required to be extended upto 08.01.2015, failing which it shall be lawful for the corporation to terminate the contract.

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You will ensure completion of construction of godown within 12 months including 120 days time granted for production of documents of the land acquired. However, if the godown is completed in the extended stipulated time, Corporation will have the discretion to choose the date of taking over the godown within 3 months of completion with corresponding reduction in guarantee period. In case of delay beyond one year, the agreement is liable to be cancelled.”

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The tender condition under Clause 43 of the MTF specifically stipulates that change of the site will not be agreed by the FCI after submission of tender. The petitioner failed to submit the land documents as promised within a period of 120 days from the date of the issue of LOM dated 11-9-2014. It sought for extension of time which was granted till 31-032015. But it failed to submit the documents resulting in termination of the contract vide letter dated 30.04.2015. Prior to termination and before expiry of time period on 31.03.2015, the petitioner sought for extension further till 07-07-2015. During the pendency of the said request for extension the contract was terminated. An appeal was made to review the termination order which was directed to be considered by the competent authority. The State Level Committee (SLC) is competent to condone delay in cases like the one in hand. So in its meeting held on 14-05-2015 the representative of the petitioner was heard whereafter drawing precedence of such extension, the SLC extended the period till 7-7-2015 but pending the termination order. The petitioner again sought for extension till 7-12-2015 before the SLC meeting held on 14-05-2015. However it was extended till 7-7-2015 informing the petitioner that extension upto 7-7-2015 does not confer right upon the petitioner to approach the HLC for further extension as HLC only ratifies decision of SLC. This information was purportedly on the basis of the circular dated 20-08-2013 empowering the SLC to condone delay in cases like

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the one in hand. But on 8-7-2015 letter requesting the HDFC bank, G.S. Road branch Guwahati to deposit the Bank Guarantee, Rs. 50,00,000/- was issued and HDFC Bank ltd accordingly deposited the same to the account of the respondent FCI in the SBI, South Guwahati Branch at Guwahati. Behind such a backdrop the petitioner sought for returning back the encashed Bank Guarantee and the performance Security Deposit of Rs. 20, 00,000/deposited in the form of demand draft drawn in favour of respondent No. 5.

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An invitation for tender for execution work is not an offer. Rather it is an attempt made by the principal to get an offer within a specific margin the principal is willing to adopt. The respondent FCI through its officials issued the notice inviting tender in this particular case stipulating certain terms and conditions. There were 14 number of offers from 14 various tenderers. Out of the said offers the petitioner’s offer was accepted. There was no dispute at the selection level accepting the offer of the petitioner amongst the other tenderers. Once the offer of the petitioner was accepted it becomes a binding contract both between the FCI and the petitioner and their relationship which is juridical in nature is governed by the terms of tender conditions and other terms if so, desired by the parties to it inasmuch as it is the practice followed even in the Govt. tenders or any other public bodies amenable under the writ jurisdiction of Article226 of the Constitution. This goes to show that once the principal, being a corporation amenable to writ jurisdiction makes a decision through a body formed and authorized to that effect and it is within the parameters of Article 14 of the Constitution without depriving any of the tenderers from their fundamental rights then the question of judicial review by the High Court under Article 226 of the Constitution ceases. The contract so entered into by the successful tenderer and the Govt. or other authority is governed by the Doctrine of Privity, which means no one but the parties to the contract are entitled under it. This itself indicates the domain of law which is a private one without any element of public law.

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The petitioner filed this writ petition assailing the arbitrary, illegal, unconstitutional and high handed action of the respondent authorities i.e. the respondent Nos. 1 to 3 against the following actions:-

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(a) terminating the contract awarded to the petitioner for construction of a 50,000 MT capacity godown in the Nagaon district, (b) then again without issuing any subsequent order to terminate the contract, the respondent authority took the decision to enchash the bank guarantee of Rs. 50 lacs and security deposit amounting Rs. 20 lacs deposited by the petitioner to be eligible to obtain and execute the contract.

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In support of the arbitrariness and illegality of the termination order Mr. Saikia projected that owing to “fortuitous event“ the petitioner could not acquire the land. On the other hand, the same is strongly denied by Mr. Roy referring various statements made in the affidavit-in-opposition. Mr. Saikia submits that the instances put forth led to the conclusion that the contract requires to be dissolved on the ground of frustration. He tried to justify that the events are well covered by the Force Majeure Clause in the MTF.

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The said submissions of the learned counsel leads me to look into Section 56 of the Contract Act, 1872. It stipulates that an agreement to do an act impossible in itself is void. A contract to do an act which after the contract is made becomes impossible or by reason of some event which the promisor could not prevent is unlawful. In order to decide the issue evidence is required in details because a party is excused of non performance if it proves that non performance was due to an impediment beyond its control and it could not have reasonably been forseen by it at the time of making of the contract, nor could it have avoided its consequences.

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In support of the insurmountable hurdles in acquiring the land by the petitioner various allegations are made in the writ petition against some student bodies and political party but they are not made parties in the writ petition. To overcome the hurdles the petitioner requested for change in site. The same was disallowed citing specific terms of MTF by the respondent FCI. The subsequent representations of the petitioner for extension of time for submission of land document there are no mention of any developments favouring the petitioner in respect of the obstructions created by the aforesaid student bodies in order to infer the cessation of the obstructions by the said bodies. On the other hand it is the submission made before the respondent that the petitioner was successful in acquiring 12

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Bighas of land out of 67 Bighas and hence sought for its extension till 7-12-2015. This itself goes to show that from the pleadings the case of the petitioner does not fall under Section 56 of the Contract Act. So the petitioner is bound by the performance he promised at the time of acceptance of the LOM. Similarly the respondent is bound to follow the terms of the condition of acceptance of the contract by the petitioner.

¶98

Now there remains the issue of refund of the bank guarantee of Rs. 50, 00,000/- and the performance guarantee in the form of security deposit amounting Rs. 20, 00,000/-. Here it would be appropriate to look into the exceptions where the court can grant injunction restraining a beneficiary from encashing the bank guarantee as held in UP State Sugar Corporation Vs Sumac International Ltd reported in (1997) 1 SCC 568. It was held that when in course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending dispute. The bank giving such a guarantee is bound to honour it as per terms irrespective any dispute raised by its customer and the courts should be slow in granting an injunction. Two exceptions are carved out. A fraud in connection with such a bank guarantee and the beneficiary wants to take advantage of it. The second exception relates to cases where allowing encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. To give a decision to that effect it is not within the law of public domain having no public element. It requires evidence to establish either of the cases covering the exceptions and pleading to that effect must be within the terms of the contract covered by the Doctrine of Privity. On plain reading of the writ petition there is no whisper in order to show that the case of the petitioner falls within either of the two exceptions. So as the case of the petitioner does not fall within Sec 56 of the Contract Act and there is no pleading of fraud or causing irretrievable harm or injustice to the petitioner in encashment of the bank guarantee, invoking the wide power under Art 226 of the Constitution this writ petition can be decided by this Court.

¶99

The contract is not a statutory one inasmuch as merely because the contract is awarded by a statutory body it would not become statutory. But the purpose of the construction of godown is for the benefit of the public. This is very much apparent in the

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minutes of SLC meeting held on 20-02-2015 wherein the SLC agreed to allow the respondent FCI authority for extension of time limit for submission of land document upto 31-03-2015 in the public interest. On the basis of the said resolution vide letter dated 25-02-2015 the respondent FCI informed the extension of time limit till 31-03-2015 to the petitioner. It was also notified to the petitioner by the said letter dated 25-02-2015 that if the petitioner failed to submit the land documents within the extended period FCI was liable to take necessary steps as per MTF.

¶102

The letter of memorandum (LOM) was issued on 11-09-2014 and it is specifically mentioned in the said LOM directing the petitioner to produce necessary documents of ownership of the land/lease deed mentioned in the technical bid alongwith all requisite approvals for construction of godown within 120 days from the issue of the LOM failing which the contract would be cancelled and supplementary bank guarantee would be invoked and security deposit would be forfeited. The said conditions were accepted by the petitioner. The said period of 120 days expired on 11-12-2014. On the basis of representations of petitioner the period was extended upto 31-03-2015. Thus the petitioner was given an additional period of 139 days. In between vide letter dated 02-01-2015 the petitioner sought for changing the site as quoted by it admittedly in the technical bid. Vide letter dated 06-01-2015 the respondent FCI informed that as per Clause 43 and condition No. 12 of MTF, location of land specified in tender cannot be changed at any stage under any circumstances. The respondent vide the said letter also did not accept the then prevailing circumstances to fall within the scope of ‘Force Majeure’ Clause but with reasoned explanation keeping in view the terms of MTF, the respondent FCI requested the petitioner to deposit the land documents within 0801-2015 failing which the FCI was liable to encash the bank guarantee and forfeit the security deposit with consequential action of termination of contract. Thereafter vide letter dated 0801-2015 the petitioner requested for 60(sixty) days time to deposit land document.

¶103

The respondent extended the time period for depositing the land documents upto 3103-2015 on the basis of the resolution of SLC as hereinabove mentioned. But the petitioner on receipt of the extension upto 31-03-2015 on 18.03.2015 sought for extension of the said period upto 7-07-2015 on the ground that the extension upto 31-03-2015 was for a short

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term period. The respondent received an e-mail dated 10-04-2015 from the petitioner with a representation dated 27-03-2015 informing that due to unavoidable circumstances the petitioner was unable to submit the land documents within the extended time of 31-03-2015 so requested for further time upto 7-07-2015. Accordingly, it was directed by the Head office of FCI at New Delhi vide letter dated 27/28-04-2015 to place the said representation before the SLC meeting for an early decision.

¶106

The FCI through its General Manager (R), respondent No. 5 invoking Clauses 8, 9 and 57(B) of MTF, the contract vide LOM dated 11-09-2014 with the petitioner was terminated resulting forfeiture of security deposit and invocation of the Bank Guarantee. On the other hand, as per the direction vide letter dated 27/28-04-2015 from New Delhi the SLC in its meeting dated 14-05-2015 considered the representation of the petitioner dated 27.03.2015 and heard the representative of the petitioner company. As against the order of termination of the contract an appeal for review of the same was also made which was also considered by the SLC in the said meeting. The petitioner in the said meeting produced land documents to the extent of 12 Bighas out of 67 Bighas. The SLC vide its resolution and considering the prevailing situation and drawing precedence from other zones of FCI extending time limit in similar situation, opined for extending the time limit upto 7-07-2015 for submission of the full documents covering 67 Bighas of land in the public interest. The SLC rejected the request for extension upto 7-12-2015 which the petitioner raised before the SLC however with an observation that the petitioner may move the HLC for extension upto 7-12-2015.

¶107

The respondent No. 5 vide letter dated 10-06-2015 informed the petitioner about the extension period upto 7-7-2015 on the basis of the resolution of the SLC. It was also advised to the petitioner to submit the land documents in respect of the total land measuring 67 Bighas 4 Kathas 7 Lechas as per the contract within the said extended period. The termination order was kept pending upto 7-7-2015 in view of the SLC decision. It was also informed that the act of extension does not confer any right upon the petitioner to make any claim for extension as the matter is subject to ratification by the HLC.

¶108

The petitioner failed to submit the land documents and as per letter dated 8-7-2015

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the respondent No. 5 expressed the intention to encash the said bank guarantee and requested the HDFC Bank Ltd. to credit the said amount to the account of FCI. Accordingly, the respondent gave effect to the termination order dated 30-04-2015. It is the contention of Mr. Saikia that while giving effect to the termination order dated 30-04-2015 notice was required to be issued to the petitioner. But in my considered opinion the same is not required. The petitioner is aware of the conditions stipulated in the LOM dated 11-09-2014 wherein it is stipulated that failure to submit the land documents within 120 days from the issuance of the LOM the contract shall be cancelled and supplementary bank guarantee shall be invoked and security deposit forfeited. The said period of 120 days was extended twice finally till 7-72015. On each and every occasion while the extension was intimated there were requisite intimations about the consequential action in coercive form which the respondent corporation is liable to initiate for failure of the petitioner to submit the documents as per contractual terms agreed to by the petitioner. There is no breach of any contractual terms by the respondents in invoking the bank guarantee and forfeiture of security deposit and termination of the contract inasmuch as those are terms of the contract agreed by the petitioner. The godown is required for the benefit of the public. The respondents nor the petitioner can take the terms of contract as mere formality but each and every terms of contract are promise/promises made by the parties to it. Because as hereinabove mentioned an invitation of tender for execution work is an attempt made by the principal (respondent) to get an offer within a specific margin the principal is willing to adopt. The said margin adopted by the principal cannot be widened or extended by a court moreso while exercising the jurisdiction of judicial review of the decision making process unless the petitioner is successful in pleading and showing arbitrariness while making the decision by the principal which is totally missing in the present case.

¶111

The core requirement for successful performance of the promise of the petitioner is the construction of the specified godown but on a plot of land, the burden of acquiring of which was not undertaken by the respondents. Options were given to the tenderers to quote the proposed land for construction of the godown as an owner or lessee with liberty to carry out the construction. The petitioner quoted the land measuring 67 Bighas and odd in the technical bid which was accepted by the respondents inasmuch as the same falls within the

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specific margin adopted by the respondents. Conditions from the respondents were intimated and the petitioner readily agreed. This itself is sufficient in my opinion, that the petitioner knowing fully well the specific requirement of the respondents was ready and willing to execute the work. But later on the petitioner failed to submit the land documents as promised by him, the respondents cannot wait for an indefinite period to acquire the land by the petitioner on the face of the promise it made to the principal i.e. the respondents that the land would be acquired within 120 days from issuance date of LOM. He was supposed to guard against any eventuality that may befall on him while acquiring the land earmarked as he made a promise to perform which he undertook before the principal to complete his execution contract. Invocation of the consequences by the principal (respondents) for failure to perform the promise made by the petitioner but within the terms of the contract cannot be held to be an act vitiated with arbitrariness atleast, in the present factual matrix. No notice is further required to give effect to the termination order nor there is any injustice caused to the petitioner once the terms of the concluded contract is given effect to. The submission that the termination order was given effect to at a time when the process for extension of further time till 7-12-2015 was pending is arbitrary and illegal cannot be accepted inasmuch as beyond the terms agreed by the petitioner though, the time limit was extended twice that cannot itself be held that a right has accrued on the petitioner that on each and every demand the principal i.e. the respondents are bound to buckle down and accept the request of the petitioner. This is because of the fact that the petitioner agreed to the terms stipulated in the LOM and the discretion so applied by the respondents in extending the time limit cannot be accepted to be terms of the contract. So there is no illegality in giving effect to the termination order which was kept pending at the time of extension of the time period till 7-7-2015.

¶114

The submission of Mr. Saikia that the termination nor encashment of Bank Guarantee was done without hearing the petitioner and as the contract does not specify any rule or procedure to be followed for termination of the contract, the principles of equity demands for consideration whether the said action of termination was illegal. This submission of Mr. Saikia in my opinion cannot be expected inasmuch as it is on record that the petitioner was heard through its representative as directed by the officials of FCI at New Delhi in the SLC meeting dated 14-05-2015. Thereafter the time limit was extended till 7-07-2015 but keeping the

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termination order pending. As the petitioner failed to submit the land documents on 7-072015 thereafter the Bank guarantee was encashed and security deposit forfeited giving effect to the termination order. The petitioner failed to the promise made by it as per the agreed terms. Twice the time period were extended on representation of the petitioner. On failure the contract was terminated. There is no illegality nor there is no arbitrariness in the decision making process.

¶117

If we go through the letter dated 21-7-2015 written by the petitioner to the Executive Director (Storage), FCI (HQ), New Delhi it is apparent that the petitioner sought for modification of the second para of letter dated 10-06-2015 and insert the word “the land required as per MTF” instead of the word “the land as per awarded contract”. This goes to show that in order to come out of the obligation the petitioner had gone to that extent of changing the NIT dated 10-04-2014 inasmuch as there was no mention of land situated at Village Ouguri nor any specific land of any other village. This is purely with an intention to avoid contractual obligations entered and accepted by the petitioner.

¶118

In Joshi Technologies International Inc Vs. Union of India reported in (2015)7 SCC 728 the Hon’ble Apex Court took note of the legal principles regarding maintainability of a writ petition in ABL International Ltd vs Export Credit Guarantee Corpn. of India Ltd. (2004) 3 SCC 553 and held as follows-

¶119

“70. Further the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarized as under:

¶120

70.1 At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

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70.5 Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of the contract which the parties had accepted with eyes wide open. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so and he can challenge the condition under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.”

¶123

From the analysis of the submissions of the parties read with various communications more specifically that of the petitioner, if taken into consideration I am constraint to hold that this writ petition is filed to avoid contractual obligations. The conditions of the LOM dated 1109-2014 are taken into consideration and it follows that the petitioner promised to submit the land documents for construction of the godown and accepted the conditions thereof. The respondents were confident that the petitioner would complete the execution contract and accepted the offer of the petitioner. Accordingly, the respondents entered into the contract on the promise of the petitioner that he would submit the land documents and carry out the construction. But subsequently the petitioner was found to be negligent in performing his promise from the discussions made hereinabove. The respondents as per terms of the contract resorted to the coercive measures. Finding no other alternative the petitioner filed this writ petition to avoid the obligation under the contract which cannot be allowed inasmuch as contracts are entered by the parties to perform but not to buy time without any cogent grounds. Accordingly, I do not find merit in this writ petition which stands dismissed. Interim order if any stands vacated.

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JUDGE

¶125

Comparing Assistant

M/S Gagan Deal Trade Private Limited v. the Union of India and 5 Ors.

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M/S Gagan Deal Trade Private Limited v. the Union of India and 5 Ors.

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