Quashed

Ms Abhoy Enterprises through Its Partner Sri Binay Kumar Singh v. the State of Jharkhand through the Secretary Rural Development Department

Jharkhand HC5 Nov 2019WPC/3513/2018

Case brief

AI extract

What is this about?

In a writ petition challenging an order rescinding a work agreement and forfeiting security money, the High Court held that despite the contract treating the rescind notice as conclusive, the principle of natural justice mandates giving the petitioner an opportunity to be heard before such a civil consequence.

What did the court decide?

Impugned order dated 31.05.2018 was quashed. Petitioner was directed to be issued a show cause notice within three weeks to reply within two weeks.

Ms Abhoy Enterprises through Its Partner… — Contract and Commercial Disputes | Jharkhand HC (2019)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(C) No.3513 of 2018

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M/s Abhoy Enterprises through its partner Sri Binay Kumar Singh

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……… Petitioner

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Versus

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1. The State of Jharkhand through the Secretary, Rural Development Department, Govt. of Jharkhand, Ranchi

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2. The Chief Engineer, Rural Development Special Range, Ranchi

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3. The Superintending Engineer, Rural Development Special Circle, Medninagar, Palamu

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4. The Executive Engineer, Rural Development Special Division No.2, Garhwa ………. Respondents

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………. Respondents

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CORAM : HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD

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For the Petitioner : Mr. Shresth Gautam, Advocate For the Resp.-State : Mrs. Aparajita Bhardawaj, AC to AG ---

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6/05.11.2019 This writ petition is under Article 226 of the Constitution of India, whereby and whereunder the order dated 31.05.2018 as contained in letter no.636 issued under the signature of Executive Engineer, Rural Development Special Division No.2, Garhwa, is under challenge, by which, the agreement being Agreement No.SBD No.-03/2012-13 dated 06.06.2012 has been rescinded as also the security money deposited by the petitioner has been forfeited and the same has been brought to the purview of the Government for its disposal.

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2. The brief facts of the case of the petitioner as per the pleading made in the writ petition is that in pursuance to the notice inviting tender for three works namely for construction of Bridges over Launga River in between Adhaura Nagar Untari Road under Nagar Untari Block, on Banki River in between Tandwa Chitari Road under Ramna Block and on Panga River at Parsodih under Bhawnathpur Block in the district of Garhwa, Mukhyamantri Gram Setu Yojna, has been allotted in favour of the petitioner.

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The work order to that effect has been issued on 06.06.2012 as would appear from annexure-1, in pursuance to the said work order, an agreement has been entered into in between the petitioner and the concerned authorities of the State of Jharkhand with the condition of contract as would appear from annexure-2.

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The petitioner for one reason or the other, has not commenced the work within the period of 1 ½ Years, by which time the work was to be completed as would appear from page-21 to the brief and the correspondences have been made by the petitioner for removing the hindrance which is coming in the way of commencement of work.

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Ultimately, the competent authority has come out with the letter for not commencing the work as because the government, has come to the finding about some defect with the original design for execution of the work, is not proper and therefore, the design has been changed which resulted into execution of a fresh agreement, in pursuance thereto, the petitioner has also agreed to commence the work but the work could not have been commenced.

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In the meanwhile, the authorities have issued letters for commencement of the work but the work has not been commenced pertaining to the work no.3 while work nos.1 and 2 have been completed which resulted into taking decision by the concerned authority on 31.05.2018 for rescinding the agreement as also forfeiting of the security money in terms of the provision as stipulated under condition no. 3(a) of the condition of contract. 3. Mr. Shresth Gautam, learned counsel appearing for the petitioner, has raised both the factual aspects in assailing the order dated 31.05.2018 but more particularly he has argued vehemently about the violation of principle of natural justice in taking adverse decision for cancellation of the agreement as also for forfeiting of the security money.

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4. Mrs. Aparajita Bhardawaj, learned AC to AG appearing for the State of Jharkhand by referring to the stand taken by the State-Respondent in the counter affidavit, wherein certain letters have been enclosed by the concerned Executive Engineer as also a press publication for commencement of the work but the work could not have been completed by the petitioner, which ultimately led the authority concerned for coming to this punitive action for cancellation of the agreement and for forfeiting of the security money, so that the work may be allotted in favour of the others in order to avoid inconvenience due to non-completion of the work in question.

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5. She has submitted by referring the provision of 3(a) to the condition of contract which confers power upon the Executive Engineer to take such action for rescinding the contract and in pursuance thereto, sufficient efforts have been made by calling upon the petitioner to complete the work, failing which,

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the agreement would be cancelled but the petitioner has not bothered to reply, therefore, the authorities have no occasion to rescind the agreement and accordingly, the impugned order has been passed.

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6. In view thereof, submission has been made that there is no infirmity in the impugned order. 7. This Court after having heard the learned counsel for the parties and after going across the condition of contract more particularly the condition as contained under clause-2 and 3, which pertains to the condition of completion of the work by the Contractor and in case of non-completion, action is to be taken in terms of the condition stipulated under clause-3.

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Condition stipulated under clause-2 and 3 are being referred for ready reference which is being quoted hereinbelow:-

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“ Clause 2: The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be reckoned from the date on which the written order to commence work is given to the contractor. The work shall throughout the stipulated period of the contract be carried on with all due diligence (time being deemed to be the essence of the contract on the part of the contract or) and the contractor shall pay as compensation an amount equal to ½ percent on the amount of the estimated cost of the whole work as shown by the tender for every day that the work remains uncommenced or unfinished after the proper date. And further to ensure good progress during the execution of the work the contractor shall be bound in all cases in which the time allowed for any work exceeds one month to complete one fourth of the whole of the work before one-fourth of the whole time allowed under the contract has elapsed on-half of the work before one-half of such time elapsed and three-fourth of the work, before three fourths of such time has elapsed in the event of the contractor falling to employ with the condition. I shall be liable to pay as compensation an amount equal to ½ percent on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete provided always that the entire amount of compensation to be paid under the provisions the clause shall not exceed 10 percent of the estimated cost of the work as shown in the tender.

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Clause 3: In any case which under any clause or clauses of or this contract the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit in the hands of Government (where paid in one sum or deducted by installments) the Executive Engineer on behalf on the Jharkhand Government shall have been powered to adopt any of the following courses, as he may deem best suited to the interest of Government.

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a. To rescind the contract (of which rescind notice in writing to the contractor under the hand of the Executive Engineer shall be conclusive evidence) and in which case the security deposit of the

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contractor shall start forfeited, and be absolutely at the disposal of Government.

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b. To employ labour paid by the Public Works Department and to supply materials to carry out the work, or any part of the work, debiting the construction with the cost of the labour and the price of the materials (of the amount of which cost and price certificate of the Engineer-in-charge shall be final and conclusive against the contractor), and crediting him with the value of the work done, in all respects in the same manner and at the same rates as if it had been carried out by the contractor under the terms of his contract, the certificate of the Executive Engineer as to the value of the work done shall be final and conclusive against the contractor.

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c. To measure up the work of the contractor and to take such part of the work of the contractor as shall be unexecuted out of his hands, and to give it another contractor to complete in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor if the whole work had been executed by him (of the amount of which excess the certificate in writing of the Executive Engineer shall be final and conclusive) shall be born and paid by the original contractor and made be deducted from any money due to him by Government under the contract or otherwise or from his security deposit or the proceeds of sale thereof, or a sufficient part thereof.

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In the event of any of the above courses adopted by the Executive Engineer, the contractor shall have no claim to compensation for any loss sustained by him by reason of his having purchased or procured any materials or entered into any engagement, or made advances on account of or with a view to execution of the work or the performance of the contract. And in case the contract shall be rescinded under the provision aforesaid, contractor shall not be entitled to recover or be paid any sum for any work there-to-fore actually performed under this contract unless and until the Executive Engineer shall have certified in writing the performance of such work and the value payable in respect thereof and he shall only be entitled to be paid the value so certified.”

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8. This Court has taken into consideration the argument advanced on behalf of the learned counsel for the petitioner pertaining to violation of principle of natural justice and therefore, thought it proper to reflect the provision of condition as stipulated under clause-3(a) vis-a-viz, the reference of letter made in the impugned order i.e. letter dated 12.02.2018 as contained in letter no.174 and letter dated 14.05.2018 as contained in letter no.571 as has been annexed as annexure-H and annexure-I to the counter affidavit.

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The condition stipulated under clause-3(a) although confers power upon the Executive Engineer to rescind notice in writing to the Contractor under the hand of the Executive Engineer has to be issued which shall be

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conclusive evidence and in which case, the security deposit of the Contractor shall start forfeited and be absolutely at the disposal of the government.

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9. It is not in dispute that the impugned order makes reference of provision of clause-3(a) of condition of contract.

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It is also not in dispute that the authorities have issued letter dated 12.02.2018 and 14.05.2015 for directing the Contractor, wherein to commence and complete the work, failing which, the action for rescinding the agreement would be taken as would appear from the order dated 12.02.2018 as also the order dated 14.05.2018 as contained under annexure-H and I annexed to the counter affidavit.

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10. It is also admitted fact that under the condition of contract as contained under clause-3(a), the power conferred upon the Executive Engineer to rescind the contract, although, there is no reference of calling upon the Contractor to give reply to show cause rather rescinding notice has been said to be conclusive evidence.

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But here the question is that when the agreement is being rescinded, the security money has been forfeited making it at the disposal of the State Government, is having civil consequence and even if, condition is not provided under the condition of contract for calling upon the concerned to furnish his reply as to why the agreement be not cancelled due to nonperformance of the terms and conditions of the contract.

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The question would be that whether in that circumstances, the observance of Principle of Natural Justice can be given go-by?

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11. This Court in order to answer the issue has gone across the judgment rendered by the Hon’ble Supreme Court in the case of Maneka Gandhi Vrs. Union of India and Anr ., reported in (1978) 1 SCC 248, wherein the issue pertains to virus of Section 10 of the Indian Passport Act which confers power upon the competent authority to impound the passport under the said provision. There is no reference of any show cause to be given before impounding the passport, therefore, that was challenged before the Hon’ble Apex Court to declare it ultra-vires is being in the teeth of violation of principle of natural justice but the Hon’ble Supreme Court while dealing with the issue, has not entered with the virus of the provision of Section 10 of the Indian Passport Act to consider the consequence of impounding and giving finding therein that even if there is no stipulation under the Act to provide an

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opportunity of hearing that does not mean that principle of natural justice would be given go-by and thereby making the principle of natural justice as cardinal principle.

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12. This Court after considering the ratio laid down by the Hon’ble Apex Court in the Case of Maneka Gandhi Vrs. Union of India and Anr. (supra), is of the view that even if under the condition stipulated under clause-3(a) of the condition of contract for rescinding notice in writing to the Contractor under the hand of the Executive Engineer has been said to be conclusive evidence does not mean that cardinal principle of natural justice will be given go-by.

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13. This Court has further examined the contention of the learned State counsel who has submitted that the letter dated 12.02.2018 and 14.05.2018 is by way of show cause and as such, the contention which has been raised by the learned counsel for the petitioner that the impugned order has been passed without issuing any show cause notice, is not worth to be considered.

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14. This Court after going across the letter dated 12.02.2018 and 14.05.2018 finds therefrom that the concerned Executive Engineer has made correspondence to the petitioner for completion of the work, earlier in the letter dated 12.02.2018, the period of one week was given and if within that period, the work would not be started, the action would be taken for rescinding the agreement, however, at present the recommendation is being made before the department to enlist the firm under the list of debarred Contractor and further in the communication dated 14.05.2018 as contained under Annexure-I, the same been repeated as has been reflected in the communication dated 12.02.2018 but further period of 10 days’ time has been provided therein and within that period of 10 days, the work would not be completed, the agreement would be rescinded and the said letter has been treated to be final reminder.

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15. In view of these two letters and according to the considered view of this Court, the said letter cannot be said to be show cause for rescinding the agreement rather the same is for commencement of the work in a particular period, failing which, the action for rescinding the agreement would be taken and the action which is to be taken for rescinding the agreement has been provided under clause-3(a) of the condition of contract.

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16. In view thereof, these two letters cannot be said to be show cause giving therein a specific reason for cancellation of rescinding the agreement so that the petitioner would be in a position to give his reply.

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17. This Court after taking into consideration the fact as has been narrated hereinabove, is of the view that even though under the agreement, there is no condition provided to issue show cause, since the cancellation of agreement pertains to civil consequence, therefore, the petitioner is entitled to be heard before taking such decision, otherwise, it would amount to non-consideration of the grievance of the petitioner which he has agitated before this Court.

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18. Therefore, the impugned order needs to be interfered with at this stage on the ground of violation of principle of natural justice, accordingly, the order as contained in communication dated 31.05.2018, is quashed.

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19. The issue is relegated before the concerned Executive Engineer with a direction upon him to issue show cause to the petitioner within the period of three weeks’ from the date of presentation of the copy of the order which shall be presented by the petitioner within the period of two weeks’ from the date of receipt of copy of the order.

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20. The petitioner shall furnish reply within three weeks’ from the date of receipt of show cause.

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21. The concerned respondent shall take decision in accordance with Law within further period of three weeks.

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22. The further action of the respondent authority will depend upon the consequence of the decision which shall be taken by the authority concerned as indicated hereinabove.

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23. Accordingly, the writ petition stands disposed of.

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Rohit/-

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(Sujit Narayan Prasad, J.)

Ms Abhoy Enterprises through Its Partner Sri Binay Kumar Singh v. the State of Jharkhand through the Secretary Rural Development Department

Case brief

What is this about?

What did the court decide?

Ms Abhoy Enterprises through Its Partner Sri Binay Kumar Singh v. the State of Jharkhand through the Secretary Rural Development Department

Case brief

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What did the court decide?

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