Allowed

Shri P Venugopal Reddy v. the Deputy Chief Engineer (Constructions)

Karnataka HC2 Sept 2024WP/19196/2024

Case brief

AI extract

What is this about?

Railway contractor whose track-doubling contract was terminated during the extension period sought refund of forfeited security deposit, EMD and performance guarantee. The Court held Karnataka had jurisdiction since the letter of acceptance issued there, quashed the refusal letter, and directed joint measurement and reconsideration of the refund claim.

What did the court decide?

Impugned letter dated 20.03.2024 quashed; joint measurement directed; refund claim to be considered within three months.

Shri P Venugopal Reddy Vs the Deputy Chief… — Public Procurement and Tenders | Karnataka HC (2024)

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1 - NC: 2024:KHC:35734 WP No. 19196 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 2^ND DAY OF SEPTEMBER, 2024

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR WRIT PETITION NO. 19196 OF 2024 (GM-RES)

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BETWEEN:

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SHRI P. VENUGOPAL REDDY S/O SHRI GOPI REDDY AGED ABOUT 59 YEARS RAILWAY CONTRACTOR FLAT NO.108, SAMAYA SONATA APARTMENTS M.S. PALYA, VIDYARANAYAPURA BENGALURU-560 097 REPRESENTED BY HIS SPA SHRI K.A. BDUL RAHIMAN S/O LATE ABDUL KHADAR AGED ABOUT 63 YEARS NO.421E, E BLOCK NEELADRI MAHAL JAYAMAHAL EXTENSION NANDI DURGA ROAD BENSON TOWN POST BENGALURU-560 046.

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…PETITIONER

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Digitally signed by B K MAHENDRAKUMAR Location: HIGH COURT OF KARNATAKA

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(BY SRI. SANDESH J. CHOUTA, SENIOR COUNSEL FOR SRI. RAVIKANTH A., ADVOCATE)

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AND:

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THE DEPUTY CHIEF ENGINEER (CONSTRUCTIONS) SOUTHERN RAILWAY ADMINISTRATION SOUTHERN RAILWAYS MANGALORE-574142.

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THE CHIEF ADMINISTRATIVE OFFICER AND CHIEF ENGINEER (CONSTRUCTION) SOUTHERN RAILWAY ERNAKULAM-682 101 KERALA STATE.

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2 - NC: 2024:KHC:35734 WP No. 19196 of 2024

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TEH GENERAL MANAGER SOUTHERN RAILWAYS CHENNAI-600 001 TAMIL NADU.

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MINISTRY OF RAILWAYS UNION OF INDIA / GOVT. OF INDIA REPRESENTED BY ITS SECRETARY NEW DELHI-110 001.

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…RESPONDENTS

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(BY SRI. B.S. VENKATANARAYANA, ADVOCATE FOR R1 TO R4)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE COMMUNIQUE LETTER BEARING NO. W 148/CN/MAQ/PVR/3 DATED 20.03.2024 ISSUED BY THE R1 TO THE PETITIONER, REFUSING/DENYING THE REFUND OF THE SECURITY DEPOSIT/EMD AND PERFORMANCE GUARANTEE VIDE ANNEXURE-S AND ETC.

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THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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ORAL ORDER

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The respondents invited tenders for the doubling of the track between Mangaluru Junction and Panambur. The petitioner was the successful bidder for the e-tender issued by respondent No.2 for carrying out the works. The stipulated time for completing the work was one year from the date of the letter of acceptance, dated 23.01.2019.

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According to the tender document, if the contractor fails to complete the contract within the stipulated or extended time, the contract may be terminated under Clause 62 of the General

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3 - NC: 2024:KHC:35734 WP No. 19196 of 2024

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Conditions of Contract, and the EMD/Performance Guarantee and security deposit will be forfeited. The time to complete the project was extended on eight occasions, two of which were at the petitioner’s request. The petitioner’s failure to complete the work within the extended time led respondent No.1 to terminate the contract and forfeit the EMD/Performance Guarantee and security deposit.

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Sri Sandesh J. Chouta, learned Senior Counsel for the petitioner, argues that the contract was extended on six occasions at the behest of respondent No.1, and the agreement was extended until 30.06.2023. Therefore, the termination of the contract during the extension period was impermissible. The petitioner asserts that jurisdiction lies with this Court, as the letter of acceptance was issued in Mangaluru. In support, he cites the following decisions:

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Indian Railway Construction Company Limited v. National Buildings Construction Corporation Limited, (2023) 7 SCC 390;

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M/s. Kusum Ingots and Alloys Ltd. v. Union of India and Another, AIR 2004 SC 2321.

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In response, learned counsel for respondents No.1 to 4 raises preliminary objections regarding the maintainability of the petition. He argues that the tender documents were floated in Kerala, and the cause of action arose in Karnataka. According to Clause 52 of the Special Conditions of Contract, disputes should

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NC: 2024:KHC:35734 WP No. 19196 of 2024

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be adjudicated by the High Court of Kerala and its subordinate courts. He contends that the termination of the contract and forfeiture of the EMD/security deposit were justified. In support, he cites the following decisions:

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Maharashtra Chess Association v. Union of India and Others, (2020) 13 SCC 285;

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Indian Railway Construction Company Limited v. National Buildings Construction Corporation Limited, (2023) 7 SCC 390;

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Concrete Products & Construction Company Pvt. Ltd. (Thiruvalam) v. Railway Board, rep. by its Executive Director (Track Modernisation), 2010 (3) MWN (Civil) 473.

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After examining the arguments and perusing the

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records:

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The tender was invited by respondent No.2 in Kerala, and the bid was submitted there. The letter of acceptance dated 23.01.2019 was issued by respondent No.1 in Karnataka. The work was to be completed in Karnataka, where the contract was located.

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The High Court of Madras, in Concrete Products & Construction Company Pvt. Ltd. v. Railway Board, ruled that jurisdiction lies with the court where the tender documents and acceptance of the tender were issued, implying that jurisdiction may be ousted where specified by the contract.

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5 - NC: 2024:KHC:35734 WP No. 19196 of 2024

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The Apex Court in M/s. Kusum Ingots and Alloys Ltd. v. Union of India and Another held that a court has jurisdiction if any part of the cause of action arises within its jurisdiction. It must be demonstrated that the integral facts pleaded in support of the cause of action fall within the court's jurisdiction.

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The Apex Court in Maharashtra Chess Association v. Union of India and Others ruled that while parties cannot exclude the jurisdiction of all courts, they may confer jurisdiction on one among multiple courts with proper jurisdiction to the exclusion of others.

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Clause 52 of the Special Conditions of Contract stipulates that disputes should be resolved by the courts under the jurisdiction of the High Court of Kerala.

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Despite the tender documents being floated in Kerala, the letter of acceptance and subsequent contract termination occurred in Karnataka. Therefore, the jurisdiction of this Court is not ousted by mutual agreement when the cause of action arose in Karnataka. The submission that this Court lacks territorial jurisdiction is therefore not acceptable.

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The application for extension of the agreement shows that the petitioner completed 20% of the work, and the contract was extended until 30.06.2023, with a penalty imposed. The contract

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was terminated on 20.02.2023 for lack of progress, despite being within the extension period.

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Although the tender documents allow for forfeiture of the EMD/security deposit and performance guarantee upon termination, whether the petitioner is entitled to a refund requires assessment by the respondents, including a joint measurement of the work completed.

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In WP No.5171/2023, this Court vide order dated 4.8.2023 (KSDJ) had observed that it was a consistent view of several High Courts that the progress of work was less than 1/3^rd of the quantum required ordinarily contractor was at fault unless a plausible explanation for other work not having been done by the tender inviting Authority. The Court therein had also observed in view of the fact that because of pendency of land acquisition, the progress of work was hampered with, it was open to the petitioner - contractor to seek refund of the security deposit/EMD from the respondents and had directed that the latter shall consider the same leniently, since the contract was awarded to some other agency as they would not arise any possibility of monetary loss to the respondents.

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Accordingly, the respondents are required to reconsider the petitioner’s claim for the refund of the EMD/security deposit and performance guarantee in pursuance with the observation contained in this order. Accordingly, I pass the following:

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NC: 2024:KHC:35734 WP No. 19196 of 2024

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ORDER

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i) The petition stands allowed.

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ii) The impugned communication/letter dated 20.3.2024 issued by the respondent No.1 at Annexure-S is hereby quashed.

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iii) The respondent No.1 is hereby directed to conduct joint measurement of the work completed by the petitioner under the contract. After conducting a joint survey, consider the claim of the petitioner for return of EMD/security deposit and performance of guarantee after adjusting the claim, if any, against the petitioner. The said exercise shall be completed within three months from the date of receipt of certified copy of this order.

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Sd/(HEMANT CHANDANGOUDAR) JUDGE

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BKM

Shri P Venugopal Reddy v. the Deputy Chief Engineer (Constructions)

Case brief

What is this about?

What did the court decide?

Shri P Venugopal Reddy v. the Deputy Chief Engineer (Constructions)

Case brief

What is this about?

What did the court decide?

What the court decided

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