This Court dismissed a writ petition seeking to quash an impugned order short-closing a contract and imposing a penalty. The holder of the bench held that the petitioner violated contract terms regarding raw material sourcing and supply schedule, rendering the penalty valid.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21.11.2019
CORAM:
THE HON'BLE MR. JUSTICE T.RAJA
W.P.No.8911 of 2014
M/s.Himachal Aluminum and Conductors, A Partnership Firm, Rep. By its Partner Mrs.Sharada Mahajan, GT Road, VPO Mohtli (Near Pathankot), Kangra District, Himachal Pradesh – 176 404. .. Petitioner Vs
6th Floor, Western Wing, NPKRR Maaligai, 144, Annasalai, Chennai – 2.
Prayer: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus to call for the records pertaining to the order passed by the third respondent on 17.12.2013 in Lr.No.CE/MM/SE/MMI/EEC/AEE6/F, RC No.52, dated 06.08.2011/D.214/13 and quash the same and consequently direct the respondents to reimburse the forfeited bank guarantee dated 24.08.2011 vide Bank Guarantee No.0645ILG00341 along with an interest of 24% p.a. from the date of bank guarantee.
For Petitioner : Mr.A.Abdul
for M/s.Nathan and Associates For Respondents: Mr.P.R.Dhilipkumar, Standing Counsel
ORDER
The present writ petition is directed against the impugned letter dated 17.12.2013 issued by the third respondent / the Chief Manager, Material Management, Chennai, short-closing the Contract No.52, dated 06.08.2011, assigned to the petitioner and imposing the penalty to the tune of Rs.2,19,32,458/.
were not able to purchase the raw materials to run the Unit. Thereafter, although the petitioner took various steps to carry forward with the contract, the monetary crisis had arisen like a boulder for procuring the raw materials and finally, the third respondent, vide communication dated 21.03.2013, stated that the Conductor supplied earlier was urgently required for effecting agriculture and LT improvement works and thereby the petitioner was also directed to comply with the supply of materials within 15 days, failing which, the respondent would terminate the contract without notice. On receipt of the same, the petitioner, vide letter dated 06.04.2013, setting out the grievances faced by their firm, sought for release of payment. However, the third respondent, without considering the plight of th petitioner, indiscriminately short closed the contract on 17.12.2013 and the respondents had also calculated the recovery to the tune of Rs.2,19,32,458/-. This apart, the petitioner was also banned from participating in the tender conducted by the respondents for a period of three years for no fault of them.
“Commencement period 15 days from the receipt of P.O. and completion in 12 equal monthly installments.
In the terms & conditions of the P.O., it had been mentioned that after receipt of materials at respective field stores, the payment will be made within reasonable time provided the Company furnished the relevant documents (Invoice,
SDBG, etc.).”
After reading the terms and conditions, the petitioner Company had accepted the purchase order, as per which, they should supply 3750 Kms within 30.08.2012 at the rate of 312.500 km per month. But, the petitioner had supplied only 497.096 km belatedly against the RC order issued by the respondents. Therefore, the respondents wrote letters on 17.11.2012, 14.02.2013, 21.03.2013 and 16.05.2013 requesting to supply the balance km of materials immediately, but, the petitioner Company had failed to supply the materials thereafter. Although there was no violation of contractual conditions at any point of time by the respondents, the petitioner had violated the same and not supplied the materials in time and thus, it has caused loss to TANGEDCO in view of purchase of Conductors at a higher rate during the subsequent tenders. Without event supplying the materials as agreed, they have insisted the respondents to release the payment before supply of materials by invoking the provisions under the MSMED Act. Their right to seek payment will arise only after supply of materials as per the delivery schedule, therefore, the impugned order passed by the third respondent short-closing the contract given to the petitioner Company is perfectly valid in law as they have admittedly violated the terms and conditions of Purchase Order.
the necessary raw materials required for the manufacture of the Conductors ordered and Aluminium Alloy Rod used for the manufacture of Conductor shall be purchased/bought from M/s.Bharat Aluminium Company Limited and M/s.HINDALCO Industries Limited. But, they have failed to comply with the said condition and on the contrary, they have purchased the same from M/s.NALCO and this was their first breach of condition. As the petitioner had accepted to supply 312.500 km. per month, at no point of time, they had executed that work in any one of the month. Therefore, the impugned order has been rightly passed short-closing the contract assigned to the petitioner Company.
“8.0 Raw Material:
8.1. The supplier shall make their own
arrangement to purchase the necessary raw materials required for the manufacture of the conductors ordered. The Aluminium Alloy rod used for the manufacture of conductor shall be purchased/brought from the following primary producers:
1.M/s.Bharat Aluminium Company Limited
2.M/s.HINDALCO Industries Limited
Invoices for the purchase of raw materials from the above primary producers shall be furnished for each consignment of conductor to be supplied along with the manufacturers test report for verification.”
arrangement to purchase the necessary raw materials required for the manufacture of the Conductor ordered and therefore, without complying with such condition for supply of materials, it is not open to them to say that the petitioner Company is covered under the MSMED Act and hence, on receipt of payment only, the petitioner Company will execute the contract. To substantiate such contention, they have not placed any such proceeding before this Court. Therefore, when the petitioner repeatedly violated the conditions of contract, I do not find any merit in this writ petition.
s/d-
Assistant Registrar(CS VIII)
True Copy
Sub-Assistant Registrar
rkm To
NPKRR Maaligai, 144,
Annasalai, Chennai – 2.
6th Floor, Western Wing, NPKRR Maaligai, 144, Annasalai, Chennai – 2.
+1 CC to M/s. Nathan & Associates sr 97897
W.P.No.8911 of 2014
RP(CO) SP(26/02/2020)
2 issues framed by the court
Whether the impugned order short-closing the contract and imposing penalty was valid given the petitioner's breach of contract terms.
Whether reliance on the MSMED Act for payment delays justifies non-compliance with purchase order conditions.
M/s. Himachal Aluminum and Conductors
The Chairman & Managing Director, Tamil Nadu Generation and Distribution Corporation Limited
The Superintending Engineer, Tamil Nadu Electricity Board
The Chief Manager, Materials Management
T. RAJA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
