Dismissed

Arunachala Impex Private Limited v. The Managing Director

Madras HC1 Jun 2022WP/10985/2022

Case brief

AI extract

What is this about?

Petitioner challenged an order imposing penalty for non-supply of 2.42 lakh oil pouches in a second spell of a government tender. The Court held that the Russia-Ukraine war was a commercial difficulty, not force majeure, as it arose after the direction for supply and prices were not impossible of performance. Writ petition dismissed.

What did the court decide?

No costs. Connected miscellaneous petitions dismissed.

Arunachala Impex Private Limited Vs The… — Public Procurement and Tenders | Madras HC (2022)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS ORDERS RESERVED ON : 13.05.2022 PRONOUNCING ORDERS ON : 01.06.2022

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Coram:

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THE HONOURABLE JUSTICE MR.G.R.SWAMINATHAN

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W.P.No.10985 of 2022 and W.M.P.Nos.10574 & 10575 of 2022

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Arunachala Impex Private Limited Represented by its Managing Director No.192/237, Thambu Chetty Street Parrys, Chennai 600 001.

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... Petitioner

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..Vs..

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The Managing Director Tamil Nadu Civil Supplies Corporation No.12, Thambusamy Road, Kilpauk Chennai 600 010.

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2.Tender Sub-Committee Rep.by its Members No.12, Thambusamy Road, Kilpauk Chennai 600 010.

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Tamil Nadu Civil Supplies Corporation Represented by its Board of Directors No.12, Thambusamy Road, Kilpauk Chennai 600 010.

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4.State of Tamil Nadu

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Rep.by the Principal Secretary Cooperation, Food and Consumer Protection Department, St.George Fort, Chennai.

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... Respondents

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Prayer: Writ Petition under Article 226 of the Constitution of India for the issuance of a Writ of Certiorari to quash the order in RC.No.BS3/62350/2021 dated 13.04.2022 passed by the 1^st respondent the supply of second spell of RBD Palmolein Oil pouches to the respondents at the rate of Rs.120.25 per pouch.

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For Petitioner : Mr.A.L.Somayaji, Senior Counsel for Ms.Pushpa Menon

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https://hcservices.ecourts.gov.in/hcservices/

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For Respondents 1-3 : Mr.R.Shunmugasundaram, Advocate General

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Assisted by Ms.A.G.Shakeenaa, Standing Counsel

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For Respondent No.4: Mr.R.Shunmugasundaram,

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Advocate General Assisted by Mr.D.Ravichander, Special Government Pleader

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O R D E R

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The petitioner is a Private Limited Company engaged in the business of buying and selling edible oil and other essential commodities. The first respondent Corporation issued tender notification dated 20.12.2021 for supply of 4 Crore nos. of one litre Fortified RBD Palmolein oil pouches. The petitioner emerged as one of the successful tenderers and its offer for the supply of 1 crore nos. of oil pouches was accepted by the respondent Corporation and this quantity was to be supplied in two spells of 50 lakh each. The petitioner successfully supplied 50 lakh oil pouches under the first spell. On 14.02.2022, the first respondent directed the petitioner to supply 50 lakh oil pouches towards the second spell. The supply under the second spell was to be completed on or before 28.03.2022. The petitioner could however supply only 2,58,950 oil pouches as against the demand for 50 lakh oil pouches under the second spell. Since war broke out between Russia and Ukraine on 24.02.2022, the petitioner could not fulfill their contractual obligations to supply the remaining second spell quantity of oil pouches. They submitted a representation in this regard to the first respondent. The first respondent insisted that the petitioner must fulfill their part of the contract. However, extension of time was granted upto 30.04.2022 for supplying the balance quantity. It was also made clear that penalty will be levied on the petitioner. Communication dated 13.04.2022 was issued to this effect. Challenging the same, this writ petition came to be filed.

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The first respondent filed a detailed counter affidavit opposing the writ prayer. A preliminary objection has been taken that the petitioner was very much having the alternative remedy of arbitration under Clause 24 of the agreement. The maintainability of the writ petition was questioned on the ground that this remedy has not been exhausted. It was also contended that the issue is purely contractual in nature and therefore public law remedy cannot be availed. The primary stand of the first respondent appears to be that when other tenderers could successfully effect supplies against the second spell also, nothing prevented the petitioner from fulfilling

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https://hcservices.ecourts.gov.in/hcservices/

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their part of the contractual obligations. The various allegations made in the writ petition have been specifically denied in the counter affidavit.

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The learned Senior Counsel appearing for the writ petitioner submitted that when the petitioner entered into an agreement with the respondent Corporation in the second week of January 2022, it could not be envisaged that war would break out between Russia and Ukraine resulting in disruption of supply of Palmolein from Indonesia and Malaysia to India. He pointed out that this would constitute a force majeure event, which has rendered the contract impossible of performance. He pointed out that the prices had sky rocketed. This is evident from the fact that the first respondent Corporation had entered into a purchase agreement with one M/s.KTV Health Food Private Limited for buying Fortified RBD Palmolein Oil pouches at the rate of Rs.153.50/- per pouch which is Rs.33.25/- higher than the rate at which the petitioner had agreed to supply. This agreement between the respondent Corporation and M/s.KTV Health Food Private Limited was entered into on 01.04.2022.

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The learned Senior Counsel would emphasize the fact that the first respondent is a State instrumentality within the meaning of Article 12 of the Constitution of India and that therefore its actions will have to be governed by the principles of fairness and equity. The respondent cannot adopt two different yardsticks. He would also state that the existence of alternative remedy is not a ground to non-suit the petitioner. The fundamental right of the petitioner under Article 19(1)(g) of the Constitution of India is involved and therefore the petitioner cannot be prevented from availing the constitutional remedy. Reiterating all the contentions set out in the affidavit filed in support of the writ petition, the learned Senior Counsel submitted that the impugned order will have to be set aside as illegal and arbitrary. He also relied on a catena of decisions.

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The learned Advocate General on the other hand, called upon this Court to dismiss the writ petition in the light of the stand taken in the counter affidavit filed by the first respondent.

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I carefully considered the rival contentions and went through the materials on record. The basic facts are not in dispute. On 20.12.2021 the first respondent Corporation issued an e-tender notification for supply of 4 Crore nos. of one litre FBD Fortified Palmolein Oil Pouches. The petitioner's offer for supply of 1 Crore nos. of oil pouches was accepted by the respondent Corporation, who issued a confirmation letter on 13.01.2022. The petitioner had remitted the Earnest Money

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https://hcservices.ecourts.gov.in/hcservices/

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Deposit and also provided the Bank Guarantee. On 21.01.2022, a formal agreement was entered into between the parties. As per the agreement, the petitioner was to supply 50 lakh nos. of oil pouches towards the first spell at the rate of Rs.120.25/- per pouch. The petitioner completed the said supply by 21.02.2022 itself. On 14.02.2022, the first respondent directed the petitioner to supply the second spell quantity of 50 lakh nos. of oil pouches at the same rate of Rs.120.25/- net per pouch. The supply was to be made on or before 28.03.2022. The petitioner however could supply only 2,58,950 pouches and the balance quantity could not be supplied. To enforce the supply of second spell quantity, the impugned communication came to be issued.

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The only question that falls for consideration is whether the petitioner can be exonerated from their contractual obligation of supplying the balance second spell quantity. It is true that war broke out between Russia and Ukraine on 24.02.2022 leading to serious price fluctuations in the market. The price had gone up by almost 25%. These developments are acknowledged by the respondent Corporation themselves. For instance, the respondent Corporation had agreed to purchase the very same RBD Fortified Palmolein oil pouches at the rate of Rs.153.50/- per pouch from another tenderer. A copy of the email confirmation order dated 01.04.2022 issued by the first respondent has been enclosed at Page 201 of the typed set of papers. It is also beyond dispute that one other tender process involving purchase of RBD Fortified Palmolein pouches was cancelled citing existence of force majeure conditions. The moot question is whether on this ground the impugned communication can be set aside.

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The tender notification was issued on 20.12.2021. The E- tender was opened on 06.01.2022. The first respondent had issued email confirmation order on 13.01.2022 itself. Once the petitioner's offer was accepted, the contract stood concluded and the petitioner was obliged to supply 1 Crore nos. of the aforesaid oil packets at the negotiated rate of Rs.120.25 net per pouch. The email confirmation order clearly reads that the first spell quantity of 50 lakh nos. was to be supplied on or before 21.02.2022 and that the next supply orders would be issued as per the requirement and storage availability. A formal agreement was also entered into on 21.01.2022 for supply of the first spell quantity. On 14.02.2022, the direction for supplying the second spell quantity was also issued. The Ukraine war admittedly broke out only on 24.02.2022. The direction to effect supply of the second spell quantity was made some ten days prior thereto. In any event, the outbreak of Russia-Ukraine war, in the facts and circumstances of this case, cannot be considered as a force majeure event. When the

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petitioner undertook to supply 1 Crore quantity on 13.01.2022, they ought to have made appropriate arrangements then itself. It is not the case of the petitioner that on 14.02.2022 when the direction for supplying the second spell quantity was issued, Palmolein was not available. The developments that took place ten days thereafter can only be called as a commercial or business difficulty. The shooting up of the price of the commodity by 25% will not qualify to be a force majeure event. Only if the supervening events have rendered the contract to be impossible of performance, then alone the case of the petitioner can be accepted. Such is clearly not the case here. As rightly pointed out by the learned Advocate General, when the other suppliers could fulfill their part of the contract and effect supply of both the first spell as well as the second spell quantities, the petitioner cannot be placed on a different footing.

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No case has been made out for the grant of relief and the writ petition stands dismissed. No costs. Consequently, connected miscellaneous petitions are also dismissed.

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Sd/-

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Assistant Registrar(Vacation Officer)

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//True Copy//

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Sub Assistant Registrar

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The Managing Director

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Tamil Nadu Civil Supplies Corporation No.12, Thambusamy Road, Kilpauk Chennai 600 010.

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2.The Members,Tender Sub-Committee No.12, Thambusamy Road, Kilpauk Chennai 600 010.

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3.The Board of Directors Tamil Nadu Civil Supplies Corporation

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No.12, Thambusamy Road, Kilpauk, Chennai 600 010.

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4.The Principal Secretary,

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State of Tamil Nadu Cooperation, Food and Consumer Protection

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Department, St.George Fort, Chennai.

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+1cc to Government Pleader, Sr.No.29680(07/06/2022)

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+1cc to M/s.Pushpa Menon, Sr.No.32045 (15/06/2022)

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W.P.No.10985 of 2022

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nrjk(CO) A.SK(06/06/2022)

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https://hcservices.ecourts.gov.in/hcservices/

Arunachala Impex Private Limited v. The Managing Director

Case brief

What is this about?

What did the court decide?

Arunachala Impex Private Limited v. The Managing Director

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Parties & counsel

Coram

Case details

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