Allowed

M/S J.K.M.Infra Projects Limit v. the State of Bihar and Ors.

Patna HC1 Oct 2013CWJC/22811/2011

Case brief

AI extract

What is this about?

This oral order disposed of two writ petitions challenging identical Administrative orders declaring petitioner contractors as defaulters and debarred from future tenders. The Court allowed the applications, quashed the debarment orders, and held that such proceedings involve fundamental rights.

What did the court decide?

The impugned orders dated 11.12.2011 declaring the petitioners as defaulters and debarred from future tenders are quashed and set aside.

M/S J.K.M.Infra Projects Limit Vs the State of… — Public Procurement and Tenders | Patna HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.22811 of 2011

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M/S J.K.M. Infra Projects Limited, A Company Registered Under The Companies Act Having Its Registered Office At C-84, Greater Kailash Part-I, New Delhi - 110048 And Its Regional Office At Flat No. 403, Gorakh Nath & Leela Apartment, East Boring Canal Road, Patna-800001 (Bihar) Through Its Authorized Signatory Mr. Ashish Jalan, S/O Late Mahavir Prasad Jalan, Presently Posted As D.G.M., Finance, J.K.M. Infra Projects, At Flat No. 403, Gorakh Nath - Leela Apartment, East Boring Cnala Road, Patna - 800001, Bihar

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.... .... Petitioner/s Versus

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The State Of Bihar Through Principal Secretary Water Resources Department

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The Principal Secretary Water Resources Department, Government Of Bihar 3. The Engineer In Chief (Central) Water Resources Department, Government Of Bihar, Patna 4. The Engineer In Chief (North) Water Resourcse Department, Government Of Bihar, Patna

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The Chief Engineer, Water Resources Department, Birpur, Bihar

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The Superintendent Engineer, Water Resources Department, Barrage Circle, Birpur, Bihar

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The Executive Engineer-Cum-Engineer-In-Charge Western Koshi Embankment, Division Kunauli At Birpur-Cum-Nodel Officer Of The Project 8. The Executive Engineer, Western Koshi Embankment, Division - Nirmali, Bihar

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The Executive Engineer Headworks Division, WRD, Birpur, Bihar

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.... .... Respondent/s

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with

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Civil Writ Jurisdiction Case No.22823 of 2011

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M/S Nccl- Vasishta J.V. Door No. 6-3-680/8/3 Shahani Residency, 3rd Floor, Thakur Mansion Lane, Somajiguda, Hyderabad - 500082, Through Its Authorised Signatory Mr. B.A.N. Raju, S/O Late Venkatpathi Raju, Residing At Muvva Nest Building, Pen House D, Nizampet Road, Kukatpally, Hyderabad - 500072

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.... .... Petitioner/s

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Versus

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The State Of Bihar Through Principal Secretary Water Resource Department

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The Principal Secretary Water Resource Department, Government Of Bihar

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Engineer In Chief (Central) Water Resource Department, Government Of Bihar, Patna

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Chief Engineer, Water Resources Department, Birpur, Bihar

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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Superintending Engineer, Water Resource Department, Saharsa, Bihar 6. Executive Engineer, Eastern Embankment Division, Supaul, Bihar

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.... .... Respondent/s

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====================================================== Appearance : (In CWJC No.22811 of 2011) For the Petitioner/s : Mr. Sanjeev Kumar For the Respondent/s : Mr. Ajay Bihari Sinha SC-19 (In CWJC No.22823 of 2011) For the Petitioner/s : Mr. Y.V. Giri, Sr. Advocate Mr. Ashish Giri For the Respondent/s : Mr. S.Raza Ahmad AAG-9 ====================================================== CORAM: HONOURABLE MR. JUSTICE KISHORE KUMAR MANDAL ORAL ORDER 6 01-10-2013 Both the applications raise common issue inasmuch as they are directed against the identical order(s) passed on 11.12.2011 by the respondent Engineer-in-Chief, Central, Water Resources Department, Government of Bihar whereby it has been communicated to the petitioners that in exercise of Clauses 3.3 and 4.8 of the Standard Bid Document (SBD), the petitioners have been declared defaulters and thereby prohibited from participating in future tender(s). They have thus been heard together and are being disposed of by the present order.

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For the sake of convenience, factual matrix shall be noticed from C.W.J.C. No. 22811 of 2011. Additional facts stated in C.W.J.C. No. 22823 of 2011, if need be, shall be noticed separately.

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The petitioner company was selected and awarded the contract by the respondent for execution of work regarding

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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“Raising, Strengthening and “Construction of Bituminous Road” (including reconstruction/restoration of structures) on Koshi embankment in different stretches estimated cost whereof was Rs. 117,35,43,672.00/-. Accordingly, Contract Agreement No. 01/SBD/2009-10 dated 10.11.2009 was signed between the parties. The Executive Engineer, Kanauli of the Water Resources Department at Birpur being the Nodal Officer of the Project signed on behalf of the State. The construction work was to be completed by 9.11.2011. The work involved three Executive Engineers of different/separate jurisdiction(s). Part of the work was to be done/executed in the Indian Territory. The petitioner was tagged to a quarry lying in Nepal territory for procuring construction materials. While the petitioner was continuing with the execution of work layer wise, it was noticed that one item of work i.e. Granular Sub Base (GSB) was not included in the agreement. This was necessary as per specification(s) prescribed by the Indian Road Congress. Realizing this mistake the respondent decided to provide 206 MM thick GSB below WMM layer in the construction of the road. This was communicated to the petitioner vide letter dated 12.05.2010 (Annexure-1) at least six months after the start of the work. The petitioner was verbally instructed to perform this extra item of laying GSB in the whole

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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stretch sometimes in June, 2010.While altering the specifications and providing GSB layer before WMM, the respondent did not disclose source of obtaining GSB materials and its rate although it was incumbent upon the respondent to do so under diverse provisions of General Conditions of Contract (GCC). The respondent Chief Engineer by a communication dated 19.01.2011 (Annexure-2) apprised the petitioner to source the material for GSB from Nepal. The petitioner subsequently found that the Government of Nepal had put a ban on the export of materials for utilizing in the Indian Territory which obstructed carriage of GSB materials from Nepal. The casualty was the progress of work. A meeting between the petitioner and the officials of the Department was held on 09.04.2011 wherein it was resolved that new source of material be provided to the petitioner. The petitioner company was later assigned Sheikhpura Quarry for the GSB materials to be used in the project/work lying within Indian territory. Having done so, the rates on which the materials were to be obtained from the said quarry became another issue. In carrying SBD materials from Sheikhpura quarry, the petitioner company was liable to incur extra freight charges. In the said process, execution of the work was delayed. The petitioner company apprised the respondents with the problem faced by it which was bound to delay completion

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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of the project within time. Again a meeting was held on 01.08.2011 between the officials of the Department and the petitioner company wherein it was assured by the petitioner that the work shall now be completed by June, 2012 inasmuch as an amended work schedule was also submitted. Certain issues were thereafter raised by the petitioner which was/were acceded to by the respondent Chief Engineer. The amended work schedule submitted by the petitioner company was also accepted. It is the case of the petitioner that yet several issues remain unresolved. In the meanwhile, the respondent vide letter No. 342 dated 11.12.2011 (Annexure-7) issued by the respondent Engineer-inChief declared the petitioner as defaulter and was prohibited from participating in future tender. Aggrieved thereby, the present writ petition has been filed.

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In C.W.J.C. No. 22823 of 2011, the petitioner is a joint venture company between S.S.Nagarjuna Construction Company Ltd. which is incorporated under the Companies Act 1956 and M/s VASISHTTA Construction Pvt. Ltd which is also registered under the Companies Act. The order dated 11.12.2011 (Annexure-4) passed by the same Engineer-in-Chief is identical to Annexure-7 of C.W.J.C. No. 22811 of 2011.

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Heard Mr. Sanjeev Kumar in support of C.W.J.C.

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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No. 22811 of 2011, Mr. Ashish Giri in support of C.W.J.C. No. 22823 of 2011 and Mr. S. Raza Ahmad, A.A.G.-9 assisted by Mr. A.B. Sinha S.C. 19 for the State. Parties have exchanged the pleadings.

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Learned counsel for the petitioner, with reference to diverse statements made in the writ petition supported by documents, submitted that the delay in completion of work within the stipulated period occurred due to obvious lapses on the part of the State respondents inasmuch as the map was not provided within time by the respondents. While finalizing the agreement, the G.S.B. component was left out. After incorporation of GSB component in the agreement and arrangement of the quarry, the same called for modification/alteration of rates. These aspects of the matter were brought to the notice of the respondents in diverse meetings held between the petitioner and the respondent. Even then the respondents unilaterally passed the impugned order declaring the petitioner defaulter and thereby prohibiting it from participating in any future tender including the present work. A party to the agreement cannot be the arbiter in such matter. While passing the impugned order, the respondents have referred to diverse provisions particularly those contained in clauses 3.3 and 4.8 of the ITB which is/are only instruction to the intending

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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bidder. Once the bid is accepted and agreement is signed, the same cannot be referred to as the source for passing such order. The order impugned is otherwise bad in law on account of gross violation of the rules of natural justice. Referring to the order issued by the Principal Secretary to the Road Construction Department contained in letter bearing No. 2131(S) dated 13.3.2009 (Annexure-1 to 2^nd supplementary affidavit), it has been submitted that the respondents were obliged to serve a notice on the petitioner before passing the impugned order in the present writ petition having serious civil consequences as noticed by the Apex Court in (1975) 1 SCC 70 (M/S Erusian Equipment and Chemicals Ltd versus State of West Bengal and Another. It has been argued that the respondent Engineer-in-Chief (Central) passed several similar/identical orders on and around the same date against which writ petitions were filed. Two of such writ petitions came to be considered by this Court which was allowed by a common order dated 10.01.2013 since reported in 2013 (1) P.L.J.R. 952 (M/s NCC Ltd. versus State of Bihar) . Referring to an order dated 6.5.2013 passed in C.W.J.C. No. 23884 of 2012(Annexure-2 to the supplementary affidavit),it has been submitted that similar order passed by the said respondent against another agency namely M/s J.K.M. Infra Projects Ltd was quashed

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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and set aside by this Court relying on the case of M/s NCC Ltd.

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(supra) .

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Mr. Giri, learned counsel for the petitioner appearing in support of C.W.J.C. No. 22823 of 2011 placed the order passed in the case of M/s NCC Ltd. (supra) in order to highlight that both the writ petitions disposed of by this Court were directed against the similar/identical order dated 18.10.2012 passed by the respondent Engineer-in-Chief (Central), Water Resources Department referring to clauses 3.3 and 4.8 of the SBD. In the present case also similar order has been passed inasmuch as the reasons assigned therein are the same. The grounds on which they are assailed are the same. There is an additional ground for delay of work as the execution of work was stopped by the Forest Department of the Government due to undertaking given for plantation of tree by the Forest Department which consumed a couple of months. It has thus been submitted that the case in hand is squarely covered by the decision rendered by this Court in the case of M/s NCC Ltd (supra) .

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Learned counsel for the State, on the other hand, submitted that before passing the impugned order, several notices were issued to the petitioner for speeding up the work yet the petitioners failed to achieve adequate progress of work resulting in

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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passing of the impugned order. It has next been contended that the dispute raised in the present case arises out of an agreement signed between the parties. Writ jurisdiction, therefore, cannot be invoked particularly when the matter can be agitated before the arbitrator and/or the Tribunal constituted by the State Government.

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The challenge has been made to the impugned order on the ground that the same has been passed by a party to the agreement and not by independent forum/authority. It has also been contended that before passing the said order having serious civil consequences upon the right of the petitioner to enter into business transactions with the State and its functionaries, no opportunity to submit show cause was given. The order is thus violative of rules of natural justice.

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The respondents have resisted the application on the ground that the petitioners have an alternative remedy and that in a matter where breach of contract is involved, the writ jurisdiction cannot be invoked. This Court in M/S NCC Ltd. (supra) has answered the submissions of the parties. After considering diverse judgments of the Apex Court, it has been held that alternative remedy in a matter where there is apparent breach of rule of natural justice would not be a bar. This Court would reproduce paragraphs 23 and 24 of the said judgment

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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hereinbelow:-

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“23. I have considered the rival submissions of learned counsels for the parties. So far as the issue of maintainability is concerned, it has been clearly held by the Apex Court in the aforesaid Popcorn Entertainment case (supra) relying upon the earlier decision in Whirlpool Corporation vs Registrar of Trade Marks : (1998) 8 SCC 1 that even in contractual matters or where there is existence of alternative remedy there is no absolute bar to exercise of jurisdiction by this Court if issues of jurisdiction and violation of natural justice arise. The present matter cannot be treated as action by the respondent authorities of the State purely in exercise of power under the contract; rather the power exercised is of declaring the petitioners defaulter and debarring from participating in future tenders which was not part of the contract entered into between the State and the petitioners and even if could have formed part of the contract would be considered as going beyond the purview of contract, so far as it relates to the existing contractual obligation between the State and the petitioners.

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24. The effect of an order declaring defaulter is grave enough so as to debar a contractor from participating in any future tender. Clause 3.3 of the SBD itself makes it clear that if such an action is taken by any of the authorities, including any State or any public sector undertaking or even by the Central Government, then the other authorities act upon the said defaulter orders and the contractor in question is practically debarred from participating in any future tender with all such authorities. Such an action would have serious consequences upon the right of a contractor to exercise his fundamental right under Article 19(1)(g) of the Constitution and hence cannot be considered as a purely contractual situation or violation of contractual right. Thus the issue not only of jurisdiction but also of compliance of

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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principles of natural justice would automatically arise in such cases and it cannot be assumed that such a matter is not maintainable before this Court in its writ jurisdiction. The challenge to the maintainability of the writ applications is, accordingly, rejected.”

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When there is allegation and counter allegation with

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regard to reasons which caused delay in completion of the work, this Court in M/S NCC Ltd. (supra) relying on M/S J.G. Engineers Pvt. Ltd. versus Union of India and Anr. reported in AIR 2011 SC 2477 held as under in paragraph 25:-

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“25. From a perusal of the facts and circumstances enumerated above it is evident that in the present matter the petitioners have been declared defaulters in carrying out their contractual work by the authorities of the State which factual situation is denied by the petitioners who have on the other hand made allegations against the State authorities as being equally liable and at fault in the matter. The contention of learned counsel for the petitioners that in such circumstances the issue regarding default can only be decided by an impartial adjudicatory body has much force in view of the law laid down by the Apex Court in M/s. J.G.Engineers case (supra). The Apex Court has clearly held that the question whether the other party has committed a breach cannot be decided by the party which alleges the breach nor the contract can provide that one party to the contract can decide whether they committed the breach or the other party committed the breach, which question can only be decided by a judicial forum, i.e. a court or an Arbitral Tribunal.”

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This Court is, therefore, in agreement with the

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submissions of the counsel for the petitioners that issues raised in the present applications are covered by the order passed in M/s

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Patna High Court CWJC No.22811 of 2011 (6) dt.01-10-2013

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NCC Ltd. (supra) .

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Accordingly, both the applications are allowed. The impugned order(s) dated 11.12.2011 passed in both the writ petitions are quashed and set aside. Aggrieved party would be at liberty to approach the arbitrator or the Tribunal constituted by the State Government for resolution of the dispute.

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There shall be no order as to costs.

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(Kishore Kumar Mandal, J)

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Pankaj/-

M/S J.K.M.Infra Projects Limit v. the State of Bihar and Ors.

Case brief

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M/S J.K.M.Infra Projects Limit v. the State of Bihar and Ors.

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