Allowed

M/S Bss Projects Private Limit v. the State of Bihar and Ors.

Patna HC3 Aug 2016CWJC/8031/2012

Case brief

AI extract

What is this about?

The court allowed the writ petition to the extent of setting aside impugned orders regarding the forfeiture of security deposit. It held the forfeiture unauthorized due to violation of natural justice as no show-cause notice was issued ever.

What did the court decide?

The impugned orders effecting forfeiture of security deposit were set aside and respondents directed to refund the amount within six weeks.

M/S Bss Projects Private Limit Vs the State of… — Civil Procedure and Limitation | Patna HC (2016)

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IN THE HIGH COURT OF JUDICATURE AT PATNA

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Civil Writ Jurisdiction Case No.8031 of 2012

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M/s BSS Projects Private Limited, Flat No. 65, Street No. 01, Sagar Society, Banjara Hill, Hyderabad (Andhara Predesh) New Address:-Pragati Nagar, Srinagar Colony, Yusufguda Post, Hyderabad-500045 Through Its Managing Director, Shri Yudhishtirgaddipati, Son Of Shri Govardhana Rao, Residing At Flat No. 307, Krishe Meadows, Srinagar Colony Main Road, Hyderabad

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.... .... Petitioner

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Versus

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The State Of Bihar through Principal Secretary, Rural Work Department, Government of Bihar, Patna

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The Principal Secretary, Rural Work Department, Government of Bihar, Patna

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The Engineer-In-Chief, Rural Work Department, Government of Bihar, Patna 4. The Chief Engineer, Rural Work Department, Division-III, Patna 5. The Superintendent Engineer, Rural Work Department, Darbhanga

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The Executive Engineer, Rural Work Department, Works Division, Rosera District-Samastipur

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.... .... Respondents

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=========================================================== Appearance :

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For the Petitioner : Mr. Ashish Giri, Advocate

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For the Respondents : Mr. Anshuman Singh, AC to Pr. AAG 1

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=========================================================== CORAM: HONOURABLE MR. JUSTICE VIKASH JAIN

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ORAL JUDGMENT Date: 03-08-2016

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I.A. No. 625 of 2013.

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This interlocutory application has been filed for amendment

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in the relief portion by adding the following prayer:

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“1(v) For issuance of writ/order/direction in the nature of certiorari for quashing the order dated 07.12.2012 passed by the Empowered Standing Committee constituting of the Secretary, Rural Works Department, the Chief Engineer-4, Rural Works Department and Mr. Ram Dhayan Ram retired Engineer-in-Chief, Road Construction Department by which the rescinding of the contract and forfeiture of the Bank Guarantee of the petitioner has been upheld holding the

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petitioner to be solely responsible for delay in execution of the project”.

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Having regard to the nature of the prayer, I.A. No. 625 of 2013 is allowed and the petitioner is permitted to make appropriate amendments in the writ petition in course of the day.

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C.W.J.C. No. 8031 of 2012.

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The present writ petition has been filed for quashing the order bearing no. 886 dated 11.04.2012 issued by the respondent, Rural Works Department, Works Division, Rosera, by which the PMGSY Contract Work Package No. BR-30R-IX and BR-30R-X granted to the petitioner has been rescinded under Clause 52.2 of the Standard Bid Document (S.B.D.) and further the security deposit has also been forfeited (Annexure-10); for directing the respondent authorities not to rescind the contract of the petitioner and further to grant the extension of period of completion of contract in light of Clause 27 read with Clause 40 of the General Conditions of Contract (Annexure-2) and/or alternatively close the contract simpliciter and grant compensation to the petitioner due to failure of the authorities in performing their part of the reciprocal promises; and for preventing the authorities from forfeiting and encashing the security deposit, performance security and mobilization bank guarantee in relation to the contracts in question.

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At the very outset, learned counsel for the petitioner states that the second and third prayers in the writ petition for directions to the respondents not to rescind the contract and for preventing forfeiture and encashment of the security deposit etc. are not pressed, as having become

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infructuous in view of subsequent developments brought on record in terms of the aforesaid interlocutory application.

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The petitioner is a Limited Company and was awarded contract under the Prime Minister Gramin Sadak Yojna (for short “PMGSY”) for the purpose of construction of village road for which a letter of award of contract was issued on 23.01.2010, pursuant to which agreements were entered into between the parties. According to the petitioner, progress in the work was delayed for reasons attributable to the respondents who did not release funds to the petitioner in terms of the agreements and the General Conditions of Contract (hereinafter referred “G.C.C”). Objections were raised by the petitioner in this regard. The respondents on their part alleged delay by the petitioner and required it to immediately proceed to complete the work. The matter culminated in the impugned order dated 11.04.2012 (Annexure-10) being passed, by which the contract was rescinded in terms of Clause 52.2 of the Standard Bid Document (SBD) and the security deposit of the petitioner was directed to be forfeited.

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Among the various contentions raised on behalf of the petitioner, learned counsel raises the preliminary issue of violation of natural justice in the matter of forfeiture of security deposit. He invites attention to the letter dated 25.10.2011 (Annexure-5) issued by the Executive Engineer by which the petitioner was requested to speed up the progress of work, failing which the contract was proposed to be rescinded and the registration of the petitioner to be placed in the blacklist. He further invites attention to the letter dated 26.11.2011 (Annexure-7)

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according to which the petitioner was once again required to complete the work without delay. He also invites attention to the letter dated 02.12.2011 (Annexure-8) by which, on account of non-completion of work, the petitioner was directed to participate in the meeting to be held on 10.12.2011 in the office of the Superintending Engineer.

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Learned counsel for the petitioner submits that the impugned order has been passed rescinding the contract and directing forfeiture of the petitioner’s security deposit, in complete violation of the principles of natural justice and without any show cause against such forfeiture. It is submitted that none of the three letters issued to the petitioner as aforesaid constitutes a show cause notice for the proposed action of forfeiture of the petitioner’s security deposit. Reliance is placed on the decision of the Supreme Court in (2014) 9 SCC 105 [Gorkha Security Services vs. Government (NCT of Delhi) and others] which makes it abundantly clear that any action proposed to be taken by the department needed to be specifically stated in the show cause notice. To the same effect is the principle laid down in AIR 1973 Patna 111 [Qudrat Ali vs. The State of Bihar and others] , in para-12 whereof it has been observed that “if the petitioner is not entitled to a refund of the security deposit in respect of the licence, he is surely entitled to a notice when an order to that effect is proposed”. He further invites attention to the judgment of this Court reported in 2012 (4) PLJR 258 [Rama Kant Singh vs. The National Hydraulic Power Corporation Ltd] wherein, being a case also involving termination of the contract under Clause 52.2 of the G.C.C., this Court had quashed the order terminating the contract and it was held that the petitioner was

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entitled to refund of the full security deposit, bank guarantee and liquidated damages recovered from the petitioner.

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Learned counsel for the respondents, on the other hand, submits that no show cause notice was in fact required to be given in cases of fundamental breach of contract as held in para-16 of the order of the Empowering Committee dated 07.12.2012 (Annexure-18). In any event, the letters of the Department were in the nature of show cause notices which clearly informed the petitioner about the slow rate of progress of work. It is therefore submitted that the impugned order cannot be faulted on grounds of violation of natural justice as sought to be contended by the petitioner.

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Having heard the parties and on careful consideration of the materials on record, this Court finds merit in the writ petition. A bare perusal of the letter dated 25.10.2011 (Annexure-5), letter dated 26.11.2011 (Annexure-7) and letter dated 02.12.2011 (Annexure-8) shows that the petitioner was never confronted with any proposal for the forfeiture of its security deposit. All three letters aforesaid merely exhorted the petitioner to complete the work expeditiously, without even a whisper about any action proposed to be taken against the petitioner. The respondents have not been able to show from any correspondence that the petitioner was required to submit its show cause reply with reference to the proposed action of forfeiture of its security deposit. The submission of the respondents that no show cause was required in cases of fundamental breach of contract is not worthy of acceptance, considering that Clause 52.2 of the agreement only contemplates termination of the

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contract in case of fundamental breach thereof and does not visualise forfeiture of the security deposit. Moreover, Clause 53.1 of the SBD relied upon by the respondents merely provides for recovery of any excess owing to the employer over the amount owing to the contractor, out of the security deposit, but not for its forfeiture in the event of fundamental breach of contract. The order of the Empowering Committee dated 07.12.2012 does not also throw any light with regard to the source of power exercised by the authorities in this regard in absence of any show cause notice. The observation in para-34 of the said order of the Empowering Committee is rather suggestive of non-application of mind in holding that there was proper notice to the petitioner merely by referring to the meeting and press communiqué for expediting the work and completing it in stipulated time, none of which however have been shown to contain a show cause notice against forfeiture of the security deposit. This Court therefore finds that the impugned action of the respondents effecting forfeiture of the petitioner’s security deposit without prior show cause notice for such proposed action was unauthorized in law and is thus liable to be set aside.

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In the circumstances, the impugned order dated 11.04.2012 (Annexure-10), and so also the order dated 07.12.2012 passed by the Empowered Standing Committee (Annexure-18), are hereby set aside insofar as concerns the issue relating to forfeiture of security deposit of the petitioner. The respondents shall take steps for refund of the amount of the security deposit in question to the petitioner within a period of six weeks from the date of receipt/production of a copy of this

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judgment. The writ petition stands allowed to the extent above.

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I.A. No. 4012 of 2012 filed for quashing the notice inviting re-tender dated 09.06.2012 for the PMGS work earlier awarded to the petitioner, stands disposed.

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I.A. No. 6759 of 2014 filed on behalf of the respondents for modification of the interim order dated 31.07.2012 in connection with extension of the period of Bank Guarantee, also stands disposed.

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Before parting with this judgment, it may be noted that the petitioner has not agitated the issue relating rescinding of the contract which is thus dismissed as not pressed. It is also made clear that since the issue relating to forfeiture of security deposit has been decided on the basis of violation of natural justice, this Court is not entering into the merits of the remaining contentions of the petitioner.

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(Vikash Jain, J)

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Md. Ibrarul/-BT

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AFR~~/NAFR~~	AFR
CAV DATE	N.A.
Uploading Date	16.08.2016
Transmission Date	N.A.

M/S Bss Projects Private Limit v. the State of Bihar and Ors.

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M/S Bss Projects Private Limit v. the State of Bihar and Ors.

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