Divided bench quashed orders forfeiting security deposit under PMGSY contract for violation of natural justice due to lack of timely show cause notice, directing refund.
Set aside impugned orders regarding forfeiture; directed refund of security deposit within six weeks.
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 PATNA
Civil Writ Jurisdiction Case No.8921 of 2012
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M/s BSS Projects Private Limited, Flat No. 65, Street No. 01, Sagar Society, Banjara Hill, Hyderabad (Andhra Pradesh) New Address:- Pragati Nagar, Srinagar Colony, Yusufguda Post , Hyderabad - 500045 through its Managing Director, Shri Yudhishtir Gaddipati, son of Shri Govardhana Rao, residing at Flat No. 307, Krishe Meadows, Srinagar Colony Main Road, Hyderabad
.... .... Petitioner
Versus
.... .... Respondent/s
=========================================================== Appearance :
For the Petitioner : Mr. Ashish Giri, Adv. For the Respondents : Mr. Subhash Pd. Singh, GA-3
=========================================================== CORAM: HONOURABLE MR. JUSTICE VIKASH JAIN ORAL JUDGMENT Date: 05-08-2016
I.A. No. 3562 of 2012 and I.A. No. 361 of 2013.
These interlocutory applications have been filed for amendment in the relief portion of the writ petition by adding the following prayers respectively:
“1(x) For issuance of writ/order/direction in the nature of certiorari for quashing the orders dated 09.05.2012 bearing no. 921, 922, 923, 924, 925, 927, 928, 929, 930, 931, 932 and 933 (wrongly addressed to J.S.R. Construction
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Pvt. Ltd.) issued by the respondent Executive Engineer, Rural Works Department, Work Division, Chapra-I wherein the various contracts earlier awarded to the petitioner i.e. package no. BR 09R 47, BR 09R 41, BR 09R 42, BR 09R 56, BR 09R 55, BR 09R 44, BR 09R 45, BR 09R 46, BR 09R 50, BR 09R 48, BR 09R 51 and BR 09R 53 respectively has been rescinded in exercise of power under clause 52-2(a) of S.B.D. and further the security deposit has been forfeited and recommended for blacklisting of the petitioner (Annexure-29 Series).
1 (xi) 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 of the petitioner has been upheld holding the petitioner to be solely responsible for delay in execution of the project.”
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C.W.J.C. No. 8921 of 2012.
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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 09.05.2012 (Annexure-29 Series) 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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the impugned order dated 09.05.2012 was passed.
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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 entitled to refund of the full security deposit, bank guarantee and liquidated damages recovered from the petitioner.
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to submit its show cause reply with reference to the proposed action of forfeiture of its security deposit. The show cause notice dated 28.12.2010 is too remote in time to be connected with the impugned action of forfeiture of the security deposit of the petitioner in terms of the order dated 09.05.2012, moreso in view of the subsequent letter dated 29.04.2011 granting extension of the date of completion of the work. 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 SBD only contemplates termination of the 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 a fundamental breach of contract. The order of the Empowered Committee dated 07.12.2012 does not also throw any light with regard to the source of power exercised by the authorities in the absence of a show cause notice for the purpose of effecting forfeiture. The observation in paragraphs 50 and 51 of the said order of the Empowered Committee is rather suggestive of non-application of mind in simply making a passing reference to the Management meeting and several letters said to have been issued to the petitioner, none of which however have been shown to contain a show cause notice for forfeiture of the security deposit. This Court therefore finds that the impugned
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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 liable to be set aside.
(Vikash Jain, J)
Md. Ibrarul/-BT
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2 issues framed by the court
Whether the forfeiture of security deposit was lawful without providing a prior notice to show cause.
Whether the 1973 Patna High Court decision regarding natural justice applies to forfeiture actions under the Standard Bid Document.
Colour shows how this judgement treated each authority
Gorkha Security Services vs. Government (NCT of Delhi) and othersApplied¶38
(2014) 9 SCC 105 · Who else cites this
Qudrat Ali vs. The State of Bihar and othersReferred¶38
AIR 1973 Patna 111 · Who else cites this
Rama Kant Singh vs. The National Hydraulic Power Corporation LtdReferred¶38
2012 (4) PLJR 258
3 provisions across 2 enactments
M/s BSS Projects Private Limited
The State of Bihar through Principal Secretary, Rural Work Department, Government of Bihar
Vikash Jain
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
