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Rajkamal Builders Pvt. Ltd. Versus State of M.P. and Ors.

2015 (12) TMI 1728 - MADHYA PRADESH HIGH COURT

Show-cause notice for cancellation of contract - Held that:- We are of the considered view that in any case before 31.12.2015, the authorities of the respondents did not have any authority to issue show-cause notice for cancellation of contract unless some new circumstance comes in existence before expiry of such extended period and in that regard, no averments are made in the impugned show cause notice although it appears from the record that the prayer of the petitioner for extending the furth .....

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within time to the petitioner to meet the necessary expenses to pay the wages to the labourers and to maintain the deployed machinery and in such premises, it could be said that due to late payment or non-payment of running bills of the petitioner within time it could not manage the requisite infrastructure to carry out the work. In such premises, we direct the authorities to make the regular payment of running bills to the petitioner within time in accordance with the procedure without any hurd .....

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so appears that the excavation work of tunnel is almost near to be completed. The same may be completed within some period and on such reasons, the petitioner appears to be entitled for extension of the period of further six months under the relevant clauses and terms of the contract. Such observation is being made, keeping in view that if by rescinding the contract of the petitioner, the authorities of the respondents proceed to carry out the remaining work through some other agency, then again .....

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For the Respondents: Arvind Dudawat, Additional Advocate General and Vishal Mishra, Deputy Advocate General ORDER U.C. Maheshwari, J. 1. On behalf of the petitioner-Company, this petition is preferred under Article 226 of the Constitution of India, for issuing the appropriate writ against the authorities of the respondents, for the following reliefs: & .....

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nted to the petitioner firm including the cost of petition. (iv-a) That, the respondents be directed to make regular, uninterrupted payment as against work performed by the petitioner without any legal or administrative hurdle, in future." Initially, the relief extending further six months period from 31.12.2015 to complete the entire work was not made in clause (ii) of aforesaid relief clause and prayer of aforesaid clause 7(iv-a) was also not made at the initial stag .....

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work, on which after accepting its tender under the contract, the petitioner was granted contract work of the aforesaid tunnel for an amount of ₹ 31,19,52,310/- by work order dated 10.10.2011 (Annexure P-3). As per terms of NIT and the contract, the petitioner-Company has submitted bank guarantee of ₹ 1 crore of Punjab and Sindh Bank, P.Y. Road, Indore through letter dated 10.10.2011 (Annexure P-4) and thereafter, again submitted bank guarantee of ₹ 1 crore in the month of Augu .....

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ve the drawing and designs as early as possible to start the work. As per further case of the petitioner, the petitioner was always remained ready to carry out the contractual complete work within time but there was always delay on behalf of the respondents, in supplying designs and drawing, in taking permission from the Forest Department and in acquiring the land for construction of tunnel and in such premises, the period to complete the contractual work was extended from time to time and lastl .....

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re P-8. As per further averments, through letter dated 10.9.2015 (Annexure P-9) the respondent No. 2 had informed to the Superintending Engineer that the petitioner has constructed more than 50% work for which the amount of ₹ 1,627.87 lacs has been given to it and still the excavation work of tunnel is conducting by the petitioner with 1 or 2 blast daily and accordingly, there is a progress of work at the site. In such correspondence, it was also stated that prima facie it appears that the .....

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the petitioner was threatened in carrying out the excavation work of tunnel from RD 74110M to RD74184M, with information that the same would be given to some other agency on the cost and risk of the petitioner. Such notice was given to the petitioner although in the shape of show cause notice but in fact it was merely an eye-wash and the language of such notice makes it an order because the respondent has pre-concluded and assumed that the petitioner would not be able to complete the constructio .....

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s was decided in the meeting dated 24.8.2015 between the petitioner and Chief Engineer of the respondents. Besides the other grounds, the impugned show-cause notice Annexure P-10 was also challenged by the petitioner, stating that the same has not been issued in speaking manner by mentioning all relevant facts and annexing photo copies of reference/letter mentioned in the same. In the lack of such information and copy of the referred documents, such show cause notice could not be treated to be a .....

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9.2015 (Annexure P-10) to the petitioner. Such notice being contrary to the aforesaid internal communication/correspondence (Annexure P-9), is not sustainable. 3. In response of the aforesaid, on behalf of the respondent No. 2, by filing a short reply, the allegations made against the authorities in the petition, were denied. In addition to it, it is stated that the alleged project was sanctioned to provide irrigation facilities to the agriculturists of 165 villages of Districts Gwali .....

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the irrigation facilities for their Rabi crops and in such premises, could not get the irrigation facilities for their Kharif crops also. In addition to it, the admission is also opposed on the ground that this petition being filed without resolution of Board of Directors of the Company, is not entertainable. 4. The prayer of the petitioner is also opposed on the ground, stating that the petition being filed against the show cause notice, is not sustainable because the show cause not .....

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the General Conditions of Contract, the petitioner has an alternative efficacious remedy of arbitration. So, in such premises, this petition is also not entertainable. In further averments, it is stated that even after extension of time for four times to complete the work to the petitioner i.e. upto 31.12.2015, in view of revised milestones submitted by the petitioner annexed with the reply, according to which the petitioner itself undertakes to complete the work of ₹ 3,119.52 lacs, howeve .....

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R-1. 5. We would like to mention here that initially, the petition was filed by the petitioner stating the State of Madhya Pradesh through Chief Engineer, Water Resources Department, Office of Chief Engineer Rajghat Canal Project, Datia as respondent No. 1, but on taking up the objection on behalf of the authorities of the respondents, by way of amendment such nomenclature was changed and State of Madhya Pradesh was impleaded as party through Principal Secretary, Department of Water .....

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itioner as stated in the earlier part of this order, the additional reply was also filed on behalf of the State authorities on 19.10.2015, in which again on the cost of repetition the objections taken in earlier reply, were taken with some additional averments, stating that the petitioner-Company is not in a position to complete the contractual work upto 31.12.2015. Thereafter, again an additional reply on behalf of the respondents was filed on 2.11.2015 in which the same contentions have been r .....

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, Bihar State Housing Board v. Ramesh Kumar Singh and others, reported in (1996)1 SCC 327, prayed to quash the impugned show cause notice Annexure P-10 as the same has been issued arbitrarily and without following the principle of natural justice. He has also advanced the argument for appropriate direction under sub-clauses of (74) and (75) of the Contact to extend further six months period from 31.12.2015 to complete the remaining work of excavation and the construction of inside of the wall (d .....

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t the initial stage of show-cause notice, for want of cause of action could not be entertained. In continuation, he said that in any case, by way of terms of contract the petitioner has a remedy for redressal of its dispute in response of the aforesaid show cause notice before the authorities and besides this, the petitioner is also having an alternative remedy for redressal of its dispute through arbitration. Thus, the petition is not entertainable. In support of his contention, he has also pla .....

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y because in the available scenario, the petitioner could not complete the contractual work upto 31.12.2015. 9. On making the specific query by the Court that after extending the period upto 31.12.2015 and as per the report of the respondent No. 2 Executive Engineer, dated 10.9.2015 (Annexure P-9) sent to the Superintending Engineer, contending that the petitioner-contractor is ready and willing to carry out the remaining work and has also given an undertaking to complete the excavati .....

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etitioner and prayed for dismissal of this petition. 10. Having heard the counsel, keeping in view the arguments advanced at length, we have carefully gone through the petition as well as the response and the additional reply, undertaking submitted by the petitioner as well as the objection filed in response of undertaking, so also the annexed papers available on record. 11. It is undisputed fact that the alleged contract to carry out the excavation/digging work of canal wa .....

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lso apparent that the respondent No. 2 by aforesaid letter (Annexure P-9) informed to the senior authority that the petitioner is ready and willing to carry out the remaining excavation/digging work of the canal and performing the work regularly but speed of the work is slow and subsequent to such correspondence, in presence of the representative of the petitioner or its Director, no inspection of the site was carried out arid only after 11 days contrary to the aforesaid communication, the reaso .....

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stance from the record and the arguments of the Additional Advocate General that what was the necessity to issue show cause notice to the petitioner within short period of near about ten-eleven days from the date of sending the communication by the respondent No. 2 to his superior official the Superintending Engineer/respondent No. 1. In any case, the show cause notice being issued before expiry of the extended period upto 31.12.2015 to complete the excavation work, could not be deemed to be bon .....

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on of the petitioner specially when the alleged show cause notice was given by the authority in arbitrary manner and without taking into consideration the available circumstances and work position of the alleged contract, then this petition requires consideration to quash the impugned show cause notice. As such the action of the authorities of the respondents shall be deemed to be mala fide on the ground that after the communication dated 10.9.2015 (Annexure P-9) on what basis the superior autho .....

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and without supplying the copies of referred documents in the same to the petitioner, enabling it to understand the entire position and situation to file the reply of the same. So, in such premises, such show cause notice (Annexure P-10) being issued contrary to the principle of natural justice and without application of mind in arbitrary manner, is not sustainable and deserves to be set aside. 14. So far as the arguments of Additional Advocate General that in view of availability of .....

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6 of the Constitution of India such show cause notice and its proceedings could be quashed by the Court in the light of the principle laid down by the apex Court in the matter of Siemens Ltd. (supra), in which it was held as under: "Although ordinarily a writ Court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction, but the question herein has to be .....

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id, our view is also fortified by the principle laid down by the apex Court in the matter of M/s. Michigan Rubber (India) Limited (supra), which was held as under: "19) From the above decisions, the following principles govern judicial review in contractual matters: (a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review on .....

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e. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited; (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is .....

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aforesaid, in the matter of Tantia Construction Private Limited (supra), the apex Court has held as under regarding the maintainability of writ petition: "Even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is not an absolute bar to the innovation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausti .....

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nce to entertain and dispose of the writ petition filed on behalf of the respondent-Company." 16. Having perused the aforesaid legal position, in the available factual scenario of the case at hand as stated by the petitioner in the petition and also reflected from the circumstances of the case that when the application prayer of the petitioner for extension of period to complete the contractual work was pending for consideration before the authorities of the respondents and after .....

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.12.2015 there was no occasion with the authorities of the respondents to give show cause notice to the petitioner for cancellation of contract, with further intimation that the remaining work shall be carried through some other agency, on the risk and cost of the petitioner. From Annexure P-11, it appears that after extending the period with consent to complete the work upto 31.12.2015 in arbitrary manner with mala fide intention contrary to departmental communication dated 10.9.2015 (Annexure .....

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d in arbitrary manner with mala fide intention to rescind the contract without sufficient cause and following the principle of natural justice, in non-speaking manner without annexing the copies of referred documents to the petitioner. 17. We are of the considered view that in any case before 31.12.2015, the authorities of the respondents did not have any authority to issue show-cause notice for cancellation of contract unless some new circumstance comes in existence before expiry of .....

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this petition under the authority of interim order of this Court the remaining excavation/digging work of tunnel was/is being carried out by the petitioner but payment of running bills was not made within time to the petitioner to meet the necessary expenses to pay the wages to the labourers and to maintain the deployed machinery and in such premises, it could be said that due to late payment or non-payment of running bills of the petitioner within time it could not manage the requisite infrast .....

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ry to the Departmental communication Annexure P-9 and on account of non-making the payment of the running bills regularly within time, the petitioner could not complete the work of contract within time. It also appears that the excavation work of tunnel is almost near to be completed. The same may be completed within some period and on such reasons, the petitioner appears to be entitled for extension of the period of further six months under the relevant clauses and terms of the contract. Such o .....

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