TMI Blog2021 (3) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking quotation for award of contract of supply for the year 2020-21. From a bare reading of the above clause relating to contract validity, it is clear that the contract is not automatically determinable by passing of time of one year. A plain reading given to the clause i.e., extendable to another year i.e., from 01.04.2020 to 31.03.2021 based on your performance, unless terminated earlier in accordance with clause 6 of general terms and conditions indicates that the contract is extended by default for one more year i.e., from 01.04.2020 to 31.03.2021 subject to fulfillment of two essential conditions (1) Performance of the Applicant (2) earlier termination in accordance with clause 6 of general terms and conditions. Thus the contract shall be extended, if it is not terminated earlier and if the performance of the contractee is satisfactory. Thus satisfactory performance and non-termination leads to automatic extension of the contract - In the instant case, the Resolution Professional has extended the tenure of the Applicant by a period of 3 months, in my opinion, obviously the Resolution Professional would not have done so, if the performance of the Applicant was not sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I II linkage coal vide order No. 4100124570, 4100124571 dated 18.02.2019 and e-auction coal work order for Unit-I and II vide order No. 4100124663, 4100124666 dated 07.03.2019 respectively on the terms set out by the Corporate Debtor including the transportation charges. c. That the terms of the contract are governed by Indian Contract Act, 1872. The main features of the Contract and the price validity set out in all work orders is as follows: a) Contract Validity: Contract validity shall remain for one year i.e. from 1st April 2019 till 31st March 2020 and is extended to another year i.e. from 1st April 2020 to 31st March 2021 based on your performance, unless terminated earlier in accordance with Clause 6 - General Terms Conditions. b) Price Validity: Above rates will be valid for 1 year i.e., from 1st April 2019 till 31st March 2020 (subject to revision of diesel component DC) with an escalation of 5% (only on Work Component, WC) in the rates for the 2nd year i.e. from 1st April 2020 to 31st March 2021. c) Termination: Sub clauses (a) (i) to (v), (b) are general and set out for the benefit of Corporate Debtor and where as sub-clause(c) reads thus: the parties may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2019 and 07.03.2019, the Resolution Professional must respect the clauses of the same and strictly comply with the provisions of Contract Act, 1872. In the present case on hand the Resolution Professional has not followed due process of law, no Notice was issued to the Applicant before inviting the tenders for transportation of coal and same shows that the Resolution Professional has travelled beyond the scope of law as such calling fresh tenders for Transportation of Coal by the Resolution Professional is arbitrary, illegal and not in accordance of Law. 3. Counsel for the Respondent/Resolution Professional filed its counter, inter-alia, stating as under:- i. That the Corporate Debtor sources fuel for operational Units I II from South Eastern Coal Field Limited (SECL) (linkage coal), in addition to procurement through open market and e-auction. To this end, the Corporate Debtor enters into work orders/contracts on a yearly basis for transportation and handling of coal with transporters/contractors after following a strict tender process. It was a regular practice of the Corporate Debtor to float tenders in the market to get the best possible price. ii. That on 30.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / contractors were due to expire on 31.03.2020 and with an aim to reduce the cost of transportation of coal, the Corporate Debtor, floated fresh tender with Tender No. LAPL/COAL/TRANS/2020-21/01 dated 21.03.2020 and invited coal transporters to submit their technical and price bids for handling and transportation of coal offered under road mode by SECL for its power station during the financial year 2020-2021. This was a regular practice of the Corporate Debtor to float tenders in the market even before commencement of CIRP. vii. While the last date for submission of bids was initially on 27.03.2020, the Corporate Debtor was constrained to extend the last date for submission of bids several times to 31.07.2020, on account of the ongoing COVID-19 crisis and the resultant lockdown. The Corporate Debtor has received 11 bids along with the requisite earnest money deposit from the prospective bidders including Indermani Minerals (India) Private Limited and Kandoi Transport Limited. However, the bids are yet to be opened and evaluated. viii. That considering the tender process could not be completed within the initially stipulated time due to the Covid-19 situation, on 27.03.2020, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2021 based on your performance, unless terminated earlier in accordance with Clause 6 of General Terms Conditions. [...] (emphasis supplied). xii. That a bare perusal of the above referred clause would make it clear that the contract would be valid for a period of one year (i.e. from 1 April 2019 to 31 March 2020) and would automatically expire after lapse of the initial one year period due to efflux of time. However, the employer i.e., the Corporate Debtor has been given the discretion to extend the contract for a further period of one year i.e., from 1 April 2020 to 31 March 2021 based on the performance of the contractor, provided that the contract is not already terminated by the employer within the initial one year period in accordance with Clause 6 of the General Terms and Conditions of the contract. xiii. That the above interpretation of Clause 4 is strictly in line with the intention of the parties, which can be gathered from the conduct of the parties themselves. In this context, reference may be made to the email of 27.03.2020 sent by the Corporate Debtor to the Applicant stating that the validity of the four work orders/contracts have been extended for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87) DRJ 307). Therefore, while termination of a private commercial contract for convenience is permissible even in the absence of a contractual right to that effect, if such termination is found to be wrongful, then the remedy lies in damages. xx. That even if the subject work orders/contracts are assumed to be terminated wrongfully, the reliefs sought by the Applicant ought not be granted by this Adjudicating Authority as its relief lies elsewhere, if at all. xxi. That the tender process is currently in an advanced stage and lot of time, effort and resources have been invested in carrying out the said process so as to ensure that the Corporate Debtor is kept as a going concern. As such, any order setting aside the process may adversely affect the Corporate Debtor and will also cause irreparable harm and injury to the Corporate Debtor. Reiterating above, counsel for the Respondent prayed to dismiss the Application. 4. Counsel for the Applicant filed its Rejoinder, reiterating the averments made in the Application, denying the allegations made in the counter and further prayed to allow the Application as prayed for. 5. Heard both the sides and perused the record. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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