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TMI Blog2021 (3) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... eps taken by the Resolution Professional in inviting fresh tenders is vitiated by law and the same is liable to be set aside in the interest of justice. 2. Brief facts leading to filing of the instant Application, as stated by the Applicant, is as under:- a. That the Corporate Debtor herein was admitted for CIRP on 05.09.2019 and the Respondent herein was appointed as Interim Resolution Professional. Later, he was confirmed as Resolution Professional. b. That the Corporate Debtor during the course of its ordinary business invited tenders for transportation of coal from South Eastern Coal Fields Limited, Coal mines from across the country to the site of its business operations at Unit-I and Unit-II for both Linkage Coal and e- auction coal and the Applicant herein has submitted the bid with all relevant information. The Corporate Debtor being satisfied that the Applicant Company stood as L-1 in the bidding process and has met all the requirements of tender, entered into Transportation Contract/work orders for unit-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 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to follow due process of law by giving the reasons for terminating the contract and to avoid the procedure contemplated under the contract and Indian Contract Act, 1872 for termination and to overcome the same calculatingly the Resolution Professional called for fresh tenders with ill-will impliedly to terminate the Contract without coming on record, thus, it is clear that the Resolution Professional is not discharging his duties in the best interest of Corporate Debtor. g. The Resolution Professional may come up with a plea that he has not taken any steps to terminate the contract which is in force till 31.03.2021, however, on perusal of the tender form and steps taken by the Resolution Professional inviting fresh bids confirms that he is moving towards the terminating of Contract/work orders issued for Unit I & II dated 18.02.2019 and 07.03.2019 respectively which is arbitrary, illegally without following due process of law. h. To terminate the above stated existing contracts/work orders dated 18.02.2019 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal. v. That all the work orders/contracts executed by the Corporate Debtor with the three contractors had an identical contract validity clause. Simply put, it was decided between the parties that the work orders/ contracts would be valid for a period of one year (i.e., from 1 April 2019 to 31 March 2020) and thereafter, extendable by another one year period (i.e. from 1 April 2020 to 31 March 2021) at the discretion of the Corporate Debtor and based on the performance of the contractor. The relevant clause for the present purposes has been reproduced herein below: "4. Validity: [...] Contract Validity - Contract validity shall remain for one year i.e. from 1st April 2019 till 31st March 2020 and is extendable to another year i.e. 1st April 2020 to 31st March 2021 based on your performance, unless terminated earlier in accordance with Clause 6 of General Terms & Conditions. [...] vi. Considering that the work orders/contracts entered into with the then existing three transporters/ 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-alia, to set aside the steps taken by the Corporate Debtor in inviting fresh tender for handling the transportation of coal. That this application has been preferred by the Applicant after a lapse of almost five months from the date when the impugned tender process was initiated i.e., on 21.03.2020 and when the tender process is nearing completion. xi. That the Clause 4 of the work orders/contract (which is identical in all the work orders/contract), has been reproduced below: "4. Validity: [...] Price Validity: Above rates will be valid for 1 year i.e. from 1st April 2019 till 31st March 2020 (subject to the revision of Diesel Component, DC) with an escalation of 5% (only on work component, WC) in the rates from the 2nd year i.e. 1st April 2020 to 31st March 20121 as explained below: [...] Contract Validity - Contract validity shall remain for one year i.e. from 1st April 2019 till 31st March 2020 and is extendable to another year i.e. 1st April 2020 to 31st 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That the Applicant is seeking a direction of specific performance against the Corporate Debtor, which is otherwise barred by Law. xvii. That the judicial decisions in the cases of Indian Oil Corporation Limited v. Amritsar Gas Services and others, ( (1991) 1 SCC 533) and Her Highness Maharani Shantidevi Vs. P. Gaikwadv Savijbhai Haribhai Pael, (AIR 2001 SC 1462) suggest that the mere existence of a termination clause may lead to the contract being 'determinable' and hence, not specifically enforceable. xviii. The Hon'ble Delhi High Court in the case of Rajasthan Breweries Limited v. The Stroh Brewery Company, (2000 (55) DRJ (DB) is relevant where the Court went on to hold that all commercial contracts are determinable contracts. xix. The Rajasthan breweries case Supra has been relied upon and subsequently followed by the decision of The Hon'ble Delhi High Court in the case of Rainbow Electric Supply Co. v. North Delhi Power Limited, (2206 (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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, 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. The term "extendable " should be appreciated with reference to the context in which it is used. It does not mean that a option is given to the Corporate Debtor to extend the contract, on the contrary, it means that subject to the satisfaction of two essential conditions i.e., (1) satisfactory performance and (2) non-termination, the contract shall be extendable. 9. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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