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HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
WRIT PETITION No.16394 of 2014
ORDER:
This Court has heard Sri P. Veera Reddy, learned senior counsel appearing for the petitioner, learned Government Pleader for Civil Supplies and Sri P. Hema Chandra, learned standing counsel representing the respondents 1 to 3-Civil Supplies Corporation.
The petitioners before this court are the legal heirs of the deceased contractor for the respondent-civil supplies corporation.
Sri P. Veera Reddy, learned senior counsel for the petitioners submits that the petitioner was awarded a work of transportation of food grains for the years 2008-09 and a contract dated 29.03.2008 was entered into. The learned senior counsel submits that the petitioner fulfilled all the statutory contractual conditions by depositing the security deposit, EMD, bank guarantee etc., and an agreement dated 08.04.2008 was entered into.
On 17.10.2008, 300 bags of food grains, weighing approximately 14.805 Metric Tons were given for transportation to the petitioner, engaged a lorry bearing No.AP 02 T 0546 to transport the same. According to the learned senior counsel the driver of the lorry diverted the stocks. Realizing that the lorry did not reach the destination the petitioner approached the 3rd respondent and also the 2 police and lodged a complaint. It transpires that the driver attempted to divert the said stocks, FIR No.85 of 2008 was registered. In view of the diversion of stocks, the petitioner's contract was also suspended. Later, the learned senior counsel points out that the lorry was traced, the driver was arrested and the law took it's own course. Further, learned senior counsel points out that the petitioner was not made an accused in the case. The charge sheet was also filed before the Judicial First Class Magistrate Court. The 14.795 MTs of rice, which was tracked and recovered, were handed over to the respondents. Learned senior counsel also points out that basing on the orders of the Hon'ble Sessions Judge, Ananthapur in Criminal Revision Petition No. 28 of 2009 the seized stock was directed to be handed over to the District Manager, Civil Supplies, Anantapur for disposal. Accordingly, the Joint Collector, who is the 2nd respondent herein permitted the sale of the seized stocks also. It is submitted that the seized stocks were also directed to be handed over to various Fair Price Shops pursuant to the proceedings of the Tahsildar on 31.01.2010. Learned senior counsel, therefore, submits that the entire stock of diverted rice was brought back into the system and distributed through the Fair Price Shops. He, therefore, submits that the respondents did not sustain any loss whatsoever. Learned senior counsel also points out that against the action taken by the respondents against the Contractor-petitioner W.P.No.3268 of 2009 was 3 also filed. Learned single Judge after considering the facts noticed that a penalty of recovery Rs.2,66,499/- towards the double the economic cost of the goods diverted was levied. While disposing the W.P.No.3268 of 2009 the Court, however, held that the amount already recovered was the double the amount of cost of goods diverted is valid recovery as per the terms of the contract. The other amounts that were withheld i.e., bank guarantee, security deposit etc., was held to be disproportionate. Against the orders of the learned single Judge a Writ Appeals were also filed by the Contractor and also by the Civil Supplies Corporation. These were numbered as W.A.Nos.340 and 638 of 2014. By a common order dated 10.04.2014, these Writ Appeals were disposed of. Learned senior counsel also points out that the order of the learned trial Judge setting aside the termination of the contract of the present petitioner was upheld, but the "double penalty" was upheld. The Division Bench also held that a fresh show cause notice should be issued to the petitioner and a de novo inquiry is to be conducted. Accordingly, a show cause notice was issued on 28.04.2014 pursuant to the orders of the Division Bench, wherein the issue of the termination of the contract, forfeiture of the security deposit, bank guarantee and pending bills was directed to be reconsidered. To the show cause notice issued the petitioner gave a detailed reply raising among other issues the fact that no loss is caused to the Corporation and that all further actions should be 4 dropped. The contractor cited certain case law also in the said reply notice and requested the Corporation to release the bank guarantee, security deposit and also the pending bills. Learned senior counsel submits that despite the said detailed reply, the impugned order dated 07.06.2014 was passed. Learned senior counsel submits that without considering the reply or the legal and factual issues raised the impugned order has been passed. Learned senior counsel submits that the order is bereft of reasons and does not consider the actual issues that are raised by the present petitioner. He also submits that in the absence of any loss being caused, forfeiture of the security deposit, refusal to return the bank guarantee and also retaining the pending bills, is not called for. Therefore, learned senior counsel argues that the amounts pending should be directed to be returned with interest along with security deposit, bank guarantee etc. Learned standing counsel, however, argues that the forfeiture of these amounts is in accordance with the terms of the contract and after considering the explanation only. It is submitted that it is an admitted fact that the stocks were diverted. The record filed by the petitioner himself clearly established the same, as per the learned standing counsel. Relying upon the terms of the work order and Clause 3(iii), the learned standing counsel argues that the petitioner contractor is responsible for the transportation of the material. He argues that as per Clause 8 (iv) and (v) of the 5 agreement the respondents are absolutely justified in the action taken. Even if there is a diversion of the truck the petitioner is responsible and the respondents have the right to terminate the contract, forfeit the security deposit, bank guarantee and also the pending bills. Learned standing counsel submits that as per condition 8(iv) the contract and his representative is responsible in case of diversion of stocks under the Essential Commodities Act. Learned standing counsel points out that the contractor is responsible for the acts of his agents including the truck owner, driver and cleaner of the truck, in which the stocks are loaded for the transportation. Relying upon these clauses of agreement, learned standing counsel argues that the impugned order is correct and therefore, there is no cause made out for interference.
COURT:
After examining the submissions made by the learned senior counsel and the learned standing counsel for respondents along with record of this case, this Court is of the opinion that the essential facts are not really in dispute.
Amongst the documents filed by the petitioners, this Court notices that the letter issued by the Inspector of Police, which is at page 58, Ex.P.10 of the material documents. As per this letter the contractor and the owner of the lorry are not responsible for the actual commission of the offence and it is the driver of the lorry, who was held to be responsible for 6 the actual commission of the offence. The proceedings of the SDPO, Anantapur, show that a direction was granted to delete the name of the contractor and the owner of the lorry from the list of accused. Thereafter the seized stock of 300 rice bags was directed to be handed over to the Manager of the respondent-corporation, who received the same. In the charge sheet it is clear that the contractor is an not accused. Thereafter, pursuant to the proceedings of the Court, including the revision petition in Crl.R.P.No.28 of 2009 the seized stocks were directed to be handed over to the District Manager, Civil Supplies Corporation. The Joint Collector passed orders to release the stocks, which was seized. Accordingly, the seized stocks were handed over to the District Manager, Anantapur, APSCSCL.
By proceedings dated 31.01.2010 the seized stock of 14.795 MTs was handed over for distribution through the Fair Price Shops. This is evidenced by an order dated 31.01.2010 and the letter of the respondent corporation dated 15.03.2010. Thus, this Court finds the entire stock of 14.795 MTs was disposed through the six fair price shops and an amount of Rs.29,590/- was realized. Thus, this Court finds that there is no pecuniary loss caused to the Corporation.
In W.P.No.3268 of 2009 filed by the petitioner, the deceased 1st petitioner, this aspect was taken note of by the learned single Judge. The order of termination of the contractor, which is challenged in the said writ was set aside 7 by the learned single Judge. Learned single Judge came to the conclusion that the impugned order visited severe penal and civil consequences on the contractor. Ultimately, in paragraph 28 of the order learned single Judge held that the amount of penalty which was levied i.e., to double the cost of the amount diverted can be sustained and the contractor has no claim over the same. The Writ petition was allowed directing the respondents to issue a fresh show cause notice for the other part of the claim. This order was again upheld in the Writ Appeals filed and a fresh show cause notice is directed to be issued. Accordingly, the show cause notice dated 28.04.2014 was issued and a detailed reply was given, running into a few pages.
The contractor very clearly asserted that the diverted stocks were re-entrusted for disposal and sales through the PDS system. It is asserted that the entire stock of 14.295 MTs were again utilized by the respondent-corporation and therefore, there is no loss to the respondent corporation. Clause 8 (vi) of agreement was held to be not applicable and the forfeiture of the deposit, bank guarantee etc., is questioned. Four judgments were also relied upon by the petitioner contractor in his reply. These are mentioned in paragraph 21 of the reply notice.
The order in Writ Appeal directed the respondents to consider the contentions urged and to pass a speaking order after receiving the reply.
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The next issue for consideration is whether the impugned order is in line with the law on the subject including the reply of the respondents.
As stated by the learned senior counsel and in line with the orders in Writ Appeal, the penalty amount of Rs.2,66,499/- has been held to be due to the respondent- corporation by the learned single judge and later by the Division Bench. Any question about the said amount cannot be reagitated once again. The larger issue is about the recent order being passed. Time and again the highest courts of the land have held when a reasoned order is to be passed along with reasons the same should be ex facie visible from the reading of the order itself. If the impugned order is examined against the background of the settled law on the subject with regard to reasons it is clear that there is no discussion whatsoever about the issues raised by the contractor in his reply to the show cause notice. The reply which is filed, from paragraph 9 onwards, raises the issue of sale of the diverted stocks and the utilization of the sale proceeds by the respondent corporation. The Writ Petition No.3268 of 2009 and the order in the Writ Appeal Nos.340 and 638 of 2014 are discussed in paragraphs 12 and 13 of the reply. In paragraph 15 it is asserted that the entire diverted stock was brought back into the system and the sale proceeds were also realized / utilized. Therefore, it is asserted that there are no damages / loss etc., that are sustained by the Corporation. It is stated 9 in paragraph 15 that no loss is caused to the corporation and the petitioner is not liable under Clause 8(vi). In paragraph 19 it is again asserted that an amount of Rs.2,66,499/- was already taken by the Corporation and again the show cause notice was issued for forfeiting the bank guarantee, security deposit and pending bills. The law on the subject and the need for reasons being furnished after considering the reply are very clear. Reasons are the hallmark of justice. They show the application of mind (Victoria Memorial Hall v Howrah Ganatantrik Nagarik Samity 1). The impugned order in the opinion of this Court does not discuss the issues raised by the contractor. For the purpose of forfeiture of the security deposit and the other claims, Clauses 8(iv) and 8(vi) are to be seen. Under Clause 8(iv) also the Corporation shall have a right to suspend the contract at any time without notice, without assigning reasons if the contractor or his representative is involved in a case of diversion of stocks or under the Essential Commodities Act or any other Act. Under the Clause 8 (v) the Corporation has a right to forfeit the security deposit, bank guarantee and pending bills in the event of failure or diversion of trucks. Under the Clause 8 (vi) the Corporation shall have a right to terminate the contract and to get the work done for the unexpired period of the contract at the petitioner's risk and cost and forfeit the security deposit or any part thereof, in addition to claim the 1 (2010) 3 SCC 732 10 bank guarantee amount for any damages, loss charges etc., that may be suffered by the Corporation. Therefore, this Court is of the opinion that while the respondent corporation has a right to suspend the contract or to terminate the same but it can only forfeit the security deposit for any "loss", "damages" sustained by the Corporation. Maula Bux v Union of India2 is the leading case on this issue. In the case on hand the Corporation has recovered the cost of the rice diverted by getting the same back into the PDS system pursuant to the orders of the Joint Collector. The seized stock was brought back into the system pursuant to the orders of the Joint Collector and Courts referred to above and a sum of Rs.2,66,999/- was also recovered from the petitioner contract. Apart from this, this Court notices that the respondents did not sustain any monetary loss. This forfeiture, retention etc., these are in the nature of the penalty. As per the settled law on the subject the question of awarding compensation or recovery of compensation will only arise if there is a "loss". Compensation as per the term means making good the loss. If no loss is sustained respondents cannot automatically forfeit the security deposit or make other claims.
This Court reiterates that rice has already been brought into the PDS system, and an amount of Rs.2.66 lakhs has already been recovered. This has been upheld by 2 (1969) 2 SCC 554) 11 the learned single judge vide its orders dated 26.11.2013 in W.P.No.3268 of 2009 and in the Writ Appeal Nos.340 and 638 of 2014, any further recovery in the form of forfeiture of the security deposit, bank guarantee and pending bills would amount to unjust enrichment. Therefore, this Court holds that the impugned order suffers from two fundamental flaws. (1) It does not consider the detailed reply and the case law and the implications of the case law submitted by the respondents. (2) The point raised by the contractor that no loss is caused to the Corporation has not been considered at all by the respondents. The case law submitted has also not been considered by the respondents. Therefore, this Court has no hesitation to hold that the respondents should be directed to forthwith release the security deposit of Rs.10,00,000/-, Bank Guarantee of Rs.15,00,000/- and pending bills of the petitioner along with interest at the rate of 6% per annum from February, 2009 till the date of actual payment. The respondent Corporation which is an instrumentality of the State has a duty to act as a model employer. It cannot enrich itself at the cost of a contractor. Retention of all these amounts would be contrary to law and also amount to unjust enrichment.
The contractor's legal heirs are fighting this battle since long after the contractor expired. The respondent-corporation did not sustain any loss as a result of the diversion of the stock. Double the amount of the value of the stock has 12 already been realized. Therefore, the retention of the other monies due to the contractor are held to be bad in law.
With the above observation, the Writ Petition is allowed. There shall be no order as to costs.
Consequently, the Miscellaneous Applications pending, if any, shall also stand closed.
__________________________ D.V.S.S.SOMAYAJULU, J Date:22.04.2022 Ssv