HONOURABLE SRI JUSTICE B. VIJAYSEN REDDY
WRIT PETITION No.30770 OF 2022
ORDER:
Respondent No.1 issued Tender Enquiry No.E112000409 dated 27.02.2021 for drilling, excavation, loading, transportation, dumping, spreading and levelling etc., of 320.873 LBCM of in-situ hard OB (which includes 1.620 LBCM of coal) with conventional equipment and additional works viz., 10,000 RMT of drilling, 1000 shovel hours and 1000 dozer hours at RG OC-II Extension Project, RG-III Area for a period of 24 months. The petitioner participated in the tender and was declared as a successful bidder. Letter of Intent (LOI) dated 10.06.2021 was issued to the petitioner. Subsequently, Order No.7600008743 dated 05.07.2021 for the project was placed on the petitioner. The value of the work awarded to the petitioner is Rs.37,646.012 lakhs exclusive of GST.
2.1. The relevant clauses of the order are as under: "1.1.1 d. SCCL will not allow the contractor to procure diesel from outside."
2"1.1.4(e) The total value of the work with Excavation and Diesel component only would be as given below:
Sl. Qty. Basic Rate Value
No. Description (LBCM) in Rs. (Rs. in
Lakh)
A Excavation rate 320.873 Rs.51.70 16589.134
for In-situ OB per BCM
Diesel 320.873 Rs.65.39 per BCM 20981.885
component for (i.e., for 0.777 Lts per
In-situ OB BCM @ Rs.84.16 per
Ltr)
1.4 SUPPLY OF DIESEL:
a. Monthly diesel quantity will be issued as per the notified quantity.
b. For monthly excess consumption the equivalent amount will be withheld from monthly bills.
c. Monthly saved quantity will be carried forward progressively till the end of the contract.
d. ... ... ...
e. ... ... ...
f. ... ... ...
g. ... ... ...
h. The year-wise quantity of diesel per BCM provided by SCCL is notified as per formulae given in the clause no.1.3.5(c).
i. At the end of every year, after assessing the weighted average lead operated as per clause 3 no.1.5(e) the diesel quantity shall be reconciled for actual lead as given at para 1.4(a) above. The quantity of diesel to be provided by SCCL for the balance years shall be re-assessed as per formula mentioned at clause 1.4(h) according to the weighted average leads tobe operated as per clause No.1.5(e) and the same will be the "Revised diesel quantity' for the respective years.
1.4(A) UTILISATION OF DIESEL:
a. The contractor shall use the diesel provided by SCCL for OB removal work which includes laying/formation of haul roads/ramps, usage of conveyance vehicles, etc., connected with the work in the project for which the diesel is provided. u. if the contractor resorts to diversion of diesel provided by SCCL for OB removal and connected works (laying of haul roads/ramps, usage of conveyance vehicles, etc.) for other than OB removal works, SCCL reserves the right to terminate the contract without paying any compensation to the contractor.
v. In case of termination of the contract as above, an amount equal to the value (as per invoice) of the diesel quantity diverted for other than OB removal works will be recovered from the bills of the contractor. A penalty of 15% on the value of the 4 unexecuted quantity of the schedule of the total contract will be levied."
2.2. That during execution of contract, the petitioner has drawn additional quantity of diesel, details of which, from March 2022 to June 2022, are as under:
March, 2022 - 1,29,336.50 Ltrs.
April, 2022 - 2,62,274.56 Ltrs.
May, 2022 - 3,22,844.74 Ltrs.
June, 2022 - 6,03,320.39 Ltrs.
2.3. The respondents have recovered cost of additional diesel at the rate of Rs.123.289 per litre for the quantity of 1,29,336.50 litres under Bill No.15, at the rate of Rs.125.431 per litre for the quantity of 2,62,274.56 litres under Bill No.17, at the rate of Rs.128.234/- per litre for the quantity of 3,22,844.74 litres under Bill No.19 and at the rate of Rs.137.793/- per litre for the quantity of 6,03,320.39 litres under Bill No.21. The total amount recovered/withheld by the respondents from the bills is Rs.17,33,76,126.97 paise which is exclusive of invoice / purchase rate of diesel. The excess amount of Rs.6,24,72,082.82 paise i.e., 5 difference between the purchased rate and the basic order rate per litre as given under Clause 1.2(e) of the Order, has been recovered / withheld by respondent No.1.
3. Heard Mr. Avinash Desai, learned counsel for the petitioner, and Sri E. Madan Mohan Rao, learned senior counsel appearing for the learned standing counsel for the respondents, and perused the material on record.
4. It is submitted by the learned counsel for the petitioner that recovery made by the respondents towards additional cost of diesel is in contravention of the terms and conditions of the order. The contract is an Item Rate Contract which excludes cost of diesel in the excavation rate quoted by the petitioner and accepted by respondent No.1. It is the obligation of respondent No.1 to provide notified quantity of diesel for excavation at the rate of 0.777 Lts / BCM for excavation of In-situ hard OB. Respondent No.1 will not allow the petitioner to procure diesel from outside. The diesel rate per litre is Rs.84.16 paise considering the rate at Rs.63.59 (i.e., for 0.777 Ltrs / BCM).
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5.1. The learned counsel for the petitioner submitted that the respondents have to supply diesel at the rate of Rs.84.16 paise per litre as per Clause 1.2(e) of the order. The recoveries made by the respondents are contrary to the terms and conditions of the contract / order which provides for equivalent amount. The term equivalent amount is shown in Clause 1.4 of the order which denotes basic rate of diesel at Rs.84.16 per litre which is the rate agreed upon by the respondents for supply of diesel.
5.2. The respondents vide letter dated 09.04.2022 enclosed Bill No.15 for the month of March 2022 in which Rs.1,59,44,603.72 is shown as deducted towards excess consumption of diesel quantity of 1,29,336.50 litres at the rate of Rs.123.28 per litre. The petitioner objected to the deductions shown in Bill No.15 vide its letter dated 20.04.2022 and sought clarification on the said deduction with reference to terms and conditions / clauses of the order and asked respondents to make deduction at equivalent amount of Rs.84.16 per litre. In response to the same, the respondents vide letter dated 26.04.2022, referring to Clause 1.4(b) of the Order justified withholding the amount of 7 Rs.1,59,45,767.75 paise towards cumulative excess consumption quantity of HSD i.e., 1,29,336.50 litres arrived at considering purchase price of HSD at the rate of Rs.123.289/- per litre from IOCL by respondent No.1 from 16.03.2022. The respondents have also enclosed copy of the invoice dated 16.03.2022 issued by the IOCL in the name of respondent No.1.
5.3. It is contended by the learned counsel for the petitioner that the respondents have unilaterally recovered excess amount of Rs.6,24,72,082.82 paise in total till date. The petitioner is currently way ahead of the schedule and has excavated more than 2 crore BCM in just 11 months as against the agreed 1,54,09,500 BCM that was to be excavated in the first year of the contract.
5.4. The committees could not resolve the dispute as per Clause 1.14 which contemplates reference of any issues / disputes to the three level management committees. The meeting of Management Committee was held on 16.05.2022. As the matter was not resolved at the request of the petitioner, the dispute was referred to the Area Management Committee and meeting was held 8 on 25.05.2022. The dispute was not resolved and the matter was finally referred to Corporate Management Committee and a meeting was held on 13.06.2022, however, the dispute remained unresolved.
5.5. It is contended by the learned counsel for the petitioner that there is no allegation of diversion against the petitioner. The agreed rate for supply of diesel by the respondents is Rs.84.16 paise per litre. Even if rates of fuel are increased due to ongoing war between Russia and Ukraine, the burden will be passed on to the consumers by the SCCL. There are no disputed questions of fact. The only interpretation is regarding equivalent amount. The learned counsel further submits that in similar contract which was awarded to the petitioner in Clause 1.4, it is mentioned that the diesel will be charged at invoice rate whereas in the instant case, it was mentioned as equivalent rate i.e., the rate agreed upon under the contract. Irrespective of variation in prices, the respondents are bound to supply diesel at Rs.84.16 paise per litre. The learned counsel relied on the decisions of the Hon'ble Supreme Court in ABL International Limited v. Export Credit Guarantee 9 Corporation of India Limited1 and Manmohan Nanda v. United India Assurance Company Limited2.
6.1. In ABL International Limited's case (Supra 1), the Hon'ble Supreme Court held as under:
"53. From the above, it is clear that when an instrumentality of the State acts contrary to public good and public interest, unfairly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations, it really acts contrary to the constitutional guarantee found in Article 14 of the Constitution. ... ... ... On facts we have found that the terms of the policy do not give room to any ambiguity as to the risk covered by the first respondent. We are also of the considered opinion that the liability of the first respondent under the policy arose when the default of the exporter occurred and thereafter when the Kazakhstan Government failed to fulfil its guarantee. There is no allegation that the contracts in question were obtained either by fraud or by misrepresentation. In such factual situation, we are of the opinion, the facts of this case do not and should not inhibit the 1 (2004) 3 SCC 553 2 (2022) 4 SCC 582 10 High Court or this Court from granting the relief sought for by the petitioner.
57. For the reasons stated hereinabove, we think the Appellate Bench of the High Court was not justified in reversing the judgment of the learned Single Judge. For the reasons stated above, the impugned judgment of the Appellate Bench of the High Court is set aside and that of the learned single Judge is restored. The appeal is allowed with costs."
6.2. In Manmohan Nanda's case (Supra 2), the Hon'ble Supreme Court held as under:
"45. The contra proferentem rule has an ancient genesis. When words are to be construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction, applies. This rule is often invoked while interpreting standard form contracts. Such contracts heavily comprise of forms with printed terms which are invariably used for the same kind of contracts. Also, such contracts are harshly worded against individuals and not read and understood most often, resulting in grave legal 11 implications. When such standard form contracts ordinarily contain exception clauses, they are invariably construed contra proferentem rule against the person who has drafted the same."
7.1. On the other hand, Mr. E. Madan Mohan Rao, learned senior counsel, appearing for Mr. J. Sreenivasa Rao, learned standing counsel for the respondents, has submitted that the writ petition is not maintainable. The prayer of the writ petition is for refund of amount on the assumed rate of diesel supply to the petitioner. The petitioner wants interpretation of clauses which does not come in the realm of writ jurisdiction and so also this Court exercising power under Article 226 of the Constitution of India cannot direct refund of the amount, that too disputed amount. The rate at Rs.84.16 per litre shown in the table of the order is indicated only for arriving at the total value of the work.
7.2. The learned senior counsel submitted that the respondents supplied diesel for excess consumption at market price. Due to increase in the market price, the petitioners are bound to pay differential amount. Clause 1.14 of the order provides for settlement of disputes. The petitioner cannot rely on 12 earlier contract which is independent of the present contract. There are 15 similar contracts and none of the contractors have challenged the deductions. Much water has flown from the judgment of the Hon'ble Supreme Court in ABL International Limited (Supra 1). The writ petition under Article 226 of the Constitution is not maintainable when the project is of a private contract and no public law element is involved. The respondents have every right to recover the differential amount and nothing extra is recovered. The decision in ABL International Limited's case (Supra 1) relates to an insurance contract and did not involve complexity in facts and issues. The learned senior counsel relied on the judgments of the Supreme Court in Kerala State Electricity Board v. Kurien E. Kalathil3, Joshi Technologies Internatiaonl INC. V. Union of India4, and Bharat Coking Coal Limited v. AMR Dev Prabha5.
3 (2000) 6 SCC 293 4 (2015) 7 SCC 728 5 (2020) 16 SCC 759 13 8.1. In Kerala State Electricity Board's case (Supra 3) , the Hon'ble Supreme Court held as under:
"11. A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not arise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if 14 provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies."
8.2. In Joshi Technologies International INC.'s case (Supra 4), the Hon'ble Supreme Court held as under:
"70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being 15 specifically performed. Otherwise, the party may sue for damages.
70.7. ... ... ...
70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course of the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. ... ... ... In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
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70.10. ... ... ...
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes."
8.3. In Bharat Coking Coal Limited's case (Supra 5), the Hon'ble Supreme Court held as under:
"30. But merely because the accusations made are against the State or its instrumentalities does not mean that an aggrieved person can bypass established civil adjudicatory processes and directly seek writ relief. In determining whether to exercise their discretion, the writ courts ought not only confine themselves to the identity of the opposite party but also to the nature of the dispute and of the relief prayed for. Thus, although every wrong has a remedy, depending upon the nature of the wrong there would be different forums for redress.17
31. ... ... ... However, writs are impermissible when the allegation is solely with regard to violation of a contractual right or duty. ... ... ..."
9. In reply to the arguments of the learned senior counsel for the SCCL, learned counsel for the petitioner has submitted that there are no factual disputes involved in this case. Only dispute is regarding equivalent amount. Everyday, fuel prices would be changing. It was held in Joshi Technologies International INC (Supra 4) that writs are maintainable even when terms of the contract are challenged.
10. It is specific case of the respondents that as per Clause 1.2(e), the invoice price of diesel at Rs.84.16 paise per litre was taken in to consideration at the time of floating the tender for arithmetical calculation only and for arriving total value of the diesel component to be supplied by the SCCL on free of cost to the contractor to obtain approval from the Board.
11. It is also contended by the respondents that on reading of clauses of the tender, the term equivalent amount denotes value of the diesel supplied by the SCCL as per the day-to-day invoice 18 price of diesel. Recoveries are made by the SCCL for excess consumption of diesel as per Clause 1.4 (a)(e) and (k) of the order. The basic rate of diesel as per "model calculation for recovery of excess consumption of diesel" contained in Clause 1.4(k) of the order is that calculation was done on the basis of invoice rate that prevailed as on the date of tender notification.
12. On the other hand, the learned counsel for the petitioner has submitted that equivalent amount which can be withheld by the respondents for monthly consumption as per clause 1.4 of the order, does not permit any interpretation and there is no doubt that equivalent rate is the basic rate i.e., Rs.84.16 per litre as shown in the tabulated column under clause 1.2(e) of the order.
13. In the considered opinion of this Court, the dispute in the instant case falls in the realm of civil law jurisdiction. A bare reading of few clauses of the contract would not be sufficient to determine nature of contract and interpret the disputed terms and conditions of the contract. It is an established principle of law that entire terms of the contract have to be read to understand intention 19 of the parties and for interpreting terms of the contract. It is not within the purview of the writ jurisdiction to decide whether equivalent rate is basic rate (Rs.84.16 per litre) or market rate in the context of assertions made by the respondents in its counter and submissions of the learned senior counsel appearing for the SCCL. The contention of the respondents is that basic rate was indicated in the tabulated column under clause 1.2(e) of the order which is only for the purpose of arriving at total value of the contract. That due to ongoing Russia - Ukraine war, there was steep increase in the price of diesel; the petitioner was aware of the changed circumstances; at no point of time, the petitioner has raised objection; the invoice rate of diesel is charged only for the excess consumption and if the petitioner is able to meet the targets with optimum consumption of diesel, only Rs.84.16 per litre will be charged.
14. It is borne out from the record that the petitioner has invoked dispute resolution mechanism provided under Clause 1.14 of the order. At three levels, the grievance of the petitioner was heard, and there were several deliberations between the petitioner 20 and the SCCL authorities. It is not the case of the petitioner that there are mala fides on the part of the respondents and that the petitioner was not heard. Thus, it cannot be held that there was any violation of principles of natural justice and the respondents acted in an arbitrary manner. The petitioner having availed the remedy provided under the Disputes Redressal Committee as per clause 1.14 of the order, ought to have approached the civil Court as there are complex disputed questions of facts involved in this case and further it requires interpretation of terms and conditions of the contract. The relief if any granted to the petitioner will have financial implications on the respondents running into several crores of rupees. The market / invoice rate of diesel is demanded by the respondents only for the excess consumption of diesel by the petitioner. So far as supply of diesel for the notified quantity, the rate charged by the respondent is Rs.84.16 per litre irrespective of the market price / invoice price. In the opinion of this Court, detailed analysis of terms and conditions of the contract and interpretation thereof is required to reach a conclusion that the equivalent rate as per clause 1.4.b of the order is basic rate of 21 Rs.84.16 per litre. The dispute in ABL International Limited's case (Supra 1) was entertained by the Apex Court by coming to a conclusion that there is no ambiguity in the terms of the policy (See Paragraph No.53). The contention of contra proferentem rule put-forth by the learned counsel for the petitioner will have to be considered only when the Court deciding the dispute comes to the conclusion that there are two possible interpretations. The said judgment is not relevant in the instant case in view of the observations of this Court in the preceding paragraphs that the matter involves disputed questions fact and interpretation of terms of the contract which do not come within the realm of writ jurisdiction. It is nobody's case that writ Court does not have jurisdiction to entertain contractual disputes. The border line is discretion of the Court. The writ Court would exercise discretion in contractual matters keeping in mind the factors like availability of alternate remedy, existence of disputed questions of fact, complexity of dispute, interpretations of terms of contract, the contract being private in nature and no public law element is involved etc. 22
15. The subject contract is a private contract. As noted above, there is no allegation of mala fides on the part of respondents and the respondents have adhered to the dispute redressal mechanism under the contract. Further, the instant case is not a case of simple nature and the resolution thereof requires detailed analysis and interpretation of terms of the contract; oral and documentary evidence is required to be adduced by the parties, which, normally, is the domain of civil law Courts. [See: Kerala State Electricity Board's case (Supra 3) and Joshi Technologies International INC's case (Supra 4)]. Thus, exercise of jurisdiction under Article 226 of the Constitution is not warranted. There are no merits in the writ petition.
16. Resultantly, the writ petition is dismissed. By the interim order dated 02.08.2022 passed by this Court, the respondents were directed to release the bill for the current month (August 2022) by making deductions for excess consumption of diesel only at the rate specified in the Work Order No.7600008743 dated 05.07.2021. The same arrangement shall continue for the month of September 2022. The petitioner is given liberty to 23 institute suit before 30th September 2022 and may seek interim relief before the civil Court having jurisdiction. The civil Court shall decide the case on merits and may pass orders in the interlocutory application, if any, filed uninfluenced by any of the observations made in this order. No order as to costs.
As a sequel thereto, miscellaneous petitions, if any, pending in the writ petition stand closed.
______________________ B. VIJAYSEN REDDY, J September 13, 2022.
PV