Bombay High Court
M/S Shiv And Sons Thr. Proprietor, ... vs Union Of India Thr. Chairman, ... on 19 October, 2023
Bench: A.S. Chandurkar
2023:BHC-NAG:15440-DB
38-WP-4735-2023(j).odt 1/11
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 4735 of 2023
M/s. Shiv & Sons
Through its proprietor,
Shiv Bhushan Pandey,
R/o. Jacob Compound,
Near Vishwanath Cinema,
Suraj Ganj, Itarsi, MP_461 111 ..... PETITIONER
...V E R S U S...
1. Union of India,
Through Chairman, Railway Board,
Ministry of Railways, Room No. 235,
Rail Bhawan, Raisina Road,
New Delhi-110 001.
2. Central Railway,
Through Principal Chief Commercial Manager,
2nd floor, New Administrative Building,
D.N.Road, Mumbai-400 001.
3. Central Railway,
Commercial Branch, Nagpur.
Through Divisional Railway Manager,
DRM Office, 1st floor,
Central Avenue, Mohan Nagar,
Nagpur- 440001. ....... RESPONDENTS
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Shri Akshat Bajpai, Advocate, through Video Conferencing, with
Ms. Aastha Sharma, Advocate for petitioner.
Shri Anup J. Gilda, Advocate for respondents.
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CORAM :- DEVENDRA KUMAR UPADHYAYA, C J. and
A.S.CHANDURKAR, J.
DATE :- 19th OCTOBER, 2023
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ORAL JUDGMENT (Per A.S.CHANDURKAR, J.)
Rule. Rule made returnable forthwith and heard the
learned counsel for the parties.
2. On 01.03.2023 the Nagpur Division of the Central
Railway, Commercial Branch- the third respondent published a
tender notice inviting bids for provision of catering services at the
General Minor Unit at Nagpur Railway Station. As per the said
invitation, the bid documents were to be obtained from
03.03.2023 to 27.03.2023. The bids were to be uploaded by
15:00 hours on 27.03.2023. In response to the aforesaid tender
notice, the bid of the petitioner, a proprietory concern, was found
eligible for being awarded the work as advertised. The petitioner
was issued a letter of allotment by the third respondent on
15.05.2023. In the said work order, performance security deposit
to the extent of 10% of the total contract value was demanded.
According to the petitioner, this was a departure from the
prevailing policy based on the Circular of the Railway Board dated
20.11.2020. As per the said policy, the performance guarantee
was to be furnished to the extent of 3% of the value of the
contract and not 10% as indicated in the letter of acceptance
dated 15.05.2023. The petitioner on 23.05.2023 issued a
38-WP-4735-2023(j).odt 3/11
communication to the third respondent stating therein that the
benefit of reduction in performance security deposit was
admissible till 31.03.2023 and as the tender notice had been
issued prior to that date, the performance security deposit that
was required to be furnished was only 3%. This request was not
accepted by the third respondent on 25.05.2023. A similar request
made by the petitioner on 29.05.2023 was again turned down on
03.07.2023 by the third respondent. After making a similar
request to the Principal Chief Commercial Manager-the second
respondent, the petitioner has approached this Court by filing the
present writ petition under Article 226 of the Constitution of India
seeking a direction against the respondents to charge performance
security deposit in accordance with the Office Memorandums
dated 12.11.2020 and 30.12.2021 alongwith the Circulars of the
Railway Board dated 20.11.2020 and 10.01.2022.
3. Shri Akshat Bajpai, learned counsel for the petitioner
inviting attention to Office Memorandum dated 12.11.2020 issued
by the Railway Board, Ministry of Railways as well as Office
Memorandum dated 30.12.2021 issued by the Department of
Expenditure, Ministry of Finance, submitted that in the light of the
original Office Memorandum dated 12.11.2020 the amount of
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performance security deposit which varied from 5% to 10% was
reduced to 3% of the value of the contract in view of slow down in
the economy due to the pandemic. He submitted that the
aforesaid benefit of reduction in the amount of performance
security deposit was extended from time to time and finally on
10.01.2022 with the issuance of the Circular by the Railway Board
stating therein that the validity of Office Memorandum dated
12.11.2020 had been extended upto 31.03.2023. It was thus
urged that since reduction in the amount of performance security
was applicable to the existing works, contracts as well as for
tenders issued till 31.03.2023, the petitioner was entitled to such
benefit of reduction as the tender notice in the present case was
issued on 01.03.2023 and the bids in question were to be
submitted by 27.03.2023. Merely because the work order was
issued to the petitioner on 15.05.2023 the same could not be a
reason to require the petitioner to pay performance security
deposit at 10% of the value of the contract since such demand
was contrary to the policy of the Railway Board. The third
respondent was bound by the Circulars issued by the Railway
Board and it was not permissible for the said respondent to
interpret these Circulars in a contrary manner. Inviting attention
to the Master Licence Agreement that was required to be entered
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into pursuant to the issuance of the work order and especially
Article 20.1 thereof, it was submitted that while interpreting the
provisions of the agreement and arrangements between the
parties, the documents were required to be read in a manner that
would require giving precedence to the latest policies of the
Railway Ministry rather than the articles of the agreement or the
bid. Thus interpreted, it was clear that the third respondent was
not justified in requiring the petitioner to furnish performance
security deposit at 10%. It was thus submitted that the petitioner
be required to furnish performance security deposit at 3% of the
value of the contract in terms of the Office Memorandums dated
12.11.2020, 20.11.2020 and 10.01.2022. It was accordingly
prayed that appropriate relief be granted to the petitioner.
4. Shri A.J.Gilda, learned counsel appearing for the
respondents vehemently opposed the aforesaid submissions. At
the outset, he submitted that the petitioner was seeking alteration
in the terms of the contract and such relief was not liable to be
granted in exercise of writ jurisdiction. The work order having
been issued to the petitioner on 15.05.2023 and the same having
been accepted by the petitioner, it was not permissible for the
petitioner to attempt to wriggle out of the obligations indicated
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therein. Granting the relief sought by the petitioner would amount
of novation of the contract which was not permissible. Referring
Article 5.1 of the Master Licence Agreement, it was submitted that
the same clearly indicated that a licencee such as the petitioner
was required to furnish performance security deposit of an amount
equal to 10% of the value of the contract. Since the work order
was issued on 15.05.2023 which was after the period during which
the Office Memorandums referred by the petitioner were to
operate, no illegality was committed by the respondents in
requiring the petitioner to furnish performance security deposit to
the extent of 10%. The benefit of the said Office Memorandums
was available only to work orders issued prior to 31.03.2023 and
as the present work order was issued thereafter, it was clear that
no relief could be granted to the petitioner. To substantiate his
contentions, the learned counsel placed reliance on the decision in
Bharat Sanchar Nigam Limited and another vs. BPL Mobile Cellular
Limited and others [(2008) 13 SCC 597] and urged that what
was stated in the Circulars could not be made binding on the
parties unless such terms were made part of the contract. He
also referred to the decision in Sainik Mining and Allied Services
Limited vs. Western Coalfields Limited and others [2022 (5)
Mh.L.J.106] to substantiate the said contention. It was thus
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urged that since the Circulars relied upon by the petitioner had
ceased to operate when the work order was issued to the
petitioner, the writ petition was liable to be dismissed. He thus
prayed for dismissal of the writ petition.
5. We have heard the learned counsel for the parties and we
have perused the documents on record. Since the petitioner prays
that it be granted the benefit of Office Memorandums dated
12.11.2020 and 30.12.2021 issued by the Department of
Expenditure, Ministry of Finance as well as the Circulars issued by
the Railway Board, it would be necessary to briefly refer to the
same. In view of the pandemic situation prevailing, the
Department of Expenditure, Ministry of Finance, issued Office
Memorandum on 12.11.2020 directing that the performance
security deposit which was existing at 5% to 10% was required to
be reduced to 3% of the value of the contract for all existing
contracts. The initial benefit of this reduction was to operate till
31.12.2021. By another Office Memorandum dated 30.12.2021
the validity of the earlier Office Memorandum dated 12.11.2020
was extended till 31.03.2023.
The Railway Board in accordance with initial Office
Memorandum dated 12.11.2020 reduced the performance security
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deposit to 3% of the value of the contract for all existing contracts
and also for all tenders issued till 31.12.2021. In view of Office
Memorandum dated 30.12.2021 the Railway Board on 10.01.2022
extended the validity of its earlier Memorandum dated 20.11.2020
upto 31.03.2023. Same was made applicable to all existing
works, contracts and for tenders till 31.03.2023. From the
aforesaid, it is clear that the Railway Board acted in accordance
with the Office Memorandum issued by the Department of
Expenditure, Ministry of Finance and reduced the performance
security deposit to 3% of the value of its contracts for all existing
works, contracts and for tenders issued till 31.03.2023. It may be
noted that these instructions were made applicable also to service
contracts by the Railway Board on 07.02.2022.
6., Undisputedly, the tender notice in question was published
by the third respondent prior to 31.03.2023. The bid documents
were available from 03.03.2023 to 27.03.2023 and last date of
submission of sealed bids was upto 15:00 hours on 27.03.2023.
Thus when the bidders responded to the aforesaid tender notice,
the Circular issued by the Railway Board on 10.01.2022 was
operating and the performance security deposit to be furnished
was required to be 3% of the value of the contract. It is true that
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the work order was issued to the petitioner pursuant to
acceptance of its bid only on 15.05.2023. It is on this basis that
the third respondent contends that the work order would not be
governed by the Circular dated 10.01.2022 as the work order was
issued after 31.03.2023.
We are not in a position to accept this contention. The
Circular dated 10.01.2022 issued by the Railway Board was
binding on the third respondent and it required performance
security deposit of 3% to be furnished for all tenders issued till
31.03.2023. The tender notice in question has been issued prior to
31.03.2023. Article 20.1 of the Master Licence Agreement
indicates the order of preference in which the Railway's latest
policies, the articles of agreement, contents of annexures to the
agreement, the licencee's response to the bid and the bids have to
be read. As per the order of preference, the Railway's latest
policies would prevail over the articles of the agreement. Thus, if
the policy of the Railway Board was to require furnishing of
performance security deposit to the extent of 3% for tenders
issued till 31.03.2023, the said policy would prevail over the work
order dated 15.05.2023. It would not be open for the third
respondent to ignore the Circulars issued by the Railway Board or
to interpret such Circulars issued by the Railway Board in a
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manner contrary to what has been stated therein. Since the
tender notice was issued when the Circular dated 10.01.2022 was
in operation, full effect to the same would have to be given. The
defence of novation sought to be raised by the respondents cannot
be accepted in view of Article 20.1 which requires precedence to
be given to the policies of the Railway's rather than the articles of
the agreement itself. Rather it was incumbent upon the third
respondent on whom the Circulars were binding to have acted in
accordance with the same than to ignore them. We
therefore do not find that by making a prayer to direct the
respondents to act in accordance with the Circulars issued by the
Railway Board, the petitioner is seeking novation of the terms of
the contract. On the contrary, the petitioner prays that the third
respondent should act as per the Circulars of the Railway Board.
7. The decisions relied upon by the learned counsel for the
petitioner are clearly distinguishable. In BSNL (supra), the
Hon'ble Supreme Court has held that when parties are ad idem
the terms of the contract, no change therein can be made
unilaterally. Any novation in the contract is required to be done on
the same terms as required for a contract to be entered into. In
the present case, there is no question of novation of the terms of
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the contract. The third respondent was bound by the Circulars
issued by the Railway Board and the clause relating to
performance security deposit as required by the Circulars ought to
have been inserted accordingly. This is clear from Article 20.1 of
the Master Licence Agreement. For same reason, the ratio of the
decision in Sainik Mining and Allied Services Ltd.(supra) cannot be
made applicable to the facts of the present case.
8. For aforesaid reasons, we are satisfied that the
petitioner is entitled to relief in terms of Circular dated 10.01.2022
issued by the Railway Board. Hence, the following order:
(a) The respondents in accordance with Circular dated
10.01.2022 issued by the Railway Board, Ministry of Railway shall
charge performance security deposit at 3% of the value of the
work order dated 15.05.2023 issued to the petitioner. The work
order shall be amended accordingly.
(b) Rule is made absolute in aforesaid terms with no order
as to costs.
(A.S.CHANDURKAR, J.) (CHIEF JUSTICE)
Andurkar..
Signed by: Jayant S. Andurkar
Designation: PA To Honourable Judge
Date: 20/10/2023 17:36:06
