Archon Powerinfra India Private ... vs Indian Oil Corporation And Others
2021 Latest Caselaw 3191 Cal

                       In the High Court at Calcutta
                      Constitutional Writ Jurisdiction
                               Appellate Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                         WPA No. 18440 of 2019
                 IA No: CAN 3 of 2020 (CAN 3997 of 2020)
                                    +
                    CAN 4 of 2020 (CAN 3998 of 2020)
                                    +
                              CAN 5 of 2021
                                   With
                          WPA No.1404 of 2020

                 Archon Powerinfra India Private Limited
                                   Vs.
                    Indian Oil Corporation and others

For the petitioner       :      Mr. Sakya Sen,
                                Mr. Amritam Mondal,
                                Ms. Jeenia Rudra.

For the
respondent-authorities :        Mr. Saptangshu Basu,

Mr. Amit Kumar Nag, Mr. Abhishek Nag, Ms. Ranjabati Ray

Hearing concluded on : 22.04.2021

Judgment on : 11.06.2021

Sabyasachi Bhattacharyya, J:-

1. The brief facts of the case are:

The Indian Oil Corporation Limited (IOCL), the first respondent in

both the writ petitions, issued a Letter of Intent (LoI) to the petitioner

for construction of new plant shed and allied civil, structural and

enabling works at LPG Bottling plant, Budge Budge, West Bengal. A

contract was duly executed in terms of the said LoI.

2. Despite the scheduled time for completion of the work having expired,

extensions were granted to the petitioner on multiple occasions for

completion of all the works.

3. The respondents allege that the contract work was not completed even

within the extended time and that the performance of the petitioner

(Archon Power Infra India Private Limited) was unsatisfactory.

4. Subsequently on July 16, 2018 M/s. Enoch Infra Build LLP sent a

written complaint to the respondents regarding the petitioner having

entered into a sub-contract with the said concern in connection with

the subject contract, payment in connection with which was allegedly

due. The complaint further indicated that the petitioner had been

diverting payments received from the respondents to third parties

without reimbursing M/s. Enoch. Two agreements dated March 7,

2017 and July 24, 2017 were allegedly executed between the

petitioner and M/s. Enoch and certain bank statements reflecting

payments from Enoch to the petitioner pursuant to the contract were

also included in the complaint.

5. The contract with the petitioner was terminated by the IOCL primarily

on the ground that the sub-contracts referred to above were in

contravention of Clause 4.8.1.1.1 and Clause 7.0.1.0(x) of the General

Conditions of Contract (GCC). Such sub-contract was allegedly

entered into without prior written approval from IOCL, which entailed

violation of the clauses of the contract and ultimately resulted in

termination of the contract. Such termination was preceded by a

show-cause notice dated August 23, 2018, to which the petitioner

gave a written reply on September 5, 2018, in which the petitioner

apparently admitted the execution of the two agreements.

6. The termination took place on November 2, 2018 and was challenged

in a writ petition, bearing WP No.23928 (W) of 2018. By an order

dated December 12, 2018, the writ petition was dismissed, upholding

the order of termination. MAT 36 of 2019 was preferred against such

order which was dismissed on February 7, 2019 by a Division Bench

of this Court. The dismissal order recorded the admission of the

petitioner that the petitioner had sub-contracted the work entrusted

to it. Both the said orders observed that the sub-contracts had

violated Clause 7.0.1.0(x) of the GCC and Article 8 of the contract

dated December 1, 2016.

7. In the order of termination, the respondents had intimated to the

petitioner that the balance work would be done through alternate

parties at the risk and cost of the petitioner as per terms and

conditions of the contract/work order.

8. Subsequently, the respondent authorities floated Tender

No.BGB/BP/PT-03/2019-20 inviting bids for the balance work. The

petitioner was specifically debarred from participating in the said

tender since the original contract was terminated on the ground of

violation of the same.

9. Challenging the debarment of the petitioner to participate in the new

tender, the petitioner filed another writ petition bearing WPA 18440 of

2019. The said writ petition is one of the subject-matters of the

present adjudication.

10. Meanwhile, a show-cause notice was issued by the respondent-

authorities to the petitioner on May 3, 2019 seeking explanation as to

why the petitioner should not be put on Holiday List. A reply was

given by the petitioner on May 30, 2019. Personal hearing was

granted to the petitioner, which was attended by the petitioner's

representative, who also submitted certain documents. Based on

such hearing and documents, the respondents decided to put the

petitioner on Holiday List, which order was communicated vide letter

dated September 18, 2019 to the petitioner.

11. The said letter dated September 18, 2019 was set aside on October

30, 2019 in WP No.19486 (W) OF 2019. Liberty was granted to the

petitioners to participate with the debarment proceeding by affording

another opportunity of hearing to the petitioner on November 8, 2019

at 11 a.m. In compliance thereof, a notice dated October 31, 2019 was

issued to the petitioner and a hearing was given on the appointed date

and time to the representative of the petitioner and its advocate.

12. By a letter dated November 21, 2019, based on such hearing, the

petitioner was again put on Holiday List for a period of three years.

13. The petitioner contends that such debarment of the petitioner to

participate in Tender No.BGB/BP/PT-03/2019-20 was illegal and

without jurisdiction, since the proceeding for Holiday Listing was

pending at that juncture.

14. The petitioner challenged such debarment/Holiday Listing in WPA

No.1404 of 2020, which is also the subject-matter of the present

adjudication.

15. Learned counsel for the petitioner alleges that the order of debarment,

challenged in WPA No.1404 of 2020, was a verbatim reproduction of

the termination order dated November 2, 2018. The said order quotes

a portion of the order passed by the Division Bench while affirming

the order upholding the termination.

16. Hence, it is argued by the petitioner, the debarment order does not

reflect application of mind and/or independent consideration of the

defence put up by the petitioner in its reply to the show-cause notice

and, as such, is unreasoned.

17. In this context, the petitioner refers to B.A. Linga Reddy and others

Vs. Karnataka State Transport Authority and others [(2015) 9 SCC 515]

and Kranti Associates Private Limited and another Vs. Masood Ahmed

Khan and others [(2010) 9 SCC 496].

18. It is further argued by the petitioner that the reasons cannot be

supplemented subsequent to the impugned order and places reliance

in such context on Mohinder Singh Gill and another Vs. The Chief

Election Comissioner, New Delhi and others [(1978) 1 SCC 405].

19. Hence, since the original order of debarment did not reflect any

reason, the post facto furnishing of reasons in the pleadings of the

respondents in the present writ petition ought not to be looked into by

the court, the petitioner contends.

20. Learned counsel for the petitioner further argues that the agreements

with M/s. Enoch (respondent no.4) was in the nature of finance

agreements and not sub-contracts. This fact, it is contended, was

admitted by M/s. Enoch, as reflected from a resolution passed at a

meeting of the designated persons of M/s. Enoch and an application

by M/s. Enoch under Section 7 of the Insolvency and Bankruptcy

Code (IBC), in the capacity of a financial creditor. A legal notice dated

July 17, 2019 also reflects the same stand taken by respondent no.4,

which itself shows that respondent no.4 admitted that the nature of

the agreements-in-question was financial and not sub-contracts.

Such documents, it is argued were not considered in the debarment

order.

21. The petitioner contends that the IOCL failed to produce any document

to show that any part of the work was actually done by respondent

no.4 (M/s Enoch) as sub-contractor or any document to show

manpower or material being supplied by respondent no.4 to the

project site.

22. Moreover, learned counsel for the petitioner argues, a sub-contract

would require the petitioner to make payment to respondent no.4 and

not the converse. However, the bank statement of the petitioner

disclosed before the authority reveals amounts being paid by

respondent no.4 to the petitioner, which indicates that the agreements

were financial in nature, as opposed to sub-contracts.

23. The next limb of argument by the petitioner is that the IOCL had full

knowledge of the arrangement between the petitioner and respondent

no.4 prior to the written complaint dated July 16, 2018. In support of

such contention, the petitioner places reliance on several instances of

correspondence between the IOCL and respondent no.4, including e-

mails of December, 2017, January, 2018, February, 2018 and March,

2018. Since IOCL never objected to such arrangement, despite having

correspondence with respondent no.4 directly in connection with the

contract given to the petitioner, the requirement of prior written

approval, contained in Clause 7.0.1.0 (x) of the GCC is argued to have

been waived. In support of the contention that contractual provisions

can be waived by conduct, learned counsel for the petitioner cites

Ramdev Food Products (P) Ltd. Vs. Arvindbhai Rambhai Patel and

others [(2006) 8 SCC 726] and Dr. Karan Singh Vs. State of J&K and

another [(2004 5 SCC 698].

24. That apart, it is contended, there was no finding in the debarment

order regarding the other allegation of continuous poor progress of

work. The petitioner alleges that it completed almost ninety per cent of

the work at the time of termination.

25. In reply, learned counsel for the respondents places reliance on

certain relevant clauses of the arguments dated March 7, 2017 and

August 24, 2018 entered into by the petitioner with M/s. Enoch which

categorically described the agreements as sub-contracts. The

respondents contend that the language of the documents clearly

shows that the major part of the work given to the petitioner was

delegated by sub-contract to M/s. Enoch. In view of the express terms

of the said agreements, it is argued, those were not paper

arrangements for obtaining financial assistance but were clearly sub-

contracts assigning 50 per cent and 68 per cent of the petitioner's

work respectively, under the contract with IOCL, in favour of M/s

Enoch, a third party.

26. It is also argued that the petitioner has admitted before the Division

Bench that the said agreements were sub-contracts, as revealed from

the observations made in the said order.

27. In the absence of any pleading or proof as to prior written approval of

the IOCL, such sub-contracts were in clear violation of Clause

4.8.1.1.1 and Clause 7.0.1.0 (x) of the GCC.

28. It is further argued that since the Division Bench affirmed the order of

the learned Single Judge upholding the termination of contract, also

on the ground that there was violation of the aforementioned clauses

due to the petitioner having sub-contracted the work to M/s. Enoch,

such findings have attained finality and the petitioner cannot reopen

the issue for fresh consideration by this court.

29. The ground for subsequent debarment, challenged in WPA 1404 of

2020, is primarily such contravention of contractual clauses by the

petitioner and, as such, since sufficient reasons were reflected in the

order of debarment, including the findings of the Division Bench, the

debarment order was passed absolutely within the authority of the

respondents.

30. Learned counsel for the respondents further argues that the subject-

matter challenged in WPA 18440 of 2019, that is, exclusion of the

petitioner from the subsequent tender, was not connected in any

manner with the proceeding for Holiday Listing which was then

pending against the petitioner. It is submitted that since the

petitioner's violation of the terms of the contract resulted in the

issuance of the subsequent tender for completion of the balance work,

allowing the petitioner to participate in the fresh tender would operate

as a negation of the order of termination of the petitioner, which has

been upheld up to the Division Bench of this court. Hence, there was

no irregularity on such score as well.

31. Upon a consideration of the respective submissions of counsel for the

parties and going through the materials-on-record, the primary

question which acquires relevance is whether this court can reopen

the question of the nature of the agreements dated March 7, 2017 and

August 24, 2017; if so, whether such agreements were sub-contracts

or financial agreements.

32. That apart, the question whether the order of debarment was

unreasoned or tainted by non-application of mind is also relevant.

33. Although the petitioner has argued that the Division Bench order in

connection with the termination of the contract with the writ

petitioner cannot operate as res judicata, since the subject-matter of

the challenge was termination and not whether the agreements-in-

question were sub-contracts, such contention cannot be accepted on

the face of it. The issue as to whether the concerned agreements were

sub-contracts was the cardinal question which had to be decided to

adjudicate upon the legality of the termination. As such, the said

question directly fell for consideration before the learned Single Judge

and attained finality upon being decided in the positive, as affirmed by

the Division Bench.

34. That apart, a bare perusal of several clauses of the agreements dated

March 7, 2017 and July 24, 2017 clearly indicates that those were not

financial agreements but delegated a major portion of the work which

was originally allocated to the petitioner by the IOCL, under sub-

contracts.

35. It is specified in the agreements that the writ petitioner would be the

main contractor and the respondent no.4 herein the sub-contractor.

The agreements further provided that all men, materials, machinery,

tools and plants, infrastructure, resources, etc., as required for the

execution of the work was provided and arranged by the writ

petitioner. All charges, materials, labour, plants and equipments,

transportation and overhead expenses incurred on execution,

completion and maintenance of the work was also to be arranged by

the writ petitioner and M/s. Enoch equally. The responsibility of the

work, under the said agreements, was clearly distributed equally

among the contractor and the sub-contractor. The terms and

conditions of the original agreements between the writ petitioner and

the IOCL were also made applicable between the writ petitioner and

M/s. Enoch.

36. The second agreement dated August 24, 2017, went one step further

by assigning the execution of sixty-eight per cent of the project,

instead of fifty per cent as contemplated in the agreement dated

March 7, 2017. Thus, in fact, the majority of the responsibility to do

such work was delegated to the sub-contractor.

37. The argument of the petitioner, that payments made by M/s. Enoch to

the petitioner indicated the nature of the agreements to be financial, is

not substantiated by the clauses of the agreements themselves.

38. Since charges and expenses were also to be shared between the

contractor and the sub-contractor, there could very well have been

occasions for the sub-contractor to make payments to the contractor,

that is, the writ petitioner.

39. Hence, there cannot be any doubt that the agreements dated March 7,

2017 and August 24, 2017 were clearly sub-contracts and not

financial agreements.

40. The other argument of the petitioner, as regards the implied consent

of the IOCL to the arrangements between the petitioner and M/s.

Enoch is also not tenable. Mere communication between the IOCL and

respondent no.4 does not necessarily indicate that there was any prior

written approval, as contemplated in Clauses 7.0.1.0(x) of the GCC,

read with Clause 4.8.1.1.1 of the same. It is neither pleaded nor

proved by the writ petitioner that there was any specific written

approval, as mandated by the work contract issued by the IOCL to the

petitioner, prior to the petitioner entering into such agreements with a

third party.

41. That apart, since deliberate violation of the clauses of the GCC on the

part of the petitioner entailed termination of the contract, the same

logic afforded sufficient basis for debarment/Holiday Listing of the

petitioner.

42. As far as the cited judgments are concerned, although reasons are

required to be given by judicial/quasi-judicial authorities, the

impugned order of debarment sufficiently indicated the grounds for

debarment. Quotation of portions of the orders passed by the learned

Single Judge and the Division Bench upholding the termination of

contract was fully justified in view of such findings having attained

finality. More detailed reasoning was not necessary or expected in an

administrative or at best quasi-judicial order, on a similar footing as a

judgment delivered by a court of law/tribunal.

43. The reasons indicated in the debarment order were sufficient to justify

the same. As such, it cannot be said that the said decision was

unreasoned or not tenable in the eye of law.

44. Regarding the unsatisfactory execution of the work, the failure of the

petitioner to conclude the work even after being granted several

extensions itself justified such conclusion. There is no dispute

regarding the grant of such extensions having actually been given and

the failure of the petitioner to complete the work even within the

extended period.

45. Even if it is supposed hypothetically that the debarment order failed to

disclose sufficient reasons for the execution of work by the petitioner

being labelled 'unsatisfactory', the other ground, that is, the deliberate

violation of the GCC by the petitioner by entering into sub-contract

agreements with M/s. Enoch entitled the respondent-authorities to

debar the petitioner.

46. As far as the challenge in WPA No.18440 of 2019 is concerned, it

would be a ridiculous proposition to reconsider the writ petitioner

itself as a participant in the fresh tender issued for completion of the

balance work, which was itself necessitated by the deliberate violation

of the clauses of the work contract by the petitioner. It defies all logic

as to why the petitioner, which had violated the contract, requiring

such additional tender to be floated, would be invited to participate in

the fresh tender for the balance of the same work. Hence, there is no

basis to the writ petitioner's challenge to its debarment from

participating in Tender No.BGB/BP/PT-03/2019-20.

47. Another ingredient which has to be considered is whether the

"admission" of M/s. Enoch that it was a financial creditor to the writ

petitioner has any bearing upon the present adjudication.

48. First, inter se communications between the writ petitioner and

respondent no.4 and/or pleadings of respondent no.4, being the sub-

contractor itself, cannot have any direct relevance to the debarment of

the petitioner, particularly in view of the termination order being

affirmed up to the Division Bench of this Court.

49. More importantly, an admission, even if any, by respondent no.4

cannot, by any stretch of imagination, bind the IOCL and its

functionaries. As such, such arguments of the writ petitioner has no

legs to stand upon.

50. Even if the said description of the respondent no.4 by itself as a

'financial creditor' could be broadly taken as an admission by

respondent no.4 in that regard, it cannot be said that such admission

would prevent the IOCL from terminating and debarring the writ

petitioner, by application of the principle of estoppel. The complaint of

M/s. Enoch was a mere trigger, and not the sole basis, for the

decision of termination and subsequent debarment of the writ

petitioner. The said complaint was only the genesis of the inquiry by

the IOCL against the writ petitioner. The complaint was neither

treated to be sacrosanct nor the only basis for terminating the

contract, suspending or Holiday Listing the writ petitioner. The

respondent-authorities independently arrived at findings upon

considering the materials produced by the writ petitioner itself as well

as other connected documents for the purpose of termination, leading

to suspension and subsequent debarment of the writ petitioner.

Hence, the alleged admission of respondent no.4 is utterly irrelevant

in the context. In its reply to the show cause and representation, the

writ petitioner did not specifically raise the question of prior

knowledge of the respondent-authorities about the arrangement

between the writ petitioner and M/s. Enoch. Rather, the factum of

the agreements being sub-contracts was admitted before the Division

Bench on behalf of the petitioner. Mere pendency of a review

application before the Division Bench, that too for an indefinite period,

cannot automatically operate as stay of such order. It is unacceptable

that mere allegation of previous knowledge of the arrangement

between the petitioner and M/s. Enoch would amount to 'prior written

approval' for grant of sub-contract, as mandated in the GCC and work

order issued to the writ petitioner by the IOCL. It cannot be said that

the clauses-in-question of the GCC were ancillary ones. The said

clauses contemplated consequential termination and award of the

balance work to third parties, hence integral to the work contract

between the petitioner and the IOCL.

51. In view of the above discussions, both the writ petitions fail on merits.

Accordingly, WPA No. 18440 of 2019 and WPA No.1404 of 2020 are

dismissed on contest without any order as to costs. All connected

applications are disposed of accordingly.

52. Urgent certified copies of this order shall be supplied to the parties

applying for the same, upon due compliance of all requisite

formalities.

( Sabyasachi Bhattacharyya, J. )