Pearl Corporation vs West Bengal Police Housing And ...
2023 Latest Caselaw 1501 Cal/2

                     In the High Court at Calcutta
                    Constitutional Writ Jurisdiction
                             Original Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                       WPO No. 2335 of 2022
                         Pearl Corporation
                                 Vs.
     West Bengal Police Housing and Infrastructure Development
              Corporation Ltd. (WBPHIDCL) and others


     For the petitioner             :    Mr. Tapas Dutta, Adv.,
                                         Mr. M. Halder, Adv.

     For the respondents            :    Mr. Kishore Datta, Sr. Adv.,

Mr. Sayan Sinha, Adv., Mr. Adil Naseer, Adv., Mr. Steven S. Biswas, Adv., Mr. Soham Kumar, Adv.

     Hearing concluded on           :    15.06.2023

     Judgment on                    :    05.07.2023



     The Court:-

1. The petitioner has challenged the termination of the petitioner and

debarment from participating in the respondents‟ contracts for two

years.

2. Learned counsel for the petitioner submits that the respondents have

acted mala fide and arbitrarily. During pendency of a previous writ

petition by the petitioner, against the alleged mala fide action of the

respondents‟, the respondents terminated the petitioner‟s contract.

The previous writ petition thus became infructuous and the same was

withdrawn with liberty to file a fresh writ petition on the subsequent

cause of action. Accordingly, the present writ petition was filed but

during the pendency of the same, the remaining work has been given

to a third party.

3. It is argued that the petitioner had substantially done the work under

the contract between the parties and, if another extension was given,

it would have completed the entire work.

4. It is argued that the petitioner was granted extension twice. As such,

time was not the essence of the contract even as per the conduct of

the respondents.

5. It is next argued that the termination of contract by the respondents

was de hors the contract entered into between the parties.

6. Learned counsel places reliance on Clause 2D of the Conditions of

Contract which contemplates that the contractor shall be liable to pay

compensation if, during review of progress of work as per sub-clause

C of Clause 2, it is found that the progress is falling behind schedule

as given in the Approved Work Programme, and after the respondents

intimating the contractor to expedite the work to achieve the progress.

7. Under sub-clause C, it is submitted that the contractor is to ensure

good progress during the execution of the work in all cases in which

the time allowed for any work exceeds one month after the Approved

Work Programme. In the event of any shortfall in performance

measured against the said programme, a penalty has been stipulated

in the said Clause.

8. It is argued that the stipulation in the contract speaks about levy of

compensation on the petitioner and, as per Clause 3, if the liability to

pay compensation amounts to the whole of his security deposit, only

then the question of termination of contract arises.

9. In the absence of any such allegation, the termination is bad.

10. It is further argued that, in any event, since the petitioner was on the

verge of completion of the work, it would be beneficial for all

concerned if the petitioner was given a further opportunity to complete

the work, instead of awarding the balance work to a third party.

11. It is argued that although extension of time was given till June 4,

2022, before the expiry of the same, that is, on March 29, 2022, the

termination was effected.

12. Hence, the said termination is vitiated due to violation of the

principles of natural justice as well as is in contravention of law and

the contract between the parties.

13. No proper reason of termination was given by the respondents.

Further, it is argued by the petitioner that no opportunity of hearing

was given to the petitioner, nor was any show-cause notice issued

prior to blacklisting the petitioner. Hence, the termination and the

blacklisting ought to be set aside.

14. Learned counsel for the petitioner places reliance on a judgment of the

Supreme Court reported at (2018) 6 SCC 157 [Madhya Pradesh Power

Management Company Limited Vs. Renew Clean Energy Private Limited

and another]. Placing particular reliance on paragraphs 13 and 14 of

the same, it is argued that if the contract permits imposition of

penalty, the contractor is liable to pay penalty. But the action of

termination of the contract was held arbitrary and to have been rightly

set aside by the High Court in the said case. Accordingly, in the said

case, the Supreme Court awarded penalty and set aside the

termination.

15. Learned senior counsel appearing for the respondent-Authorities

controverts the petitioner‟s submissions and argues that upon an

inspection held immediately prior to the termination, it was seen that

work only up to about 27.23 per cent had been done by the petitioner.

Since the work schedule provided for specific components of the work

to be done by phases, it was evident that the petitioner was far behind

the schedule and it would be impossible for the petitioner to conclude

the work within the last date as per the extension lastly granted.

16. It is argued that the petitioner was given several chances to conclude

the work, over two years from 2020 to 2022. However, despite the

same, the petitioner failed to complete the work on each occasion. It

is only out of grace that the respondents did not impose any penalty

on the petitioner, although under the contract, it was permissible for

the respondents to do so.

17. It is submitted that there was no arbitrariness in the termination.

Rather, the debarment was within the discretion of the respondent-

Authorities, in view of the palpable inefficiency and negligence of the

petitioner.

18. In view of the urgency of the nature of the work, the respondents had

to assign the balance work to a third party for the purpose of

completion of the same on expeditious basis.

19. Learned senior counsel appearing for the respondents cites M.P. Power

Management Company Limited, Jabalpur Vs. Sky Power Southeast

Solar India Private Limited and others, reported at (2023) 2 SCC 703.

It is submitted on the basis of the said judgment that normally the

courts would not exercise their discretion to examine issues unless

the action has some public law character attached to it. In the

present case, the matter relates to a private contract between the

petitioner and the respondent-Authorities.

20. It is further argued that when it comes to a challenge to the

termination of contract by the State, which is a non-statutory body,

the action being in purported exercise of the powers/rights under a

contract, it would be oversimplifying a complex issue to lay down any

inflexible rule in favour of the court turning away the petitioner to

alternate fora. However, ordinarily, the cases of termination of

contract by the State, acting within its contractual domain, may not

lend itself for appropriate redress by the writ court. This is

undoubtedly so if the court is duty-bound to arrive at findings which

involve untying knots, which are presented by disputed questions of

fact.

21. Learned senior counsel also places reliance on Joshi Technologies

Internationals INC. Vs. Union of India and others, reported at (2005) 7

SCC 728, wherein it was held that if the rights are purely of private

character, no mandamus can be issued. Even if the respondent is

"State", the other condition which has to be satisfied for issuance of

such a writ is the public duty. In a matter of private character of

purely contractual field, no such public duty element is involved and,

thus, mandamus will not lie. It was further observed that if there are

very serious disputed questions of fact which are of complex nature

and require oral evidence for their determination, the court would not

normally exercise its discretion in interfering with the same. Even in

cases where the question is of choice or consideration of competing

claims before entering into the field of contract, facts have to be

investigated and found before the question of a violation of Article 14

of the Constitution could arise. If those facts are disputed and require

assessment of evidence, the correctness of which can only be tested

satisfactorily by taking detailed evidence, involving examination and

cross-examination of witnesses, the case could not be conveniently or

satisfactorily decided in proceedings under Article 226 of the

Constitution. It was held that in such cases, the court can direct the

aggrieved party to resort to the alternative remedy of civil suit, etc.

22. Upon hearing learned counsel for the parties, a perusal of the

conditions of the contract becomes necessary.

23. The only specific provision as to termination of the contract is

stipulated in Clause 2B of the Conditions of Contract. The said sub-

clause stipulates that in the event of failure to start the work after 15

days from commencement of the work as per the Work Order due to

the contractor‟s fault, a notice is to be issued to the contractor giving

further 7 days to start the work. If the contactor fails to start even

within the extended period, the contract will be terminated without

giving any further notice. In the event of termination of contract

under the said Clause, the earnest money deposited would be forfeited

and the contractor would be barred from applying in any tender of the

Corporation for 2 years from the date of termination of the contract.

24. However, Clause 2B was never resorted to or referred to in any of the

correspondences by the respondent-Authorities, not even in the letter

of termination and debarment.

25. Sub-clause D is, in turn, dependent on sub-clause C, since it

stipulates that during any review of progress of work as mentioned on

sub-clause C, if it is found that the progress is falling behind schedule

as given in the Approved Work Programme, the contractor would be

intimated to expedite the work to achieve the progress with the

Approved Work Programme. In the next review of progress, if the

progress still fell behind the schedule, the contractor would be liable

to pay compensation of 2 per cent or such smaller amount as the

Managing Director may decide.

26. Sub-clause C stipulates that the contractor shall ensure good progress

and shall be bound, where the time allowed for work exceeds one

month, by the Approved Work Programme. In the event of shortfall in

performance measured against the said Programme, an amount at the

rate of 1 per cent of the tendered amount can be retained as penalty

from the successive bill. During the subsequent review, if it is found

that the previous delay has been recouped, the retained penalty

amount may also be refunded.

27. In the present case, as admitted in the impugned termination letter

dated March 29, 2022, no penalty was imposed on the petitioner

under Clause 2C. Although the respondents cite "good gesture" as the

reason for non-imposition of penalty, the same does not justify such

non-imposition. In fact, there is nothing on record to deduce that the

same was merely good gesture, since the non-imposition of penalty

may very well be interpreted also to mean that the petitioner was

either not liable to pay penalty, since it had no fault of its own in the

delay, or even that it had recouped the delay in execution, leading to

refund of the penalty or adjustment of the same. In any event, a

conclusion on such score would have to be based merely on

conjecture. The fact remains that, admittedly, no penalty was

imposed. As such, there did not arise any occasion to invoke sub-

clause C of Clause 2 at all. As a result, sub-clause D does not come

into the picture at all.

28. Taking the worst case scenario against the petitioner, an initial default

under Clause 2C might have led to steps being taken under Clause

2D. However, the maximum step which could be taken under sub-

clause D was imposition of compensation of 2 per cent or smaller

amount, as may be decided by the MD, of the tendered cost of the

whole work for every week that the due quantity of work as per

Approved Work Programmed remains incomplete.

29. Again, sub-clause E of Clause 2 provides that the work shall be

executed throughout the stipulated period of contract with all due

diligence. In the event of the contractor failing to do so, he shall be

liable to pay as compensation an amount equal to 2 per cent or

smaller amount as may be decided by the MD.

30. The sub-clause thereafter states that the entire amount of

compensation to be paid under the provision of Clause 2 shall not

exceed 10 per cent of the tendered amount of the work.

31. Thus, nothing in Clause 2D, which has been cited in the termination

letter, could invite the ultimate action of terminating the contract of

the petitioner.

32. It is important to note that Clause 3 of the Conditions of Contract

(which has never been mentioned by the respondents in the

Termination Letter) provides that where, under any Clause of the

Contract, the contractor shall have rendered himself liable to pay

compensation amounting to the whole of his security deposit, the

Managing Director or his authorized representative shall have the

power to adopt the courses given thereunder. Under Clause (a), one of

such sanctions is to rescind the contract, in which case the security

deposit of the contractor shall stand forfeited and be absolutely at the

disposal of the Managing Director or his representative.

33. However, the termination letter impugned in the present writ petition,

dated March 29, 2022, shows that the same was issued not by the

Managing Director but by the Executive Engineer (Zone-VII). As such,

the said termination letter itself was vitiated by lack of authority.

34. Even if it is construed that the Executive Engineer was duly

authorized by the Managing Director, upon a consideration of the

same, it is seen that the respondents have cited therein penal action

under Clause 2D. However, there is nothing in Clause 2D to attract

the ultimate punishments of termination and debarment.

35. Hence, the termination effected by the impugned Communication

dated March 29, 2022 is palpably de hors the contract.

36. That apart, the same also violates natural justice, since as per the last

Revised Work Schedule, annexed at page 89 of the writ petition, the

last date of completion of the contract was June 4, 2022, much before

which the impugned termination was effected.

37. The argument that the petitioner had failed to complete even the

initial phase of work schedule is not germane, since there is no

provision in the contract for termination of contract if each phase was

not completed within time.

38. Although the respondents have alleged that the petitioner had failed

even on March 29, 2022 to complete the component of the Work

Schedule which was stipulated to be done by March 29, 2022, the

Work Schedule itself shows that the first element of the activities to be

done by the petitioner was 3rd Floor Tiles Rectification Work, which

was to be completed by March 30, 2022. Notably, the termination

letter was issued even prior to March 30, 2022, that is on March 29,

2022. That apart, the respondents have stated in the second

paragraph of the termination letter that during inspection on the site

on March 28, 2022 by the concerned Assistant Engineer, it was found

that only rectification work at 3rd Floor Toilet had been taken up by

dismantling 3rd Floor Toilet Wall Tiles and using two number of

„Santras‟.

39. A bare perusal at the Revised Work Schedule shows that the activity

with regard to 3rd Floor comprises of as many as five elements. The

first, that is, Tiles Rectification Work was to be done by March 30,

2022. The second, that is, Plaster Rectification Work was to be

completed by April 1, 2022, the third, that is, Primer-Paint Work was

to be concluded within April 15, 2022; thereafter the fourth

component, that is, External Repairing Work, by April 25, 2022 and

the fifth component, that is, External Primer-Paint Work was to be

done by May 25, 2022. Hence, the termination, about two and half

months prior to the end of the work, was palpably illegal and

unlawful. The mere allegation, that an inspection of the site on March

28, 2022 (which was two days prior to the date of completion of even

the first phase of the extended work schedule) showed that the 3rd

Floor Toilet Work was being taken up by the petitioner, does not

provide any ground to the respondents to terminate the contract all on

a sudden.

40. Mere previous delay of the petitioner, in the absence of anything else,

is not sufficient to attribute fault for such delay solely on the

petitioner, particularly since the respondents themselves had gone on

extending time on several occasions, admittedly without imposing

penalty as provided for in the contract.

41. On a more serious footing, the respondents also debarred the

petitioner from participating in any procurement process under the

West Police Housing and Infrastructure Development Corporation

Limited for the next two years. Such debarment tantamounts to

blacklisting. It has been held time and again in several judgments of

the Supreme Court and different High Courts that blacklisting cannot

be effected without giving prior opportunity of hearing/show cause to

the contractor.

42. Since, in the present case, the only provision of blacklisting is found

in Clause 3(a), in the absence of any allegation of the satisfaction of

the conditions of Clause 3, that is, the whole of the security deposit

having become equal to the liability of compensation to be paid by the

petitioner, such blacklisting is palpably de hors the contract.

43. In fact, Clause 3(a) merely confers power on the respondents to

terminate the contract and not to debar the contractor. The sole

provision of debarment is found in Clause 2B of the contract.

However, it was too late in the day for the respondents to resort to

Clause 2B, since there is no allegation at all that the petitioner failed

to start work after 15 days from the date of commencement of the

work. In fact, the work had progressed over two years after the date of

commencement, and, as such, Clause 2B had not or could not be

invoked by the respondents at all.

44. Hence, the obvious conclusion is that the debarment took place de

hors the provisions of the contract.

45. Although it cannot be denied that an employer may, under certain

circumstances, being so dissatisfied with a contractor on serious

grounds that the employer does not want to continue with the said

contractor, blacklist him; however, in such cases, it is the well-settled

position of law that a Show-Cause Notice has to be issued to the

contractor and the allegedly recalcitrant contractor has to be given an

opportunity of hearing before passing an order of debarment. In the

present case, none of such modalities have been resorted to by the

respondents, thereby palpably vitiating and rendering arbitrary the

action of the respondents in issuing the termination and debarment

letter to the petitioner.

46. As such, the termination of contract and debarment of the petitioner

by the respondents vide communication dated March 29, 2022 and

the follow-up action of the respondents in awarding the balance work

to a third party are tainted and vitiated by contravention of law,

natural justice and the terms of the contract.

47. Insofar as the scope of interference of this Court under Article 226 of

the Constitution is concerned, in view of the above discussions, it is

well-settled in law that the respondent-Authorities, which come within

the purview of „State‟ as contemplated in Article 12 of the

Constitution, have a higher responsibility than an ordinary employer

to be transparent, follow natural justice and give a free play to fair

play in all its actions. Let alone being transparent, the impugned

action here was palpably arbitrary and, as such, calls for interference

by this Court.

48. Insofar as the nature of the work is concerned, the urgency of the

same has been harped on by the respondents themselves all along.

The administrative authorities‟ repeated warning regarding alleged

slow pace of work has been cited even in the impugned termination

letter. Hence, there cannot be any doubt that the renovation and

upgradation of the head quarters of the traffic guard of Kolkata Police

assumes a public character, since the said Authorities discharge

public duties, for which the basic amenities pertaining to the work-in-

question are essentially and integrally in public interest.

49. Hence, the impugned termination and debarment are justiciable in a

judicial review.

50. However, in the present case, even if the termination and debarment

are set aside, the relief of the petitioner lies in damages, since the

remaining work has already been awarded to a third party and has, in

all probability, been concluded by it by now.

51. In such circumstances, WPO No.2335 of 2022 is allowed, thereby

setting aside the communication dated March 29, 2022 (Annexure P-

23 at page 91 of the writ petition), whereby the petitioner‟s contract

was terminated and the petitioner was debarred from participating in

any procurement process under the respondent no.1-Corporation for

the next two years. The petitioner will be at liberty to participate in all

such procurement processes in future, being undeterred by the

impugned communication dated March 29, 2022.

52. In view of the termination of contract being, thus, set aside, the

petitioner will be at liberty to approach the competent civil court

claiming appropriate damages for such illegal termination. For the

purpose of limitation for filling such suit, the commencement of such

limitation period shall be deemed to start from this day, since the

cause of action therefor ripens with this order.

53. It is made clear that although the termination and the debarment

have been set aside herein, this Court has not entered into the merits

of the quantum of the damages and compensation which is to be

awarded to the petitioner. Such consideration is left to the competent

civil court, if so approached by the petitioner, to be assessed by taking

detailed evidence and upon taking into consideration all factors

involved.

54. There will be no order as to costs.

55. Urgent certified server copies, if applied for, be issued to the parties

upon compliance of due formalities.

( Sabyasachi Bhattacharyya, J. )