Calcutta High Court (Appellete Side)
M/S Essal - Rre Enterprises (Jv) vs The Coal India Limited & Ors on 1 May, 2023
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
Present :-
The Hon'ble Justice Moushumi Bhattacharya
W.P.A 28663 of 2022
M/s Essal - RRE Enterprises (JV)
vs.
The Coal India Limited & Ors.
For the petitioner : Mr. Srijib Chakraborty, Adv.
Mr. Sunny Nandy, Adv.
Mr. Deeptangshu Kar, Adv.
For the respondents : Mr. Tilak Bose, Sr. Adv.
Mr. Suddhasatva Banerjee, Adv.
Mr. Syed Nurul Arefin, Adv.
Mr. Rahul Singh, Adv.
Ms. Rashmi Binayak, Adv.
Last Heard on : 21.04.2023.
Delivered on : 01.05.2023.
Moushumi Bhattacharya, J.
1. The petitioner has challenged an order of banning and termination dated
2.12.2022 issued by Eastern Coalfields Limited (ECL). The reason for banning
is the petitioner's poor performance and continuous failure to improve its
performance despite several letters issued by ECL. The impugned letter gives
detailed particulars of the reminders sent to the petitioner and the petitioner's
failure to rectify the situation. The letter also refers to a show-cause notice
issued to the petitioner and a personal hearing given on 7.9.2022. The
impugned letter also refers to Chapter 6, section 12 − Guidelines for Banning of
Business and clause no. 2(v)(b) in relation thereto.
2. Learned counsel appearing for the petitioner submits that the petitioner
faced several allegedly insurmountable difficulties in executing the project
including non-availability of land which resulted in the delay. Counsel blames
the ECL for not providing sufficient land within a reasonable time frame.
Counsel submits that 21.47 acres of land was given to the petitioner on
22.7.2022 after which a fresh Target was given for August, 2022. Counsel
complains that ECL terminated the contract on 19.8.2022 before the petitioner
could meet the target. Counsel submits that the termination letter of 19.8.2022
was issued without giving the petitioner an opportunity of hearing and further
that the contract was terminated under clause 10(a) and (b) of the General
Terms and Conditions (GTC) of the e- tender notice dated 21.12.2015. Counsel
submits that the said clause only speaks of cancellation of contract and not of
termination. Counsel further submits that the petitioner has been banned for 3
years instead of 1 as provided under the Guidelines for Banning of Business.
Counsel further submits that the impugned letter does not disclose any
subjective satisfaction as to the reason for banning and is hence arbitrary and
bad in law.
3. Learned counsel appearing for the respondent ECL seeks vacating of an
order passed by this Court on 22.12.2022 which records the stand taken by
learned counsel appearing for the ECL that ECL shall not take any steps to the
prejudice of the petitioner till 9.1.2023. Counsel submits that ECL continues to
face prejudice by reason of the aforesaid order and points to numerous failures
on the part of the petitioner to perform and complete the work. Counsel
submits that the contract was terminated on 19.8.2022 and the petitioner has
not challenged the same till date. It is further submitted that the petitioner was
given several opportunities to rectify its conduct in terms of performance and
was also given a show-cause notice and a personal hearing before the contract
was terminated. Counsel urges that there were several allegations against the
petitioner including the removal of coals to unspecified destination, driving on
unauthorised routes and driving in protected areas which were admitted on
behalf of the petitioner by way of hand written endorsements appearing from
the Minutes of a meeting held on 7.9.2022. The extract of the Minutes is placed
before the Court.
4. The respondent ECL engaged the petitioner as a contractor in terms of a
tender floated by ECL for removal and extraction of coal from the New Kenda
Quarries. Before dealing with the question of whether the petitioner failed to
perform its obligations in accordance with the general terms and condition
which was part of the e-Tender Notice dated 21.12.2015, the undisputed fact
which emerges from the records is that ECL terminated the contract with the
petitioner on 19.8.2022.
5. The letter of termination mentions the reason thereof namely the
petitioner's poor performance against the target resulting in substantial loss to
ECL. ECL issued a show cause notice to the petitioner on 5.4.2022 and the
petitioner was given an opportunity to reply to the show cause notice. The
letter records that a meeting was held between the parties on 2.5.2022 where
the petitioner could not give a satisfactory explanation for the poor
performance. The letter further records a second show-cause notice dated
23.4.2022 alleging the violation of the NIT terms to which the petitioner did not
respond. The contract was terminated on the ground of deviation and violation
of the agreement/NIT. Significantly, there is no challenge to this letter of
termination dated 19.8.2022. The only challenge made in the present writ
petition is to a Letter of Banning dated 2.12.2022. Further the petitioner has
not disclosed the second show-cause notice dated 23.4.2022 which has been
referred in the termination letter of 19.8.2022.
6. Contrary to the submissions made on behalf of the petitioner, the
termination was issued under Clause 10(a) and (b) of the General Terms and
Conditions. Clause 10 relates to the termination, suspension, cancellation and
foreclosure of the contract and empowers the ECL (described as the Company
in the said Clauses) to cancel the contract in full or in part if the contractor
(petitioner in this case) makes default in proceeding with the work with due
diligence and continues to do so even after being put on notice (10(a)) or
commits default / breach in complying with any of the terms of the contract
and fails to rectify the default to the satisfaction of the Engineer in-charge of
ECL (10(b)). Clause 10.1 of the GTC further provides that the contract shall
stand terminated under certain circumstances while clause 10.2 provides for a
post-termination scenario where the Engineer-in-charge of ECL shall be
empowered to carry out the incomplete work at the risk of the contractor. The
petitioner has failed to place the above clauses which were relevant to the
termination dated 19.8.2022 or place the complete documentation with regard
to the termination.
7. As stated above, the termination notice itself indicates that ECL complied
with the procedure which it was required to do before terminating the contract.
The petitioner was issued two show cause notices, given sufficient
opportunities to respond to the same and was also called for a meeting on
2.5.2022 to explain its unsatisfactory performance. These facts have been
reiterated in the impugned letter dated 2.12.2022 banning the petitioner for a
period of 3 years under Clause 2(v)(b) of section 12 of the Guidelines for
Banning of Business. The impugned Letter of Banning makes detailed
references to the series of letters issued by ECL to the petitioner in the form of
reminders asking the petitioner to meet the short-fall of the target production.
The contents of the impugned letter makes it evident that the petitioner was
also issued a show cause notice dated 21.8.2022 under Clause 2(v)(b) of
Guidelines for Banning of Business which was replied to by the petitioner on
29.8.2022. The respondent ECL gave an opportunity of a personal hearing on
7.9.2022 where the petitioner committed to restart the work from 12.9.2022
but failed in fulfillment of its commitments. In this context it is relevant to
state that clause 2 of the Guidelines relates to the banning of a contractor
under certain circumstances including continued and repeated failure to meet
contractual obligations on termination of contract (2(v)(b)).
8. Therefore, the petitioner has not been able to disclose any evidence of
ECL either terminating the contract or banning the petitioner in breach of
principles of natural justice. The stand taken on behalf of the petitioner that
ECL failed to give the petitioner an opportunity of hearing before terminating
the contract on 19.8.2022 is contrary to the material on record.
9. The actions taken by ECL against the petitioner with reference to the
termination and impugned banning finds support from several clauses in the
NIT. Under the Special Notes and Terms and Conditions of the NIT, Clause 39
relates to the contractor's plying on specified routes, engaging skilled drivers of
trucks (Clause 33) both of which find mention in the handwritten Minutes of a
meeting dated 7.5.2022 attended by officials from the petitioner's side as well
as by ECL. The Minutes contain specific admissions of non-compliance of these
clauses by the petitioner's representatives. The authenticity and genuineness of
these documents was proved by comparing the same with the original records
maintained by ECL.
10. It is also significant that the petitioner acted upon the termination letter
of 19.8.2022 by causing a joint measurement to be taken as required for
ascertaining the balance work. This is recorded in the impugned Letter of
Banning dated 2.12.2022. The notice of final measurement given on 13.9.2022
was placed before the Court.
11. Apart from the Clause 2(v)(b) of the Guidelines for Banning of Business
which has been referred to above, ECL was also authorised to ban the
petitioner under Clause 6.2.5 of the GTC where defaulting contractor may be
barred from participating in future tenders for a minimum period of one year.
Since the petitioner has contended that the period of banning was contrary to
the GTC, it is relevant to state that Clause 6.2.5 only mentions the minimum
period of banning which is one year; there is no outer limit indicated. The
petitioner has also not been able to give a satisfactory answer to the admitted
fact of the petitioner stopping all activities including production from 10.6.2022
which finds specific mention in the show cause notice dated 21.8.2022 issued
by ECL for banning of business.
12. The allegation of ECL not providing the required land to the petitioner is
also belied by Clause 21 of the Special Terms and Conditions which provides
that the land will be given for execution entirely or in a phased manner or
restricting the magnitude of the work depending upon the availability of land.
ECL's letter of 22.7.2022 further makes it clear that 21.47 acres of land was
made available to the petitioner in Quarry 1 for machine deployment.
Therefore, none of the allegations made by the petitioner for the non-
performance on the part of ECL finds corroboration from the documents on
record.
13. The respondent ECL has been restrained from taking any steps to the
prejudice of the petitioner since 22.12.2022. Although, the restriction was put
in place till 9.1.2023, ECL continues to be fettered from invoking Clause 10.2
of the GTC, which is a post-termination step where the Engineer in-charge of
ECL is authorised to carry out the incomplete work by any other means at the
risk of the contractor. The undisputed fact is that the petitioner could not show
any work done post 10.6.22 despite land being made available to the petitioner.
The petitioner has not been able to make out a case of wrongful banning of
business or the banning not being in accordance with the terms of the GTC or
the Guidelines for Banning of Business. The petitioner has not challenged the
termination which was much prior to the banning. The petitioner has also not
been able to make out a case of either the termination or the banning being
done without giving an opportunity to the petitioner to present its case. The
action of the respondent ECL is informed by fairness and transparency in
terms of giving repeated opportunities to the petitioner to correct its failure and
make up the for performance-shortfall.
14. ECL cannot be penalised for the admitted non-performance / failure to
perform on the part of the petitioner and prevented from exercising its powers
under the General Terms and Conditions. This is particularly relevant where
the impugned banning of business letter of 2.12.2022 is found to be justified in
the facts of the case. The restraint on ECL consequent to the order dated
22.12.2022 is hence lifted.
15. Although academic in the context of the above findings, State of Punjab v.
Bandeep Singh; (2016) 1 SCC 724 and S.J.S. Business Enterprises (P) Ltd. v.
State of Bihar; (2004) 7 SCC 166 cited on behalf of the petitioner are definitely
of little relevance to the facts of the case; the first decision is on the
requirement of a decision of an administrative nature to contain reasons and
the second is on the effect of suppression of a material fact. The decision of this
Court in M/s. BGM and M-NS(JV) v. Eastern Coalfields Limited in WPA 24457 of
2022 involved a case of blacklisting before termination where the Court found
the conduct of the respondent to be contradictory and unconscionable.
16. In view of the foregoing discussion, this Court does not find any merit in
the contentions made on behalf of the petitioner for quashing the impugned
Letter of Banning dated 2.12.2022 or to restrain the respondent ECL from
acting in pursuance thereof.
17. WPA 28663 of 2022 is accordingly dismissed without any order as to
costs. All connected applications are disposed of.
Urgent photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfillment of requisite formalities.
(Moushumi Bhattacharya, J.)
