Calcutta High Court (Appellete Side)
Indian Oil Corporation Ltd. & Ors vs Ajit Kumar Murmu on 8 October, 2024
Author: Joymalya Bagchi
Bench: Joymalya Bagchi
SL No. 1
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
Present:
The Hon'ble Justice Joymalya Bagchi
And
The Hon'ble Justice Gaurang Kanth
MAT 1905 of 2024
(CAN 1 of 2024)
Indian Oil Corporation Ltd. & Ors.
-Vs-
Ajit Kumar Murmu
For the Appellants : Mr. Amit Kumar Nag, Adv.
Ms. Pritha Bhaumik, Adv.
For the Respondent/
writ petitioner : Mr. Debabrata Saha Roy, Adv.
Mr. Subhankar Das, Adv.
Mr. Neil Basu, Adv.
Mr. Sankha Biswas
Heard on : 04.10.2024 & 07.10.2024
Judgment on : 08.10.2024
Joymalya Bagchi, J. :-
1. Appellate Indian Oil Corporation Ltd. ('IOCL' for short) has assailed the
judgment and order dated 17.07.2024 whereby the order of termination
and blacklisting dated 10.09.2024 was set aside and the writ petitioner
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was permitted to supply four tank trucks ('TTs' for short) in terms of the
agreement dated 31.12.2024.
Facts:-
Factual matrix giving rise to the appeal is as follows:-
2. Appellant IOCL floated a tender for road transport of bulk petroleum
products like MS/HSD/Branded Fuels etc. for Mourigram terminal. Clause
1.1(a) of the tender document provided the estimated requirement of TTs
were in two different clusters i.e. 12-16 KL and 18-24 KL. Tender
conditions also provided tenderer offering maximum TTs in 1:8 ratio in the
aforesaid categories shall be ranked at the top and in case of a tie, average
age of the fleet would be the determining factor.
3. In response to the advertisement, writ petitioner submitted bid in
Scheduled Tribe category by offering 18 TTs (two in 18-24 KL and sixteen
in 12-16 KL category). The writ petitioner was declared as the successful
bidder and appellant IOCL by a Memo dated 11.11.2021 issued a letter of
acceptance in favour of the writ petitioner.
4. After completion of formalities an agreement was executed between the
appellant IOCL and the writ petitioner on 26.11.2021 for supply of 14 TTs
(two in 18-24 KL and twelve in 12-16b KL category). Thereafter, the work
order dated 27.12.2021 was issued in favour of the writ petitioner. As per
the request of the appellant oil company, the writ petitioner continued to
transport petroleum products in fourteen TTs for one and half years.
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Thereafter due to various circumstances, the writ petitioner was unable to
place ten out of the fourteen TTs for transportation in a regular manner.
Appellant Oil Company called upon the writ petitioner to show cause why
penal action shall not be taken against him for irregular placement of TTs.
Ten TTs were suspended for three months. On 03.08.2023 writ petitioner
was served with another show cause notice calling upon him to show
cause why action shall not be taken against him for submission of
incorrect documents with regard to month and year of manufacture of
seven out of the 14 TTs and also for irregular reporting of the TTs at
loading stations in violation of Clauses 8.2.2.2(d) and 8.2.2.13 of the
Industry Transport Discipline Guidelines ('ITDG' for short), Clause15(d)(f)
of the Transport Agreement and Clauses 17,18 and 19 of the tender terms
and conditions.
5. Writ petitioner duly submitted his reply to the said show cause notice. A
personal hearing was also conducted over video conference, writ petitioner
sought time to replace the old ten TTs.
6. Finally, by an impugned order dated 10.09.2024 the appellant Oil
Company held inspite of repeated requests the writ petitioner had failed to
place 10 TTs regularly at various locations for supply of petroleum
products and had submitted false manufacturing month and year in
respect of Tank Trunk bearing No. WB11C5642. Thereby he had violated
clause 19 of the Tender Document, Clause 8.2.2.2(d) and 8.2.2.13 of ITDG.
Accordingly, the road transport agreement dated 31.12.2024 was
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terminated and fourteen TTs were blacklisted on an industry basis till
13.12.2026. Security deposit of Rs. 50,000/- was also forfeited.
Findings of the Hon'ble Single Bench :-
7. This was challenged before this Court. Hon'ble Single Judge, inter alia,
held due to financial stringencies the writ petitioner was unable to replace
old vehicles which were not regularly reporting at different localities.
Hon'ble Judge further held incorrect disclosure of the month and year of
manufacture of one Tank Truck bearing No. WB11C5642 was an
inadvertent mistake and not an intentional misrepresentation. Accordingly,
dishonest complicity of the constructor had not been established and order
of termination of agreement dated 31.12.2024 and blacklisting of the
fourteen TTs were quashed. Writ petitioner was permitted to continue with
the agreement in relation to the four TTs till 31.12.2024.
Arguments at the Bar:-
8. Mr. Nag for the appellant Oil Company contends Hon'ble Single Judge
failed to take into consideration the fact that writ petitioner had repeatedly
failed to place the ten TTs for loading and inspite of opportunity did not
replace them. This was in breach of clause 4(a) of the Agreement. Clause
15(e) of the said Agreement entitles the Oil Company to terminate the
agreement in case of breach of any of its terms and conditions. In addition
thereto, writ petitioner had furnished false certificate and information with
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regard to month and year of manufacture of TT bearing No. WB11C5642 as
November, 2014 instead of October, 2014. Submission of forged document
and false information violates clause 8.2.2.13 of the ITDG and as per
Clause 19 of the tender conditions the Oil Company was entitled to
terminate the entire contract and black list all fourteen TTs.
9. On the other hand, Mr. Saha Roy contends penalties envisaged in the
aforesaid clauses are of graded nature. Clauses 8.2.2.2(d) of ITDG
unequivocally states, irregular reporting at the loading station of a TT
would entail its blacklisting only and not termination of the entire
agreement. Similarly, as per clause 8.2.2.13 of ITDG submission of forged
documents/false information to enter into a contract would amount to
blacklisting of the TT concerned and not the entire fleet.
10. Appellant authority could not place on record any material to show mala
fide complicity of the contractor would justify the aggravated penalty
prescribed in Clause 8.2.2 of ITDG.
Relevant Clauses:-
11. For better appreciation of the issues, relevant clauses of the tender
documents, agreement and ITDG are set out below:-
Tender Conditions:
"19. If the contract is awarded and case of false/forged
information/ document is detected subsequent to award of contract,
the contract shall be liable to be terminated, all TTs blacklisted on
industry basis and IOCL shall be entitled to recover such damages/
losses/ claims/ etc. as the IOCL may undergo. In such cases the
Security Deposit (SD) shall also be forfeited."
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Terms of the Agreement:-
"4.(a) the Tank Trucks listed in the LOA/ Work Order shall be made
available to the Company at all times during the Agreement period at
the loading location. In case of non/ irregular reporting action will be
taken as per as ITDG including blacklisting of TTs/Termination of
contract.
(b) If a TT does not report to loading location for loading for a continuous
period of 7 days in a calendar month or 10 days cumulative in a
calendar month, a penalty of Rs 20,000/- plus applicable GST will be
levied by way of auto debit from the transferred bill.
(c) If TT remains non-reported for continuous 90 days, the TT will
automatically be removed from contract and a penalty of Rs 2,00,000/-
plus applicable GST will be imposed on the carrier by way of auto debit
and further action as per ITDG shall be taken.
***** ***** ***** ***** ***** ***** ***** *****
15....
Notwithstanding anything to the contrary contained hereinabove,
Company reserves the right to terminate this Agreement forthwith upon
or at any time after happening of any of the following :-
...
(e) Breach of any of the terms or conditions of this Agreement by the
Carrier."
Industry Transport Discipline Guidelines
"8.2.2. Penalties upon detection of
malpractice/irregularities
The carrier shall attract penalties for the malpractice/irregularities
as given below and the TT mentioned in the following instances
shall be suspended/blacklisted along with TT crew. However, an
investigation, wherever required, shall be conducted and if the
malpractice/irregularity is established then penal actions
stipulated as under shall be taken, including blacklisting:-
Clause No. Type of Penalty against number of
malpractice / instance
irregularity
First Second Third
... ... ... ... ...
8.2.2.2 a) **** ...
b) ****
c) ****
d) Irregular TT shall be TT shall
reporting of TT at suspended be
loading location for 3 blacklisted
without months
permission of the
location.
... ... ... ... ...
8.2.2.13 Entering into TT shall be ... ...
Contract based blacklisted.
on forged
documents/ false
information
During the validity of transportation contract, in the first instance
of blacklisting for a Contractor, as per the above provisions,
damage of Rs. 1 lakh will be imposed on the Contractor apart
from blacklisting of the involved TT. In second instance of
blacklisting, a damage of Rs 3 lakhs will be imposed and the
involved TT will be blacklisted. In third instance of blacklisting, a
damage of Rs. 5 lakhs will be imposed and 25% of the remaining
TTs will be blacklisted alongwith the involved TT. In fourth
instance, a penalty of Rs. 8 lakhs will be imposed and 50% of
remaining TTs will be blacklisted along with involved TT. In case
of any further incident of malpractice, the entire fleet will be
blacklisted and the SD will be forfeited and the transportation
contract will terminated. The percentage of TT blacklisted will be
in proportion of own & attached offered and will be rounded off to
the higher numerical.
Above damages imposed are in addition to the recovery of the
product quantity found short or recovery due to contaminated
product involving the cost of product, expenses and losses
incurred as determined by the company.
However, in case complicity of the Contractor is established even
in first instance of malpractice, the entire fleet will be blacklisted,
contract terminated & carrier blacklisted along with forfeiture of
SD.
The blacklisting of TTs shall be on Industry basis."
Whether the order of termination and blacklisting is justified?
12. In this backdrop, we need to examine whether impugned order of
termination of the entire contract and blacklisting of all 14 TTs was
justified. The order of termination is based on two grounds:-
i. Irregular reporting of 10 TTs at various locations since May, 2023;
ii. Use of fake documents and false declaration with regard to month and
year of manufacture of TT bearing registration mark WB11C5642.
(i) Irregular Reporting of TTs:-
13. Writ petitioner had been awarded with a work order to place 14 TTs for
transportation of bulk petroleum from Mourigram. Initially, for one and a
half years he placed the TTs regularly. Thereafter, he failed to do so and 10
TTs were temporarily suspended for three months since 20.04.2023.
Thereafter, writ petitioner again failed to place the said TTs at various
locations as per request of IOCL. Under such circumstances, show-cause
notice was issued upon the writ petitioner. By letters dated 15.09.2023
and 07.12.2023 writ petitioner stated the vehicles had become old and due
to financial stringency he was unable to immediately repair and replace
them. He sought time. Thereafter, by letter dated 09.02.2024 as well as
during oral hearing 03.06.2024 writ petitioner offered to replace the 10 TTs
with new vehicles and prayed for time.
14. In this backdrop, the Oil Company terminated the entire contract and
blacklisted the entire fleet. Consequence of irregular placing of TTs is spelt
out in Clause 4 of the agreement and Clause 8.2.2.2(d) of the ITDG. Clause
4(a) states TTs shall be made available at all times by the contractor to the
company at the loading locations. Failure to do so would attract action as
per ITDG including the blacklisting of TTs and termination of contract.
Sub-Clause (a) provides for imposition of penalty of Rs.20,000/- if a TT
does not report for a continuous period of 7 days. Sub-Clause (c) provides
for an enhanced penalty of 2 lakhs in the event the TT is not reporting for
continuous 90 days. Clause 8.2.2.2(d) of ITDG deals with penalty in
respect of irregular reporting of TTs and provides the TT concerned shall be
blacklisted.
15. Conjoint reading of the aforesaid Clauses show in the event of irregular
reporting of TTs would attract monetary penalty including blacklisting of
the TTs concerned. None of these Clauses would permit the Oil Company
to terminate the entire contract as a whole and blacklist the entire fleet for
non-reporting of one or some of the TTs covered by the said agreement.
16. However, Mr. Nag would seek to trace such power to Clause 15 of the
agreement which, inter alia, provides for termination of the agreement as a
whole in case of breach of any of its terms and conditions. It is true Clause
15 of the agreement begins with a non-obstante clause and reserves the
right of the oil company to terminate the agreement as a consequence of
breach of its terms by the carrier. But this clause has to be read
harmoniously with other clauses of the agreement particularly Clause 4(b)
and (c) and Clause 8.2.2.2(d) of ITDG which specifically deals with the
consequences of irregular reporting of TTs and provides for lesser
penalty. A proper construction of all the clauses of the agreement would
not empower the oil company to terminate the entire agreement for
irregular reporting of TTs in all cases. Only in exceptional cases where for
cogent reasons the Company comes to a finding that the lesser penalties
prescribed in clause 4 of the agreement and clause 8.2.2.2(d) of ITDG may
not suffice, the oil company would be justified to resort to terminate the
entire agreement under Clause 15 thereof.
17. In the event the Oil Company chooses to resort to the more harsh provision
under Clause 15, it is incumbent upon them to state the special and
exceptional reasons which had prompted them to resort to the harsher
provision over and above the specific penalties prescribed for the breach in
question. Perusal of the order shows there is no application of mind to the
prescribed graded penalty scheme laid down in Clause 4 of the agreement
and Clause 8.2.2.2(d) of ITDG while passing the impugned order of
termination of the agreement as a whole and blacklisting the entire fleet.
This renders the impugned order vulnerable to judicial review.
(ii) Use of forged document/false declaration in respect of one
TT bearing registration mark WB11C5642:-
18. Initially, the show-cause notice called upon the writ petitioner to submit
documents to justify the declaration of month and year of manufacture of
7 out of the 14 TTs offered by them. Writ petitioner submitted documents
and the Oil Company was satisfied there was no incorrect declaration with
regard to 6 of the TTs. However, the month and year of manufacture of one
TT bearing registration no. WB11C5642 was found to be incorrectly made
as November, 2011 instead of October 2014 as appearing from registration
office records. As per Clause 8.2.2.13 of ITDG, this would justify the
blacklisting of this TT only. However, Mr. Nag relies on a sub-para in
Clause 8.2.2.2 which, inter alia, provides in case complicity of the
contractor is established even in first instance of malpractice, entire fleet
shall be blacklisted, contract terminated and security deposit forfeited. He
also relies on Clause 19 of the tender conditions which, inter alia, provides
in case false, forged information is detected subsequent to award of
contract, the contract is liable to be terminated.
19. Aforesaid clauses make it amply clear mere submission of a forged/false
information with regard to one or some of the TTs would not ipso facto lead
to termination of the contract as a whole or blacklisting of the entire fleet.
It must be borne in mind that an order of blacklisting on an industry basis
would tantamount to a commercial death of the contractor. This extreme
penalty is reserved for those egregious cases where the Oil Company is
able to establish complicity of the contractor in the malpractice. The word
'complicity'1 means active connivance or participation in wrong doing or a
crime. That is to say, fake document or false information relied upon by
the contractor must be used with the requisite intention to deceive or
defraud the Oil Company and thereby gain unfair advantage.
20. In the present case, the contractor had submitted a fake registration
certificate and declared month and year of manufacture of one of the TTs
as November, 2014 instead of October, 2014. It is for the Oil Company to
establish that this false declaration, if detected, had deceived the company
and helped the contractor to gain unfair advantage.
21. Mr. Nag argued the false declaration helped the writ petitioner in offering
the batch of TTs on a 1:8 ratio and thereby secure first position. Writ
petitioner had offered two trucks in 18 to 24 kilolitres and 16 trucks in 12
to 16 kilolitres category. The offers in the respective categories were based
on the capacity of the trucks and not the age of their manufacture. As per
the tender conditions under the heading 'Ranking in Lot System', age of
manufacture is relevant only when two contractors in Lot 1 (offering trucks
in the two categories on a 1:8 ratio) are jointly ranked in the top. It is
nobody's case that Joy Mataji, the other contractor was ranked at the top
along with the writ petitioner.
Shorter OXFORD English Dictionary, Fifth Edn., O.U Press 2002, 469;
Black's Law Dictionary, Sixth Edn., 285.
22. In this backdrop, incorrect declaration with regard to the month and year
of one of the TT's by the writ petitioner did not give any unfair advantage to
secure the contract. On the contrary, such declaration, if detected, would
visit him with undesirable consequences. In such view of the matter, it
belies logic why a prudent businessman would intentionally provide false
information with regard to the month and year of manufacture of his TT
and expose himself to unnecessary disqualification.
23. The aforesaid factual matrix clearly shows the incorrect declaration with
regard to the TT in question was either due to reckless overzealousness
without any perceptible benefit to the contractor or sheer negligence on his
part. No doubt, this would visit him with the penalty of blacklisting of the
TT concerned but cannot transcend to a case of complicity which would
entail cancellation of the agreement as a whole and blacklisting of the
entire fleet. Respondent authority failed to consider these relevant factors
and mechanically cancelled the entire agreement and blacklisted the entire
fleet.
24. In the light of the aforesaid facts, we are constrained to observe though the
order of termination of the contract and blacklisting of 10 TTs including
the one in respect of which false declaration was made is justified, there is
no justification for the imposition of the extreme penalty of cancellation of
the agreement as a whole, and blacklisting of the entire fleet till
31.12.2026.
Conclusion
25. Accordingly, we modify the impugned order of termination and en bloc
blacklisting and direct the same shall operate with regard to 10 TTs in
question. Writ petitioner shall be permitted to ply 4 TTs as per the
agreement.
26. With these directions, appeal and the connected application are disposed
of.
27. There shall be no order as to costs.
28. Order is pronounced in open Court in presence of the parties. Parties are
at liberty to communicate the gist of the order to the Oil Company for
necessary compliance.
29. Photostat certified copy of this judgment, if applied for, be given to the
parties on compliance of all formalities.
I agree.
(Gaurang Kanth, J.) (Joymalya Bagchi, J.)
SG/as
