R.K.Associates vs The Managing Director, Irctc & ...
2009 Latest Caselaw 77 Del

45
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                           Pronounced on: 14.01.2009

+                 W.P. (C) 210/2009, C.M No.423/2009

      R.K.ASSOCIATES                                     ..... Petitioner
                        Through: Mr. Jayant Bhushan, Sr. Advocate
                        with Mr. G. Prakash, Advocate.

                  versus

      THE MANAGING DIRECTOR, IRCTC & ANR.         ..... Respondents
                    Through: Mr. Gourab Banerji, Sr. Advocate
                    with Mr. Saurav Agrawal and Mr. D. Kumar,
                    Advocates.

      CORAM:
      HON'BLE MR. JUSTICE S. RAVINDRA BHAT

1.    Whether the Reporters of local papers
      may be allowed to see the judgment?

2.    To be referred to Reporter or not?

3.    Whether the judgment should be
      reported in the Digest?

      S.RAVINDRA BHAT, J. (ORAL)

% The petitioner challenges the order dated 5.1.2009, whereby

the license awarded by the respondents (hereafter called IRCTC) on

7.5.2008 for the business of catering service in the "Golden Temple

Mail" was cancelled. The order also debars the petitioner from

participating in future tender processes for a period of two years

effective from that date.

CWP 210/09 Page 1

2. It is contended by the petitioner that the order is unsustainable

and arbitrary as it is premised on assumptions. Learned counsel relied

upon the averments as well as the reply to the show cause notice

issued by the respondent, IRCTC on 12.12.2008. Counsel contended

that each of the allegations were effectively refuted - in the reply to

show cause,- and that the impugned order nevertheless was issued by

IRCTC without holding proper enquiry and on the basis of assumptions.

3. Learned Sr. counsel further contended that the show cause

notice issued by the respondents, proposing action against the

petitioner, nowhere sought the latter's response on the point that the

concern would be debarred from future tender processes in the event

of an adverse determination, on the show cause notice. This, according

to him, is unsustainable in law. Counsel relied upon the decision of the

Supreme Court, reported as Erusian Equipment & Chemicals -vs- State

of West Bengal (1975 (1) SCC 70.

4. Learned counsel for the respondents contended that the disputes

cannot be the subject matter of writ proceedings as this does not

pertain to any pre-contract administrative decision but concerns the

working out of the contract duly awarded. It was also contended that

Clause 7.12 of the Terms and Conditions, governing the contract

clearly stipulates that in the event of successful tenderer/contractor

violating any term or condition, leading to unsatisfactory service or

CWP 210/09 Page 2 poor quality of articles etc. not only the license could be terminated

but that the licensee would be debarred from participating in future

projects.

5. It is evident from the above that the petitioner is seeking

intervention of the Court under Article 226 in respect of what are

essentially contractual disputes. As held by the Supreme Court in the

decision State of U.P. and Ors. v. Maharaja Dharmander Prasad

Singh and Ors. (1989 (2) SCC 505), National Highways Authority

of India v. Ganga Enterprises (2003 (7) SCC 410), Verigamto

Naveen v. Government of A.P. (2001 (8) SCC 344) , such disputes

cannot be adjudicated by the High Court under Article 226, as they

involve a disputed questions of fact requiring the parties to lead

evidence. In such cases, it would be appropriate for the aggrieved

party to approach the Civil Court or seek recourse to arbitration, if they

have agreed to such mechanism.

6. The observations above are not dispositive of the petition;

there is one area where the petitioner's grievance appears to be well

founded. The show cause notice issued to it nowhere reflects the

IRCTC's thinking that the petitioner's transgressions are such as to its

being debarred for any, much less a period of two years. In the

circumstances, the impugned order to the extent it debars the

CWP 210/09 Page 3 petitioner is unsustainable in law. Before taking such action which

virtually spells civil death on the concerned party, principles of natural

justice which include issuance of notice, grant of reasonable and

adequate opportunity by the concerned agency have to be mandatorily

followed. This is the law declared in Erusian Equipment (supra); it has

been unwaveringly followed and applied in applied in later judgments.

In Grosons Pharmaceuticals (P) Ltd. v. State of U.P.,(2001) 8 SCC 604 it

was held that:

"It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facets of the principles of natural justice."

This view has again been reiterated in B.S.N. Joshi & Sons Ltd. v. Nair

Coal Services Ltd., (2006) 11 SCC 548.

7. The IRCTC relies on the Clause 7.12 which is in the following

terms: -

"In the event of unsatisfactory service, poor quality of articles, persistent complaints from passengers, and service below the standard or any failure or default at any time on the part of the Licensee to carry out the terms and provisions of the agreement to the satisfaction of the IRCTC (who will be sole judge and whose decision shall be final) it shall be optional to the IRCTC to make any substitute arrangement it may deem necessary at the cost and risk of the Licensee or to forthwith terminate this agreement without any previous notice to the Licensee and in case of such termination the Security Deposit be forfeited by the CWP 210/09 Page 4 IRCTC and the Licensee shall have no claim what so ever against IRCTC or any of the officials in consequence of such termination of the agreement. No refund of proportionate Licensee Fee shall be admissible in case of Termination under this clause. The Licensee agrees to make good all cost and expenses, if any incurred by the IRC TC for making the substitute arrangements referred to above. The License shall be also be debarred from participating in the future projects of IRCTC for a period of two year."

8. The above condition no doubt stipulates that the licensee has to

be debarred from participating in future projects in the event of

unsatisfactory service, poor quality of articles etc. Nevertheless, in

such circumstances also there is authority (D. K. Yadav v. J. M. A.

Industries Ltd. (1993) 3 SCC 259 and Uptron India Ltd., -vs-. Shammi

Bhan 1998-(6)-SCC -538 to say that show cause notice and principles

of natural justice have to be followed, even where the authority or

agency prescribes "automatic" application of a norm, as a

consequence for the occurrence of some event. Therefore, IRCTC has

to perforce issue a show cause notice, in such cases, and, after

granting opportunity to the contractor, exercise its discretion whether

to blacklist the concern and if so to what extent. This procedure is part

of the non-derogable principle of fairness, mandated by Article 14 of

the Constitution of India.

9. In the circumstances, the impugned order to the extent it

debars the petitioner for a period of two years from participating in

CWP 210/09 Page 5 future projects, is hereby quashed. All rights and contentions of the

parties are hereby reserved including the petitioner's right to

challenge the correctness of the impugned order cancelling the

contract before the Civil Court.

                                                 S. RAVINDRA BHAT
                                                           (JUDGE)
 JANUARY 14, 2009
/vd/




CWP 210/09                                                        Page 6