M/S. Shah Nanji Nagsi vs Food Corporation Of India & Others
2009 Latest Caselaw 4674 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   W.P.(C) 1698/2006

%                                 Date of decision : 17th November, 2009.

      M/S SHAH NANJI NAGSI                  ..... Petitioner
                      Through Mr. B.P. Aggarwal, advocate.

                    versus

      F.C.I & ORS                                ..... Respondents
                             Through

      CORAM:
      HON'BLE MR. JUSTICE SANJIV KHANNA

                              ORDER

1. The petitioner M/S Shah Nanji Nagsi has filed the present writ petition

for release of balance undelivered quantity of 30,951 metric tonnes of par

boiled rice in terms of a concluded contract. The petitioner is also asking for

refund of excess amount of penal interest levied by Food Corporation of India

(hereinafter referred to as FCI, for short) or in alternative adjustment of the

said amount against the undelivered par boiled rice.

2. In January, 2002, the respondent, FCI had invited tender for sale of par

boiled rice on "as is where is basis". The petitioner submitted their bid and

paid earnest money of Rs. 30,00,000/- for 1,30,000 metric tonnes of par

boiled rice. The offer was extended at the request of the respondent, FCI. The

offer made by the petitioner was found to be low and the respondent FCI by

WPC No.1698/2006 Page 1 their letter dated 18th March, 2002 made a counter offer to the petitioner to

lift the stock @ Rs. 500/- per quintal for which the petitioner was required to

deposit 1% of the cost of the stock within three days. On 19th March, 2002, the

petitioner accepted the counter offer and it is stated that payment of Rs.

25,00,000/- was made as earnest money and thus Rs.55,00,000/-was

deposited as earnest money for supply of 1,08,850 metric tonnes of par

boiled [email protected] Rs.500/- per quintal. As per the petitioner, the full quantity of par

boiled rice was not supplied as the same was diverted to National Council for

Consumer Federation (hereinafter referred to as NCCF, for short) or to NAFED.

3. The respondent, FCI, however, in their counter affidavit have stated

that the rice for which the petitioner had submitted their bid was four years

old and rice, which was supplied to NCCF and NAFED was two years old and,

therefore, there is no connection between the supply made to NCCF and

NAFED and the short fall in the supply made to the petitioner. On the question

of short fall, it has been explained as under:-

"The contents of paragraphs 4(xxiii) & (xxiv) of the petition, it is admitted that there was shortage of 30961 MTs. Of boiled Rice but it was not on account of any mischief according to policy decisions of Government of India and Food Corporation of India the food grains from one region is dispatched to other Region as and where required. The stocks included in the petitioner's tender were measured before 31/01/2002 and it was calculated at the tune of 108850 Mts. As the

WPC No.1698/2006 Page 2 tender was not accepted on due date, In the meantime there was demand from Bihar, West Bengal, and South India, accordingly to policy rice from Chhattisgarh Region which were not under the accepted tender, were to be dispatched with. Accordingly the rice from Chhattisgarh Region the rice were dispatched including same of the stacks which were under the tender of petitioner, though not accepted. The rice so dispatched was according to "first in first out basis". In this routine 26617 MTs of the rice included in the unaccepted tender of the petitioner, was dispatched. It is submitted that this dispatch was made prior to 19/03/2002 the petitioner tender was accepted on "as is where is basis" the balance quantity of the petitioner was due to this reason only. The clause "J" of the Agreement exempts these type of circumstances and gives ample jurisdiction with Senior Regional Manager to do the needful according to the circumstances in the best public use. Moreover, the Food Corporation of India itself provides storage loss, a copy of schedule of approved shortage is filed herewith as Annexure R-3. According to this the Respondent No.3 at the relevant time was authorized to condone the shortage up to 5%.

In the present case, after dispatching 26617 MTs only about 4000 MTs. Was short which was well within sanctioned shortage. Actually, there was no shortage in the quantity but due to dispatch of 26617 MTs there became shortage in the quantity pre-mentioned in petitioners tender. The respondent to rectify this shortage offered the petitioner vide Annexure-R-2 to come for counter offer for the balance quantity of different quality. But the petitioner did not turn up. Hence the whole allegation is false and baseless. The contention made in the para do not give any help to the

WPC No.1698/2006 Page 3 petitioner in the facts and circumstances of the case."

4. In view of the said explanation given by the respondent, FCI, I am not

inclined to entertain the present writ petition and leave it open to the

petitioner to question and challenge and claim damages for alleged shortfall in

breach of the contract, in a civil suit. The petitioner has equally efficacious

alternative remedy by way of civil suit in which the commercial contract can

be interpreted and the claim of the petitioner can be examined. The

respondents have pointed out that the petitioner had written letters asking

for refund of security deposit and the earnest money vide letters dated 4th

September, 2003, 6th September, 2003 and 17th September, 2003, and in

terms thereof the excess amount deposited by the petitioner was refunded.

The respondents have, therefore, taken the plea of "estoppel". The petitioner,

however, submits that the letters were written under protest. The said letters

have been placed on record as annexures R-1, R-2 and R-3 to the counter

affidavit. Prima facie the letters do not indicate that these were written

under protest and without prejudice to the rights of the petitioner to claim

damages.

5. Counsel for the petitioner has referred two decisions of the Supreme

Court in Gujarat State Financial Corporation Vs. M/s. Lotus Hotels Pvt. Ltd.

(1983) 3 SCC 379,     Union of India and Others Vs. Dinesh Engineering



WPC No.1698/2006                                                         Page 4

Corporation and Another, (2001) 8 SCC 491 and a decision of Delhi High Court

in Gharda Chemicals Limited Vs. Central Warehousing Corporation Vs.

Central Warehousing Corporation, 118 (2005) DLT 159(DB), in support of his

contention that the writ petition even in contractual matters is maintainable.

Writ petition in contractual matters can be entertained in case there is

arbitrariness and the authorities have acted contrary to Article 14 of the

Constitution. In a writ petition while exercising power of judicial review, the

court is concerned with the administrative action and examines whether the

said action is free from arbitrariness, bias and mala fide. However, in the

present case the subject matter is a commercial dispute and the respondents

have prima facie shown that their conduct and decision is not tainted or

malafide. Moreover, State must be given freedom of contract and free play in

the joints while acting in contractual matters.

6. In case the respondent, FCI have acted contrary to the contract and

committed breach thereof, the petitioner under the law of contract can claim

damages. Mere breach of contract by the respondent does not establish

arbitrariness or malafides. Question of breach and interpretation of a contract

should be ordinarily made subject matter of ordinary civil proceedings. It is

noticed that the petitioner in fact seeks specific performance of a contract

relating to moveable property by way of present writ petition as he is seeking

direction that the balance quantity of par boiled rice should be directed to be

WPC No.1698/2006 Page 5 released. Normally, in cases of moveable property, damages is the appropriate

remedy and specific performance of contract in moveable property is directed

in exceptional cases. Explanation (ii) to Section 10 read with Section 14(1) of

the Specific Relied Act 1963 provide for relieving the breach of contract of

movable property by way of compensation in money or damages.

7. Quantum and amount of damages require oral evidence and

adjudication of factual disputes which cannot be decided in a writ petition. It

is well-settled that a writ petition under Article 226 of the Constitution of India

is not maintainable for enforcement of terms of a contract. (Refer, Bareilly

Development Authority versus Ajay Pal Singh AIR 1989 SC 1076 wherein it

was observed that when State enters into a contract which is non statutory

and purely contractual then the rights of the parties inter se are governed by

the terms of the contract and not by the provisions of the Constitution and no

writ order can be issued under Article 226 to compel an authority to remedy a

breach of contract pure and simple; Kerala State Electricity Board and

another versus Kurien E. Kalathil and others JT 2000 (8) SC 167) the Supreme

Court held that interpretation and implementation a clause in a contract

cannot be a subject matter of a writ petition under Article 226 of the

Constitution)

8. Counsel for the petitioner submitted that the respondents have

deducted Rs.27,63,663/- on account of delay under clause H(v), which reads

WPC No.1698/2006 Page 6 as under:-

"(v) After 60 days, further extension will be admissible only for a further period of 30 days on payment of 30 days on payment of 2% penal interest over and above the bank rate."

9. It is submitted that the said deduction has been wrongly made as the delay was occasioned by the respondents-FCI themselves. It is also submitted that the petitioner had made an application for extension of time. These are factual disputes. Who was responsible for the delay, cannot be adjudicated without recording oral evidence and is not a matter which can be decided in a writ petition. The petitioner, if required, is at liberty to file a civil suit claiming refund of the said amount.

10. The writ petition is dismissed. The observations made above are for the purpose of deciding the present writ petition and civil suit, if any, filed by the petitioner will be decided without being influenced by the said observations. The petitioner had filed the present writ petition on 2nd June, 2006 and the same has remained pending since then. The petitioner, if required, will be at liberty to file an application under Section 14 of the Limitation Act, 1963. No costs.

SANJIV KHANNA, J.

NOVEMBER 17, 2009.

NA/P




WPC No.1698/2006                                                                Page 7