Jharkhand High Court
M/S Tahal Consulting Engineers ... vs The State Of Jharkhand on 8 April, 2021
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 1427 of 2021
M/s Tahal Consulting Engineers India Private Limited, Gurgaon (Haryana),
through its duly authorized representative, Ms. Reetika Goel, Assistant Manager
(Legal)
..... Petitioner
Versus
1. The State of Jharkhand
2. The Secretary, Department of Drinking Water and Sanitation, Government of
Jharkhand, Ranchi
3. The Engineer-in-Chief, Department of Drinking Water and Sanitation,
Government of Jharkhand, Ranchi
4. The Superintending Engineer, Department of Drinking Water and Sanitation,
Government of Jharkhand, Dhanbad Circle, Dhanbad
5. The Executive Engineer, Drinking Water and Sanitation Department, Division
No.1, Dhanbad
6. Yes Bank Limited, Mumbai (Maharashtra), through the Branch Manager,
Gurgaon Branch, Gurgaon (Haryana)
7. The Branch Manager, Yes Bank Limited, Gurgaon Branch, Gurgaon (Haryana)
..... Respondents
With
W.P.(C) No. 1428 of 2021
M/s Tahal Consulting Engineers India Private Limited, Gurgaon (Haryana),
through its duly authorized representative, Ms. Reetika Goel, Assistant Manager
(Legal)
..... Petitioner
Versus
1. The State of Jharkhand
2. The Secretary, Department of Drinking Water and Sanitation, Government of
Jharkhand, Ranchi
3. The Engineer-in-Chief, Department of Drinking Water and Sanitation,
Government of Jharkhand, Ranchi
4. The Superintending Engineer, Department of Drinking Water and Sanitation,
Government of Jharkhand, Dhanbad Circle, Dhanbad
5. The Executive Engineer, Drinking Water and Sanitation Department, Division
No.1, Dhanbad
6. Yes Bank Limited, Mumbai (Maharashtra), through the Branch Manager,
Gurgaon Branch, Gurgaon (Haryana)
7. The Branch Manager, Yes Bank Limited, Gurgaon Branch, Gurgaon (Haryana)
..... Respondents
-----
CORAM
HON'BLE MR. JUSTICE RAJESH SHANKAR
-----
For the Petitioner: Mr. Pandey Neeraj Rai
Mr. Akchansh kishore
Mr. Rohit Ranjan Sinha
For the State: Mr. Mohan Dubey, A.C to A.G
-----
03/08.04.2021 Both these writ petitions have been filed for quashing various letters
whereby the petitioner has been informed that a recommendation is being made
to higher officials of the Drinking Water and Sanitation Department,
Government of Jharkhand to forfeit the mobilization advance or to
invoke/encash the Bank Guarantees furnished in lieu of the mobilization
advance. Further prayer has been made for issuance of direction upon the
respondents to take a decision on the petitioner's request for extension of time
made in terms with Clause 28.2 & 28.3 of the Conditions of Contract. The
petitioner has also prayed for staying the invocation and/or encashment of the
Bank Guarantees furnished in connection with the aforesaid contracts.
2. Mr. Pandey Neeraj Rai, learned counsel appearing on behalf of the
petitioner, submits that the petitioner was awarded two contracts, one for South
Zone [subject matter of W.P.(C) No. 1427 of 2021] and another for North Zone
[subject matter of W.P.(C) No. 1428 of 2021], to carry out survey, designing,
drawing and construction of RCC Intake Well-cum-Pump House, gang-way,
water treatment plant, water reservoir, water distribution network, supply &
installation of pumps, maintenance etc. for Multi-villages Scheme of Gobindpur
& Nirsa Block, Rural Water Supply Scheme under the Department of Drinking
Water and Sanitation, Government of Jharkhand, Division No.1,
Dhanbad, Jharkhand. The contract value for Gobindpur & Nirsa Block (South
Zone) was Rs.1,87,44,97,227/- and for Gobindpur and Nirsa Block (North Zone)
was Rs.3,34,94,56,939/-. It is further submitted that as per the terms of the
contract, the petitioner submitted the Bank Guarantees to cover the mobilization
advance @10% of the contract price. The petitioner started execution of the
said works with sincerity and diligence, however, due to laches on the part of
the respondents, the same could not be completed within the stipulated period.
It is further submitted that Clause 28 of the Conditions of Contract provides for
extension of the intended completion date and as such the petitioner requested
for extension of time giving full justification vide its numerous letters, but all
went in vein and no decision was taken as per the mechanism provided in the
contract, rather a letter dated 13.02.2021 was sent to the petitioner by the
respondent No.5 alleging that the petitioner was making excuses for not
completing the said works in time informing that the recommendation for
forfeiting the mobilization advance was being made to the higher officials. It is
further submitted that the petitioner wrote letter dated 09.03.2021 to the
respondent No.5 requesting him not to take any hasty action with respect to
invocation of the Bank Guarantees in view of the Conditions of the Contract
which allow repayment of mobilization advance either by the original completion
date or by expiry of the extended time for completion in the case where
extension is applicable. The petitioner again wrote letter dated 19.03.2021
requesting the respondent No.5 not to invoke the Bank Guarantees. However,
the respondent authorities have taken steps towards invocation of the Bank
Guarantees and the respondent No.5 has requested the manager of the
petitioner's Bank i.e. Yes Bank Limited not to allow the petitioner to get the
Bank Guarantees encashed and to allow encashment of the Bank Guarantees
only through the person authorized or nominated by the respondent No.5. It is
further submitted that the decision for forfeiture of mobilization advance or
invocation of Bank Guarantees is absolutely arbitrary, illegal and unwarranted in
absence of any decision taken by the respondents on the petitioner's request for
extension of time. It is also submitted that the respondents have failed to take
and convey any decision on the request for extension of time, despite long lapse
of the timelines provided in the mechanism as stipulated in Clause 28.2 & 28.3
read with Clause 32 of the Conditions of Contract.
3. Mr. Mohan Dubey, learned A.C to A.G appearing on behalf of the State-
respondents, opposes the petitioner's claim and submits that the present writ
petitions are not maintainable in view of the nature of the dispute involved
therein. It is further submitted that the petitioner was already given sufficient
opportunity to complete the project, however, no progress was found in the said
works and it just tried to make excuses to justify the delay. It is further
submitted that finding no option, the respondent No.5 issued show cause notice
to the petitioner vide letter No. 530 dated 20.03.2021 in response to its letters
to clarify its stand within one week as to why a recommendation be not made to
the higher officials to take action against it as per the agreement by cancelling
the same and in the meantime, a direction was issued to the petitioner's Bank
not to encash the Bank Guarantees on its demand.
4. Heard learned counsel for the parties and perused the relevant materials
available on record. Admittedly, the time for completion of the said projects has
already expired. The petitioner has claimed that the delay is attributable to the
respondents as they failed to provide timely inputs, delayed in handing over
encumbered land, delayed in granting various approvals and in providing
permissions/clearances from the concerned department as well as also delayed
in release of payments. It has been claimed that one of the causes for delay is
outbreak of Covid-19 pandemic. In spite of the said facts, the respondents failed
to extend the time for completion of the projects, though various letters were
written by the petitioner on the said issue.
5. It would however be evident from letter No. 530 dated 20.03.2021 that
the petitioner has been asked to explain its position within one week as to why
the agreement be not cancelled and recommendation to higher officials for
taking appropriate action be not made against it. The respondent No.5 has
claimed in the said letter that the petitioner has been negligent in executing the
said works. It has also been stated inter alia that due to outbreak of Covid-19
pandemic, the government had decided to extend the time for six months for
those projects in which time of completion was fixed after March, 2020 and the
extension sought by the petitioner till December, 2022 was not allowed looking
to the physical progress of the work. It has also been claimed by the said
respondent that the query regarding GST has only been made by the petitioner
to consume time and to take an excuse for delay. It has further been mentioned
in the letter dated 20.03.2021 that the progress of the said works in the last
seven months was not satisfactory. Thus, there are allegations and counter
allegations between the parties for non-completion of the said projects in time
and the dispute of such factual nature cannot be adjudicated by this Court
under its writ jurisdiction.
6. In the case of Noble Resources Ltd. Vs. State of Orissa & Anr.
reported in (2006) 10 SCC 236, the Hon'ble Supreme Court has held as
under:
"42. Moreover, certain serious disputed
questions of fact have arisen for
determination. Such disputed questions of
fact ordinarily could not have been
entertained by the High Court in exercise of
its power of judicial review.
43. Ordinarily, a specific performance of
contract would not be enforced by issuing a
writ of/or in the nature of mandamus,
particularly when keeping in view the
provisions of the Specific Relief Act, 1963,
damages may be an adequate remedy for
breach of contract."
7. In the case of Joshi Technologies International Inc. Vs. Union of
India & Ors. reported in (2015) 7 SCC 728 : 2015 SCC, the Hon'ble
Supreme Court has held as under:
"69. The position thus summarised in the
aforesaid principles has to be understood in
the context of discussion that preceded which
we have pointed out above. As per this, no
doubt, there is no absolute bar to the
maintainability of the writ petition even in
contractual matters or where there are
disputed questions of fact or even when
monetary claim is raised. At the same time,
discretion lies with the High Court which
under certain circumstances, it can refuse to
exercise. It also follows that under the
following circumstances, "normally", the Court
would not exercise such a discretion:
69.1. The Court may not examine the issue
unless the action has some public law
character attached to it.
69.2. Whenever a particular mode of
settlement of dispute is provided in the
contract, the High Court would refuse to
exercise its discretion under Article 226 of the
Constitution and relegate the party to the said
mode of settlement, particularly when
settlement of disputes is to be resorted to
through the means of arbitration.
69.3. If there are very serious disputed
questions of fact which are of complex nature
and require oral evidence for their
determination.
69.4. Money claims per se particularly arising
out of contractual obligations are normally not
to be entertained except in exceptional
circumstances.
70. Further, the legal position which emerges
from various judgments of this Court dealing
with different situations/aspects relating to
contracts entered into by the State/public
authority with private parties, can be
summarised as under:
70.1. At the stage of entering into a contract,
the State acts purely in its executive capacity
and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in
the contractual field, is under obligation to act
fairly and cannot practise some
discriminations.
70.3. Even in cases where 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. In such cases the Court can
direct the aggrieved party to resort to
alternate remedy of civil suit, etc.
70.4. Writ jurisdiction of the High Court under
Article 226 of the Constitution was not
intended to facilitate avoidance of obligation
voluntarily incurred.
70.5. Writ petition was not maintainable to
avoid contractual obligation. Occurrence of
commercial difficulty, inconvenience or
hardship in performance of the conditions
agreed to in the contract can provide no
justification in not complying with the terms
of contract which the parties had accepted
with open eyes. It cannot ever be that a
licensee can work out the licence if he finds it
profitable to do so: and he can challenge the
conditions under which he agreed to take the
licence, if he finds it commercially inexpedient
to conduct his business.
70.6. Ordinarily, where a breach of contract is
complained of, the party complaining of such
breach may sue for specific performance of the
contract, if contract is capable of being
specifically performed. Otherwise, the party
may sue for damages.
70.7. Writ can be issued where there is
executive action unsupported by law or even
in respect of a corporation there is denial of
equality before law or equal protection of law
or if it can be shown that action of the public
authorities was without giving any hearing
and violation of principles of natural justice
after holding that action could not have been
taken without observing principles of natural
justice.
70.8. If the contract between private party
and the State/instrumentality and/or agency
of the State is under the realm of a private law
and there is no element of public law, the
normal course for the aggrieved party, is to
invoke the remedies provided under ordinary
civil law rather than approaching the High
Court under Article 226 of the Constitution of
India and invoking its extraordinary
jurisdiction.
70.9. The distinction between public law and
private law element in the contract with the
State is getting blurred. However, it has not
been totally obliterated and where the matter
falls purely in private field of contract, this
Court has maintained the position that writ
petition is not maintainable. The dichotomy
between public law and private law rights and
remedies would depend on the factual matrix
of each case and the distinction between the
public law remedies and private law field,
cannot be demarcated with precision. In fact,
each case has to be examined, on its facts
whether the contractual relations between the
parties bear insignia of public element. Once
on the facts of a particular case it is found that
nature of the activity or controversy involves
public law element, then the matter can be
examined by the High Court in writ petitions
under Article 226 of the Constitution of India
to see whether action of the State and/or
instrumentality or agency of the State is fair,
just and equitable or that relevant factors are
taken into consideration and irrelevant factors
have not gone into the decision-making
process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate
expectation of a citizen, in such a situation,
may not by itself be a distinct enforceable
right, but failure to consider and give due
weight to it may render the decision arbitrary,
and this is how the requirements of due
consideration of a legitimate expectation
forms part of the principle of non-
arbitrariness.
70.11. The scope of judicial review in respect
of disputes falling within the domain of
contractual obligations may be more limited
and in doubtful cases the parties may be
relegated to adjudication of their rights by
resort to remedies provided for adjudication of
purely contractual disputes."
8. Moreover, it appears that vide letter dated 20.03.2021, the petitioner has
been asked to reply the show cause notice within a week on the allegation
levelled against it. The law relating to intervention by the Writ Court at the
stage of issuance of show cause notice has been laid down by the Hon'ble
Supreme Court in the case of Union of India & Anr. Vs. Kunisetty
Satyanarayana reported in (2006) 12 SCC 28, the relevant paragraphs of
which read as under:
"14. The reason why ordinarily a writ petition
should not be entertained against a mere
show-cause notice or charge-sheet is that at
that stage the writ petition may be held to be
premature. A mere charge-sheet or show-
cause notice does not give rise to any cause of
action, because it does not amount to an
adverse order which affects the rights of any
party unless the same has been issued by a
person having no jurisdiction to do so. It is
quite possible that after considering the reply
to the show-cause notice or after holding an
enquiry the authority concerned may drop the
proceedings and/or hold that the charges are
not established. It is well settled that a writ
petition lies when some right of any party is
infringed. A mere show-cause notice or
charge-sheet does not infringe the right of
anyone. It is only when a final order imposing
some punishment or otherwise adversely
affecting a party is passed, that the said party
can be said to have any grievance.
15. Writ jurisdiction is discretionary
jurisdiction and hence such discretion under
Article 226 should not ordinarily be exercised
by quashing a show-cause notice or charge-
sheet.
16. No doubt, in some very rare and
exceptional cases the High Court can quash a
charge-sheet or show-cause notice if it is
found to be wholly without jurisdiction or for
some other reason if it is wholly illegal.
However, ordinarily the High Court should not
interfere in such a matter."
9. Thus, the writ petition can be entertained at the stage of issuance of
show cause notice in very exceptional cases when the High Court finds that
such show cause notice has been issued without jurisdiction or is wholly illegal.
The petitioner has not been able to explain such an exceptional circumstance
before this Court so as to entertain the present writ petitions at the stage of
issuance of show cause notice to it. Moreover, the allegation made in the show
cause notice is substantively factual in nature which cannot be adjudicated by
this Court under the Writ jurisdiction.
10. Learned counsel for the petitioner has put strong reliance on a judgment
of the High Court of Delhi rendered in the case of M/s Halliburton Offshore
Services Inc. Vs. Vedana Limited & Anr. [O.M.P.(I)(COMM) & I.A. 3697
of 2020] wherein a petition under Section 9 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as 'the Act, 1996') was filed and an interim
protection was sought in the nature of restraining the respondents from
invoking or encashing the Bank Guarantee. In the said case, the learned Bench
cited various judgments of the Hon'ble Supreme Court dealing with the scope of
judicial interference in the matters of invocation or encashment of Bank
Guarantee and thereafter summarized the law in paragraph 16 as under:
"16. In my view, it is not necessary to multiply
references to precedents, the law with respect
to injunction of encashment, or invocation, of
unconditional bank guarantees, being fairly
well settled. It is significant, however, that,
where the earlier understanding of the
expression "special equities", as a
circumstance in which invocation of bank
guarantees could be inducted, was that such
equities were limited to cases where
irretrievable injustice resulted, the recent
decision in Standard Chartered Bank
Ltd, seems to visualise irretrievable injustice,
and special equities, as distinct circumstances,
the existence of either of which would justify
an order of injunction. Viewed any which way,
there appears to be no gainsaying the
proposition that, where "special equities"
exist, the court is empowered, in a given set of
facts and circumstances, to injunct invocation,
or encashment, of a bank guarantee. Where
such special circumstances do exist, no
occasion arises, to revert to the general
principle regarding the contractually binding
nature of a bank guarantee, or the legal
obligation of the bank to honour the bank
guarantee, these special circumstances
having, in all cases, being treated as
exceptions to this general principle."
11. Thereafter, the learned Bench found that the delay in the said case was
caused due to sudden imposition of the lockdown pursuant to outbreak of
Covid-19 pandemic and having taken into consideration the petitioner's claim
that a substantial part of the work had been accomplished, granted ad-interim
stay on invocation and encashment of the Bank Guarantees. Thus, the nature of
the proceeding before the Bench of the High Court of Delhi was under Section 9
of the Act, 1996 and the learned Court exercised the power by granting the
interim protection. The petitioner has however preferred the present writ
petitions involving disputed question of facts with a prayer to restrain the
respondents from invoking the Bank Guarantees which have been furnished by
it in lieu of mobilization advance.
12. Now, the question before this Court is as to whether in the present facts
and situation, any direction can be issued to the respondents restraining them
from taking any action of forfeiting the mobilization advance or encashing the
Bank Guarantees furnished by the petitioner in relation to the works in question.
13. Clause 49.3 of the Conditions of Contract (3rd Section of the Standard
Bidding Documents) provides that if the contractor fails to comply with the time
for completion as stipulated in the tender, then the contractor shall pay to the
employer the relevant sum stated in the Contract Data as liquidated damages
for such default and not as penalty for everyday or part of day which shall
elapse between relevant time for completion and the date stated in the taking
over certificate of the whole of the works on the relevant section, subject to the
limit stated in the Contract Data. It further provides that the employer may,
without prejudice to any other method of recovery, deduct the amount of such
damages from any money due or to become due to the contractor as per
relevant recovery laws. The payment or deduction of such damages shall not
relieve the contractor from his obligation to complete the work or from his any
other obligation and liability under the contract.
14. Thus, the right to claim damages is with the respondents for
non-completion of the work within the stipulated time for which they are at
liberty to deduct the amount of damage from the money due to the contractor
(the petitioner herein) and as such the said action taken by the respondents
cannot be said to be beyond jurisdiction.
15. In the case of The State of Orissa Vs. Madan Gopal Rungta reported
in 1952 SCR 28, the Hon'ble Supreme Court has held as under:
"On behalf of the appellant, it was urged that
the Court had no jurisdiction to pass such
orders under Art. 226 under the circumstances
of the case. This is not a case where the Court
before finally disposing of a petition under Art.
226 gave directions in the nature of interim
relief for the purpose of maintaining the status
quo. The question which we have to determine
is whether directions in the nature of interim
relief only could be granted under Art. 226,
when the Court expressly stated that it
refrained from determining the rights of the
parties on which a writ of mandamus or
directions of a like nature could be issued. In
our opinion, Art. 226 cannot be used for the
purpose of giving interim relief as the only and
final relief on the application as the High Court
has purported to do. The directions have been
given here only to circumvent the provisions of
S.80, Civil P. C., and in our opinion that is not
within the scope of Art. 226. An interim relief
can be granted only in aid of and as ancillary
to the main relief which may be available to
the party on final determination of his rights in
a suit or proceeding. If the Court was of
opinion that there was no other convenient or
adequate remedy open to the petitioners, it
might have proceeded to investigate the case
on its merits and come to a decision as to
whether the petitioners succeeded in
establishing that there was an infringement of
any of their legal rights which entitled them to
a writ of mandamus or any other directions of
a like nature; and pending such determination
it might have made a suitable interim order for
maintaining the status quo ante. But when the
Court declined to decide on the rights of the
parties and expressly held that they should be
investigated more properly in a civil suit, it
could not, for the purpose of facilitating the
institution of such suit, issue directions in the
nature of temporary injunctions, under Art.
226 of the Constitution. In our opinion, the
language of Art. 226 does not permit such an
action. On that short ground, the judgment of
the Orissa High Court under appeal cannot be
upheld."
16. It may be thus construed that a writ petition cannot be entertained only
for granting interim relief to the petitioner. If it is found by the Court that the
nature of dispute is such that the same cannot be adjudicated by it, then any
such direction in the nature of interim relief cannot be passed. An interim relief
can be granted only in aid of and as ancillary to the main relief which may be
available to a party on final determination of his rights in a suit or proceeding.
17. This Court is of the view that since the time for completion of the said
project has already expired and there are allegations and counter allegations of
the parties against each other, no direction can be issued by this Court to
restrain the respondents from invoking the Bank Guarantees, if they choose to
do so.
18. The petitioner has heavily relied upon Clause 28.3 of the Conditions of
Contract which provides that the Engineer shall, within 14 days of receiving full
justification from the contractor for extension of intended completion date, refer
his decision to the Employer. The Employer shall, in not more than 21 days,
communicate to the Engineer the acceptance or otherwise of the Engineer's
decision. The contractor will have to extend the date of Performance Security
according to new intended completion date.
19. On going through the language of Clause 28.3, it would appear that the
same does not confer right to the petitioner for extension of time, rather it is the
respondent No.5, who is required to satisfy himself with the justification given
by the contractor (the petitioner herein) and to refer his decision to the
employer.
20. Considering the aforesaid facts and circumstances as well as keeping in
view the nature of dispute involved in the present cases, I am not inclined to
grant any relief to the petitioner under the extraordinary writ jurisdiction. The
petitioner may, however, respond to the letter dated 20.03.2021 issued by the
respondent No.5 giving appropriate explanation towards the allegation made
against it. It is clarified that the observation made by this Court in the present
order is only with respect to the petitioner's prayer to restrain the respondents
from encashing the Bank Guarantees furnished by it in lieu of the mobilization
advance, without touching the merit of the rival claims of the parties. The
petitioner, if so chooses, may approach the competent Court of civil jurisdiction
or any other redressal forum as per the stipulation made in the Bid
Documents/agreement for adjudication of its factual plea.
21. Both these writ petitions are accordingly dismissed with the aforesaid
observations.
22. Consequently, I.A No. 2004 of 2021 [W.P.(C) No. 1428 of 2021] and I.A
No. 2005 of 2021 [W.P.(C) No. 1427 of 2021] also stand dismissed.
Satish/A.F.R (RAJESH SHANKAR, J)
