M/S Jagdish International Pvt. ... vs Food Corporation Of India
2021 Latest Caselaw 4216 MP

    HIGH COURT OF MADHYA PRADESH : JABALPUR
                  (Division Bench)


                            W.P. No.12313/2016

                    M/s Jagdish International Pvt. Ltd.
                                    -Versus-
                 Food Corporation of India and another
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Shri Prakash Upadhyay, Advocate for the petitioner.
Shri Utkarsh Agrawal, Advocate for respondents.
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CORAM :
    Hon'ble Shri Justice Mohammad Rafiq, Chief Justice.
    Hon'ble Shri Justice Vijay Kumar Shukla, Judge.

Reserved for orders on                     :     05-8-2021
Date of pronouncement                      :     12-8-2021
Whether approved for reporting             :

           [Hearing convened through video conferencing]

                                 ORDER

(Jabalpur, dtd.12.8.2021)

Per : Vijay Kumar Shukla, J.-

In the instant petition preferred under Article 226 of the

Constitution of India, the petitioner has prayed for refund of

Rs.82,15,000/- Earnest Money Deposit (EMD), which is forfeited by

the respondents. Later on, an application for amendment was

moved by the petitioner to further challenge the orders dated 28-12-

2015 and 22-4-2016, Annexure-P/7 and Annexure-P/9 respectively,

whereby the revision/appeal filed by the petitioner under Clause 16

of the Instructions to Bidders and Terms and Conditions governing

E-auction [hereinafter referred to as "the IBT"]/Model Tender Form

(for brevity "MTF") was dismissed by the respondents.

2. The facts as have been uncurtained are that the

petitioner is a private limited company and is a general merchant

commission agent and supplier of wheat and it is based out of the

Northern region.

3. On 20-10-2015 the respondents - Food Corporation of

India (FCI), Regional Office at Bhopal, issued a tender for sale of

wheat to bulk consumers/traders under OMSS (D) through e-

auction. The petitioner submitted its bid for 5 railway rakes of

wheat from the Railway Stations, namely, (a) Narsinghpur - 1 rake

(b) Gadarwara - 1 rake (c) Kachhpura - 3 rake; and as per Clause 6

of the tender document it deposited EMD which was credited to the

designated FCI Bank account in compliance with the Clause 6(i) of

the IBT. The bid was opened and the petitioner emerged as the

highest bidder for all the five rakes and thus, it was declared to be

the successful bidder.

4. In terms Clause 11-A of the MTF the petitioner

deposited the entire bid amount with the respondents within 7

working days from the date of issuance of the acceptance letter by

the respondents-FCI. The respondents invited bid for sale of wheat

through dedicated movement laying at FCI/State agencies/depots.

The said tender was for the M.P. region on "as is where is" basis

only for bulk customers/traders of wheat already empanelled by the

FCI. The petitioner was the successful bidder and as per Clause 11-

A(viii) of the MTF, it has placed indent with the Railway within 14

working days. According to the petitioner, due to some unavoidable

circumstances the said indent was cancelled and it was re-scheduled.

Though the respondents are accepting the fact that it has not caused

any financial loss to them, but despite that they proceeded for

forfeiture of the EMD of Rs.41,07,500/- each for Kachhpura and

Gadarwara. The indent was cancelled because of the non-

availability expressed by the FCI contractor to load the railway

rakes owing to Diwali festival and in these circumstances, forfeiture

of the EMD is arbitrary.

5. As per Clause 11-A(iv) of the MTF the buyer has to

complete the lifting within a period of 14 working days from the

next date of communication of acceptance by the FCI. Clause 11-

A(v) of the MTF stipulates that after 14 working days, on the

request of buyer, the Area Manager of the FCI may allow extension

of maximum period of another 21 working days for lifting stock

from the FCI godown, on payment of storage charges at the rate of

50 paise per quintal per day, subject to total minimum of Rs.2000/-.

The sub-clauses (iv), (v) and (viii) of Clause 11-A of the MTF,

being relevant for the present purpose, are extracted hereunder :

"11. Payment of Cost & Delivery Schedule A(i). xx xx xx

(iv). The buyer shall complete the lifting within free period of fourteen (14) working days from the next date of communication of acceptance by FCI.

(v). After fourteen (14) working days, on the request of buyer, Area Manager, FCI may allow the extension for a maximum period of another twenty one (21) working days for lifting the stock from FCI godown on payment of storage charges at the rate of 50 paise per qtl. per day subject to total minimum of Rs.2000/-. These storage charges shall be recovered in respect of the unlifted quantity of stocks during the extended period (actual period for which the stocks remain in the godown). After expiry of thirty five (35) working days, no further extension will be granted and an amount equivalent to value of the unlifted quantity or amount equivalent to EMD, whichever is lower, shall be recovered/forfeited and the balance amount, if any, to be refunded to the bidder.

(vi) xx xx xx

(viii) The successful bidder has to place the indent with railways within 14 working days from the next date of issue of the acceptance by the FCI."

6. Forfeiture of the EMD has been done as per Clause

6(iii) of the MTF, which reads thus :

"6. Earnest Money Deposit (EMD) :

            (i)   xx     xx     xx
           (ii)   xx     xx     xx





             (iii) EMD furnished by the bidder shall be

forfeited, if the bidder withdraws his offer or modifies the terms and conditions thereof, or does not keep his offer open for acceptance during the validity period or resiles from the offer or fails or neglects to observe/perform any of the obligation under the contract or violates any of the terms of contract except under Clause 11A(v) and 11(A)

(ix)."

7. The petitioner after depositing the entire cost of wheat

placed four indents, i.e. three indents at Kachhpura on 02-11-2015

and one indent at Gadarwara on 03-11-2015. As per terms of the

contract the petitioner was required to pay the entire cost and place

indent within 14 days from the date of receipt of the letter by it and

hence, the petitioner has complied with the terms and conditions as

stipulated in Clause 11-A(viii) of the MTF.

8. Out of three rakes booked at Kachhpura, two rakes were

loaded on 3rd and 5th November, 2015. However, the 3rd rake from

Kachhpura and the 4th rake from Gadarwara could not be loaded on

5-11-2015. It is alleged that the FCI contractor, who was

responsible for loading the rakes, expressed his inability to load the

same due to non-availability of manpower on account of ensuing

Diwali festival. A copy of the letter written by the contractor has

been appended as Annexure-P/2 to the writ petition. It is further

asseverated that under these compelling circumstances, the

petitioner was left with no other option, but to cancel the indent of

the 3rd and 4th rakes. It informed the FCI with the request for

extension of time and also transferred the amount of rent which was

required to pay for such extension. Copies of the application and

certificate issued by the Bank for transfer of amount to the FCI on

10-11-2015, have been filed as Annexure-P/3 and Annexure-P/4.

9. It is setforth that the indent was again placed at

Gadarwara on 12-11-2015 and it was about to place the indent for

Kachhpura on 13-11-2015. However, the petitioner was informed

by communication dated 13-11-2015 by the FCI that extension of

time is not permissible, as the stipulated 14 working days have

elapsed on 10-11-2015 and the request of the petitioner for extension

of time stood rejected for Gadawara and Kachhpura.

10. According to the petitioner the aforesaid order/decision

of the respondents is contrary to Clause 11-A(v) of the MTF which

permits for another 21 working days and on payment of the

specified rent, the petitioner ought to have been permitted to lift the

stocks until 01-12-2015 and for extension of time rent in advance

was paid.

11. The petitioner has raised a grievance before the

appropriate authority designated for the said purpose under the

MTF. However, on 28-11-2015 the petitioner was informed that

because of non-compliance of the terms of the contract its EMD

amounting to Rs.82,15,000/- stood forfeited. The petitioner

preferred an appeal against the said order as per Clause 16 of the

MTF. By letter dated 26-4-2016 the petitioner was informed that the

appeal has been dismissed on the ground that it has failed to lift the

stock within the stipulated period of 14 working days. In the instant

petition, the petitioner has assailed the aforesaid orders and

forfeiture of the EMD.

12. The respondents have filed return and denied the

assertion of the petitioner that there is no loss caused to them due to

the default of the petitioner. It is putforth that the petitioner could

not place the indent with the Railways within the stipulated period

of 14 days, for one rake at Kachhpura and the other at Gadarwara

and the contention of the petitioner that it could not place the indent

for the aforesaid, due to fault of the FCI contractor, who has

informed the petitioner that due to festival of Diwali, there will be

shortage of workmen, has been negatived. It is further submitted

that on 5-11-2015 when indent was withdrawn by the petitioner on

the ground of insufficient workmen, during the same period, i.e.

from 5-11-2015 to 11-11-2015, as many as 39 rakes under the

dedicated movement were loaded from 17 different rail-heads of the

M.P. region. One rake was loaded from Kachhpura on 8-11-2015 by

the same contractor after cancellation of the petitioner's indent. The

aforesaid fact is also recorded in the orders dated 28-12-2015 and

22-4-2016. It is urged that the petitioner suo moto withdrew the

indent placed with Railway, without informing the respondents and

thereafter placed it again on 12-11-2015, i.e. after expiration of 14

days time and, therefore, there is no question of any extension, as

there was no such request by the petitioner before expiration of time

period in which the indents are placed i.e. 10-11-2015.

13. The respondents heavily relied on Clause 11(F) of the

MTF, which provides that the State Agencies shall supervise the

issue of stock from Agencies godowns, loading in trucks, transport

of stock from godown to rail-heads and loading to the rakes. Only

in cases, when State agencies do not have any transport, then the

transport is to be carried out under the supervision of the FCI. It is

urged that there was no communication made to the answering

respondents by the petitioner as regards incapacity of transport.

Therefore, the stand of the petitioner in this regard is nothing but an

afterthought. It is argued that there is clear violation of Clause 11-

A(iii) of the IBT/MTF and in terms of Clause 6(iii) of the MTF the

petitioner's EMD was rightly forfeited and the authorities have

rightly rejected the representation of the petitioner made in that

behalf.

14. The petitioner has filed rejoinder to the return filed by

the respondents contending, inter alia, that the petitioner has paid

full price of all 5 railway rakes of wheat, i.e. Rs.20,53,75,000/-

within 7 working days, as per Clause 11-A of the MTF. Railway

indent of all five rakes were placed within the stipulated period of

14 days as per Clause 11-A(viii) of the MTF and three rakes of

wheat was successfully lifted. However, railway indent for two

rakes was withdrawn by the petitioner and it was placed again after

Diwali with the request to extend lifting schedule for 4 days and

deposited rent for storage, i.e. Rs.53000/- and Rs.66250/-

respectively for un-lifted quantity. The permission was denied, the

order was cancelled, and the amount deposited by the petitioner was

refunded after deducting the EMD for un-lifted quantity which

comes to Rs.82,15,000/-.

15. It is setforth that the respondents have adopted hyper-

technical approach and they are undue enriching themselves by

forfeiting the amount of Rs.82,15,000/- from the EMD of the

petitioner. It is put forth that in certain cases, under similar

circumstances, the respondents have taken lenient view and

forfeiture of EMD was considered to be harsh and direction was

issued for refund of the same.

16. The respondents have filed additional return and

reiterated that it was the fault of the petitioner that it could not place

indent with Railways within the stipulated period of 14 days and

refuted that because of the fault of the FCI contractor, the petitioner

could not lift the quantity within the stipulated time. It is

strenuously urged that when the indent was withdrawn by the

petitioner on the ground of insufficient manpower, during the same

period, i.e. from 05-11-2015 to 11-11-2015, as many as 39 rakes

under the dedicated movement were loaded from 17 different rail-

heads of M.P. Region. One rake was loaded from Kachhpura on 8-

11-2015 by the same contractor after cancellation of the petitioner's

indent. Thus, it is vehemently urged that there is no force in the

submission of the learned counsel for the petitioner that it is the fault

of the respondents/FCI. The petitioner was not given extension in

terms of Clause 11-A(v) of the MTF. The petitioner itself withdrew

the indent placed with the Railways without informing the

respondents and thereafter placed it again on 12-11-2015 after

expiration of 14 days. There is no question of any extension, as

there was no such request by the petitioner before expiry of the

stipulated period in which the indents are placed, i.e. before 10-11-

2015.

17. According to the respondents there was clear violation

of Clause 11-A(viii) of the MTF by the petitioner and hence, in

terms of Clause 6(iii) of the MTF the EMD of the petitioner was

rightly forfeited.

18. We have heard the learned counsel for the parties and

bestowed our anxious consideration on the rival submissions raised

at the Bar.

19. On 20-10-2015 the respondents/FCI issued a tender for

sale of wheat to bulk consumers in which the petitioner has also

submitted its bid. The petitioner has purchased 5 railway rakes of

wheat, which comes around 13250 Metric Tonnes. On 23-10-2015 a

communication was issued to the petitioner for payment of balance

amount and lifting of foodgrains from the Warehouse of the FCI

situated at Narsinghpur, Gadarwara and Kachhpura (railway siding).

As per IBT/MTF the petitioner was also asked to deposit remaining

price of wheat purchase within 7 days. Between the period 23-10-

2015 to 06-11-2015 as per Clause 11-A(ii) of the MTF the petitioner

has deposited the cost of foodgrain/wheat which was about

Rs.20,53,75,000/-, within stipulated time and also placed railway

indent for all five rakes of purchased wheat, as per Clause 11-A(vii)

of the MTF. Three rakes of wheat were also lifted between 4-11-

2015 to 6-11-2015. On 10-11-2015 the two rakes of wheat could not

be lifted within free period of 14 days, due to non-availability of

manpower owing to Diwali festival. Thus, on 5-11-2015 the

railways indent for two rakes were cancelled by the petitioner and

on 10-11-2015 the sum of Rs.53000/- and Rs.66200/- was deposited

in the account of the FCI as warehousing rent, with the intend to

take benefit of Clause 11-A(v) of the MTF and seek extension for

lifting of foodgrain/wheat.

20. On 12-11-2015 the petitioner has placed fresh railway

indent for two rakes, in order to initiate lifting of remaining quantity.

On 13-11-2015 an application was made for extension of time for

the period of another 4 days as per Clause 11-A(v) of the MTF. The

said application was dismissed on the same day. The sole reason for

denial is that the petitioner failed to make railway indent within 14

working days. The impugned order has been passed for forfeiture of

the EMD as per Clause 6(iii) of the IBT/MTF. The petitioner has

preferred an appeal as per Clause 16 of the MTF whereby even

though the Grievance Redressal Committee (GRC) of the

respondents/FCI has also neither doubted bonafide of the petitioner

nor any loss has been caused to them due to the said delay, but has

taken a hyper-technical approach that the petitioner has cancelled

two railway indents without informing the FCI. The first

submission of the learned counsel for the petitioner that withdrawal

of railway indent is not withdrawal of offer and, therefore, the

respondents could not have attracted the consequence of Clause

6(iii) of the MTF. For the aforesaid submissions, the following

facts emerge for consideration in the present case :

(i) The petitioner has never shown either from its conduct or otherwise that it has any intention to withdraw from its offer. It paid full price of purchased foodgrain/wheat and has already completed the transaction of sale and has fully complied with other conditions.

(ii) The following conduct of the petitioner has shown its willingness to comply with all terms and conditions of the contract :

(a) The price of wheat was deposited within a period of 7 days, as required under Clause-11A(ii) of the MTF;

(b) Railway indent for all five rakes was placed within the stipulated period of 14 days as per Clause 11-A(viii) of the MTF. The petitioner has also successfully lifted three rakes load of foodgrain/wheat and hence, subsequent cancellation of railway indent for two rakes on 5 th November and again placing it on 12th November, would not constitute any violation of the condition of the MTF.

(iii) Clauses 11-A(iv) to (ix) are required to be read harmoniously and they cannot be read in isolation.

(iv) The application for extension was rejected taking aid of Clause 11-A (viii) of the MTF on the ground that railway indent was not placed for these two rakes within 14 days. However, the clause relating to extension of time, neither stipulates that railway indents were to be placed within a period of 14 days, nor the bidder was required to make an application for extension before expiry of free period of 14 days.

(v) The bonafide of the petitioner is clear from the fact that along with an application for extension of time, the petitioner has also transferred warehouse charges for un-lifted quantity of foodgrain/wheat. The respondents rejected the application for extension of time arbitrarily.

21. We are not inclined to accept the argument advanced by

the learned counsel for the respondents that the present petition

involves disputed question of facts. The clauses of the IBT/MTF

have to be interpreted harmoniously and liberal interpretation has to

be given, for the reasons as have been discussed hereinabove.

22. We are of the considered view, that the act of the

respondents in rejecting the application for extension of time suffers

from arbitrariness, because of the following reasons :

(I) The petitioner was a successful bidder for five railway rakes of wheat. It has paid full price of all five rakes of wheat, i.e. Rs.20,53,75,000/- within 7 working days, as per Clause 11-A of the IBT.

(II) Railway indent of all five rakes were placed within a period of 14 days, as stipulated in Clause 11-A of the MTF and three rakes of wheat was successfully lifted. However, the railway indent for two rakes was withdrawn by the petitioner and it was again placed after Diwali with the request to extend the lifting schedule for 4 days and it deposited rent of storage, i.e. Rs.53000/- and Rs.66,200/- respectively for the un-lifted quantity.

(III) The respondents have adopted literal and strict interpretation of Clause 11-A(viii) of the MTF. Whereas the petitioner has taken recourse to Clause 11-A(v) of the MTF.

(IV) The explanation furnished by the petitioner for withdrawal of railway indent is not very much material, as it is an admitted position on record that the railway indent of all five rakes were placed within the stipulated period of 14 working days, however, two rakes indent was withdrawn and intended to be placed after 3-4 days, taking aid of Clause 11- A(v) of the MTF. Thus, the respondents have adopted hyper- technical approach by forfeiting the amount of Rs.82,15,000/- from the EMD of the petitioner.

23. In view of our preceding analysis, we are of the

considered view that the petitioner has deposited entire cost of

13250 Metric Tonnes of foodgrain/wheat amounting to

Rs.20,53,75,000/-. However, the petitioner could not lift the

contracted quantity of wheat within 14 days, but lifted the same

within 4 days, after 14 days available to the petitioner. For default of

4 days on the part of the petitioner, forfeiture of the EMD of

Rs.41,07,500/- each, in respect of Kachhpura and Gadarwara centres

is harsh and unreasonable.

24. We are not oblivious of the scope of interference in

contractual matters under Article 226 of the Constitution of India.

The enunciation of law made by the Apex Court in the cases of Tata

Celular vs. Union of India, (1994) 6 SCC 651; A.B.L.

International Ltd. and another vs. Export Credit Guarantee

Corporation of India Ltd. and others, (2004) 3 SCC 553; and

Noble Resources Ltd. vs. State of Orissa and another, (2006) 10

SCC 236 are taken note of. The Apex Court after surveying its

various judgments dealing with different situations/aspects relating

to contract entered into by the State/public authority with private

parties ruled that there is no absolute bar to the maintainability of

the writ petition, even in the contractual matters. At this juncture, it

is profitable to reproduce para 15 of the judgment rendered in the

case of Noble Resources Ltd. (supra) :

"15. It is trite that if an action on the part of the State is violative of the equality clause contained in Article 14 of the Constitution of India, a writ petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a contract and a breach of contract; whereas in the former the court's scrutiny would be more intrusive, in the latter the Court may not ordinarily exercise its discretionary jurisdiction of judicial review, unless it

is found to be violative of Article 14 of the Constitution. While exercising contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on their part. Indisputably, inherent limitations exist, but it would be correct to opine that under no circumstances a writ will lie only because it involves a contractual matter."

25. In view of the aforesaid enunciation of law and taking

into consideration the facts and circumstances of the case in proper

perspective and the documents brought on record and the reasoning

ascribed hereinabove, the impugned orders passed by the

respondents rejecting the application moved by the petitioner for

extension of time and forfeiture of the EMD, suffer from vice of

arbitrariness. Hence, we quash the impugned orders dated 28-12-

2015 and 22-4-2016 contained in Annexure-P/7 and Annexure-P/9

respectively, and direct the respondents to refund the EMD of the

petitioner accruing prevalent interest thereon, within a period of 60

days from today.

26. Ex-consequenti, the writ petition is allowed. No order

as to costs.

      (Mohammad Rafiq)                                     (Vijay Kumar Shukla)
        Chief Justice                                             Judge

ac.

  Digitally signed by AJAY KUMAR CHATURVEDI
  Date: 2021.08.12 17:17:42 +05'30'