Orissa High Court
M/S Mdsg Construction Pvt vs State Of Odisha & Ors on 31 January, 2023
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P (C) No.2817 of 2023
M/s MDSG Construction Pvt. ..... Petitioner
Ltd., Nuapada
Mr. P.C. Nayak, Adv.
Vs.
State of Odisha & Ors. ..... Opposite Parties
Mr. P.P. Mohanty, AGA
CORAM:
DR. JUSTICE B.R. SARANGI
MR. JUSTICE B.P. SATAPATHY
ORDER
31.01.2023
Order No. This matter is taken up through hybrid mode.
2. Heard Mr. P.C. Nayak, learned Counsel appearing for the
Petitioner and Mr. P.P. Mohanty, learned Additional Government
Advocate for the State Opposite Parties.
3. The petitioner has filed this writ petition seeking to quash
the decision making process adopted by the opposite party no.3 in
approval of recession of contract vide letter no.27914 dated
13.09.2022 under Annexure-5 in penalty clause-2(a) & 2(b)(i) of
agreement and also its subsequent orders, as the same is passed
before expiry of contract, when the project is not required to be
executed being project estimated completely altered from 150
seated Gents Hostel to 200 seated Gents Hostel and further the
same is passed behind back of the petitioner, without show cause
and without affording opportunity to the petitioner. The petitioner
further seeks to quash the office order no.358 dated 24.01.2023
passed by opposite party no.5 under Annexure-17 in demanding
the penalty amount and encasing the bank guarantee, as the same
has been passed without any show cause, without any opportunity
of hearing and violative of Article 14 of the Constitution of India.
4. Mr. P.C. Nayak, learned Counsel appearing for the
Petitioner contended that against the termination of contract vide
letter dated 13.09.2022 under Annexure-5 and imposition of
penalty vide Annexure-17 dated 24.01.2023, the Petitioner has
approached this Court by filing this Writ Petition. He contended
that the Authority has imposed such penalty without giving
opportunity of hearing to the Petitioner. Therefore, there is gross
violation of Principle of Natural Justice. In support of his
contentions, he has relied upon the Judgment of the apex Court in
Gorkha Security Services v. Government (NCT of Delhi) and
Others, (2014) 9 SCC 105.
5. Mr. P.P. Mohanty, learned Additional Government
Advocate for the State-Opposite Parties contended that if the
petitioner has not been given opportunity of hearing, as contended
by learned counsel for the Petitioner, let liberty may be granted to
the Petitioner.
6. Having heard learned Counsel for the parties and after
going through the records, it appears that the Petitioner has filed
this Writ Petition against termination of contract and imposition of
penalty, which has been done without giving him opportunity of
hearing. Therefore, there is gross violation of Principle of Natural
Justice. In Gorkha Security Services (supra), the apex Court in
paragraphs-24, 25 & 26 of the Judgment held as follows:
"24. It would be necessary to take note of the relevant
portion of Clause 27 of the NIT under which umbrage is
taken by the respondents to justify their action, and even
appealed to the High Court. Clause 27(a) reads as under:
"(a).....(sic) In case the contractor fails to
commence/excute the work as stipulated in the
agreement or unsatisfactory performance or does
not meet the statutory requirements of the contract,
Department reserves the right to impose the penalty
as detailed below:
(i) 20% of cost of order/agreement per
week, up to two weeks' delays.
(ii) After two weeks' delay principal
employer reserves the right to cancel the
contract and withhold the agreement and get
this job carried out preferably from other
contractor(s) registered with DGR and then
from open market or with other agencies if
DGR registered agencies are not in a position
to provide such contractor(s). The difference if
any will be recovered from the defaulter
contractor and also shall be blacklisted for a
period of 4 years from participating in such
type of tender and his earnest money/security
deposit may also be forfeited, if so
warranted."
25. It is clear from the reading of the aforesaid clause that
when there is a failure on the part of the contractor to
comply with the express terms of the contract and/or to
commit breach of the said terms resulting into failure to
commence / execute the work as stipulated in the agreement
or giving the performance that does not meet the statutory
requirements of the contract, the Department has a right to
impose various kinds of penalties as provided in the
aforesaid clause. These penalties are of the following nature:
(i) Penalty in the form of 20% of cost of orders
/agreement per week, up to delay of 2 weeks.
(ii) If the delay is beyond 2 weeks then:
(a) To cancel the contract and withhold the
agreement . In that event, Department has
right to get the job carried out from other
contractor at the defaulter contractor;
(b) To blacklist the defaulter contractor for a
period of 4 years ;
(c) To forfeit his earnest money/deposits, if so
warranted.
26. In the present case, it is obvious that action is taken
as provided in sub-clause (ii). Under this clause, as is clear
from the reading thereof, the Department had a right to
cancel the contract and withhold the agreement. That has
been done. The Department has also a right to get the job
which was to be carried out by the defaulting contractor, to
be carried out from other contractor(s). In such an event, the
Department also has a right to recover the difference from
the defaulting contractor. This clause, no doubt, gives further
right to the Department to blacklist the contractor for a
period of 4 years and also forfeit his earnest money/security
deposit, if so required. It is thus apparent that this sub-clause
provides for various actions which can be taken and
penalties which can be imposed by the Department. In such a
situation which action the Department proposes to take, need
to be specifically stated in the show-cause notice. It becomes
all the more important when the action of blacklisting and/or
forfeiture of earnest money/security deposit is to be taken, as
the clause stipulates that such an action can be taken, if so
warranted. The words "if so warranted", thus, assume great
significance. It would show that it is not necessary for the
Department to resort to penalty of blacklisting or forfeiture
of earnest money/security deposit in all cases, even if there is
such a power. It is left to the Department to inflict any such
penalty or not depending upon as to whether circumstances
in a particular case warrant such a penalty..."
7. In view of the above, the Annexure-5 dated 13.09.2022 and
Annexure-17 dated 24.01.2023 passed by Opposite Party Nos.3
and 5 cannot sustain in the eye of law. Therefore, the same are
liable to be quashed and are hereby quashed. The matter is
remitted back to Opposite Party No.3 to pass appropriate Order by
giving opportunity of hearing to the Petitioner in compliance of
the Principle of Natural Justice.
8. Accordingly, the Writ Petition stands disposed of.
Issue urgent certified copy as per rules.
(DR. B.R. SARANGI)
JUDGE
Ashok (B.P. SATAPATHY)
JUDGE
