[Cites 9, Cited by 0]
Orissa High Court
M/S. Jalaram Transport vs Mahanadi Coalfields Limited And .... ... on 4 February, 2026
Author: Murahari Sri Raman
Bench: Murahari Sri Raman
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.37718 of 2023
M/s. Jalaram Transport .... Petitioner
-Versus-
Mahanadi Coalfields Limited and .... Opposite Parties
others
Advocates appeared in this case:
For Petitioner : Mr. Avijit Patnaik, Advocate
For Opp. Parties : Mr. Haripad Mohanty, Advocate
CORAM:
HON'BLE THE CHIEF JUSTICE
AND
HON'BLE MR. JUSTICE MURAHARI SRI RAMAN
JUDGMENT
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Date of Hearing : 12th November, 2025
Date of Judgment : 04th February, 2026
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HARISH TANDON, CJ.
1. The petitioner challenges the notice of demand dated 12th
November, 2023 issued by opposite parties-MCL to recover a sum
of Rs.9,15,980.70 from the running contract of the petitioner under
NIT-843 dated 25th February, 2022 of Ananta OCP, Jagannath Area
on account of penalty.
2. A prelude to the litigation is required to be adumbrated to
consider the points raised in the instant litigation. The Notice
Inviting Tender (NIT) was floated on 20th March, 2012 for
transportation of crushed coal by tippers from feeder breaker of
Jagannath colliery to siding I, III and IV of Jagannath Area for a
total quantity of 38 lakh Tes. The petitioner was adjudged as the
successful bidder and deposited the bank guarantee as earnest
money and two further guarantees towards the performance security
and the security deposit with opposite party No.1. The period of
completion of the entire work was fixed for 365 days. Pursuant to
the said NIT and the petitioner having adjudged as a successful
bidder, the letter of acceptance was issued on 13th June, 2012
followed by a work order dated 21st June, 2012. The date of
completion of work was fixed at 3rd July, 2013, which according to
the petitioner was duly executed and the payments were released
from time to time except a paltry sum of Rs.3,28,398/-.
2.1. It is stated in the petition that after a lapse of ten years, the
impugned demand is raised without assigning any reason therefor,
nor adhering to the principle of natural justice. It is averred in the
writ petition that Clause 6.2 of the General Terms and Conditions
(GTC) of the Contract clearly provides that the penalties shall be
calculated on a monthly basis and in order to give an opportunity to
the contractor to make up the shortfall in succeeding three months
within the stipulated time of completion and on fulfilling the said
shortfall, the said penalty shall be released. On the basis of the said
Clause, it is a specific case of the petitioner that once the entire
amount has been released except the said paltry sum, the imposition
of penalty after a gap of ten years is whimsical, arbitrary and also in
violation of the terms and conditions embodied in the contract.
2.2. On the other hand, the opposite parties took a stand that the
petitioner failed to comply the safety terms and conditions of the
contract and also to deploy those tippers which have a requisite
safety features. A notice was issued to the petitioner on 9th October,
2012 with an advice to deploy those tippers which have safety
features, but the same was challenged by the petitioner in W.P.(C)
No.20844 of 2012 before this Court. In the said writ petition, the
petitioner challenged sub-clause (1) (i) (vi) and (xviii) of Clause-
39.00 as illegal and inoperative. The interim order was passed in the
said petition until 12th April, 2019 when the petitioner withdrew the
same. It is averred in the counter affidavit that because of the interim
order being operative, no further steps could be taken. Responding
to Clause 6.2 of the GTC, it is averred that the hindrance register
maintained jointly by the management and the contractor would
indicate not only the daily progress, but the shortfall, if any, and,
therefore, imposition of penalty for such shortfall in terms of the
said Clause cannot be said to be perverse and illegal. Lastly, it is
averred that since the petitioner is also awarded other contract, the
said amount can be recovered from the RA bills which in fact has
been indicated in the impugned letter.
3. While admitting the instant writ petition, an interim order
was passed on 12th February, 2024 restraining the opposite parties
from making any further recovery from the petitioner's account on
the basis of the said impugned demand notice.
4. Mr. Avijit Patnaik, learned counsel for the petitioner has
submitted that the impugned demand notice dated 12th November,
2023 is bad, infirm and illegal as no opportunity of hearing was
given to the petitioner before imposition of penalty. It is further
submitted that in terms of Clause 6.2 of the GTC, the penalty shall
be calculated on a monthly basis and can only be withheld for the
limited purpose of giving an opportunity to the contractor to make
up the shortfall within three months and, therefore, after the release
of all the payments including the bank guarantees, such
imposition/demand is per se beyond the terms and conditions of the
contract. It is further submitted that once the work has already been
completed and the bills raised by the petitioner were paid up, the
imposition of penalty after a gap of ten years is not only imaginary,
but otherwise not sustainable in law. The reliance is placed upon a
judgment of the apex Court in case of M.P. Power Management
Company Limited v. Sky Power Southeast Solar India Private
Limited, (2023) 2 SCC 703 that there is no absolute fetter on the
part of the writ Court to interfere in a contractual field, if the action
or inaction of the authority is perceived from the contract and such
decision is per se arbitrary. Learned counsel for the petitioner has
further relied upon a judgment of the apex Court rendered in case of
Mohinder Singh Gill v. The Chief Election Commissioner, New
Delhi, (1978) 1 SCC 405 in support of the contention that the party
shall not be permitted to take a new plea in the litigation, if such
plea is not reflected in the impugned decision of the authority.
5. Per contra, Mr. Haripad Mohanty, learned counsel for
opposite parties-MCL has vociferously submitted that the delay in
raising a demand was because of an intervening interim order passed
in the earlier writ petition filed by the petitioner and, therefore, it
cannot be said that there is unexplained delay in imposing the
penalty. It is further submitted that since the entire work could not
be completed, the time was extended which was duly rectified by
the petitioner that it will not charge any escalation of price which
shows that the petitioner did not complete the work within the time
frame. It is, thus, submitted that after withdrawal of the said writ
petition, the penalty was calculated on the basis of a hindrance
register and a decision is taken to recover the said amount from the
other contract awarded to the petitioner.
6. On the conspectus of the aforesaid rival stands taken by the
parties, the question we frame for consideration is whether the
impugned demand notice issued after a lapse of a decade can be said
to be perverse, arbitrary and illegal being not in consonance with the
terms and conditions of the contract.
7. It is not in dispute that the tender was floated for
transportation of crushed coal by tippers from the feeder breaker of
Jagannath colliery to the different sidings in a time bound manner.
The agreement was executed between the parties which undeniably
includes a GTC as a part of the contract and, there is no incongruity
in perceiving the terms and conditions embodied therein having its
applicability and binding on the parties. Clause-6.2 of the GTC,
which has been heavily relied upon by the petitioner postulates as
under:
"6.2 In the event of the contractor's failure to comply
with the required progress in terms of the agreed time
and progress chart or to complete the work and clear the
site on or before the date of completion of contract or the
extended date of completion, he shall without prejudice to
any other right or remedy available under the law to the
company on account of such breach, shall become liable
to pay for penalty as under:
a) If the average daily progress of work during the
calendar month is less than the stipulated rate indicated
in the detailed tender notice, penalty as detailed below
will be levied.
i) If the average daily progress of work executed during
the calendar month is more than 80% and less than 100%
of stipulated rate of progress, penalty equal to 10% of the
contract value of the shortfall in work shall be levied.
ii) If the average daily progress of work executed during
the calendar month is less than 80% of stipulated rate,
penalty equal to 20% of contract value of the shortfall in
work shall be levied.
iii) The aggregate of the penalties so levied shall not
exceed 20% of the total contract value.
Penalties will be calculated every month and withheld.
The contractor shall be allowed to make up the shortfall
in the succeeding three months within the stipulated time
of completion. Once the shortfall is fully made up the so
withheld penalty will be released.
b) The defaulters i.e. the Contractors who do not
commence the work after issue of LOA shall not be
allowed to participate in the re-tendering for the same
work."
8. A bare look of the above quoted Clause leaves no ambiguity
that in the event of a failure on the part of the contractor to meet the
required progress within the stipulated time shall become liable to
pay further penalty. The incidence is also jotted down therein in the
sub-clause appended thereto and, therefore, the penalty can only be
imposed in the event no incidences are patent and apparent on the
face of the record. It further provides that in the event any shortfall
is noticed in a month, an opportunity should be given to the
contractor to make up the shortfall in succeeding three months and
in the event the contractor fulfils such obligations, penalty so
withheld shall be released.
8.1. It would not be incongruous in perceiving the intention of
the contracting parties from the above Clause that the shortfall must
be communicated to the contractor on a monthly basis and an
opportunity should be given to make up such shortfall in the
succeeding three months. The said agreement further provides for
maintenance of the hindrance register jointly at the site which is
found during the course of an execution, giving further opportunity
to the contractor to make good the delay by putting his endeavors
constantly to the satisfaction of the Engineer-in-Charge. Though
Clause 8.8 of the GTC bestowed power upon the opposite parties to
recover and enforce the recovery of any over-payments detected
after the payments as a result of a post payment audit or the
technical examination or by any other means, but such Clause has to
be read conjointly and in relation to Clause 6.2 of the said GTC.
8.2. Though the nature of the interim order passed in an earlier
writ petition is not lucidly and/or explicitly disclosed by both the
parties, but from the nature of the reliefs claimed therein, it does not
appear to us that there was any interdiction in ascertaining the
shortfall leading to the imposition of the penalty. Even the stand of
the opposite parties-MCL cannot be accepted for the reason that
once the said writ petition was withdrawn in the year 2019, yet there
was a complete silence for a considerable period and the demand
was issued after a lapse of more than three years. The record would
reveal that the hindrance register was prepared in the year 2022
though Clause 6.2 postulates the same to be maintained on a
monthly basis and an opportunity should be given to the
contractor/transporter to make up the shortfall within three months
succeeding such perceived shortfall.
8.3. There is no iota piece of paper produced by either parties
that any shortfall on a monthly basis was ever communicated to the
petitioner and opportunity was given to make up the said shortfall
within the succeeding three months period. It is no longer res
integra that the parties to the contract are bound by the terms and
conditions thereof. In the event, it is aggrieved by the parties that the
shortfall should be detected on a monthly basis and an opportunity is
to be given to make up the said shortfall within the stipulated time, it
is unjust that one of the contracting parties would raise a demand
de hors the said Clause. A plea of demur was taken that the writ
petition raising an issue in relation to a contract is not maintainable
which does not appear to be an absolute fetter in view of the
judgment rendered by the apex Court in M.P. Power Management
Company Limited (supra) in the following:
"82. We may cull out our conclusions in regard to the
points, which we have framed:
82.1. It is, undoubtedly, true that the writ jurisdiction is a
public law remedy. A matter, which lies entirely within a
private realm of affairs of public body, may not lend itself
for being dealt with under the writ jurisdiction of the
Court.
82.2. The principle laid down in Bareilly Development
Authority [Bareilly Development Authority v. Ajai Pal
Singh, (1989) 2 SCC 116] that in the case of a non-
statutory contract the rights are governed only by the
terms of the contract and the decisions, which are
purported to be followed, including Radhakrishna
Agarwal [Radhakrishna Agarwal v. State of Bihar,
(1977) 3 SCC 457] , may not continue to hold good, in
the light of what has been laid down in ABL [ABL
International Ltd. v. Export Credit Guarantee Corpn. of
India Ltd., (2004) 3 SCC 553] and as followed in the
recent judgment in Sudhir Kumar Singh [State of
U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 : 2020
SCC OnLine SC 847] .
82.3. The mere fact that relief is sought under a contract
which is not statutory, will not entitle the respondent
State in a case by itself to ward off scrutiny of its action
or inaction under the contract, if the complaining party is
able to establish that the action/inaction is, per se,
arbitrary.
82.4. An action will lie, undoubtedly, when the State
purports to award any largesse and, undoubtedly, this
relates to the stage prior to the contract being entered
into (see Ramana Dayaram Shetty [Ramana Dayaram
Shetty v. International Airport Authority of India, (1979)
3 SCC 489] ). This scrutiny, no doubt, would be
undertaken within the nature of the judicial review, which
has been declared in the decision in Tata
Cellular v. Union of India [Tata Cellular v. Union of
India, (1994) 6 SCC 651] .
82.5. After the contract is entered into, there can be a
variety of circumstances, which may provide a cause of
action to a party to the contract with the State, to seek
relief by filing a writ petition.
82.6. Without intending to be exhaustive, it may include
the relief of seeking payment of amounts due to the
aggrieved party from the State. The State can, indeed, be
called upon to honour its obligations of making payment,
unless it be that there is a serious and genuine dispute
raised relating to the liability of the State to make the
payment. Such dispute, ordinarily, would include the
contention that the aggrieved party has not fulfilled its
obligations and the Court finds that such a contention by
the State is not a mere ruse or a pretence.
82.7. The existence of an alternate remedy, is,
undoubtedly, a matter to be borne in mind in declining
relief in a writ petition in a contractual matter. Again, the
question as to whether the writ petitioner must be told off
the gates, would depend upon the nature of the claim and
relief sought by the petitioner, the questions, which would
have to be decided, and, most importantly, whether there
are disputed questions of fact, resolution of which is
necessary, as an indispensable prelude to the grant of the
relief sought. Undoubtedly, while there is no prohibition,
in the writ court even deciding disputed questions of fact,
particularly when the dispute surrounds demystifying of
documents only, the Court may relegate the party to the
remedy by way of a civil suit.
82.8. The existence of a provision for arbitration, which
is a forum intended to quicken the pace of dispute
resolution, is viewed as a near bar to the entertainment of
a writ petition [see in this regard, the view of this Court
even in ABL [ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553]
explaining how it distinguished the decision of this Court
in State of U.P. v. Bridge & Roof Co. (India) Ltd. [State
of U.P. v. Bridge & Roof Co. (India) Ltd., (1996) 6 SCC
22] , by its observations in SCC para 14 in ABL [ABL
International Ltd. v. Export Credit Guarantee Corpn. of
India Ltd., (2004) 3 SCC 553] ].
82.9. The need to deal with disputed questions of fact,
cannot be made a smokescreen to guillotine a genuine
claim raised in a writ petition, when actually the
resolution of a disputed question of fact is unnecessary to
grant relief to a writ applicant.
82.10. The reach of Article 14 enables a writ court to
deal with arbitrary State action even after a contract is
entered into by the State. A wide variety of circumstances
can generate causes of action for invoking Article 14. The
Court's approach in dealing with the same, would be
guided by, undoubtedly, the overwhelming need to
obviate arbitrary State action, in cases where the writ
remedy provides an effective and fair means of preventing
miscarriage of justice arising from palpably
unreasonable action by the State.
82.11. Termination of contract can again arise in a wide
variety of situations. If for instance, a contract is
terminated, by a person, who is demonstrated, without
any need for any argument, to be the person, who is
completely unauthorised to cancel the contract, there may
not be any necessity to drive the party to the unnecessary
ordeal of a prolix and avoidable round of litigation. The
intervention by the High Court, in such a case, where
there is no dispute to be resolved, would also be
conducive in public interest, apart from ensuring the
fundamental right of the petitioner under Article 14 of the
Constitution of India. When it comes to a challenge to the
termination of a contract by the State, which is a non-
statutory body, which is acting in purported exercise of
the powers/rights under such a contract, it would be over
simplifying a complex issue to lay down any inflexible
rule in favour of the Court turning away the petitioner to
alternate fora. Ordinarily, the cases of termination of
contract by the State, acting within its contractual
domain, may not lend itself for appropriate redress by the
writ court. This is, undoubtedly, so if the Court is duty-
bound to arrive at findings, which involve untying knots,
which are presented by disputed questions of facts.
Undoubtedly, in view of ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd.,
(2004) 3 SCC 553] , if resolving the dispute, in a case of
repudiation of a contract, involves only appreciating the
true scope of documentary material in the light of
pleadings, the Court may still grant relief to an applicant.
We must enter a caveat. The Courts are today reeling
under the weight of a docket explosion, which is truly
alarming. If a case involves a large body of documents
and the Court is called upon to enter upon findings of
facts and involves merely the construction of the
document, it may not be an unsound discretion to relegate
the party to the alternate remedy. This is not to deprive
the Court of its constitutional power as laid down
in ABL [ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553] . It
all depends upon the facts of each case as to whether,
having regard to the scope of the dispute to be resolved,
whether the Court will still entertain the petition.
82.12. In a case the State is a party to the contract and a
breach of a contract is alleged against the State, a civil
action in the appropriate forum is, undoubtedly,
maintainable. But this is not the end of the matter. Having
regard to the position of the State and its duty to act fairly
and to eschew arbitrariness in all its actions, resort to the
constitutional remedy on the cause of action, that the
action is arbitrary, is permissible (see in this
regard Shrilekha Vidyarthi v. State of U.P. [Shrilekha
Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC
(L&S) 742] ). However, it must be made clear that every
case involving breach of contract by the State, cannot be
dressed up and disguised as a case of arbitrary State
action. While the concept of an arbitrary action or
inaction cannot be cribbed or confined to any immutable
mantra, and must be laid bare, with reference to the facts
of each case, it cannot be a mere allegation of breach of
contract that would suffice. What must be involved in the
case must be action/inaction, which must be palpably
unreasonable or absolutely irrational and bereft of any
principle. An action, which is completely mala fide, can
hardly be described as a fair action and may, depending
on the facts, amount to arbitrary action. The question
must be posed and answered by the Court and all we
intend to lay down is that there is a discretion available
to the Court to grant relief in appropriate cases.
82.13. A lodestar, which may illumine the path of the
Court, would be the dimension of public interest
subserved by the Court interfering in the matter, rather
than relegating the matter to the alternate forum.
82.14. Another relevant criteria is, if the Court has
entertained the matter, then, while it is not tabooed that
the Court should not relegate the party at a later stage,
ordinarily, it would be a germane consideration, which
may persuade the Court to complete what it had started,
provided it is otherwise a sound exercise of jurisdiction to
decide the matter on merits in the writ petition itself.
82.15. Violation of natural justice has been recognised as
a ground signifying the presence of a public law element
and can found a cause of action premised on breach of
Article 14. (See Sudhir Kumar Singh [State of
U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 : 2020
SCC OnLine SC 847] )."
8.4. Apart from the same, we notice that the impugned demand
does not reflect any grounds while imposing the penalty except the
shortfall amount required to be recovered. It has been highlighted in
the constitution Bench decision rendered in Mohinder Singh Gill
(supra) that it is not open to the authorities to take a different route,
to what has not been taken in the administrative order nor can be
improved by filing a counter affidavit before Court. The authority
cannot wriggle out of the grounds taken in the impugned action and
ultimately taking a different route to justify such action was
deprecated.
9. In view of the facts as discussed above, we do not find any
justification in the action of the authorities in imposing the penalty
and demanding the recovery thereof from the different contracts.
The same is hereby quashed and set aside. The authorities are
directed to release the retention money within six weeks from the
date of the communication of this order, to the petitioner.
10. The writ petition is, thus, disposed of.
I agree.
(Murahari Sri Raman) (Harish Tandon)
Judge Chief Justice
S.K. Guin/PA
Location: High Court of Orissa, Cuttack
Date: 05-Feb-2026 13:37:43
