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2021 Supreme(AP) 309
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
R. Raghunandan Rao, J.
M/s. Century Pharmalabs India Pvt. Litd. – Petitioner
Versus
The State of Andhra Pradesh, rep. by its Principal Secretary, Health, Medical and Family Welfare Department and ors. – Respondents
W.P.No.7729 of 2019
Decided On : 02-11-2021
Advocate Appeared:
For the Petitioner: Sri P. Roy Reddy
For the Respondent:G.P. for Medical Health & Welfare Addl. Advocate General
Point of Law : If there is a case of economic duress made out against a contract or undertaking given by the weaker party, such an agreement or undertaking can be disregarded.
Headnote:
Indian Contract Act - Section 73 - Tender - Agreement - Forfeited amounts - Petitioner used to supply pharmaceutical products as per indent and demand of second respondent - But, according to petitioner, due to placement of orders by the 2nd respondent over and above quantities mentioned in tender notification to tune of 200% to 400%, there were delays in supply of medicines - For delayed supplies, 2nd respondent imposed penalty at rate of 0.5% of value of goods not supplied, for each delay up to a maximum period of 15 days, and 1% per day thereafter and deducted penalties from running bills of petitioner - Being a small scale industry and MSME Unit, petitioner submitted its representation to 2nd respondent for waiver of all penalties and refund of forfeited amounts - Whether petitioner would be entitled for refund of any amount deducted over and above 5% of contract value in relation to purchase orders.
Finding of the court : Petitioner, which is a small scale unit, cannot obviously take on 2nd Respondent which is one of primary sources of business and income to Petitioner - Only option available to petitioner is to sign on dotted line failing which it was in danger of losing desperately needed funds and also all future business from one of it's main sources of business - Petitioner is entitled to recover excess liquidated damages levied on Petitioner, as long as Memo dated remains undisturbed and in view of said memo, 2nd Respondent cannot rely on decision of Managing committee of 2nd Respondent held to reject claim of Petitioner
Result : Writ petition is disposed of
ORDER :
1. The petitioner is a small scale industry and MSME Unit, engaged in manufacturing, export and supply of pharmaceutical products. The Petitioner was one of the successful tenderers in the tender issued by the 2nd Respondent, as the implementing agency of the 1st Respondent, vide ‘E’ tender notification vide tender notice No.2/APMSIDC/Medicines/2015-17, dated 12.10.2015 for supply of general medicines to its 13 central Medicines Stores. Consequently, an agreement dated 16.04.2016 was executed between the petitioner and the 2nd Respondent. The provisions of the Tender and the consequent agreement, relevant to the present case, are clause 21 of the tender and Clause 3 of the agreement which read as under:
Clause 21 of the Tender
“The supply should be started within 45 days and should be completed within 75 days from the date of receipt of purchase order in phased manner. If no supply is received even after 75 days of receipt of the purchase orders from the supplier, the MD, APMSIDC is authorised to impose a penalty at the rate of 0.5% of the value of goods not supplied will be levied for each day delayed up to a maximum period of 15 days.”
Clause 3 of the Agreement
Penalty charges for delayed supply of drugs:
1. 75 days from the date of issue of PO. – No penalty.
2. For the next 15 days i.e. 76th day to 90th day – 0.5% per day of the value of drugs received during this period.
3. The Managing Director, APMSIDC at his discretion may extend the time period 90 days on the request of the firm in writing at a penalty of 1% of the value of the drugs supplied beyond 90 days for each day of delay or part there of up to 120 days.”
2. The Petitioner used to supply the pharmaceutical products as per the indent and demand of the second respondent. But, according to the petitioner, due to the placement of orders by the 2nd respondent over and above the quantities mentioned in the tender notification to the tune of 200% to 400%, there were delays in the supply of medicines. For the delayed supplies, the 2nd respondent imposed penalty at the rate of 0.5% of the value of the goods not supplied, for each delay up to a maximum period of 15 days, and 1% per day thereafter and deducted the penalties from the running bills of the petitioner. Being a small scale industry and MSME Unit, the petitioner submitted its representation on 02.08.2017 to the 2nd respondent for waiver of all the penalties and refund of the forfeited amounts.
3. In a related development, various pulverising barytes units had sought waiver of certain liquidated damages from M/s. A.P. Mineral Development Corporation Limited. This request had been forwarded to the Government, which had issued G.O.Ms.No.169 dated 02.12.2016. In this G.O. the Government had accorded approval to the proposal of M/s. A.P. Mineral Development Corporation Limited, to cap levy of liquidated damages to 5% of the shortfall of quantity supplied to the Corporation. Subsequently, two companies, which are similarly situated to the petitioner, had submitted representations to the 2nd respondent, who forwarded the said representations to the Government along with the recommendation made by the Managing Committee of the 2nd respondent in its 77th meeting held on 11.04.2018 resolving to restrict the total deduction towards liquidated damages to 5% of the contract value, of the delayed supplies, in line with the concessions given under G.O.Ms.No.169 dated 02.12.2016, to support SSI Units, which are facing difficulties. This recommendation was accepted by the Government which issued Memo No.42/H2/2018-1, dated 04.05.2018 according permission to the Managing Director of the 2nd respondent to restrict the total deduction of liquidated damages to 5% of the contract value. In view of this Memo, units such as the petitioner were entitled to seek refund of all those amounts which had been deducted in excess of 5% of the contract value. On that basis, the petitioner has approached this Court claiming that its representation
