Back
2013 Supreme(Pat) 1081
IN THE HIGH COURT OF JUDICATURE AT PATNA
Kishore K. Mandal, J.
J.K.M. Infra Projects Limited – Petitioners
Versus
State of Bihar through, Principal Secretary, Water Resources Department & other – Respondent
CWJC Nos. 22811 with 22823 of 2011
Decided On: 1.10.2013
For the Petitioners: Mr. Sanjeev Kumar, M/s Y.V. Giri & Ashish Giri.
For the Respondents: Mr. Ajay Bihari Sinha & Mr. S. Raza Ahmad.
The main legal point established in the judgment is that in matters involving violation of rules of natural justice and serious civil consequences, the alternative remedy would not be a bar to the exercise of jurisdiction by the court.
Headnote:
Defaulters - Contract Dispute - Clauses 3.3 and 4.8 of the Standard Bid Document (SBD) - [General Conditions of Contract (GCC), ITB, SBD] - The court discussed the violation of rules of natural justice, the power of declaring the petitioners defaulter, and the serious consequences of such action. The court highlighted the jurisdiction and compliance of principles of natural justice in contractual matters and the grave effect of an order declaring defaulter, which could impact the fundamental rights of the contractor under Article 19(1)(g) of the Constitution.
Fact of the Case:
The petitioner company was declared a defaulter and prohibited from participating in future tenders by the respondent Engineer-in-Chief, Central, Water Resources Department, Government of Bihar. The dispute arose from a contract for the execution of road construction work, where delays and issues regarding material sourcing and rates led to the default declaration.
Finding of the Court:
The court found that the impugned order declaring the petitioner as a defaulter and prohibiting participation in future tenders was violative of the rules of natural justice and had serious civil consequences. The court allowed the applications and quashed the impugned orders, directing the aggrieved party to approach the arbitrator or the Tribunal constituted by the State Government for dispute resolution.
Issues: The issues included the delay in completion of work, violation of rules of natural justice, jurisdiction of the court in contractual matters, and the impact of the order declaring the petitioner as a defaulter on the fundamental rights of the contractor.
Ratio Decidendi: The court held that in matters involving apparent breach of the rule of natural justice, the alternative remedy would not be a bar to the exercise of jurisdiction. It emphasized that the power exercised to declare the petitioners as defaulters and prohibit them from participating in future tenders went beyond the purview of the contract and had serious consequences on the contractor's fundamental rights.
Final Decision: The court allowed both applications, quashed the impugned orders, and directed the aggrieved party to approach the arbitrator or the Tribunal constituted by the State Government for resolution of the dispute.
1. Both the applications raise common issue inasmuch as they are directed against the identical order(s) passed on 11.12.2011 by the respondent Engineer-in-Chief, Central, Water Resources Department, Government of Bihar whereby it has been communicated to the petitioners that in exercise of Clauses 3.3 and 4.8 of the Standard Bid Document (SBD), the petitioners have been declared defaulters and thereby prohibited from participating in future tender(s). They have thus been heard together and are being disposed of by the present order.
2. For the sake of convenience, factual matrix shall be noticed from C.W.J.C. No. 22811 of 2011. Additional facts stated in C.W.J.C. No. 22823 of 2011, if need be, shall be noticed separately.
3. The petitioner company was selected and awarded the contract by the respondent for execution of work regarding "Raising, Strengthening and "Construction of Bituminous Road" (including reconstruction/restoration of structures) on Koshi embankment in different stretches estimated cost whereof was Rs. 1,17,35,43,672.00. Accordingly, Contract Agreement No. 01/SBD/2009-10 dated 10.11.2009 was signed between the parties. The Executive Engineer, Kanauli of the Water Resources Department at Birpur being the Nodal Officer of the Project signed on behalf of the State. The construction work was to be completed by 9.11.2011. The work involved three Executive Engineers of different/separate jurisdiction(s). Part of the work was to be done executed in tile Indian Territory. The petitioner was tagged to a quarry lying in Nepal territory for procuring construction materials. While the petitioner was continuing with the execution of work layer wise, it was noticed that one item of work i.e. Granular Sub Base (GSB) was not included in the agreement. This was necessary as per specification(s) prescribed by the Indian Road Congress. Realizing this mistake the respondent decided to provide 206 MM thick GSB below WMM layer in the construction of the road. This was communicated to the petitioner vide letter dated 12.5.2010 (Annexure-i) at least six months after the start of the work. The petitioner was verbally instructed to perform this extra item of laying GSB in the whole stretch sometimes in June, 2010. While altering the specifications and providing GSB layer before WMM, the respondent did not disclose source of obtaining GSB materials and its rate although it was incumbent upon the respondent to do so under diverse provisions of General Conditions of Contract (GCC). The respondent Chief Engineer by a communication dated 19.1.2011 (Annexure-2) apprised the petitioner to source the material for GSB from Nepal. The petitioner subsequently found that the Government of Nepal had put a ban on the export of materials for utilizing in the Indian Territory which obstructed carriage of GSB materials from Nepal. The casualty was the progress of work. A meeting between the petitioner and the officials of the Department was held on 9.4.2011 wherein it was resolved that new source of material be provided to the petitioner. The petitioner company was later assigned Sheikhpura Quarry for the GSB materials to be used in the project work lying within Indian territory. Having done so, the rates on which the materials were to be obtained from the said quarry became another issue. In carrying SBD materials from Sheikhpura quarry, the petitioner company was liable to incur extra freight charges. In the said process, execution of the work was delayed. The petitioner company apprised the respondents with the problem faced by it which was bound to delay completion of the project within time. Again a meeting was held on 1.8.2011 between the officials of the Department and the petitioner company wherein it was assured by the petitioner that the work shall now be completed by June, 2012 inasmuch as an amended work schedule was also submitted. Certain issues were thereafter raised by the petitioner which was/were acceded to by the respondent Chie
