IN THE HIGH COURT OF JUDICATURE AT PATNA
VIKASH JAIN, J.
CWJC No. 7977 of 2020
(26.10.2021)
M/s M.K. Gupta & Company ... Petitioner
vs.
Union of India & Ors. ... Respondents
Government Contract – Work Contract – Imposition of penalty by way of liquidated damages for extension of time – Petitioner with bona fide intention of completing as much of project as possible, assumed monetary risk and carried out minor work of protective nature – There was nationwide lockdown from 24.03.2020 due to COVID-19 pandemic – Force Majeure Clause prohibits a party from making claim for damages against other party in respect of non-performance or delay in performance of work – Respondents have not come up with any satisfactory reasons in order to justify imposition of liquidated damages for extension of time or why petitioner has been denied benefit of Force Majeure Clause – Authorities have arbitrarily and unjustifiably imposed liquidated damages upon petitioner which cannot be sustained – Impugned order set aside and petitioner shall be entitled to all consequential benefits. (Paras 8 to 12)
Vikash Jain, J.—Heard learned counsel for the petitioner and counsel for the respondents. Learned counsel for the petitioner has filed an undertaking to remove all defects pointed out by the Stamp Reporter as and when required. It is accordingly directed that all defects pointed out by the Stamp Reporter be removed within one month hereof.
2. The present writ petition has been filed for the following reliefs as formulated by the petitioner—
“1(i) For issuance of writ in the nature of Certiorari to quash and set aside the Memorandum No. W/362/17-18/ROB/Fulbari- Gazoldova/L/ W-2 dated 03.06.2020 whereby and whereunder the penalty of liquidated damages to the tune of Rs. 53,50,108.85/- (Rupees Fifty Three Lakhs Fifty Thousand One Hundred Eight and Eighty-Five Paise) have been imposed upon the Petitioner for the grant of extension of time of work contract during the COVID-19 pandemic period from 31.03.2020 to 31.07.2020.
(ii) To hold and declare that the imposition of penalty of Rs. 53,50,108.85/- for grant of extension of time of work contract during the COVID-19 global pandemic from 31.03.2020 to 31.07.2020, despite the Force Majeure Clause 17 of Indian Railways Standard General Conditions of Contract (hereinafter to be referred as “the GCC”) in effect is illegal and unjust.
(iii) For issuance of writ in the nature of Mandamus directing and commanding the Respondent authorities to allow the Petitioner to complete the approved balance work which is less than 10% of the work contract and has been put on hold by the Railway authorities vide Letter No. W/362/17-18/ROB/Fulbari-Gazoldova/L/W-2 dated 15.07.2020.
(iv) To pass any other relief or reliefs for which the petitioner is found to be entitled in the facts and circumstances of the case.”
3. The short facts of the case, according to the petitionerfirm, are that it participated in Tender Notice No. KIR/Engg./03 of 2018 floated by the respondent authorities for construction of road overbridge at Fulbari-Gazoldoa Canal Road, and on being found duly eligible, a letter of acceptance was issued on 25.05.2018. Thereafter, the contract agreement was entered into between the petitioner and the respondents on 01.08.2018 for total estimated cost of the work of Rs. 10,00,09,289.13/- which was scheduled to be completed by 24.11.2019. Owing to certain reasons, the work was delayed and a request for extension of time under Clause 17A of the General Conditions of Contract (the “GCC”) on 08.11.2019 was made by the petitioner, which was granted without liquidated damages till 31.03.2020 vide letter dated 09.01.2020 issued by the respondents. On the same day i.e. on 09.01.2020, the respondents also proposed for variation in quantities of work which was also required to be sanctioned by the Railway authorities in writing, pending which the work was not to proceed in terms of Clause 41 of the GCC. The proposed variation was not sanctioned and approved by the respondent authorities within the extended time till 31.03.2020. Besides, in view of the outbreak of COVID-19 and consequent national lock-down on 24.03.2020 onwards, the work could not proceed and accordingly, a request was made on 27.03.2020 for extension of time till 31.07.2020. On such request, the Sr. Section Engineer, Work, New Jalpaiguri noted that 90% of the work had been completed and that the Railway would not suffer any loss if such extension were granted. However, by the impugned letter dated 03.06.2020, a penalty of Rs. 53,50,108.85/- was imposed upon the petitioner for grant of extension of time from 31.03.2020 to 31.07.2020.
4. Ms. Anukriti Jaipuriyar, learned counsel for the petitioner submits that the action of the respondent Railway in imposing the penalty is completely arbitrary and unjustified in the facts and circumstances of the case. It is submitted that in view of the variation proposed by the Railway on 09.01.2020 (Annexure- P/5), the petitioner could not execute the work in view of Clause 41 of the GCC until modification was ma
Government Contract – Levy of penalty while granting extension of time is wholly without authority of law and is illegal.
Contract termination invalid due to delayed, uncommunicated extension order despite genuine delay reasons; extension granted to original contractor.
The main legal point established in the judgment is that the conclusion of a contract can occur upon the award of work, and non-compliance with tender and contract terms can justify contract terminat....
Penalties imposed in commercial contracts without a show-cause notice are arbitrary; COVID-19 may constitute force majeure affecting deadlines.
Writ jurisdiction can address arbitrary state actions in contractual disputes, emphasizing the importance of procedural fairness and adherence to contractual terms, especially regarding extensions an....
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