IMPORTANT POINT
The court established that termination of a contract must comply with natural justice principles, requiring adequate reasoning and opportunity for the affected party to respond.

JUDGMENT :

Shampa Sarkar, J.

1. This writ petition arises out of the termination notice dated June 24, 2024 issued by the Chief Engineer/CON/HQ/GRC. The said notice reads as follows:

“Ref: 1. CE/C/HQ/GRC’s 48 hrs’ Notice letter no. SER/CON ORGN/HQ/POST TENDER/4402/594 dt. 04.06.2024.

2. Dy. CE/C/GRC’s office 7 days’ Notice letter No. CE/C/South/GRC/DSPN-Nandigram/KInfratech dt.09.05.2024.

Dear Sir,

Forty-eight hours (48 hrs.) notice was given to you under this office letter of even NO.594, dated 04.06.2024; but you have taken no action to commence the work/show adequate progress of the work.

Since the period of 48 hours’ notice has already expired, the above contract stands rescinded in terms of Clause 62 of the Standard General Conditions of Contract and the balance work under this contract will be carried out independently without your participation. Your participation as well as participation of every member/partner in any manner as an Individual or a partnership firm/JV is herby debarred from participation in the tender for executing the balance work land your Security Deposit shall be forfeited and Performance Guarantee shall also be encashed.”

2. The petitioner is aggrieved for the following reasons:

a) The Dispute Adjudication Board had not been formed, as per the Standard General Conditions of Contract.

b) The arbitration clause at Clause 63 of the Standard General Conditions of Contract could not be invoked in this case.

c) The demand for arbitration under Clause 64(1) would also not be a bar as the order is devoid of reasons and the decision to forfeit the security deposit and encash the performance guarantee was taken without hearing the petitioner.

d) The notice of termination does not indicate the reasons as to why the authority was not satisfied with the answers which were given repeatedly by the petitioner justifying its inability to complete the project or continue with the work at the pace which was expected from them.

e) Correspondence with the Deputy Chief Engineer and the letter written to the Chief Engineer would indicate that the petitioner had provided the reasons as to why the balance work could not be executed on time. Reference is made to certain admissions made by the Deputy Chief Engineer with regard to the problems relating to acquisition of land etc. The railway authority was required to hand over free and clear land, free from all encumbrances, which they failed to do.

3. The learned advocate for the railway authority submits that the notices were given to the petitioner as per the Standard General Conditions of Contract. The termination was done in accordance with such procedure. Initially 7 days’ notice was given, thereafter 48 hours’ notice was also given.

4. It is further submitted that the petitioner ought to have approached the authority with the demand for arbitration.

5. After going through the record, this court finds that apart from the letters written to the Deputy Chief Engineer with regard to the problems that the petitioner was facing in execution of the balance work etc., the petitioner had also written a letter to the Chief Engineer South-Eastern Railways authority, with necessary explanations. The authority terminated the contract without providing any reason. The decision to forfeit the security deposit and encash the performance guarantee was also taken without dealing with the petitioner’s explanation and without quantifying the loss suffered by the railways.

6. The petitioner pointed out difficulties with regard to local agitation and contended that local people did not allow the workers to enter the site. Thus, the commencement of the earth work was delayed. The next difficulty pointed out was that the tentative drawings without any clearance of the design by the appropriate authority had been received belatedly. The seven days’ notice was issued without providing a hindrance free site and approved drawings to the contractor. None of the bridges had proper approach and transportation of th