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2020 Supreme(Del) 794
IN THE HIGH COURT OF DELHI AT NEW DELHI
Navin Chawla, J.
Hariom Project Private Limited - Appellant
Versus
Military Engineer Services, Director Of Contract Management & Ors. - Respondent
Writ Petition (Civil) No. 10729 of 2019; Civil Miscellaneous No. 44377 of 2019, 11633 of 2019
Decided On : 17-08-2020
Shamik Sanjanwala, Advocate, Kirtiman Singh, Advocate, Rohan Anand, Advocate
The decision to ban a contractor must be fair, proportionate, and based on the gravity of the offense, considering factors such as the contractor's past conduct and the nature of the breach.
Headnote:
Breach of Contract - Military Engineering Services - Clause 4.1 - 2. Brief description of work to be carried out, : All works as enumerated in details see IAFW-2212-a, Sheet_(attached). Sch 'A' & catered in particular specifications, other documents including drawing forming part of the contract. - 4. The date of commencement and handing over of the site was 26/27.09.2013 and the Scheduled Date of Completion of work was 26.03.2015. - 5. Clause 4 of the Contract prescribes the 'PEB Structure of Schedule A'. Clause 4.1 thereof provides that the work of PEB structure shall be executed through one of the Specialist Firms mentioned in the said Clause. One of such firms was M/s Lloyd Insulations (India) Private Limited, which was initially made respondent no. 4 in the present petition, however, the petitioner thereafter filed an application seeking deletion of the said respondent, being CM No. 53245/2019. The same was allowed by this Court by its order dated 21.01.2020, making it clear that such deletion would be at the peril of the petitioner.
Fact of the Case:
The petitioner was banned for two years from participating in tenders of Military Engineering Services (MES) due to alleged violation of the Contract conditions. The bone of contention was the scope of work under the Contract/Work Order, specifically the erection of the PEB structure.
Finding of the Court:
The Court found that the petitioner was not solely responsible for the delay and the sagging of the girder, attributing fault to M/s Lloyd Insulations for the faulty design. The Court also noted the ambiguity in the contractual terms and the petitioner's unblemished record of executing contracts for the MES.
Issues: The issues revolved around the interpretation of the Contract terms, the responsibility for the delay and sagging of the girder, and the proportionality of the ban imposed on the petitioner.
Ratio Decidendi: The Court held that the ban imposed on the petitioner was disproportionate and arbitrary, considering the ambiguity in the Contract terms, the fault lying with M/s Lloyd Insulations, and the petitioner's past record of executing contracts for the MES.
Final Decision: The petition was allowed, and the ban on the petitioner for two years from participating in tenders of MES was set aside.
JUDGMENT
Navin Chawla, J. - This petition has been filed by the petitioner challenging the order dated 22.04.2019 passed by the respondent no. 1 debarring the petitioner for a period of two years from the date of the order from participating in the tenders of Military Engineering Services (hereinafter referred to as "MES").
2. The petitioner was awarded a Contract of additions and alterations of certain Pre-Engineered Building (hereinafter referred to as "PEB") at Air Force Station, Bagdogra, West Bengal, vide Letter of Acceptance dated 30.08.2013, for a lump sum amount of Rs. 5.46 crores.
3. Thereafter a Work Order dated 14.09.2013 was issued in favor of the petitioner. The Work Order described the work to be carried out as under:-
"2. Brief description of work to be carried out, : All works as enumerated in details see IAFW-2212-a, Sheet_(attached). Sch "A" & catered in particular specifications, other documents including drawing forming part of the contract."
4. The date of commencement and handing over of the site was 26/27.09.2013 and the Scheduled Date of Completion of work was 26.03.2015.
5. Clause 4 of the Contract prescribes the "PEB Structure of Schedule A". Clause 4.1 thereof provides that the work of PEB structure shall be executed through one of the Specialist Firms mentioned in the said Clause. One of such firms was M/s Lloyd Insulations (India) Private Limited, which was initially made respondent no. 4 in the present petition, however, the petitioner thereafter filed an application seeking deletion of the said respondent, being CM No. 53245/2019. The same was allowed by this Court by its order dated 21.01.2020, making it clear that such deletion would be at the peril of the petitioner.
6. The bone of contention between the parties is the scope of work under the said Contract/Work Order. The respondents contend that as per the provisions of the Contract, all work, including design, supply, fabrication and erection of the PEB structure was to be executed by the petitioner through one of the Specialist Firms mentioned under Clause 4.1 of the Contract/Work Order. Whereas, it is the case of the petitioner that the erection of the PEB structure could be done by the petitioner itself and was so done under the supervision of M/s Lloyd Insulations.
7. There is no dispute between the parties that while the design, supply and fabrication of the PEB structure was gotten done by the petitioner from M/s Lloyd Insulations, the erection of the structure was done by the petitioner itself.
8. There is further no dispute between the parties that due to the faulty design supplied by M/s Lloyd Insulations and subsequently vetted and approved by NIT, Durgapur, one long girder of the PEB structure was found sagging, which needed to be replaced, eventually leading to delay in the completion of work. As against the Scheduled Date of Completion of work, which was prescribed as 26.03.2015, the work was eventually completed on 01.09.2017.
9. The respondents thereafter issued a Show Cause Notice dated 05.09.2018 to the petitioner calling upon the petitioner to show cause as to why the Executing Authority not be approached for taking suitable action against the petitioner for violation of the Contract conditions. The allegations as contained in the Show Cause Notice are reproduced hereinunder:-
"3. The scope of work included design, supply, fabrication and erection of PEB structure. As per contract provisions, the work of PEB structure was to be got executed through one of the specialist firms mentioned therein.
4. You have preferred to get the work of PEB executed through M/s Lloyd Insulations (India) Limited (One of the firms mentioned in the CA) but it has been intimated by M/s Lloyd that as per order placed by you on them, erection of PEB structure was not made part of Agreement. It indicates that erection of PEB structure was carried out by your firm under your own arrangements, which is a violation of contract conditions.
5. During curr
