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IN THE HIGH COURT OF GAUHATI, ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH
MICHAEL ZOTHANKHUMA, J.
XTRA FREIGHT FORWARDER – Petitioner
Versus
THE UNION OF INDIA – Respondent
WP (C) No. 4693 of 2023
Decided On : 29-01-2024
TERMINATION - CONTRACT LAW - Clause 11, Clause 25, Clause 27 of the Work Order and Agreement - The court discussed the legal provisions regarding contract termination, emphasizing the necessity of providing written reasons for termination within three days if done without notice. The court found that the termination was unsustainable due to the lack of compliance with these provisions, influencing its decision to set aside the termination order.
Fact of the Case:
The petitioner was awarded a contract for leasing a Parcel Cargo Express Train but faced operational difficulties at the designated handling stations. After repeated requests to change the handling station were denied, the contract was terminated without prior notice, leading the petitioner to challenge the termination.
Finding of the Court:
The court found that the termination of the contract was in violation of the stipulated terms in the work order and agreement, particularly the lack of prior notice and failure to provide written reasons for the termination.
Issues: Whether the termination of the contract was valid given the lack of notice and written reasons as required by the contract terms.
Ratio Decidendi: The court held that while the railway authorities have the right to terminate the contract without notice, they are still obligated to provide written reasons for the termination within three days, which was not done in this case.
Final Decision: The court set aside the termination order, allowing the petitioner to continue with the contract work, while leaving open the possibility for the railway authorities to terminate the contract in accordance with the proper procedures if justified.
ORDER :
1. Heard Mr. M.K. Choudhury, learned Senior counsel, assisted by Mr. P. Bharadwaj, learned counsel for the petitioner. Also heard Mr. K.K. Parasar, learned CGC.
2. Pursuant to a bidding process initiated vide Tender no. C259RNYLEASINGPCET05, the petitioner on emerging successful, was issued a Letter of Acceptance [LoA] for tender viz. ‘Leasing of Parcel Cargo Express Train [PCET] from Azara [AZA] to Tungalakabad [TKD] for a period of six years on round trip basis, consisting 15 LVPHs + 1 SLR [363.9 tons] for first six months and 20 LVPHs + 1 SLR [483.9] for remaining period’ [‘the Contract-Work’, for short]. The LoA further mentioned that intermediate parcel handling stations would be at New Jalpaiguri Junction [NJP], Sankrail Goods Terminal [SGTY], Alam Nagar [AMU] and Rampur [RMU]. After compliance of necessary formalities including deposit of Security Deposit required on the part of the petitioner, the petitioner was issued a Work Order on 06.10.2022 whereby the petitioner was allowed to commence the Contract-Work from 04.11.2022 without fail. Accordingly, the petitioner started the Contract-Work of running of AZA-TKD-AZA lease Parcel Cargo Express Train Ex AZA on round trip basis from 04.11.2022.
3. It is projected that during the initial period, the petitioner faced a number of issues/difficulties in respect of loading and unloading goods at Tungalakabad [TKD] station, but in course of time, the issues got resolved. The petitioner had further faced difficulties in loading/unloading of goods at Sankrail Goods Terminal [SGTY] within the jurisdiction of Eastern Railway. The main difficulty faced by the petitioner at Sankrail Goods Terminal [SGTY] was that there was no shed at SGTY and as a result, substantial damages to goods occurred at the time of loading and unloading of SGTY. The petitioner made requests for changing of intermediate parcel handling station from Sankrail Goods Terminal [SGTY] to Chitpur Station [CP], which is also within the jurisdiction of Eastern Railway in terms of the ‘Policy for leasing of Parcel Cargo Express Train [PCET]’, more particularly, Para 2.8 thereof, notified by FM Circular no. 04 of 2016 dated 15.06.2016 by the Railway Board, Ministry of Railways.
4. It is the case of the petitioner that despite repeated representations from the petitioner to change the intermediate parcel handling station from Sankrail Goods Terminal [SGTY] to Chitpur Station [CP], that too, after obtaining necessary permission from the Eastern Railway, the NF Railway authorities declined the said prayer through the respondent no. 4 vide its letter dated 27.06.2023. When an appeal was preferred by the petitioner, the appellate authority also rejected the prayer of the petitioner vide Final Intimation dated 26.07.2023. By the Final Intimation dated 26.07.2023, the petitioner was intimated that action would be initiated as per Clause 11 of the Contract Agreement and the Contract Agreement would be terminated. It was further observed that in case of termination, the security deposit would be forfeited and the petitioner would be debarred from fresh registration for a period of 5 [five] years.
5. Mr. Bhardwaj, learned counsel for the petitioner has contended that neither the letter dated 27.06.2023 [Annexure-21] nor the Final Intimation dated 26.07.2023 has disclosed any reason and as such, both the decisions contained therein have suffered from irrationality and arbitrariness. The petitioner was served with the Order of Termination dated 11.08.2023 [Annexure-27] whereby the Contract-Work which was for a period of 6 [six] years from 04.11.2022 to 03.11.2028, stood terminated with immediate effect. By the Order of Termination, it was further informed to the petitioner that he has been debarred from fresh registration for a period of 5 [five] years. The Order of Termination contains other penalties also.
6. Mr. Parasar, learned Central Government Counsel while raising the issue of maintainability, has contended that the peti
The court established that termination of a lease contract without proper notice violates principles of natural justice and contractual obligations.
The court emphasized the importance of fair play and the right to a fair hearing before imposing penal consequences or termination of a contract.
Contractual termination notice must be issued by the authorized Railway Administration, adhering to principles of natural justice.
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