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THE HIGH COURT OF GAUHATI (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH
DEVASHIS BARUAH, J
G.B. Chowdhury Holdings Pvt Ltd - Appellant
Versus
The Food Corporation Of India And 3 Ors - Respondent
WP(C) 66 / 2024
Decided On : 23-01-2025
(A) Constitution of India - Article 12 - Contractual obligations - The dispute arose from the imposition of Rs.2.11 crores by the Food Corporation of India (FCI) on the Petitioner, following a demand notice issued after a significant delay. The contract was for transportation services, initially based on a distance of 90 Kms, later contested by FCI based on a re-evaluation of the distance to 74 Kms. The Petitioner argued that the contract was validly discharged upon issuance of a No Demand Certificate and refund of the security deposit. (Paras 2 , 6 , 48 )
(B) Jurisdiction - The court emphasized that the actions of the FCI were arbitrary and unreasonable, violating the principles of fairness expected from a State entity under Article 12. The court ruled that the demand notice issued after 5½ years was invalid and quashed the appropriation of funds from other contracts. (Paras 47 , 48 )
Facts of the case:
The Petitioner was contracted for transportation services from 20.06.2015 to 22.07.2017, with a dispute arising over the distance for payment calculations. The FCI later claimed excess payments based on a revised distance assessment. (Paras 4 , 8 )
Findings of Court:
The court found that the contract was validly discharged upon the issuance of the No Demand Certificate and that the subsequent demand was void. The FCI's actions were deemed high-handed and arbitrary. (Paras 48 )
Issues: The main issues included the validity of the demand notice issued after a long delay and whether the contract was validly discharged. (Paras 46 , 48 )
Ratio Decidendi: The court held that the issuance of a No Demand Certificate and the refund of the security deposit constituted a valid discharge of the contract, and the FCI's subsequent demand was illegal. (Paras 48 )
Result: The demand notice was quashed, and the FCI was directed to refund the deducted amount. (Paras 48 )
JUDGMENT :
DEVASHIS BARUAH, J.
Heard Mr. B. Chakraborty, the learned counsel appearing on behalf of the Petitioner and Mr. P. K. Roy, the learned Senior counsel assisted by Mr. S. K. Chakraborty, the learned counsel appearing on behalf of the Food Corporation of India.
2. The dispute involved in the instant writ petition pertains to the imposition of an amount of Rs.2.11 crores by the Respondent FCI upon the Petitioner and the manner in which the recovery was made from the dues the Petitioner was entitled to in respect to other contracts the Petitioner had with the FCI.
3. The materials on record reveals that a Notice Inviting e-Tender was issued on the 11.03.2015 for transportation of foodgrains/sugar/allied materials from EXRailway Siding FSD Changsari to FCI FSD Tangla via weighbridge (Distance 90 Kms) minimum daily requirement of trucks 20-30 which may increase or decrease as per the exigency of the requirement.
4. The Petitioner herein submitted its tender and was appointed as a Transport Contractor vide an order dated 20.06.2015. The said contract was for a period of two years i.e. from 20.06.2015 to 19.06.2017. The said contract was further extended upto 22.07.2017. The record further reveal that during the period of the contract and more particularly sometime just before its culmination, certain steps were taken to measure the shortest motorable distance between RTC Ex-FCI Siding CFCC Changsari to Tangla via weighbridge and the District Office Committee declared the distance to be 74 Km in its report dated 29.04.2017. The Area Manager thereafter confirmed it vide a letter dated 19.05.2017. It is further seen that subsequent thereto, there were confusion inasmuch as the shortest route assessed was without taking into consideration the road restrictions and as to whether it was the best suitable shortest route for heavy vehicles. Subsequent thereto, fresh assessments were made and vide a letter dated 25.05.2017, it was confirmed by the Area Manager that the distance of the shortest motorable route was 76 Km. On that basis, a communication dated 26.07.2017 (much after the extended period of the contract), the Assistant General Manager (Cont.), FCI wrote to the Area Manager, FCI that the Transport Bills w.e.f. 29.04.2017 be passed on the basis of 76 KM distance and not 90 KM. The rationale for implementing the said distance w.e.f. 29.04.2017 was on account of the District Office Committee for the first time rendered the report on 29.04.2017.
5. The records are not clear as to whether the Petitioner was taken into confidence about reducing the distance from 90 KM to 76 KM but it appears that the Petitioner protested against such action by submitting representations on 29.07.2017 and 25.09.2017.
6. It is relevant to mention that the Petitioner carried out the said contract during the period from 20.06.2015 to 22.07.2017 and in that regard had received the total consideration of Rs.13,75,04,372/-. The records reveal that the Respondent FCI w.e.f. 22.03.2017 till 22.07.2017, calculated the amount payable by taking into consideration 74 KM and not 90 KM. In that regard, an amount of Rs.25,00,000/- was recovered from the Petitioner. Subsequent thereto, on 05.12.2017, an order was passed by the Assistant General Manager, FCI acknowledging the issuance of the No Demand Certificate by the Area Manager, FCI and for refund of the security deposit.
7. The Petitioner did not challenge the imposition and recovery of Rs.25,00,000/-. At the same time, the Petitioner also submitted a No Dues Certificate. The Respondent FCI had also issued the No Dues Certificate and further refunded the Security Deposit without reserving any rights. It is the case of the Petitioner that in view of the above, there was a valid discharge of the contract. It is the further case of the Petitioner that to its utter shock and surprise after a lapse of more than 5½ years, the Respondent FCI issued a Demand Notic
The issuance of a No Demand Certificate validly discharged the contract, and subsequent demands by the Food Corporation of India were arbitrary and illegal.
Adopting a different view in matter in facts and circumstances of case would not be permissible in eye of law.
The court ruled that claims for damages in breach of contract require proof of actual loss, which was not established by the plaintiffs, leading to dismissal of the appeal.
Contracts must be honored based on verified terms and conditions; discrepancies in distances stated versus actual must be rectified to uphold contractual integrity.
Contractor had not approached Grievance Redressal Committee and hence, Court, relegated contractor to invoke jurisdiction of Grievance Redressal Committee for ventilating its grievances.
The main legal point established is that in contractual matters, the court may intervene to prevent arbitrariness or favoritism by the government bodies, especially if the actions violate the equalit....
The court emphasized that bureaucratic processes justify leniency in condoning delays in filing appeals, recognizing that good cause is a lesser standard than sufficient cause.
The issue price for recovery under the Model Tender Form cannot be interpreted as dependent on subsidized rates for specific schemes.
Retrospective recovery of amounts by public authorities must adhere to established tender conditions and principles of natural justice.
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