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2008 Supreme(Mad) 3069
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K.K. SASIDHARAN
S. Girija
Versus
Chairman-cum-Managing Director, Tamil Nadu Civil Supplies Corporation Ltd., Chennai & Others
W.P. Nos. 22033, 22034 and 23261 of 2007 and M.P. No. 1 of 2007 (3 Nos.) and 2 of 2007 (2 Nos.)
Decided on : 26-08-2008
For the Petitioners:D. Ashok Kumar, Advocate.
For the Respondent:V. Selvanayagam, Advocate.
The main legal point established in the judgment is the requirement for fairness, equality, and reasonableness in governmental actions, particularly in contractual matters, and the importance of honoring arbitration clauses in agreements.
Headnote:
Transport Contractor - Termination of Contract - Tamil Nadu Civil Supplies Corporation Limited - Clause 21 of the agreement - Arbitration - Blacklisting - Union of India v. Mithiborwala and Others AIR 1975 SC 266 : (1975) 1 SCC 70 - Shrilekha Vidyarthi v. State of U.P. AIR 1991 SC 537 : (1991) 1 SCC 212 - M.D., H.S.I.D.C. v. Hari Om Enterprises (2008) 9 SCALE 241 : (2008) 6 MLJ 691
Fact of the Case:
The Transport Contractor challenged the termination of the contract and blacklisting by the Tamil Nadu Civil Supplies Corporation Limited. The petitioner had been in the line of operation as a transport contractor under the Corporation for twenty-five years and had completed transport contracts satisfactorily. The Corporation issued a show cause notice for cancellation of the contract based on alleged deficiencies in service. The petitioner denied the charges and claimed the notice was mala fide. The contract was terminated, and the petitioner was blacklisted for three years. The petitioner filed writ petitions challenging the termination and blacklisting.
Finding of the Court:
The Court found that the contract termination and blacklisting were premature and lacked factual foundation and sufficient materials. The Court quashed the impugned orders and directed the Corporation to refer the dispute to an Arbitrator. The Court emphasized the importance of fairness and equality in public contracts and the need for reasonableness in governmental actions, including contractual matters.
Issues: The issues involved the premature termination of the contract and blacklisting, the necessity of referring the dispute to an Arbitrator as per the agreement, and the violation of Article 14 of the Constitution in governmental actions.
Ratio Decidendi: The Court held that the premature termination and blacklisting were arbitrary and unreasonable, emphasizing the need for fairness, equality, and reasonableness in governmental actions, especially in contractual matters. The Court also highlighted the importance of honoring the arbitration clause in the agreement.
Final Decision: The Court quashed the impugned orders, directed the Corporation to refer the dispute to an Arbitrator, and allowed the writ petitions subject to the above direction.
These three writ petitions have been preferred by a Transport Contractor engaged in the transport of essential Commodities as a carrier under the Tamil Nadu Civil Supplies Corporation Limited, challenging the order of termination of the contract as well as blacklisting on account of failure to perform the contract as per the terms and conditions.
2. The prayer in W.P. No. 23261 of 2007 is to quash the impugned order dated 26. 2007 on the file of the Regional Manager, Tamil Nadu Civil Supplies Corporation, Erode Region, Erode terminating the contract of the petitioner for the year 2006-2007. The prayer in W.P. Nos. 22033 and 22034 of 2007 pertains to blacklisting of the petitioner for a period of three years and to allot the contract to the petitioner after setting aside the said orders of blacklisting dated 16. 2007.
3. W.P. No. 23261 of 2007
The factual matrix necessary for the disposal of the writ petition are as under:
The petitioner is stated to be the managing partner of “Dinesh Babu Transport” engaged in the handling and transport of essential commodities for the last twenty five years. The petitioner hs been in the line of operation as a transport contractor under the Tamil Nadu Civil Supplies Corporation and the transport unit of the petitioner has completed the transport contracts so far taken in satisfactory manner and as such there were no room for complaints against the petitioner in her transaction with the respondent Corporation for all these years.
4. In pursuance of the notification issued by the first respondent for the purpose of appointment of transport contractors pertaining to various regions, the petitioner took part in such tender and her tender was found to be the lowest tender. But however, with a view to avoid the award of contract in favour of the petitioner, the second respondent issued a show cause notice dated 25. 2007 calling upon the petitioner to show cause as to why the contract executed between the petitioner and the respondent should not be cancelled on the basis of certain alleged deficiency in service. In the said notice, the following deficiencies were pointed out as the reason for initiation of proceedings for cancellation of contract.
“(a) The petitioner failed to take delivery of 150 metric tons of Wheat allotted by the Food Corporation of India from Erode Region during 2006 and in view of non-lifting of such Wheat, the quota for the month of October was lapsed.
.(b) The failure of the petitioner to supply required number of lorries for needy Godowns in time, 117.529 metric tons of wheat moved departmentally during March, 2007.
.(c) Since the petitioner has not provided required lorries for needy Godowns, an amount of Rs. 27,400/- has been recovered from the petitioner and as per the tender condition, if penalty is imposed more than 25% of the Security Deposit, the transport contract is liable to be terminated.”
5. In response to the show cause notice dated 25. 2007, the petitioner submitted her explanation wherein the petitioner while denying the contention of the respondents also submitted certain factual particulars, which would show that the charges framed against the petitioner were not proved. In the reply it was also indicted that the contract itself is coming to an end by 30.6.2007 and as such the issue of charge sheet at the fag end of the contract on 25. 2007 was clearly mala fide and resorted to by the respondents only with a view to see that no fresh contract is awarded to the petitioner.
6. The matter was examined by the second respondent on the basis of the explanation given by the petitioner and the contract was terminated as per proceedings dated 26. 2007 and the said proceeding was challenged in W.P. No. 23261 of 2007.
7. The proceedings initiated by the second respondent for the purpose terminating the existing contract which expires on 30.6.2007 was taken as the basis for black listing the petitioner for a period of three years as per proceedings dat
