Parties to a contract must seek arbitration as per an existing arbitration clause before approaching the court for disputes arising from contractual obligations.

ORDER :

M. Dhandapani, J.

Assailing the impugned orders passed by the respondent in and by which amount payable to the petitioner has been withheld, the present writ petitions have been filed.

2. It is the case of the petitioner that tenders were floated by the respondent for the supply of 12 grocery items in which the petitioner came out successful and was awarded the tender. As per clause 14 of the Notice Inviting Tender (for short ‘NIT’), the supplier is to comply with the standards prescribed in the annexures to the NIT and also it prescribes the procedure for checking the quality of supply, which requires samples to be drawn in the presence of the suppliers and issuance of analysis report to the supplier.

3. It is the further case of the petitioner that upon acceptance of the tender, as envisaged under the NIT the supplies were made and bills were submitted to the respondents. It is the further averment of the petitioner that though upon supply, the amounts were to be released retaining 20% of the bill value which would be released after reconciliation with the regions, vide the impugned orders, several deductions were made towards recovery by alleging that the items supplied by the petitioner did not comply with the specifications incorporated in the NIT as reported by the National Accreditation Board for Testing and Calibration Laboratories, which tested the random samples of the items supplied, which was communicated to the respondent.

4. Subsequent to the said order, which was not served on the petitioner with regard to the recovery of the amounts, show cause notices were issued by the respondent with respect to the supplied undertaken by the petitioner and in the show cause notices it has been pointed out that upon examination of the samples drawn from the supply made by the petitioner company, the samples did not conform with the prescribed specifications to which the petitioner submitted his replies. It is the further averment of the petitioner that the respective show cause notices culminated in the passing of the impugned order by the respondent, whereby, without considering the reply of the petitioner, the respondent had imposed a penalty of 50% of the value of the supply due to which the petitioner has been put to loss to the tune of Rs.1,28,43,588/= in each of the petitions. It is the further averment of the petitioner that prior to passing the impugned orders, the respondent did not provide an opportunity of hearing to the petitioner, which is in violation of the terms of NIT and further the samples were drawn with the presence of the petitioner, which also is in violation of clause 14 of the NIT and, therefore, the present writ petitions have been filed.

5. Learned counsel appearing for the petitioner submitted that the impugned order suffers from total non-application of mind and is biased, pre- determined, mala fide, arbitrary and colourable exercise of power conferred upon the respondent. It is the further submission of the learned counsel that the show cause notice was issued by the respondent belatedly after punitive measures were enforced by the impugned order and the materials, which have been relied on by the respondent have not been provided to the petitioner and that no substantive material has been placed by the respondent to corroborate the allegations.

6. It is the further submission of the learned counsel that the respondent acted in contravention of Clause 14 of NIT, which specifically provides that the samples have to be drawn for testing in the presence of the supplier/petitioner. However, in the present case, the samples were drawn without the presence of the petitioner and, therefore, the said samples cannot form the basis of the present impugned orders.

7. It is the further submission of the learned counsel that the imposition of penalty is in violation of principles of natural justice and is arbitrary and that even in contract matters, the State is mandated to act as per the principles of fairne