An authority must adhere to contract terms, including timely communication of penalties and an opportunity to rectify, or face quashing of arbitrary demands.

JUDGMENT :

HARISH TANDON, CJ.

1. The petitioner challenges the notice of demand dated 12^th November, 2023 issued by opposite parties-MCL to recover a sum of Rs.9,15,980.70 from the running contract of the petitioner under NIT-843 dated 25^th February, 2022 of Ananta OCP, Jagannath Area on account of penalty.

2. A prelude to the litigation is required to be adumbrated to consider the points raised in the instant litigation. The Notice Inviting Tender (NIT) was floated on 20^th March, 2012 for transportation of crushed coal by tippers from feeder breaker of Jagannath colliery to siding I, III and IV of Jagannath Area for a total quantity of 38 lakh Tes. The petitioner was adjudged as the successful bidder and deposited the bank guarantee as earnest money and two further guarantees towards the performance security and the security deposit with opposite party No.1. The period of completion of the entire work was fixed for 365 days. Pursuant to the said NIT and the petitioner having adjudged as a successful bidder, the letter of acceptance was issued on 13^th June, 2012 followed by a work order dated 21^st June, 2012. The date of completion of work was fixed at 3^rd July, 2013, which according to the petitioner was duly executed and the payments were released from time to time except a paltry sum of Rs.3,28,398/-.

2.1. It is stated in the petition that after a lapse of ten years, the impugned demand is raised without assigning any reason therefor, nor adhering to the principle of natural justice. It is averred in the writ petition that Clause 6.2 of the General Terms and Conditions (GTC) of the Contract clearly provides that the penalties shall be calculated on a monthly basis and in order to give an opportunity to the contractor to make up the shortfall in succeeding three months within the stipulated time of completion and on fulfilling the said shortfall, the said penalty shall be released. On the basis of the said Clause, it is a specific case of the petitioner that once the entire amount has been released except the said paltry sum, the imposition of penalty after a gap of ten years is whimsical, arbitrary and also in violation of the terms and conditions embodied in the contract.

2.2. On the other hand, the opposite parties took a stand that the petitioner failed to comply the safety terms and conditions of the contract and also to deploy those tippers which have a requisite safety features. A notice was issued to the petitioner on 9^th October, 2012 with an advice to deploy those tippers which have safety features, but the same was challenged by the petitioner in W.P.(C) No.20844 of 2012 before this Court. In the said writ petition, the petitioner challenged sub-clause (1) (i) (vi) and (xviii) of Clause- 39.00 as illegal and inoperative. The interim order was passed in the said petition until 12^th April, 2019 when the petitioner withdrew the same. It is averred in the counter affidavit that because of the interim order being operative, no further steps could be taken. Responding to Clause 6.2 of the GTC, it is averred that the hindrance register maintained jointly by the management and the contractor would indicate not only the daily progress, but the shortfall, if any, and, therefore, imposition of penalty for such shortfall in terms of the said Clause cannot be said to be perverse and illegal. Lastly, it is averred that since the petitioner is also awarded other contract, the said amount can be recovered from the RA bills which in fact has been indicated in the impugned letter.

3. While admitting the instant writ petition, an interim order was passed on 12^th February, 2024 restraining the opposite parties from making any further r