Back
2018 Supreme(P&H) 45
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
S.J. VAZIFDAR, AVNEESH JHINGAN, JJ.
M/s Sukhdev Singh and Co. - Petitioner
Versus
Food Corporation of India and others - Respondents
CWP. 21719 of 2017 (O&M)
Decided On : 17-01-2018
For the Petitioner:Mr. Pawan Kumar, Senior Advocate, with Mr. Vipin Kumar, Advocate.
For the Respondent:Mr. J.S. Puri, Advocate, Mr. Ravi Kant Sharma, Advocate.
The main legal point established in the judgment is that the termination of a contract may be justified if there is a failure to comply with the stipulated terms, but blacklisting requires justification and cannot be automatic.
Headnote:
Termination - Labour Handling Contract - Model Tender Form - IX(a)(i), IX(b), IX(f)
Fact of the Case:
The petitioners challenged the termination of their Labour Handling Contract, forfeiture of earnest money, and blacklisting for five years. The respondents terminated the contract as the petitioners failed to deposit the security amount within the stipulated time. The court upheld the termination but found the blacklisting unsustainable due to lack of justification in the impugned order.
Finding of the Court:
The court upheld the termination of the contract but found the blacklisting unsustainable due to lack of justification. The court also stated that the decision on refund of earnest money and return of bank guarantees is premature and should be determined based on various facts and circumstances.
Issues: The main issue was the validity of the termination of the contract and the blacklisting of the petitioners. The court also addressed the potential refund of earnest money and return of bank guarantees.
Ratio Decidendi: The court held that the termination of the contract was justified as the petitioners failed to deposit the security amount within the stipulated time. However, the court found the blacklisting unsustainable due to lack of justification in the impugned order. The decision on refund of earnest money and return of bank guarantees was deemed premature and subject to assessment by the official respondents.
Final Decision: The court upheld the termination of the contract, set aside the order of blacklisting, and relegated the petitioners to pursue appropriate proceedings regarding the forfeiture of the amounts deposited and the invocation of the guarantees.
S.J. VAZIFDAR, J.
1. The petitioners have challenged an order dated 19/20.09.2017 terminating the Labour Handling Contract awarded to them; forfeiting the earnest money deposited by the petitioners and blacklisting the petitioners for five years.
2. Respondent Nos. 2 to 5 are officers of the first respondent. Respondent No. 6 is the private respondent in whose favour the work has now been awarded pursuant to the termination of the contract with the petitioners.
3. The official respondents issued tenders for the appointment of Handling Contractors. By a letter dated 24.04.2017, the petitioners were informed that their quotation had been accepted for the period upto 03.08.2018. The petitioners were called upon to deposit Rs. 19,52,200/- as security together with the performance guarantee. The letter also stated that the petitioners had the option to deposit 50 per cent security in lump sum and the balance by deduction at 10 per cent from each admitted bill against the contract and that the petitioners could get adjusted the earnest money of Rs. 7,80,880/- deposited towards security. Note 1 at the foot of the letter dated 24.04.2017 in so far as it is relevant reads as under:-
“1. The Area Manager, FCI, Sangrur with the request to complete all formalities by obtaining Security Deposit of Rs. 19,52,200/- @ 5% of CV and one Bank Guarantee of Rs. 39,04,400/- @ 10% of CV strictly as per Performa prescribed in Appendix-IV of MTF. Send confirmation of deposit of Security and BG within 15 working days without any fail.”
4. The parties rightly agreed that the MTF i.e. the Model Tender Form applies to this case. The following clause therein is relevant and reads as under:-
“IX. Security Deposit:
(a) The successful Tenderer shall furnish within fifteen working days of acceptance of his tender, a Security Deposit for the due, proper and complete discharge of all their obligations under the Contract. The Security Deposit will comprise of the total of the amounts specified in following clauses (i) (ii) and (iii):
(i) A sum equivalent to 5% of the value of the Contract in the form of Demand Draft or Pay Order issued by a scheduled bank or through Electronic Clearing System (ECS)/Other Electronic Means in favour of the General Manager, Food Corporation of India. The contractor at his option may deposit 50 (fifty) percent of this amount within fifteen working days of acceptance of his tender while the balance 50 (fifty) percent may be paid by the contractor by deductions at the rate of 10 (ten) per cent from the admitted bills. The Security Deposit shall not earn any interest.
(ii) another sum equivalent to 10% of the value of Contract, in the form of an irrevocable and unconditional Bank Guarantee issued by State Bank of India or its Associate Banks or by other Public Sector Banks in the format prescribed in Appendix-IV which shall be enforceable till six months after the expiry of contract period.
(iii) If applicable, an additional sum equivalent to 10% of the value of Contract (in addition to i & ii above), in terms of the undertaking provided by the Tenderer (without experience) for relaxation of eligibility conditions, in the form of an irrevocable and unconditional Bank Guarantee issued by State Bank of India or its Associate Banks/other Public Sector Banks in the format prescribed in Appendix-V which shall be enforceable till six months after the expiry of contract period.
(b) In case of failure of tenderer to deposit the Bank Guarantee as stipulated in clause 7(i) (b) & (c) within 15 working days of acceptance of his tender, further extension of 15 working days can be given subject to levy of penalty @ 1% of the whole amount of the Security Deposit and another 15 working days with levy of penalty @ 2% on the whole amount on the Security Deposit by GM(R).
(c) Upon satisfactory performance of the services and on completion of all the obligations by the contractor under the terms of contract and on submission of “No Due Certificate” from the
