Krishan Lal vs Food Corpn. Of India And Ors

Krishan Lal ...Appellant

Versus

Food Corporation of India & Ors. ...Respondents

O R D E R

T.S. THAKUR, J.

1. These appeals by special leave arise out of an order

passed by the High Court of Punjab and Haryana whereby

Civil Writ Petition No. 2416 of 2002 and R.A. No.134 of

2002 filed by the appellant seeking refund of Rs.10 lakhs

deposited towards security pursuant to the order passed by

the High Court has been dismissed.

2. On 12th November, 1999 the Food Corporation of India

invited tenders for appointment of Handling and

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Transportation Contracts at various depots including the

depot at Dabwali in the State of Haryana. Several persons

appear to have submitted their tenders in response to the

said tender notice including M/s R.R.S. Chautala &

Company who eventually bagged the contract in question

having offered to undertake the contracted work in

consideration of payment at 186% above the schedule of

rates. The appellant questioned the said allotment in Writ

Petition No.1368 of 2000, inter alia, alleging that he had

been illegally prevented from submitting his tender by

being denied the requisite form for submission of the

tender. The appellant also asserted that he was ready to

undertake the Handling and Transportation work at a much

lower rate of 110% above the schedule of rates as against

186% offered by the successful tenderer mentioned above.

The appellant even offered to deposit a sum of Rs.10 lakhs

by way of security to show his bona fides. An affidavit to

that effect was also, it appears, filed by the appellant.

3. The Writ Petition filed by the appellant was eventually

allowed by the High Court by its order dated 5th April, 2001.

The High Court held that the decision taken by the Food

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Corporation of India was without consideration of relevant

facts and was not reasonable. The High Court therefore,

found a case justifying interruption of contract and setting

aside of the allotment of work in favour of the successful

tenderer. Having said that, the High Court issued the

following directions:

"It is directed that the fifth respondent shall cease to

operate immediately. The respondent-corporation shall

invite fresh tenders and proceed to allot the work in

accordance with law. The petitioner shall be bound by

his offer to work at 110% above the schedule of rates.

He would deposit an amount of Rs.10 lacs by way of

security within one week from today with the office of

the Senior Regional Manager, Food Corporation of

India, Chandigarh. This amount shall be adjusted

towards security, etc. if the work is allotted to the

petitioner. Otherwise, it would be refunded within one

week of the final decision regarding the allotment of

the work."

4. In obedience to the above directions the respondent-

Food Corporation of India (FCI) invited sealed tender for

handling and transport contact for its Dabwali depot for a

period of six months. The short term tender notice

required the intending tenderers to submit their tenders

along with complete documents and the earnest money

prescribed in the form of a Demand Draft.

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5. In response to the above tender notice, the appellant

also submitted a tender offering to undertake the work @

50% above the schedule of rates. This offer was accepted

by the respondent-Corporation with a direction to the

District Manager, FCI, Hissar that no amount towards

security be demanded from the appellant as the security

amount of Rs.3,09,500/- stood deposited in the Regional

Office. Shortly after the allotment of the contract to the

appellant, the appellant sent a fax message expressing his

inability to undertake the handling and transport contract

and withdrawing the offer made by him. By this time the

appellant had already executed a formal agreement with

the respondent-Corporation on 28th May, 2001. In

response, the respondent-Corporation informed the

appellant that any withdrawal after the execution of the

formal agreement was tantamount to a breach of the

terms and conditions of the contract and would attract

action under Clause X(b) of the agreement. The appellant

was requested to take up the handling and transport work

within one week positively, failing which the respondent-

Corporation proposed to take recourse to Clause X(b) of

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the agreement to get the work done at the risk and cost of

the appellant.

6. It is common ground that the appellant did not

undertake the work. He cited some security problems

which according to the appellant prevented him from

discharging his contractual obligations. Not only that the

appellant demanded the refund of Rs.10 lakhs which stood

deposited with the respondent-Corporation pursuant to the

direction issued by the High Court in the writ petition

referred to earlier. Upon refusal of the respondent-

Corporation to refund the amount in question the

appellant filed Writ Petition No.2416 of 2002 in the High

Court of Punjab and Haryana for a mandamus directing

the respondent-Corporation to refund the same. The High

Court dismissed the said petition holding that since the

parties had entered into a written contract their mutual

rights and obligations were governed by the terms and

conditions of the said contract. The High Court observed:

"It appears from the record of the case and in

particular Annexure-P-5 dated 20.6.2001 addressed to

the petitioner by the F.C.I. that the petitioner had

executed agreement in the office on 28.5.2001 and his

offer at 50% ASOR was accepted by the office vide

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telegram dated 25.5.2001, a copy whereof was sent to

the petitioner through registered post. It has been

clearly mentioned in Annexure-P-5 that the F.C.I had

accepted the offer of the petitioner and that being so,

in our view, a concluded contract had come into

existence. Withdrawal of offer would certainly attract

relevant condition of the contract. "The contract that

has been arrived at between the parties has not been

placed on records. The terms of contract in the event a

party, after its offer has been accepted, may back out,

are, thus, not known. There is, however, sufficient

indication forthcoming from Annexure-P-5 that Clause

10(b) would apply in the event of contractor may not

carry out the work allotted to him. This clause too has

not been shown to us nor made a part of pleadings. All

that we would, thus, like to observe at this stage is that

once the parties have arrived at concluded contract,

the terms thereof would alone determine the rights

inter se parties. Be that as it may, petitioner cannot

ask for refund of Rs.10 Lacs on the dint of orders

passed in his earlier petition bearing No.1368 of 2000

as it is only in the event work was not to be allotted to

him that, he could ask for refund of the money

deposited by him."

7. We have heard learned counsel for the parties at some

length. The material facts are not in dispute. It is not in

dispute that the amount of Rs.10 lakhs was deposited by

the appellant in terms of the order of the High Court in Writ

Petition No.1368 of 2000. The said amount had to be

refunded to the appellant if the work was not allotted to the

appellant upon the issue of the fresh tenders. In case the

appellant succeeded in bagging the contract the amount

was to be adjusted towards security. This clearly implied

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that the order passed by the High Court envisaged a

situation where the appellant would not succeed in securing

the contract pursuant to the fresh tender process, in which

event the amount deposited by the appellant had been

refundable in toto. In case, however, the appellant

succeeded in bagging the contract which obviously

depended upon whether he offered the lowest rate for

undertaking the work in question, the amount deposited by

him had to be adjusted towards security in relation to the

said contract. It is also not in dispute that a short-term

tender was issued pursuant to the direction of the High

Court and that the security amount required to be furnished

by the appellant was limited to a sum of Rs.3,09,500/-.

The High Court order did not provide for a situation where

the security amount required under the contract may be

Rs.3,09,500/- for other tenderers but Rs.10 lakhs in the

case of the appellant. That a formal agreement was

executed between the parties is also admitted before us as

indeed it was before the High Court. Withdrawal of the offer

tantamount to refusal to undertake the contract, hence a

breach of the terms of the contract, and shall attract the

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penal provisions contained in the same is also not in

question. Our attention was, in this regard, drawn by

learned counsel for the appellant to Clause X (b) and XI (f)

of the agreement which read as under:

"X(b) The Senior Regional Manager shall also have

without prejudice to other rights and remedies, the

right, in the even of breach by the contractors of any of

the terms and conditions of the contract to terminate

the contract forthwith and to get the work done for the

unexpired period of the contract at the risk and cost of

the contractors and/or forfeit the security deposit at

any part thereof for the sum of sums due for any

damages, losses, charges, expenses of costs that may

be suffered or incurred by the corporation due the

contractor's negligence or unworkment like

performance of any of the services under the contract.

XI (f) In the event of termination of the contract

envisaged in clause X, of the Senior Regional Manager

shall have the rights of forfeit the entire or part of the

amount of security deposit lodged by the contractors or

to appropriate the Security Deposit or any part thereof

in or towards the satisfaction of any sum due to be

claimed for any damages, losses, charged expenses or

cost that may be suffered or incurred by the

Corporation."

8. It was argued on behalf of the appellant that even the

widest and most favourable interpretation of the above

terms would not entitle the respondent-Corporation to

forfeit any amount besides the security deposit and recover

any damages, losses or cost that may be suffered or

incurred by the respondent-Corporation in getting the

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contracted work executed through some other agency.

Such being the position the respondent-Corporation could

at best forfeit the sum of Rs.3,09,500/- towards security

deposit and a sum of Rs.2,17,274/- which the respondent-

Corporation claimed to have incurred towards extra

expenditure in getting the work executed at the risk and

cost of the appellant. The extra expenditure incurred by the

respondent-Corporation after termination of the contract

allotted to the appellant, it is noteworthy, has been

quantified by the respondent-Corporation in para 5(i) & (ii)

of the counter-affidavit filed on its behalf. The respondent-

Corporation has inter alia said:

"I say that during the contract period of six months of

the petitioner, the Respondent Corporation had to incur

an extra expenditure of Rs.2,17,274/- and suffered

heavy losses. I say that security amount of Rs.10

lakhs was furnished by the petitioner as security for

fulfilment of contract in terms of High Court order.

Even after depositing Rs.10 lakhs as per the High Court

Orders, the petitioner did not resume the work and the

entire amount of Rs. 10 lakhs was rightly forfeited

against excess payment made towards alternative

arrangements made at the risk and cost of the

petitioner. I say that the amount of Rs.10lakhs was

stand forfeited under Clause X(b) read with Clause

XI(f) of the contract."

9. It was in the light of the above assertions, argued Mr.

Jha, learned counsel for the appellant, that the respondent-

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Corporation could not lay any claim against the amount in

question in excess of Rs.3,09,500/ plus Rs.2,17,274/- and

that the balance amount was liable to be refunded to the

appellant.

10. On behalf of the respondent-Corporation it was argued

that the appellant ought to have resorted to the arbitration

clause under the agreement instead of filing a writ petition

in the High Court. Alternatively, it was argued that the

security deposit having been made under the orders of the

High Court, the entire amount of Rs.10 lakhs was liable to

be forfeited on the failure of the appellant to work once the

same was allotted to him.

11. It is true that there was an arbitration clause in the

agreement executed between the parties. It is equally true

that, keeping in view the nature of the controversy, any

claim for refund of the amount deposited by the appellant

could be and ought to have been raised before the

Arbitrator under the said arbitration. The fact, however,

remains that the High Court had entertained the writ

petition as early as in the year 2002 and the present

appeals have been pending in this Court for the past ten

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years or so. Relegating the parties to arbitration will not be

feasible at this stage especially when the proceedings

before the Arbitrator may also drag on for another decade.

Availability of an alternative remedy for adjudication of the

disputes is, therefore, not a ground that can be pressed

into service at this belated stage and is accordingly

rejected.

12. Equally untenable is the alternative argument that

since the amount of Rs.10 lakhs had been deposited

pursuant to the order passed by the High Court the same

was liable to be forfeited in toto in the event of any breach

of the agreement between the parties. The deposit was, no

doubt, made pursuant to the direction of the High Court but

the said direction did not go further to say that in case the

appellant committed a breach of the agreement executed

between the parties, any such breach would result in the

forfeiture of the entire amount of Rs.10 lakhs. A closer

reading of the order passed by the High Court leaves no

manner of doubt that the amount was deposited but was

refundable in case the contract was not allotted and was

adjustable towards security if the appellant succeeded in

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emerging as the successful tenderer. In the event of

adjustment of the amount towards security the breach of

the contract would have led to the forfeiture of the security

amount alone and not the entire amount deposited by the

appellant.

13. Even so, the terms of the contract provided for

execution of the contracted work through another agency

at the risk and cost of the appellant. It is not in dispute

that the respondent-Corporation had engaged an

alternative agency for getting the work executed. It is also

not in dispute that an extra amount was incurred by the

respondent-Corporation in that regard. If that be so, the

amount lying with the respondent-Corporation could be

utilised for recovery of the loss. The respondent-

Corporation could therefore make a claim for recovery of

the extra expenditure, incurred by it. We must mention, in

fairness to Mr. Jha, that the respondent-Corporation's right

to forfeit the security amount or to recover the extra

expenditure incurred in getting the work executed from

alternative agency was not disputed by him.

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14. That being the position, the respondent-Corporation

would be entitled to retain a sum of Rs.3,09,500/ plus

Rs.2,17,274/- = Rs.5,26,774/-. The balance amount of

Rs.4,73,226/- ought to have been refunded to the appellant

on the admitted factual and contractual premise.

15. In the result, we allow this appeal, set aside the order

passed by the High Court and direct the respondent-

Corporation to refund the balance amount of Rs.4,73,226/-

to the appellant within a period of three months from today

failing which the said amount shall start earning interest @

10% p.a. from the date of expiry of the stipulated period of

three months mentioned above. We are consciously

making no order for payment of interest on the amount

held refundable to the appellant, for we are of the opinion

that the appellant had without any real intention to perform

the work in question got the earlier contract terminated by

a judicial order and put the Corporation through the

unnecessary botheration and consequential prejudice of

calling for fresh tenders. The appellant, it appears to us,

was interested only in scoring a point over his rival for

whatever reasons he had in view. The conduct of the

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appellant has, therefore, dissuaded us from directing

payment of any interest to him on the amount that is held

refundable.

16. These appeals are, with above directions &

observations, allowed and disposed of leaving the parties to

bear their own costs.

...........................................

...J.

(T.S. THAKUR)

...........................................

...J.

(GYAN SUDHA MISRA)

New Delhi

February 24, 2012

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