Spml Infra Ltd. & Anr vs Sri Gopal Singh

Civil Writ Jurisdiction Case No.1344 of 2014 =========================================================== 1. SPML Infra Ltd., 22 Camac Street, Block-A, 3rd Floor, Kolkata- 700016 (Formerly Known As Subhash Project And Marketing Ltd., Through Its Project Manager, SPML, Infra Ltd., 2. The Project Manager, SPML Infra Ltd., 22 Camac Street, Block- A, 3rd Floor, Kolkata- 700016 .... .... Petitioners Versus 1. The State Of Bihar Through The Principal Secretary, Public Health Engineering Department, Viswshraiya Bhawan, Bailey Road, Patna. 2. Engineer In- Chief- Cum- Special Secretary, Public Health Engineering Department,Viswshwaraiya Bhawan, Bailey Road, Patna. 3. Chief Engineer, Public Health Engineering Department, Visweshraiya Bhawan, Bailey Road, Patna. 4. Superintending Engineer, Public Health Engineering Department, Government Of Bihar, Muzaffarpur Circle, Muzaffrpur- 800015 5. Executive Engineer, Public Health Engineering Department, Government Of Bihar, Hajipur Division, Muzaffarpur- 844101 .... .... Respondents with

=========================================================== Miscellaneous Jurisdiction Case No. 2114 of 2014 IN Civil Writ Jurisdiction Case No. 1344 of 2014 =========================================================== 1. SPML Infra Ltd., 22 Camac Street, Block-A, 3rd Floor, Kolkata- 700016 (Formerly Known As Subhash Project And Marketing Ltd., Through Its Project Manager, SPML, Infra Ltd., 2. The Project Manager, SPML Infra Ltd., 22 Camac Street, Block- A, 3rd Floor, Kolkata- 700016 .... .... Petitioners Versus 1. Sri Gopal Singh, son of not known, Executive Engineer, Public Health Engineering Department, Govt. of Bihar, Hajipur Division, Muzaffarpur- 844101 2. The State of Bihar through Chief Secretary, Public Health Engineering Department .... .... Opp.Parties =========================================================== Appearance : For the Petitioner/s : Mr. Y.V.Giri, Sr.Adv. Mr. Ashish Giri For the Respondent/s : Mr. Lalit Kishore, PAAG Mr. Piyush Lal, AC to PAAG =========================================================== CORAM: HONOURABLE MR. JUSTICE MIHIR KUMAR JHA CAV JUDGMENT Date: 26-11-2015 Patna High Court CWJC No.1344 of 2014 2

Heard learned counsel for the parties.

2. The prayer of the petitioner in this writ application when it

was filed on 16.1.2014 had read as follows:

"i) To issue an appropriate writ/order/direction in the nature of Certiorari for quashing the order dated 22.5.2013 of the Principal Secretary, Public Health Engineering Department, Govt. of Bihar by which decision has already been taken to rescind the contract of the petitioner (Annexure 7). ii) To issue an appropriate writ/order/direction in the nature of Mandamus directing the respondent authorities not to deduct liquidated damages pursuant to the agreement dated 15.4.2010

.

iii) To issue an appropriate writ/order/direction in the nature of Mandamus directing the respondent authorities to refund the amount that has already been deducted unlawfully by way of liquidated damages.

iv) To issue an appropriate writ/order/direction commanding the respondent authorities to decide the dispute raised by the petitioner in its letter dated 3.7.2013 by way of arbitration as per Clause 25 read with letter dated 26.8.2013.

v) To issue an appropriate writ/order/direction preventing the respondent authorities from taking any coercive steps against the petitioner such as cancellation of the contract, forfeiture of security deposit, encashment of bank guarantee etc. unless the issue of default/ dispute as has been raised by the petitioner is adjudicated by an independent arbitrator."

3. Before the writ application with the aforementioned Patna High Court CWJC No.1344 of 2014 3

prayer could be taken up, the petitioner had filed two interlocutory

applications, being I.A.No. 2104/2014 and I.A.No. 4012/2014,

seeking amendment in the relief on account of certain subsequent

developments and these reliefs were for quashing the report dated

3.3.2014 in relation to the meeting held on 26.2.2014 as also for

quashing the order dated 13.5.2014 by which the petitioner‟s contract

dated 15.4.2010 had been rescinded and the security deposit has been

forfeited as well as the petitioner has been blacklisted.

4. This Court in fact by an order dated 16.5.2014 while

adjourning the matter for enabling the learned counsel for the State to

take instruction and file counter affidavit had stayed the operation of

the impugned order dated 13.5.2014 in so far it related to forfeiting of

the security deposit and blacklisting of the petitioner. The aforesaid

order of this Court dated 16.5.2014 in fact reads as follows:

" I.A.No. 2104/2014 & I.A.No.4012/2014.

The two interlocutory applications have been filed for amendment in the reliefs prayed for in the writ application on account of some developments that have taken place and for adding the Joint Secretary, Public Health Engineering Department, Govt. of Bihar as party respondent no.6. The reliefs sought to be added are for quashing the report dated 3.3.2014 in relation to the meeting held on 26.2.2014 as also for quashing the order dated 13.5.2014, by which the petitioner‟s contract dated 15.4.2010 has been rescinded and security deposit has been forfeited and the petitioner has Patna High Court CWJC No.1344 of 2014 4

been blacklisted.

In the facts and circumstances of the case, prayers for amendment of reliefs and addition of party are allowed. I.A.No. 2104/2014 and I.A.No. 4012 of 2014 are, accordingly, disposed of.

Learned counsel for the petitioner submits that the respondents have acted in a most illegal manner contrary to the law laid down of this Court in the case of N.C.C.Ltd. vs. the State of Bihar and others: 2013(1) PLJR 952, in which it has been held that where allegations of default and non- performance of the terms and conditions of the contract against the State authorities are made it is not open to them to sit in judgment over the same and themselves decide the issue.

It is submitted by learned counsel for the petitioner that in the present matter, the respondents have not only cancelled the contract but have also blacklisted the petitioner with the civil consequence of forfeiting the security deposit as also blacklisting which they cannot do. This, according to learned counsel, has been done as against the letter dated 3.7.2013 of the petitioner, in which a specific demand was made for the decision of the dispute by reference to arbitration in terms of clause 25, which is the arbitration clause in the contract. As prayed for by learned counsel for the State, put up on 23.6.2014 in the same position to enable him to file counter affidavit in the matter.

Until further orders, the impugned order dated 13.5.2014, in so far as it relates to forfeiting of the security deposit and the blacklisting of the petitioner, shall remain stayed." Patna High Court CWJC No.1344 of 2014 5

5. Well before 23.6.2014, the date fixed by this Court in the

aforesaid order dated 16.5.2014, the petitioner had again filed two

more interlocutory applications, being I.A.No. 4110/2014 and I.A.No.

4111/2014, during Summer Vacation and a Vacation Bench of this

Court had stayed operation of the order dated 5.6.2014 assailed in

I.A.No.4110/2014, whereby and whereunder a letter was sent by the

Executive Engineer, Public Health Engineering Division, Hajipur to

the State Bank of India for invocation of the Bank guarantee dated

16.3.2013 and making payment of Rs.12,30,00,000/- being subject

matter of three Bank guarantees. The aforesaid interim order dated

10.6.2014 is also reproduced hereinbelow:

" Heard Mr. Y.V.Giri, learned Senior counsel for the petitioner, Mr. P.K.Verma, AAG-5, learned Senior counsel for the State and Mr. K.K.Sinha, learned counsel for the State Bank of India.

I.A.No. 4110 of 2014 and 4111 of 2014.

So far as I.A.No. 4111 of 2014 is concerned, it is an application filed by the petitioners for impleading State Bank of India as mentioned in detail in paragraph no.1 of the interlocutory application as a party respondent to this writ application.

So far as I.A.No. 4110 of 2014 is concerned, this application has been filed by the petitioners praying for stay of the letter dated 5.6.2014 issued by the Executive Engineer, Public Health Division, Hajipur to the State Bank of India by which the bank guarantees dated 16.3.2013, has Patna High Court CWJC No.1344 of 2014 6

been invoked and request has been made to the State Bank of India to pay the sum of Rs.4,40,00000/-, Rs.3,50,00000/-, Rs.4,40,00000/-, total amounting to Rs.12,30,00000/- by way of bank draft in faovur of Executive Engineer, Public Health Division, Hajipur.

According to learned counsel for the petitioners, this bank guarantee was furnished by the petitioners against the mobilization advance given by the State Government. The 90 per cent of the mobilization advance has already been utilized by the petitioners. Further according to learned counsel, this bank guarantee is also a security deposit in the shape of bank guarantee given by the petitioners and by the terms of order dated 16.5.2014, this Court passed an order to the effect that the impugned order dated 13.5.2014 „in so far as it relates to forfeiting of the security deposit and the blacklisting of the petitioners, shall remain stayed‟ but in spite of stay order staying forfeiting of the security deposit, the State Government is invoking the bank guarantee which has been deposited by the petitioner as security for the mobilization advance given by the State Government by the order dated 5.6.2014.

Learned AAG-5, appearing on behalf of the State has submitted that the bank guarantee furnished by the petitioners against the mobilization advance is not a security deposit. In fact the security deposit for the performance of contract was made by the petitioners is only to the extent of Rs.4,40,00000/- and while granting stay order, by the terms of order dated 16.5.2014 forfeiting of that security deposit has been stayed.

Patna High Court CWJC No.1344 of 2014 7 In view of the above submissions of the parties the dispute relates to the question as to whether the bank guarantee furnished by the petitioners against the mobilization advance given by the State Government is security deposit or not. From perusal of the order dated 16.5.2014, it appears that the case has been directed to be listed on 23.6.2014 in order to enable the State counsel to file the counter affidavit.

Learned counsel for the State Bank of India has submitted that he has nothing to do with the bank guarantee of the petitioner and shall abide the order of this Court. In the facts and circumstances of this case when the case is going to be listed on 23.6.2014, it is directed that till then the operation of the impugned order dated 5.6.2014 bearing no. 1307, 1308 and 1309 issued by the Executive Engineer, Public Health Division, Hajipur for payment of three bank guarantees to the extent of Rs.12,30,00000/- shall remain stayed.

In other words, the encashment of the said three bank guarantees total amounting to Rs.12,30,00000/- is stayed till 23.6.2014.

Put up this case on 23.6.2014 in the same position."

6. Let it be noted that on 24.6.2014 the petitioner had filed a

contempt application, M.J.C.No. 2114/2014, alleging violation of the

order of this Court dated 10.6.2014 and this Court by an order dated

24.6.2014 had directed the opposite parties named in the contempt

application to file their show cause reply by 1st July, 2014. By the Patna High Court CWJC No.1344 of 2014 8

same order dated 24.6.2014 the interim order passed on 10.6.2014

was directed to continue.

7. Thereafter when the pleadings have been completed both

the cases were heard leading to the present judgment.

8. Mr. Y.V.Giri, learned Senior counsel for the petitioner,

has submitted that once the petitioner itself had sought to

communicate its foreclosure of the contract on account of non-

fulfilment of the obligatory terms and conditions on the part of the

respondents vide its letter dated 20.4.2013, the decision taken by the

Principal Secretary of the Public Health Engineering Department

(PHED) on 22.5.2013 taking a decision for cancellation of contract of

the petitioner was wholly unsustainable either on fact or in law,

inasmuch as the officials of the PHED could not have taken such a

decision and the matter ought to have been referred to some

independent Arbitrator. In this regard he has placed reliance on the

judgment of this Court in the case of N.C.C.Ltd. v. State of Bihar &

ors., reported in 2013(1) PLJR 952.

9. Proceeding further Mr. Giri had also submitted that once

the petitioner by its letter dated 3.7.2013 had requested for settlement

of all disputes by invoking Clause 25 of the Agreement which was

followed by its another letter dated 26.8.2013 addressed to the Chief

Engineer, PHED, Patna for requesting settlement of dispute and Patna High Court CWJC No.1344 of 2014 9

adjudication of its various claims in terms of Clause 25 of the

Agreement and finally by letter dated 8.10.2013 addressed by the

petitioner to the Principal Secretary, PHED, requesting for

appointment of the Arbitrator for settlement of the dispute in terms of

Clause 25(i) and (ii) of the Agreement, the decision to issue show

cause notice to the petitioner on 20.3.2014 seeking explanation from

the petitioner as to why its agreement should not be cancelled, its

security deposit be not forfeited and the petitioner be not blacklisted

was in teeth of inter-party agreement and specially its arbitration

clause. Mr. Giri, in the same wake, having assailed the show cause

notice has also submitted that the consequential decision taken on

13.5.2014 for cancellation of the agreement with the petitioner as well

as forfeiting the security deposit made by the petitioner and its being

blacklisted on 13.5.2014 was also bad because the petitioner‟s show

cause reply dated 16.4.2014 was not at all considered and the

impugned order dated 13.5.2014 also did not contain reasons for

taking such a harsh decision.

10. Mr. Giri has then come out to explain the alleged

contempt committed by the respondents- opposite parties and in this

regard he has submitted that after the petitioner had given a copy of

the order dated 16.5.2014 to the Engineer-in-Chief of PHED, the

action taken by the Executive Engineer, Hajipur vide his three letters Patna High Court CWJC No.1344 of 2014 10

dated 5.6.2014 bearing No. 1307, 1308 and 1309 informing the State

Bank of India, Kolkata invoking three Bank guarantees all dated

16.3.2013 issued against advance payment was in teeth of the

direction given by this Court in the order dated 16.5.2014. According

to Mr. Giri, the Executive Engineer ought to have not encashed the

Bank guarantee and his receiving the Bank draft on 9.6.2014 from the

authorities of the State Bank of India, Kolkata for a total of Rs.12.30

crores and its being entered by the Cashier in PH Division of the

Executive Engineer on 10.6.2014 as also preparation of Challan on

11.6.2014 and the deposit of the Bank draft in the Treasury on

12.6.2014 were in teeth of the interim order passed by this Court on

10.6.2014.

11. On the basis of these submissions Mr. Giri was of the

view that since the opposite parties have clearly committed contempt

they should not be allowed to be heard on merits unless they first

purge the contempt. Reliance in this regard has been placed by Mr.

Giri on the judgment of the Apex Court in the case of State of Orissa

& anr. V. Aswini Kumar Baliar Singh, reported in (2006)6 SCC 759,

as also in the case of B.S.N. Joshi & Sons Ltd. V. Ajoy Mehta & anr.,

reported in (2009)3 SCC 458, as well as a judgment of the Division

Bench of this Court in the case of Ram Vilas Mishra v. State of Bihar

& ors., reported in 1993(1) PLJR 437.

Patna High Court CWJC No.1344 of 2014 11

12. Per contra, Mr. Lalit Kishore, learned counsel for the

respondents in the writ petition and the opposite parties in the

contempt application, has submitted that first of all there would be no

question of violation of any interim order of this Court, inasmuch as

by the interim order of this Court dated 16.5.2014 only the rescinding

of the petitioner‟s contract dated 15.4.2010 had been stayed apart

from forfeiting the security deposit and blacklisting of the petitioner.

Mr. Lalit Kishore in this regard has explained that the aforesaid

interim order was never violated and in fact that is also not the subject

matter of the contempt application, wherein the petitioner has alleged

contempt only on account of the violation of the order of this Court

dated 10.6.2014.

13. In this regard he has also submitted that whereas the

interim order was passed on 10.6.2014 staying operation of the

impugned order dated 5.6.2014 passed by the Executive Engineer,

Public Health Engineering Division, Hajipur, the said letter had

already been acted upon by the State Bank of India, Kolkata on

9.6.2014 itself by not only invoking of the Bank guarantee but its

encashment as well by giving the amount to the Executive Engineer in

three Bank drafts on 9.6.2014 itself. According to the learned PAAG,

once the entire encashment of the Bank guarantee was already

completed on 9.6.2014, its being entered either in the cash book by Patna High Court CWJC No.1344 of 2014 12

the Executive Engineer on 10.6.2014 or its being deposited in the

Treasury on 11.6.2014 will not amount to committing contempt,

inasmuch as all that was said in the interim order dated 10.6.2014 was

confined to encashment of the Bank guarantee which according to

him had already stood encashed on 9.6.2014 itself well before passing

of the interim order by this Court dated 10.6.2014.

14. Learned PAAG has also submitted that the impugned

order cancelling the contract of the petitioner is strictly in accordance

with the terms and conditions of the agreement and in fact a writ

petition will not be maintainable in presence of arbitration clause in

such agreement specially when the petitioner itself claims to invoke

arbitration clause.

15. In the considered opinion of this Court the encashment

of the Bank guarantee by the Bankers of the petitioner having been

completed on 9.6.2014 itself, inasmuch as admittedly three Bank

drafts to the tune of Rs. 12.30 crores had already been handed over to

the Executive Engineer, PHED, Hajipur on 9.6.2014 by the competent

authority of the Bank, there would be no question of committing any

contempt by the Executive Engineer and therefore, this Court does not

find any merit in the plea of contempt raised by the petitioner.

16. Let it be kept in mind that all that was said by the order

dated 10.6.2014 was that the operation of the impugned order dated Patna High Court CWJC No.1344 of 2014 13

5.6.2014 bearing letter nos. 1307, 1308 and 1309 issued by the

Executive Engineer, Public Health Division, Hajipur for payment of

three Bank guarantees to the extent of Rs.12,30,00,000/- shall remaine

stayed. As noted above, by the aforementioned letter of the Executive

Engineer dated 5.6.2014 bearing Nos. 1307, 1308 and 1309 only a

request was made by the Executive Engineer to the concerned Bank

requesting him to pay the amount covered by the Bank guarantee.

Thus, when the Bank guarantee was already invoked and also Bank

had given resultant Bank draft to the Executive Engineer on 9.6.2014

well before passing of the interim order on 10.6.2014 by this Court,

there would be no question of violation of the first part of the interim

order dated 10.6.2014, inasmuch as the operation of the letter dated

5.6.2014 had already been completed on 9.6.2014.

17. For the same reason this Court would also not find any

violation of clarifying portion of the interim order dated 10.6.2014,

inasmuch as the expression „encashment of Bank guarantee‟ will

always mean that the Bank guarantee which was given by the Bank to

the Executive Engineer was not to be encahsed but then when the

Bank itself had encashed the Bank guarantee by preparing and also

handing over the draft of Rs.12,30,00,000/- to the Executive Engineer

on 9.6.2014, it would be very difficult for this Court to hold the

opposite parties in contempt.

Patna High Court CWJC No.1344 of 2014 14

18. Once this Court finds that no contempt was actually

committed by the opposite parties on account of completion of

encashment of the Bank guarantee well before passing of the interim

order of this Court, there would be no question of application of the

judgment of the Apex Court in the case of Aswini Kumar Baliar

Singh (supra) and in the case of B.S.N. Joshi & Sons Ltd. (supra) or

the Division Bench judgment of this Court in the case of Ram Vilas

Mishra (supra), all of whom proceed on the basis that the contempt

had already been committed, whereafter the opposite parties-

contemnors cannot be heard on merit unless they purge the contempt.

It is here that the facts of the case and the finding arrived by this Court

that no contempt was committed would by itself be sufficient to reject

the submission of Mr. Giri, learned Senior counsel for the petitioners.

19. Reverting back to the main issue as with regard to the

decision taken for cancellation of contract of the petitioner followed

by forfeiture of security deposit and the decision of blacklisting this

Court, in the peculiar facts and circumstances of the case, would find

that when the petitioner itself had sought remedy of arbitration under

the agreement it had no reason to file the writ application. To that

extent the preliminary objection raised by Mr. Lalit Kishore, learned

PAAG, seems to be apt and appropriate, inasmuch as it is not in

dispute that the inter-party agreement between the petitioner and the Patna High Court CWJC No.1344 of 2014 15

respondents had contained the following arbitration clause:

"25. Settlement of Dispute & Arbitration Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in- before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim right matter or thing whatsoever in any way arising out of or relating to contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter.

i) If the contractor considered any work demanded of him to be outside the requirements of the contract, or dispute any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 7 days request the Superintending Engineer in writing for written instruction or decision.

Thereupon, the Superintending Engineer shall given his written instructions or decision within a period of fifteen

days from the receipt of the contractor's letter. If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision Patna High Court CWJC No.1344 of 2014 16

of the Superintending Engineer, the contractor may, within

15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of

receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.

ii) Except where the decision has become final, binding and conclusive in terms of Sub para (i) above disputes or difference shall be referred for adjudication through arbitrator appointed by Engineer-in-Chief or the administrative head of the said P.W.D. If the arbitrator so appointed is unable or unwilling to act or resign his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.

It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute along with the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal. Patna High Court CWJC No.1344 of 2014 17

It is also a term of this contract that no person other than a person appointed by such Engineer-in-Chief or the administrative head of the department as aforesaid should act as arbitrator and if for any reason that is snot possible, the matter shall not be referred to arbitrator at all. It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claim in writing as aforesaid within 45 days of receiving the intimation from the Engineer-in-Charge that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.

The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) or any statutory modifications or re- enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause.

It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties.

It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid Patna High Court CWJC No.1344 of 2014 18

before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid. All arbitration shall be held at Patna and at no other place."

(underlining for emphasis)

20. As a matter of fact when the petitioner itself admits that

it had made repeated requests to the Superintending Engineer, Chief

Engineer and the Secretary to the PHED for taking recourse to

arbitration, the only remedy for the petitioner in case arbitration

clause was not being followed by the respondents was to invoke

Section 11(5) of the Arbitration and Conciliation Act under which this

Court could have passed an order for appointment of Arbitrator. A

writ petition in any view of the matter for the relief sought herein was

not maintainable in presence of the aforesaid arbitration clause.

21. Reference in this connection may be usefully made to the

judgment of the Apex Court in the case of State of U.P. v. Bridge &

Roof Co. (India) Ltd., reported in (1996)6 SCC 22, wherein it was

held as follows:

"21. ... Further the contract in question contains a clause providing inter alia for settlement of disputes by reference Patna High Court CWJC No.1344 of 2014 19

to arbitration. The arbitrators can decide both questions of fact as well as question of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article

226. The existence of an effective alternative remedy- in this case, provided in the contract itself- is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226."

22. The same principle in fact has also been reiterated by the

Apex Court in the case of ABL International Ltd. & anr. V. Export

Credit Guarantee Corporation of India Ltd. & ors., reported in (2004)3

SCC 553, wherein it was held as follows:

"It is well known that if the parties to a dispute had agreed to settle their dispute by arbitration and if there is an agreement in that regard, the court will not permit recourse to any other remedy without invoking the remedy by way of arbitration, unless of course both the parties to the dispute agree on another mode of dispute resolution."

23. Mr. Giri, however, had placed reliance on the judgment

of the Apex Court in the case of Verigamto Naveen v. Govt. of U.P.

& ors., reported in (2001)8 SCC 344, with a specific reference to

paragraph no.21 to contend that a writ petition can be also

maintainable in the matter of contract and it is not that this Court will Patna High Court CWJC No.1344 of 2014 20

non-suit the petitioner only on the ground of parties being bound by

an agreement constituting contract and also containing an arbitration

clause.

24. In the considered opinion of this Court the reliance

placed on the judgment of Verigamto Naveen (supra) is wholly

misplaced, inasmuch as that case was in relation to a statutory

contract flowing out of Mines and Minerals (Regulation and

Development) Act, 1957 and the issue before the Apex Court was

illegal termination of the lease/ sub-lease in violation of the provisions

made in the aforesaid Act. It was in relation to this statutory contract

that the Apex Court in paragraph 21 of the judgment had come to a

finding that the cancellation of contract is subject to the statutory

provision and therefore, the matter cannot be said to be purely arising

out of the contractual field.

25. In the present case it is an admitted position that the

contract in question for design, construction and commissioning of

1500 nos. mini water supply scheme in 26 draught effected districts of

Bihar with provision of electrical pumping set on turn key basis was

never within the realm of statutory contract. Thus, what was said way

back in the case of M/s Radha Krishna Agrawal & ors. v. State of

Bihar & ors., both by this Court as also by the Apex Court in the

judgment reported in AIR 1977 Patna 65 and further by the Apex Patna High Court CWJC No.1344 of 2014 21

Court in AIR 1977 SC 1496, had still remained the good law and has

not been watered down as is being submitted by Mr. Giri by referring

to the case of Verigamto Naveen (supra).

26. As a matter of fact when it is also not in doubt that the

present contract was out and out non-statutory contract, the following

observations made by the Division Bench of this Court in the case of

M/s Radha Krishna Agrawal (supra) has to be squarely made

applicable, inasmuch as this Court had held as follows:

"18. ... ... ... Now the question is as to whether the allegation regarding the breach of the terms of the agreement, either by the petitioner or by the respondent State can be examined by this Court in exercise of its writ jurisdiction. According to the learned counsel appearing for the petitioners the impugned actions are in exercise of executive powers by the State under Article 298 of the Constitution which are amenable to the jurisdiction of this Court. Whether under the writ jurisdiction such dispute can be agitated and decided has been the subject matter of controversy. Such disputes can be put under three groups for the purpose of answering the question:

(i) Where a petitioner makes a grievance of breach of promise on the part of the State in cases wherein assurance or promise made by the State he has acted to his prejudice and predicament, but the agreement is short of a contract within the meaning of Article 299 of the Constitution;

(ii) Where the contract entered into between the Patna High Court CWJC No.1344 of 2014 22

person aggrieved and the State is in exercise of a power under certain Act or Rules framed thereunder and the petitioner alleges a breach on the part of the State; and

(iii) Where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract, and the petitioner complains about breach of such contract by the State.

19. So far as the cases under categories (i) and (ii) are concerned, it is almost settled that the person aggrieved can invoke the writ jurisdiction of this Court. In Union of India v. M/s Anglo Afghan Agencies (AIR 1968 SC 718), Century Spinning and Manufacturing Co. Ltd. v. Ulhasnagar Municipal Council, (AIR 1971 SC 1021) and Robertson v. Minister of Pensions, ((1949)1 KB 227), it was pointed out that public bodies are as much bound as private individuals to carry out representations of facts and promises made by them relying on which other persons have altered their position to their prejudice and in such cases even if the contract has not been embodied in the form prescribed, it can be enforced by a writ in appropriate cases in equity. Similarly in K.N. Guruswamy v. State of Mysore, (AIR 1954 SC 592), D.F.O. South Kheri v. Ram Sanhi Singh, (AIR 1973 SC 295) and Shree Krishna Gynoday Sugar Ltd. v. State of Bihar (AIR 1975 Pat. 123), it has been held that, even if the right to relief arose not of an alleged breach of contract, but the action Patna High Court CWJC No.1344 of 2014 23

of the authority which was being challenged was of a public authority vested with statutory power, this Court, in exercise of its writ jurisdiction, can grant relief to the aggrieved person. On the other hand, in case falling under category (iii), where there is no question of exercise of any statutory power and the rights of the parties flow from mere terms of the contract entered into by the authorities of the State, a party to such agreement should not be allowed to invoke the writ jurisdiction of this Court for the purpose of finding out as to whether there has been a breach of contract on the part of the State or on the part of such person. It is apparent that in such cases there cannot be adjudication without evidence on the point. There is no question of infraction of any rules or statutes. Courts have always called upon such petitioners to seek their remedy in the Civil Court. In this connection reference can be made to a Bench decision of this Court in B.K.Sinha v. State of Bihar (AIR 1974 Pat 230), where Untwalia, C.J. (as he then was) after making a reference to the Supreme Court in Umakant Saran v. State of Bihar (AIR 1973 SC

964); and Lekhraj Sathram Das v. N.M.Shah, (AIR 1966 SC 334) observed:

"Here in the very nature of the contract in question the petitioner had no right to claim its specific performance. The Statute did not impose any legal duty on the authorities concerned that if they thought that the petitioner should not be allowed to complete the work even assuming they thought so wrongly- they could not stop the work ........... A Patna High Court CWJC No.1344 of 2014 24

writ of mandamus cannot issue to compel the authorities to remedy a breach of contract pure and simple."

In the same case at page 231 it was further observed:-

"I am, therefore, definitely of the view that until and unless in the breach is involved violation of certain legal and public duties or violation of statutory duties to the remedy of which the petitioner is entitled by issuance of a writ of mandamus, mere breach of contract cannot be remedied by this Court in exercise of its powers under Article 226 of the Constitution."

(Underlining for emphasis)

27. When the case of Radha Krishna Agrawal (supra) from

this Court had gone to the Apex Court, the same was not only

approved but in fact was further explained in the following words:

"12. The Patna High Court had, very rightly divided the types of cases 'in which breaches of alleged obligation by the State units agents can be set up into three types. These were stated as follows :-

"(i) Where a petitioner makes a grievance of breach of promise on the part of the State in cases where an assurance or promise made by the State he has acted to his prejudice and predicament, but the agreement is short of a contract within the meaning of article 299 of the Constitution;

(ii) Where the contract entered into between the person aggrieved and the State is in exercise of a statutory power Patna High Court CWJC No.1344 of 2014 25

under certain Act or Rules framed thereunder and the petitioner alleges a breach on the pan of State; and

(iii) Where the contract entered into between the State, and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract, and the petitioner complains about breach of such contract by the State."

13. It rightly held that the cases such as Union of India v. M/s. Anglo Afghan Agencies, AIR 1968 SC 718 andCentury Spinning & Manufacturing Co. Ltd. v. Ulhasnagar Municipal Council, AIR 1971 SC 1021; and Robertson v. Minister of Pensions, (1949) 1 KB 227 belong to the first category where it could be held that public bodies or the State are as much bound as private individual are to carry out obligations incurred by them because parties seeking to bind the authorities have altered their position to their disadvantage or have acted to their detriment on the strength of the representations made by these authorities. The High Court thought that in such cases the obligation could sometimes be appropriately enforced on a Writ Petition even though the obligation was equitable only. We do not propose to express an opinion here on the question whether such an obligation could be enforced in proceedings under Article 226 of the Constitution now. It. is enough to observe that the cases before us do not belong to this category."

28. Thus, in the considered opinion of this Court the

judgment of the Division Bench of this Court and the Apex Court in Patna High Court CWJC No.1344 of 2014 26

the case of Radha Krishna Agrawal (supra) will leave nothing for

speculation that the case of the present nature arising out of a non-

statutory contract either with regard to termination of contract or

consequential order of blacklisting will not be maintainable, inasmuch

as the term of the contract itself empowers the departmental

authorities to cancel such contract in certain eventualities.

29. A division bench of this Court following the ratio in

the case of C.K. Achutan (supra) in the case of B.K. Sinha Vs. State of

Bihar reported in AIR 1974 Pat 230 had again reiterated the same

principles by holding as follows:-

"A writ of mandamus cannot issue to compel the authorities to remedy a breach of contract pure and simple."

30. The Apex Court again in the case of Har Shankar Vs.

Dy. Excise & Taxation Commissioner reported in AIR 1975 SC 1121 while

considering the issue of cancellation of retail sale of country liquor

and foreign liquor on account of default in making payment had gone

to hold as follows:-

"Those who contract with open eyes must accept the burdens of the contract along with its benefits. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a Patna High Court CWJC No.1344 of 2014 27

binding force."

31. The overemphasized submission of the learned

counsel for the petitioner that it had completed almost all the work

and it was wholly unfair on the part of the respondents to also forfeit

the amount of security and advances as well as invoking the bank

guarantee would also not impress this Court. Rescinding of contract

having been already set out in Clause-14 of the SBD, already quoted

above, this court would find no error in the action of the respondent in

invoking the bank guarantee. The issue as to whether the amount of

bank guarantee invoked is much more than the value of the work left

to be completed by the petitioner is a question of evidence but the

parties having been bound by the inter-parte agreement also providing

for forfeiture of the security and advance and also rescinding of the

agreement, no complaint can be made if one of the parties has taken

an action well within the terms of the contract. Reference in this

connection may also be usefully made to the judgment of the Apex

Court in the case of Divisional Forest Officer Vs. Bishwanath Tea Co.

reported in AIR 1981 SC 1368 wherein it was held as follows:-

"Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract if contract is capable of being specifically performed, or the party may sue for damages. Such a suit would ordinarily be cognizable by civil court. The High Patna High Court CWJC No.1344 of 2014 28

Court in its extraordinary jurisdiction would not entertain a petition either for specific performance or contract or for recovering damages. A right to relief flowing from a contract has to be claimed in a civil court where a suit for specific performance of contract or for damages could be filed."

32. Yet again, the same view was reiterated in a more

emphatic manner by the Apex Court in the case of Premji Bhai Parmar

Vs. Delhi Development Authority reported in AIR 1980 SC 738 where it was

held as follows:-

"After the State or its agents entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights an obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contact only unless some statutes steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract."

33. This Court would in fact found the present case to be

fully covered by the ratio laid down by the Apex Court in the case of

State of Bihar Vs. Jain Plastic & Chemicals Ltd. reported in 2002(1)SCC 216 Patna High Court CWJC No.1344 of 2014 29

wherein a writ application filed against the deduction of amount from

the final bill to be paid to the contractor due to breach of contract was

held to be not maintainable and the Apex Court had gone to hold that

even if it is possible to decide the question raised in the petition on the

basis of affidavits and counter affidavits, it would not be proper to

exercise extraordinary jurisdiction under Article 226 of the

Constitution in cases of alleged breach of contract.

34. The aforesaid view of the Apex Court in the case of

Jain Plastics and Chemicals Ltd. (supra) has been again reiterated in a

very recent judgment of the Apex Court dated 14.08.2015 in the case

of State of Kerala and others Vs. M.K.Jose reported in 2015(4) PLJR

146 (SC) wherein law has been laid in the following terms :-

13. A writ court should ordinarily not entertain a writ petition, if there is a breach of contract involving disputed questions of fact. The present case clearly indicates that the factual disputes are involved. In State of Bihar v. Jain Plastics and Chemicals Ltd. reported in (2002) 1 SCC 216, a two-Judge Bench reiterating the exercise of power under Article 226 of the Constitution in respect of enforcement of contractual obligations has stated:-

"It is to be reiterated that writ petition under Article 226 is not the proper proceedings for adjudicating such disputes. Under the law, it was open to the respondent to approach the court of competent jurisdiction for appropriate relief for breach of Patna High Court CWJC No.1344 of 2014 30

contract. It is settled law that when an alternative and equally efficacious remedy is open to the litigant, he should be required to pursue that remedy and not invoke the writ jurisdiction of the High Court. Equally, the existence of alternative remedy does not affect the jurisdiction of the court to issue writ, but ordinarily that would be a good ground in refusing to exercise the discretion under Article 226."

35. In the aforesaid case, it has been further observed by the Apex Court:-

"It is true that many matters could be decided after referring to the contentions raised in the affidavits and counter-affidavits, but that would hardly be a ground for exercise of extraordinary jurisdiction under Article 226 of the Constitution in case of alleged breach of contract. Whether the alleged non-supply of road permits by the appellants would justify breach of contract by the respondent would depend upon facts and evidence and is not required to be decided or dealt with in a writ petition. Such seriously disputed questions or rival claims of the parties with regard to breach of contract are to be investigated and determined on the basis of evidence which may be led by the parties in a properly instituted civil suit rather than by a court exercising prerogative of issuing writs."

14. In National Highways Authority of India v. Ganga Enterprises reported in (2003) 7 SCC 410, the respondent Patna High Court CWJC No.1344 of 2014 31

therein had filed a writ petition before the High Court for refund of the amount. The High Court posed two questions, namely, (a) whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act; and (b) whether the writ petition is maintainable in a claim arising out of breach of contract. While dealing with the said issue, this Court opined that:-

"It is settled law that disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India. It has been so held in the cases of Kerala SEB v. Kurien E. Kalathil reported in (2000)6 SCC 293, State of U.P. v. Bridge & Roof Co. (India) Ltd. reported in (1996) 6 SCC 22 and Bareilly Development Authority v. Ajai Pal Singh reported in (1989) 2 SCC 116. This is settled law. The dispute in this case was regarding the terms of offer. They were thus contractual disputes in respect of which a writ court was not the proper forum. Mr Dave, however, relied upon the cases of Verigamto Naveen v. Govt. of A.P. reported in (2001) 8 SCC 344 and Harminder Singh Arora v.

Union of India reported in (1986) 3 SCC 247. These, however, are cases where the writ court was enforcing a statutory right or duty. These cases do not lay down that a writ court can interfere in a matter of contract only. Thus on the ground of maintainability the petition should have been Patna High Court CWJC No.1344 of 2014 32

dismissed."

36. Thus, on the basis of the law laid down by the Apex

Court, as discussed above, there will be no difficulty in coming to the

conclusion that the present writ application as with regard to non-

statutory contract also containing arbitration clause, questioning the

termination of contract as per the terms of the contract, will not be

maintainable.

37. The next submission of Mr. Giri, that once the petitioner

had already sought foreclosure of the contract on account of non-

fulfilment of the terms and conditions under the agreement by the

respondents, the authorities of the PHED could not have taken a

decision for either cancellation of contract or forfeiting the security

amount or blacklisting the petitioner because they could not have been

the judge of their own cause, also seems to be an argument in

desperation. The plain and simple fact is that the petitioner was

awarded a contract to complete the work of design, construction and

commissioning of 1500 nos. mini water supply scheme in 26 draught

effected districts of Bihar with provision of electrical pumping set on

turn key basis and the contract was to be completed within a period of

18 months i.e. 1.4.2010 to 30.9.2011.

38. From the counter affidavit of the respondents it is also

very clear that the petitioner could not complete the work despite Patna High Court CWJC No.1344 of 2014 33

repeated indulgences including extension of time given to it. This

aspect has been explained in paragraph no.6 of the counter affidavit

which reads as follows:

"6(i) The Public Health Engineering Department came out with a tender for the work of design, construction and commissioning of 1500 nos. mini water supply scheme in 26 draught effected districts of Bihar with provision of electrical pumping set on turn key basis with 12 months of O & M after trial run of three months for the contract price of Rs.220,00,00,000/- (Rupees Two hundred twenty crores only) vide letter no.6 dated 1.4.2010. The bid of this petitioner was accepted by the then Chief Engineer (Urban), PHED and the then Executive Engineer of P.H.Division, Hajipur signed the agreement on behalf of Engineer-in-Chief cum Special Secretary, PHED, Bihar on 15.4.2010. In this way, the agreement was for the value of Rs.220 crores and the completion period of 18 month starting from 1.4.2010 and finishing on 30.9.2011 were granted under the agreement. The terms of agreement would be governed by the General Conditions of Contract dated 1.4.2010.

(ii) That after contact/ agreement, firstly the contractor/ petitioner submitted the design and drawings on 13.7.2010 for approval the sites of 760 work of mini water supply of electric pumping set in Patna Division and after verification the Regional Chief Engineer, Patna approved on 19.7.2010 and handed over the approved design and drawings to the agency of the petitioner to work.

(iii) That secondly the contractor/ petitioner submitted Patna High Court CWJC No.1344 of 2014 34

design and drawings on 11.7.2010 for approval the construction work of 515 sites of mini water supply of electric pumping set and after verification the Chief Engineer, Bhagalpur approved the design and drawing on 15.7.2010 and handed over the design and drawings to the agency of the petitioner/ contractor.

(iv) That thirdly the contractor/ petitioner submitted designs and drawings of 225 sites on 15.5.2010 and the same was approved by the Chief Engineer, Muzaffarpur on 8.6.2011 and handed over to the agency of the petitioner/ contractor.

(v) That it is relevant to mention here that the respondents handed over location of 880 sites for completion the work within time as per the agreement, but the petitioner/ contractor has completed the work and established only 26 electric pumping sets till 15.10.2011.

It is also relevant to mention here that the respondents handed over 349 sites after 15.10.2011 for completion the work of electric pumping set of 349 sites in different districts and thus the respondents handed over total 1229 sites out of 1500 sites in different districts, but the petitioner/ contractor only completed the work of 115 sites since after 15.10.2011 and 230 sites are pending and on query the respondents found that the petitioner/ contractor slowed down the work after March, 2012 and stopped their work since March, 2013.

(vi) That as per terms and conditions as laid down in clause 10B(ii) of the agreement that mobilization amount may not be given exceeding 10% of the tendered value, if request made by the contractor in writing within one month of the Patna High Court CWJC No.1344 of 2014 35

order to commence the work and mobilization amount of 10% may be given in two or more than two installments, if the contractor executes a Bank guarantee/ Bond from a scheduled Nationalized Bank but the same is not applicable in clause 10B(ii) of the contract.

It is relevant to mention here that the contractor submitted application before respondents with a prayer to grant mobilization advance vide letter no. 125 dated 15.2.2010 and thereafter the respondents decided to grant mobilization amount in three installments to the petitioner/ contractor vide official letter no.1574 dated 12.5.2010 so that contractor may complete the work within time under the provisions of 10B(ii) clause of the contract.

It is also relevant to mention here that recovery of such sums advance shall be made by deduction from the contractor‟s bills commencing after first ten percent of gross value of the work as per provision 10B sub-clause (iv).

(vii) That the respondents handed over the list of 880 sites before 15.10.2011 for completion of the work of electric pumping set, but the petitioner/ contractor only completed the work of 26 sites of electric pumping set. It is out and out to place mention here that the respondents also given the list of 349 sites to the petitioner/ contractor after the lapse period, but the contractor only completed the work of 89 items and thus the contractor only completed the work of 115 sites of electric pumping set and work of 230 sites is pending as yet. Reason best known to the petitioner/ contractor. The respondents made several correspondences to the contractor, but the petitioner/ contractor has not Patna High Court CWJC No.1344 of 2014 36

followed the instructions of the respondents which shows his malafide intention and his intentions is to digest the mobilization amount and the contractor also finally stopped the work since March, 2013.

(viii) That the petitioner/ contractor submitted bill of Rs.2942.26024 Lac for the different districts and after verification of Rs.2133.93974 Lac was paid and Rs.267.5238 Lac is pending due to defect of bills. And the petitioner/ contractor submitted bills of Rs.559.61717 Lac without work.

(ix) That the petitioner/ contractor admitted that he completed the installation work of 115 items of electric pumping set and deposited the cost for supply of electric power of 104 items and cost for supply of electrical power of 11 items has not been deposited as yet.

The petitioner/ contractor also accepted before the respondents that the work for installation of 230 items is going on but there is no three phase line in 66 items of pumping set. The petitioner/ contractor accepted that he deposited the cost for supply of electrical power of 13 items but he has not deposited the cost for supply of electrical power of 53 items. Thus, it appears that there is laches and negligency on the part of the petitioner/ contractor and made violation of the agreement.

And the petitioner/ contractor has not done the work as per the agreement and committed mischief.

(x) That the petitioner/ contractor submitted a presentation as per clause-25 of the contract for Arbitration on 3.7.2013 before Superintending Engineer, P.H.Divisoin, Muzaffarpur, Patna High Court CWJC No.1344 of 2014 37

but the petitioner/ contractor has not proceeded as per the document of Arbitration and the respondents become confirmed that due to malafide intention and negligence of the contractor/ petitioner has not proceeded as per the norms of contract as yet.

(xi) That the petitioner/ contractor submitted bills for mobilization advance of different districts of Bihar before the respondents and the respondents made advance payment of Rs.1495.43944 Lac and Rs.224.72359 Lac has ben adjusted by the different districts from the contractor in different bills and mobilization amount of Rs.1270.71595 as well as interest is lying with the contractor.

(xii) That after lapse of the contract period, authority of the concerned department directed the firm to expedite the work project but in spite of the several reminders and notices from the different concerned P.H. Divisions the progress of the project remained slow and sluggish. The contractor has not pay heed towards the direction of the authority.

(xiii) That on 26.2.2014 a meeting was held by the Joint Secretary (Management Cell), PHED, Patna in presence of the several concerned Executive Engineers as well as the representatives of the firm and fully discussed the grievances of the contractor and lastly it was decided that the contractor has committed illegalities and gross negligency towards the work handed over to him causing irreparable damage to the people of drought affected districts, the meeting was resolved with a direction to recover the mobilization advance and cancel the contract and also forfeit the security amount of the contractor.

Patna High Court CWJC No.1344 of 2014 38

(xiv) That it is relevant to mention here that the total amount of Rs.1495.43944 (Mobilization Advance) has been given to the petitioner/ contractor so that he may proceed towards the work speedily and Rs.224.72349 is adjusted by the respondents and Rs.1274.38376 as well as interest is liable to be adjusted from the petitioner/ contractor.

(xv) That the work of petitioner/ contractor is not satisfactory in spite of several directions given by the respondents and villagers of several draught affected districts have not taken the benefit of water supply. And the people remained deprived from the basic need of drinking water supply in spite the best effort of respondents. It is relevant to mention here that in spite of approval of designs and drawings of 1085 sites and handed over 800 sites with NOC for starting the work, but the contractor has not completed the work causing loss to the mass suffering for drinking water and hampered the citizens of the draught affected districts of Bihar.

Under the facts it appears that the petitioner/ contractor with malafide intention induce the respondents to grant mobilization advance and after getting the said amount the petitioner/ contractor has not completed the work as per the agreement and dishonestly withheld the amount of Rs.1274.38376 which was liable to be recovered and for that reason the three Bank Guarantees given against the mobilization advance were invoked on 6.6.2014. The State Bank of India, Kolkata office paid the Bank Guarantee on 9.6.2014 after seeking legal opinion from their own Lawyer."

Patna High Court CWJC No.1344 of 2014 39

39. This Court is not going to hold for the time being as to

who was the erring party but this much becomes clear from the stand

taken by both the petitioner and the respondents that a contract which

was given by the respondents to the petitioner was not completed

within the prescribed period and the claim of the petitioner is that the

respondents had failed in furnishing and fulfilling the conditions for

execution of the contract by it, whereas the respondents have come

out to say that it was the petitioner which had failed to complete the

work despite of the co-operation extended by the departmental

authorities. In fact the pleadings on record will be sufficient to show

that there was/ is presence of a dispute as defined under the

Arbitration Act and its resolution can be made possible only by

leading of evidence both oral and documentary before the Arbitrator

as per the dispute resolution mechanism evolved, agreed and entered

into between the parties.

40. The only submission of Mr. Giri, that the departmental

authorities could not have decided as to whether the petitioner was the

erring person either on fact or in law and the matter should have been

left in the hands of the independent authorized person, would in fact

amount to rewriting of the terms and conditions of the agreement.

41. The submission of Mr. Giri, learned Senior counsel for

the petitioner, that authorities of the department could not have taken Patna High Court CWJC No.1344 of 2014 40

an action because it was a party to the agreement and the matter had to

be referred to a neutral person for determining as to whether the

petitioner had committed any breach of terms and conditions of the

agreement, has to be also noted for its being rejected.

42. The reliance of the learned counsel for the petitioner to

certain observations made in this regard in paragraph no.26 in the case

of M/s NCC Ltd. (supra) seems to be wholly misplaced, inasmuch as

some observation therein on the basis of a judgment of Apex Court in

the case of M/s J.G.Engineers Private Ltd. v. Union of India & anor.,

reported in (2011)5 SCC 758, is far too wide and in fact not at all

contextual, inasmuch as in the case of M/s J.G.Engineers Pvt. Ltd.

(supra) the issue actually before the Apex Court was with regard to

correctness of an award of the arbitrator. The terms and conditions of

the agreement were, therefore, pressed into action to examine as to

whether the counter claim of the Union of India against the contractor

M/s J.G.Engineer could be rejected by the arbitrator in view an

unilateral decision of the authorities of the Union of India. Let it be

noted that the arbitrator had held that the contractor had committed no

delay and thus, was entitled to certain relief of payment of amount

under the terms and conditions of the agreement as claimed by it in

the arbitration proceeding but the High Court had reversed the

decision of the arbitrator against which the contractor M/s Patna High Court CWJC No.1344 of 2014 41

J.G.Engineers had moved the Apex Court.

43. It was actually in that context that certain observations were

made by the Apex Court with regard to unilateral decision taken by

the department which were examined by the arbitrator and were found

to be not correct. The said judgment of M/s J.G.Engineers Pvt. Ltd.

(supra), therefore, is not an authority that in no case the department or

the Government awarding contract can take its decision as also annul

the contract on the ground of violation of terms and conditions of the

contract and for each and every issue such decision has to be taken by

a neutral person.

44. Such observation made by this Court in the case of M/s

N.C.C. (supra) said to be based on the judgment of the Apex Court in

the case of M/s J.G.Engineers Pvt. Ltd. (supra) would actually place

the contractor on dictating terms because firstly it would default in

completing work and then it would expect the department to refer the

matter to a neutral person to adjudicate as to whether there was no

fault on the part of the contractor. That, however, is not even the ratio

of the judgment of the case of M/s J.G.Engineer Pvt. Ltd. (supra)

which in fact lays down the law only with regard to the grounds on

which the award of the arbitrator can be interfered by the Court in

exercise of power under section 34 of the Arbitration and Conciliation

Act. Thus, whatever has been held by the learned Single Judge in the Patna High Court CWJC No.1344 of 2014 42

case of M/s NCC Ltd. (supra) on the basis of ratio laid down by the

Apex Court in the case of M/s J.G.Engineers Pvt. Ltd. (supra) does

not seem to be correct ennunciation of law.

45. The view of learned Single Judge in the case of M/s N.C.C.

(supra) even other wise cannot be made applicable to the facts of the

present case of the petitioner because in this case such power in the

agreement has been vested to the department to take action against

the defaulting contractor in case of breach of terms and conditions of

the agreement as clearly spelt out in different clauses forming part of

the contract. If the wide proposition laid down by the learned Single

Judge in the case of M/s NCC Ltd. (supra) is accepted to be correct

enunciation of law, this Court would find it difficult to allow any

contractor to be subjected to determination or cancelling any contract

though it may have agreed to it with its open eyes, as the petitioner

had, while entering into the agreement, Clause 3 whereof reads as

follows:

"CLAUSE 3 When Contract can be determined/Rescined Subject to the other provisions contained in this clause the Engineer-In-Charge may, without prejudice to his any other rights or remedy against the contractor in respect of any delay inferior workmanship, any claims for damages and/or any other provisions of this contract or otherwise, and whether the date of completion has or has not elapsed, Patna High Court CWJC No.1344 of 2014 43

by notice in writing absolutely determine the contract in any of the following cases :

i) It the contractor having been given by the Engineer-in-Charge a notice in writing to rectify, reconstruct or replace any defective work or that the work is being performed in an inefficient or otherwise improper or unworkman like manner shall omit to comply with the requirement of such notice for a period of seven days thereafter.

ii) If the contractor being a company shall pass a resolution or the court shall make an order that the company shall be wind up or if a receiver or a manager on behalf of a creditor shall be appointed or if circumstances shall arise which entitle the court or the creditor to appoint a receiver or a manager or which entitle the court to make a winding up order.

iii) if the contractor has, without reasonable cause, suspended the progress of thework or has failed to proceed with the work with due diligence so that in the opinion of the Engineer-in-Charge (which shall be final and binding) he will be unable to secure completion of the work by the date of completion and continues to do so after a notice in writing of seven days from the Engineer-in-Charge.

iv) If the contractor fails to complete the work within the stipulated date or items of work with individual date of completion, if any stipulated, on or before such date(s) of completion and does not complete them within the period specified in a notice Patna High Court CWJC No.1344 of 2014 44

given in writing in that behalf by the Engineer-in- Charge.

v) If the contractor persistently neglects to carry out his obligations under the contract and/or commits default in complying with any of the terms and conditions of the contract and does not remedy it or take effective steps to remedy it within 7 days after a notice in writing is given to him in that behalf by the Engineer-in-Charge.

vi) If the contractor commits any acts mentioned in Clause 21 hereof:

vii) If the work is not started by the contractor within 1/8th of the stipulated time subject to the maximum of 45 days.

When the contractor has made himself liable for action under any of the cases aforesaid, the Engineer-in- Charge on behalf of the Governor of Bihar shall have powers :

a) To determine or rescind the contract as aforesaid (of which termination or rescission notice in writing to the contractor under the hand of Engineer-

in-Charge shall be conclusive evidence). Upon such determination or rescission the Earnest Money Deposit, Security Deposit already recovered and Performance Guarantee under the contract shall be liable to be forfeited and shall be absolutely at the disposal of the Government.

b) After giving notice to the contractor to measure up the work of the contractor and to take such Patna High Court CWJC No.1344 of 2014 45

whole, or the balance or part thereof as shall be un- executed out of his hands and to give it to another contractor to complete the work. The contractor, whose contract is determined or rescinded as above, shall not be allowed to participate in the tendering process for the balance work.

In the event of above course(s) being adopted by the Engineer-in-Charge, the contractor shall have no claim to compensation for any loss sustained by him by reasons of his having purchased or procured any materials or entered into any engagements or made any advances on account or with a view to the execution of the work or the performance of the contract. And in case action is taken under any of the provision aforesaid the contractor shall not be entitled to recover or be paid any sum for any work thereof or actually performed under this contract unless and until the Engineer-in-Charge has certified in writing the performance of such work and the value payable in respect thereof and he shall only be entitled to be paid the value so certified.

46. Yet again Clause 14 of the agreement of the petitioner had

itself stipulated for cancellation of contract in full or part on the

certain eventuality which again for the sake of clarity and convenience

is quoted hereinbelow:

"CLAUSE 14 Cancellation of Contract in full or part If the contractor :

i) at any time makes default in proceeding with Patna High Court CWJC No.1344 of 2014 46

the works or any part of the work with due diligence and continues to do so after a notice in writing of 7 days from the Engineer-in-Charge; or

ii) Commits default to comply with any of the terms and conditions of the contract and does not remedy it or take effective steps to remedy it within 7 days after a notice in writing is given to him in that behalf by the Engineer-in-Charge; or

iii) Fails to complete the works or items of work with individual dates of completion, on or before the date(s) of completion, and does not complete them within the period specified in a notice given in writing in that behalf by the Engineer-in-Charge; or

iv) Shall offer or give or agree to give to any person in Government service or to any other person on his behalf any gift or consideration of any kind as an inducement or reward for doing or forbearing to do or for having done or forborne to do any act in relation to the obtaining or execution of this or any other contract for Government; or

v) Shall enter into a contract with Government in connection with which commission has been paid or agreed to be paid by him or to his knowledge, unless the particulars of any such commission and the terms of payment thereof have been previously disclosed in writing to the Accepting Authority/Engineer-in- Charge; or

vi) Shall obtain a contract with Government as a result of wrong tendering or other non-bonafide Patna High Court CWJC No.1344 of 2014 47

methods of competitive tendering; or

vii) Being an individual, or if a firm, any partner thereof shall at any time be adjudged insolvent or have a receiving order or order for administration of his estate made against him or shall take any proceedings for liquidation or composition (other than a voluntary liquidation for the purpose of amalgamation or reconstruction) under any Insolvency Act for the time being in force the sequestration of his estate or if a trust deed be executed by him for benefit of his creditors; or

viii) Being a company, shall pass a resolution or the Court shall make an order for the winding up of the company, or a receiver or manager on behalf of the debenture holders or otherwise shall be appointed or circumstances shall arise which entitle the Court or debenture holders to appoint a receiver or manager; or

ix) Shall suffer an execution being levied on his goods and allow it to be continued for a period of 21 days; or

x) Assigns, transfers, sublets (engagement of labour on a piece-work basis or of labour with materials not to be incorporated in the work, shall not be deemed to be subletting) or otherwise parts with or attempts to assign, transfer sublet or otherwise parts with the entire works or any portion thereof without the prior written approval of the Competent Authority;

The Competent Authority may, without prejudice to any other right or remedy which shall Patna High Court CWJC No.1344 of 2014 48

have accrued or shall accrue hereafter to Government, by a notice in writing to cancel the contract as a whole or only such items of work in default from the Contract. The Engineer-in-Charge shall on such cancellation by the Competent Authority have powers to :

(a) Take possession of the site and any materials, constructional plant, implements stores, etc., thereon; and/or

(b) Carry out the incomplete work by any means at the risk and cost of the contractor.

On cancellation of the contract in full or in part, the Engineer-in-Charge shall determine what amount, if any, is recoverable from the contractor for completion of the works or part of the works or in case the works or part of the works is not to be completed, the loss of damage suffered by Government. In determining the amount, credit shall be given to the contractor for the value of the work executed by him up to the time of cancellation, the value of contractor's materials taken over and incorporated in the work and use of plant and machinery belonging to the contractor.

Any excess expenditure incurred or to be incurred by Government in completing the works or part of the works or the excess loss or damages suffered or which may be suffered by Government as aforesaid after allowing such credit shall without prejudice to any other right or remedy available to Patna High Court CWJC No.1344 of 2014 49

Government in law be recovered from any moneys due to the contractor on any account, and if such moneys are not sufficient the contractor shall be called upon in writing and shall be liable to pay the same within 31 days.

If the contractor fails to pay the required sum within the aforesaid period of 30 days the Engineer-in- Charge shall have the right to sell any or all of the contractors unused materials, constructional plant, implements, temporary buildings, etc. and apply the proceeds of sale thereof towards the satisfaction of any sums due from the contractor under the contract and if thereafter there be any balance is outstanding from the contractor, it shall be recovered in accordance with the provisions of the contract.

Any sums in excess of the amounts due to Government and unsold materials, constructional plant, etc., shall be returned to the contractor, provided always that if cost or anticipated cost of completion by Government of the works or part of the works is less than the amount which the contractor would have been paid had he completed the works or part of the works, such benefit shall not accrue to the contractor."

(Underlining for emphasis)

47. The aforesaid underlined stipulations made in the agreement

have been quoted in extenso only for the purpose to show that the

competent authority of the department has been vested full power and

authority to take action against the contractor and therefore, it will be Patna High Court CWJC No.1344 of 2014 50

very difficult for this Court to accept the submission of the learned

counsel for the petitioner that in no event any action can be taken

against the contractor by the authorities of the department and such a

decision, as to whether any default was committed by the contractor,

has to be decided only by a neutral person. That in fact again would

be firstly amount to enforcing the terms and conditions of the contract

and that too of a non-statutory contract which cannot be done in writ

jurisdiction under Article 226 of the Constitution of India in view of

law laid down by the Apex Court in the case of Radha Krishna

Agrawal (supra). Secondly as per stipulation made in Clause 3 and 14

of the Agreement if the contractor makes a default or causes breach of

terms and conditions it is the competent authority of the department

who has been vested power to take appropriate action not only for

determination of contract but also taking other penal measures.

48. As a matter of fact it is for this reason that the terms of

agreement had envisaged that if the contractor becomes aggrieved on

account of any action taken by the competent authorities of the

department within the terms and conditions of the contract that a

provision for arbitration in Clause 25 of the Agreement has been also

made as has been already quoted above. The dispute in fact relating to

the agreement in any form can arise only when the department will

take a decision against the contractor and the remedy in such cases Patna High Court CWJC No.1344 of 2014 51

would be only the arbitration and nothing else.

49. The petitioner also cannot expect this writ Court to decide

as to whether it had justified reasons either in not completing the work

or seeking extension of time because even the issue of extension of

time is not a matter of right and is well covered by Clause 5 of the

Clause of contract which reads as follows:

"CLAUSE 5 Time and Extension for Delay The time allowed for execution of the Works as specified in the Schedule 'F' or the extended time in accordance with these conditions shall be the essence of the Contract. The execution of the works shall commence from such time period as mentioned in letter of acceptance or from the date of handing over of the site whichever is later. If the Contractor commits default in commencing the execution of the work as aforesaid, Government shall without prejudice to any other right or remedy available in law, be at liberty to forfeit the security deposit absolutely.

5.1 As soon as possible after the contract is concluded the Contractor shall submit a Time & Progress Chart for each milestone and get it approved by the Department. The Chart shall be prepared in direct relation to the time stated in the Contract documents for completion of items of the work. It shall indicate the forecast of the dates of commencement and completion of various trades or sections of the work and may be amended as necessary by agreement between the Engineer-in-Charge and Contractor within the limitations of time imposed in the contract documents, and further to Patna High Court CWJC No.1344 of 2014 52

ensure good progress during the execution of the work, the contractor shall in all cases in which the time allowed for any work, exceeds one month (save for special jobs for which a separate Programme has been agreed upon) complete the work as per milestone given in schedule 'F'.

5.2 If the work(s) be delayed by.

i) force majeure, or

ii) Serious loss or damage by fire, or

iii) Civil commotion, local.

iv) delay on the part of other contractors or tradesmen engaged by Engineer-in-Charge in executing work not forming part of the Contract, or

v) non-availability of stores, which are the responsibility of Government to supply or

vi) non-availability or break down of tools and Plant to be supplied or supplied by Government or

vii) any other cause which, in the absolute discretion of the authority mentioned in Schedule 'F' is beyond the Contractor's control.

then upon the happening of any such event causing delay, the Contractor shall immediately give notice thereof in writing to the Engineer-in-Charge but shall nevertheless use constantly his best endeavors to prevent or make good the delay and shall do all that may be reasonably required to the satisfaction of the Engineer-in-Charge to proceed with the works.

5.3 Request for the rescheduling of Milestones and extension of time, to be eligible for consideration, shall be made by the contractor in writing within fourteen days of the Patna High Court CWJC No.1344 of 2014 53

happening of the hindering event causing delay on the prescribed form. The Contractor may also, if practicable, indicate in such a request the period for which extension is desired.

5.4 In any such case the authority mentioned in Schedule 'F' may give a fair and reasonable extension of time and reschedule the milestones for completion of work. Such extension shall be communicated to the Contractor by the Engineer-in-Charge in writing, within 3 months of the date of receipt of such request. Non application by the contractor for extension of time shall not be a bar for giving a fair and reasonable extension by the Engineer-in-Charge and this shall be binding on the contractor.

5.5 The basic centerlines, reference points and benchmarks will be fixed by the department. The contractor shall established at his own cost at suitable points, additional reference lines and bench marks as may be necessary and instructed by the engineer-in-charge. The contractor shall remain responsible for the sufficiency and accuracy of all the bench marks and reference lines."

(underlining for emphasis)

50. Thus, merely because the petitioner had filed an application

for extension of time and the same was in any way under

consideration would not mean that on non-completion of work even

upto 80% in a period of four years from the date of award of the

contract for which the completion period was from 01.04.2010 to

30.09.2011 no action could have been taken against the petitioner Patna High Court CWJC No.1344 of 2014 54

save and except to refer the matter to a neutral person to adjudicate as

to whether the petitioner on account of non-completion of work had

become defaulter. The ratio laid down by the Apex Court in the case

of M/s J.G.Engineers Pvt. Ltd. (supra) in no view of the matter does

go to this extent and in fact whatever observations have been made

therein in relation to examining the correctness of an award in terms

of section 34 of the Arbitration and Conciliation Act cannot have such

a far consequence that the department having awarded the contract to

a contractor within the specified terms and conditions of the

agreement will become a slave and captive in the hand of the

contractor and will also be compelled to keep on awarding fresh

contract to a contractor irrespective of default made by him by way of

non-completion of work.

51. The next submission of Mr. Giri that the impugned order

does not contain the reasons and as such, the same would be in

violation of the principles of natural justice because whatever was

stated by the petitioner in the show cause reply has not been taken into

consideration also does not appeal to this Court for two reasons,

firstly, the Division Bench of this Court in the case of M/s Radha

Krishna Agrawal (supra) has specifically held that the adherence to

the principles of natural justice will not be applicable in a purely

contractual matter arising out of non-statutory contract and in this Patna High Court CWJC No.1344 of 2014 55

regard this Court has said as follows:

"Learned counsel for the petitioners contended that even in cases of exercise of contractual right of termination of a lease principles of natural justice are attracted. I do not think that it is a correct legal proposition. No case was brought to our notice either of the Supreme Court or any of the High Courts in India which has taken the view that before exercising the right or option to terminate an agreement or lease in terms thereof contracting party must be given an opportunity to have his say in the matter. Even on principle I do not think that it is possible to accept the contention. Although it is true, as observed by Lord Denning, M, R. in Gaming Board for Great Britain ex parte Benaim (1971) 1 AE. RH 1148 that it is not possible to lay down rigid rules as to when the principles of natural justice are to apply", yet cases firmly establish that the circumstances in which or the occasion where the action under challenge has been taken, determines the applicability of the rules of natural justice. It has been held by A. N. Ray J. (as he then was) speaking for the Court in Daud Ahmad v. District Magistrate, Allahabad, (AIR 1972 SC 896 at p. 899). "It is the nature of power and the circumstance and conditions under which it is exercised that will occasion the invocation of the principles of natural justice."

I may also usefully refer to what was said by the Privy Council in Durayappan, v. Fernando (1967) 2 A. C. 337 at p. 349. Giving the opinion of the Board Lord Upjohn said "In their Lordships' opinion there are three Patna High Court CWJC No.1344 of 2014 56

matters which must always be borne in mind when considering whether the principle should be applied or not. These matters ars ..... Secondly, in what circumstances or upon what, occasion is the person daiming to be entitled to exercise the measure of control entitled to intervene." To put the same matter tersely borrowing the phrase of Lord Denning. "Every thing depends on the subject matter". In my view, unless the Court is of the opinion that the occasion or circumstances for the exercise of power is such, that it would be unfair or unjust to the party affected by action taken, to be visited by the consequences thereof, unless it had been given an opportunity to have his say in the matter, the principles of natural justice are not attracted. In my view the exercise of contractual right is not such an occasion. There is nothing unjust or unfair in a party terminating a contract, even without giving the other party an opportunity to have his say in the matter, on the basis of the express right conferred by the contract itself. The very nature and occasion of the exercise of right flowing as it does from the contract, is such as to exclude the applicability of the rules of natural justice. Further it is to be observed that when a right to terminate a lease, on the ground of the existence of conditions which give a right of termination, has been exercised, it is open to the party exercising the option to justify the action taken, if properly challenged, not only on the grounds which were under contemplation when the action was taken, but also on other grounds which are available in law to the Patna High Court CWJC No.1344 of 2014 57

contracting party in terms of the agreement. This is an additional reason as to why rules of natural justice cannot be held to be attracted in cases where a lease has been terminated in terms of the contract itself."

(Underlining for emphasis)

52. Secondly, even on going through the content of the

impugned order of cancellation of contract of the petitioner dated

13.5.2014 which essentially has to be read in the backdrop of the

show cause notice issued to the petitioner on 20.3.2014 it would

become clear that there was a full application of mind by the

authorities before passing the impugned order. Let it be kept in mind

that apart from various communications and reminders periodical

assessment of the work done by the petitioner was made and it was

noticed that after March, 2013 the petitioner had failed to do any

work. Thus, the petitioner in the show cause notice was directed to

explain on specific issues as would be evident from perusal of the

show cause notice dated 20.3.2014 which for the sake of clarity and

convenience is quoted hereinbelow:

^^fcgkj ljdkj yksd LokLF; vfHk;a=.k foHkkx i=kad&6@izk0vk0&111@11&645 iVuk] fnukad 20-3-14 izs"kd] t;'kadj pkS/kjh vfHk;ark izeq[k&lg&fo'ks"k lfpo Patna High Court CWJC No.1344 of 2014 58

lsok esa] ,l0ih0,e0,y0 bUQzk fy0] 22] dSesd LVzhV] CykWd&, rhljk rYyk] dksydkrk&700016@ ,Q&27@2] vks[kyk bUMLVzh;y ,fj;k] QSt&AA ubZ fnYyh&110020 fo"k;& jkT; ds lq[kkM+ izHkkfor 26 ftykssa esa fo|qr iai pkfyr iai ds lkFk 1500 feuh ikbZi tykiwfrZ ;kstukvksa ds dk;kZUo;u gsrq VuZ&dh ds vk/kkj ij vkeaf+=r fufonk esa foHkkxh; dk;Z vkoaVu la[;k&6@izk0vk0&103@10&1082] fnukad 01-04-2010 ds laca/k esaA egk'k;] mi;qZDr fo"k; ds lEcU/k esa dguk gS fd jkT; ds lq[kkM+ izHkkfor 26 ftykssa eas fo|qr pkfyr iai ds lkFk feuh tykiwfrZ tykiwfrZ ;kstuk ds dk;kZUo;u gsrq foHkkxh; i=kad&1082 fnukad 01-04-2010 ds }kjk vkidks dk;Z vkoaVu fd;k x;k gSA rnuqlkj vkids }kjk yksd LokLF; izeaMy] gkthiqj esa ,djkjukek fd;k x;k gSA ,djkjukek ds vuqlkj ;kstuk dks iw.kZ djus dh vof/k 18 ekg Fkh] tks fnukad 15-10-2011 dks lekIr gks pqdh gSA ,djkjukek ds vuqlkj ;kstuk dks iw.kZ dj rhu ekg ds lQy Vzk;y ju ds i'pkr ;kstuk dk ckjg ekg rd O&M dk dk;Z vkids }kjk fd;k tkuk gSA ;kstukvksa dh izxfr dh leh{kk le; le; ij vkids lkFk dh x;h gSA ijUrq] ;kstuk ds dk;kZUo;u dh izxfr dkQh /kheh ,oa vlarks"kizn jghA dk;Zikyd vfHk;ark] yksd LokLF; izeaMy] gkthiqj }kjk ;kstuk dh izxfr vlarks"ktud jgus ds dkj.k vkidks iwoZ esa uksfVl Hkh fn;k x;k gS ,oa mlds ckn Hkh vkids }kjk dk;Z dh izxfr ykus esa dksbz vfHk:fp ugha fn[kkbZ x;h gSA ekpZ 2013 ls ;kstuk dk dk;Z yxHkx can dj gSA ,slh ifjfLFkfr dks /;ku esa j[krs gq, foHkkx }kjk lacaf/kr dk;Zikyd vfHk;aark] v/kh{k.k vfHk;ark ,oa {ks=h; eq[; vfHk;ark ds lkFk ;kstuk ds dk;ksZa dh izxfr dh leh{kk fnukad 26-02-2014 dks eq[;ky;] iVuk esa dh x;h] ftlesa vkids izfrfu/k esa 'kkfey gq;s ¼cSBd dh dk;Zokgh dh Nk;kizfr layXu½A vkids }kjk dk;kZfUor dh tk jgh ;kstukvksa dh izxfr esa visf{kr izxfr ugh gksus ds laca/k esa fo'ks"k :i ls ppkZ mDr cSBd esa dh x;h ,oa fofHkUu fcUnqvksa ij fLFkfr fuEuor gSA& Patna High Court CWJC No.1344 of 2014 59

 ;kstuk ds fMtkbu ,oa Mzkbax dk vuqeksnu ,djkjukek esa ;kstuk ds dk;kZUo;u gsrq fMtkbZu ,oa Mzkbax dk vuqeksnu lacaf/kr {ks=h; eq[; vfHk;ark }kjk fd;s tkus dk izko/kku gSA mDr vkyksd esa vkids }kjk iVuk iz{ks= ds vUrxZr 760 feuh tykiwfrZ ;kstuk ds fuekZ.k gsrq fMtkbZu ,oa Mzkbax fnukad 13-07-2010 dks lefiZr fd;k x;kA ftls tkapksijkar fnukad 19-07-2010 dks {ks=h; eq[; vfHk;ark iVuk }kjk vuqeksfnr fd;k x;k ,oa vkidks miyC/k djk fn;k x;kA Hkkxyiqj iz{ks= ds varxZr 515 feuh tykiwfrZ ;kstuk ds fuekZ.k gsrq fMtkbZu ,oa Mzkbax fnukad 11-07-2010 dks lefiZr fd;k x;k ftls {ks=h; eq[; vfHk;ark Hkkxyiqj }kjk fnukad 15-07-2010 dks vuqeksfnr fd;k x;k ,oa vkidks miyC/k djk;k x;kA eqtIQjiqj iz{ks= ds vUrxZr 225 feuh tykiwfrZ ;kstuk ds fuekZ.k gsrq vkids }kjk fMtkbZu 15-05-2010 dks {ks=h; izeq[k vfHk;ark eqtIQjiqj dks lefiZr fd;k x;k] ftls vkids izfrfuf/k ds }kjk lq/kkj djkdj fnukad 08-06-2011 dks {ks=h; eq[;

vfHk;ark eqtIQjiqj }kjk vuqeksfnr fd;k x;k ,oa vkidks miyc/k djk;k x;k A mDr ls Li"V gS fd iVuk ,oa Hkkxyiqj iz{ks= ds vUrzxZr dqy 1275 ;kstukvksa ds dk;kZUo;u gsrq fMtkbZu ,oa Mzkbax ekg tqykbZ 2010 esas gh vuqeksfnr dj foHkkx }kjk miyC/k djk;k x;kA ijUrq ;kstuk ds dk;kZUo;u esa visf{kr izxfr vkids }kjk ugha yk;h x;hA  ;kstuk ds dk;kZUo;u gsrq LFky lwfp fofHkUu dk;Z izeaMyksa }kjk ;kstuk ds dk;kZUo;um gsrq fu/kkZfjr le; vof/k ds vUrZxZr vkidks 880 LFky miyC/k djk;s x;s ftuds fo:n~/k ek= 26 ;kstukvksa dks iw.kZ dj pkyw fd;k x;kA mDr ls Li"V gS fd vkids }kjk ;kstuk ds dk;kZUo;u esa vfHk:fp ugha fn[kkbZ x;hA foHkkx }kjk ;kstuk iw.kZ djus dh fu/kkZfjr vof/k ds i'pkr Hkh 349 vnn vkSj LFky vkidks miyC/k djk;s x;sA vcrd vkids }kjk ek= 115 ;kstuk,a iw.kZ dh x;h gS rFkk 230 ;kstuk,a viw.kZ fLFkfr esa gS tks dk;Z ds izfr vkids ykijokgh dk ifjpk;d gSA  ;kstuk ds dk;kZUo;u gsrq eksosykbZys'ku vfxze ;kstuk ds dk;kZUo;u esa rasth ykus ds mn~ns'; ls vkids vuqjks/k ij SBD dh dafmdk&10B¼AA½ ds vkyksd esa nl izfr'kr Patna High Court CWJC No.1344 of 2014 60

ekscsykbZys'ku vfxze nsus dk izko/kku fd;k x;kA fofHkUu ize.Myksa ds }kjk ;kstuk dk dk;kZUo;u lqxerkiwoZd djus gsrq izFke fd'r ds :i esa ekg vxLr 2011 rd :i;s 1136-74044 yk[k rFkk f}rh; fd'r ds :i esa ekg ekpZ 2011 ls ekg tqykbZ 2012 rd :i;s 358-699 yk[k ;kfu dqy 1495-43944 yk[k :i;s dk ekscsykbZts'ku vfxze vn;k x;k ftlds fo:n~/k dkZ dh izxfr de jgus ds dkj.k ek= 224-7249 :i;s ds vfxze dk lek;kstu pkyw foi=ksa ls fd;k tk ldkA bl izdkj vHkh Hkh vkids ikl 1270-71595 yk[k :i;k eksosykbZts'ku vfxze ds :i esa gS] ftlij lwn dh jkf'k dh x.kuk djus ij mDr jkf'k vkSj vf/kd gks tk;sxhA foHkkx }kjk ;kstuk ds dk;kZUo;u esa rsth ykus gsrq lg;ksx djus dh mijkar Hkh visf{kr izxfr vkids }kjk ugha ykbZ x;ha] tks dk;Z ds izfr vkids ykijokgh dk ?kksrd gSA  ;kstuk ds dk;kZUo;u gsrq Hkqxrku fofHkUu dk;Z izeaMyksa esa vkids }kjk lefiZr fd;s x;s foi= dh jf'k 2942-26024 yk[k :i;k gS] ftlds tkap ds mijkar vkidks 2133- 93974 yk[k :i;k dk Hkqxrku fd;k x;k ,oa foi= eas =qfV jgus ds dkj.k 267-5238 yk[k :i;s dk Hkqxrku yafcr gSA blds lkFk gh vkids }kjk fcuk dk;Z djk;s Hkh dqN izeaMyksa esa vfu;fer :i ls yxHkx 559- 61717 yk[k :i;s dk foi= lefkiZr fd;k x;k] tks lgh ugha gSA  fo|qr la;kstu fofHkUu izeaMyksa ds v/khu fo|qr la;kstu gsrq 104 LFkyksas ds fy, jkf'k tek dh x;h gS] tcfd 115 ;kstuk,a iw.kZ dh x;h gSA fuek.kZ/khu 230 LFkyksa esa ls 13 LFkyksa ds fy, fo|qr la;kstu dh jkf'k tek dh x;h gSA vr,o fo|qr la;kstu ysdj ;kstuk dks pkyw djkus dh fn'kkk esa Hkh vkids }kjk dkbZ :fp ugha yh x;hA mi;qzZDr rF;ksa ls Li"V gS fd vkids }kjk djk;s x;s dk;Z dh izxfr 'kq:vkrh nkSj ls gh dkQh /kheh ,oa vlarks"kizn jgh gS rFkk ekpZ 2013 ls ;kstuk dk dk;Z yxHkx can gSA fnukad 26-02-2014 dks gqbZ cSBd esa Hkh vkids izfrfuf/k }kjk mDr fcUnqvksa ds laca/k esa dksbZ [kaMu Hkh ugh fd;k x;kA ,djkjukek ds vuqlkj dk;Z lekfIr ds vof/k fcrs gq, djhc <kbZ o"kZ gks x;s gSA vr,o D;ksa u vkids ,djkjukek dks fo[kafMr djrs gq, tekur dh jkf'k jkT;lkr dj vkids deZ dks dkyh lwph esa Mkyh Patna High Court CWJC No.1344 of 2014 61

tk;\ vr,o funs'k gS fd mi;qZDr fcUnqvksa ij viuk Li"Vhdj.k ,d lIrkg ds vUnj fuf'pr :i ls miyc/k djkosa] vU;Fkk ,drjQk fu.kZ; ysrs gq, vkids QeZ ds fo:n~/k mDr dkjZokbZ dh tk;sxhA fo'oklHkku g0@* 20@03@14 ¼t;'kadj pkS/kjh½ vfHk;ark izeq[k&lg&fo'ks"k lfpo**

(underlining for emphasis)

53. Let it be noted that the petitioner claims that it had filed

exhaustive show cause reply on 16.4.2014 which reads as follows:

"Letter No.-SPML/PHED/PAT-1583 Date 16.4.2014 To, The Engineer in Chief cum Special Secretary, Public Health Engineering Department, Govt. of Bihar, Patna

Sub: Design, construction & commissioning of 1500 no. Mini Water Supply of Scheme for 26 drought effected districts of Bihar with provision of electrical pumping sets on turn key basis with 12 months O & M after three months trial run- Proposal for completion of the works taken up during the contract period and the work plan for such completion.

Dear Sir, This has reference to the subject contract awarded by the Public Health Engineering Department (PHED) of the Government of Bihar to SPML Infra Limited as per contract agreement No. SBD/01 of 2010-2011 under PHED work Patna High Court CWJC No.1344 of 2014 62

order No.6/ PRA-A 103/10-1082 dated 1.4.2010. The time of performance of contract was agreed as 18 months. PHED as the Employer to the contract had an obligation to finalize the locations for the various components of the water supply facilities to be created in 1500 villages including the supply of electrical power. In this regard, SPML states

1) That SPML vide its letter dated 24th February 2014, which was received by the PHED on 6th March 2014 had, taking cognizance of the discussions and deliberations that took place in the meeting held on 5th February 2014 with the Engineer in Chief, had agreed to complete the work in the villages where SPML had started the work subject to the following conditions:

a. The PHED shall not take any action of termination of contract and initiate penal action against SPML as the delay in performance of the contract is solely due to PHED in terms of not providing the site of work as well as not making available the electrical power for commissioning of the village schemes. Any action initiated in this direction shall stand withdrawn.

b. The PHED on completion of the works in the villages where it had started the works during the contract period shall foreclose the contract and declare it as performed on the grounds that PHED could not make available land site and electrical power in total of 1106 villages. c. As has been committed by the PHED in the Meeting held on 5th February 2014, PHED will make payments for the works as per the bills raised and to be raised by the SPML without any demur and delay.

Patna High Court CWJC No.1344 of 2014 63 d. As has been agreed by the PHED in the meeting held on 5th February 2014, PHED shall provide electrical power in 66 villages as per the list annexed with the letter dated 24th February 2014 on immediate priority. A copy of the said letter is annexed hereto and marked as Annexure 1.

2) That the Joint Secretary, PHED had convened a meeting on 26th February 2014 wherein SPML had stated that SPML is willing to complete the work in villages which was started during the contract period will be completed within six months. It was also clarified that in 1155 villages where work was not started, SPML will not be able to take up and complete the work.

A. Making available work fronts and locations (No Objection certificates for sites):

1. That as against 1500 villages, the No Objection certificates received for execution of the works at the land sites are for 620 villages with Khata and Khesara Numbers.

However, the NOC received with Khata and Khesara during the contract period i.e. from 1.4.2010 to 30.9.2011 is for 548 villages. Out of these 548 villages, NOC for 79 v villages was received within 3 months prior to the completion date. In case of 89 villages, the sites are still disputed and/or power line is not available. Bores have failed in 28 villages. Considering this, the total available and clear sites for construction are in 352 villages.

2. There are other 593 locations wherein the list of sites was provided during the contract period but Khata and Khesara were not available, however SPML started the work at 167 locations by obtaining the land through joint survey and Patna High Court CWJC No.1344 of 2014 64

consultations with the PHED.

Hence, considering this, the total villages come to 352+ 167 =519 which is received within the contract period duly cleared for execution. Details of these is annexed hereto and marked as Annexure 2.

B. Work Execution Plan

1. SPML has already completed work in 170 units as on date out of which 104 village schemes have already been commissioned. The balance to be completed, therefore works out to 519- 170= 349 villages. A statement showing division wise balance work for completion in these 349 villages is annexed hereto and marked as Annexure 3, SPML agrees and proposes to complete the work in these balance 349 villages, subject to the fulfillment of conditions as stated hereinabove.

2. That SPML proposes to complete the balance villages (519- 170= 349) as per the following schedule.

Sr. Description Village Time of completion in months from the Nos. date of confirmation to be given by the PHED i. Locations where the work of 39 6 bore as a source of water and switch room are completed ii. Locations where bores have 56 9 been completed and other works are in partial completion iii. Locations where only bore is 129 10 completed and other works are not started iv. Sites for which NOC was given 125 12 with Khata and Khesara 3 months prior to completion date but work yet to start Patna High Court CWJC No.1344 of 2014 65

Total 34918 (time for different locations to run concurrently)

3. That SPML agrees to complete the 349 village water supply schemes as above subject to PHED agreeing to take over these villages as well as the villages which are earlier completed (170 villages) for operation and maintenance. PHED shall also ensure availability of electrical power for commissioning of all the completed villages immediately on their completion without any delay whatsoever.

4. That out of 170 village works in 104 villages are completed and commissioned. The log book for taking over is ready. However, PHED ha snot taken over the village schemes for operation and maintenance. A list showing these 104 villages is annexed hereto and marked as Annexure 4.

5. That out 170 villages, works in 66 village schemes are completed. However, commissioning could not be done by SPML as the electrical power connection is yet to be received at these villages. A list showing these 66 villages is annexed hereto and marked as Annexure 5.

C. Outstanding payments SPML places on record the following factual details relating to the outstanding payments.

a) Payment due commensurate to the work actually done.

An amount equivalent to Rs.12,60,82,198/- is outstanding to be paid by PHED to SPML towards the work already done in the 394 villages. Details thereof is annexed hereto and marked as Annexure 6.

b) Mobilization advances adjustment Patna High Court CWJC No.1344 of 2014 66

Rs.14,16,11,197/- were paid by the PHED to SPML as Mobilization Advance under clause 10B(ii) of the Contract. Against this, advance payment, Rs.2,84,59,602/- have been adjusted so far as the provisions of the contract. Details thereof are annexed hereto and marked as Annexure 7.

c) Reimbursement of Electrical Connection Charges Providing electrical power at the village location was the responsibility of the PHED. However, to get the connections for commissioning of the schemes, SPML under knowledge of the PHED had paid connection charges to the BSEB, PHED has to reimburse these charges to SPML as they were to be paid by PHED only. Details thereof is annexed herewith and marked as Annexure 8.

That this proposal is without prejudice to the right of SPML to pursue the contractual claims which are already made and subject to an agreement to be reached with the PHED that the contract shall be foreclosed and discharged as performed on completion of the villages mentioned hereinabove. PHED is hereby requested to consider this proposal and issue a letter of confirmation extending the time of completion upto 18 months from the date of its confirmation without levy of any liquidated damages or without any contractual action whatsoever.

For and on behalf of SPML Infra Ltd.

Sd/-

(Authorized Signatory)"

54. This Court has purposely extracted the whole of show

cause reply filed by the petitioner on 16.4.2014, inasmuch as from its

bare reading it will become clear that it was in fact not a show cause Patna High Court CWJC No.1344 of 2014 67

reply to the allegations made in the show cause notice dated

20.3.2014. In fact not a word has been said about the allegation made

and issue raised in show cause notice in this alleged reply of the

petitioner dated 16.4.2014. The petitioner in fact was asked to explain

the reason for not completing the work within 18 months and the

periodical extension given thereafter but in the letter dated 16.4.2014,

which is being claimed to be its show cause reply, the petitioner had

raised all those issues commending from 5th February, 2014 with a

request that it should be provided with the work front and location,

whereafter it intends to execute the plan only on getting certain

outstanding payments. As a matter of fact when the letter dated

16.4.2014 only refers itself to be the proposal, that cannot be read to

be a show cause reply and therefore, this Court will have no difficulty

in holding that the petitioner did not even care to file show cause reply

to the specific allegations made against it in the show cause notice

dated 20.3.2014.

55. The petitioner thus having not done so at least cannot

complain and raise plea of violation of the principles of natural justice

including that the impugned order is not a reasoned order. The

question would be if the petitioner did not controvert the allegations in

the show cause notice and in fact did not say a word about the

allegations in the show cause notice, what reasons were go be given Patna High Court CWJC No.1344 of 2014 68

by the authorities? Thus, this plea of impugned order dated 13.5.2014

to be bad on the ground of its being non-speaking order is also wholly

misconceived both on fact and in law.

56. This would also become further clear from the impugned

order of termination of contract of the petitioner wherein it was

specifically mentioned that when the petitioner did not file its reply to

the show cause notice dated 20.3.2014 it was given a reminder on

16.4.2014 for submitting its show cause reply by 25.4.2014 but even

then no show cause reply was filed and the aforesaid letter dated

16.4.2014 of the petitioner by way of fresh proposal was received. All

these aspects, therefore, have been dealt in the impugned order dated

13.5.2014 which reads as follows:

fcgkj ljdkj yksd LokLF; vfHk;a=.k foHkkx vkns'k lafpdk la[;k&6@izk0vk0&111@11&874 fnukad& 13-5-14 fo"k;& es0 ,l0ih0,e0,y0 bUQzk fy0 ubZ fnYyh dks jkT; ds lq[kkM+ izHkkfor 26 ftyksa esa fo|qr iai vk/kkfjr 1500 feuh ikbZi tykiwfrZ ;kstukvksa ds dk;ZkUo;u gsrq vkoaVu dk;Z dh ,djkjukek la[;k&,l0ch0Mh0&01 o"kZ 2010&11 dks fo[kafMr dj tekur dh jkf'k jkT;lkr djus ,oa QeZ dks dkyh lwph esa Mkyus ds laca/k esaA jkT; ds lq[kkM+ izHkkfor 26 ftykssa esa fo|qr pkfyr iai ds lkFk 1500 feuh ikbZi tykiwfrZ ;kstukvksa ds dk;kZUo;u gsrq esllZ ,l0ih0,e0,y0 bUQkz fy0 ubZ fnYyh dks foHkkxh; i=kad&1082] fnukad 01-04-2010 dk;Z vkoaVu vkns'k fuxZr fd;k x;kA rnuqlkj QeZ }kjk ,djkjukek dk;Zikyd vfHk;ark] yksd LokLF; ize.My] gkthiqj ds lkFk fd;k x;kA ¼,djkjukek la[;k&,l0ch0Mh001] o"kZ 2010&11½ Patna High Court CWJC No.1344 of 2014 69

,djkjukek ds vuqlkj ;kstuk dks iw.kZ djus dh vof/k 18 ekg Fkh] tks fnukad 15-10-2011 djks lekIr gks pqdh gSA {ks=h; inkf/kdkfj;ksa ls izkIr lwpuk ds vuqlkj QeZ ds }kjk djk;s tk jgs dk;Z dh izxfr dkQh /kheh jgh gS rFkk ekpZ 2013 ls dk;Z yxHkx can fd;s tkus dh fLFkfr esa {ks=h; inkf/kdkfj;ksa }kjk QeZ dks bl laca/k esa i= fy[ks x;s ,oa Lekfjr Hkh fd;s x;sA ijUrq QeZ ds }kjk dk;Z dh izxfr esa dkbZ lq/kkj ugha yk;k tk ldkA bl laUnHkZ esa QWkeZ ds izfrfuf/kx.k ,oa {ks=h; inkf/kdkfj;ksa ds lkFk dk;Z dh leh{kk foHkkxh; eq[;ky; Lrj ij Hkh dh x;hA ijUrq blds Hkh visf{kr ifj.kke ugha feysA rRi'pkr fnukad 26- 02-2014 dks QeZ ds izfrfuf/kx.k ,oa lEcfU/kr {ks=h; inkf/kdkfj;ksa ds lkFk eq[;ky; Lrj ij iqu% leh{kkRed cSBd dh x;hA mDr cSBd esa {ks=h; inkf/kdkfj;ksa ls izkIr lwpuk ds vuqlkj QeZ ds }kjk vcrd ek= 115 ;kstukvksa dks iw.kZ fd;k x;k gS ,oa 230 ;kstuk,a viw.kZ fLFkfr esa ,d yEcs vlsZ ls gSA ;kstuk dh izxfr dh bl fLFkfr ij QeZ ds izfrfuf/kx.k }kjk Hkh dksbZ [kaMu ugha fd;k x;k vkSj u gh muds }kjk dkbZ Bksl izLrko vFkok dk;Z ;kstuk crkbZ x;h tks dk;Z ds izfr mudh ykijokgh ,oa vfHk:fp ugha ysus dk ?kksrd gSA dk;Z dh izxfr vlarks"ktud jgus ds QyLo:i QeZ dks foHkkxh; i=kad 6@izk0vk0&111@11&645 fnukad 20-03-2014 ds }kjk Li"Vhdj.k ,d lIrkg ds vUnj nsus dk funs'k fn;k x;kA ijUrq QeZ }kjk dkbZ Li"Vhdj.k ugha fn;s tkus ds dkj.k iwu% foHkkxh;

i=kad&6@izk0vk0&111@11&777 fnukad 16-04-2014 ds }kjk Li"Vhdj.k dk tcko 25-04-2014 rd nsus gsrq funs'k fn;k x;kA foHkkx }kjk iwNs x;s Li"Vhdj.k ds fcUnqvksa ds lUnHkZ esa fcUnqokj tcko ugha nsdj QeZ vius i=kad&1583 fnuad 16-04-2014 tks foHkkx esa fnukad 25-04-2014 dkz izkIr gqvk] ds }kjk lwfpr fd;k gS fd 349 LFkyksa ij dk;Z iw.kZ fd;k tk ldsxk] c'krsZ fd foHkkx mugsa 18 eghus ds vkSj le; o`f} dh Lohd`fr nsA blizdkj ;g Li"V gksrk gS fd QeZ ds }kjk ,djkfjr 1500 ;kstukkvksa ds iw.kZ djus ds y{; ds izfr dksbz izfron~/krk ugha jg x;h gSA ,djkjukek dh 'krksZ ds vuqlkj ;kstuk dh izxfr vlarks"ktud jgus ,oa ,d yaca vlsZ ls dk;Z can j[kus dh fZLFkfr esa ,djkjukek ds Claus of Contract dh dafMdk 1A] 2] 3 ,oa 14 ds vkyksd esa QeZ dh lafonk dks fo[kafMr dj tekur dh jkf'k jkT;lkr djus ,oa Patna High Court CWJC No.1344 of 2014 70

dkyh lwph esa Mkyus dk mi;qDr ekeyk curk gSA mi;qzZDr ifjis{; esa lE;d~ fopkjksijkar es0 ,l0ih0,e0,y0 baQkz fy0 ubZ fnYyh] fudk fuca/ku la[;k 290@10 gS dh lafonk ¼,djkjukek la[;k ,l0ch0Mh0&01] o"kZ 2010&11½ dks fo[kafMr dj tekur dh jkf'k jkT;lkr djus ,oa dkyh lwph esa Mkyus dk fu.kZ; fy;k tkrk gSA ;g vkns'k rRdky izHkko ls ykxw gksxkA g0@& 13@05@14 ¼t;'kadj pkS/kjh½ vfHk;ark izeq[k&lg&fo'ks"k lfpo Kkikad&874 iVuk] fnukad 13-5-14**

(underlining for emphasis)

57. The result of the aforesaid discussion, on the issue of

show cause notice and show cause reply, would be that the impugned

order cannot be held to be bad on account of its being allegedly non-

speaking because the petitioner had never raised any issue pertaining

to the allegations made against it in the show cause notice dated

20.3.2014 and in fact did not file his show cause reply despite

reminder given on 16.4.2014. In that view of the matter this Court

does not find that the petitioner can raise the issue of violation of the

principles of natural justice which in the peculiar facts and

circumstances of this case seems to be more or less ornamental or in

the words of the Apex Court in the case of Gulam Mustafa v. State of

Gujrat, reported in AIR 1977 SC 448, "the last refuse of a losing

litigant".

Patna High Court CWJC No.1344 of 2014 71

58. The last submission of the learned counsel for the

petitioner that the authorities of the department could not have

invoked the Bank guarantee, inasmuch as the petitioner had

competing claim and was always desirous to complete the work is

also not acceptable to this Court either on fact or in law. Let it be

noted that the impugned order rescinding the contract of the petitioner

came to be passed on 13.5.2014 and the Bank guarantee was invoked

thereafter on 9.6.2014. The Bank guarantee invariably is given by a

party by way of its financial commitment. The department on account

of several acts of omission and commission and particularly non-

completion of allotted work in the prescribed period had sustained

loss and therefore, it was definitely entitled under the terms of the

agreement to invoke Bank guarantee.

59. Secondly, the issue as with regard to maintainability of a

writ petition questioning the decision of invoking Bank guarantee has

also been well settled by the Apex Court in the case of Larsen &

Toubro Ltd. V. Maharashtra State Electricity Board & ors., reported

in (1995)6 SCC 68, wherein having referred to its earlier judgment in

the case of United Commercial Bank v. Bank of India, reported in

(1981)2 SCC 766, U.P.Coop. Federation Ltd.v. Singh Consultants &

Engineers (P) Ltd., reported in (1988)1 SCC 174, General Electric

Technical Services Co. Inc. v. Punj Sons (P) Ltd., reported in (1991)4 Patna High Court CWJC No.1344 of 2014 72

SCC 230, and the decision of the Court of Appeal in England in Elian

and Rabbath v. Matsas and Matsas, reported in (1966)2 Lloyd‟s Rep

495, CA, as also the judgment in the case of Svenska Handelsbanken

v. Indian Charge Chrome, reported in (1994)1 SCC 502, it had been

held that

"In case of confirmed bank guarantee/ irrevocable letters of credit, it cannot be interfered by the courts unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud."

60. What would be irretrievable injustice has been also

explained therein stating that it has to be based on the ground that the

guarantee was not encashable on its terms. The Apex Court in this

regard in the case of Larsen and Tubro (supra) had held that

"There should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties and mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee."

61. This judgment in the case of Larsen & Toubro Ltd.

(supra) was again followed by the Apex Court in the case of

Hindustan Steel Workers Construction Ltd. V. G.S.Atwal & Co.

(Engineers) Pvt. Ltd., reported in (1995)6 SCC 76, as well as in the

case of U.P.State Sugar Corporation v. Sumac International Ltd.,

reporte din (1997)1 SCC 568, wherein it was held as follows:

"15. Our attention was invited to a number of decisions on Patna High Court CWJC No.1344 of 2014 73

this issue- among them, to Larsen & Toubro Ltd. V. Maharashtra SEB, reported in (1995)6 SCC 68, and Hindustan Steel Workers Construction Ltd. V. G.S. Atwal & Co. (Engineers) (P) Ltd., reported in (1995)6 SCC 76, as also to National Thermal Power Corpn. Ltd. V. Flowmore (P) Ltd., reported in (1995)4 SCC 515. The latest decision is in the case of State of Maharashtra v. National Construction Co., reported in (1996)1 SCC 735, where this Court has summed up the position by stating (SCC p. 741), para 13) "The rule is well established that a bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. The duty of the bank under a performance guarantee is created by the document itself. Once the documents are in order the bank giving the guarantee must honour the same and make payment ordinarily unless there is an allegation of fraud or the like. The courts will not interfere directly or indirectly to withhold payment, otherwise trust in commerce internal and international would be irreparably damaged. But that does not mean that the parties to the underlying contract cannot settle the disputes with respect to allegations of breach by resorting to litigation or arbitration as stipulated in the contract. The remedy arising ex contractu is not barred and the cause of action for the same is independent of enforcement of the guarantee."

62. The other relevant decision on the same issue of the

Apex Court is in the case of Hindustan Steelworks Cosntruction Ltd.

V. Tarapore & Co., reported in (1996)5 SCC 34, wherein it was held Patna High Court CWJC No.1344 of 2014 74

as follows:

"16. Clearly, therefore, the existence of any dispute between the parties to the contract is not a ground for issuing an injunction to restrain the enforcement of bank guarantees."

63. Applying the aforementioned principles in the facts of

the present case this Court does not find existence of any fraud,

inasmuch as there is at best only a dispute between the parties to the

contract which cannot be a ground for issuing an injunction to restrain

enforcement of the Bank guarantee.

64. This Court, however, must take one more submission of

Mr. Giri that if the petitioner now would invoke its arbitration clause

of the agreement in the light of the impugned order of cancellation of

contract of the petitioner, as well as forfeiture of its security and its

blacklisting, arbitration cannot be held in a fair and objective manner.

According to Mr. Giri, the Arbitrator should have been given a clean

slate in view of the dispute raised by the petitioner seeking reference

to arbitration proceeding.

65. Mr. Lalit Kishore, learned PAAG, on the other hand, has

submitted that once the petitioner takes recourse of arbitration

proceeding the same shall be conducted and decided on its own merits

and the Arbitrator will never be bound by the action taken or the order

passed by the department.

66. In the considered opinion of this Court the prayer of the Patna High Court CWJC No.1344 of 2014 75

petitioner in this writ application for invoking arbitration clause was

itself premature, inasmuch as the petitioner on its own showing had

not moved the competent authority in terms of Clause 25 of the

Arbitration Clause. The prayer made in this writ application seeking a

direction from this Court to the respondent authorities of PHED to

decide the dispute as raised by it in its letter dated 3.7.2013 cannot be

said to be invoking arbitration clause as per Clause 25 of the

Agreement. The petitioner in fact had to first move the Superintending

Engineer for a written instruction and if the Superintending Engineer

had failed to give such instruction he had to move the Chief Engineer

and the Chief Engineer had to give his decision within 30 days and if

the petitioner was aggrieved by such decision of the Chief Engineer

he had to give notice to the Chief Engineer for appointment of

Arbitrator.

67. Admittedly this part of requirement of Clause 25(i) and

(ii) of the Agreement was never completed by the petitioner before

rushing to this Court by filing this writ application on 16.1.2014. As a

matter of fact the petitioner had also not even taken plea of pendency

of this writ application either in the joint meeting held on 26.2.2014 or

in the alleged show cause reply filed by it on 16.4.2014 though this

writ petition had already been filed on 16.1.2014, which for the

reasons indicated above was wholly premature. As a matter of fact the Patna High Court CWJC No.1344 of 2014 76

impugned order of cancellation of contract was passed only during the

pendency of this writ application on 13.5.2014, whereas the writ

petition was heard only for the first time on 16.5.2014.

68. It, thus, becomes clear that the petitioner actually wanted

to preempt the authorities of PHED in not taking any action against it

but then when it had not only attended the meeting on 26.2.2014 in its

bid to explain its point of view but had also submitted its proposal in

the letter dated 16.4.2014 without even referring to pendency of this

writ application, it cannot come out to assail the impugned order on

the ground of pendency of the writ application.

69. The submission of Mr. Giri that the petitioner did not

move the Bihar Public Works Contracts Disputes Arbitration Tribunal

(hereinafter referred to as „the Arbitration Tribunal‟) because the

Bihar Public Works Contracts Disputes Arbitration Tribunal Act,

2008 (hereinafter referred to as „2008 Act‟) had the effect of

superseding Clause 25 of the Agreement envisaging arbitration

proceedings to be conducted as per Arbitration and Conciliation Act,

1996 is also to be only noted for its being rejected. The 2008 Act

under section 2(k) defines „Works Contract‟ in the following terms:

"Works contract means a contract made by the State Government or a public undertaking with any other person for the execution of any of its works relating to construction, repairs or maintenance of any building or superstructure, Patna High Court CWJC No.1344 of 2014 77

dam, weir, canal, reservoir, tank, lake, road, all types of bridge, culvert, factory or work shops or of such other work of the State Government, or as the case may be, of the public undertaking, as the State Government may, by notification in the Official Gazette, specify and includes-

(i) a contract made for the supply of goods relating to the execution of any of such works or for supply of any other goods irrespective of whether it is required for any specific project or work or any type of consultancy services/ service providers.

(ii) Contracts made for the supply of services relating to the execution of any of such works, including consultancy services for preparation of DPR‟s;

Supervision; project advisory, quality assurance, Project Management or any other management services.

(iii) Words and expressions used and not defined in this Act, but defined in the Arbitration Act, shall have the meanings assigned to them in the Arbitration Act."

70. Section 8 of 2008 Act also lays down that the provision

of 2008 Act shall be in addition to Arbitration and Conciliation Act

and therefore, when Clause 25 of the Agreement talks of provision of

Arbitration and Conciliation Act, 1996 it cannot be said that 2008

Bihar Act has the effect of either overriding the provisions of

Arbitration and Conciliation Act, 1996 which is a Central Legislation.

The Bihar Act of 2008 in fact does not in any manner create an

impediment for arbitration in Clause 25 of the Agreement inasmuch Patna High Court CWJC No.1344 of 2014 78

as Section 8 of Bihar Act, 2008 in this regard reads as follows:

"8. Act to be in addition to Arbitration & Conciliation Act, 1996.- Notwithstanding anything contained in this Act, any of the provisions shall be in addition to and supplemental to Arbitration & Conciliation Act, 1996 and in case any of the provision contained herein is construed to be in conflict with Arbitration Act, then the latter Act shall prevail to the extent of conflict."

71. Section 9 of 2008 Bihar Act in fact is a complete answer

to the submission of Mr. Giri wherein either party has been given the

liberty to move to the Tribunal for raising the dispute and its being

adjudicated by the Arbitral Tribunal. Section 9 in this regard reads as

follows:

"9. Reference to Tribunal and making of award-

(1) Where any dispute arises between the parties to the contract, either party shall, irrespective of whether such contract contains an arbitration clause or not, refer, within one year from the date on which the dispute has arisen, such dispute in writing to the Tribunal for arbitration in such form and accompanied by such documents or other evidence and by such fees, as may be prescribed.

(2) On receipt of a reference under Sub-section (1), the Tribunal may, if satisfied after such inquiry as it may deem fit to make, that the requirements under this Act in relation to the reference are complied with, admit such reference and where the Tribunal is not so satisfied, it may reject the reference summarily.

(3) Where the Tribunal admits the reference under Sub-section(2), it shall after recording evidence if necessary, and after perusal of the material on record and on affording an opportunity to the parties to submit their arguments, make an award or an interim award, giving its reasons therefore.

(4) The Tribunal shall use all reasonable dispatch in entering on and proceeding with the reference admitted by Patna High Court CWJC No.1344 of 2014 79

it and making the award, and an endeavour shall be made to make an award within four months from the date on which the Tribunal had admitted the reference.

(5) The award including the interim award made by the Tribunal shall subject to an order, if any made under Section-12 or 13, be final and binding on the parties to the dispute.

(6) An award including an interim award as confirmed or varied by an order, if any, made under Section-12 or 13 shall be deemed to be a decree within the meaning of Section-2 of the Code of Civil Procedure, 1908 of principal Court of original jurisdiction within the local limits whereof the award or the interim award has been made and shall be executed accordingly."

72. In view of above, this Court will have no difficulty in

also holding that the petitioner has/ had statutory effective alternative

remedy by way of arbitration before the Bihar Public Works Contracts

Disputes Arbitration Tribunal.

73. Thus, for the reasons indicated above, this Court will

have no difficulty in coming to the conclusion that this writ

application has got no merit.

74. That being so, this writ application must fail and is,

accordingly, dismissed, as a result whereof the interim order of this

Court dated 13.5.2014 and 10.6.2014 shall automatically stand

vacated.

75. There would be, however, no order as to costs.

M.J.C.No. 2114 of 2014

76. As this Court has already discussed earlier the facts as Patna High Court CWJC No.1344 of 2014 80

with regard to the alleged contempt they need not be repeated for

deciding the issue raised by the petitioner in this contempt application.

Suffice it to say that this contempt application was filed on 19.6.2014

alleging that the opposite parties have caused willful disobedience to

the interim order dated 16.5.2014 and 10.6.2014. In this regard the

case of the petitioner is that even when this Court by the interim order

dated 16.5.2014 had stayed operation of the impugned order dated

13.5.2014 so far it related to forfeiting of the security deposit and

blacklisting of the petitioner but even then the opposite parties have in

complete violation of the aforementioned order had forfeited the

security deposit by way of encashment of Bank guarantee despite a

separate interim order of restraint passed by this court on 10.6.2014.

77. According to the petitioner, it is the action on the part of

the Executive Engineer encashing the Bank guarantee of a sum of

Rs.12,30,00,000/- by depositing it in Treasury on 12.6.2014 which

would amount to committing further contempt of the interim order of

this Court dated 10.6.2014.

78. The opposite parties, on the other hand, have filed their

show cause reply and have explained that they have not violated any

part of the interim orders dated 16.5.2014 and/or 10.6.2014.

According to the opposite parties what was protected by way of stay

under the interim order of this Court dated 16.5.2014 was only Patna High Court CWJC No.1344 of 2014 81

security deposit as per the Agreement which came to be cancelled by

the impugned order passed by the Engineer-in-Chief. The opposite

parties have in this regard explained that such security amount

furnished at the time of execution of the agreement vide Bank

guarantee dated 7.4.2010 to the tune of Rs.4,40,00,000/- has not been

touched and that has never been invoked. The opposite parties have in

fact also explained that it was the subsequent three Bank guarantees

dated 16.3.2013 by way of performance guarantee clearly

distinguishable from the security deposit as per agreement executed in

the year 2010, which actually was invoked as there was no stay of the

same in the order dated 16.5.2014 of this Court.

79. In the same way the opposite parties have also explained

that there would be no question of violation of the subsequent interim

order dated 10.6.2014, inasmuch as on the request of the Executive

Engineer in its letter dated 5.6.2014 the officials of the State Bank of

India at Kolkata had encashed the Bank guarantee on 9.6.2014 by way

of furnishing and handing over the bank draft in the name of the

Executive Engineer, whereafter the ministerial act of its being

deposited in the Treasury would not amount to contempt, inasmuch as

what was said in the order dated 9.6.2014 was only with regard to

either staying operation of the order dated 5.6.2014 whereby and

whereunder a request was made by the Executive Engineer to the Patna High Court CWJC No.1344 of 2014 82

State Bank of India, Kolkata to encash the performance Bank

guarantee or staying encashment of Bank guarantee but then both the

acts were already completed on 9.6.2014 at a point of time when the

interim order was not there and the said interim order came to be

passed only on 10.6.2014.

80. In this regard the opposite parties given a detailed

explanation in paragraph no.6 of the show cause reply which reads as

follows:

"6. That the opposite party would humbly state and submit that in terms of the Standard Bid Document (SBD), the petitioner was obliged to get a security deposit of 10% of the contract value. Earlier in the SBD, Clause 10 relating to mobilization advance was not applicable in the present case, but after the agreement, on the representation of the petitioner the said clause regarding mobilization advance was made applicable on the condition that the petitioner will be paid mobilization advance to the extent of 10% of the contract value subject to furnishing Bank Guarantee/ Guarantees convering the advance on account of mobilization. Thus, the „security deposit‟ and „mobilization advance‟ are two different things under the SBD. Since in the writ application, there is no stay of the whole order dated 13.5.2014 and the contract in question was already rescinded which was not stayed, the opposite party was directed by the Engineer-in-Chief cum Special Secretary vide letter no. 963 dated 5.6.2014 to invoke the three Bank guarantees which were specifically submitted to cover the mobilization Patna High Court CWJC No.1344 of 2014 83

advance amount lying with the petitioner."

81. Let it be kept in mind that the aforesazid statement has

not been controverted by the petitioner and therefore, the plea of

security deposit referable to Rs.4,40,00,000/- at the time of execution

of the agreement cannot be equated much less made comparable with

the mobilization advance of Rs.13,20,00,000/- which actually did not

form part of the earlier agreement and was a subsequent condition

agreed between the parties. Once this aspect becomes clear there

would be no question of violation of at least the interim order dated

16.5.2014.

82. In the considered opinion of this Court when the stay

order was passed on 16.5.2014 staying operation of part the order of

the Engineer-in-Chief dated 13.5.2013 only as with regard to either

blacklisting or forfeiting of the security deposit, the meaning of

security deposit has to remain confined in the context of agreement

which was sought to be cancelled on 16.05.2013. Under the

Agreement, which were executed way back in the year 2010, there

was only one security deposit of Rs. 4,40,00,000/- and that was

furnished by the petitioner by a bank guarantee dated 7.4.2010. That

security deposit as noted above has not been invoked or encashed by

the opposite parties till date. Thus there is apparently no violation of

interim order dated 16.5.2014 by the opposite parties.

83. The next question would be as with regard to alleged Patna High Court CWJC No.1344 of 2014 84

violation of the interim order dated 10.6.2014. Let it be noted that on

10.6.2014 this Court had restrained either operation of the content of

the letter dated 5.6.2014 written by the Executive Engineer to the

State Bank of India, Kolkata or had directed that the Bank guarantee

of the petitioner would not be invoked. This interim order was

however passed on 10.6.2014 but then it is an admitted fact and again

asserted by the opposite parties in their show cause reply that pursuant

to the aforementioned request made by the opposite party Executive

Engineer to the State Bank of India, Kolkata in its three seprate letters

dated 5.6.2014 for encashing the Bank guarantee involving amount of

mobilization advance to the tune of Rs.13.30 crores was already acted

upon by the State Bank of India, Kolkata by way of not only

encashing the Bank guarantee but also preparing of a draft and

handing it over to the Executive Engineer on 9.6.2014.

84. This aspect again has been clarified in paragraphs no. 8,

9 and 10 which again is reproduced hereinbelow:

"8. That the opposite party along with a Class IV employee namely Sri Lagandeo Singh went to Kolkata and submitted three Bank Guarantees along with his letters no. 1307, 1308 and 1309, all dated 5.6.2014 I the Corporate Account Branch of the State Bank of India at Kolkata. The Bank was requested to pay the amount under the three Bank Guarantees which were issued by the Bank to cover mobilization advance given to the petitioner.

Patna High Court CWJC No.1344 of 2014 85 9. That the opposite party states that on 6.6.2014, the opposite party was informed orally by the Bank authorities that they will send these letters to their legal advisor because the Bank was aware of the order dated 16.5.2014 passed in C.W.J.C.No. 1344/2014. The Bank also informed the petitioner that the three Bank Guarantees were invoked by the opposite party. Since the Bank wanted to take a legal advice which was likely to take a day or two, the opposite party authorized Sri Lagandeo Singh, Class IV employe to receive the Bank drafts towards payment of the Bank Guarnatees and asked him to stay at Kolkata, whereas the opposite party left Kolkata in the evening of 7th June, 2014.

10. That the opposite party states that as it appears the Bank obtained the legal opinion from its legal Advisor and decided to make payment of the Bank Guarantee amount for which three separate Bank Drafts were prepared on 9th June, 2014 by way of payment of the three Bank Guarantees and those drafts were made available to Sri Lagandeo Singh, Class IV employee in the late evening on 9.6.2014. Payment through Bank drafts amounts to encashment of the three Bank Guarantees."

85. Let it be again only noted that there is no denial of the

aforementioned stand taken by the opposite parties in their show

cause reply by the petitioner despite service of copy on them on

1.7.2014.

86. This Court has also carefully perused the Bank‟s letter

dated 9.6.2014, as contained in Annexure D to the show cause reply.

It gives full detail of not only encashment of the Bank guarantee but Patna High Court CWJC No.1344 of 2014 86

also its payment through three Bank drafts No. 765854, 765855,

765856 all dated 9.6.2014 as is apparent from photo copy of the draft

enclosed with the show cause reply.

87. As a matter of fact this Court would find that it was the

petitioner who wanted to confuse the authorities of the Bank by

writing some uncalled for letter to the State Bank of India on 6th June,

2014 wherein the authorities of the Bank were requested by the

petitioner not to encash the Bank guarantee on the ground that the

High Court on 16.5.2014 had granted stay order against "forfeiture of

Bank guarantee" until further orders, whereas the fact remains that the

order of this Court dated 16.5.2014 was only with regard to stay on

'forfeiture of security deposit'.

88. Thus, for the reasons indicated above, this Court does

not find that the opposite parties have committed any contempt.

89. That being so, this contempt application has also no

merit and is, accordingly, dismissed.

(Mihir Kumar Jha, J)

Patna High Court Dated 26th November, 2015 Surendra/ A.F.R.

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