Full Judgment
ORDER
SHEET IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE GA2911of 2012 CS338of 2012 MAK ENGINEERING INDUSTRIES LTD.Versus UNION OF INDIA & ORS.GA2300of 2012 With CS263of 2012 EASTERN TRACK UDYOG PVT.LTD.Versus UNION OF INDIA & ORS.GA2735of 2012 With CS296of 2012 EASTERN TRACK UDYOG PVT.LTD.Versus UNION OF INDIA BEFORE: The Hon'ble JUSTICE SOUMEN SEN Date : 7th September, 2015.
Mr.Jishnu Saha, Sr.Adv.Mr.Raja Basu Chowdhury, Adv.Mr.D.N.Ghosh, Adv.Mr.L.K.Chatterjee, Sr.Adv.Ms.Aparna Banerjee, Adv.The Court: The Court: Since the issues involved in all the three applications are similar and identical, the said three matters are heard analogously and disposed of by this order.
The plaintiff is aggrieved by the notices issued by Research Designs and Standards Organization (RDSO).a wing of the Ministry of the Railways.
The plaintiff supplies elastic rail clips to the railways.
According to them these clips were duly supplied to the railways.
They were not rejected during the period stipulated for rejection.
The railways have also made payment.
It was most unfair on the part of the railways to reopen the contract after making payment, by drawing samples, testing them and coming to the conclusion that they did not conform to the acceptable standards, according to the plaintiff.
According to Mr.Saha, learned counsel for the plaintiff, the railways had no authority to carry out this kind of inspection and reopen the concluded contract.
Moreover, if these notices are put to effect, the zonal railways which regularly place contracts with the plaintiff would be debarred from placing any new contract.
Moreover, there is a direction in one of these notices asking the plaintiff to stop production.
It is also submitted that after drawing of the samples inspection was made unilaterally by the railways.
The plaintiff was called upon to be a mere witness to such inspection and had no other right.
Mr.Jishnu Saha, learned Senior Advocate on behalf of the plaintiff submits that reference to general guidelines for vendor development in invoking the power by the railways is arbitrary.
It is submitted plaintiff that and the there said is no contract defendants by by which and the between the plaintiff had agreed to the clauses regarding inspection beyond the period of ninety days.
Mr.Saha has referred to the contracts between the plaintiff and the zonal railways which says that in respect of the concluded contract in respect of the materials pre-inspected at the firm premises the consignee would issue rejection advice within ninety days from the date of receipt.
Since in the instant case the contracts were concluded by the end of 2010, and all supplies were effected within the aforesaid time, the time to issue rejection advice had expired long back and it was not open to the defendants to issue show cause notices for supply of inferior quality of materials.
It is further submitted that the goods were not inspected at the premises of the consignee and the plaintiff was never informed about the nature of the defect alleged in any of the communications made by the defendants.
Mr.Chatterjee, learned counsel appearing for the railways pointed out that there was a safety factor included in this exercise.
These elastic clips hold the rails on to the sleeper in a railway track.
Any compromise with quality would endanger the lives of lacs of passengeRs.who travel by rail.
RDSO is a body of the railways entrusted with ensuring quality and safety.
For this purpose they conducted inquiries and upon due inquiry they have found the goods of the plaintiff to be inferior.
Departmental action should not be stopped by the court.
Mr.Chatterjee, learned Counsel submits that the contentions raised on behalf of the plaintiff that the vendor guidelines would not be applicable to the plaintiff is contrary to record as it would appear from the undertaking relied upon by the Railways in GA No.2911 of 2012, and issued by the plaintiff dated 14th June, 2010 that the plaintiff had accepted the contents of general guidelines for vendor development effective from 1st April, 2010.
Mr.Chatterjee document that submits the that it plaintiff would as appear seller is from the obliged contract to supply materials of the contract specification and also guaranteed that the goods supplied would continue to conform to the description and quality for a period of 30 months after their delivery or 24 months from the date of placement in service.
If the goods were found to be of inferior quality or the quality has deteriorated within the aforesaid time, it would be obligation of the seller to replace the goods as such portion thereof as may be rejected by the purchaser.
There cannot be any doubt that the plaintiff at this stage cannot turn around and contends that the clauses of the general conditions of vendor development would not be applicable in the instant case.
Purpose of such inspection is to ensure that quality of the materials supplied are of contract specification since it involves the safety of public at large.
The period of ninety days prima facie appears to be directory and not mandatory.
It would not stop beyond the period of ninety days.
If such interpretation is accepted then even if the quality of material was found to be inferior, the defendants would not be in a position to reject the same or ask for replacing and/or to take any punitive action for supplying such inferior quality.
The plaintiff after accepting the terms cannot be heard to say that the terms are arbitrary when the to clauses of the said guidelines are sought be applied against the plaintiff for alleged supply of inferior materials.
However, the fact remains that the notices under challenge do not specify the nature of the defect.
Even if the plaintiff is required to answer to the said show cause notices the plaintiff would be unable to give reply in absence of specific details.
The plaintiff is required to be informed the nature of defect otherwise the notice would be vague.
Moreover, before a punitive action of this nature is taken, the defendants are required and obliged to follow the principles of natural justice.
Even in the affidavit, the defendants have failed to disclose the nature of the defects.
A joint note purported to have been prepared after carrying out inspection of materials taken from sealed packs do not disclose the nature of defects.
There is also no complaint against the plaintiff for the supplies effected for the previous years and also for subsequent yeaRs.The plaintiff has been the vendor for long.
the At the admission stage, the learned Single Judge records a prima facie finding in favour of the plaintiff which reads: (a) Two things should not be mixed up.
One is a contract which a private contractor had or has with the railways.
The contract usually contains an arbitration clause.
Sometimes there is no arbitration clause.
It may well be the case on some occasions that after performance of the contract, the railways can find faults with the supply made and reopen the case.
It might be the case on other occasions that after supply has been made and payments made therefor, the railways cannot raise any complaint regarding the quality of the goods.
These contentions are to be resolved by arbitration or in a civil court.
The arbitrator or the Court has sufficient powers to deal with such a situation.
(b) Another aspect of the matter is the safety aspect.
The railways have good reasons to be concerned about the safety of the railway tracks.
So they are entitled to make a thorough search of, amongst other things, the clips supplied by any vendor which includes the plaintiff and try to find out whether their quality is acceptable.
It might well be the case that a past officer of the railways passed the goods without properly verifying the standards.
It is quite true that a railway contractor supplying these items has to be approved by RDSO and may be removed from the list of approved contractors if the goods supplied by him are deficient or if the contractor is unable to supply the goods of a particular quality or for other reasons.
Since the plaintiff has been supplying these railway clips for a very long time and has been in the list of approved contract ORS.a due procedure has to be followed before deleting their name from the list or refusing to accept their goods.
(c) I am of the opinion that these two notices have made a mix up of the above two options of the government.
This might result in prejudicial consequences for the plaintiff because they might be forced to face an adveRs.civil consequence, without an opportunity to represent themselves and without hearing them.
The Railway Authorities on the basis of such prima facie finding were directed not to give effect to that part of the above notice directing the plaintiff to stop production of their product.
On consideration of the said affidavit I see no reason to revisit the issue and modify and/or take a contrary view of the order dated 14th August, 2012.
While confirming the said interim order I clarify that this order would not prevent inspection of product of the plaintiff by RITES according to the existing contracts between the parties and upon notice to the plaintiff.
If the railways wish to proceed with de-listing of the plaintiff or not buying their goods it has to follow proper procedure by giving opportunity to the plaintiff to deal with test report by a written or oral representation, if any.
This order shall not be construed to mean that this Court has dealt with the reports of the inspecting authority on merits.
If the Railways want to proceed on the basis of such reports then the Railways are required to follow the due procedure as indicated in the order dated 14th August, 2012.
The report has to be made available to the plaintiff.
A prayer is made by Mr.Chatterjee, learned Counsel on behalf of the respondents to file their written statement.
The defendants shall file written statement within a period of four weeks from date in all the three suits.
GA No.2911 of 2012, GA No.2300 of 2012 and GA No.2735 of 2012 accordingly, stand disposed of.
(SOUMEN SEN, J.) dg2