Judgment:
Navaniti Prasad Singh, J.
1. As pleadings are complete and all parties have appeared with their consent the writ petition has been heard for final disposal at this stage itself.
2. The writ petition was filed on 11.12.2008, against the order of suspension of work dated 07.06.2008 (Annexure-6), and termination of the contract for work dated 21.11.2008 (Annexure-11/2), as done by IRCON International Limited, a Government of India undertaking, and for direction to the said respondent for clearing all dues payable to the petitioner including the fifth running bill.
3. The writ petition having been filed after service of copy of the writ petition on the learned Advocate General for the State and its officers. A copy of the writ petition was also served upon the counsel who normally appears for IRCON International Limited in this Court as also after serving copies of the writ petition in the local office of IRCON International Limited. When the matter was taken up for admission for the first time in spite of such services of notice of writ petition no one appeared on behalf of the IRCON International Limited. Interlocutory applications were filed amending the writ petition, in view of the subsequent events and for staying of re-tender notice of the balance work at the risk and cost of the petitioner. As no one appeared on behalf of the IRCON International Limited and having considered the matter prima facie, by order dated 13.01.2009 apart from fresh notices having been ordered to be issued on respondent ad interim stay with regard to re-tender was passed by this Court. Subsequently parties have appeared, filed their counter affidavits and rejoinders were filed.
4. The principle plea of the petitioner, who is the contractor, as against suspension/cancellation and re-tender at the risk and cost of the petitioner of the balance work, is based on unauthorized and virtually mala fide interference in the contractual relationship between the petitioner and IRCON International Limited by the respondent-State Officials.
5. The facts are not much in dispute and as would be seen that the assertions of the petitioner virtually stand admitted and established by the IRCON International Limited itself and their documents annexed by them itself.
6. The dispute relates to the construction of two public roads, namely, Pandasarai to Mabbi (10.491 Kms) and Laheraisarai to Khadalabari (5.517 Kms) totaling to about 16.008 Kms within Darbhanga town. It included few culverts as well. This is referred to as State High Way-50, Package-1B(I).
7. It appears that the State Government entrusted the work of the said construction of the said roads by way of improvement and upgradation to IRCON International Limited, a Government of India undertaking, expertising in large scale civil constructions. IRCON International Limited then issued a tender inter alia for the said work. Petitioner Company, which is inter alia a civil contractor of repute having expertise in such work, tendered. The cost of the project tendered was of Rs. 30.36 crores and the period of completion of work was 24 months. Petitioner tendered and after due negotiation petitioner was issued letter of acceptance by IRCON International Limited dated 20.02.2007. Pursuant to the said letter of acceptance on 04.04.2007 a bi-partite agreement was executed between the petitioner Company and IRCON International Limited for the said work for a consideration of Rs. 29.72 crores, which was marginally below the tendered price. Petitioner had to deposit and it deposited the requisite earnest money and security by way of fix deposits.
8. Petitioner mobilized resources, machinery and man power for the said work and started the work. The first running account bill was submitted on 14.02.2008 by the petitioner to IRCON International Limited. After making certain deductions, statutory and otherwise, without complaint against petitioner, payments were made. The second running account bill dated 15.03.2008, the third running account bill dated 29.04.2008 and the fourth running account bill dated 07.05.2008 were similarly paid. The disputes then arise after submission of the fifth running account bill dated 30.05.2008.
9. As noticed above, the roads were part of State High Way running through the town of Darbhanga and the roads had to be widened and virtually re-laid in concrete. This naturally required closure of traffic for considerable periods to facilitate the work. This caused problems both for the public at large and the contractor. As for public this was the main arterial road and closure caused great inconvenience. Electric Poles under-ground telephone cables and encroachments had to be removed and traffic movements severely restricted causing public resentment. On part of contractor without adequate help and co-operation from the State they were unable to execute the work in an orderly fashion required for work of such magnitude in the town.
10. As noticed above, till May 2008 petitioner neither had any problems with IRCON International Limited nor were there any complaints by them in respect of petitioner's work. It appears that in April 2008, the Flying Squad of the State Government in the Department of Road Construction, made some sample testing of the roads laid by the petitioner and based on the test reports done at the State's own laboratory, alleged that work was sub-standard. Commissioner, Darbhanga who has also been made party by name (Respondent No. 3) alleged on basis of the said reports that the work being sub-standard IRCON International Limited should look for alternatives. It is alleged by the petitioner that he (Respondent No. 3) took all steps, mala fide, to disturb the working of petitioner and the State official ensured that IRCON International Limited took action against petitioner. Based on the test reports so obtained by the State from its own agency on 01.06.2008, an F.I.R. was lodged against representatives of the petitioner's Company and Officers of IRCON International Limited. It may also be noted here that in the mean time for reasons not clearly disclosed IRCON International Limited started reducing, in stages, the work allotted to petitioner by withdrawing it from the petitioner's contract and allotting it to other private agencies, even without tender or public notice and that too at a cost higher than what was agreed by the petitioner. Consequent to the F.I.R. being lodged, by impugned order dated 07.06.2008, without disclosing any reason the work was suspended by IRCON International Limited, allegedly merely referring to quality check and testing done by the State Government and further substantial work was diverted to other agency. Petitioner by his various communications immediately protested and clearly stated that if IRCON International Limited found that the work of petitioner was not up to standard, as specified in the contract, then it was open to IRCON International Limited to point out the defects and petitioner undertook to rectify the defects, as specified in the contract between the parties. But nothing was so pointed out nor was any rectification demanded by IRCON International Limited. Ultimately, on 21.11.2008 the contract was terminated and decision taken to re-tender the balance work left with the petitioner. Petitioner has annexed as Annexure-15, the internal notings of Senior Officials of IRCON International Limited itself to show unauthorized interference by the Commissioner, Darbhanga (Respondent No. 3) to the extent that IRCON International Limited officials themselves noted that Commissioner, Darbhanga was not permitting, even groove cutting on existing roads by the petitioner and was insisting that work to the petitioner be terminated and work allotted to new agency to complete the package. This is the noting of the General Manager (Administration) dated 13.06.2008 of IRCON International Limited itself. It notes reduction of scope of work of petitioner, its allotment to another group even at extra cost. Petitioner's submission is that under the contract itself there are Clauses 43, 50 & 55 which clearly provides for such situation of suspension, default and termination. These have not at all been followed. IRCON International Limited has in fact acted de hors the contract at the pressure by the State. On 20.11.2008 Officials of IRCON International Limited were asserted. On 21.11.2008 the contract rescinded. It is stated that in fact IRCON International Limited itself was of the view that there was no default on part of the petitioner, but in view of the dominating position of the State and its official it could do little to defend its contractor and for maintaining long term relationship with the State decided to cancel the remaining contract, having already diverted substantial work to other private contractors even without tender or public notice.
11. Respondent No. 3 is the Commissioner, Darbhanga who has been made party by name as well. On his behalf a counter affidavit has been filed. Apart from denial in general the assertions of the petitioner its stand is that it interfered in the matter in larger public interest as there was public agitation against the work being done by the petitioner and in order to maintain law and order. The notings of the General Manager (Administration) of IRCON International Limited itself dated 13.06.2008 (Annexure-15) that Commissioner, Darbhanga was obstructing and restricting the work of the petitioner and wanted the work to be terminated and allotted to another contractor is not specifically denied.
12. IRCON International Limited has filed a comprehensive counter affidavit and annexed documents to support its actions. It states that it had decided to suspend the work by its order dated 07.06.2008 pursuant to the directive received from the Principal Secretary. Department of Road Construction, Government of Bihar. It has annexed as Annexure-A, the letter dated 05.06.2008 of the Principal Secretary, which directed the suspension of work and proceedings against the contractor including direction to rescind the work, on the ground that the work was found to be sub-standard on testing by government, for the purpose of saving cement by the Contractor, for which an F.I.R. was also lodged at his instance. It is pursuant to that on the very next day of the receipt of the said communication, without any further enquiry, work was suspended by the impugned order dated 07.06.2008. They have then annexed the proceeding of the Commissioner, Darbhanga dated 10.06.2008 to show that the Commissioner directed that the alternative arrangement to be made to complete the work. In their counter affidavit IRCON International Limited has not denied the notings of its General Manager (Administration) dated 13.06.2008, as contained in Annexure-15, to the writ petition wherein its General Manager had noted that the Commissioner was not permitting the petitioner to do the work and was obstructing the work. Two important communications of IRCON International Limited from its Executive Director to the Principal Secretary, Department of Road Construction. Government of Bihar has been annexed as Annexures-F & H dated 14.07.2008 and 03.11.2008. These two letters are of some significance. It appears that having got the test reports of the State of quality of work IRCON International Limited itself decided to get the work tested at third independent party experts in the field. Having examined their third independent party's report and made enquiries in their letter dated 14.07.2008 (Annexure-F), this is what Executive Director of IRCON International Limited has communicated to the Principal Secretary:.It does not indicate that contractor has saved on cement. The quality check does indicate that the quality of work achieved was not up to the desired level which is due to the fact that the road was not blocked inspite of all the efforts of our supervisors during the curing period and traffic was moving over the road during this curing period.
It would like to assure you that wherever the quality of work is sub standard the same will be got re-done....
13. In their letter dated 03.11.2008, the Executive Director of IRCON International Limited to the Principal Secretary, Department of Road Construction, Government of Bihar, they inter alia suggested that the issue of sub-standard work should be dealt contractually which permits the rectification of sub-standard work at the cost of contractor rather than taking action (of cancellation) which will otherwise invites claims and disputes. Alternatives of rectification were suggested. This is Annexure-H dated 03.11.2008. Various Clauses of contract were also brought to the notice of the authorities which obliged IRCON to give opportunity to petitioner for rectification but as authorities insisted the cancellation was ordered and re-tender issued. It may be noted that on 20.11.2008 some officials of IRCON were arrested and on 21.11.2008 the cancellation order passed.
14. It is in this back ground this Court is called upon to determine whether the suspension and termination of contract is valid and is not de hors the contract.
15. Having considered the matter, in my view, there is no escape from the finding that left to itself, as between the contracting parties, the petitioner and IRCON International Limited, the petitioner at best would have been asked to rectify the work at their own cost, which the petitioner was always ready and willing. This is so because undisputedly IRCON International Limited itself was clearly of the view that the defect that was pointed out was not because of any construction fault or default committed by petitioner but primarily because of non-cooperative attitude of local State district administration. This is evident from Annexure-15 dated 13.06.2008, when the General Manager (Administration) of IRCON International Limited itself notes that Commissioner, Darbhanga Division is not permitting the petitioner to go on with its work. This is further fortified by Annexure-F dated 14.07.2008 of the Executive Director of IRCON International Limited itself to the Principal Secretary, Department of Road Construction, Government of Bihar clearly defending petitioner and stating that as traffic was allowed to move on uncured roads, the curing process could not be completed, which led to sub-standard quality. Further, in their letter dated 10.12.2008 to the Police (Annexure-16), IRCON has taken a categorical stand that the testing done by State was not proper, there was no fault on part of petitioner or IRCON nor any illegality committed. This, in my view, clearly establishes the truth of the matter. Petitioner cannot be blamed for any sub-standard work. IRCON International Limited itself does not hold petitioner responsible. This letter is Annexure-F to the IRCON counter affidavit and is dated 14.07.2008. Further, in their counter affidavit itself, they have stated that it is pursuant to directives dated 05.06.2008 of the Principal Secretary that they suspended the work. It is their tacit admission that suspension was not because they desired it or pursuant to their enquiry or pursuant to their satisfaction. Then, we have Annexure-H dated 03.11.2008, another letter to the Principal Secretary by IRCON International Limited itself, where again they have pleaded that the matter be dealt contractually giving chance to petitioner to rectify the defects, as was envisaged under the contract itself. Thus, in my view, IRCON International Limited wanted to adhere to and proceed in accordance with contract as between IRCON International Limited and the petitioner but could not do so because of the extreme stand taken by the State, which was clearly de hors the contract. On 20.11.2008 IRCON officials were arrested and on 21.11.2008 the contract thus rescinded by IRCON. These, in my view, establish mala fide in law if not on facts. Thus, the reasons for suspension and cancellation of contract is at least not bona fide and not for valid reasons. IRCON International Limited itself did not find any culpable deficiency on part of petitioner rather it always defended the petitioner and was seeking rectification at best. Left to its own, it would not have taken any such action as suspension and cancellation. Keeping in mind that it was a contract as between the IRCON International Limited and the petitioner, such interference by third party, who was not a party to the contract directly, cannot be countenanced by this Court. It is thus apparent that the action of IRCON was under pressure and influence of State officials and actions not on its own objective findings. IRCON wanted to proceed contractually but was not allowed to do so by State officials. This was clearly arbitrary and de hors the contract. In the result, the suspension and cancellation cannot be sustained and is quashed. IRCON International Limited is directed to clear the payments due to the petitioner making admissible deductions. If petitioner is aggrieved by any such deductions it will have its remedies as provided in law but this will not inevitably lead to resumption of work by petitioner. IRCON International Limited would be free to decide the same within the parameters of the contract and the rights contained therein. In event of IRCON International Limited deciding to go ahead with the re-tender process it would be certainly not be at the risk and cost of the petitioner.
16. In the result, with the aforesaid observations and directions, the writ petition is allowed to the extent as indicated above.