Krishan Lal Vs. Food
Corporation of India & Ors.
Nos.8569-8570 of 2003]
O R D E R
T.S. THAKUR, J.
appeals by special leave arise out of an order passed by the High Court of
Punjab and Haryana whereby Civil Writ Petition No. 2416 of 2002 and R.A. No.134
of 2002 filed by the appellant seeking refund of Rs.10 lakhs deposited towards
security pursuant to the order passed by the High Court has been dismissed.
12th November, 1999 the Food Corporation of India invited tenders for appointment
of Handling and Transportation Contracts at various depots including the depot
at Dabwali in the State of Haryana. Several persons appear to have submitted
their tenders in response to the said tender notice including M/s R.R.S. Chautala
& Company who eventually bagged the contract in question having offered to undertake
the contracted work in consideration of payment at 186% above the schedule of rates.
questioned the said allotment in Writ Petition No.1368 of 2000, inter alia, alleging
that he had been illegally prevented from submitting his tender by being denied
the requisite form for submission of the tender. The appellant also asserted that
he was ready to undertake the Handling and Transportation work at a much lower
rate of 110% above the schedule of rates as against 186% offered by the
successful tenderer mentioned above. The appellant even offered to deposit a
sum of Rs.10 lakhs by way of security to show his bona fides. An affidavit to that
effect was also, it appears, filed by the appellant.
Writ Petition filed by the appellant was eventually allowed by the High Court
by its order dated 5th April, 2001. The High Court held that the decision taken
by the Food 2Corporation of India was without consideration of relevant facts and
was not reasonable. The High Court therefore, found a case justifying
interruption of contract and setting aside of the allotment of work in favour of
the successful tenderer. Having said that, the High Court issued the following
directions: "It is directed that the fifth respondent shall cease to operate
respondent-corporation shall invite fresh tenders and proceed to allot the work
in accordance with law. The petitioner shall be bound by his offer to work at
110% above the schedule of rates. He would deposit an amount of Rs.10 lacs by way
of security within one week from today with the office of the Senior Regional Manager,
Food Corporation of India, Chandigarh. This amount shall be adjusted towards security,
etc. if the work is allotted to the petitioner. Otherwise, it would be refunded
within one week of the final decision regarding the allotment of the
obedience to the above directions the respondent- Food Corporation of India (FCI)
invited sealed tender for handling and transport contact for its Dabwali depot
for a period of six months. The short term tender notice required the intending
tenderers to submit their tenders along with complete documents and the earnest
money prescribed in the form of a Demand Draft.
response to the above tender notice, the appellant also submitted a tender
offering to undertake the work @ 50% above the schedule of rates. This offer
was accepted by the respondent-Corporation with a direction to the District Manager,
FCI, Hissar that no amount towards security be demanded from the appellant as the
security amount of Rs.3,09,500/- stood deposited in the Regional Office. Shortly
after the allotment of the contract to the appellant, the appellant sent a fax
message expressing his inability to undertake the handling and transport
contract and withdrawing the offer made by him.
By this time the appellant
had already executed a formal agreement with the respondent-Corporation on 28th
May, 2001. In response, the respondent-Corporation informed the appellant that any
withdrawal after the execution of the formal agreement was tantamount to a breach
of the terms and conditions of the contract and would attract action under
Clause X(b) of the agreement. The appellant was requested to take up the
handling and transport work within one week positively, failing which the respondent-Corporation
proposed to take recourse to Clause X(b) of the agreement to get the work done
at the risk and cost of the appellant.
is common ground that the appellant did not undertake the work. He cited some security
problems which according to the appellant prevented him from discharging his
contractual obligations. Not only that the appellant demanded the refund of
Rs.10 lakhs which stood deposited with the respondent-Corporation pursuant to
the direction issued by the High Court in the writ petition referred to earlier.
Upon refusal of the respondent-Corporation to refund the amount in question the
appellant filed Writ Petition No.2416 of 2002 in the High Court of Punjab and Haryana
for a mandamus directing the respondent-Corporation to refund the same.
The High Court dismissed
the said petition holding that since the parties had entered into a written contract
their mutual rights and obligations were governed by the terms and conditions
of the said contract. The High Court observed: "It appears from the record
of the case and in particular Annexure-P-5 dated 20.6.2001 addressed to the petitioner
by the F.C.I. that the petitioner had executed agreement in the office on
28.5.2001 and his offer at 50% ASOR was accepted by the office vide telegram
dated 25.5.2001, a copy whereof was sent to the petitioner through registered post.
It has been clearly mentioned in Annexure-P-5 that the F.C.I had accepted the
offer of the petitioner and that being so, in our view, a concluded contract had
come into existence.
Withdrawal of offer would
certainly attract relevant condition of the contract. "The contract that has
been arrived at between the parties has not been placed on records. The terms
of contract in the event a party, after its offer has been accepted, may back
out, are, thus, not known. There is, however, sufficient indication forthcoming
from Annexure-P-5 that Clause 10(b) would apply in the event of contractor may not
carry out the work allotted to him.
This clause too has not
been shown to us nor made a part of pleadings. All that we would, thus, like to
observe at this stage is that once the parties have arrived at concluded contract,
the terms thereof would alone determine the rights inter se parties. Be that as
it may, petitioner cannot ask for refund of Rs.10 Lacs on the dint of orders passed
in his earlier petition bearing No.1368 of 2000 as it is only in the event work
was not to be allotted to him that, he could ask for refund of the money deposited
have heard learned counsel for the parties at some length. The material facts are
not in dispute. It is not in dispute that the amount of Rs.10 lakhs was deposited
by the appellant in terms of the order of the High Court in Writ Petition No.1368
of 2000. The said amount had to be refunded to the appellant if the work was
not allotted to the appellant upon the issue of the fresh tenders. In case the appellant
succeeded in bagging the contract the amount was to be adjusted towards security.
This clearly implied that
the order passed by the High Court envisaged a situation where the appellant
would not succeed in securing the contract pursuant to the fresh tender
process, in which event the amount deposited by the appellant had been refundable
in to. In case, however, the appellant succeeded in bagging the contract which obviously
depended upon whether he offered the lowest rate for undertaking the work in
question, the amount deposited by him had to be adjusted towards security in
relation to the said contract. It is also not in dispute that a short-term tender
was issued pursuant to the direction of the High Court and that the security
amount required to be furnished by the appellant was limited to a sum of Rs.3,09,500/-.
The High Court order
did not provide for a situation where the security amount required under the contract
may be Rs.3,09,500/- for other tenderers but Rs.10 lakhs in the case of the appellant.
That a formal agreement was executed between the parties is also admitted
before us as indeed it was before the High Court. Withdrawal of the offer tantamount
to refusal to undertake the contract, hence a breach of the terms of the contract,
and shall attract the penal provisions contained in the same is also not in question.
Our attention was, in
this regard, drawn by learned counsel for the appellant to Clause X (b) and XI
(f) of the agreement which read as under: "X(b) The Senior Regional Manager
shall also have without prejudice to other rights and remedies, the right, in
the even of breach by the contractors of any of the terms and conditions of the
contract to terminate the contract forthwith and to get the work done for the unexpired
period of the contract at the risk and cost of the contractors and/or forfeit the
security deposit at any part thereof for the sum of sums due for any damages,
losses, charges, expenses of costs that may be suffered or incurred by the corporation
due the contractor's negligence or unworkment like performance of any of the
services under the contract.
XI (f) In the event of
termination of the contract envisaged in clause X, of the Senior Regional
Manager shall have the rights of forfeit the entire or part of the amount of
security deposit lodged by the contractors or to appropriate the Security
Deposit or any part thereof in or towards the satisfaction of any sum due to be
claimed for any damages, losses, charged expenses or cost that may be suffered or
incurred by the Corporation."
was argued on behalf of the appellant that even the widest and most favourable interpretation
of the above terms would not entitle the respondent-Corporation to forfeit any
amount besides the security deposit and recover any damages, losses or cost that
may be suffered or incurred by the respondent-Corporation in getting the contracted
work executed through some other agency. Such being the position the respondent-Corporation
could at best forfeit the sum of Rs.3,09,500/- towards security deposit and a
sum of Rs.2,17,274/- which the respondent-Corporation claimed to have incurred towards
extra expenditure in getting the work executed at the risk and cost of the
The extra expenditure
incurred by the respondent-Corporation after termination of the contract allotted
to the appellant, it is noteworthy, has been quantified by the
respondent-Corporation in para 5(i) & (ii) of the counter-affidavit filed
on its behalf. The respondent-Corporation has inter alia said: "I say that
during the contract period of six months of the petitioner, the Respondent
Corporation had to incur an extra expenditure of Rs.2,17,274/- and suffered heavy
losses. I say that security amount of Rs.10 lakhs was furnished by the petitioner
as security for fulfilment of contract in terms of High Court order. Even after
depositing Rs.10 lakhs as per the High Court Orders, the petitioner did not
resume the work and the entire amount of Rs. 10 lakhs was rightly forfeited against
excess payment made towards alternative arrangements made at the risk and cost of
the petitioner. I say that the amount of Rs.10lakhs was stand forfeited under Clause
X(b) read with Clause XI(f) of the contract."
was in the light of the above assertions, argued Mr. Jha, learned counsel for
the appellant, that the respondent- 9Corporation could not lay any claim
against the amount in question in excess of Rs.3,09,500/ plus Rs.2,17,274/- and
that the balance amount was liable to be refunded to the appellant.
behalf of the respondent-Corporation it was argued that the appellant ought to
have resorted to the arbitration clause under the agreement instead of filing a
writ petition in the High Court. Alternatively, it was argued that the security
deposit having been made under the orders of the High Court, the entire amount
of Rs.10 lakhs was liable to be forfeited on the failure of the appellant to
work once the same was allotted to him.
is true that there was an arbitration clause in the agreement executed between
the parties. It is equally true that, keeping in view the nature of the controversy,
any claim for refund of the amount deposited by the appellant could be and ought
to have been raised before the Arbitrator under the said arbitration. The fact,
however, remains that the High Court had entertained the writ petition as early
as in the year 2002 and the present appeals have been pending in this Court for
the past ten years or so. Relegating the parties to arbitration will not be feasible
at this stage especially when the proceedings before the Arbitrator may also
drag on for another decade. Availability of an alternative remedy for
adjudication of the disputes is, therefore, not a ground that can be pressed into
service at this belated stage and is accordingly rejected.
untenable is the alternative argument that since the amount of Rs.10 lakhs had been
deposited pursuant to the order passed by the High Court the same was liable to
be forfeited in toto in the event of any breach of the agreement between the
parties. The deposit was, no doubt, made pursuant to the direction of the High
Court but the said direction did not go further to say that in case the appellant
committed a breach of the agreement executed between the parties, any such breach
would result in the forfeiture of the entire amount of Rs.10 lakhs. A closer reading
of the order passed by the High Court leaves no manner of doubt that the amount
was deposited but was refundable in case the contract was not allotted and was adjustable
towards security if the appellant succeeded in emerging as the successful tenderer.
In the event of adjustment of the amount towards security the breach of the
contract would have led to the forfeiture of the security amount alone and not
the entire amount deposited by the appellant.
so, the terms of the contract provided for execution of the contracted work through
another agency at the risk and cost of the appellant. It is not in dispute that
the respondent-Corporation had engaged an alternative agency for getting the
work executed. It is also not in dispute that an extra amount was incurred by the
respondent-Corporation in that regard. If that be so, the amount lying with the
respondent-Corporation could be utilised for recovery of the loss. The respondent-Corporation
could therefore make a claim for recovery of the extra expenditure, incurred by
it. We must mention, in fairness to Mr. Jha, that the respondent-Corporation's
right to forfeit the security amount or to recover the extra expenditure incurred
in getting the work executed from alternative agency was not disputed by him.
being the position, the respondent-Corporation would be entitled to retain a sum
of Rs.3,09,500/ plus Rs.2,17,274/- = Rs.5,26,774/-. The balance amount of Rs.4,73,226/-
ought to have been refunded to the appellant on the admitted factual and
the result, we allow this appeal, set aside the order passed by the High Court and
direct the respondent-Corporation to refund the balance amount of Rs.4,73,226/-
to the appellant within a period of three months from today failing which the
said amount shall start earning interest @ 10% p.a. from the date of expiry of
the stipulated period of three months mentioned above. We are consciously making
no order for payment of interest on the amount held refundable to the
appellant, for we are of the opinion that the appellant had without any real
intention to perform the work in question got the earlier contract terminated
by a judicial order and put the Corporation through the unnecessary botheration
and consequential prejudice of calling for fresh tenders. The appellant, it appears
to us, was interested only in scoring a point over his rival for whatever reasons
he had in view. The conduct of the appellant has, therefore, dissuaded us from directing
payment of any interest to him on the amount that is held refundable.
appeals are, with above directions & observations, allowed and disposed of
leaving the parties to bear their own costs.
(GYAN SUDHA MISRA)