As both the writ petitions instituted under Article 226 of the Constitution of India involve similar nature of challenge, the same are taken up together at the request of the learned counsel ...
No Acts & Articles mentioned in this case
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THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
WRIT PETITION (C) No. 6103/2012
M/s. M.K. Dhiroomal Associates JV, a Joint
Venture of M/s M.K. Engineering and M/s
Shiroomal and Sons Pvt. Ltd., having its
registered office at West Guwahati,
Maligaon, Guwahati - 11.
………………Petitioner
-Versus-
1) Union of India, represented by the
Secretary, Ministry of Railways, Railway
Board, Railway Bhawan, New Delhi.
2) Northeast Frontier Railways, represented
by the General Manager, Northeast
Frontier Railways, Guwahati -12.
3) The Chief Engineer, Constructions, the
North East Frontier Railways, Maligaon,
Guwahati - 12.
4) The Chief Engineer, Constructions – 3,
the North East Frontier Railways,
Guwahati- 12.
GAHC010002782012
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THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
WRIT PETITION (C) No. 6103/2012
M/s. M.K. Dhiroomal Associates JV, a Joint
Venture of M/s M.K. Engineering and M/s
Shiroomal and Sons Pvt. Ltd., having its
registered office at West Guwahati,
Maligaon, Guwahati - 11.
………………Petitioner
-Versus-
1) Union of India, represented by the
Secretary, Ministry of Railways, Railway
Board, Railway Bhawan, New Delhi.
2) Northeast Frontier Railways, represented
by the General Manager, Northeast
Frontier Railways, Guwahati -12.
3) The Chief Engineer, Constructions, the
North East Frontier Railways, Maligaon,
Guwahati - 12.
4) The Chief Engineer, Constructions – 3,
the North East Frontier Railways,
Guwahati- 12.
GAHC010002782012
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5) The Deputy Chief Engineer, Constructions
– 2, the North East Frontier Railways,
Guwahati - 12.
6) The Assistant Engineer, Constructions - 4,
Bogibeel, North East Frontier Railways,
Silapathar.
7) The Executive Director, Civil Engineer G,
Railway Board, North East Frontier
Railways, Guwahati - 12.
……………….Respondents
WRIT PETITION (C) No. 266/2012
Smti. Purnima Das, W/o Late J.C. Das R/o
Sibbari Road, Tarapur P.S. Silchar, District -
Cachar, Assam.
………………Petitioner
-Versus-
1) Union of India, represented by the
Secretary, Ministry of Railways, Railway
Board, Railway Bhawan, New Delhi.
2) General Manager, Office of the General
Manager, Northeast Frontier Railway,
Maligaon, Guwahati -11.
3) The Chief Engineer, Constructions, the
North East Frontier Railways, Maligaon,
Guwahati - 11.
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4) The Public Information Officer,
Northeast Frontier Railway, Maligaon,
Guwahati - 11.
……………….Respondents
Advocates :
Petitioners : Mr. M. Biswas, Advocate
Respondents [W.P.(C) no. 6013/2012] : Dr. B.N. Gogoi, SC, N.F. Railway
Respondents [W.P.(C) no. 266/2012] : Mr. B.K. Das, Addl. SC, N.F. Railway
Date of Hearing, Judgment & Order : 21.09.2023
BEFORE
HON’BLE MR. JUSTICE MANISH CHOUDHURY
JUDGMENT & ORDER [ORAL]
As both the writ petitions instituted under Article 226 of the Constitution of
India involve similar nature of challenge, the same are taken up together at the
request of the learned counsel for the parties, as they have stated that
exchange of pleadings in both the writ petitions is complete.
2. The petitioners in both the writ petitions are represented by Mr. M. Biswas,
learned counsel; the respondents in the writ petition, W.P.[C] no. 266/2012 are
represented by Dr. B.N. Gogoi, learned Standing Counsel, N.F. Railway; and the
respondents in the writ petition, W.P.[C] no. 6103/2012 are represented by Mr.
B.K. Das, learned Additional Standing Counsel, N.F. Railway.
3. As the nature of challenge in both the writ petitions are similar, the facts,
pleadings and issues involved in the writ petition, W.P.[C] no. 6103/2012 are
taken up for discussion, at first.
Writ Petition, W.P.[C] no. 6103/2012 :-
4. The writ petition, W.P.[C] no. 6103/2012 has been preferred to assail a Final
Variation Statement issued vide Letter no. W/60/CON/BB/NB-
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Dyke/DBRT/2006/22/120 dated 08.12.2010 in relation to a contract agreement,
that is, Contract Agreement no. CON/Bogibeel/120 dated 27.02.2007. In
addition, the petitioner has also sought setting aside and quashing of a Letter
no. W/60/CON/NB/Dyke/120/02 dated 03.01.2011; and another Letter no.
W/60/CON/Bogibeel/NB-Dyke/SPTR/120 dated 05.01.2011 issued by the
respondent N.F. Railway authorities. Assailment is also made to Clause 6.0
contained in the Contract Agreement, executed between the petitioner and the
respondent N.F. Railway authorities on 27.02.2007, with regard to its
inapplicability.
5. In order to understand and appreciate the challenge made, it is necessary to
narrate the background events, which have led to the issuance of the Final
Variation Statement and the impugned Letters, in brief, at the inception.
5.1. In the year 2006, the respondent N.F. Railway authorities vide Tender no.
CE/CON/Bogibeel/NB Dyke/2006/22 invited bids from intending eligible bidders
for execution of a contract-work viz. “Raising, widening, strengthening of North
bank dyke by earthwork in filling to form embankment & formation with
mechanical compaction and other ancillary works in between Chainage 0.5 km
upstream of Bridge Centre Line perpendicular to Bogibeel Bridge centre line
[Service road] to Ch. 7.0 Km downstream of Bridge centre line along with
perpendicular to Bogibeel Bridge centre line at North bank of River Brahmaputra
in connection with Bogibeel Bridge Project [Gr.2]” [‘the Contract-Work’, for
short]. Responding to the Tender no. CE/CON/Bogibeel/NB Dyke/2006/22, the
petitioner which is a joint venture concern of two entities, submitted its Offer on
14.08.2006. The Offer of the petitioner was accepted by the Competent
Authority in the respondent N.F. Railway for and on behalf of the President of
India at a total cost of Rs. 18,74,69,000/-, as quoted by the petitioner, and an
Acceptance Letter bearing no. W/362/CON/BBI/NB-Dyke/DBRT/2006/22 dated
12.12.2006 stood issued under the hand of the Chief Engineer/Construction-
3/N.F. Railway, Maligaon O/o the General Manager [Construction], Maligaon,
Guwahati.
5.2. With the issuance of the Acceptance Letter dated 12.12.2006, the petitioner was
authorized to commence the Contract-Work and to ensure completion of the
Contract-Work within the stipulated period of time, mentioned therein. By the
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Acceptance Letter dated 12.12.2006, the petitioner was informed that Earnest
Money Deposit to the extent of Rs. 34,09,540/-, deposited by it, would be
retained as a part of the Security Deposit and rest of the amount towards the
Security Deposit would be deducted from CC bills as per conditions of the
Contract Agreement. The petitioner was asked to execute a formal Contract
Agreement for the Contract-Work and to deposit a Performance Guarantee in
the form of an irrevocable Bank Guarantee amounting to 5% of the Contract
Value, prior to signing of the Contract Agreement within a period of 15 [fifteen]
days therefrom. A Schedule of Items of Work and approximate Quantities was
made as part of the Acceptance Letter dated 12.12.2006. It was mentioned that
the Acceptance Letter shall be legal and enforceable contract between the
petitioner and the respondent N.F. Railway authorities.
5.3. Subsequent to deposit of the Performance Guarantee and compliance of other
requisite formalities, a contract agreement being Contract Agreement no.
CON/Bogibeel/120 dated 27.02.2007 came to be executed between the
petitioner on one hand and the Chief Engineer/Construction-3/N.F. Railway for
the Railway Administration on behalf of the President of India on the other
hand. As per the Contract Agreement dated 27.02.2007, the petitioner as the
Contractor had agreed with the N.F. Railway authorities for performance of the
Contract-Work set forth in a Schedule thereto, that is, [i] the General Conditions
of Contract; [ii] the Specifications of the Northeast Frontier Railway 1998
Edition, corrected up-to-date; and [iii] the Special Conditions and Special
Specifications, if any, as part of the Contract Agreement. As per the Contract
Agreement, the total approximate Contract Value of the Contract-Work was Rs.
18,74,69,000/-. One set of Additional Special Conditions of Contract was also
made part of the Contract Agreement no. CON/Bogibeel/120 dated 27.02.2007.
Clause 6.0 in respect of which the petitioner has mounted a challenge, is part of
the said Additional Special Conditions of Contract.
5.4. On being awarded the Contract-Work, the petitioner proceeded to execute the
Contract-Work. In course of time, the petitioner had completed the Contract-
Work and it was inspected by the concerned authorities in the respondent N.F.
Railway. A Completion Certificate bearing no. W/60/CON/Bogibeel/NB/North
Dyke/120 dated 29.07.2009 stood issued under the hand of the Deputy Chief
Engineer/Construction 2/N.F. Railway certifying that the petitioner had
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successfully completed the Contract-Work awarded vide the Contract
Agreement no. CON/Bogibeel/120 dated 27.02.2007. The Completion Certificate
also contained the detail expenditure of the works wherein it was mentioned
that the Date of Commencement of the Contract-Work was 26.12.2006 and the
Actual Date of Completion was 31.01.2009. The Certificate also mentioned the
original Contract Agreement value was Rs. 18,74,69,000/- and the up-to-date
value of bill was Rs. 11,29,08,422/-. Mention was also made in the said
Certificate to the effect that the Final Variation Statement of the Contract
Agreement was under process for finalization whereas the overall progress of
work achieved was 100%.
5.5. It was on 08.12.2010, the respondent N.F. Railway authorities vide Letter
bearing no. W/60/CON/BB/NB-Dyke/DBRT/2006/22/120 issued a Final Variation
Statement in relation to the Contract Agreement no. CON/Bogibeel/120 dated
27.02.2007. As per the Final Variation Statement, which was shown to have
been approved by the Competent Authority in the respondent N.F. Railway,
there was negotiation with the Contractor i.e. the petitioner towards Final
Variation Statement against the Contract Agreement dated 27.02.2007 and it
was agreed that the revised Contract Value in respect of the Contract-Work
would be Rs. 12,86,54,574.39.
5.6. The Final Variation Statement dated 08.12.2010 was followed by a Letter
bearing no. W/60/CON/NB/Dyke/120/02 dated 03.01.2011 addressed to the
petitioner. By the Letter dated 03.01.2011, it was informed to the petitioner that
the Competent Authority had approved the Final Variation Statement against
the Contract Agreement no. CON/Bogibeel/120 dated 27.02.2007. The
petitioner was, thereby, requested to deposit a sum of Rs. 25,21,881.27 as
‘vitiated amount’ or to submit a no claim certificate for deduction of the said
sum from the final bill amount of the petitioner which would result in finalization
of the Contract Agreement from the end of the respondent N.F. Railway. The
Letter no. W/60/CON/Bogibeel/NB-Dyke/SPTR/120 dated 05.01.2011 of the
Deputy Chief Engineer/Construction-2/SPTR to Chief Engineer/Construction-
3/MLG, N.F. Railway contained a proposal to consider the Contract Agreement
for single tender on a number of grounds.
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6. Mr. Biswas, learned counsel for the petitioner has submitted that it is not in
dispute that the petitioner had executed the Contract-Work to the extent of
100%, as certified by the N.F. Railway authorities themselves in the Certificate
dated 29.07.2009. He has drawn attention to Clause no. 2.8 of the Additional
Special Conditions of Contract [Additional SCC] to submit that the parties to the
Contract Agreement had agreed that the quantities specified in the Schedule of
Works were approximate and meant to give the tenderers an idea of quantum
of works involved. Right stood reserved to the respondent N.F. Railway
authorities to increase or decrease the quantities against various items and
add/or delete from the items up to 50% of the quantities or even more, as per
the actual requirements at site. Thus, there was provision to reduce payment
after measurements of the completed work with the issuance of a Final
Variation Statement. The petitioner is not aggrieved to that part of the Final
Variation Statement issued on 08.12.2010 whereby the value of the Contract-
Work had been revised to Rs. 12,86,54,574.39. The petitioner is aggrieved by
that part of the Final Variation Statement dated 08.12.2010 whereby a sum of
Rs. 25,21,881.27 has been sought to be recovered from the petitioner on the
premise that the Contract Agreement stood ‘vitiated’ to that extent.
6.1. Contending that such kind of recovery on the ground of vitiation was not
contemplated in the Contract Agreement, he has strenuously contended that
though in Clause 6.0 of the Additional Special Conditions of Contract, a mention
was made about ‘Vitiation of Contract’, the concept of ‘Vitiation’ was neither
explained in the Contract Agreement nor the same was brought to the notice of
the petitioner for any kind of consent from his side, by any mode whatsoever.
In such view of the matter, it is absolutely arbitrary on the part of the
respondent N.F. authorities to ask for a no claim certificate from the petitioner
vide Letter no. W/60/CON/NB/Dyke/120/02 dated 03.01.2011 for the purpose of
deducting the sum of Rs. 25,21,881.27 as vitiated amount, from the final bill
amount of the petitioner submitted for the Contract-Work.
6.2. Mr. Biswas has further submitted that though the Letter dated 05.01.2011 was
an inter-departmental communication between the authorities in the N.F.
Railway, but a perusal of the same would go to show that a decision had
already been taken by the respondent N.F. Railway authorities, as revealed from
the Letter no. W/60/CON/NB/Dyke/120/02 dated 03.01.2011, to the effect that
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recovery of a sum of Rs. 25,21,881.27 would be made either from the final bill
amount of the petitioner or on the basis of a no claim certificate. It is his further
contention that the respondent N.F. Railway authorities by making mention
about a Circular Letter no. XXIII no. 64/CE-I/CT/37 dated 05.05.1995 and other
letters of the Railway Board, Ministry of Railway, Government of India, in their
Affidavit-in-Opposition, have sought to bring the aspect of ‘vitiation’ for the
purpose of consideration in contracts entered into by the N.F. Railway
authorities on one side unilaterally. But, the said Circular Letter was never made
a part of the Contract Agreement dated 27.02.2007 by even making a mention
of it therein. It is his contention that to bind a contractor like the petitioner in
the manner contemplated in the Circular Letter dated 05.05.1995 of the Railway
Board, it was incumbent on the part of the respondent N.F. Railway authorities
to specifically include the same in the Contract Agreement, at least by
mentioning it. In the absence of any explanation provided in the Contract
Agreement about ‘vitiation’ and since the Circular Letter dated 05.05.1995 or
any other Circular/Letter/Notification, etc. was not part of the Contract
Agreement, it is not open for the respondent N.F. Railway authorities to resort
to a method which was neither mentioned in the Contract Agreement nor
envisaged by it, even by implication. Mr. Biswas has submitted that the main
reason to challenge the Letter dated 05.01.2011 is that the respondent N.F.
Railway authorities had brought in the figures of another contractor [L-1], to
make a comparison of the rates in respect of 5 [five] nos. of items offered by
the petitioner in his Bid to arrive at the alleged ‘vitiated’ amount of Rs.
25,21,881.27. He has contended that since the parties neither at the time of
execution of the Contract Agreement nor at a later point of time by any kind of
supplementary agreement had agreed for any method of calculation for any
vitiated amount, the petitioner as the Contractor, cannot be asked to agree to
such method.
7. In response, Mr. Das, learned Additional Standing Counsel, N.F. Railway has, at
first, placed reliance on Clause 6.0 :- ‘Vitiation of Contract’, appearing in the
Additional Special Conditions of Contract, to contend that if during the execution
of the Contract-Work, variation of quantities against items of work became
inevitable and such variation caused ‘vitiation’ of the Contract, it is permissible
on the part of the N.F. Railway authorities as the Tendering Authority/Employer,
to deduct the amount of ‘vitiation’ from the Contractor's bill. While admitting
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that the concept of ‘vitiation’ has not been defined in the Contract Agreement or
any other documents which were made part of the Contract Agreement in any
specific manner, he has referred to the Circular Letter dated 05.05.1995 of the
Railway Board, Ministry of Railways, Government of India. He has contended
that the concept of ‘vitiation’ has been explained in the said Circular Letter
dated 05.05.1995. It was made clear therein that that the concept of ‘vitiation’
gets operational in the event there is increase or decrease of quantities
substantially, that is, more than 25% of the overall accepted tender cost.
7.1. It is the contention of Mr. Das that the petitioner as the Contractor/tenderer had
full knowledge about the implication of Clause 6.0 of the Additional Special
Conditions of Contract and the obligation arising out of it. He has adverted to
the contentions made in paragraph 18 of the Affidavit-in-Opposition filed by the
respondent N.F. Railway authorities wherein it has been sought to canvass that
the respondent N.F. Railway authorities while accepting an Offer, considers the
overall bid value of the bidders and not the rates of individual items. It is
contended that ordinarily, the lowest eligible and technically suitable tenderer
[L-1] is awarded the contract-work for which tender process is undertaken. The
respondent N.F. Railway has envisaged a situation that it is quite possible that
for some of the rates quoted by the L-1 bidder, L-1 bidder might be higher
though overall he is L-1 and so, it is also quite possible for some items in which
L-1 is not a lowest, there is positive variation in quantities and for other items in
which L-1 is lowest, there is a negative variation in quantities. In such situation,
‘vitiation’ can set in and then, L-1 may not remain L-1. It is for the purpose of
ensuring that L-1 remains L-1 at all times, the ‘vitiation’ amount has to be
deducted from the bidder who is awarded the contract-work, as per Clause 6.0
of the Additional Special Conditions of Contract. It is further contended that due
to the nature of contract entered into by the parties, it is not open for a
contractor like the petitioner to raise such contentions in a writ petition under
Article 226 of the Constitution of India whereas such disputes are arbitrable.
8. I have given due consideration to the rival submissions advanced by the learned
counsel for the parties and have also perused the materials on record brought
by the parties through their pleadings.
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9. In view of the above rival contentions, it is necessary to find out about the
nature of the contract, that is, Contract Agreement no. CON/Bogibeel/120 dated
27.02.2007, entered into between the parties herein. In the Acceptance Letter
bearing no. W/362/CON/BBI/NB-Dyke/DBRT/2006/22 dated 12.12.2006, it was
inter alia mentioned that the Offer of the petitioner for the Contract-Work was
accepted by the Competent Authority for and on behalf of the President of India
at a total cost of Rs. 18,74,69,000.00. The Contract Agreement no.
CON/Bogibeel/120 had been executed on 27.02.2007 between the President of
India acting through the Railway Administration, thereinafter called the ‘Railway’
on one part and the petitioner [JV], thereinafter called the ‘Contractor’ of the
other part.
9.1. As per Clause [1] of Article 299 of the Constitution of India, all contracts made
in exercise of the executive power of the Union or of a State shall be expressed
to be made by the President, or by the Governor of the State, as the case may
be, and all such contracts and all assurances of property made in the exercise of
that power shall be executed on behalf of the President or the Governor by such
persons and in such manner as he may direct or authorise. The provisions of
Article 299 of the Constitution of India require that a contract made in the
exercise of the executive power of the Union or of a State must satisfy three
conditions viz. [i] it must be expressed to be made by the President or by the
Governor of the State, as the case may be; [ii] it must be executed on behalf of
the President or the Governor, as the case may be; and [iii] its execution must
be by such person and in such manner as the President or the Governor may
direct or authorise. It is settled that failure to comply with these conditions
nullifies the contract and renders it void and unenforceable. It has been
interpreted in a recent three-Judges Bench decision of the Hon’ble Supreme
Court of India in Arbitration Petition no. 51 of 2022 [M/s Glock Asia-Pacific Ltd. vs.
Union of India], decided on 19.05.2003, that Article 299 of the Constitution only
lays down the formality that is necessary to bind the Government with
contractual liability and Article 299 does not lay down the substantial law
relating to the contractual liability of the Government. In the case in hand, no
question has been raised as regards non-compliance of any of such mandatory
formalities, set forth in Article 299[1].
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9.2. In State of Haryana and others vs. Lal Chand and others, reported in [1984] 3 SCC
634, it has been held that Article 299[1] applies to a contract made in exercise
of the executive power of the Union or the State, but not to a contract made in
exercise of statutory power. Article 299[1] has no application to a case where a
particular statutory authority as distinguished from the Union or the States
enters into a contract which is statutory in nature. Such a contract, even though
it is for securing the interest of the Union or the States, is not a contract which
has been entered into by or on behalf of the Union or the State in exercise of its
executive power. It has been held to be settled that contracts made in exercise
of statutory powers are not covered by Article 299[1].
9.3. There are two categories of contracts – statutory contract and non-statutory
contract. It is settled that even if a contract is entered into in exercise of an
enabling power conferred by a statute then also the contract does not become a
statutory contract. If a contract incorporates certain terms and conditions in it
which are statutory then such a contract to that extent can be termed as
statutory. A contract may contain certain other terms and conditions which are
not of statutory character and which have been incorporated as a result of
mutual agreement then such terms and conditions in the contract are to be
treated of non-statutory character. The Contract Agreement herein admittedly
falls in the category of non-statutory contract.
9.4. After surveying a number of precedents, the Hon’ble Supreme Court of India in
Joshi Technologies International Inc. vs. Union of India and others, reported in [2015] 7
SCC 728, has observed that contracts governed by the provisions of Article 299
of the Constitution of India are formal contracts made in exercise of the
executive power of the Union or of a State, as the case may be, and are made
on behalf of the President or the Governor, as the case may be. These contracts
are to be made by such persons and in such a manner as the President or the
Governor may direct or authorize. Therefore, there is no doubt to the position
that the Contract Agreement no. CON/Bogibeel/120 dated 27.02.2007 is not a
statutory contract and is a non-statutory contract.
10. The present writ petition was filed on 03.12.2012 and was first moved on
17.12.2012. The Affidavit-in-Opposition on behalf of the respondent N.F.
Railway authorities was filed on 27.11.2013. It was not alluded in the Affidavit-
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in-Opposition that the alleged dispute was referable to arbitration as per any
arbitration clause contained in the Contract Agreement. It is only at the time of
final hearing of the writ petition, a plea has been advanced that the dispute
could be referred to arbitration. One has to bear in mind that the Contract
Agreement no. CON/Bogibeel/120 was executed between the parties on
27.02.2007. It is true that where the contract itself provides an effective
alternative remedy by way of reference to arbitration, it is ordinarily a good
ground for declining to exercise the extra-ordinary and discretionary jurisdiction
under Article 226 of the Constitution of India. It has been held in Ram Barai
Singh and Company vs. State of Bihar and others, reported in [2015] 13 SCC 592,
that a constitutional remedy by way of writ petition is always available to an
aggrieved party and an arbitration clause in an agreement between the parties
cannot ipso facto render a writ petition not maintainable. It has been observed
to the effect that availability of alternative remedy is definitely a permissible
ground for refusal by a writ court to exercise its jurisdiction in appropriate
cases. But once the respondent had not objected to entertainment of the writ
petition on the ground of availability of alternative remedy, the final judgment
rendered on merits is not to be faulted with. It is for the writ court to consider
whether in an appropriate case, the writ petitioner should be relegated to avail
alternative remedy or not. But once the writ petition is heard at length and
decided against one or the other party on merits, such a decision/order cannot
be held to be bad in law only on the ground that the writ petition was not
maintainable due to availability of alternative remedy. In Maharashtra Chess
Association vs. Union of India and others, reported in [2020] 13 SCC 285, it has been
observed that mere existence of alternate forums where the aggrieved party
may secure relief does not create a legal bar on a High Court to exercise its writ
jurisdiction. In Ram Barai Singh [Supra], it was found that the agreement itself
had worked out long back and on that ground, the plea as regards availability of
remedy of arbitration was negated. In the case in hand, after the Contract
Agreement was executed on 27.02.2007, the Contract-Work was completed as
far back as on 31.01.2009. It was on and from 08.10.2010 when the Final
Variation Statement was issued by the respondent N.F. Railway authorities, the
dispute regarding ‘vitiation’ arose between the parties.
11. The alleged dispute involved herein is the alleged decision to recover a sum of
Rs. 25,21,881.27 by the respondent N.F. Railway authorities on the ground that
Page 13 of 26
the Contract Agreement between them stood vitiated to the extent of Rs.
25,21,881.27. As to the maintainability of a writ petition, the Hon’ble Supreme
Court of India in ABL International Ltd. and another vs. Export Credit Guarantee
Corporation of India Ltd. and others, reported in [2004] 3 SCC 553, after discussing
a number of previous preiudacates/authorities, has laid down the legal
principles as follows :- [a] in an appropriate case, a writ petition as against a
State or an instrumentality of a State arising out of a contractual obligation is
maintainable; [b] merely because some disputed questions of fact arise for
consideration, same cannot be a ground to refuse to entertain a writ petition in
all cases as a matter of rule; and [c] a writ petition involving a consequential
relief of monetary claim is also maintainable. The aforesaid principles have been
followed in subsequent three-Judge Bench decision in State of Uttar Pradesh vs.
Sudhir Kumar, reported in 2020 SCC OnLine SC 847 and Popatrao Vynkatrao Patil
vs. State of Maharashtra, reported in [2020] 19 SCC 241. It is, however, to be kept
in mind that the plenary power under Article 226 is to be exercised with
circumspection when other remedies have been provided by the contract. But
as a statement of principle, the jurisdiction under Article 226 is not excluded in
contractual matters. Reiterating the said principles, it has been observed in
Unitech Limited and others vs. Telangana State Industrial Infrastructure Corporation
[TSIIC] and others, reported in [2021] 2 SCALE 653, that while exercising its
jurisdiction under Article 226, the Court is entitled to enquire into whether the
action of the State or its instrumentalities is arbitrary or unfair and in
consequence, in violation of Article 14. The jurisdiction under Article 226 is a
valuable constitutional safeguard against an arbitrary exercise of State power or
a misuse of authority. In determining as to whether the jurisdiction should be
exercised in a contractual dispute, the Court must, undoubtedly eschew,
disputed questions of fact which would depend upon an evidentiary
determination requiring a trial. But, it is equally well-settled that the jurisdiction
under Article 226 cannot be ousted only on the basis that the dispute pertains
to the contractual arena. This is for the simple reason that the State and its
instrumentalities are not exempt from the duty to act fairly merely because in
their business dealings they have entered into the realm of contract. Similarly,
the presence of an arbitration clause does not oust the jurisdiction under Article
226 in all cases though, it still needs to be decided from case to case as to
whether recourse to a public law remedy can justifiably be invoked.
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12. Reverting back to the facts of the case in hand, it is noticed that the respondent
Railway authorities had first raised the issue of ‘vitiation’ in the Final Variation
Statement prepared against the Contract Agreement no. CON/Bogibeel/120
dated 27.02.2007 on 08.12.2010. For ready reference, the contents of the said
Final Variation Statement are extracted hereunder :-
“NORTH EAST FRONTIER RAILWAY
[Construction Organisation]
General Manager/
Construction N.F. Railway,
Maligaon-11
No.W/60/CON/BB/NB-Dyke/DBRT/2006/22/120 dated 08.12.2010
Dy.CE/Con-2/Bogibeel,
N.F. Railway, Silapathar
Sub :- Final Variation Statement against CA No.CON/Bogibeel/120 dated 27.02.2007.
CAO/Con. N.F. Railway, Maligaon with the vetting of Associate Finance has
approved the Final Variation Statement and accepted the T.C. recommendation after
conducting negotiation with the contractor towards final variation statement against CA
no.CON/Bogibeel/120 dated 27.02.2007 with the revised value of Rs. 12,86,54,574.39.
A statement showing the brief description of items of works, quantities beyond
50% of CA put for negotiation, negotiated rates, CA rate & amount etc. is shown below in
a table for better appreciation.
CA Item No. 13
Brief description work Any other item of works not included above but required
to be executed for successful completion of the work as
deemed necessary by the Engineer and which shall be as
per NFSR 1993 edition corrected up to date on the day of
opening of tender.
Unit % age above below/at par
Quantity 504929.20
Orgl. CA rate 191%
CA Rate with Clause 2.8 179.36% above
Nego. Rate 178% above
Amount as per CA rate [In Rs.] 1469335.24
Amount as per rate with Clause 2.8 1410561.83
Amount as per nego. Rate [in Rs.] 1403694.84
Net reduction achieved [in Rs.] 6866.99
On negotiation total reduction achieved = Rs. 6866.99
This is for your information and requested to obtaining ‘No Objection Certificate’ from
contractor to recover the vitiated amount of Rs. 25,21,881.27 please.
Page 15 of 26
DA : Vetted copy of FVS I/C Chief Engineer/Construction
N.F. Railway, Maligaon”
12.1. In the detail Statement of calculation, appended to the Final Variation
Statement, it was mentioned that the Contract Value of the Contract Agreement
was Rs. 18,74,69,000.00, but the amount required to be paid to the Contractor
i.e. the petitioner after adjustment, would be Rs. 12,86,54,568.71. The Final
Variation Statement had, thus, reported the variation in amount as Rs.[-]
5,88,14,431.29 and the percentage of variation as [-] 31.37%. The Final
Variation Statement was followed by the Letter no. W/60/CON/NB/Dyke/120/02
dated 03.01.2011 the contents of which were as under :-
“NORTH EAST FRONTIER RAILWAY
[Construction Organisation]
Office of the
Deputy Chief Engineer/Con.
Bogibeel Bridge Project,
Silapathar-787059
No.W/60/CON/Bogibeel/NB/North Dyke/120 dated 29.07.2009
To,
M/s M.K. Dhiroomal Associates [JV],
West Maligaon, Guwahati.
Sub :- Submission of “No Claim Certificate” for deduction the vitiated amount of Rs.
25,21,881.21
Ref : CA No. CON/Bogibeel/120 dated 27.02.2007
Dear Sir[s]
In reference to above CA, Competent Authority has approved the final variation
statement against CA No. CON/Bogibeel/120 dated 27.02.2007. In this connection, you
are requested to deposit the vitiated amount of Rs. 25,21,881.21 or submit No Claim
Certificate for deducting the same from your Final bill so that CA can be finalized by this
end.
Matter may please be treated most urgent
Yours faithfully,
[S.C. Saikia]
Page 16 of 26
AXEN/CON-4/Bogibeel
N.F. Railway, Silapathar.
12.2. In the Letter no. W/60/CON/Bogibeel/NB-Dyke/SPTR/120 dated 05.01.2011, an
inter-departmental communication, it was inter alia canvassed that as the Final
Variation amount had decreased beyond [-] 25% from the original Contract
Agreement Value, ‘vitiation’ had taken place and the vitiated amount would be
Rs. 25,21,881.27. To arrive at the said ‘vitiated’ amount, a comparison was
made between the rates and the amounts offered by the petitioner as the L-1
Bidder and one Jaichand Lal Singhi as the L-2 Bidder in respect of various
descriptions of works. It was after carrying out such calculation, a decision was
seen to have been taken to obtain a No Claim Certificate from the petitioner in
respect of the ‘vitiated’ amount.
12.3. As per the contentions advanced on behalf of the respondent N.F. Railway
authorities, the source of the contractual right to recover the vitiated amount
from the contractor is relatable to Clause 6.0 of the Additional Special
Conditions of Contract. Clause 6.0 of the Additional Special Conditions of
Contract reads as under :-
Clause 6.0 VITIATION OF CONTRACT
The contract shall not be vitiated by any inadvertent error of any kind of
the surveys, information, specification drawing or schedule of quantities.
However, during execution of work if variation of quantities against item of
work become inevitable and such variation cause vitiation of the contract,
the amount of vitiation will be deducted from the contractor’s bill.
12.4. As found out from the above discussion, the definition of the term ‘vitiation’ has
not been provided either in the Contract Agreement or in the Additional Special
Conditions of Contract. The respondents have not adverted to any definition of
‘vitiation’ provided elsewhere, which is part and parcel of the Contract
Agreement dated 27.02.2007 executed between the parties. In the Affidavit-in-
Opposition, a Letter no. 2007/CE-I/CT/18/Pt-13 dated 04.10.2010 of the
Railway Board, Ministry of Railways, Government of India, has been annexed
and it is contended that it has been laid down therein that in case of vitiation of
the tender, sanction of the Competent Authority as per single tender should be
obtained. It is further contended that the provision for vitiation is not
Page 17 of 26
automatically applicable but the same is subject to sanction of the Competent
Authority and as such, the recovery of the vitiation amount is not discarded in
any manner. It has also been canvassed by the learned counsel for the
respondent N.F. Railway authorities that the Letter no. 2007/CE-I/CT/18/Pt-13
dated 04.10.2010 has referred to another Circular Letter of the Railway Board
bearing no. 94/CET/CT/37 dated 05.05.1995, the same is also applicable in a
contract of the nature like in the case in hand. It has been urged that since the
Circular Letter no. 94/CET/CT/37 dated 05.05.1995 has contained the
methodology how the aspect of vitiation is to be worked out, it is not open to
the petitioner to deny the authority of the Railway to recover the amount to the
extent the Contract Agreement has got vitiated.
12.5. On a perusal of the Circular Letter no. 94/CET/CT/37 dated 05.05.1995 and the
Letter no. 2007/CE-I/CT/18/Pt-13 dated 04.10.2010, it is found that they are in
the nature of internal Circular Letters. In the Letter bearing no. W/362/CON/S-
L/EMB/2006 dated 28.08.2023 of the Construction Organisation, N.F. Railway,
produced before the Court by Mr. Das, learned Additional Standing Counsel,
N.F. Railway, it is sought to be explained that in simple terms, ‘vitiation’ is a
process when a contract awarded to the lowest bidder [L-1] and during
execution if some variation in quantities are done in that contract agreement
and the same excess variation are compared with other bidders like 2
nd
lowest
bidder [L-2], 3
rd
lowest bidder [L-3], etc. It is after putting the same variation
quantities with the rates of other bidders, if the total contract agreement value
becomes less with respect to the lowest bidder [L-1], then the excess amount of
lowest bidder [L-1] is deducted from his final bill as the vitiation amount. It is
canvassed that vitiation can take place both in case of increase or decrease in
quantities, during execution of the contract-work.
12.6. Thus, it clear that the amount of vitiation has been worked out in the case in
hand on the basis of the methodology contained in the internal Circular Letters
of the Railway Board, Ministry of Railway, Government of India. By applying the
methodology to calculate the vitiated amount, the respondent N.F. Railway
authorities had arrived at the sum of Rs. 25,21,881.27. From a look at those
two internal Circular Letters viz. Circular Letter no. 94/CET/CT/37 dated
05.05.1995 and the Circular Letter no. 2007/CE-I/CT/18/Pt-13 dated
04.10.2010, it does not appear that they are statutory in nature or they have
Page 18 of 26
been framed under any statute. The concept of vitiation explained there may
relevant for the authorities in the respondent N.F. Railway. Since the two
Circular Letters neither have any statutory force nor contain any statutory
prescription, the same could not automatically be made applicable to or would
govern the Contract Agreement dated 27.02.2007. Even it is assumed that the
petitioner as the Contractor had knowledge about the two internal Circular
Letters containing the methodology of calculating the vitiation amount, the
same would not be enough for the respondent N.F. Railway authorities to give
effect to them unless they become part of the Contract Agreement dated
27.02.2007 governing the inter se relationship between them. It is pertinent to
mention that the Contract Agreement dated 27.02.2007 being a non-statutory
contract, the inter se relationship between the parties are governed by the
ordinary laws of contract.
12.7. In this connection, it is relevant to refer to the observations made in Bharat
Sanchar Nigam Limited and another vs. BPL Mobile Cellular Limited and others,
reported in [2008] 13 SCC 597. The core question involved therein is the effect of
the application of internal circulars issued by the Department of
Telecommunications [DoT] in the contracts entered into by and between the
parties in respect of/as regards inter-connection links provided by it. The DoT
authorities sought to charge the respondent therein who obtained leased
circuits by executing lease agreements, on flat rate basis purported to be in
terms of certain internal circulars having no force of law. It has been observed
that the circular letters cannot ipso facto be given effect to unless they become
part of the contract. If the parties were ad item as regards terms of the
contract, any change in the tariff could not have been made unilaterally. Thus,
when the particular contract is entered into, its novation has to be on fulfillment
of all procedural requirements. In other words, any novation in the contract to
be done on the same terms as are required for entering into a valid and
concluded contract. As such an exercise was not resorted to before seeking to
charge the tariff as indicated in the internal circulars, it has been held that the
tariff cannot be charged from the respondent on the basis of the internal
circular letters in the absence of any agreement. As the lease agreement was
non-statutory contract with no statutory rule governing the field, it has been
observed that the parties are with the liberty to enter into any contract
containing such terms and conditions as regards the rate or the period
Page 19 of 26
stipulating such terms as the case may be. It has been observed that the matter
might have been different if the parties had entered into an agreement with
their eyes wide open that the circular letter shall form part of the contract. They
might have also been held bound if they accepted the new rates or the periods
either expressly or sub-silentio. It has been held that a direction contained in
the Circular Letters could be relevant for the officers who are authorized but the
Circular Letters having no statutory force, they could not govern the contract-
work. If some authorities have violated the terms of the said Circular Letters,
they might have committed misconduct, but when a contract agreement is
entered into, the parties shall be bound thereby. The decision has also observed
as follows :-
51. In the instant case, the resources to be leased out were subject to
agreement. The terms were to be mutually agreed upon. The terms of
contract, in terms of Section 8 of the Contract Act, fructified into a
concluded contract. Once a concluded contract was arrived at, the
parties were bound thereby. If they were to alter or modify the terms
thereof, it was required to be done either by express agreement or by
necessary implication which would negate the application of the
doctrine of ‘acceptance sub silentio’. But, there is nothing on record
to show that such a course of action was taken. The respondents at no
point of time were made known either about the internal circulars or
about the letters issued from time to time not only changing the tariff
but also the basis thereof.
As a higher rate was stated to be enforced on the basis of those internal
circulars by the DoT/BSNL, the challenge was negated and the appeals
preferred by the BSNL as appellant, were dismissed.
13. Even a mere reference to those Circular Letters in the Contract Agreement no.
CON/Bogibeel/120 dated 27.02.2007 would not have the effect of making those
internal Circular Letters parts of the Contract Agreement. A reference to a
document in the contract should be such wherefrom the intention of the parties
to incorporate the document into the contract as its part and parcel is clearly
visible. It requires a conscious acceptance of such a document as part and
parcel of the contract by the parties before such document could be read as a
Page 20 of 26
part of the contract between the parties. It has been observed in M.R. Engineers
and Contractors [P] Ltd. vs. Som Datt Builders Ltd. reported in [2009] 7 SCC 696,
that there is a difference between reference to another document in a contract
and incorporation of another document in a contract, by reference. In the first
case, the parties intend to adopt only specific portions or part of the referred
document for the purposes of the contract. In the second case, the parties
intend to incorporate the referred document in entirety, into the contract.
Therefore when there is a reference to a document in a contract, the court has
to consider whether the reference to the document is with the intention of
incorporating the contents of that document in entirety into the contract, or
with the intention of adopting or borrowing specific portions of the said
document for application to the contract. It bears repetition to state that neither
of the above two situations is present in the case in hand as the Contract
Agreement no. CON/Bogibeel/120 dated 27.02.2007 does not even contain a
reference to the Circular Letters, dated 05.05.1995 & dated 04.10.2010,
containing methodology of calculation of the vitiation amount, as documents
incorporated into the Contract Agreement by reference.
14. In view of the nature of contract the parties herein have entered into, it has
emerged that the inter se relationship between the parties were/are governed
by the ordinary laws of contract. It is well settled principle of law of contract
that a party to a contract can insist for performance of only those terms and
conditions, which are part of the concluded contract. A party to a concluded
contract has no right to unilaterally alter the terms and conditions of the
contract and neither of the parties has any right to add any additional terms and
conditions in the contract unless both the parties agree to add or alter any such
terms and conditions in the contract. It is also settled that if any party adds any
additional terms and conditions in the contract without the consent of the other
contracting party then such unilateral addition is not binding on the other party.
A party which unilaterally adds any such terms or conditions, has no right to
insist on the other party to comply or abide by such additional term or
condition.
15. As the Contract Agreement no. CON/Bogibeel/120 dated 27.02.2007 is in the
nature of a non-statutory contract and the inter se relationship between the
parties are to be governed by the ordinary laws of contract, a question also
arises as to whether the action on the part of the State respondents, that is, the
Page 21 of 26
respondent N.F. Railway authorities seeking to recover the sum of Rs.
25,21,881.27 as vitiation amount from the petitioner as the Contractor, can be
brought within the ambit and purview of the power of judicial review as the
respondent N.F. Railway authorities have projected that they have sought to
enforce their right in terms of the Contract Agreement. It has also emerged
from the discussion made above that the methodology to calculate the vitiation
amount which is contained in the two Circular Letters, dated 05.05.1995 &
dated 04.10.2010, or any other document of the respondent N.F. Railway,
which is/are never a part of the Contract Agreement, either by way of
incorporation by reference or implication or by any subsequent supplementary
agreement. Thus, if such methodology of calculating the vitiation amount is to
be treated and read as part of the Contract Agreement dated 27.02.2007, there
ought to have been a consensus between the parties who had executed the
Contract Agreement no. CON/Bogibeel/120 at an earlier date on 27.02.2007. It
is settled that where a mode is prescribed for doing an act and there is no
impediment to follow that procedure, the performance of the act otherwise
and in a manner which does not disclose any discernible principle which is
reasonable, is to be termed as arbitrary and in such situation, the principle
enshrined in Article 14 of the Constitution of India comes to the fore.
16. Having regard to the fact situation obtaining in the case in hand, it is apt to
refer to the decision of the Hon’ble Supreme Court of India in Kumari Shrilekha
Vidyarthi and others vs. State of U.P. and others, reported in [1991] 1 SCC 212
wherein it is held that even if the contract is concluded, the State cannot cast
off its personality and exercise unbridled power unfettered by the requirements
of Article 14 in the sphere of contractual matters and claim to be governed
therein only by private law principles applicable to private individuals whose
rights flow only from the terms of the contract without anything more. It has
been categorically held that the personality of the State, requiring regulation of
its conduct in all spheres by requirements of Article 14, does not undergo such
a radical change after the making of a contract merely because some
contractual rights accrue to the other party in addition. It has been held that the
situation does not envisage or permit unfairness or unreasonableness in State
actions in any sphere or its activity contrary to the professed ideals and
exclusion of Article 14 in contractual matters has not been accepted. The
Page 22 of 26
Hon’ble Supreme Court in Kumari Shrilekha Vidyarthi [supra], has gone on to
observe as under :-
22. There is an obvious difference in the contracts between private parties
and contracts to which the State is a party. Private parties are
concerned only with their personal interest whereas the State while
exercising its powers and discharging its functions, acts indubitably, as
is expected of it, for public good and in public interest. The impact of
every State action is also on public interest. This factor alone is
sufficient to import at least the minimal requirements of public law
obligations and impress with this character the contracts made by the
State or its instrumentality. It is a different matter that the scope of
judicial review in respect of disputes falling within the domain of
contractual obligations may be more limited and in doubtful cases the
parties may be relegated to adjudication of their rights by resort to
remedies provided for adjudication of purely contractual disputes.
However, to the extent, challenge is made on the ground of violation of
Article 14 by alleging that the impugned act is arbitrary, unfair or
unreasonable, the fact that the dispute also falls within the domain of
contractual obligations would not relieve the State of its obligation to
comply with the basic requirements of Article 14. To this extent, the
obligation is of a public character invariably in every case irrespective
of there being any other right or obligation in addition thereto. An
additional contractual obligation cannot divest the claimant of the
guarantee under Article 14 of non-arbitrariness at the hands of the
State in any of its actions.
23. Thus, in a case like the present, if it is shown that the impugned State
action is arbitrary and, therefore, violative of Article 14 of the
Constitution, there can be no impediment in striking down the
impugned act irrespective of the question whether an additional right,
contractual or statutory, if any, is also available to the aggrieved
persons.
24. The State cannot be attributed the split personality of Dr Jekyll and Mr
Hyde in the contractual field so as to impress on it all the
characteristics of the State at the threshold while making a contract
requiring it to fulfil the obligation of Article 14 of the Constitution and
Page 23 of 26
thereafter permitting it to cast off its garb of State to adorn the new
robe of a private body during the subsistence of the contract enabling it
to act arbitrarily subject only to the contractual obligations and
remedies flowing from it. It is really the nature of its personality as
State which is significant and must characterize all its actions, in
whatever field, and not the nature of function, contractual or
otherwise, which is decisive of the nature of scrutiny permitted for
examining the validity of its act. The requirement of Article 14 being
the duty to act fairly, justly and reasonably, there is nothing which
militates against the concept of requiring the State always to so act,
even in contractual matters. There is a basic difference between the
acts of the State which must invariably be in public interest and those
of a private individual, engaged in similar activities, being primarily for
personal gain, which may or may not promote public interest. Viewed
in this manner, in which we find no conceptual difficulty or
anachronism, we find no reason why the requirement of Article 14
should not extend even in the sphere of contractual matters for
regulating the conduct of the State activity.
17. In view of the discussions made above and for the reasons assigned therein,
this Court has found the action on the part of the respondent N.F. Railway in
seeking to recover the vitiation amount of Rs. 25,21,881.27 in terms of the Final
Vitiation Statement dated 08.12.2010 to be an unilateral one as there was no
novation of the contract at any time subsequent to 27.02.2007, that is, the date
of execution of the Contract Agreement no. CON/Bogibeel/120. Such unilateral
decision to recover any amount as vitiation amount cannot be made binding on
the petitioner, the other contracting party and any steps taken towards such
recovery as vitiation amount is to be treated as arbitrary under Article 14 of the
Constitution of India. It is, therefore, ordered that no deduction of the sum of
Rs. 25,21,881.27 as vitiated amount in relation to the Contract Agreement no.
CON/Bogibeel/120 dated 27.02.2007 shall be made in finalizing the dues of the
petitioner as the Contractor. The writ petition is allowed to the extent indicated
above.
Writ Petition, W.P.[C] no. 266/2012 :-
Page 24 of 26
18. One Jiten Chandra Das pursuant to Tender Notice no. CE/CON/S-
L/EMB/2006/07, was awarded a contract-work viz. ‘Earthwork in filling for
making/widening/raising existing MG formation to BG standard from Chainage
18/400 Km to 191/400 [New Chainage] including rebuilding/construction/
strengthening of 7 nos. minor bridges [Br. no. 590, 591, 592, 593, 594, 595 &
596] on same alignment between station Chargola & Karimganj excluding
Karimganj station yard and other ancillary works in connection with Gauge
Conversion of Badarpur – Baraigram section of Lumding – Silchar Project’ [‘the
Contract-Work’, for short] at an approximate Contract Value of Rs.
3,25,88,600/-. Similar to the Contract Agreement no. CON/Bogibeel/120 dated
27.02.2007, referred to in W.P.[C] no. 6103/2012, a contract agreement being
Contract Agreement no. CON/S-L/98 was entered into on 27.07.2006 between
the President of India acting through the Railway Administration, thereinafter
called the ‘Railway’ on one part and Jiten Chandra Das thereinafter called the
‘Contractor’ of the other part. Apart from the Contract Agreement, [i] the
General Conditions of Contract, [ii] the Specifications of the Northeast Frontier
Railway 1998 Edition, and [iii] the Special Conditions and Special Specifications,
if any, and drawings were made part of the Contract Agreement. In addition,
the Additional Special Conditions of Contract were also made part of the
Contract Agreement and the following clause was, inter alia, contained in the
Additional Special Conditions of Contract :-
6.0 VITIATION OF CONTRACT
6.1 The contract shall not be vitiated by any inadvertent error of any kind of
the surveys, information, specification drawing or schedule of quantities.
However, during execution of work if variation of quantities against item of work
become inevitable and such variation cause vitiation of the contract, the amount
of vitiation will be deducted from the contractor’s bill.
19. When the Contract-Work awarded to Jiten Chandra Das vide Contract
Agreement no. CON/S-L/98 was being executed, Jiten Chandra Das expired on
13.06.2009 leaving the petitioner and three children who were minors at that
point of time. It is not in dispute that after the demise of Jiten Chandra Das, the
respondent N.F. Railway authorities carried out final measurement in respect of
the works executed by Jiten Chandra Das in relation to the Contract-Work till his
death. As per the final measurement, the amount payable to the Contractor,
Page 25 of 26
Jiten Chandra Das [since deceased] was found out to be Rs. 1,05,66,415.47. As
an amount of Rs. 95,84,676/- had already paid to Jiten Chandra Das on
13.03.2009 during his lifetime, the respondent N.F. Railway authorities found
that the balance amount payable to Jiten Chandra Das as the Contractor for the
Contract-Work was Rs. 9,81,739.47.
20. The respondent N.F. Railway authorities by taking resort to the vitiation clause,
referred above, contained in the Additional Special Conditions of Contract,
calculated a sum of Rs. 10,33,671.47 as vitiation amount. After calculation of
the vitiation amount, the respondent N.F. Railway authorities had worked out
that net amount to be recovered from the Contractor would be Rs. 51,932.01.
The respondent N.F. Railway authorities have also stated that an amount of Rs.
16,18,906/- is recoverable towards Forest Royalty Clearance Certificate [FRCC].
The calculation worked out by the respondent N.F. Railway authorities is also
reflected in a Letter bearing no. W/362/CON/SCL/B-K/981/357 dated
16.10.2012 of the Deputy Chief Engineer, N.F. Railway as under :-
[i] Amount of total work done -- Rs. 1,05,66,415.47
[ii] Less the amount paid vide CC – VII dt. 30.03.09--[-] Rs. 95,84,676.00
_________________
[ii] Balance amount to be paid to the Contractor -- Rs. 9,81,739.47
[iv] Less amount to be recovered from contractor
due to vitiation as per CA clause -- [-] Rs. 10,33,671.47
[v] Net amount to be recovered from contractor
due to vitiation -- Rs. 51,932.01
[vi] Add the amount pending for FRCC -- [+] Rs. 6,18,906.00
Thus, total amount to be recovered from
Contractor -- Rs. 16,70,838.00
21. In this writ petition, the petitioner has assailed the action on the part of the
respondent N.F. Railway authorities to recover the amount of Rs. 10,33,671.47
as vitiation amount and has sought for a direction to the respondent N.F.
Railway authorities to disburse the amount of Rs. 9,81,739.47. The respondent
N.F. Railway authorities in this case had worked out the vitiation amount by
comparing rates quoted by Jiten Chandra Das as L-1 bidder with the rates
quoted by two other bidders. In so far as the claim made by the respondent
Order downloaded on 24-12-2024 06:27:01 PMPage 26 of 26
N.F. Railway authorities about the sum of Rs. 16,18,906/- is concerned, the
petitioner in its rejoinder affidavit, has mentioned that the petitioner would
submit/settle the issue of Forest Royalty Clearance Certificate [FRCC] and would
sign the necessary no claim dues.
22. In view of such factual matrix and presence of the vitiation clause of exactly
similar nature, this Court has found that the factual position of the case in hand
is, in essence, similar to that of the writ petition, W.P.[C] no. 6013/2012,
meaning thereby, the methodology the respondent N.F. Railway authorities
have followed in working out the vitiation amount of Rs. 10,33,671.47 was not a
part of the Contract Agreement no. CON/S-L/98 dated 27.07.2006 either by way
of any supplementary agreement or by incorporation by reference. As the fact
situation obtaining in the case is similar to that of the writ petition, W.P.[C] no.
6103/2012 in so far as working out the vitiation amount is concerned, this Court
has found that the reasons assigned in the writ petition, W.P.[C] no. 6103/2012
that the act of seeking recovery of the vitiation amount is arbitrary, irrational
and unjust, is also found applicable on all fours in the case in hand also. Though
in this writ petition, the respondent N.F. Railway authorities have raised a plea
to the effect that the dispute raised is arbitrable, this Court in view of the
findings already arrived at in the writ petition, W.P.[C] no. 6103/2012 and
elapse of a time period of more than a decade, does not find it appropriate to
relegate the parties to arbitration at this distant point of time. Repelling such
contention, it is observed that the action on the part of the respondent N.F.
Railway authorities in seeking to recover the sum of Rs. 10,33,671.47 from the
final bill amount in relation to the Contract Agreement no. CON/S-L/98 dated
27.07.2006 being arbitrary and not in conformity with Article 14 of the
Constitution of India, is not to be enforced. The writ petition is allowed to the
extent indicated above. It is observed that this Court has not made any
observation as regards the claim of the respondent N.F. Railway authorities with
regard to Forest Royalty Clearance Certificate [FRCC]. There shall, however, be
no order as to costs.
JUDGE
Comparing Assistant
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