Case Note & Summary
The petitioner, M/s Sainik Mining and Allied Services Limited, a company engaged in mining and excavation, was awarded a work order by Western Coalfields Limited (WCL) pursuant to a tender notice dated 20.02.2016 for coal excavation. The contract had a duration of 83 months. The petitioner commenced work but faced delays due to various reasons, including failure of WCL to provide the required land and other force majeure events. Despite the petitioner's requests for extension of time under Clause 6.4 of the tender conditions, WCL issued a show cause notice on 29.10.2021 alleging failure to achieve the monthly agreed quantity of 75% for six consecutive months. The petitioner submitted a detailed reply on 12.11.2021 explaining the reasons for the shortfall, including non-availability of land and other factors beyond its control. However, without considering the reply, the Area General Manager passed the impugned order dated 08.12.2021 terminating the work order, forfeiting the performance security deposit, and debarring the petitioner from participating in future tenders for three years. The petitioner challenged this order by way of a writ petition. The court examined the contractual clauses, particularly Clauses 6.2, 6.4, 9, and 9(b) of the tender notice. The court found that the termination order was passed without giving any opportunity of hearing to the petitioner, violating principles of natural justice. The court also noted that the authority did not apply its mind to the petitioner's explanations and the contractual provisions for extension of time. The debarment was held to be disproportionate and arbitrary. Consequently, the court quashed the impugned order and directed the respondents to refund the performance security deposit within four weeks. The court also directed that the petitioner be allowed to participate in future tenders without any disqualification arising from the impugned order.
Headnote
A) Administrative Law - Natural Justice - Reasonable Opportunity - Termination of Contract - The order terminating the work order, forfeiting performance security, and debarring the petitioner from future tenders was passed without giving any show cause notice or opportunity of hearing, violating principles of natural justice. Held that such an order is unsustainable and liable to be set aside (Paras 8-10). B) Contract Law - Termination - Non-Application of Mind - The termination order was based on a report that did not consider the petitioner's explanations regarding delays caused by the respondent's failure to provide land and other force majeure events. The authority did not apply its mind to the contractual provisions for extension of time. Held that the order suffers from non-application of mind (Paras 11-13). C) Contract Law - Debarment - Proportionality - Debarment for three years without considering the gravity of the alleged default and without providing an opportunity to show cause is disproportionate and arbitrary. Held that debarment must be preceded by a fair hearing and must be proportionate (Paras 14-15).
Issue of Consideration
Whether the termination of the work order, forfeiture of performance security, and debarment of the petitioner from future tenders by the respondent without providing a reasonable opportunity of hearing and without proper application of mind is legally sustainable.
Final Decision
The impugned order dated 08.12.2021 is quashed and set aside. The respondents are directed to refund the performance security deposit to the petitioner within four weeks. The petitioner shall be allowed to participate in future tenders without any disqualification arising from the impugned order.
Law Points
- Natural Justice
- Reasonable Opportunity
- Non-Application of Mind
- Termination of Contract
- Forfeiture of Performance Security
- Debarment
- Liquidated Damages
- Force Majeure
- Contractual Interpretation
