2015 (12) TMI 1728 - HC - Indian Laws

Show-cause notice for cancellation of contract - Held that - We are of the considered view that in any case before 31.12.2015 the authorities of the respondents did not have any authority to issue show-cause notice for cancellation of contract unless some new circumstance comes in existence before expiry of such extended period and in that regard no averments are made in the impugned show cause notice although it appears from the record that the prayer of the petitioner for extending the further period of six months from 31.12.2015 to complete the work was pending before the authority of respondent No. 2. In such premises the impugned show-cause notice Annexure P-10 deserves to be and is hereby quashed. It is also apparent from the papers placed on the record that even after filing this petition under the authority of interim order of this Court the remaining excavation/digging work of tunnel was/is being carried out by the petitioner but payment of running bills was not made within time to the petitioner to meet the necessary expenses to pay the wages to the labourers and to maintain the deployed machinery and in such premises it could be said that due to late payment or non-payment of running bills of the petitioner within time it could not manage the requisite infrastructure to carry out the work. In such premises we direct the authorities to make the regular payment of running bills to the petitioner within time in accordance with the procedure without any hurdle or hindrance to carry out the remaining work within the prescribed and extended period. In the available scenario it is apparent that due to non-cooperation of the respondents- authorities till some extent and unnecessary process of the show cause notice Annexure P-10 issued contrary to the Departmental communication Annexure P-9 and on account of non-making the payment of the running bills regularly within time the petitioner could not complete the work of contract within time. It also appears that the excavation work of tunnel is almost near to be completed. The same may be completed within some period and on such reasons the petitioner appears to be entitled for extension of the period of further six months under the relevant clauses and terms of the contract. Such observation is being made keeping in view that if by rescinding the contract of the petitioner the authorities of the respondents proceed to carry out the remaining work through some other agency then again long time would be required for NIT process and finalization of contract and issuing the work order and in that circumstance the remaining work of the contract could not be completed in short period and consequently the public work will suffer and the agriculturists could not get the water for irrigation of their field in early days.

Summary

Issues Involved:
1. Validity of the show cause notice issued to the petitioner.
2. Delay in the completion of the contractual work.
3. Payment of running bills to the petitioner.
4. Availability of alternative remedies, including arbitration.
5. Extension of time for completion of the contractual work.

Detailed Analysis:

1. Validity of the Show Cause Notice:
The petitioner challenged the show cause notice dated 21.09.2015, arguing it was issued arbitrarily and without following the principle of natural justice. The court noted that the notice was issued in a non-speaking manner and without sufficient cause, as it was given only ten-eleven days after an internal communication (dated 10.09.2015) which indicated the petitioner was willing and ready to complete the work by the extended deadline of 31.12.2015. The court found this notice to be arbitrary and pre-planned, issued without proper reasoning or consideration of the circumstances, and thus quashed it.

2. Delay in the Completion of the Contractual Work:
The petitioner claimed that delays were caused by the respondents' failure to provide necessary drawings, designs, and permissions on time. The court acknowledged that the work period had been extended multiple times due to these delays, and the petitioner had completed more than 50% of the work by the time of the last extension. The court found that the petitioner was making progress, albeit slowly, and was willing to complete the work within the extended period.

3. Payment of Running Bills to the Petitioner:
The petitioner argued that delayed or non-payment of running bills hindered their ability to manage the requisite infrastructure and pay laborers. The court directed the respondents to make regular payments of running bills within time, in accordance with the contract and departmental procedures, to ensure the petitioner could continue the work without financial hurdles.

4. Availability of Alternative Remedies, Including Arbitration:
The respondents contended that the petition was not maintainable due to the availability of an alternative remedy through arbitration, as per the contract. However, the court held that the presence of an arbitration clause does not bar the jurisdiction of the High Court under Article 226 of the Constitution of India, especially when the show cause notice was issued in an arbitrary and non-speaking manner. The court cited precedents to support its jurisdiction in such cases.

5. Extension of Time for Completion of the Contractual Work:
The petitioner sought an extension of six months beyond 31.12.2015 to complete the remaining work. The court observed that the petitioner appeared to be entitled to this extension, given the delays caused by the respondents and the near completion of the excavation work. The court directed the respondents to consider the petitioner's request for an extension sympathetically, in the interest of public welfare and the timely completion of the project.

Conclusion:
The court quashed the impugned show cause notice dated 21.09.2015, directed the respondents to allow the petitioner to continue the work as per the contract, and to consider extending the period for completion by six months beyond 31.12.2015. The court also mandated the timely payment of running bills to the petitioner, ensuring no hindrance in the completion of the contractual work. The petition was allowed, and there was no order as to costs.