Sainik Mining and Allied Services Ltd. and Another vs Mahanadi Coal Fields Ltd. and Others

B.K. Nayak, J.—In this writ application, the Petitioner-company challenges the letter dated 02.03.2009 under Annexure issued by Opp. Party No. 2, General Manager (Technical Co-ordination), Mahanadi Coalfields Limited (in short ''M.C.L.'') threatening to initiate action towards cancellation of contract, forfeiture of earnest money & taking up the contract work at Petitioner''s risk & cost. The further prayer is to direct the Opp. Parties to release Petitioners'' all previous dues concerning different earlier works.

The case of the Petitioner is that the Opp. Parties, Mahanadi Coalfields Limited & its functionaries issued notice dated 26.3.2008 under Annexure-2 inviting tender under Ref. No. MCL/SBP/GM(TC)/NIT-477/2008/2008 for the work, Extraction & Transfer of Coal/Coal measure strata by deploying "Surface Miners" on hiring basis at Kulda OCP, Basundhara Garjanbahal Area of M.C.L. In pursuance of the notice the Petitioner participated in the tender process & having been found qualified in both technical & price bids, the said work was awarded in its favour & acceptance of Petitioner''s bid was communicated by the Opp. Parties in their letter dated 31.10.2008 under Annexure-3. The Petitioner company issued letter dated 12.11.2008 acknowledging receipt of Opp. Parties letter under Annexue-3. The Opp. Parties also issued work Order Dated 04.11.2008 vide Annexure-5. In the work order the Opp. Parties acknowledged receipt of the earnest money of Rs. 7,55,600 deposited by the Petitioner & also asked the Petitioner to deposit a further sum of Rs. 25,35,732, since as per the terms of the bid, the contractor was to deposit performance security @ 5% of annualised value of contract vide letter dated 03.12.2008. In their letter under Annexure-6, the Opp. Parties further instructed the Petitioner for submission of the aforesaid performance security amount at M.C.L. Headquarters in the form of Demand Draft. The Petitioner was also further reminded in the said letter to submit other documents like Indemnity Bond, Insurance, updated R.C. Books & fitness certificate of the fleet for execution of agreement.

It is the further case of the Petitioner that the Petitioner-company had executed various works under M.C.L. earlier since 1998 for which a sum of about Rs. 15.00 crores (roughly) was due to the Petitioner from the Opp. Parties, which the latter have not yet released, for which the Petitioner-company could not furnish the performance security of Rs. 25,35,732 in connection with the present contract because of its financial stringency. The Petitioner, therefore, in its letter dated 13.12.2008 under Annexure-8 requested the Opp. Parties for 15 days time beyond 15.12.2008 for maintenance & repair of machine/equipments before starting execution of the work. On receipt of the aforesaid letter, the Opp. Parties requested the Petitioner vide their letter dated 17.12.2008 under Annexure-9 to start the work latest by 26.12.2008 & also to fulfil the formalities-like submission of security deposit & the required papers concerning execution of agreement. The Petitioner-company having expressed their helplessness in arranging finances intimated vide letter dated 19.1.2009 under Annexure-12 that they were not in a position to take the contract work. In reply, the Opp. Parties in their letter dated 20.1,2009 (Annexure-13) requested the Petitioner to start the work within 15 days failing which action would be taken for forfeiture of earnest money as per Clause No. 6.1 of General Terms & Conditions of the bid document. Thereafter, the Petitioner'' company having failed to start the work, the Opp. Parties issued the impugned letter dated 02.03.2009 (Annexure-1) requesting the Petitioner to start the work within 15 days of the issue of the said letter, failing which M.C.L. would be compelled to initiate action towards cancellation of contract, forfeiture of earnest money deposited & taking up of the work at the risk & cost of the Petitioner-company.

It is urged by the Petitioner that the Opp. Parties having held up substantial amount of money of the Petitioner-company in connection with other works done by them previously, the company was not in a position to arrange finances to start the present work in question & therefore, M.C.L''s notice under Annexure-1 threatening to cancel the contract & to forfeit earnest money & take up the work at the risk & cost of the Petitioner is unreasonable, unjust & illegal. It is the further submission that all the formalities with regard to execution of agreement having not been completed, the contract had not reached finality & the person aggrieved (Opp. Parties) cannot claim risk & cost whimsically.

The Opp. Parties filed a counter affidavit in reply stating that the Petitioner was issued with L.O.I. & the same was accepted by the Petitioner & further work order was also issued in favour of the Petitioner, which amounts to awarding of the contract in favour of the Petitioner, & the agreement is a mere formality as the agreement consists of the N.I.T. including its terms & conditions, LOI & the work order with all its terms & conditions. It is stated that the contentions of the Petitioner-company being contrary to the conditions mentioned in the Notice Inviting Tender (NIT) they are not sustainable. It is also stated that Glause-3.3 (a) of Instructions to Bidders in the tender notice, stipulates that to qualify for award of the contract, evidence of possessing adequate working capital (at least 20% of the annualised value of this work) inclusive of access to lines of credit & availability of other financial resources to meet the requirement, & that being aware of this condition, the Petitioner submitted certificate regarding adequate working capital along with the tender, which was taken into account at the time of scrutinising the technical bid as well as the financial bid by the M.C.L. authorities & the Petitioner being the L-1, work order was issued in its favour. It is further stated that the Petitioner having already informed in its letter dated 19.1.2009 (Annexure 12) that it would not take up the work, it was not open to the Petitioner to challenge the notice of cancellation of the contract under Anexure 1. The Opp. Parties have every right to act on the basis of the conditions provided in the instruction to bidders, general terms & conditions, special terms & conditions as per Annexure-2 for the failure of the Petitioner to execute the work. It is further stated in the counter affidavit that the Writ Petition has become infructuous in as much as the Opp. Parties have already cancelled the contract/work order vide office Order Dated 09.04.2009 as per Annexure-A. Their further plea is that after cancellation the work was retendered in which the Petitioner has participated.

The questions that fall for consideration are whether there was a valid contract between the parties in absence of a written agreement & whether the Opp. Parties were legally entitled to issue the impugned notice of cancellation of the contract & forfeiture of earnest money etc., under Annexure-1.

Admittedly, the notice inviting tender contains detailed procedure & terms & conditions with regard to tender process including award of the contract. The Petitioner-company having been found qualified in the technical as well as price bids, its bid was accepted & it was issued with work order on the terms & conditions including the special terms & conditions which are part of the tender notice & were agreed to by the Petitioner when it made the offer by way of submission of tender & by the Opp. Parties when they accepted the bid of the Petitioner & issued work order in its favour. Clause 29 of "Instruction to Bidders" provides for notification of the award & formation of the contract. Clause 29.2 specifically stipulates that the notification of the award will constitute the formation of the contract, subject only to the furnishing of a performance security/security deposit in accordance with Clause 30. It is thus clear that by way of acceptance of the bid of the Petitioner & the issuance of work order by the Opp. Parties, the contract was formed & execution of a written agreement was a mere formality & was not a condition precedent for the formation of the contract.

Clause 2(i) of the ''Special Terms & Conditions of tender'' inter alia stipulates that for delay in starting the work after 45''days of receipt of L.O. 1, the management shall get the work executed at the L-1 contractor''s cost & risk for the daily average quantity & the difference in the rate shall be recovered from the L-1 tenderers SD/other payments due of the tenderer with M.C.L.

In view of the aforesaid conditions & stipulations, the Opp. Parties were well within their right to issue notice of cancellation of the contract & the work order & to forfeit the earnest money & to take up the work otherwise at the risk & cost of the Petitioner, since admittedly despite being given several extensions of time the petitioner could not stain the work & on the contrary, expressed inability to execute the work. The action of the Opp. Parties in issuing the notice under Annexure-1, therefore, cannot be termed as unreasonable or unjust.

It is the further undisputed fact, as revealed from the counter affidavit & the documents annexed thereto that the contract/work order has already been cancelled on 09.04.2009 under Annexure-A & the said cancellation order has not been challenged by the Petitioner. It is the further undisputed fact that after cancellation of the contract, the process of retender of the work has been initiated by the Opp. Parties & the Petitioner has already participated in the said retender process, which only goes to show that the Petitioner has no grievance about the cancellation of the work order issued in its favour.

So far as the relief of issuing directions to the Opp. Parties to release all previous dues concerning different works executed by the Petitioner earlier, the details of which have been set out in paragraph-8 of the Writ Petition, is concerned, the same cannot be worked out in this Writ Petition in as much as the Petitioner can take recourse to the modes of settlement as agreed upon between the parties under the respective contracts.

For the foregoing reasons, we find no merit in this Writ Petition, which is accordingly dismissed without any order for costs.

I.M. Quddusi, A.C.J.

I agree.