Dipak Pal vs The Managing Director, Food Corporation Of India & Ors.

“Remarks:-The entire unloading operation was conducted under the strict vigil of ICCS Dist. Squad, Manager (Depot), Manager (MOVT), RPF/ Railway staff, High security seal found affix with wagons. Heavy losse grain found in wagon. The stocks were received on 100% weighment through DOS of all the 42 wagons through owned computerize Lorry weighbridge at FSD BERHAMPORE premises under the supervision of FCI officials. Local Berhampore Police/DSP Traffic has also informed to keep watch enroute during unloading of Rake. This is for your kind information and necessary action please. Hence, it is requested to depute the team of consignor and for joint verification of stock within 3 days because there is urgency of issue out the stock to State Government. The Stock has been kept separately as per instruction in vogue”.

“Clause X- (a)The contractor shall be liable for all costs, damages, demurrages, wharf age, forfeiture of wagon registration fees, charges and expenses suffered or Incurred by the Corporation due to the contractor's negligence and un-workman like performance of any services under this contract or breach of any terms thereof or his failure to carry out the work with a view to avoid Incurrence of demurrage, etc. and for all damages or losses occasioned to the Corporation due to any act whether negligent or otherwise of the contractor themselves or his employees. The decision of the General Manager regarding such failure of the contractor and his liability for the losses, etc. suffered by Corporation, and the quantification of such losses, shall be final and binding on the contractor.

“(b)

The Corporation shall be at liberty to reimburse themselves of any damages, losses, charges, costs or expenses suffered or incurred by it due to contractor's negligence and un-workman like performance of services under the contract or breach of any terms thereof. The total sum claimed shall be deducted from any sum then due or which at any time hereafter may become due to the contractor under this or any other contract with the Corporation. In the event of the sum which may be due from the Corporation as aforesaid being insufficient, the balance of the total sum claimed and recoverable from the contractors as aforesaid shall be deducted from the security deposit furnished by the contractor. Should this sum also be not sufficient to cover the full amount claimed by the Corporation, contractor shall pay to the Corporation on demand the remaining balance of the aforesaid sum claimed.

“(c)

In the event of delay on the part of the contractor in providing other services as mentioned in the MTF i.e. labour, weighment machines, weights and any other services mentioned in the agreement, efficiently and to the entire satisfaction of the GM (Region) or any officer acting on his behalf, the General Manager shall without prejudice to other rights and remedies under this agreement, have a lawful right to levy Liquidated Damages from the contractor @ Rs. 2000/- per day or such lesser sum per day or part of a day of the delay as the GM (Region) in his absolute discretion may determine subject to the total liquidated damages not exceeding 15% of the value of the contract during the operation period of the contract. The decision of the Corporation in regard to levy of above Liquidated Damages shall be final and binding on the parties.

“(d)

The Contractor shall be responsible for the safety of the goods from the time they are loaded on his trucks from Railway Goods shed or siding Godowns, until they have been unloaded from his trucks at godowns or at other trucks or vice-versa, so as to avoid loss of grain, etc. through the holes/crevices in the decks of the trucks. He shall deliver the number of bags and the weight of foodgrains, fertilizers/sugar/groundnut/any other food product etc. received by him and loaded on his trucks and shall be liable to make good the value of any loss, shortage or damage during transit. The General Manager will be the sole judge for determining after taking into consideration all the relevant circumstances, the quantum and value of loss and also as regards the liability of the contractor for such loss and the amount to be recovered from him. The decision of the General Manager in this regard shall be final and binding on the contractor.

“(e)

The Contractor shall provide sufficient number of tarpaulins for each truck to cover the bags of foodgrains etc. and take reasonable precautions to avoid wetting/damage/loss to foodgrains during the transport. In the event of deficiency in service by contractor in not providing the tarpaulins for spreading on the decks of trucks or for covering the truck after loading, Liquidated Damages @ Rs. 200/-per truck will be imposed by the concerned General Manager/Area Manager without prejudice to any other right or remedies under the contract and law”.

“Clause XVIII- (a) The contract will be governed by the laws of India for the time being in force.

“(b)

In case of any dispute arising out of and touching upon the contract, the same will be first referred to the Dispute/Grievance Redressal Committee constituted and functioning at the Zonal Office of the Corporation, with a view to settle the disputes. The role of GRC shall cover the period from the date of award of contract. If any dispute remains thereafter, the same will be settled in the Court of Law having competent Jurisdiction.

“(c)

The results of technical evaluation will be uploaded on the GeM Portal. In case there are technically disqualified bidders, the reasons for disqualification will be uploaded and price bid shall be opened only after three working days. If any of the bidders is disqualified, he may submit grievance (if any) to General Manager (Region) within three working days from the date of disqualification. However, no new documents will be accepted. In case of receipt of grievance, General Manager (Region) will redress the grievance by passing Speaking Order within seven (7) working days. In case of receipt of grievance from any disqualified bidder, the validity period of the tender shall get automatically extended by 15 working days, which shall be binding on all the bidders.”

“11.

Upon completion of the weighment process for the entire stock at the destination point it was noticed that a quantity of 160.46480 quintals was found transit loss comparing to the total dispatched quantity of 27,252.49060 quintals, reflecting a loss percentage of 0.589%. The weighment was meticulously conducted using FCI’s controlled electronic Lorry Weigh bridge.

“12.

In order to accurately assess the substantial loss associated with that particular consignment, the office of FCI initiated a joint inspection and verification process by summoning a team from dispatching end to collaborate with the team at the Murshidabad Divisional office level. A detailed analysis of the wagon wise and trick wise unloading statements revealed significant inconsistencies in the average weight per bag across different wagons and tricks, even within the same wagon. This clearly indicates that the Handling and Transport Contractor, i.e. the writ petitioner’s negligent attitude in handling of food grains.

“13.

In the above situation, in accordance with the provisions outlined in the tender agreement (MTF) for Handling and Transport Contractors, specifically under Clause XX of points No. 4,8,21,26,27, and 30 the writ petitioner Dipak Pal, who was entrusted with the handling and transportation of the aforementioned consignment, was held accountable for the resultant losses. Nevertheless, the competent authority has determined to recover 50% of the total transit loss, amount to 40.1087 quintals, at twice of the acquisition cost fixed for the year 2022-23. The recovery sum was totaling Rs. 273040.78. The Divisional Office Murshidabad has already communicated to Mr. Deepak pal vide the letter dated 03.04.2024, the reason behind the deduction of Rs. 2,73,040.78 in response to his query letter.”

“… In this connection it is submitted that no written request was received from the contractor regarding the participation in the joint verification at the relevant point of time. …” Upon a query from this Court as to when the petitioner was invited to participate in the joint verification, the learned advocate for the respondents fairly submitted that no such invitation was ever made.

“98.

No apter description of Rule 9(i) can be given than to call it “the Henry VIII clause”. It confers absolute and arbitrary power upon the Corporation. It does not even state who on behalf of the Corporation is to exercise that power. It was submitted on behalf of the appellants that it would be the Board of Directors. The impugned letters of termination, however, do not refer to any resolution or decision of the Board and even if they did, it would be irrelevant to the validity of Rule 9(i). There are no guidelines whatever laid down to indicate in what circumstances the power given by Rule 9(i) is to be exercised by the Corporation. No opportunity whatever of a hearing is at all to be afforded to the permanent employee whose service is being terminated in the exercise of this power. It was urged that the Board of Directors would not exercise this power arbitrarily or capriciously as it consists of responsible and highly placed persons. This submission ignores the fact that however highly placed a person may be, he must necessarily possess human frailties. It also overlooks the well-known saying of Lord Acton, which has now almost become a maxim, in the appendix to his “Historical Essays and Studies”, that: “Power tends to corrupt, and absolute power corrupts absolutely.” As we have pointed out earlier, the said Rules provide for four different modes in which the services of a permanent employee can be terminated earlier than his attaining the age of superannuation, namely, Rule 9(i), Rule 9(ii), sub-clause (iv) of clause (b) of Rule 36 read with Rule 38 and Rule 37. Under Rule 9(ii) the termination of service is to be on the ground of: “Services no longer required in the interest of the Company.” Sub-clause (iv) of clause (b) of Rule 36 read with Rule 38 provides for dismissal on the ground of misconduct. Rule 37 provides for termination of service at any time without any notice if the employee is found guilty of any of the acts mentioned in that rule. Rule 9(i) is the only rule which does not state in what circumstances the power conferred by that rule is to be exercised. Thus, even where the Corporation could proceed under Rule 36 and dismiss an employee on the ground of misconduct after holding a regular disciplinary inquiry, it is free to resort instead to Rule 9(i) in order to avoid the hassle of an inquiry. Rule 9(i) thus confers an absolute, arbitrary and unguided power upon the Corporation. It violates one of the two great rules of natural justice — the audi alteram partem rule. It is not only in cases to which Article 14 applies that the rules of natural justice come into play. As pointed out in Union of India v. Tulsiram Patel [(1985) 3 SCC 398 : 1985 SCC (L&S) 672] : (at SCC p. 463, para 72) “The principles of natural justice are not the creation of Article 14. Article 14 is not their begetter but their constitutional guardian.” That case has traced in some detail the origin and development of the concept of principles of natural justice and of the audi alteram partem rule (at pp. 463-80). They apply in diverse situations and not only to cases of State action. As pointed out by O. Chinnappa Reddy, J., in Swadeshi Cotton Mills v. Union of India [(1981) 1 SCC 664] they are implicit in every decision-making function, whether judicial or quasi-judicial or administrative. Undoubtedly, in certain circumstances the principles of natural justice can be modified and, in exceptional cases, can even be excluded as pointed out in Tulsiram Patel case [(1985) 3 SCC 398 : 1985 SCC (L&S) 672] . Rule 9(i), however, is not covered by any of the situations which would justify the total exclusion of the audi alteram partem rule.”

“104.

As the Corporation is “the State” within the meaning of Article 12, it was amenable to the writ jurisdiction of the High Court under Article 226. It is now well established that an instrumentality or agency of the State being “the State” under Article 12 of the Constitution is subject to the constitutional limitations, and its actions are State actions and must be judged in the light of the Fundamental Rights guaranteed by Part III of the Constitution (see for instance, Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi [(1975) 1 SCC 421 : 1975 SCC (L&S) 101 : AIR 1975 SC 1331 : (1975) 3 SCR 619] , International Airport Authority case [(1979) 3 SCC 489 : AIR 1979 SC 1628 : (1979) 3 SCR 1014] and Ajay Hasia case [(1975) 1 SCC 421 : 1975 SCC (L&S) 101 : AIR 1975 SC 1331 : (1975) 3 SCR 619] ). The actions of an instrumentality or agency of the State must, therefore, be in conformity with Article 14 of the Constitution. The progression of the judicial concept of Article 14 from a prohibition against discriminatory class legislation to an invalidating factor for any discriminatory or arbitrary State action has been traced in Tulsiram Patel case [(1985) 3 SCC 398 : 1985 SCC (L&S) 672] (at pp. 473-76). The principles of natural justice have now come to be recognized as being a part of the constitutional guarantee contained in Article 14. In Tulsiram Patel case [(1985) 3 SCC 398 : 1985 SCC (L&S) 672] this Court said: (at p. 476, para 95)

“The principles of natural justice have thus come to be recognized as being a part of the guarantee contained in Article 14 because of the new and dynamic interpretation given by this Court to the concept of equality which is the subject-matter of that article. Shortly put, the syllogism runs thus: violation of a rule of natural justice results in arbitrariness which is the same as discrimination; where discrimination is the result of State action, it is violation of Article 14; therefore, a violation of a principle of natural justice by a State action is a violation of Article 14. Article 14, however, is not the sole repository of the principles of natural justice. What it does is to guarantee that any law or State action violating them will be struck down. The principles of natural justice, however, apply not only to legislation and State action but also where any tribunal, authority or body of men, not coming within the definition of ‘State’ in Article 12, is charged with the duty of deciding a matter.”

“35.

From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision is necessary. It was, thus, observed in A.K. Kraipak case [(1969) 2 SCC 262] that if the purpose of rules of natural justice is to prevent miscarriage of justice, one fails to see how these rules should not be made available to administrative inquiries. In Maneka Gandhi v. Union of India [(1978) 1 SCC 248] also the application of principle of natural justice was extended to the administrative action of the State and its authorities. It is, thus, clear that before taking an action, service of notice and giving of hearing to the noticee is required. In Maharashtra State Financial Corpn. v. Suvarna Board Mills [(1994) 5 SCC 566] , this aspect was explained in the following manner : (SCC p. 568, para 3) “3. It has been contended before us by the learned counsel for the appellant that principles of natural justice were satisfied before taking action under Section 29, assuming that it was necessary to do so. Let it be seen whether it was so. It is well settled that natural justice cannot be placed in a straitjacket; its rules are not embodied and they do vary from case to case and from one fact-situation to another. All that has to be seen is that no adverse civil consequences are allowed to ensue before one is put on notice that the consequence would follow if he would not take care of the lapse, because of which the action as made known is contemplated. No particular form of notice is the demand of law. All will depend on facts and circumstances of the case.”

“36.

In East India Commercial Co. Ltd. v. Collector of Customs [AIR 1962 SC 1893], this Court held that whether the statute provides for notice or not, it is incumbent upon the quasi-judicial authority to issue a notice to the persons concerned disclosing the circumstances under which proceedings are sought to be initiated against them, failing which the conclusion would be that principles of natural justice are violated.”

“…In our opinion, the post-decisional opportunity of hearing does not subserve the rules of natural justice. The authority who embarks upon a post-decisional hearing will naturally proceed with a closed mind and there is hardly any chance of getting a proper consideration of the representation at such a post-decisional opportunity.”