M/S. Ganesh Prasad Singh vs Union Of India & Ors.

Suvra Ghosh, J

The petitioner seeks issuance of a Writ in the nature of Mandamus commanding the respondents to rescind, cancel and quash the notice of termination issued on 12th April, 2022.

It is contended on behalf of the petitioner that the petitioner is a partnership firm engaged in the business of executing interior cleaning, padlocking/unlocking and watering of platform return/stable/terminating trains and cleaning of depots and stabling lines, in the name and style of M/s. Ganesh Prasad Singh. A tender was issued in favour of the petitioner by the 6th respondent for the purpose of interior cleaning, padlocking/unlocking and watering of platform return/stable/terminating trains and cleaning depots and stable lines for the period of three years as a successful bidder and letter of acceptance was issued in his favour on 1st September, 2021. However, no contract qua the said tender has been executed by and between the parties till date. The petitioner furnished Bank guarantee to the tune of Rs. 89,500/- in favour of FA/CAO, South Eastern Railway, Garden Reach, Kolkata – 700043 in connection with the tender. The petitioner commenced work in terms of the tender notice upon issuance of letter of acceptance in his favour. On 25th March, 2022 the respondent authorities issued a letter to the petitioner indicating that the performance of the petitioner in executing the work was below the desirable standards of services and the petitioner was requested to take necessary measures for addressing the issues pointed out in the letter. A seven days’ notice was issued upon the petitioner by the 6th respondent on 1st April, 2022 which stated that failure of the petitioner to improve performance within the time frame indicated in the notice would result in issuance of a notice of termination. The petitioner, vide letter dated 7th April, 2022 refuted the allegations contained in the letter dated 25th March, 2022 despite which a letter of termination was issued to him by the 6th respondent on 12th April, 2022 imposing three-tier penalty upon him - the work order was terminated, penalty to the tune of Rs. 1, 11, 56, 000/- was slapped upon him and he was debarred from participating in tender floated by the South Eastern Railway, Chakradharpur Division for the period of two years from the date of issuance of the letter. The reply given by the petitioner was not taken into consideration by the authority in issuing the notice of termination and no opportunity of hearing was granted to the petitioner prior to issuance of the notice. The amount of penalty assessed by the authority also has no legal sanction. The letter of termination has been issued in terms of the General Conditions of Contract for Service (for short, the GCC for Service) of the railway authority. Since no formal contract was entered into by and between the parties, the GCC for Service is not applicable in the instance case. The punitive measures also can be made applicable upon execution of a contract and not at the pre-contractual stage.

Learned counsel has placed reliance in the authorities in M/s. Vedanta Ltd. (formerly known as Sesa Sterlite Ltd. and Successor in Interest of Erstwhile Sterlite Industries (India) Ltd.) v/s. M/s. Emirates Trading Agency LLC. reported in AIR 2017 Supreme Court 2035, Dresser Rand S.A. v/s. 1. Bindal Agro Chem Ltd., 2. K.G. Khosla Compressors Ltd. reported in (2006) 1 Supreme Court Cases 751 and judgments of coordinate Benches of this Court in W.P. No. 26079 (W) of 2017 and W.P.A. 10668 of 2021.

In refuting the contention of the petitioner, learned counsel for the respondents has submitted that the agreement between the parties could not be executed as the requested documents were not submitted by the petitioner. Several discrepancies on the part of the petitioner were noticed by the authority upon inspection in addition to the fact that the petitioner was working through a sub-contractor named Manoj Kumar Singh which is not permissible under the GCC for Service, 2018, without permission of the competent railway authority. Performance notice and seven days’ notice were issued to the petitioner for rectification of the irregularities despite which no step was taken and the irregularities continued. Termination notice was issued upon the petitioner and the contract was terminated as per clause 7.4 (i) of GCC for Service, 2018 upon obtaining approval of the competent authority following which the Bank guarantee was forfeited.

It is not in dispute that being a successful bidder in the tender floated by the respondent authorities, letter of acceptance was issued in favour of the petitioner on 1st September, 2021 requesting the petitioner to submit Performance Guarantee in the form as given in clause 4.11 of GCC for Service equivalent to 3% of the contract value amounting to Rs. 89494.43/-within 30 days from the date of issuance of letter of acceptance, for execution of the contract agreement. Performance Guarantee was submitted by the petitioner along with the amount of Rs. 89,500/- on 7th September, 2021. Admittedly no formal contract was executed by and between the parties. Performance notice was issued upon the petitioner on 25th March, 2022 on certain allegations in terms of clause 7.4.1 of the GCC for Service following which a seven days’ notice and thereafter a termination notice was issued in terms of clause 7.4.2 and 7.4.3 respectively. Needless to state that the GCC for Service is applicable in a service contract executed by and between the authority and the applicant. In the present case, admittedly no such contract was executed at all.

Learned counsel for the respondents has drawn the attention of the Court to annexure-II of the tender notice which is a bid form which demonstrates that “until the formal agreement is prepared and executed, acceptance of this Bid shall constitute a binding contract between us subject to modifications, as may be mutually agreed to between us and indicated in the letter of acceptance of my/our offer for this work/service.” In the case in hand, there was no absolute and unqualified acceptance of the bid and instead of acceptance of the proposal, counter proposal was made in the letter of acceptance. In the words of the Hon’ble Supreme Court in M/s. Vedanta Ltd (supra), in order to convert a proposal into a contract, the acceptance must be absolute and unqualified. The existence of a concluded contract is a sine qua non in a claim for compensation for loss and damages under section 73 of the Indian Contract Act, 1872 arising out of a breach of contract. If instead of acceptance of a proposal, a counter-proposal is made, no concluded contract comes into existence.

In echoing the said observation, the Hon’ble Supreme Court, in Dresser Rand S.A. (supra) has stated that the parties agreeing upon the terms subject to which a contract will be governed, when made, is not the same as entering into the contract itself. A prelude to a contract should not be confused with the contract itself. The said proposition of law has also been reiterated by the coordinate Benches of this Court in the judgments referred to above.

The only inference that can be drawn is that in absence of a concluded contract between the parties the GCC for Service which governs concluded contract executed by and between the parties is not applicable. It is only upon execution of a concluded contract between the parties that the GCC for Service comes into play. A letter of acceptance issued in favour of the petitioner can under no circumstances be construed as a concluded contract between the parties and the performance notice, seven days’ notice as well as the termination notice fall foul of the terms of the GCC for Service. Termination of the contract in terms of clause 7.4(i) is also dehors the law.

Also, the petitioner was deprived of an opportunity of hearing by the authority prior to issuance of the termination notice which is violation of natural justice. The petitioner ought to have been given an opportunity to place his contention before the authority prior to issuance of the punitive measures. Three-fold penalty of termination of service, imposition of fine and black listing of the petitioner were imposed without taking into consideration the reply submitted by the petitioner before the authority or affording fair hearing to him.

In view of the above, the performance notice dated 25th March, 2022, seven days’ notice dated 1st April, 2022 and the letter of termination dated 12th April, 2022 are set aside/quashed.

The writ petition being W.P.A. 1694 of 2023 is accordingly allowed.

There shall however be no order as to costs.

Since no affidavit is invited, the allegations contained in the writ petition are deemed not to be admitted.

Urgent certified website copies of this judgment, if applied for, be supplied to the parties expeditiously on compliance with the usual formalities.