N.R. Ispat And Power Private Limited vs State Of Chhattisgarh

Since a common issue is involved in both the writ petitions, they are heard and decided together.

Pursuant to the order dated 14.9.2018 passed by the Supreme Court in Writ Petition (Civil) No.20/02/1995, the Respondents/authorities convened an e-auction for sale of iron ore which was seized in connection with a forest crime being Forest Crime No.7480 of 2001. The quantity of the proposed iron ore was 15832.187 metric ton. The Petitioners/firms of both the cases participated in the e-auction. In the said e-auction, specification, quantity, floor size and earnest money were demonstrated. It is further mentioned that the firms who were participating in the auction could satisfy themselves about the quality and specifications of the product and acquaint themselves with other operational aspects relating to logistics etc. Both the Petitioners/firms were successful in the bid and successful e-auction was allotted to them. Out of 15832.187 metric ton proposed iron ore, 8,000 metric ton iron ore was allotted to Petitioner NRVS Steels Limited [Writ Petition (C) No.3658 of 2022] and remaining 7,832.187 metric ton iron ore was allotted to Petitioner N.R. Ispat and Power Private Limited [Writ Petition (C) No.3337 of 2022]. As per the terms and conditions of the e-auction, both the Petitioners/firms were to deposit 25% of the bid amount as EMD within 7 days of sale acceptance intimation and remaining 75% was to be deposited within 30 days of sale acceptance intimation. A penalty clause was also there according to which if the above payments are not made within the stipulated period, penalty @ 1% per week on the total sale value upto the period of 2 weeks was to be imposed. As per the terms and conditions, the lifting period of the product was 60 days from the date of contract and any extension of lifting period would be considered by the CCF (Chief Conservator of Forest), Kanker Circle. There was also a provision if the successful bidder is unable to lift the material within the stipulated period, ground rent @ 1% per week shall be levied and upto 2 weeks maximum. Both the Petitioners/firms deposited 25% of the earnest money by 24.2.2022 and remaining 75% of the auction money were deposited by them by 25.4.2022. In both the writ petitions, the Petitioners/firms moved applications on 24.5.2022 and 17.6.2022 for extension of time for lifting the iron ore on the ground that in the iron ore normal stones were also mixed which were required separation and monsoon was also to arrive and rainfall was also to start very soon. Both the Petitioners/firms again moved an application on 12.7.2022 and requested for grant of extension of time for lifting the iron ore on the same ground. The Respondents/ authorities convened a proceeding on 7.7.2022 and declined to allow all the requests made by the Petitioners/firms.

The instant writ petitions have been moved by the Petitioners/firms on the grounds that the date of seizure has not been demonstrated by the Respondents/authorities, they have also not mentioned in the e-auction of the iron ore that the seized material was iron ore, the Mining Department also did not issue any certificate in respect of percentage of the iron ore, the Petitioners/firms participated in the e-auction on the basis of information that there was 63% iron ore in the lot, but, the iron ore, which was demarcated by the Respondents/authorities was less than 63% and, therefore, separation of the iron ore from the mixed normal stones was essential and without doing separation lifting of the iron ore was not possible and as the monsoon had come and rainfall had started, therefore also, lifting and transportation of the seized iron ore from the dumped area was not possible. Therefore, it is prayed by the Petitioners/firms that a technical committee be constituted for the purpose of separation of mixed normal stones from the iron ore and the period of 60 days for lifting be counted from the date of valid permission issued by the Forest Department. It is further prayed that as the delay in lifting the iron ore was for reasonable cause, therefore, the Petitioners/firms are not liable for any penalty for delayed lifting of the iron ore.

In their reply/return, the Respondents have pleaded that the e-auction of the classified iron ore was done through Metal Scrap Trading Corporation (MSTC), Raipur by the earlier Forest Division Bhanupratappur of Kanker Forest Circle. In the 4th e-auction held on 14.12.2021 the bid of the Petitioners/firms was approved in the meeting of Forest Produce Inter Departmental Committee on 29.12.2021 vide Annexure R1. After the approval by the Committee, letters were issued to the Petitioners/firms regarding deposit of 25% of the amount of the total sale value within a period of 7 days vide letter dated 3.1.2022 (Annexure R2). Again reminders were issued on 12.1.2022 and 8.2.2022 in this regard. Thereafter, as per the terms and conditions of the e-auction, on 4.2.2022, a notice was issued to the Petitioners/firms to deposit 25% of the sale value along with penalty amount @ 1% per week on the sale value. The 25% amount has been deposited by both the Petitioners/firms by 24.2.2022. Thereafter, an agreement was executed between both the parties on 7.3.2022 vide Annexure R5. On 8.3.2022, a notice was issued to the Petitioners/firms regarding deposit of 75% amount of the sale value within a period of 14 days vide Annexure R6. Both the Petitioners/firms deposited 75% amount of the sale value excluding late fee on 25.4.2022. As both the payments, i.e., 25% and 75% made by the Petitioners/firms delayed, therefore, they are liable to pay a late fee @ 1% of sale value as per the terms and conditions of the e-auction and the agreement executed between both the parties. It is further pleaded that after deposit of the money, a work order was issued on 24.5.2022 for lifting 50% quantity of the iron ore in first installment within a period of 60 days. In the aforesaid work order, it is categorically mentioned that after transportation of the aforesaid 50% quantity of the iron ore within the stipulated period, another work order would be issued for lifting of further 25% quantity of the iron ore. It is further pleaded that for remaining 25% of the iron ore work order would be issued after the decision of the Committee regarding exemption in submission of the late fee amount, i.e., 1% of the sale value. Despite issuance of the work order, the Petitioners/firms did not lift the iron ore from the spot. The iron ore was sold in e-auction on the condition “as is where is and no complaint basis”. On 17.6.2022, for the first time at this stage, the Petitioners/firms submitted an application mentioning that separation of mixed normal stones from the iron ore was essential and they requested for extension of time for lifting the iron ore. Thereafter, on 7.7.2022, a joint meeting was convened in which the representatives of the Petitioners/firms were duly informed about the terms and conditions of the e-auction and proceeding Annexure P1 was drawn. As the Petitioners/firms failed to lift the material within the stipulated period, the work order has been cancelled due to non-lifting of the material. With regard to the quality concern of the iron ore, the Petitioners/firms never made any complaint before deposit of full value. They also agreed upon the terms and conditions of the tender and filled the price and deposited the full amount. Therefore, there is no need of constitution of any committee as prayed by the Petitioners/firms. The amount of 25% of the sale value was deposited after a delay of 6 weeks and the remaining 75% of the total sale value was deposited after a delay of 5 weeks. Therefore, as per the terms and conditions of the agreement as well as the e-tender, the Petitioners/firms are liable to pay 1% as penalty of total sale value which has not been paid till date. The Petitioners/firms were given various opportunities to facilitate the transportation of the iron ore, but, they have chosen to maliciously make wrong allegations against the Respondents/authorities for non-payment of the penalty for which the Petitioners/firms are solely liable. The Petitioners/firms have only been imposed the minimum late fee penalty @ 1% of total sale value for minimum 2 weeks which is mandatory as per the e-auction conditions and the same cannot be exempted as it would vitiate the whole auction procedure. The Petitioners/firms were well aware of the weather condition which was a rainy season in the months of May and June and the Petitioners/firms also did not show any difficulty to perform their obligation under the work order that they are unable to lift the iron ore during the rainy season. Therefore, the Petitioners/firms are not entitled to get any relief in these writ petitions.

I have heard the arguments raised on behalf of the parties and perused the petitions and the reply as also the documents annexed with them with due care.

Before dealing with the issue, some of the relevant provisions of the e-auction (Annexure P3 in both the writ petitions) need to be reproduced hereinbelow, which read as under:

“5. INSPECTION:

Forest Department shall allow inspection of materials at site to be auctioned to all interested prospective buyers prior to the e-auction as per auction catalogue.

PAYMENT METHODOLOGY:

All payments are to be made by way of Demand Draft/NEFT RTGS in favour of DFO East Bhanupratappur.

The Bank Account Details are provided below:

Bank Name : STATE BANK OF INDIA

Branch : BHANUPRATAPPUR

A/c No. : 32401299542

IFS Code : SBIN0002832

Details of Payment by the buyer are as follows:

S.No.

Payment

Duration (in days)

1.

EMD (25% of Net Sale Value excluding taxes and duties)

Within 7 days from the sale acceptance intimation by CCF Kanker, after IDC approval.

2.

Balance Material Value (including applicable taxes and other statutory levies like DMF, NMET, GST etc)

Within 30 days from the sale acceptance intimation by CCF Kanker, after IDC approval.

Note:

In case of failure of party to submit EMD 25% of Net Sale Value excluding by Taxes and duties the Pre Bid EMD amount deposited by party may be forfeited.

“After Agreement in case of failure of party to execute/to comply with the order, as per the terms and conditions of the order, the security deposit submitted by the defaulter party will be forfeited. The Iron Ore at the sole discretion of the Forest Department may be disposed off at the risk and cost of defaulter party and losses/damages, if any, that may incur on this account, may be recovered from the defaulter party.”

LATE PAYMENT PENALTY:

For any delay in making payment within the time limit specified, the payment may be accepted on the discretion of MSTC/Seller upto a period of two weeks from the due date of payment on payment of additional late payment penalty @ 1% per week on the total sale value, and thereafter on the sole discretion of the Seller. However, MSTC/Seller reserve the right not to accept the payment with or without the late penalty after the expiry of the above mentioned time limits or even within the aforesaid additional period of 14 days at MSTCs/Sellers sole discretion and in such an event the sale of the lot will be automatically cancelled and the Earnest Money/Security Deposit (as the case may be) will automatically stand forfeited. After the additional period of 14 days, the Seller will have the sole discretion on whether to accept/reject the Contract.

LIFTING PERIOD:

60 days from the date of contract. Extension of lifting period may be considered by CCF, Kanker Circle and is at the discretion of Forest Department.

GROUND RENT:

If the Successful bidder is unable to lift the material within stipulated period as specified in the Contract/Order, Ground Rent @ 1% per week shall be levied and upto 2 weeks maximum, provided written request is received before the expiry of 60 days free lifting period. If no such request is received, the Sale Order shall stand cancelled and the Pre Bid EMD, EMD, Balance Material Value, shall be considered forfeited on completion of 60 days of free lifting period. The Seller will have the sole discretion on whether to accept/reject the Contract.

GENERAL TERMS & CONDITIONS:

xxx xxx xxx

f. Quantities mentioned in notice are only indicative and may undergo a change depending on factors like actual production of seized Iron Ore, bottlenecks in seized Iron Ore transportation etc.

g. There will not be any joint/third party sampling facility extended to any Buyer. Refusal on account of non-suitability and/or sub-standard quality for the allotted quantity of seized Iron Ore shall not be acceptable.

j. Forest Department reserves right(s) to amend/modify and revise the terms and conditions contained herein in full or in part at any point of time and no party shall have any right whatsoever to raise any claim in that regard on that count.

l. After the submission of bid(s) by the Buyer, a presumption would be drawn that the buyer has inspected the material and has satisfied himself about the nature, quantity, quality, other technical specifications, taxes-duties and legalities prior to the e-auction. No complaint, whatsoever, would be entertained after the submission of the bid.”

It is also appropriate to reproduce hereinbelow some of the relevant clauses of the agreement (Annexure R5 in both the writ petitions) executed between both the parties, which read as under:

In the e-auction (Annexure P3), it is categorically mentioned that the specifications of iron ore mentioned are only indicative and the iron ore is offered on “as is where is and no complaint basis”. It is also mentioned that the firms may satisfy themselves about the quality and specifications of the product. As per Clause 5 of the terms and conditions of the e-auction, the Forest Department shall allow inspection of the material at site to all interested buyers prior to e-auction. Thus, it is clear that before participating in the auction proceeding, the Petitioners/firms should have satisfied themselves about the quality of the iron ore. As per the general terms and conditions of the e-auction, no buyer was extended any facility of sampling prior to the e-auction and after submission of the bid, there was a presumption also that the buyer has inspected the material and satisfied himself about the quantity, quality and other technical specifications of the material.

In this regard, submission was made by Learned Senior Counsel appearing for the Petitioners/firms that the Petitioners/firms participated in the bid for purchase of iron ore only and the agreement in this regard was also executed between both the parties for the sale of iron ore only. Since before the participation in the e-auction, no sampling facility was extended to the Petitioners/firms, at that time, the Petitioners/firms were not aware of the fact that on the spot normal stones were also mixed with the iron ore. After depositing the entire money for the sale, it was found by the Petitioners/firms that normal stones were also mixed with the iron ore, which were required to be separated. From perusal of the applications made by the Petitioners/firms (collectively Annexure P6 dated 24.5.2022 and 17.6.2022), it appears that the Petitioners/firms made requests for extension of time for lifting the material on the ground that separation of the iron ore from the mixed normal stones was necessary and monsoon was also coming. Though there is a provision in the terms and conditions of the e-auction, i.e., “as is where is and no complaint basis”, the material iron ore was offered for sale to which the Petitioners/firms also accepted. But, if in the iron ore normal stones are also mixed then the Petitioners/firms cannot be compelled to lift the normal stones also at the time of lifting the iron ore. If the Petitioners/firms are interested to lift only the iron ore from the site, separation of mixed normal stones from the iron ore is essential. Since the Petitioners/firms have deposited the entire sale value, it shows that they are interested to lift the iron ore.

Thus, as prayed by Learned Senior Counsel for the Petitioners/firms, it would, on the ground of equity, be appropriate to constitute a technical committee for separation of the mixed normal stones from the iron ore.

Accordingly, it is directed that the Respondents/authorities shall constitute a technical committee consisting of members to be decided by the Respondents/authorities themselves, which should be headed by one of the senior officers of the Forest Department. One Mining Officer and one representative from each of the Petitioners/firms shall also be made members of the said technical committee. This committee be constituted within 15 days of the receipt of this order. This committee shall supervise the work of separation of the mixed normal stones from the iron ore at the site and submit its report within 60 days of its constitution before Respondents 2 and 3 of Writ Petition (C) No.3337 of 2022. Thereafter, on the basis of the said report, the Respondents/authorities shall issue a fresh work order for lifting of the material as per the terms and conditions of the e-auction and the agreement. After the separation of the mixed normal stones from the iron ore, the whole iron ore shall be lifted by the Petitioners/firms from the site except the separated normal stones. It is made clear that all the expenses for the separation of the mixed normal stones from the iron ore at the site shall be fully borne by the Petitioners/firms only.

With regard to imposition of the penalty of 1% of sale value for late deposit of the 25% and 75% amounts of the sale value, undisputedly, the amounts were deposited by the Petitioners/firms 6 weeks and 5 weeks belatedly, respectively, but, the penalty amount has not yet been paid by the Petitioners/firms. Looking to the facts and circumstances of the case, the Respondents/authorities are also directed to sympathetically consider the request of the Petitioners/firms for waiving of the aforesaid penalty.

As regards the ground rent, as contained in Clause 12 of the terms and conditions of the e-auction and Clause 5(10) of the agreement, as the Petitioners/firms were unable to lift the material within the stipulated period and made requests for extension of time for lifting the material on the ground of separation of the mixed normal stones from the iron ore and the ground of coming monsoon and considering the above a technical committee is ordered to be constituted, therefore, it is held that at present the Petitioners/firms are not liable to pay any ground rent on the ground of non-lifting of the material.

Consequently, both the writ petitions are disposed of in the aforesaid terms.