HON'BLE SRI JUSTICE C.V. NAGARJUNA REDDY W.P.No.26081 of 2014 Date : 24-11-2014 Between :
Sri Chennakeshava Pulverizing Mill, Represented by its Managing Director Gunipati Ramaiah ..
Petitioner And The Government of Andhra Pradesh, Represented by its Secretary, Mines and Industries Department, Secretariat, Hyderabad and another ..
Respondents Counsel for petitioner : Sri P. Gangaiah Naidu, Senior Counsel for Sri N. Bharat Babu Counsel for respondent No.1: Assistant Government Pleader for Industries and Commerce Counsel for respondent No.2 : Sri V. Subrahmanyam The Court made the following
ORDER:
This Writ Petition is filed for a mandamus to declare the action of respondent No.2 in not extending the period of the petitioner’s agreement dated 6-5-2013 for lifting 25,000 M.Ts. of C and D grade Barytes as illegal and arbitrary. As an alternative relief, the petitioner etitioner claimed refund of non- performance deposit in the event this Court is not inclined to grant the main relief claimed in paragraph (a) of the prayer of the Writ Petition.
The facts leading to the filing of the Writ Petition are as under:
The petitioner is a pulverising mill and it has entered into an agreement with respondent No.2 on 6-5-2013 for purchase of C+D+W grades of Barytes. As per Clause-1 of the agreement, the period of contract is upto 23-4-2014. Under Clause-5 the agreement rate payable per M.T. is Rs.1926/-. Under Clause-3, the petitioner is entitled to purchase 30,000 M.Ts. of all grades of Barytes. Under Clause-10, the petitioner shall deposit performance security deposit of Rs.57,78,000/-.
Between July and November 2013, the petitioner lifted 5000 M.Ts. of C+D grades of Barytes by paying Rs.1926/- per M.T. The petitioner addressed letter dated 27-1-2014 to the Managing Director of respondent No.2 wherein it has informed the latter that they have lifted only 5000 M.Ts. of Barytes; and that due to participation of its workers in Samaikyandhra Bandh for nearly two months, it could not lift the ore as per the schedule. It was further alleged in the said letter that A-1 grade material was not available during that time. The petitioner has therefore requested for extension of the contract period to enable it to lift the material. However, the petitioner has not received any response to the said request. The said request was followed up by the petitioner by representations dated 6-6- 2014 and 27-6-2014. As respondent No.2 has not considered the petitioner’s request, it has approached respondent No.1 and the Secretary to the Chief Minister has addressed letter dated 14-7-2014 to respondent No.2 to consider the petitioner’s request. As the petitioner has not received any response to any of its representations, it has filed this Writ Petition.
On behalf of respondent No.2, its Executive Director has filed a counter-affidavit wherein he has inter alia admitted that on 27-1-2014 the petitioner addressed letter to respondent No.2 for extension of time on the ground that the workers and employees have been participating in the Samaikyandhra Bandh. The counter-affidavit relied upon Clause-6(iii) of the agreement and pleaded that the force majuere clause does not apply to the petitioner. Referring to the representations dated 6-6-2014 and 6-8-2014, the counter-affidavit has stated that the said letters were addressed after expiry of the contract period i.e., 23-4-2014 and that therefore they were not considered by respondent No.2. Respondent No.2 has also drawn a comparison between the performance of the petitioner and five other buyers and stated that the said contractors have performed their contracts.
The only issue that requires consideration in this Writ Petition is whether respondent No.2 has acted in a fair and non-arbitrary manner while considering the request of the petitioner for extension of the contract.
It is not in dispute that the contract period ended on 23-4- 2014. At least more than three months prior to the expiry of the contract, the petitioner has made a representation to respondent No.2 on 27-1-2014 requesting it to extend the contract period by pleading that due to Samaikyandhra agitation, in which its workers and employees have participated, the petitioner could not lift the Barytes. In this context, Clause-14 of the agreement deserves a mention. This clause reads as under :
“Force majeure: In the event of either party being rendered physically unable by force majeure to perform any obligation required to be performed by them under this order, the relative obligation of the party affected by such force majeure shall be suspended for the period during which such causes actually lasts.
The term “FORCE MAJEURE” shall mean acts of God, war, Civil riots/movements, fire directly affecting order, flood, earthquakes, hurricane, lockouts, strike, stoppage/dislocation of work due to action by the Corporation’s workers/Labour/Staff Union, Civil war, compliance with any statute or regulation of the Government.
Upon the occurrence of such causes and upon its termination, the party alleging that it has been rendered unable as aforesaid thereby, shall notify the other party in writing the beginning of the cause amounting to Force Majeure as also the ending of the said cause by giving notice to the other party within a week of the ending of the cause respectively.
Time for performance of the relative obligation suspended by Force Majeure shall then stand extended by the period for which such cause lasts.”
Except taking the stand that Clause 14 has no application to the petitioner’s case, respondent No.2 has not substantiated the said stand. Respondent No.2 has not disputed the fact that there was intense agitation pertaining to the division of the State during the period in which the petitioner has pleaded its inability to lift the Barytes due to the participation of its workers and employees in the said strike. Indeed, the intensity of the agitation was felt by the entire united State of Andhra Pradesh and this Court cannot but take judicial notice of the said fact. The definition of force majeure under Clause-14 of the agreement takes within its sweep, civil riots/movements etc. Thus, Clause-14 of the agreement is wide enough to comprehend the agitation taken place in connection with the division of the State. In my considered opinion, respondent No.2 ought to have accepted the plea of the petitioner and granted reasonable extension in view of Clause-14 of the agreement. Indeed, respondent No.2 has not responded to the petitioner’s representation for more than three months before the expiry of the agreement. Perhaps, had respondent No.2 communicated its disinclination to accept the request of the petitioner for extension, the petitioner would have alerted itself and tried to lift the agreed quantity before the expiry of the agreement period. In my opinion, the silence on the part of respondent No.2 on the petitioner’s representations amounted to patent arbitrariness and lack of fair approach in dealing with the petitioner. It is fairly well settled that even in contractual sphere, the State of bound to act with fairness and reasonableness.
I n Ramana Dayaram Shetty Vs. International Airport Authority of India
[1]
, the Supreme Court held as under:
“….It is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. This rule was enunciated by Mr. Justice Frankfurter in Viteralli v. Seton 359 U.S. 535 : 3 L.Ed. 1012 where the learned Judge said:
“An executive agency must be rigorously held to the standards by which it professes its action to be judged. Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed. This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the sword.”
…. It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle it makes no difference whether the exercise of the power involves affectation of some right or denial of some privilege.
In Dwarakdas Marfatia & sons Vs. Board of Trustees of the Port of Bombay
[2]
, the Supreme Court held :
“… Hence every action/activity of the Bombay Port Trust which constituted “State” within Article 12 of the Constitution in respect of any right conferred or privilege granted by any statute is subject to Article 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test of Article 14. If a governmental policy or action even in contractual matters fails to satisfy the test of reasonableness, it would be unconstitutional.”
I n ABL International Ltd. v. Export Credit Guarantee
[3]
Corpn. of India Ltd.
the Supreme Court held as under :
“ … It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent.”
At the hearing, Sri V. Subrahmanyam, learned Counsel for respondent No.2, stated that the petitioner’s performance security deposit has been forfeited. However, Sri P. Gangaiah Naidu, the learned Senior Counsel, appearing for the petitioner, has submitted that no proceedings of forfeiture have been received by his client. The learned Standing Counsel has stated that no formal proceeding was issued forfeiting the deposit. In my view, unless respondent No.2 has issued a proceeding forfeiting the petitioner’s deposit and communicated the same to the latter, such an unilateral action taken even without the knowledge of the petitioner cannot be countenanced by the Court.
On a careful consideration of the facts of the case, this Court has no hesitation to hold that respondent No.2 has acted in a highly whimsical manner by not considering the petitioner’s representation for extension of time. As this Court is satisfied that the cause shown by the petitioner falls within the term ‘force majeure’ under Clause-14 of the agreement, respondent No.2 is directed to extend the term of the agreement by two months from today. The petitioner shall lift the balance quantity of Barytes within this extended period. It is made clear that the petitioner is not entitled to seek any further extension on any ground whatsoever. If the petitioner fails to lift the balance quantity or any part thereof within this extended period, respondent No.2 shall be free to take action according to law.
Subject to the above directions, the Writ Petition is allowed to the extent indicated above.
As a sequel to the disposal of the Writ Petition, WPMP No.32602 of 2014 is disposed of as infructuous.
Justice C.V. Nagarjuna Reddy Date : 24-11-2014 L.R. copies AM
[1] 1979(3) SCC 489
[2] 1989(3) SCC 293
[3] (2004) 3 SCC 553