Bookmark
PDF
Share
CaseIQ

Ms Setu Printers v. State Of Jharkhand & Ors

Jharkhand High Court

Sep 6, 2011

Judgment

Subsequent
References

CaseIQ

Important Paras

Please sign up to view Important Paras.

Smart Summary (Beta)

Factual and Procedural Background

The writ petitioner was awarded a contract by the respondents to supply certain articles and submitted a bill for Rs. 64,74,761/-. The petitioner supplied the goods; the respondents retained, accepted and used them. When the petitioner demanded payment, the respondents refused, contending that the work order had been issued contrary to the Finance Department's Resolution No. 5703 dated 1.10.2002, which — for items above Rs. 50,000/- — required inviting tenders via newspapers. It is not disputed that no such tender was issued.

Procedurally, a learned Single Judge dismissed the writ petition (W.P. (C) No. 46 of 2010). The present bench reviewed that dismissal and addressed whether the respondents may retain and use goods worth Rs. 64,74,761/- while denying payment on the ground of procedural non-compliance by their own officers.

Legal Issues Presented

Whether the respondents can retain and use goods valued at Rs. 64,74,761/- and simultaneously deny payment to the supplier on the sole ground that the departmental procedure (inviting tender) was not followed by their officers.
Whether a writ petition seeking consequential monetary relief arising out of a contractual obligation is maintainable in the circumstances of undisputed facts (reference to the principle in ABL International Ltd.).
Whether the principle in Section 70 of the Indian Contract Act (as interpreted in State of West Bengal v. B.K. Mondal & Sons) applies to require payment when the government has accepted goods or services despite procedural irregularity.
Whether the facts of this case require directing the parties to pursue relief in a civil court (i.e., whether the matter should be remitted rather than decided by writ jurisdiction), having regard to precedents like Jagdish Mandal.

Arguments of the Parties

Appellant's (Writ Petitioner) Arguments

The petitioner supplied the goods in accordance with the contract, submitted a bill of Rs. 64,74,761/-, and there is no dispute regarding the quality or valuation of the goods.
Because the respondents accepted and used the goods, they cannot retain them without payment merely on the ground that departmental procedure (inviting tenders) was not complied with by their officers.
Denying payment on that ground would amount to unlawful enrichment of the respondents and impose a de facto penalty of Rs. 64,74,761/- on the petitioner for an internal procedural lapse by respondents' employees.
The petitioner relies on the principle that writ jurisdiction can be invoked for contractual monetary claims in appropriate cases (citing ABL International Ltd.), and on Section 70 of the Indian Contract Act as interpreted in State of West Bengal v. B.K. Mondal & Sons.

Respondents' Arguments

The respondents relied on the contention that the contract had been awarded contrary to the Finance Department's Resolution No. 5703 and that hence payment could be denied.
Learned counsel for the respondents stated that departmental proceedings were initiated against the employees who failed to follow procedure (though what punishment, if any, was imposed is not recorded).
The respondents relied upon the decision in Jagdish Mandal v. State of Orissa to support the position that matters concerning tender/award procedures often warrant civil remedies and that courts should be cautious in exercising writ jurisdiction in such matters.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
ABL International Ltd. & Anr. vs. Export Credit Guarantee Corporation of India Ltd. & Ors., (2004) 3 SCC 553	The proposition that in appropriate cases writ petitions arising out of contractual obligations (including consequential monetary claims) are maintainable; the existence of disputed questions of fact does not automatically bar writ jurisdiction in all cases.	The court relied on this principle to hold that, because the facts in the present case are undisputed (supply, acceptance, value), the writ petition could not have been rejected on maintainability grounds. The court found the petitioner's case even stronger than in ABL.
State of West Bengal v. B.K. Mondal & Sons, AIR 1962 SC 779	Interpretation of Section 70 of the Indian Contract Act: if a person has lawfully done something or delivered something to another, and it is accepted and enjoyed by that other, the person is entitled to consideration or reasonable compensation even if formal procedural requirements were not strictly followed.	The court invoked this authority to support the proposition that the State (or its departments) is subject to Section 70 and must pay for goods it has accepted and enjoyed despite procedural irregularities; thus Section 70 supports the petitioner's claim for compensation.
Food Corporation of India & Another vs. Seil Limited & Ors., (2008) 3 SCC 440	Supportive precedent on similar issues (as characterized in the opinion).	The court stated it was "benefited by" this judgment and treated it as concordant with the view that an accepted supply may give rise to a claim despite procedural irregularity; used as analogous support for allowing relief.
Jagdish Mandal vs. State of Orissa and others, (2007) 14 SCC 514	Observations that tenderers/contractors with grievances can seek damages in civil courts and courts should be slow to entertain writ petitions in tender matters where aggrieved parties have alternative remedies; caution against judicial interference for technical/procedural violations.	Respondents relied on this decision and the Single Judge had considered it. The court distinguished Jagdish Mandal on the facts, stating it did not overrule ABL and did not prevent the present writ being entertained where facts were undisputed and the issue could be decided without detailed evidence.

Court's Reasoning and Analysis

The court proceeded in the following analytical steps, based strictly on the materials and authorities cited in the opinion:

Begin with factual matrix: the petitioner received the supply order, delivered the goods, the respondents accepted and used them, and a bill for Rs. 64,74,761/- was submitted. The only disputed point is procedural non-compliance (no tender invited as required by Resolution No. 5703).
Maintainability: The court applied the principle in ABL International that writ petitions involving contractual monetary claims can be maintainable in appropriate cases and that the mere existence of disputed facts is not an automatic bar. Because facts here were undisputed (supply, acceptance, value), the maintainability objection could not prevail.
On substance, the court held that respondents cannot take advantage of their own officers' procedural breach to retain benefits without payment. Allowing respondents to retain goods while denying payment would amount to unlawful enrichment.
The court relied on Section 70, as interpreted in State of West Bengal v. B.K. Mondal & Sons, to reason that where the government accepts goods or enjoys work done for it, Section 70 can support a claim for compensation notwithstanding non-compliance with certain formal requirements. The court considered that refusing payment would produce unreasonable consequences and could impede governmental functioning.
The court considered and distinguished Jagdish Mandal. While acknowledging the caution in that decision about entertaining writs in tender disputes and the desirability of civil remedies in some cases, the court concluded that Jagdish Mandal did not overrule ABL International and was not controlling in a case with undisputed facts where writ relief could be granted without detailed evidence.
Respondents' contention that they had initiated departmental proceedings against errant employees was regarded as insufficient to justify denying the petitioner payment. The court found it impermissible to impose, effectively, a penalty of Rs. 64,74,761/- on the petitioner for the respondents' internal procedural lapses.
Given the undisputed facts and applicable authorities, the court concluded that sending the parties to civil court would be unnecessary and unduly burdensome when the matter could be decided on the admitted record under writ jurisdiction.

Holding and Implications

Core Ruling: The impugned judgment of the learned Single Judge is set aside and the writ petition is allowed.

Direct Orders and Relief: The respondents are directed to pay Rs. 64,74,761/- to the writ petitioner without delay, together with interest at the rate of 6% per annum.

Implications:

The immediate, practical consequence is a mandatory payment order in favour of the petitioner (principal amount plus interest).
The court treated established authorities (ABL International; B.K. Mondal) as applicable in circumstances where goods were supplied, accepted and used and there was no dispute about value or quality, even though formal tendering procedure was omitted by respondents' officers.
The opinion does not purport to lay down a novel general principle beyond application of existing authorities; it applies precedent to the specific undisputed factual matrix and does not announce a new legal doctrine. The decision primarily affects the parties by directing payment and rejecting respondents' defence based on procedural non-compliance by their employees.

Bench: (Prakash Tatia, A.C.J.) (P.P. Bhatt, J.) — as shown in the opinion.

Show all summary ...

passed by learned Single Judge in W.P. (C) No. 46 of 2010 by which writ petition of the writ petitioner-appellant was dismissed.

3. The facts are not in dispute that the petitioner was given the contract to supply certain articles by the respondents, for which a bill of Rs. 64,74,761/- was submitted by the writ petitioner. The writ petitioner supplied the goods, which were retained and used, but when the cost of the above goods was demanded by the writ petitioner-appellant, it was refused by the respondents on the ground that the work order was given contrary to the rules/instructions contained in Resolution No. 5703 dated 1.10.2002 issued by the Finance Department, whereunder for any item of value above Rs. 50,000/-, tender should have been issued in the newspapers. This fact is not in dispute that no such tender was issued but the contract was given to the writ petitioner and the petitioner supplied the goods and the goods were not only accepted but also were utilised by the respondents. Therefore, the question for consideration before this Court is only that whether the respondents can retain the goods of the value of Rs. 64,74,761/- and at the same time deny the payment of the cost of goods on the ground that the procedure for giving the contract was not followed by the persons and officers of the respondents' department.

4. Learned Single Judge, after considering the arguments of the parties, observed that Hon'ble Supreme Court in the case of ABL International Ltd. & Anr. Vs. Export Credit Guarantee Corporation of India Ltd. & Ors. reported in (2004) 3 SCC 553 held that in an appropriate case, writ petition arising out of contractual obligation, is maintainable and merely because some disputed question of fact arises, the same cannot be the ground to refuse to entertain writ petitions in all cases as a matter of rule and that; a writ petition involving a consequential relief of monetary claim is also maintainable and in view of said judgment of Supreme Court held that "there is no dispute with respect to the above principle." Obviously the principle enunciated in the judgment, rendered by the Hon'ble Supreme Court cannot be disputed, rather to say, is required to be obeyed. In this case, as we have already noticed that the facts are not in dispute and this fact shows that the petitioner was given the supply order of goods of Rs. 64,74,761/- and there is no dispute with respect to the quality of the goods as well as value of the goods. However, the procedure was not followed in giving the contract to the writ petitioner and that was that before giving the work contract the department should have invited the tender. This fact is also not in dispute. Therefore, the petitioner's case stands on a better footing than that of ABL International Ltd. & Anr. (Supra), wherein Hon'ble Supreme Court held that merely because some disputed question of fact arises, on that ground the writ jurisdiction cannot be denied to the writ petitioner. The question only survives is that whether the respondents by taking help of this violation of procedure initially violated by their own employees and officers, can retain the goods without any consideration payment to the supplier? The procedure to purchase goods is prescribed, obviously, for the purpose of getting goods at a fair price from open market with an object to give an opportunity to all persons to compete as the Government contracts cannot be given by choice and by method of choose and pick up. In this case when it is not in dispute that the actual market value of the goods supplied by the writ petitioner is the same as claimed by the writ petitioner, in that situation the respondents cannot deny the payment of value of the goods received and used by them and there is no ground, other than violation of procedure. This cannot be basis for respondents to take double benefit of retaining goods of the petitioner as well as the consideration of the goods. If this is permitted then the principle of unlawful enrichment applies against the respondents who by entering into an illegal contract will take benefit of the gods without there being any consideration. We failed to understand as to how such a plea has been taken by the respondents in the facts of this case when they cannot justify that they have right to retain the goods of Rs.64,74,761/- merely on the ground of not following the procedure by their own officers.

5. Learned counsel for the respondents submitted that the respondents initiated proceeding against their own employees departmentally. However, what punishment has been imposed upon that employees is not known. In any fact situation, there cannot be penalty of Rs. 64,74,761/- because of non- observance of the procedure as indicated above. As, if the petitioner is denied the amount of Rs. 64,74,761/- because of non-observance of the rules, then that will amount to putting penalty upon the petitioner to the tune of Rs. 64,74,761/-, which is impermissible.

6. In addition to above, we may take the help of judgment of the Hon'ble Supreme Court delivered in the case of State of West Bengal Vs. B.K. Mondal and Sons reported in AIR 1962 SC 779 wherein even the question of "lawful Contract" has been considered while interpreting Section 70 of the Indian Contract Act which requires that the if a person has lawfully done something or lawfully deliver something to another, then he is entitled to get the consideration or reasonable damages for his action. The Hon'ble Supreme Court in paragraph 20 thereof observed that "It is well known that in the functioning of the vast organisation represented by a modern State Government officers have invariably to enter into a variety of contracts which are often of a petty nature. Sometimes they may have to act in emergency, and on many occasions,in the pursuit of the welfare policy of the State Government officers may have to enter into contract orally or through correspondence without strictly complying with the provisions of section 175 (3) of the Act." Hon'ble Supreme Court held that if, in all these cases, what is done in pursuance of the contracts is for the benefit of the Government and for their use and enjoyment and is otherwise legitimate and proper Section 70 would step in and support a claim for compensation made by the contracting parties notwithstanding the fact that the contract had not been made as required by Section 175 (3). If it is held that Section 70 was inapplicable in regard to such dealings by government officer it would lead to extremely unreasonable consequences and may even hamper, if not wholly bring to a standstill the efficient working of the Government from day to day. Hon'ble Supreme Court then observed that like ordinary citizens even the State Government is subject to the provisions of section 70, and if it has accepted the things delivered to it or enjoyed the work done for it, such acceptance and enjoyment would afford a valid basis for claim of compensation against it.

7. In a case where the contract is of a private nature with the Government and the facts are not in dispute, in that situation asking the parties to go to Civil Court and burden the Civil Court with the litigations, which could be decided without evidence in view of the undisputed or admitted facts, will be unnecessarily burdening the Courts and particularly when the parties have approached the Court and when the learned Single Judge held that in the fact situation, the writ petition could not have been rejected in the light of judgment of Hon'ble Supreme Court in the case of ABL International Ltd. (Supra), we do not find any justification now to send the parties to Civil Court in view of the facts of this case.

8. We are benefited by the judgment delivered in the case of Food Corporation of India & another Vs. Seil Limited & Ors reported in (2008) 3 SCC 440 which also has taken the same view.

9. Learned counsel for the respondents relied upon the judgment of the Hon'ble Supreme Court delivered in the case of Jagdish Mandal Vs. State of Orissa and others reported in (2007) 14 SCC 514. It has also been considered by the learned Single Judge, on the basis of which the writ petition has been dismissed.

10. It will be worthwhile to mention here that in Jagdish Mandal's case the Hon'ble Supreme Court observed that "the tenderer or contractor with a grievance can always seek damages in a civil Court. Attempts by unsuccessful tenderer with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review should be resisted." The above observation clearly indicates that in such circumstances referred to above, the Court should be slow in entertaining writ petitions. Not only this in the same paragraph the Hon'ble Supreme Court observed that judicial review of administrative action intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. We have referred the above observations from the portion which has been quoted in the impugned judgment itself to indicate that subject matter in the case of Jagdish Mandal (supra) was entirely different and it nowhere overrules the propositions laid down in the case of ABL International Ltd. & Anr.(Supra), nor it is a declaration of law that in a contract where there is no disputed question of fact, and this involves question of law only, requiring no detailed investigation even of law, writ petition is maintainable or not.

11. In view of the above reasons, we are of the considered opinion that the writ petition of the writ petitioner should have been allowed in the facts of the case. Hence, the impugned judgment is set aside and the writ petition is allowed. The respondents are directed to pay Rs. 64,74,761/- to the writ petitioner without any delay with interest @ 6 % per annum.

(Prakash Tatia, A.C J) (P.P. Bhatt, J) Dey/-Alankar/-