M/S Malik Traders Petitioner v. State Of Haryana And Others S

Factual and Procedural Background

This petition challenges the order dated 3.9.2010 which terminated the petitioner’s contract for toll collection on Kaithal-Patiala Road near Punjab Border. The contract, initiated on 8.4.2010 and operative until 30.6.2011, was terminated prematurely on allegations that the petitioner charged toll at rates higher than prescribed during a surprise inspection by officials. Along with termination, a penalty of Rs. 1,00,000 was imposed, the performance security of Rs. 31,63,838 was forfeited, and the petitioner was barred from participating in future tenders of the Haryana State Roads and Bridges Development Corporation Limited, Panchkula.

Legal Issues Presented

1. Whether the termination of the contract without giving the petitioner a hearing violated the principles of natural justice.
2. Whether the petitioner’s debarment from future tenders was justified and if proper consideration was given to the petitioner’s representation on this issue.
3. The applicability of arbitration as an alternative remedy in the dispute arising from the termination of the contract.

Arguments of the Parties

Petitioner’s Arguments

• The termination order was passed without affording any hearing to the petitioner, violating the principle of natural justice.
• The petitioner relied on precedents including Harbans Lal Sahnia and another v. Indian Oil Corporation Ltd. and others, Sahara India (Firm), Lucknow v. Commissioner of Income-Tax, Central Inland Water Transport Corporation Limited and another v. Brojo Nath Ganguli and another, and M/s S.B.P and Co. v. M/s Patel Engineering Ltd. and another to support the claim of violation of natural justice.

Table of Precedents Cited

Court's Reasoning and Analysis

The court acknowledged that the petitioner’s contract was terminated on the ground of charging higher toll rates detected during a surprise inspection. While the petitioner argued that termination without hearing violated natural justice, the court observed that the contract provided for arbitration as an alternative remedy. Consequently, the court found no ground to interfere with the termination on this basis and held that the issue of wrongful termination and penalty could be addressed in arbitration proceedings.

Regarding the petitioner’s debarment from future tenders, the court noted that this issue was not solely governed by the contract terms. The petitioner had submitted a representation contesting the debarment, which the respondents had replied to by stating the action was per contract terms. The court held that the petitioner’s viewpoint deserved reconsideration, especially concerning the duration of debarment, and directed the respondents to reconsider the matter if representation was made within one month, with a decision to be taken within the following month.

Holding and Implications

The court’s final decision was to dispose of the petition as follows:

• The petitioner is relegated to arbitration for resolving issues related to termination of the contract and consequential penalties.
• The issue of debarment from future tenders is to be reconsidered by the respondents upon a fresh representation by the petitioner, with a specific direction to determine the period of debarment.

The decision leaves the termination and penalty issues to arbitration and does not set a new precedent on natural justice in commercial contract termination. It ensures procedural fairness by mandating reconsideration of debarment, directly impacting the petitioner’s participation in future tenders.