SCA/30915/2007 1/9 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 30915 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= ELECTRO INSULATORS & 1 - Petitioner(s) Versus GUJARAT URJA VIKAS NIGAM LIMITED & 2 - Respondent(s) ================================================= Appearance : MR TUSHAR MEHTA for Petitioner(s) : 1 - 2. MS LILU K BHAYA for Respondent(s) : 1 - 3. ================================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 25/01/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) The first petitioner (M/s. Electro Insulators) is presently the sole proprietary concern of Janakkumar Indulal Vyas. The concern was earlier a partnership firm which had Janakkumar Indulal Vyas and Subodhbhai Natwarbhai Trivedi as partners when the contract in question was awarded to the firm on 16.01.2006. SCA/30915/2007 2/9 JUDGMENT 2. Under the above contract awarded by respondent No.2 – Dakshin Gujarat Vij Co. Ltd. (hereinafter referred to as “the second respondent”), the petitioner was required to supply Kit Kat fuses in the following three different categories :- Amp Kit Kat Fuses Contract Quantity Quantity supplied 63 12000 3750 31% 100 10000 4000 40% 200 10000 2100 21% It is the petitioners' case that after the above contract was awarded to the petitioners, there was sudden spurt in the price of copper which was the major raw material for making Kit Kat fuses in terms of the value of the raw materials. On account of such sudden spurt in the price of copper sometime in April 2006, it was impossible for the petitioners to supply the contract quantity. The petitioners, therefore, went on requesting the officers of the second respondent to give suitable price rise because the price of copper had shot up almost 2.5 times. The officers of the second respondent, however, did not pay any heed to the said request and, therefore, the petitioner could not supply the contract quantity. It appears that the petitioner could supply only 31% of 63 Amp Kit Kat fuses, 40% of 100 Amp Kit Kat fuses and 21% of 200 Amp Kit Kat fuses. On that ground, the second respondent–Company has passed the impugned order dated 14.12.2007 treating the petitioners' failure to supply ordered material of contract as a breach of contract, ordering recovery of amount of Rs.35.60 lacs SCA/30915/2007 3/9 JUDGMENT towards the difference of price as per the quoted cost and the present market rate at the risk and cost of petitioner No.1 and also ordering to stop dealings with petitioner No.1 and the partners of the firm for a period of three years from the date of the impugned order. The order further indicates that it was also decided to debar petitioner No.1 from supplying their products as accessories or bought out items for any supplies to be made by any vendor to the second respondent or holding Company i.e. Gujarat Urja Vikas Nigam Ltd. and its subsidiary. 3. At the first hearing of this petition, Mr Tushar Mehta, learned counsel for the petitioners had submitted that apart from the impugned order dated 14.12.2007 imposing harsh penalties on the petitioners for failure to supply the ordered quantity, which failure was only on account of reasons beyond the control of the petitioners, petitioner No.1 is also being subjected to further penalty of being debarred from consideration for supply of various sizes of Kit Kat fuses to Madhya Gujarat Vij Co. Ltd. (third respondent). The petitioner is being treated as technically not qualified for the tender proceedings being conducted by the third respondent – Company on the ground that the petitioner had failed to supply the ordered quantity to the second respondent and was accordingly debarred by the impugned order dated 14.12.2007. It was also the contention of the petitioners that the second respondent had agreed to cancel the similar contract in favour of SCA/30915/2007 4/9 JUDGMENT another party and the second respondent had thereafter agreed to purchase Kit Kat fuses at a much higher price after taking into consideration the rise in the price of copper. 4. In response to the notice, affidavit-in-reply has been filed by the Executive Engineer (Material) on behalf of the first respondent i.e. Gujarat Urja Vikas Nigam Ltd., the holding Company of the second respondent. Separate affidavits are also filed on behalf of respondent Nos.2 and 3 Companies. On behalf of the first respondent Company, it is pointed out that cancellation of the contract was in respect of only Aluminum conductor where the Aluminum was the major component and it was only in respect of particular tender bearing Nos. SP/2430 and SP/2431 that the first respondent Company had taken the decision in the peculiar facts and circumstances of the case and that the same had nothing to do with any price rise in copper. 5. As far as the second respondent Company is concerned, it is submitted that the petitioner had failed to supply the ordered quantity of Kit Kat fuses pursuant to the contract dated 16.01.2006. To rebut the petitioner's case that other parties had succeeded in obtaining the benefit of price rise, affidavits are also filed on behalf of the second and third respondent to the effect that the second respondent had issued a similar contract to M/s. Jay Associates on 16.01.2006 for supplying one lac quantity of 16 Amp Kit Kat fuses and that the said party had supplied the contract quantity by SCA/30915/2007 5/9 JUDGMENT 29.04.2006. Similarly, in the affidavit filed on behalf of the third respondent Company, it is stated that M/s. Bharat Electricals, Vadodara was awarded contract dated 06.10.2005 for supplying 10,000 Kit Kat fuses of 63 Amp at the price of Rs.58.30 per piece and that the said firm had successfully executed the order. However, the petitioner, which was awarded the contract of supplying 63 Amp rating Kit Kat fuses has failed to execute the contract even though it was awarded the contract at the rate of Rs.60.50 per piece. It is also stated that the sister concern of the petitioner M/s Fuse Cell, wherein petitioner No.2 - S.N.Trivedi is the proprietor, was awarded the contract for supply of Kit Kat fuses of 100 Amp and 200 Amp, but the said order was not executed by the said firm and not a single piece out of the said order was supplied. 6. On the basis of the above facts, Ms Lilu Bhaya for all the respondent Companies has submitted that the petitioner having failed to supply the contracted quantity pursuant to the contract dated 16.01.2006 cannot be permitted to hold the respondents to ransom by insisting that the petitioners are entitled to the higher price and that unless they are given the price rise, the petitioners cannot be subjected to any penalties and that they are entitled to have their tender considered by all the respondents. It is also submitted that merely because the price of the raw material goes up during the term of the contract, it cannot be a legal ground not to carry out the obligations under the contract, more particularly, SCA/30915/2007 6/9 JUDGMENT when M/s. Jay Associates and M/s. Bharat Electricals had fulfilled their obligations under the respective contracts which were also awarded in January 2006 and October 2005. 7. Mr Tushar Mehta, learned counsel for the petitioners has thereupon submitted that the copper component in 16 Amp Kit Kat fuse is only 25% and the copper component in 63 Amp Kit Kat fuse is 50%, whereas the copper component in 100 Amp fuse and 200 Amp fuse is 78% and 83% respectively. It is also submitted from the representations which were already submitted to the Chief Engineer of the second respondent Company that if the petitioners had to supply the balance quantities of Kit Kat of 63 Amp rating and 100 Amp rating and 200 Amp rating at the contract rates, the petitioners would have been required to incur substantial additional cost and that the total cost of the balance quantity to be supplied would have been more than Rs.59 lacs as against the contract price of Rs.28.17 lacs. It is submitted that for any businessman, this would be an impossible proposition wiping his business out of existence and therefore, the petitioner ought not to have been visited with the harsh penalty of demand of Rs.35 lacs and also debarring the petitioner from other tender proceedings. It is submitted that the case of M/s. Jay Associates which had supplied 16 Amp rating Kit Kat fuses with copper component of only 25% and the case of M/s. Bharat Electricals, Vadodara which had supplied 63 Amp Kit Kat with copper component of 50% could not be considered as comparable with the petitioner's case who was SCA/30915/2007 7/9 JUDGMENT required to supply 200 Amp Kit Kat with 83% copper component and 100 Amp with 78% copper component, over and above 63 Amp Kit Kat fuses. It is also stated that the petitioner had already supplied 3750 Kit Kat fuses of 63 Amp rating, 4000 of 100 Amp rating and 2100 of 200 Amp rating out of the copper stock purchased prior to the price rise and that therefore, the petitioner's bona fides can be easily guaged from the fact that from the then existing stock of copper, the petitioner had already supplied substantial quantities of Kit Kat fuses in all the categories. 8. It appears that on the record of this petition, the petitioners as well as the respondents have sought to place material in support of their respective contentions. However, looking to the nature of the dispute between the parties and particularly in view of the case being pleaded by Mr Tushar Mehta on behalf of the petitioners that apart from the non supply of Kit Kat fuses as per the quantities ordered under the contract dated 16.01.2006 for which the sudden price rise of 2.5 times in the cost of metal was the only causative factor, the petitioners have never committed any default in supplying any other material under any other contract for the last 20 years and that their rates are generally lowest and the quality satisfactory, we are of the view that whether the non-supply of Kit Kat fuses as per the contract dated 16.01.2006 should be condoned or whether the penalties imposed by the Chief Engineer of the second respondent Company should be waived or reduced is a SCA/30915/2007 8/9 JUDGMENT matter, which is eminently suitable to be decided by the highest authority of the second respondent Company. 9. In view of the above discussion, we dispose of this petition with a direction that upon the first petitioner making a suitable representation on the subject matter of this petition to the Managing Director of the second respondent - Dakshin Gujarat Vij Co. Ltd., the said authority will look into the matter and after giving an opportunity of personal hearing, shall take appropriate decision in the matter. 10. Similarly, according to the petitioners, the first petitioner is offering to supply Kit Kat fuses to third respondent–Madhya Gujarat Vij Co. Ltd. at a competitive rate and therefore, it will also be open to the first petitioner to make a similar representation to the third respondent–Company for considering its tender. The Managing Director of the third respondent – Company shall also accordingly look into the matter and consider the petitioner's representation after the Managing Director of the second respondent Company takes decision on the petitioner's representation. If the petitioner makes such a representation to the Managing Director of both the Companies by 31.01.2008, the respondent Companies shall not act upon the impugned decision dated 14.12.2007 till the decision is taken on the representations and till then, the impugned order dated 14.12.2007 shall be treated as in abeyance. SCA/30915/2007 9/9 JUDGMENT In other words, the Managing Director of the second respondent as well as Managing Director of the third respondent shall be at liberty to take appropriate decision on the merits of the matter without being hampered by order dated 14.12.2007 of the In-Charge Chief Engineer (Procurement) of the second respondent – Dakshin Gujarat Vij Co. Ltd. and without being inhibited by the stand taken in the affidavits filed on behalf of the respondent Companies. As far as the third respondent Company is concerned, while the petitioner will make a representation to its Managing Director by 31.01.2008, the decision thereon may be taken as early as possible. 11. As directed above, while the petitioner will make representation by 31.01.2008, the Managing Director of the respective respondent Companies shall take appropriate decision as expeditiously as possible and preferably by 15.02.2008 from the date of the representation. 12. The petition is accordingly disposed of in terms of the above directions and observations. [M.S. SHAH, J.] [RAVI R. TRIPATHI, J.] mrpandya*