IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE SECOND DAY OF DECEMBER TWO THOUSAND AND ELEVEN PRESENT THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR WRIT PETITION No.26412 of 2011 BETWEEN M/s. BGR Mining & Infra Private Limited, Hyderabad. ... PETITIONER AND The Singareni Collieries Company Limited, Rep. By its Chairman & Managing Director, Hyderabad and two others. ...RESPONDENTS Counsel for the Petitioner: MR. E. MANOHAR For MR. CH. PURNACHANDRA RAO Counsel for the Respondents: MR. C.V. MOHAN REDDY For MR. NANDIGAMA KRISHNA RAO The Court made the following order: ORDER: Petitioner – company, being an experienced contractor for removal of Over Burden & Extraction of coal, was entrusted the contract work described as “Blast Hole Drilling, Controlled Blasting with Shock Tube Initiation, Excavation, Loading, Transportation, Dumping etc. of over burden” at KTK.OCP, Section–1, Bhupalapalli Area, Warangal District, Andhra Pradesh. The work order dated 22.09.2008 was placed on the petitioner for a total quantity of 554.50 LBCM. While the petitioner was working on the said contract a major slide occurred on 11.05.2010 along the crop site due to geological disturbances and presence of clay layers. The Director of Mines Safety, Hyderabad Region – I was informed by the respondents and he inspected the mine on 26.05.2010 and under Section 22 1 (A) of the Mines Act, 1952 issued directives not to deploy any men or machinery at a distance of 50 Mts from the toe of the disturbed zone. The said area is part of the area covered under the present contract of the petitioner and on account of the aforesaid statutory order passed by the Director of Mines Safety [details whereof are noted hereunder], the work within the restriction zone had to be stopped. In technical terms, the conditions imposed by the Director of Mines Safety, which binds both the parties herein, the in crop side surface edge had to be shifted from 70 Mts to 100 Mts affecting some area within the contract of the petitioner, with the result, therefore, the petitioner though was awarded work in the restricted zone, cannot excavate the overlapped area on account of the restriction placed by the Director of Mines Safety. The present writ petition relates to the aforesaid part of the area now put in the restricted zone. 2. The main grievance of the writ petitioner is against the notice inviting tenders impugned in the writ petition dated 05.09.2011. The said notice is questioned by the petitioner on the ground that the aforesaid impugned tender notice called for covers part of the area within the petitioner’s contract and as such, the respondents action in inviting the impugned tenders is illegal, void and violative of Articles 14, 19(1)(g) and 21 of the Constitution of India. It is also necessary to notice the consequential relief sought for by the petitioner, which seeks a direction against the respondents to finalize the levels/measurements in the area, which was included in the petitioner’s work order but is subject matter of the impugned tender notice, in case the respondents intend to delete the yellow marked area shown in the map. 3. Both sides have filed detailed affidavits, counter affidavits, additional counter affidavits, rejoinders, sir rejoinders together with number of documents, which include the correspondence between the petitioner and the respondents as well as the proceedings of the Director of Mines Safety, the gist of the minutes of the meeting between the petitioner and the respondents and number of maps, duly coloured, showing different areas in different colours to demonstrate the areas where the slides occurred and the alternate areas proposed for excavation. 4. Mr. E. Manohar, learned senior counsel appearing for the petitioner, has made elaborate submissions in support of the petitioner by pointing out that the part of the area, which is covered by the impugned tender notice, undisputably falls within the area allotted to the petitioner under the work order dated 22.09.2008, which is already under execution by the petitioner. Learned senior counsel points out that the petitioner’s contract is neither terminated nor there is any variation as contemplated under law with regard to the area allotted and the counter affidavits of the respondents, in effect, admit that the impugned tender notice covers part of the area of the petitioner’s area. Learned senior counsel, therefore, submits that per se the impugned tender notice is not sustainable to the extent it relates to the yellow marked portion in the plan, which, admittedly, forms part of the petitioner’s area and no fresh tender can be called with regard thereto, particularly, without settlement of quantity of work already executed by the petitioner in that area and without deleting that area from the petitioner’s work order. 5. Mr. C.V. Mohan Reddy, learned senior counsel appearing for the respondents, objects to the sustainability of the writ petition on the ground that several disputed questions raised therein cannot be adjudicated under the extraordinary jurisdiction by this Court and also on the ground that the writ petition suffers from suppression of material facts as orders of the Director of Mines Safety is not disclosed. Learned senior counsel would state that the effect of the order of the Director of Mines Safety and restrictions placed upon the part area in the work allotted to the petitioner cannot be denied by the petitioner. In that situation, therefore, the broad contention on behalf of the respondents is that having found the restricted area required to be excluded from the working of the petitioner’s area, joint meetings were called for to ensure that no prejudice is caused to the petitioner. An additional area was allotted to the petitioner to be excavated in the place of restricted area and thereby, there would not be a variation in the contract quantity allotted to the petitioner beyond 10%. According to the respondents, therefore, the revised projection plans together with the statement showing slide wise quantity to be excavated as per the minutes of the meeting were communicated to the petitioner under respondents letter dated 14.04.2011 and thereby it is ensured that against the contract quantity of 554.54 LBCM, the petitioner will be entitled to extract 535.44 LBCM. A plan (not to scale) was produced by the respondents herein and relied upon to explain to the Court the circumstances under which the part of the contract area of the petitioner was required to be deleted and the additional area, which is allotted to the petitioner in lieu thereof. The said plan shows portions marked A and B, which is the slide area where the area marked ‘A’ has slid and fell on the area marked ‘B’ due to geological disturbances whereupon the Director of Mines Safety has put a restriction line covering the portions A and B, which also covers part of the petitioner’s contract area marked as ‘D’ in the plan. The respondents, therefore, state that it is in those circumstances that they allotted additional area marked ‘C’ in the plan. A scan/Xerox copy of the said plan, which is informative and which assisted this Court in resolution of the present dispute is appended to this judgment, as under, to appreciate the area which suffered slides ‘C’ and ‘D’ portions, referred to above. 6. It is also mentioned in the pleadings of the respondents that the performance of the petitioner was not satisfactory and that they had notified the petitioner of the same by cautioning him of termination of contract on that ground but the fact remains that nothing further happened and there was no termination and the petitioner continues to carry on the work. That part, therefore, need not be addressed. 7. In the light of the gist of the averments of the petitioner and the respondents, as noted above, it is to be appreciated that the working of the contract by the petitioner was affected on account of major slides, which occurred on 11.05.2010 over part area allotted to the petitioner and thereby the Director of Mines Safety was informed and he inspected the portion affected by the slide and issued directives under his proceedings dated 28.05.2010. It was noted by the Director as under: “I, therefore, apprehend that there is an urgent danger to the persons working near the crusher-CHP including the proposed pre-weigh Bin under construction. I under the powers conferred on me under the provisions of sub-section A(1) of Section 22 of the Mines Act, 1952 hereby give notice for carrying following rectification works to prevent any injury to persons working therein within a period of two months. 1. A line shall be drawn at a distance of 50 m from the disturbed zone of in- crop side as well as from the toe all around considering as a danger zone and no equipment, persons, machineries shall be deployed in this danger zone. 2. A strong berm of 3m height and 3m width shall be constructed in the quarry bottom at a distance of 50 m from the tow of the bottom bench from the raise/in-crop side to prevent inadvertent entry of persons, machinery. 3. Geological mapping shall be carried out to find out exact location of faults and its affects/disturbances so that proper steps shall be taken. 4. Study of slope stability shall be undertaken on urgent basis to find out safe angle and to form benches as per recommendations of such study in a time bound manner. Soil study shall be undertaken to ensure the stability of CHP-Crusher and the proposed pre-weigh Bin. 5. Steps shall be taken to immediately shift CHP-Crusher and the proposed pre-weigh Bin from the danger zone to prevent injuries to the persons working therein. 6. A scheme of rectification shall be prepared and submitted to his Directorate for approval. 8. In pursuance of the said directives, which both the parties are bound to comply with, the respondents state that the slide shown is required to be flattened from top to bottom and as per the part final survey conducted, as required, the said part area was taken in possession of the respondents and on account of the 50 Mts barrier left between the contractors operating area and the disturbed zone, an earthen bund was to be constructed to prevent rolling of objects from the disturbed zone into the contractors area to avoid danger to men and machinery of the contractor. The said in-crop side quarry surface edge, therefore, had to be shifted from 70 Mts to 100 Mts in which some area in the on going work of the petitioner was also part affected and the petitioner cannot excavate in the said restricted zone on account of the orders of Director of Mines Safety, referred to above. The respondents, therefore, justify that compliance with the directions of the Director of Mines Safety resulted in reduction in quantity under the petitioner’s contract, Which were adequately compensated by allotting further quantity of 41.96 LBCM and thereby, the total contracted quantity of the petitioner would not be affected beyond 10% permissible limit. In other words, therefore, the respondents justify their action in taking over the part of the area of the petitioner’s work area on account of the supervening circumstance of sliding and the allotment of additional area to the petitioner to ensure that petitioner’s contract for lifting requisite quantity is not affected beyond 10% permissible limit as per the terms of the contract. Clauses (3) and (6), which deal with permissible variation under the petitioner’s contract, are extracted as hereunder: “3. VARIATION IN LEAD DISTANCE The bench-wise lead distances are only average distance planned, subject to variation of +/- 200m. Whenever there is a change in the specified unloading/dumping location resulting in variance in lead distance, the revised bench-wise rates and quantity of diesel will be calculated as per the formulae given below. … … 6. Due to the uncertainty in the location of coal seams and due to the presence of number of faults, slab-wise quantities projected may not tally within 10% variation. Hence, 10% variation clause would be limited to the total quantity. The achievement should be basing on the quantities projected in the month-wise schedules. The contractor shall invariably execute bench-wise quantities indicated above. In case excess quantities are excavated in any of the benches the excess quantities so excavated shall be over and above the total scheduled quantities. However, SCCL has right to insist the successful contractor to excavate maximum of 10% of additional quantity over and above the total scheduled quantities and contractor should excavate the quantities accordingly.” 9. In the situation, as above, it would be appropriate to look into the minutes of the meeting dated 27.03.2011 between the Chief General Manager (Purchase) of the respondents with the representative of the writ petitioner. The relevant portion is extracted as under: SL. No. Firm’s Representation SCCL’s Response 1. The firm represented for assessment of final quantities to be excavated after deleting the quantity blocked at the slided area The Plan No.SCCL/BHP/KTKOC/OBR/19, Dt.07.03.2011 demarcating the restricted due to sliding and working area is communicated to M/s. BGR & Co., which was accepted by the contractor for further excavation. The dip side slab wise quantities between slabs RL 840-830 bench and RL 810- 800 will be adjusted to achieve at least 95% of the originally projected slab wise quantities and the same are agreed mutually. Accordingly, Revised projection plan will be redrawn and submitted by 15.04.2011 for mutual acceptance. The aforesaid minutes are followed by letter of the respondents dated 14.04.2011, which is extracted as hereunder: “Reference to the minutes of the meeting with representative of your firm held at office of Chief General Manager (Purchase), Kothagudem on 27.03.2011, please find herewith enclosed Revised Projection Plan and sections and a statement showing the slab wise quantities to be excavated as per the point No.1 of the minutes drawn. The total quantity to be excavated by deleting the incrop side slided area is about 535.44 LBCM (OB:522.94 LBCM + Coal: 12.50 LBCM) against the order quantity of 554.54 LBCM. It is requested to submit the revised monthly schedule for the balance quantities of OB & Coal to be excavated for mutual acceptance. Plan & Section No.SCCL/BHP/KTKOC/2011/21B, dtd. 05.04.2011.” 10. It is the specific case of the respondents, as is evident from their pleadings, which states that a meeting was held on 27.03.2011 at the office of the Chief General Manager (Purchase), Kothagudem of the respondent company with the representative of the petitioner and it was mutually agreed that the total quantity of overburden and coal to be excavated by deleting the disturbed area is about 535.44 LBCM against the order quantity of 554.54 LBCM. Accordingly, the bench wise quantities are adjusted within the order terms and final projection plan was handed over to the petitioner (para 12 of the counter). 11. Petitioner filed a reply denying that it has given consent for the entrustment of additional area. The minutes of the meeting, extracted above, however, are not refuted by the petitioner. In view of the said reply, the respondents filed rejoinder reiterating the consent given by the petitioner, as is evident from the minutes of the meeting and the letter dated 14.04.2011, both of which are extracted above. This prompted the petitioner to file a sir- rejoinder where it reiterates the stand that no additional area was given on account of the slide and it has denied that letter of 14.04.2011 does not amount to any consent of the petitioner. However, it is admitted that it is only a revised projection plan, which was given requesting the petitioner to submit a revised monthly schedule for balance quantity of OB and coal to be excavated from mutual acceptance. 12. In the light of the aforesaid stand of the petitioner, the letter of the respondents dated 28.06.2011 becomes crucial. First two paras of the letter, extracted hereunder, would show that the petitioner had, in fact, given revised monthly schedule but had not reduced the period proportionate to the reduced quantity. “A meeting was held at office of the CGM (Purchase)/KGM on 27.03.2011 and it was mutually agreed to excavate at least 95% of the OB & Coal quantities in lower benches from RL 840 bench to RL 800 benches due to quantities blocked in the in crop side slided area. Accordingly projections were redrawn and a plan was handed over to you vide Lr.No.BHP/PO/KTK-OC/OBR/52/2011/150 dated 14.04.2011. The total quantity to be excavated by deleting the in crop side slided area is about 535.44 LBCM (OB: 522.94 LBCM + Coal: 12.50 LBCM) against the order quantity of 554.54 LBCM and it is advised to submit the revised monthly schedule for the balance quantities of OB & Coal for mutual acceptance. Reference to the letter cited No.2; you have submitted the revised monthly schedules wherein you have not reduced the period proportionate to the reduced quantity i.e. for 19.1 LBCM. On this proposal, CGM (Purchase) advised to reduce the period proportionate to the reduced quantity.” In my opinion, therefore, the correspondence aforesaid, undoubtedly, establishes that petitioner had accepted the revised quantity offered by the respondents in the place of originally contracted quantity and in law, it would amount to novation of the original contract by substituting the same to that extent by a revised arrangement. 13. From the above, it is evident that the petitioner cannot work in the part of the area allotted to him earlier on account of the slides and that is the reason why the respondents have allotted the portion marked ‘C’, as explained above. The original contract to that extent stands substituted by the modified extent, which, in law amounts to novation as contemplated under Section 62 of the Contract Act. Two decisions of the Supreme Court in the context would be appropriate to be noticed. Para 5 of the decision of the Supreme Court in UNION OF INDIA v. KISHORILAL[1] is relevant to be extracted as under: The law on the first point is well-settled. One of the modes by which a contract can be discharged is by the same process which created it, i.e., by mutual agreement; the parties to the original contract may enter into a new contract in substitution of the old one. The legal position was clarified by the Privy Council in Payana Reena Saminathan v. Pana Lana Palaniappa [1914] A.C. 618. Lord Moulton defined the legal incidents of a substituted contract in the following terms at p. 622 : "The 'receipt' given by the appellants, and accepted by the respondent, and acted on by both parties proves conclusively that all the parties agreed to a settlement of all their existing disputes by the arrangement formulated in the 'receipt'. It is a clear example of what used to be well known in common law pleadings as "accord and satisfaction by a substituted agreement". No matter what were the respective rights of the parties inter se they are abandoned in consideration of the acceptance by all of new agreement. The consequence is that when such an accord and satisfaction takes place the prior rights of the parties are extinguished. They have in fact been exchanged for the new rights; and the new agreement becomes a new departure, and the rights of all the parties are fully represented by it." The House of Lords in Norris v. Baron and Company [1918] A.C. 1 in the context of a contract for sale of goods brought out clearly the distinction between a contract which varies the terms of the earlier contract and a contract which rescinds the earlier one, in the following passage at p. 26 : "In the first case there are no such executory clauses in the second arrangement as would enable you to sue upon that alone if the first did not exist; in the second you could sue on the second arrangement alone, and the first contract is got rid of either by express words to that effect, or because, the second dealing with the same subject-matter as the first but in a different way, it is impossible that the two should be both performed." Scrutton, L.J., in British Russian Gazette and Trade Outlook Limited v. Associated Newspaper, Limited [1933] 2 K.B. 616, after referring to the authoritative text-books on the subject, describes the concept of "accord and satisfaction" thus a p. 643 "Accord and satisfaction is the purchase of a release from an obligation whether arising under contract or tort by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative. Formerly it was necessary that the consideration should be executed......... Later it was conceded that the consideration might be executory....... The consideration on each side might be an executory promise, the two mutual promises making an agreement enforceable in law, a contract.... 'An accord, with mutual promises to perform, is good, though the thing be not performed at the time of action; for the party has a remedy to compel the performance', that is to say, a cross action on the contract of accord....... If, however, it can be shown that what a creditor accepts in satisfaction is merely his debtor's promise and not the performance of that promise, the original cause of action is discharged from the date when the promise is made." The said observations indicate that an original cause of action can be discharged by an executory agreement if the intention to that effect is clear. The modern rule is stated by Cheshire and Fifoot in their Law of Contract, 3rd Edn., at p. 453 : "The modern rule is, then, that if what the creditor has accepted in satisfaction is merely his debtor's promise to give consideration, and not the performance of that promise, the original cause of action is discharged from the date when the agreement is made. This, therefore, raises a question of construction in each case, for it has to be decided as a fact whether it was the making of the promise itself or the performance of the promise that the creditor consented to take by way of satisfaction." So too, Chitty in his book on Contracts, 31st Edn., states at p. 286 : "The plaintiff may agree to accept the performance of a substituted consideration in satisfaction, or he may agree to accept the promise of such performance. In the former there is no satisfaction until performance, and the debtor remains liable upon the original claim until the satisfaction is executed. In the latter, if the promise be not performed, the plaintiff's remedy is by action for the breach of the substituted agreement, and he has no right of resort to the original claim." From the aforesaid authorities it is manifest that a contract may be discharged by the parties thereto by a substituted agreement and thereafter the original cause of action arising under the earlier contract is discharged and the parties are governed only by the terms of the substituted contract. The ascertainment of the intention of the parties is essentially a question of fact to be decided on the facts and circumstances of each case. Para 18 of the decision of the Supreme Court in H.R. BASAVARAJ v. CANARA BANK[2] is relevant to be extracted as under: 18. Now let us examine Section 62 of the Act which reads as follows: “62. Effect of novation, rescission and alteration of contract. – If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” This section gives statutory form to the common law principle of novation. The basis principle behind the concept of novation is the substitution of a contract by a new one only through the consent of both the parties to the same. Such consent may be expressed as in written agreements or implied through their actions or conduct. It was defined thus by the House of Lords in Scarf v.