Kashish Developers Limited vs. The State Of Bihar

Held

The Court held that the impugned order dated July 2, 2020, rescinding the agreement, is void and quashed. The primary reason for this decision was the non-compliance with the principles of natural justice and Clause 14 of the contract, which stipulated issuance of a written notice to the contractor before cancellation. The Court found that no show cause notice was issued to the petitioner prior to the rescission. Additionally, the Court found the order to be bad in law because the Executive Engineer, the competent authority, appeared to have acted on departmental directions from the Chief Engineer and Superintending Engineer, rather than exercising his independent judgment. The Court relied on the Apex Court's decision in Gordhandas Bhanji. Regarding the petitioner's request for a 12-month extension to complete the work, the Court granted liberty to the petitioner to file a representation with the respondents. This representation is to be considered sympathetically, taking into account the COVID-19 lockdown and relevant judgments, and disposed of within four weeks of its filing.

Facts

Kashish Developers Limited (the petitioner) entered into an agreement with the Executive Engineer, Building Construction Department, Bihar, Patna, for the construction of Vidhayak Awasan (MLA Parisar). The work was to commence on May 2, 2017, with a completion deadline of May 2, 2019. The petitioner claims the work was hampered by various issues including encroachment, tree removal, lack of drawings, underground utilities, demonetization, sand supply ban, GST implementation, COVID-19 pandemic, irregular payments, and drawing changes. Despite requests for outstanding dues and time extension, the agreement was rescinded by an office order dated July 2, 2020, issued by the Executive Engineer. The petitioner sought to set aside this order and requested a 12-month extension to complete the remaining work.

Key Issues

1. Whether the rescission of the agreement by the Executive Engineer, without issuing a show cause notice to the petitioner, violates the principles of natural justice and Clause 14 of the contract, rendering the order illegal and void? 2. Whether the Executive Engineer, in rescinding the contract, failed to apply his independent mind and exercised his judgment based on departmental directions rather than his own assessment? Petitioner's Arguments: - The rescission order is illegal and void for non-compliance with Clause 14 of the contract, which mandates a written notice prior to cancellation, and for violating the principles of natural justice, which are inherent in Article 14 of the Constitution. - Substantial work has been completed, and the petitioner undertakes to finish the remaining work within twelve months. - Relied on judgments in Kems Services Pvt. Ltd. vs. South Bihar Power Distribution Company Ltd. & Ors. and B.K. Enterprises, Dhanpura, Ara v. State of Bihar to support the court's power to direct completion within a stipulated time and the importance of considering financial consequences. - The Executive Engineer acted on departmental directions and did not apply his independent mind. Revenue/State's Arguments: - Not recorded in the judgment.