Kashish Developers Limited vs. The State Of Bihar Through The Principal Secretary-Cum-Commissioner

Held

The Court held that the impugned order dated July 2, 2020, rescinding the agreement, is void and quashed on two primary grounds. Firstly, it was held that the order was passed in violation of the principles of natural justice and Clause 14 of the contract, as no show cause notice was issued to the petitioner before rescission. The Court emphasized that compliance with natural justice is inherent in Article 14 of the Constitution. Secondly, the Court found the order to be bad in law because the Executive Engineer, the competent authority, did not apply his independent mind but acted on departmental directions from higher authorities. The Court cited the Apex Court's decision in Gordhandas Bhanji. Regarding the petitioner's request to complete the work within eight months, 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, the full bench judgment on court functioning during the pandemic, and the cited case laws. The respondents are directed to dispose of this representation within four weeks of its filing.

Facts

Kashish Developers Limited (the petitioner) entered into an agreement (No. 05 SBD 2015/16) with the Executive Engineer, Building Construction Department, Bihar, Patna, for the construction of Vidhayak Awasan. The work order was issued on August 10, 2015, with a completion deadline of August 10, 2017. The petitioner claims the work was hampered by various issues including site encroachment, presence of trees, underground cables and pipelines, demonetization, sand ban, GST implementation, irregular payments, and the COVID-19 pandemic. Despite requests for time extension and payment of dues, the Executive Engineer rescinded the agreement on July 2, 2020, through an office order. The petitioner filed a writ petition challenging this order.

Key Issues

1. Whether the rescission of the agreement by the respondent authorities is illegal and void for non-compliance with the principles of natural justice, specifically by failing to issue a show cause notice to the petitioner prior to rescission, as mandated by Clause 14 of the contract and Article 14 of the Constitution of India? 2. Whether the rescission order is bad in law because the Executive Engineer failed to apply his independent mind and exercised his judgment based on departmental directions, rather than independently deciding on the necessity of termination? 3. Whether the petitioner should be granted an opportunity to complete the remaining work within a stipulated period, considering the delays caused by factors beyond its control and the impact of the COVID-19 pandemic lockdown? Petitioner's arguments: The petitioner argued that the rescission order is illegal due to the violation of Clause 14 of the contract and the principles of natural justice, as no show cause notice was issued. They relied on judgments like 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 of work within a stipulated time. The petitioner also contended that the Executive Engineer acted mechanically without independent application of mind. The petitioner further submitted that substantial work was completed and offered to finish the remaining work within eight months. Revenue/State's arguments: The judgment does not record specific arguments made by the respondent State.