Kashish Developers Limited vs. The State Of Bihar

Held

The Court held that the rescission of the agreement by the Executive Engineer, Building Division Gaya, vide the impugned order dated 26.06.2020, is void and quashed. This decision was based on two grounds: (a) the violation of Clause 14 of the contract, which mandates a show cause notice before rescission, and (b) the violation of the principles of natural justice, as no opportunity was given to the Petitioner to respond before the order was passed. The Court noted that the State conceded that no show cause notice was issued. Consequently, any subsequent actions taken by the respondents based on this rescission were also declared null and void. Regarding the second issue, the Court granted the Petitioner a further opportunity to complete the balance outstanding work within six months from the date of uploading the judgment. This was based on the Petitioner's undertaking, the impact of the COVID-19 lockdown, and the need to save public money by completing the work at old rates. The Court also acknowledged the Petitioner's readiness to complete the work despite pending dues and GST disputes. It was clarified that failure to complete the work within the stipulated six months would allow respondents to take action as per the contract.

Facts

Kashish Developers Limited (Petitioner) was awarded an agreement (Agreement No. 13 SBD 2015/16) for construction work. The Petitioner faced hindrances from a previous agency and a stay order from the High Court in a related case (CWJC No. 6745 of 2015). After the stay was lifted and appeals were disposed of, the Petitioner was permitted to restart work. However, the Petitioner alleges delayed payments and issues with GST. The Executive Engineer, Building Division Gaya (Respondent No. 4), rescinded the agreement via an office order dated 26.06.2020, citing unsatisfactory progress and labor shortage, despite extending time for completion until June 2020. The Petitioner contends this rescission occurred without a show cause notice, despite the COVID-19 lockdown impacting work progress.

Key Issues

1. Whether the rescission of the agreement by the Executive Engineer, Building Division Gaya, vide office order dated 26.06.2020, is void for non-compliance with Clause 14 of the contract and the principles of natural justice, specifically the absence of a show cause notice? (Question of law) 2. Whether the Petitioner should be granted an opportunity to complete the remaining work within six months, considering the impact of the COVID-19 pandemic lockdown and alleged delays by the respondents? (Question of mixed law and fact) Petitioner's Arguments: The rescission is illegal as no show cause notice was issued, violating Clause 14 of the contract and principles of natural justice. The delay in work was due to factors beyond their control, including the COVID-19 lockdown and hindrances from previous agencies. They seek an extension of six months to complete the work. Respondent's Arguments: The Petitioner's performance was unsatisfactory and slow, with a continuous shortage of labor. Various warnings were issued. All submitted bills have been cleared. The writ petition is not maintainable as Clause 25 of the contract mandates arbitration for dispute resolution.