M/S Kanti Prashad Mittal vs. Union Of INDIA Through Ministry Of Road Transport And Highways & Ors.

Facts

The Petitioner, M/s Kanti Prashad Mittal, challenged an order dated 15.06.2023 by Respondent No.3 (Executive Engineer, PWD) justifying the grant of Performance Certificates to Respondent No.7. The Petitioner was awarded a contract for road works on EPC mode. Clause 4.2(i) of the EPC Agreement stipulated that the contractor must carry out at least 51% of the works directly, with sub-contracting limited to 49%. The Petitioner subcontracted nearly the entire work to Respondent No.7. Despite this, Respondent No.3 issued Performance Certificates to Respondent No.7 on 24.03.2020 for Rs.12,89,13,850/- and on 20.09.2020 for Rs.22,31,67,000/-. Disputes arose, leading to an FIR against the Petitioner for alleged non-payment. The Petitioner's challenge to the final report in the FIR led to a direction for further investigation. The Petitioner also represented against the Performance Certificates, which were initially rejected.

Held

The Court held that the respondents admitted that the subcontract for more than 49% of the work order was given and executed by Respondent No.7. It was also noted that during the execution of the project, none of the respondents raised any suspicion over the subcontract exceeding the prescribed limit or questioned its approval by a competent authority. These contentions were raised only after the Court's directions in a previous writ petition. The Court found evidence of collusion and corrupt practices by the department officers. The Court also noted the pending investigation of FIR No.70/2020 for over three years. Considering these exceptional circumstances, the Court directed the CBI to conduct an inquiry into the subcontracting of the work to Respondent No.7 and to take action in accordance with the law, submitting a report to the Court. The Writ Petition was dismissed with these directions.

Key Issues

1. Whether the Petitioner's subcontracting of work to Respondent No.7, exceeding the permissible limit of 49% as stipulated in Clause 4.2(i) of the EPC Agreement, renders the subsequent Performance Certificates issued by Respondent No.3 to Respondent No.7 invalid, and if so, what is the consequence, turning on the interpretation of Clause 4.2(i) of the EPC Agreement. Petitioner's arguments: The Petitioner contended that the respondents, including Respondent No.3, were aware of the subcontracting and did not raise objections until after this Court's directions in a previous writ petition. They argued that the respondents are colluding and engaging in corrupt practices, as evidenced by the delay in investigation of FIR No.70/2020 and the belated objections to the subcontract. Respondents' arguments: The respondents admitted that the subcontract exceeded 49% of the work order. However, they raised contentions regarding the subcontract not being approved by a competent authority and the Petitioner's failure to adhere to the subcontracting limits. They also argued that the Petitioner's challenge to the Performance Certificates was belated.