M/S. Sushee Hitech Projects PVT. LTD. vs. The Singareni Collieries Company Limited

Facts

The petitioner, M/s. Sushee Hitech Projects Pvt. Ltd., challenged a letter dated 25.07.2023 from the Project Officer of The Singareni Collieries Company Limited. This letter proposed to adjust an amount of Rs. 26,43,82,998.39 from the petitioner's running bills. This adjustment was towards a difference in Lead Variation Class (LVC) for 2nd and 3rd year quantities excavated during the 3rd year. The petitioner argued this was done without notice, without considering the COVID-19 pandemic period (a declared force majeure), and despite their pending claim of Rs. 28.63 crores (without GST). The petitioner contended that the respondents unilaterally revised parameters and projected items. The respondents, in their counter, stated that the petitioner did not achieve projected lead-based kilometers and quantities, and they fixed the rate at 68% for 2nd year quantities excavated in the 2nd and 3rd years instead of the expected 79%.

Held

The Court held that the respondents shall keep the action proposed in the impugned letter dated 25.07.2023 in abeyance until the disposal of Writ Appeal No. 582 of 2020. A final decision must be taken subject to the outcome of that appeal. The Court directed that for the purpose of payment, the respondents shall treat the petitioner as having deployed HEMM in August 2020 and achieved 90% of the monthly target as per Work Order Condition No. 1.1.3 (c). Consequently, the petitioner is entitled to payment for 2nd year quantities excavated at the rate of 79% of the awarded rate, with the application of PVC for HEMM from August 2020, as per Clause 1.3.7 of the Work Order. The Court reasoned that the petitioner fulfilled the conditions for the 79% rate, including HEMM deployment and achieving the 90% target. The respondents' assumption of HEMM deployment from February 2022 was contrary to the Work Order and their own admission. The Court also noted that the contract extends until 2026, and the respondents have security deposits and pending bills from which any recoverable amount could be adjusted later, making immediate adjustment from running bills unnecessary and inequitable. The Court expressed concern over the government company's choice to bypass arbitration or mediation.

Key Issues

1. Whether the impugned letter dated 25.07.2023, proposing to adjust Rs. 26,43,82,998.39 from the petitioner's running bills towards LVC difference for 2nd and 3rd year quantities excavated during the 3rd year, is arbitrary, illegal, and violative of the principles of natural justice, particularly in light of Clause 1.12 of the Work Order and the COVID-19 pandemic period? 2. Whether the respondents are justified in fixing the rate at 68% for 2nd year quantities excavated in the 2nd and 3rd years, instead of 79% as claimed by the petitioner, based on the deployment of HEMM and achievement of monthly scheduled quantities? Petitioner's arguments: The action is arbitrary and illegal, violating principles of natural justice and constitutional rights. It contravenes this Court's order in W.A. No. 582 of 2020, which restrained coercive action during the force majeure period without notice. The COVID-19 pandemic, declared force majeure under Clause 1.12, affected work progress. The respondents failed to settle the petitioner's claim of Rs. 28.63 crores. The petitioner met the conditions for 79% payment for 2nd year quantities excavated in the 2nd and 3rd years, including deploying HEMM and achieving 90% monthly scheduled quantity in August 2020, as admitted by the respondents. The respondents' assumption of HEMM deployment from February 2022, contrary to the Work Order, is incorrect. Respondents' arguments: The petitioner did not achieve projected lead-based kilometers and quantities. The parameters and projected items were revised unilaterally. The respondents fixed the rate at 68% for 2nd year quantities excavated in the 2nd and 3rd years.