EAST CENTRAL RAILWAY Vs. INTERLINK COAL PVT LTD

JUDGEMENT

(1.) ON 22,7.2007, the East Central Railway invited tenders for the construction of several residential units, staff quarters and other miscellaneous works at Sonepur/Hajipur. The estimated cost of the project was Rs. 10,67,88,840.20 paise. The tender stipulated price variation clause in Chapter-3. Clause 34 of the said terms and conditions provides for price variation. Clause 34(A) is the general conditions for price variation. Clause 34(C) stipulates ceiling on price variation. As per Clause 34(C)(i), the adjustment i.e. reimbursements/recovery based on price indices, shall be made only if to the extent the amount to be adjusted is in excess of 5% of the amount payable to the contractor as per accepted rates. As per Clause 34(C)(ii), the total amount of adjustments i.e. increase/decrease in the payment to the contractor shall be limited to 10% i.e. [15%-5% (floor price)] of the amount finally payable to the contractor as per accepted rates for the contracts where the period of completion is between 1 to 2 years. As per Clause 34(C)(iii), the total amount of adjustment i.e. increase/decrease in the payment to the contractor shall be limited to 20% i.e. [25%-5% (floor price)] of the amount finally payable to the contractor as per accepted rates for the contracts where the period of completion is more than two years. That from perusal of the ceiling on price variation clause is evident that the total amount of adjustment shall be limited to 10% of the amount finally payable to the contractor where the period of completion is upto two years and 20% adjustment is in the case of period of completion of more than two years. In the present case, the period of completion of the work is eighteen months and, therefore, the upper ceiling limit is only upto 10%. Pursuant to the tender notification, several contractors, including the petitioner, submitted tender papers, along with the earnest money deposits in the form of fixed deposit. The tender was opened on 5.9.2007. The offer of the petitioner, being the lowest, was accepted. The acceptance was communicated to the petitioner in writing on 23/ 24.1.2008. The petitioner started the work. A final agreement as contemplated under the terms and conditions. After the acceptance of the quotation made by the petitioner, as per Annexure-1 dated 28.9.2007, there was a change in policy, whereby the ceiling limit prescribed at 15- 25% stood deleted. In the opening sentence of the said circular, it is stated that the modified clause would have prospective effect in all future work contracts. ON 2.2.2008 and 5.5.2008, after starting the work, the petitioner requested the appellant for deleting the price variation clause, in view of the amendment. ON 8.7.2008, the petitioner sent Annexure-4 letter stating the difficulty in signing the agreement unless price variation clause is deleted. Annexure-4 reads thus:- "Ref: ICPC/Con/08/47dated 8.7.08 To, The Chief Engineer, East Central Railway, Mahendru Ghat, Patna Sub:- For deletion of ceiling on price variation clause as provided in Clause 34(C) as per policy decision of the Ministry of Railway (Railway Board) issued vide letter no. 2007/CEI/CT/18, New Delhi dated 28.9.2007. Dear Sir, With reference to the captioned subject, we would like to submit that we have been allotted works contract vide Acceptance No. ECR/CAO/Con/ WT/474/450 dated 23.1.08 for the work of providing 38 units type-Ill, 86 units type-11 and 36 units type-1 quarter and other miscellaneous work at Konharaghat, Hajipur'. In terms of the agreement, we have been directed to utilise Cement PPC confirming IS 1489 (Pt.-1) and TMT steel basis (Grade fe 415) conforming to IS: 1786 of any diameter from Tata/ SAIL/RINL. Accordingly we quoted the basic rates of the said quality of cement and steel as prevailing in the market at that point of time. However, the agreement consists of the Price Variation Clause. In Clause 34(C)(ii) & (iii) of the agreement, there is a ceiling on price variation, which inter alia provides that the total amount of adjustment shall be limited to 10% [15%- 5% (floor price)] in case of work to be completed within two years and 20% [25%-5% (floor price)] in case the period of completion is more than 2 years. Before the agreement was signed by both the parties, we could be able to know that the Govt, of India, Ministry of Railway (Railway Board) has taken a policy decision to delete the clause relating to Ceiling on price variation so far as it relates to upper limit. The said policy decision was communicated to all FA & CAOs of all Indian Railways vide letter no. 2007/CEI/CT/18, New Delhi dated 28.9.2007 issued under the signature of Executive Director, Civil Engineering, Railway Board, New Delhi. We, therefore, request you to kindly delete the Clause 34(C)(ii) & (iii) in terms of the policy decision of the Govt, of India, Ministry of Railway (Railway Board), else, we are unable to sign the agreement in question, which consists of ceiling clause on price variation. The said clause is actually in the teeth of the policy decision of the Govt, of India, Ministry of Railway (Railway Board). Thanking you, Yours faithfully, For: M/s Interlink Coal (P) Ltd. Sd/- Managing Director" Despite the above letter, the appellant Railway took the stand that since the policy decision was after the acceptance of the tender submitted by the petitioner, no change can be effected. Finally, on 18.3.2008, a formal agreement was entered into between the parties on the same terms and conditions as stipulated in the tender form retaining the ceiling clause. ON 12.11.2008, the writ petition was for incorporating the price variation clause in the agreement, in view of the amendment to the policy dated 28.9.2007.

(2.) THE learned Single Judge found that "the petitioner seeks only a just compensation for unanticipated abnormal rise in prices of its basic ingredients required for fulfillment of the contract. On the other hand, if compensation, accordingly, is not permitted, then Railway would certainly be getting its work done at a cost less than legitimate due and would, thus, be unjustly enriching itself because of factors beyond control of both the contracting parties. That would be unjust and unfair". THE learned Single Judge held that the policy decision is violative of Article 14 of the Constitution and the Railway cannot act unfairly. THE writ petition was allowed in the following manner:-

(3.) THEREFORE, we allow the Letters Patent Appeal and the impugned judgment of the learned Single Judge is set aside.