Dipankar Datta, J.@mdashWhether or not the respondents are justified in withholding payment due to the petitioners invoking clause 18 of the Condition of Contract Governing Contracts placed by the Central Purchase Organisation of the Government of India (hereafter the contract) while inspection of jute bales supplied by them is in progress at the end of the purchaser and in the absence of any dispute regarding quality thereof having been raised by it, is the sole question that arises for decision on this writ petition. Facts preceding presentation of this writ petition on September 13, 2013 are required to be noted.
2. M/s. Abhishek Projects Pvt. Ltd. (hereafter Abhishek) and the first petitioner have common directors. Abhishek had supplied plastic bags to the respondents, which on inspection were found to be defective. However, Abhishek had been paid the value of the plastic bags. To recover the loss sustained owing to supply of defective plastic bags by Abhishek, the axe fell on the first petitioner which had supplied jute bales to the respondents. An amount in excess of Rs. 10 crores payable to the first petitioner was withheld. This resulted in the first round of litigation between the parties. W.P. 21845(W) of 2013 was presented before this Court by the petitioners challenging withholding of payments. It was considered by me on July 25, 2013. While admitting the writ petition and calling for affidavits, I had directed that the payments to which the petitioners were entitled should not be withheld only on the ground that Abhishek had supplied defective plastic bags. However, the respondents were not precluded from withholding payment in favour of the first petitioner, strictly in terms of the agreement executed by and between the parties.
3. Since payment was not released in favour of the petitioners, they initiated. action for contempt. Ultimately, the contempt action was not pressed but I granted liberty to the petitioners to pursue their remedy in accordance with law by order dated September 11, 2013. Availing of such liberty, the writ jurisdiction of this Court has once again been invoked by the petitioners by presenting this writ petition.
4. In between the two orders passed by me on July 25, 2013 and September 11, 2013, the following letters emanated from the offices of the respondents: August 7, 2013 : Letter of the Commissioner, Govt. of Punjab to D.G.S. & D., New Delhi, that the petitioner has supplied 5200 bales and the concerned consignees are inspecting the bags to ascertain quality and final inspection report will be sent on receipt of response from them;
August 16, 2013 : Letter of the Director (HW), D.G.S. & D., New Delhi to the Dy. Director General (Supply), Kolkata that the competent authority has decided to withhold the amount under clause 18 of D.G.S. & D. 68 (R) until inspections are over because it may create liability to the extent of cost of 5200 bales. August 19, 2013 : Letter of the Director, (S & D), Kolkata, to the petitioners, informing them that the concerned consignees ar3e in course of inspecting 5200 bales and that the competent authority has decided to withhold the amount under clause 18 of D.G.S. & D. 68(R) until the time inspections are over because it may create liability to the extent of cost of 5200 bales supplied;
August 19, 2013 : Letter of the Secretary, Food, Civil Supplies and Consumer Affairs, Punjab to the D.G.S. & D., New Delhi that the consignees have received 5.58 lac bales upto August 16, 2013 and they are conducting inspection, and results of inspection will be intimated on receipt of report from them;
August 21, 2013: Letter of the Asstt. Director (Supplies), office of D.G.S. & D., Kolkata, to the petitioners stating that the competent authority has decided to withhold balance 10% payment under clause 18 and ISA of the contract until the time the inspections are over; and
August 29, 2013: Letter of the Pay and Accounts Officer, (D.G.S. & D.) Kolkata to the petitioners stating that in compliance with the letter dated August 19, 2013 of the Director (SD), Kolkata, a sum of Rs. 10.62 crores as per details given in a chart thereto is withheld.
5. Mr. Sengupta, learned advocate for the petitioners, contended that the respondents have acted in colourable exercise of power and invocation of Clause 18 of the contract, on facts and in the circumstances, cannot be sustained. According to him, payment was initially sought to be withheld citing supply of defective plastic bags by Abhishek; however, after the Court intervened and made necessary direction for payment in terms of the contract, shelter of Clause 18 has been sought to be taken. Inviting my attention to the supply orders placed on the petitioners, it was further contended by him that the petitioners are entitled to 90% payment on proof of dispatch and inspection at the supplier''s end whereas in terms of Clause 18, the purchaser can withhold payment only if a claim or claims for payment of a sum of money is raised by it. Referring to the correspondence as noted above, he urged that as per the own showing of the respondents only inspection of the jute bales supplied pursuant to the supply orders is in progress and in the absence of any claim by the purchaser for payment of a sum of money, payment could not have been withheld. It was submitted that the observations in the letters dated August 16 and 19, 2013 that ''it may create liability'' are sufficient proof that no claim for payment of money had been raised by the purchaser.
6. Relying on the decision of the Supreme Court reported in
7. He, accordingly, prayed for orders in terms of the prayer clauses of the writ petition.
8. Per contra, Mr. Bharadwaj, learned advocate for the respondents contended that the writ petition ought to fail for non-joinder of necessary parties. According to him the Government of Punjab is the purchaser of the jute bales supplied by the petitioners but it has not been included in the array of respondents together with the Director, Quality Control, and in their absence the writ petition cannot be effectively decided. It was next contended by him that this Court on the earlier writ petition did not pass a blanket interim order. Since the respondents were not precluded from withholding payment strictly in terms of the contract executed by and between the parties and Clause 18 permits withholding, such step was taken to protect the interest of the purchaser. Finally, he submitted that withholding of payment impugned in this writ petition has no relation with Abhishek having supplied defective plastic bags and that as and when inspection would result in a confirmation that the jute bales conform to the required quality, payment would be released in favour of the petitioners. He prayed for dismissal of the writ petition.
9. Before I proceed to examine the contentious issue raised in this writ petition, it would be proper to deal with the objection of Mr. Bharadwaj that the writ petition suffers from non-joinder of necessary parties and hence ought to fail. The correspondence annexed to the writ petition does not reflect that either the Government of Punjab or the Director, Quality Control has raised any objection in respect of the quality of the jute bales that have been supplied or taken any exception to the entire consignment received by them as not conforming to the terms of the supply orders or the contract. A stage has reached where inspection is in progress. The consignment may or may not be found to be defective. Bearing in mind the question that this writ petition has thrown up (as noted in the first paragraph), I do not consider non-inclusion of the Government of Punjab and the Director, Quality Control in the array of parties as fatal for its maintainability. The objection stands overruled.
10. Now, to appreciate the argument of Mr. Sengupta that the respondents have acted in colourable exercise of power, one has to examine the relevant clauses of the supply orders and the general conditions of contract (Clause 9 of the former and Clause 18 of the latter). Clause 9 reads as follows:
9. Payment:
9.1. Payment Terms:
90% payment on proof of inspection and dispatch and balance 10% on acceptance of stores by the consignee within 60 days of receipt of the stores. In case of dispatch beyond Original/Refixed DP after obtaining DP extension, 2% payment for every month of delay or part thereof subject to maximum of 5% will be withheld till regularization of D.P.
9.2. Paying Authority: Deputy Controller of Accounts, Min. of Commerce, 15, R.N. Mukherjee Road, Kolkata - 700 001.
Clause 18 reads as follows:
18. WITHHOLDING AND LIEN IN RESPECT OF SUMS CLAIMED
Whenever any claim or claims for payment of a sum of money arises out of or under the contract against the contractor the purchaser shall be entitled to withhold and also have a lien to retain such sum or sums in whole or in part from the security, if any, deposited by the contractor and for the purpose aforesaid, the purchaser shall be entitled to withhold the said cash security deposit or the security, if any, furnished as the case may be and also have a lien over the name pending finalization or adjudication of any such claim. In the event of the security being in sufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the purchaser shall be entitled to withhold and have a lien to retain to the extent of the such claimed amount or amounts referred to supra, from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other contract with the purchaser or the Government or any person contracting through the Secretary pending finalization or adjudication of any such claim.
It is an agreed term of the contract that the sum of money or monies so withheld or retained under the lien referred to above, by the purchaser will be kept withheld or retained as such by the purchaser till the claim arising out of or under the contract is determined by the arbitrator (if the contract is governed by the arbitration clause) or by the competent Court as prescribed under clause 20 hereinafter provided, as the case may be, and the contract will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to supra and duly notified as such to the contractor. For the purpose of this clause, where the contractor is a partnership firm or a limited company, the purchaser shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/limited company, as the case may be whether in his individual capacity or otherwise.
11. In Kamaluddin Ansari (supra), the Supreme Court had the occasion to observe as follows:
27. ***The golden rule is that when the words of a statute are clear, plain and unambiguous, that is, they are reasonably susceptible to only one meaning, the Courts are bound to give effect to that meaning irrespective of the consequences. The duty of a Judge is to expound and not to legislate, is a fundamental rule. If we apply the same principle to the interpretation of Clause 18 of the standard form of contract, it would be clear that the clause unequivocally contemplates a claim for the payment and it is open to the Union of India to appropriate any amount due to the contractor under other pending bills. It does not contemplate the amount due and, therefore, the heading of this clause which talks of only ''Recovery of sums due'' will not control Clause 18. The clause in our opinion gives wide powers to the Union of India to recover the amount claimed by appropriating any sum then due or which at any time thereafter may become due to the contractor under other contracts.
12. At the extreme, a claim for the payment likely to be raised by the purchaser may be sufficient to withhold payment to the supplier by invoking Clause 18 of the contract in terms of the dictum of the Supreme Court noticed supra. However, one cannot ignore that the standard form of contract wherein Clause 18 appears is used for supply of various kinds of commodities and is not restricted to jute bales only. For jute bales, there is a special characteristic. The terms and conditions of the contract have to be read conjointly with the terms and conditions of the supply orders. A reading thereof would reveal the consensus the parties reached in respect of the consignor being entitled to receive 90% of the payment on proof of dispatch and inspection and the balance 10% on completion of inspection at the consignee''s end. Assuming that a claim is raised in terms of Clause 18, it could at best be restricted to withholding of 10% balance payment and not in respect of the entire quantity of jute bales. The logic therefore is that an inspection is made by the respondents themselves before dispatch and it stands to reason that jute bales not found to conform to the required quality would not be dispatched.
13. The situation here, however, seems to be worse. The respondents appear to have withheld the entire payment without any claim raised by the purchaser. The supply orders obliged the respondents to release payment to the extent of 90% immediately on dispatch and inspection. There has indeed been a breach by not releasing at least 90% of the value of the jute bales. Mr. Sengupta is right in his contention that all that emanates from the correspondence is the likelihood of creation of liability and not an actual liability. Unless an opinion in this behalf is formed, invocation of Clause 18 is in excess of jurisdiction.
14. I had enquired from Mr. Bharadwaj as to whether withholding of payment to the petitioners had been resorted to during inspection at any time prior to Abhishek being found to have supplied defective plastic bags. Mr. Bharadwaj fairly submitted that there was no record of such instance. I am, therefore, constrained to hold that invocation of Clause 18 of the contract by the respondents is not bona fide and is in furtherance of their intention to withhold payments to the petitioners because Abhishek had supplied defective plastic bags and payments having been made in favour of Abhishek, there is seemingly no avenue open to recover the same from Abhishek.
15. I have also no option open but to hold that while the petitioners having agreed to the terms of the supply orders cannot claim release of payment in respect of the entire quantity of jute bales supplied by them, at the same time the respondents cannot also refuse to perform their part of the obligations.
16. For the reasons aforesaid, the writ petition succeeds in part. The decision of the respondents to withhold payment to the petitioners stand set aside. 90% of the total value of jute bales that have been supplied by the first petitioner shall be released forthwith and the balance 10% shall be released only after inspection at the purchaser''s end is complete and the jute bales found to be in order. There shall be no order as to costs.
Urgent photostat certified copy of this judgment and order, if applied, may be furnished to the applicant at an early date.
