KRISHAN LALversusFOOD CORPORATION OF INDIA & ORS.

                    [2012] 3 S.C.R. 571


                       KRISHAN LAL                             A
                             v.
         FOOD CORPORATION OF INDIA & ORS.
          (Civil Appeal Nos. 8569-8570 of 2003)

                   FEBRUARY 24, 2012
                                                               B
     [T.S. THAKUR AND GYAN SUDHA MISRA, JJ.]

      Tenders - Invitation of tenders for appointment of
handling and transportation contracts at various depots -
Submission of tender by the appellant offering to undertake C
the work - Respondent-Corporation accepted the offer -
Allotment of contract to the appellant - However, appellant
expressed his inability to undertake the contract due to security
problems and withdrew the offer made by him - Meanwhile,
appellant had deposited certain amount towards security with D
the respondent-Corporation, pursuant to the order of the High
Court - Refusal of the Corporation to refund the amount - Writ
petition by the appellant seeking refund of the security amount,
dismissed - On appeal, held: There was an arbitration clause
in the agreement executed between the parties and in view of E
the nature of dispute, the claim for refund of the amount
deposited by the appellant should have been raised before
the arbitrator - However, the High Court had entertained the
writ petition as early as in the year 2002 and the instant
appeals had been pending in this Court for the past ten years F
or so - Relegating the parties to arbitration when the matter
has been pending for past ten years not feasible -Availability
of alternative remedy cannot be pressed into service at this
belated stage - The amount was deposited but was refundable
in case the contract was not allotted and was adjustable G
towards security if the appellant succeeded in emerging as the
successful tenderer - In the event of adjustment of the amount
towards security the breach of the contract would have led to
the forfeiture of the security amount alone and not the entire
                            571                                H
/

        572      SUPREME COURT REPORTS                 [2012] 3 S.C.R.


    A amount deposited by the appellant - Respondent-Corporation
      had engaged an alternative agency for getting the work
      executed and had incurred an extra amount in that regard and
      thus, could make a claim for recovery of the extra expenditure
      incurred by it - Corporation directed to refund the balance
    B amount to the appellant after deducting the amount towards
      forfeiture of security deposit and a sum towards extra
      expehditure in getting the work executed at the risk and cost
      of the appellant.

    C       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
        8569·8570 of 2003.

          From the Judgment & Order dated 15.02.2000 of the High
      Court of Punjab & Haryana at Chandigarh in Civil Writ Petition
      No. 2416 of 2000 and Judgment & Order dated 23.05.2003 in
    D Review Application No. 134 of 2002.

              M.P. Jha, Ram Ekbal Roy, Anil K. Chopra for the Appellant.

              Indra Sawhney for the Respondents.

    E         The Order of the Court was delivered

              T.S. THAKUR, J. 1. These appeals by special leave arise
        out of an order passed by the High Court of Punjab and
        Haryana whereby Civil Writ Petition No. 2416 of 2002 and RA.
    F   No.134 of 2002 filed by the appellant seeking refund of Rs.10
        lakhs deposited towards security pursuant to the order passed
        by the High Court has been dismissed.

            2. On 12th November, 1999 the Food Corporation of India
      invited tenders for appointment of Handling and Transportation
    G Contracts at various depots including the depot at Dabwali in
      the State of Haryana. Several persons appear to have
      submitted their tenders in response to the said tender notice
      including M/s R.R.S. Chautala & Company who eventually
      bagged the contract in question having offered to undertake the
    H contracted work in consideration of payment at 186% above
KRISHAN LAL v. FOOD CORPORATION OF INDIA & 573
            ORS. [TS. THAKUR, J.]

the schedule of rates. The appellant questioned the said            A
allotment in Writ Petition No.1368 of 2000, inter alia, alleging
that he had been illegally prevented from submitting his tender
by being denied the requisite form for submission of the tender.
The appellant also asserted that he was ready to undertake the
Handling and Transportation work at a much lower rate of 110%       B
above the schedule of rates as against 186% offered by the
successful tenderer mentioned above. The appellant even
offered to deposit a sum of Rs.10 lakhs by way of security to
show his bona fides. An affidavit to that effect was also, it
appears, filed by the appellant.                                    c
     3. The Writ Petition filed by the appellant was eventually
allowed by the High Court by its order dated 5th April, 2001.
The High Court held that the decision taken by the Food
Corporation of India was without consideration of relevant facts
and was not reasonable. The High Court therefore, found a           D
case justifying interruption of contract and setting aside of the
allotment of work in favour of the successful tenderer. Having
said that, the High Court issued the following directions:

     "It is directed that the fifth respondent shall cease to       E
     operate immediately. The respondent-corporation shall
     invite fresh tenders and proceed to allot the work in
     accordance with law. The petitioner shall be bound by his
     offer to work at 110% above the schedule of rates. He
     would deposit an amount of Rs.10 lacs by way of security       F
     within one week from today with the office of the Senior
     Regional Manager, Food Corporation of India,
     Chandigarh. This amount shall be adjusted towards
     security, etc. if the work is allotted to the petitioner.
     Otherwise, it would be refunded within one week of the final   G
     decision regarding the allotment of the work."

     4. In obedience to the above directions the respondent-
Food Corporation of India (FCI) invited sealed tender for
handling and transport contact for its Dabwali depot for a period
of six months. The short term tender notice required the            H
    574     SUPREME COURT REPORTS                 [2012] 3 S.C.R.


A   intending tenderers to submit their tenders along with complete
    documents and the earnest money prescribed in the form of a
    Demand Draft.

        5. In response to the above tender notice, the appellant
  also submjllild a tender offering to undertake the work @ 50%
8
  above the schedule of rates. This offer was accepted by the ,
  respondent-Corporation with a direction to the District .
  Manager, FCI, Hissar that no amount towards security be
  demanded from the appellant as the security amount of
C Rs.3,09,500/- stood deposited in the Regional Office. Shortly
  after the allotment of the contract to the appellant, the appellant
  sent a fax message expressing his inability to undertake the
  handling and transport contract and withdrawing the offer made
  by him. By this time the appellant had already executed a
  formal agreement with the respondent-Corporation on 28th
D May, 2001. In response, the respondent-Corporation informed
  the appellantthat any withdrawal after the execution of the formal
  agreement was tantamount to a breach of the terms. and
  conditions of the contract and would attract action under Clause
  X(b) of the agreement. The appellant was requested to take
E up the handling and transport work within one week positively,
  failing which the respondent-Corporation proposed to take
  recourse to Clause X(b) of the agreement to get the work done
  at the risk and cost of the appellant.

F      6. It is common ground.that the appellant did not undertake
  the work. He cited some security problems which according to
  the appellant prevented him from discharging his contractual
  obligations. Not only that the appellant demanded the refund
  of, Rs.10 lakhs which stood deposited with the respondent-
G Corporation pursuant to the direction issued by the High Court
  in the writ petition referred to earlier. Upon refusal of the
  respondent-Corporation to refund the amount in question the
  appellant filed Writ Petition No.2416 of 2002 in the High Court
  of Punjab and Haryana for a mandamus directing the
  respondent-Corporation to refund the same. The High Court
H dismissed the said petition holding that since the parties had
KRISHAN LAL v. FOOD CORPORATION OF INDIA & 575
            ORS. [T.S. THAKUR, J.]

entered into a written contract their mutual rights and               A
obligations were governed by the terms and conditions of the
said contract.The High Court observed:

     "It appears from the record of the case and in particular
     Annexure-P-5 dated 20.6.2001 addressed to the petitioner 8
     by the F.C.I. that the petitioner had executed agreement
     in the office on 28.5.2001 and his offer at 50% ASOR was
     accepted by the office vide telegram dated 25.5.2001, a
     copy whereof was sent to the petitioner through registered
     post. It has been clearly mentioned in Annexure-P-5 that C
     the F.C.I had accepted the offer of the petitioner and that
     being so, in our view, a concluded contract had come into
     existence. Withdrawal of offer would certainly attract
     relevant condition of the contract. "The contract that has
     been arrived at between the parties has not been placed
     on records. The terms of contract in the event a party, after D
     its offer has been accepted, may back out, are, thus, not
     known. There is, however, sufficient indication forthcoming
     from Annexure-P-5 that Clause 10(b) would apply in the
     event of contractor may not carry out the work allotted to
     him. This clause too has not been shown to us nor made E
     a part of pleadings. All that we would, thus, like to observe
     at this stage is that once the parties have arrived at
     concluded contract, the terms thereof would alone
     determine the rights inter se parties. Be that as it may,
     petitioner cannot ask for refund of Rs.10 Lacs on the dint F
     of orders passed in his earlier petition bearing No.1368
     of 2000 as it is only in the event work was not to be allotted
     to him that, he could ask for refund of the money deposited
     by him."

      7. We have heard learned counsel for the parties at some        G
length. The material facts are not in dispute. It is not in dispute
that the amount of Rs.10 lakhs was deposited by the appellant
in terms of the order of the High Court in Writ Petition No.1368
of 2000. The said amount had to be refunded to the appellant
                                                                      H
    576       SUPREME COURT REPORTS                     [2012] 3 S.C.R.


A if the work was not allotted to the appellant upon the issue of
  the fresh tenders. In case the appellant succeeded in bagging
  the contract the amount was to be adjusted towards security.
  This clearly implied that the order passed by the High Court
  envisaged a situation where the appellant-wo.!J!d not succeed
B in securing the contract pursuant to the fresh tender process,
  in which event the amount deposited by the appellant had been
  refundable in toto. In case, however, the appellant succeeded
  in bagging the contract which obviously depended upon whether
  he offered the lowest rate for undertaking the work in question,
c the amount deposited by him had to be adjusted towards
  security in relation to the said contract. It is also not in dispute
  that a short-term tender was issued pursuant to the direction
  of the High Court and that the security amount required to be
   furnished by the appellant was limited to a sum of Rs.3,09,500/
  -. The High Court order did not provide for a situation where
0
   the security amount required under the contract may be
   Rs.3,09,500/- for other tenderers but Rs.10 lakhs in the case
   of the appellant. That a formal agreement was executed
   between the parties is also admitted before us as indeed it was
   before the High Court. Withdrawal of the offer tantamount to
E refusal to undertake the contract, hence a breach of the terms
   of the contract, and shall attract the penal provisions contained
   in_ the same is also not in question. Our attention was, in this
   regard, drawn by learned counsel for the appellant to Clause
   X (b) and XI (f) of the agreement which read as under:
F
            "X(b) The Senior Regional Manager shall also have
           without prejudice to other rights and remedies, the right,
           in the even of breach by the contractors of any of the terms
            and conditions of the contract to terminate the contract
G           forthwith and to get the work done for the unexpired period
          · of the contract at the risk and cost of the contractors and/
            or forfeit the security deposit at any part thereof for the sum
            of sums due for any damages, losses, charges, expenses
            ofcosts that may be suffered or incurred by the corporation
H
KRISHAN LAL v. FOOD CORPORATION OF INDIA & 577
            ORS. [T.S. THAKUR, J.]
     due the contractor's negligence or unworkment like                 A
     performance of any of the service.s under the contract.

     XI (f) In the event of termination of the contract envisaged
     in clause X, of the Senior Regional Manager shall have the
     rights of forfeit the entire or part of th~ amount of security
                                                                        8
     aeposit lodged by the contractors or to appropriate the
     Security Deposit or any part thereof in or towards the
     satisfaction of any sum due to be claimed for any
     damages, losses, charged expenses or cost that may be
     suffered or incurred by the Corporation."
                                                                        c
     8. It was argued on behalf of the appellant that even the
widest and most favourable interpretation of the above terms
would not entitle the respondent-Corporation to forfeit any
amount besides the security deposit and recover any damages,
losses or cost that may be suffered or incurred by the                  D
respondent-Corporation in getting the contracted work executed
through some other agency. Such being the position the
respondent-Corporation could at best forfeit the sum of
Rs.3,09,500/- towards security deposit and a sum of
Rs.2,17,274/- which the respondent-Corporation claimed to               E
have incurred towards extra expenditure in getting the work
executed at the risk and cost of the appellant. The extra
expenditure incurred by the respondent-Corporation after
termination of the contract allotted to the appellant, it is
noteworthy, has been quantified by the respondent-Corporation           F
in para 5(i) & (ii) of the counter-affidavit filed on its behalf. The
respondent-Corporation has inter alia said:

    "I say that during the contract period of six months of the
    petitioner, the Respondent Corporation had to incur an
    extra expenditure of Rs.2, 17,274/- and suffered heavy G
    losses. I say that -security amount of Rs.10 lakhs was
    furnished by the petitioner as security for fulfilment of
    contract in terms of High Court order. Even after depositing
    Rs.10 lakhs as per the High Court Orders, the petitioner
    did not resume the work and the entire amount of Rs. 1O H
    578     -.SUPREME COURT REPORTS                 [2012] 3 S.C.R.


A         lakhs was rightly forfeited against excess payment made
          towards alternative arrangements made at the risk and
          cost of the petitioner. I say that the amount of Rs.1 Olakhs
          was stand forfeited under Clause X(b) read with Clause
          Xl(f) of the contract."
B
         9. It was in the light of the above assertions, argued Mr.
    Jha, learned counsel for the appellant, that the respondent-
    Corporation could not lay any claim against the amount in
    question in excess of Rs.3,09,500/ plus Rs.2, 17,274/- and that
    the balance amount was liable to be refunded to the appellant.
c
        10. On behalf of the respondent-Corporation it was argued
  that the appellant ought to have resorted to the arbitration clause
  under the agreement instead of filing a writ petition in the High
  Court. Alternatively, it was argued that the security deposit
o having been made under the orders of the High Court, the entire
  amount of Rs.10 lakhs was liable to be forfeited on the failure
  of the appellant to work once the same was allotted to him.

        11. It is true that there was an arbitration clause in the
E agreement executed between the parties. It is equally true that,
  keeping in view the nature of the controversy, any claim for
  refund of the amount deposited by the appellant could be and
  ought to have been raised before the Arbitrator under the said
  arbitration. The fact, however, remains that the High Court had
  entertained the writ petition as early as in the year 2002 and
F the present appeals have been pending in this Court for the
  past ten years or so. Relegating the parties to arbitration will
  not be feasible at this stage especially when the proceedings
  before the Arbitrator may also drag on for another decade.
  Availability o{ an alternative remedy for adjudication of the
G disputes is, therefore, not a ground that can be pressed into
  service at this belated stage and is accordingly rejected.

       12. Equally untenable is the alternative argument that since
  the amount of Rs.10 lakhs had been deposited pursuant to the
H order passed by the High Court the same was liable to be
KRISHAN LAL v. FOOD CORPORATION OF INDIA & 579
            ORS. [T.S. THAKUR, J.]
forfeited in toto in the event of any breach of the agreement A
between the parties. The deposit was, no doubt, made
pursuant to the direction of the High Court but the said direction
did not go further to say that in case the appellant committed a
breach of the agreement executed between the parties, any
such breach would result in the forfeiture of the entire amount B
of Rs.1 O lakhs. A closer reading of the order passed by the
High Court leaves no manner of doubt that the amount was
deposited but was refundable in cas~ the contract was not
allotted and was adjustable towards security if the appellant
succeeded in emerging as the successful tenderer. In the event c
of adjustment of the amount towards security the breach of the
contract would have led to the forfeiture of the security amount
alone and not the entire amount deposited by the appellant.

     13. Even so, the terms of the contract provided for
execution of the contracted work through another agency at the D
risk and cost of tfe appellant. It is not in dispute that the
respondent-Corporation had engaged an alternative agency for
getting the work executed. It is also not in dispute that an extra
amount was incurred by the respondent-Corporation in that
regard. If that be so, the amount lying with the respondent- E
Corporation could be utilised for recovery of the loss. The
respondent-Corporation could therefore make a claim for
recovery of the extra expenditure, incurred by it. We must
mention, in fairness to Mr. Jha, that the respondent-
Corporation's right to forfeit the security amount or to recover F
the extra expenditure incurred in getting the work executed from
alternative agency was not disputed by him.

     14. That being the position, the respondent-Corporation
would be entitled to retain a sum of Rs.3,09,500/ plus G
Rs.2,17,274/-   =  Rs.5,26,774/-. The balance amount of
Rs.4, 73,226/- ought to have been refunded to the appellant on
the admitted factual and contractual premise.

    15. In the result, we allow this appeal, set aside the order
passed by the High Court and direct the respondent-Corporation H
    580      SUPREME COURT REPORTS                  [2012] 3 S.C.R.


A to refund the balance amount of Rs.4,73,226/- to the appellant
  within a period of three months from today failing which the said
  amount shall start earning interest@ 10% p.a. from the date
  of expiry of the stipulated period of three months mentioned
  above. We are consciously making no order for payment of
B interest on the amount held refundable to the appellant, for we
  are of the opinion that the appellant had without any real intention
  to perform the work in question got the earlier contract
  terminated by a judicial order and put the Corporation through
  the unnecessary botheration and consequential prejudice of
c calling for fresh tenders. The appellant, it appears to us, was
  interested only in scoring a point over his rival for whatever
  reasons he had i!l view. The conduct of the appellant has,
  therefore, dissuaded us from directing payment of any interest
  to him on the amount that is held refundable.
D       16. These appeals are, with above directions &
    observations, allowed and disposed of leaving the parties to
    bear their own costs.
                    I


    N.J.                                      Appeals disposed of.




               '·t'




               ,'       ·,