Soumen Sen, J. - (1.) In a suit for declaration that the recession of contract by the defendant is illegal and the invocation of the performance bank guarantee is fraudulent and wrongful, the plaintiff has filed this application praying essentially for an order of injunction restraining the defendant no.1 from encashing the performance bank guarantee bearing No.01154101 IPG 000277 dated 19th August, 2010 for a sum of Rs.61,53,350/-.
(2.) The dispute essentially arose during the performance of a contract awarded to the plaintiff for construction of foundation, substructure, approaches including allied and miscellaneous works for bridge No.182(9 x 45.7 mtr.) between IB and Brajraj Nagar Station in connection with 3rd Line between Champa-Jharsuguda. The suit originally filed was directed against the threat by the Union of India to invoke the bank guarantee furnished in lieu of performance by the plaintiff. The grievance of the plaintiff is that the plaintiff in course of construction of the Railway Bridge found it impossible to undertake the construction by well-sinking method due to rocky bed. The plaintiff contends that the construction could be carried out only by piling. The plaintiff contends that under the scope of work the plaintiff would be required to do Geotech Investigation which involves soil testing. The plaintiff, however, was prevented from doing so by the defendant on the ground that the soil testing had already been carried out for the said bridge before awarding the contract and the plaintiff was requested to proceed on the basis of the said soil investigation report. However, after doing about 55% of the work the plaintiff encountered insurmountable difficulties in proceedings further due to hard rock beneath the earth. It was well neigh impossible for the plaintiff to undertake construction applying the well sinking method. The well sinking method is completely unsuitable for construction of the bridge with the said topographical feature and this fact was never disclosed to the plaintiff. The plaintiff had no means to ascertain the presence of hard rock bed in an around the said area where the construction would take place as the defendant no.1 requested the plaintiff to carry construction on the basis of the soil report made available by the defendant to the plaintiff. The plaintiff contends that it is admitted position that the rock bed would not permit such construction. Notwithstanding the aforesaid and for no fault of the plaintiff the contract was subsequently terminated and according to the plaintiffs a fresh contract has been awarded or is proposed to be awarded with the plaintiffs being disqualified to participate in the tender process although a very fundamental process of construction has been altered from the well sinking method to the piling method. The claim of the plaintiff is vindicated in the light of the complete change of procedure for construction suggested by the Union of India, in proposing the altered terms for the same construction. In the suit that was initially limited to the performance guarantee or the bank guarantee furnished, in lieu thereof, the plaintiffs subsequently amended the plaint to challenge the termination of contract and seek damages. The case made out by the plaintiffs is that it was impossible to perform the contract. The said amendment was allowed and upheld by the Division Bench.
(3.) Mr. Pratap Chatterjee learned Senior Counsel appearing with Mr. Samrat Sen, Senior Advocate for the plaintiffs has submitted that the Union did not permit the plaintiffs to have soil testing of its own and had ask the plaintiff to execute the work on the basis of the soil report furnished by the defendant, by reason whereof, it was not possible for the plaintiffs to ascertain the presence of hard rock under the earth which were completely unsuitable to undertake construction by well sinking method. The defendant was aware of the said difficulties but insisted that the plaintiff should continue with the work and has thereafter issued a show cause notice on 5th March, 2014 alleging that no action has been taken by the plaintiffs to commence the work and there has been no adequate progress of the work. Mr. Chatterjee has referred to the representation made by the plaintiffs in answer to the show cause being a letter dated 14th February, 2014 and submits that in the said representation it has been categorically stated that the plaintiffs were not allowed to carry out the Geotechnical Investigation and were handed over the report of Geotechnical Investigation carried out by railways themselves on which basis the design of the bridge foundation were to be made. The type of foundation recommended in the report was well foundation and contract also provided for well foundation. The plaintiff based on such report appointed an experience design consultant and submitted the design for approval of railways. The plaintiffs contended that as per the standard design requirements of well foundation the required depth of well foundation was coming out to be on the higher side, considering that the wells were to penetrate in rock. Although it was unusual but since it was based on the Geotech report issued by the railways the plaintiff submitted the design with rider that if good hard rock is encountered at higher level than the proposed founding level, well may be plugged at level higher than the proposed level after ensuring adequate socket depth in the rock. Mr. Chatterjee submits that in the said representation it has been categorically stated that the railway was not sure of feasibility of construction of well foundation at such depth in rock as approved by them. Mr. Chatterjee submits that the Union at present is holding a sum in excess of Rs.61 lakhs against the absurd claim of Rs.15 crores made in the written statement recently filed. The claim sounds in damages. Mr. Chatterjee submits that under Clause 17B of the Indian Railways Standard General Conditions of Contract published in July, 2013 the Union is entitled to damages for contracts valued about Rs.2 lakhs 10% of first Rs.2 lakhs and 5% of the balance contract sum. The Union cannot claim over and above the aforesaid sum. The claim on account of liquidated damages under the said clause could not exceed more than Rs.61 lakhs and accordingly the enforcement of the bank guarantee is illegal. Mr. Chatterjee refers to Section 17 of the Indian Contract Act and submits that even a reckless representation or omission to disclose essential fact would constitute a fraud. Mr. Chatterjee submits that the Union being aware of the hard rock beneath the earth in an around the construction area should have disclosed such facts so as to enable the plaintiffs to take an informed decision. Mr. Chatterjee has referred to decisions in the case of 'Gangotri Enterprises Ltd. versus Union of India and Ors., 2016 11 SCC 720', paragraph 40 and 'State of Haryana and Ors. versus Continental Construction Ltd., 2002 10 SCC 508', paragraph 3 to argue that having regard to the fact that, the sum claimed by the defendant no.1 from the plaintiff is in a nature of damages which is not yet adjudicated upon in the suit inasmuch as the sum in excess of Rs.61 lakhs is being retained by the defendant no.1 and an interim order of injunction against the bank guarantee is subsisting since 7th March, 2014 against the defendants, the interim order may be confirmed till the disposal of the suit.;