The Rajasthan High Court reiterated that strict rules of evidence are not applicable in administrative proceedings and even in contractual matters, the employer shall be under an obligation to act fairly and comply with the basic requirements of Article 14 of the Constitution.

The challenge in this case was laid by the appellant-Firm against the judgment of a Commercial Court whereby the claims of the Firm were rejected.

The Division Bench comprising Justice Madan Gopal Vyas and Justice Shree Chandrashekhar explained, “The normal rule which governs the civil proceedings is that a fact is said to be shown if it is proved by preponderance of probability. Under section 3 of the Indian Evidence Act, a fact is said to be proved when the Court either believes it to exist or considers its existence show probable that a prudent man under the circumstances would proceed on the supposition that such fact really exists.”

Senior Advocate Manoj Bhandari represented the Petitioner while AAG S.S. Rathore represented the Respondent.

Factual Background

The Canal work at Amarpura projects were awarded to the appellant-firm and the total contract value was Rs. 98,67,614. Extension orders were passed for the completion of the work. Notwithstanding the extensions of time granted by the Employer, the appellant-firm could not complete the work due to which the firm was saddled with penalty. Later on, the appellant-firm was informed that it was required to deposit Rs.4,86,746 and that amount was adjusted against the security deposit. Additionally, damages to the tune of Rs.25,76,076 was required to be deposited by it.

Before the Commercial Court, the case pleaded by the appellant-firm was that there were serious defaults and non-performance of its obligations by the Employer since possession of the bed level cross-section of the land was not given to it. On the issue of loss caused to the appellant-firm to the tune of Rs.16,02,249, the Commercial Court held that no supporting evidence was produced by it except some letters relating to the acquisition of land. It was also held that the claimant firm was heard and thereafter the Empowered Standing Committee held that the claims of the claimants were not tenable.

Reasoning

On a perusal of the documents and the facts of the case, the Bench at the outset mentioned, “...Commercial Court proceeded in the matter on such assumptions and presumptions that cannot have any foundation in law.”

As per the Bench, the decision of the Empowered Standing Committee was a unilateral order only recording the stand of the Employer and a cryptic conclusion of the Committee that the claims of the claimants were not tenable. “ Any administrative order which ensures civil consequence to a party must be taken after a proper consideration of stand taken by the rival parties”, it added. Moreover, on the claim made by the appellant-firm on account of loss of profit, the Commercial Court completely shut its eyes to the documents laid in evidence by the appellant-firm.

“The Employer took unilateral decisions and that can be easily ascertained on a glance at the contents of the letter dated 5th July 2006, 12th July 2006 and 21st October 2007. The orders granting extensions of time vide letters dated 31st March and 28th June 2006 do not indicate any reason for granting such extensions of time and simply record that the Employer has reserved its right to recover damages under Clauses 2 and 3 (C) of the contract”, the Bench observed.

It was further observed that the preponderance of probability regarding existence of a fact is examined with reference to the stand of the parties and the supporting materials thereof, and not by merely recording the stand of the Employer which itself was the adjudicator. The various documents laid in evidence by the appellant-firm demonstrating protest by the agriculturist and difficulties faced by it in execution of subject works could not have been ignored on a specious plea that the possession of land was given to the appellant-firm.“In an administrative proceeding while strict rules of evidence are not applicable the general rules of fairness, justice and good conscience must be followed and a commonsensical approach should be adopted. This is also well settled that even in the contractual matters the Employer shall be under an obligation to act fairly and comply with the basic requirements of Article 14 of Constitution of India”, the Bench further opined.

The Court also stated that there was a fundamental breach of the contract since the Employer could not perform its essential obligations under the contract. In a situation like the present one, the written terms of contract for recovery of penalty, damages etc. couldn’t be enforced against the appellant-firm, it added.

Thus, setting aside the decision of the Commercial Court, the Bench held that the appellant-firm was entitled to its claims.

Cause Title: M/s Mewar Associates v. The State Of Rajasthan & Ors. (Neutral Citation: 2025:RJ-JD:1545-DB)

Appearance:

Appellant: Senior Advocate Manoj Bhandari, Advocate Aniket Tater

Respondent: AAG S.S. Rathore

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