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Shree Laxmi Iron and Steel Works Pvt Ltd Vs. the Research Designs and Standards Organization (Rdso) and Ors. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Judge
AppellantShree Laxmi Iron and Steel Works Pvt Ltd
Respondent the Research Designs and Standards Organization (Rdso) and Ors.
Excerpt:
.....present when the second set of samples was to be opened. the plaintiff claims that nothing in the rdso letters showed that the plaintiff or its representative would be involved in cours.of the inspection and, as such, there was no point in deputing a representative to be present when the second sample was opened by the rdso. it also does not appear that the plaintiff was overly interested in ascertaining from the rdso or otherwise as to how the firs.sample drawn by the rdso from konkan railway did not conform to the specifications under the relevant purchase order. the present suit was prompted by the receipt of a third letter from the rdso which was dated september 14, 2012, but was issued on or after september 25, 2012 as the dates of the signature and handwritten endorsements at the.....
Judgment:

O-2 GA2977of 2012 CS360of 2012 IN THE HIGH COURT AT CALCUTTA ORDINARY ORIGINAL CIVIL JURISDICTION SHREE LAXMI IRON & STEEL WORKS PVT LTD VERSUS THE RESEARCH DESIGNS & STANDARDS ORGANIZATION (RDSO) & ORS.BEFORE: The Hon'ble JUSTICE SANJIB BANERJEE Date : 7th November, 2016.

Mr.Jishnu Saha,Sr.Advocate Mr.Debnath Ghosh,Advocate Ms.Srinanda Bose,Advocate Mkr.

Avijit Dey,Advocate appeaRs.appeaRs.appeaRs.appeaRs.Mr.L.K.Chatterjee,Sr.Advocate appeaRs.Ms.Aparna Banerjee,Advocate appeaRs.Mr.Jishnu Chowdhury,Advocate Mr.Chayan Gupta,Advocate Mr.Aritra Basu,Advocate Mr.Dwip Raj Basu,Advocate appeaRs.appeaRs.appeaRs.appeaRs.Mr.Dilip Kumar Chatterjee,Advocate appeaRs.Mr.Dipanjan Dutta,Advocate appeaRs.The Court : - As innocent as the present action appears to be, it is plain to see that by merely instituting the suit and ensuring its continuation for a certain period of time, the plaintiff has obtained undeserving benefits and has virtually enjoyed a decree in respect of its supplies to the railways.

The grievance in the suit is that notwithstanding the plaintiff having completed the supply of metal liners to the Konkan Railway, several months after the payment had been released and the performance guarantee discharged, the Research Designs & Standards Organisation (RDSO) under the Ministry of Railways gathered samples of the goods supplied by the plaintiff to the Konkan Railway and unilaterally found the goods not to conform to the specifications under the contract pertaining to the dimensions thereof.

By an initial notice of July 4/9, 2012 the RDSO informed the plaintiff that the fiRs.set of samples that had been drawn by the RDSO in respect of the supply of metal liners pertaining to a purchase order dated December 6, 2011 did not conform “to the norms of IRS specification for Metal Liner (Provision 1995).” The letter went on to refer to the “General Guidelines for Vendor Development” and advised the plaintiff to stop further production of metal liners pertaining to the specified drawing “as precautionary measure to avoid production and supply of potentially inferior product with immediate effect.” The letter also indicated that no further inspection of the manufactured goods could be carried out and the final decision as to the adherence of the goods to the desired specifications would be based on the outcome of the tests conducted on the second set of samples.

Clause 20 of the vendor guidelines were expressly referred to in the said letter.

Simultaneously with the issuance of the letter pertaining to the failure of the fiRs.set of samples to conform to the specifications, a further letter dated July 4/9, 2012 was issued by the RDSO to the plaintiff inviting the plaintiff to depute an authorised representative to attend the office of the RDSO for witnessing the opening of a second set of sealed samples.

The plaintiff says that the plaintiff did not authorise any representative to visit the RDSO office or to be present when the second set of samples was to be opened.

The plaintiff claims that nothing in the RDSO letters showed that the plaintiff or its representative would be involved in couRs.of the inspection and, as such, there was no point in deputing a representative to be present when the second sample was opened by the RDSO.

It also does not appear that the plaintiff was overly interested in ascertaining from the RDSO or otherwise as to how the fiRs.sample drawn by the RDSO from Konkan Railway did not conform to the specifications under the relevant purchase order.

The present suit was prompted by the receipt of a third letter from the RDSO which was dated September 14, 2012, but was issued on or after September 25, 2012 as the dates of the signature and handwritten endorsements at the foot of the letter would indicate.

The present interlocutory application was filed on or about October 17, 2012.

By the letter of September 14, 2012, the RDSO informed the plaintiff that since the plaintiff did not depute any representative to be present at the time that the second sample was to be opened, RDSO caused the second sample to be opened on August 17, 2012 in the presence of “independent witnesses”.

The letter further informed the plaintiff that the second set of samples “also does not conform to the dimensional check and further testing is in process.” The letter also observed that the markings on the goods as to the year of manufacture may have been mistaken and called upon the plaintiff to have the matters clarified by the inspecting officers or the consignee or by the plaintiff itself.

Again, the plaintiff does not appear to have responded to the notice of September 14, 2012; not even asked RDSO as to the nature or extent of the goods failing to conform to the specifications stipulated in the relevant purchase order.

It is also not the plaintiff’s case that the plaintiff forwarded such letter of September 14, 2012 to either the inspecting agency, second defendant Rites LTD.or to consignee Konkan Railway whether to carry out a fresh inspection or otherwise allay the misgivings of RDSO consequent upon the two samples failing to pass muster.

The plaintiff’s visit to this Court was rewarded with an order that restrained any effect being given to the RDSO directive for the plaintiff to stop production of the relevant material or supplies thereof to the railways.

The plaintiff also obtained orders for further inspection to be carried out, but as the events panned out and can now be seen, it is evident that the primary objective of the plaintiff was to come to Court and stall the steps that RDSO could have taken under the vendor guidelines.

In short, the plaintiff wanted to protect its subsisting orders against the RDSO directive to stop production of the relevant goods and its supply and the plaintiff succeeded in obtaining a virtual decree in the RDSO order of suspension of production and supply being injuncted by this Court.

In a sense, if there had been any accident or loss of blood due to the failure of the metal lineRs.as they did not adhere to the specifications as to dimensions, the RDSO may have been justified in blaming the Court therefor.

What the plaintiff now seeks to demonstrate is the subsequent “clean” certificates issued in its favour by Rites.

The plaintiff draws the Court’s attention to two reports furnished in its favour by Rites, without referring to the third report which altogether demolished the earlier reports and concluded that the goods supplied by the plaintiff under the relevant purchase order may have been “unsuitable”.

The need for the RDSO to draw the samples and carry out the inspection and the steps taken by the RDSO in such regard have been lucidly explained in the affidavit filed on behalf of such organisation.

It appears that every vendor interested in effecting supply of any goods to the railways, particularly, engineering goods, needs to be on the list of approved vendors as prepared by the RDSO.

At the relevant point of time, the plaintiff was governed by the “General Guidelines for Vendor Development” effective from September 5, 2011.

A copy of such guidelines has been appended to the petition.

Clause 20.1 of the said guidelines deals with consignee-end sample testing and the several clauses thereafter, which have been explained in the RDSO affidavit, provide for the drawing of samples by the RDSO from the relevant railway consignee and the testing thereof.

The new vendor guidelines that have now come into place make some changes in the procedure with effect from July 27, 2015, but there does not appear to be a major departure from the previous set of guidelines.

In any event, since the samples were drawn by the RDSO in 2012 and long prior to the guidelines effective from July 27, 2015 coming into effect, the earlier guidelines would govern the parties.

The RDSO affidavit explains that the sampling test is not necessarily linked to any particular contract but is conducted to ascertain whether due inspection had been carried out and the subsequent supply conformed to the specifications stipulated in the relevant contract or purchase order.

Quite realistically, the RDSO affidavit says that inspection certificates may sometimes be erroneous, whether deliberate or otherwise.

The affidavit also speaks of inferior quality goods being slipped in after the inspection is conducted.

In this case, the test of the fiRs.sample failed whereupon it was incumbent on RDSO, under the vendor guidelines, to inform the plaintiff of such result and invite the plaintiff to depute a representative or be present at the time that the second sample was to be opened for testing.

The plaintiff failed to depute any personnel within reasonable time of the receipt of the notice dated July 4/9, 2012 and the second sample was opened by the RDSO on August 17, 2012 and the dimension tests carried out showed that the goods did not adhere to the specifications stipulated in the relevant purchase order.

A copy of the RDSO letter of September 14, 2012 appears to have been forwarded to Rites.

However, the joint inspection conducted by Rites – the report whereof is heavily relied on by the plaintiff – appears not to have conducted the dimension tests at all.

The fiRs.report of Rites of May 23, 2013 appears to have been prepared to suit the plaintiff.

Despite Rites being made aware by RDSO of the failure of the plaintiff’s metal liners to meet the required dimensional specifications, the third paragraph of the Rites’ report of May 23, 2013 went out of its way to suggest that no complaint regarding the quality or “usability” of the product had been reported by the ultimate user.

It also appears that a colossal error, apparently committed by the inspecting official of Rites for which he has been subsequently taken to task, was glossed over by Rites in its initial report of May 23, 2013 after the RDSO had reported the matter to Rites.

In accordance with inspection procedure specified in the relevant purchase order, the goods were apparently inspected by the official of Rites in the end of December, 2011 and the beginning of January, 2012.

The inspection certificate refers to the relevant dates and the numbers of the lots.

However, it was subsequently discovered – a fact that was glossed over in the Rites’ subsequent reports of May 23, 2013 and June 17, 2013 – that there could not have been any typographical mistake in the original inspection certificate by describing the lots to be of the year 2011 since it was clearly evident from the goods that they had been manufactured in the year 2012.

Indeed, the body of the Rites affidavit disowns the typographical mistake excuse proffered in the reports of May 23, 2013 and June 17, 2013 in the following words: “14.

With reference to the contents of paragraphs 11 to 16 of the said petition, it is stated that the inspection conducted by the respondent No.2 was improper.

The respondent No.2’s inspecting engineer, Mr.Pradip Ranjan Sarkar, who was incharge of carrying out the inspection, carried out the inspection and signed the Inspection Certificates.

The inspection was done improperly and Mr.Pradip Ranjan Sarkar has acted in connivance and collusion with the petitioner to further the petitioner’s incorrect intention of supplying deficient quality material to the Railways.

The Inspection Certificates purport to record that the materials were offered for inspection on 29th December, 2011 and 3rd January, 2012 by the petitioner, the inspection was initiated on 30th December, 2011 and 5th January, 2012 and the inspection was completed on 9th January, 2012 and 20th January, 2012 respectively.

It has however transpired that the material was not even manufactured on that date.

Copies of the Inspection Certificates dated 9th January, 2012 and 20th January, 2012, issued by the respondent No.2 under signature of Mr.Pradip Ranjan Sarkar, are annexed hereto and collectively marked with the letter “B”.

The marking and lot number indicated in the Certificates would show that the year of manufacture is 2011.

However, the embossing on the materials will show that the materials have been manufactured in the year 2012.

The dates of inspection on the Inspection Certificates could, therefore, not have been possible since at that time, the goods were not even manufactured…” The second of the subsequent reports of Rites of June 17, 2013 advised that the apparent typographical error be corrected.

However, it is evident from such second report of Rites that only the markings were tested or checked and no other tests were conducted in respect of the goods supplied by the plaintiff to Konkan Railway under the relevant purchase order.

Similarly, it is evident from the fiRs.report of Rites of May 23, 2013 that no other tests may have been conducted as the entire particulars in the form relating to the details of tests have been scored through.

A third report was prepared by Rites which was, quite childishly, not referred to on behalf of the plaintiff though it is included as part of Rites’ affidavit.

Such third report of July 8, 2013 refers to a letter of May 21, 2013 issued by the Director Vigilance which prompted the same senior inspecting engineer to furnish an altogether different report by virtually disowning his two previous reports of May 23, 2013 and June 17, 2013.

The third report stated as follows:“The conclusion may be read as “The markings mentioned in IC (inspection certificate issused by Pradip Ranjan Sarkar) differs from the markings observed on supplied material and also based on RDSO vigilance letter reffered (sic.

referred) at Sr.No.2, material is unsuitable…” The entire thrust of the plaintiff’s submission today was that notwithstanding RDSO finding some minor fault in the goods supplied under the relevant purchase order by the plaintiff to Konkan Railway, the Rites gave the plaintiff a complete clean-chit after a joint inspection and, as such, the RDSO report could no longer be looked into.

The situation as evident from the documents disclosed in the affidavits demonstrates the utter falsity of the case run and the argument made on behalf of the plaintiff.

Some six months after the RDSO advice to the plaintiff of September 14, 2012 remained unheeded and the plaintiff failed to furnish any material to satisfy the RDSO that the goods supplied by the plaintiff under the relevant purchase order to Konkan Railway adhered to the contractual specifications, the final report of the inspection of the second sample was forwarded by RDSO to the plaintiff under cover of a letter dated March 20, 2013.

Such letter referred to the failure by the plaintiff to depute any representative at the time that the second sample was opened.

The full test results were forwarded to the plaintiff under cover of such letter.

The letter has been disclosed in the affidavit filed by the RDSO and the test results show that the plaintiff’s goods passed the chemical analysis, macro examination and the hardness tests; but they failed in the dimension tests.

The two sets of samples that have been detailed in the test report failed in the dimension tests in all aspects except for the second sample in respect of one of the gauges.

Apropos such test results, the plaintiff raises another bogey.

The plaintiff says that clause 6.3.3 of the purchase order or the terms relating thereto bind both the plaintiff and the railways and such clause required two sets of gauges to be manufactured by the plaintiff in accordance with the drawings and specifications of RDSO for one set of the gauges to be retained by the plaintiff and the other set of gauges to be made available to the inspecting agency for the inspecting agency to conduct dimension tests on the goods at the time of inspection.

The substance of the plaintiff’s submission in such regard is that since RDSO had no access to either the plaintiff’s set of gauges or to the inspecting agency’s set of gauges, the results of the dimension tests conducted by RDSO ought to be disregarded.

In such regard, the plaintiff seeks to rely on a prima facie view expressed in an ad interim order on a writ petition passed on September 7, 2012.

There is no substance in the plaintiff’s contention in such regard.

To begin with, the relevant clause does not require the inspecting agency to be in possession of the second set of gauges.

All that it requires is for the second set to be used by the inspecting officer during inspection.

Even if it is accepted for argument’s sake that such sentence in clause 6.3.3 of the purchase order or its attendant conditions implied the second set of gauges to be retained by the inspecting agency, one cannot lose sight of the fact that the two sets of gauges that were required to be prepared by the plaintiff were to be as per the specifications of the RDSO.

If any third party, other than RDSO, had conducted the tests on any gauges other than the two sets manufactured by the plaintiff, the point would have been open to the plaintiff; but since it is the RDSO gauges that revealed that the plaintiff’s goods did not adhere to the contractual specifications as to the dimensions, it is not acceptable that the goods had to be tested for their dimensions only on either set of gauges manufactured for such purpose by the plaintiff under clause 6.3.3 of the purchase order or its attendant terMs.More importantly, at no point of time did the plaintiff question the veracity of the test results, whether upon the receipt of the initial letters of July 4/9, 2012 or upon receipt of the subsequent letter of September 14, 2012 or the actual test results of March 20, 2013.

Indeed, the veracity of the test results may not be an issue in this suit; for if they were, the Court would scarcely have the expertise to go into such aspect of the matter.

The plaintiff has deliberately confused one set of matters with another to present some kind of a dispute before the Court only to ensure that the work orders in execution at the time that the suit was instituted were altogether completed by taking advantage of the pendency of the suit in this Court.

Towards such end, the plaintiff has been completely successful in fooling this Court.

As would be evident from the vendor guidelines relevant at the time of institution of the suit, it was for the plaintiff to address the RDSO’s misgivings as to the goods supplied under the relevant purchase order.

The plaintiff did not respond to the several notices issued by RDSO to indicate as to why the errors pointed out by RDSO may not have been of any significance or there may not have been any error at all or otherwise.

Under the procedure as envisaged in the guidelines relevant at the time, a precautionary order of requiring the goods not to be supplied any further is passed by the RDSO upon the fiRs.sample failing, subject to the results of the second sample.

The direction issued and advice given by RDSO to the plaintiff vide its fiRs.letter of July 4/9, 2012 was in conformity with the vendor guidelines as they existed then.

Upon receipt of such information, it was incumbent on the plaintiff to either question the results or demonstrate otherwise that the goods did conform to the specifications.

It was also open to the plaintiff to approach the RDSO to indicate why the marginal aberrations were of no relevance.

As it later transpired from the investigation undertaken by Rites, the plaintiff had induced the inspecting officer of Rites, who visited the plaintiff’s manufacturing facility in the end of 2011 and the beginning of 2012, to issue a favourable report prior to the goods being manufactured at all.

So that such cat was not out of the bag upon further investigation, the plaintiff chose the safer road of coming to court rather exposing itself to further queries of RDSO and the plaintiff’s collusion with the relevant official becoming apparent.

The entire plan has succeeded and the supplies have now been effected by the time the seemingly innocuous motion has ripened for final hearing.

There may be metal liners in several depots of the railways, waiting to kill passengers or derail train compartments.

Despite the best efforts of the RDSO, the supply of sub-standard material to the railways could not be stopped.

It is, however, not clear whether the metal liners of the plaintiff’s supply have been used by the railways since there is a line in the Konkan Railway’s recent affidavit that the price for the rejected goods should be refunded to it, though no action in such regard may have been taken by Konkan Railways for obvious reasons.

Indeed, under the procedure envisaged under the vendor guidelines relevant at the time, even if steps had been taken by the RDSO to delist or downgrade the plaintiff as a supplier or suspend the plaintiff from the list of approved supplieRs.an appeal could have been carried to a designated high official of the RDSO.

The plaintiff hijacked the entire process by coming to court and obtaining an order that nullified the RDSO directive for the plaintiff to not supply the sub-standard goods till such time that further tests were conducted and clearance was issued in such regard.

There is no case made out by the plaintiff for the issuance of any interlocutory order.

The test reports have not been challenged on merits.

The procedure for carrying out the tests has not been seriously questioned though some points of prejudice have been urged.

The plaintiff was, undoubtedly, bound by the vendor guidelines and the drawing of the samples and the testing thereof by RDSO were strictly in accordance with the vendor guidelines.

The propriety of the vendor guidelines has not been called into question.

The plaintiff has attempted to mislead the Court by suggesting that Rites has given a clean final report to the plaintiff, when it is plain to see that Rites did not conduct the dimension tests, and, in any event, observed that the goods supplied were “unsuitable”.

When the plaintiff has not been able to make out a prima facie case, the consideration of balance of convenience does not arise.

Even if the balance of convenience were to be taken into account, the same would be overwhelmingly against the plaintiff.

By the RDSO advice of July 4/9, 2012 the plaintiff was required to stop production and supply of only the metal liners and not of other goods that the plaintiff may have been supplying to the railways.

Further, when the safety of trains was involved, the plaintiff’s business interest would not be a relevant consideration to allow the goods to be supplied when lives could be at risk.

For this dishonest action and the gross abuse of the process of the Court, certain conditions have to be imposed on the plaintiff in addition to this petition being dismissed.

There is no doubt that the plaintiff has undeservingly obtained orders which allowed the plaintiff to continue its supplies despite the RDSO ban following the failure of the fiRs.sample to meet the specifications under the relevant purchase order.

Such order of the RDSO as contained in its letter of July 4/9, 2012 will revive immediately.

In any event, as a consequence of the second sample also failing, the plaintiff will not be entitled to supply metal liners to the railways in any manner whatsoever without the RDSO expressly clearing the plaintiff to effect such supplies.

For this completely unmeritorious and vicious action, the plaintiff will remain restrained from supplying any goods of any description (in addition to metal lineRs.to the railways till such time that the plaintiff puts in a deposit of Rs.1 crore with the RDSO which deposit will stand forfeited upon the slightest complaint against the plaintiff’s goods adhering to any specifications being justified within a period of five years from date.

To clarify, no nut or bolt of the plaintiff’s manufacture will reach any railway station or yard or store without the deposit of Rs.1 crore in terms of this order in actual money (not by way of any bank guarantee) being made with the RDSO at its headquarteRs.which money the RDSO will be entitled to forfeit upon the discovery of any goods supplied by the plaintiff to the railways in the next five years not adhering to the contracted specifications.

If there is no default on such account on the part of the plaintiff, the deposit will be refunded after five years from the date of such deposit being made to the plaintiff with interest at the rate of 5% per annum simple, irrespective of the interest that RDSO may earn on such deposit.

GA No.2977 of 2012 is disposed of by vacating all subsisting orders in favour of the plaintiff and restoring the order of arrest of supply imposed on the plaintiff by the RDSO letter of July 4/9, 2012 and making the directions as contained hereinabove effective immediately.

In addition, the plaintiff will pay costs of the present interlocutory proceedings assessed at Rs.5 lakh to the RDSO.

The plaintiff prays for a stay of the operation of this order which is unhesitatingly declined.

Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.

(SANJIB BANERJEE, J.) s.chandra/bp/kc


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