RSMML cannot penalise contractor for delays its own note-sheets acknowledged as force majeure: Rajasthan HC

Jodhpur: The Rajasthan High Court has quashed the order dated 24 December 2023 by which Rajasthan State Mines and Minerals Limited (RSMML) terminated a limestone transportation contract, forfeited the security deposit, and blacklisted the petitioner for three years, holding that the delay in commencement and the shortfall in execution of work were caused by truck union agitation that fell squarely within the force majeure clause of the agreement — a position that RSMML’s own contemporaneous note-sheets had themselves recorded.

A Division Bench of Justice Sunil Beniwal and Justice Arun Monga, pronouncing judgment on 30 March 2026, held that the contradictory approach of the State — acknowledging force majeure in its internal records while simultaneously terminating the contract on the same grounds — cannot be upheld.

RSMML issued a Notice Inviting Tender (NIT) dated 23 March 2023 for the loading of limestone gitti of various sizes from crusher hoppers and stacks at the company’s Sanu Mines, District Jaisalmer, its transportation to the railway siding at Sanu Railway Station, and its unloading, stacking, and mechanized loading into railway wagons.

The petitioner, M/s United Coal Carrier, was declared the L-1 bidder, and a Letter of Acceptance was issued on 17 July 2023 followed by an addendum on 20 July 2023. An agreement dated 16 August 2023 was executed between RSMML and M/s Jai Tanot Mata Mining and Transportation Co-operative Society, through which the petitioner was required to execute the work. The tender had earlier been challenged by M/s PMP Infratech Pvt. Ltd., an unsuccessful bidder, but S.B. Civil Writ Petition No. 8853/2023 was dismissed on 13 July 2023.

As per the tender conditions, the petitioner was required to commence work within 30 days of the Letter of Acceptance, i.e., by 16 August 2023. From 17 August 2023, however, the Jaisalmer Truck and Dumper Operator Association began agitation and strike action, demanding that the contractor use only local trucks at rates dictated by the union. These demands were not part of the tender conditions.

The petitioner was effectively prevented from commencing operations. It approached this Court through S.B. Civil Writ Petition No. 14178/2023, which was disposed of vide order dated 27 September 2023 directing the police to ensure that the petitioner’s lawful transportation fleet was not harmed due to unlawful competition or illegal pressure from any person. Work finally commenced on 8 October 2023 under police protection, a delay of 53 days. Even thereafter, operations were restricted to daytime hours and specific locations, with police escort required — limiting output to approximately 3,000 MT per day against a required rate of approximately 12,000 MT per day.

RSMML issued various communications directing the petitioner to meet prescribed production criteria, failing which action would be taken under the contract. The petitioner responded highlighting the law and order situation. On 21 December 2023, the petitioner was called to a meeting to discuss transportation targets in view of the prevailing situation. On 24 December 2023, RSMML terminated the contract under Clause 4.86 of the contract on two grounds: delay of 53 days in commencement, and failure to meet the requisite transportation and loading targets. It simultaneously forfeited performance security of Rs. 5.27 crores and bid security of Rs. 411.84 lakhs (both in the form of bank guarantees), and blacklisted the petitioner from RSMML tenders for three years. A contempt petition (S.B. Writ Contempt No. 1248/2023) filed by the petitioner was dismissed on 21 January 2026 after RSMML submitted that the law and order situation had been resolved and a temporary police post established at Village Sonu. Notably, RSMML itself issued a satisfactory performance certificate in favour of the petitioner for the period 1 July 2024 to 30 September 2025, confirming that assigned targets had been met once the situation normalised.

Senior Advocate Mr. Sudhir Gupta, with Ms. Shweta Chauhan and Mr. Tarang Gupta, and Senior Advocate Mr. Sachin Acharya, with Mr. Gautam Bhadadra and Mr. Vipul Dharnia, submitted that both grounds for termination were directly attributable to the force majeure situation created by the truck union agitation, which was beyond the control of the petitioner. The force majeure clause (Clause 4.65 of the NIT) uses non-exhaustive language covering “any cause beyond reasonable control” and therefore encompasses obstruction by a third-party truck union.

Counsel relied extensively on RSMML’s own internal note-sheets, particularly those dated 9 November 2023, 16 November 2023, and 26 December 2023, which recorded that the delay and shortfall were not attributable to the petitioner and recommended that no penal provisions be invoked. A precedent directly on point was cited: when an identical law and order situation arose for the previous contractor PMP Infratech at the same Sanu Mines, RSMML had recognised it as force majeure and waived off the penalty (as recorded in Note Nos. 62 and 63 of PMP Infratech’s file).

The same problem had arisen for even earlier contractors, as evidenced by S.B. Civil Writ Petition No. 6556/2019 (M/s LR Mining and Transportation Cooperative Society) and S.B. Civil Writ Petition No. 7055/2020 (PMP Infratech). Furthermore, RSMML itself had acknowledged during contempt proceedings that the law and order issues had since been resolved. The petitioner’s satisfactory performance certificate for 2024–25 demonstrated that, once conditions normalised, the petitioner performed to standard.

Counsel for RSMML, Mr. Vinay Jain, submitted that the petitioner had been given multiple opportunities to meet its contractual obligations but failed to do so, resulting in losses to the State. Under Clause 3.1(vii) of the NIT, the petitioner was deemed to have satisfied itself about working conditions at the site before bidding, and the law and order situation could not therefore be said to be beyond its control. Approximately five months had elapsed since the agreement without any improvement in performance, justifying the termination.

Senior Advocate Mr. M.S. Singhvi, appearing for PMP Infratech (impleaded only to address legal issues), submitted that the contract was inherently determinable, making the writ petition not maintainable and relegating the petitioner to remedies under the Specific Relief Act, 1963. Senior Advocate Mr. Vikas Balia, also for PMP Infratech, argued that the force majeure clause (Clause 4.65) was exhaustive and did not include resistance by a truck union or a general law and order situation; that PMP Infratech had itself resolved a similar problem within eight days, demonstrating that the situation was manageable; and that the petitioner lacked both the requisite experience in industrial mineral transportation and the necessary fleet strength.

The Division Bench, per Justice Sunil Beniwal, first addressed maintainability. While judicial restraint in tender and contractual matters is the norm, citing Tata Cellular v. Union of India [(1994) 6 SCC 651] and Silppi Constructions Contractors v. Union of India [(2020) 16 SCC 489], the Court held that the writ petition was maintainable in the facts and circumstances of this case, where the challenge went to both the rationality of the decision and alleged violation of natural justice.

The Court also relied on M.P. Power Management Company Ltd. v. Sky Power Southeast Solar India Pvt. Ltd. [(2023) 2 SCC 703], which recognises that where a dispute involves only documentary construction and the writ petition has been pending for a considerable time, it may be appropriate to decide it on merits rather than relegate the parties to an alternative forum. Since the petitioner’s contract was at its fag end, no useful purpose would be served by such relegation. The objection regarding disputed questions of fact was also rejected, as the existence of the law and order situation was in effect an admitted position on record, acknowledged by RSMML itself in the contempt proceedings.

On the merits, the Court examined Clause 4.65 of the NIT in detail and held that it is not exhaustive. While the clause lists specific contingencies such as statutory directions, civil commotion, fire, epidemics, war, and acts of God, it uses the language “shall include but not limited to” and covers “any other cause beyond reasonable control of the party affected.” A holistic reading reveals that any cause outside the party’s reasonable control qualifies as a force majeure event.

The truck union agitation, which had recurred across three successive contractors for the same Sanu Mines work over several years, plainly fell within this residuary category. The formal notice requirement was held to be satisfied given that both parties were in continuous communication about the situation and RSMML was itself treating the circumstances as force majeure in its own internal notes.

Crucially, the Court found it telling that while RSMML’s own officers at multiple levels — the EIC (Transportation), the Unit Head (Jaisalmer), the Manager (Contracts), and the Group General Manager (Limestone) — had in their note-sheets recorded the force majeure nature of the situation and recommended that neither the penalty for delay nor the shortfall should be attributed to the petitioner, RSMML’s Head Office proceeded to terminate the contract on those very grounds. This contradictory approach, the Court held, “cannot be upheld, as it is clearly borne out from the record that the petitioner was not at fault, rather, it was the extraneous circumstances that adversely affected the execution of the work.”

The arguments advanced by PMP Infratech — that it had resolved a similar problem within eight days, and that the petitioner lacked experience or fleet strength — were rejected. These submissions were unsupported by the stand taken by RSMML in its reply and did not form any part of the reasoning in the termination order itself. The Court declined to embark upon an independent inquiry into these aspects, particularly given that PMP Infratech had been impleaded only to address legal issues.

In a concurring epilogue, Justice Arun Monga noted that since the termination had been conclusively held to be legally infirm — its foundation being the very circumstances characterised as force majeure — the cascading consequences of blacklisting and forfeiture of security deposit were equally rendered “unsustainable/unlawful” and did not merit independent adjudication. Justice Monga also noted that RSMML’s own counsel had fairly conceded during hearing that the petitioner’s performance after the force majeure period was “entire satisfactory and free from any complaint,” fortifying the conclusion that the force majeure plea was genuine and not contrived. With only a short period of the contract remaining, equitable considerations further supported permitting the petitioner to continue for the balance duration.

The impugned order/communication dated 24 December 2023 issued by RSMML — terminating the contract, forfeiting the security deposit, and blacklisting the petitioner for three years — was quashed and set aside in its entirety. The writ petition was allowed.

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