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Judgment
The petitioner is before this Court claiming to be
aggrieved by the letter dated 04.01.2017 (Annexure-A)
issued by the respondent No.3 terminating the
agreement entered into between the parties. The
petitioner is seeking that enquiry be initiated into the
gross acts of omission and commission on the part of
respondents No.1 to 3 in playing fraud upon the
petitioner.
The petitioner having participated in the tender
process for the work of strengthening from KM 216.00
(Gulagalale) to KM 237.00 (Maranahalli) and
providing rigid pavement from KM 250.620 (Kempuhole)
to KM 263.00 (Addahole) (Shiradi Ghat) of NH-48,
Bengaluru-Mangaluru Section, being successful had
entered into an agreement dated 06.11.2015 with the
respondents No.1 to 3 called as ''Engineering,
Procurement and Construction'' (''EPC'' for short). The
project cost was fixed at Rs.90,27,83,520/-. The
petitioner in that regard has referred to the different
Articles contained in the agreement including the term
to appoint a consulting firm and the manner of
commencement of the work as per the appointed date.
The petitioner contends that as per the requirement
they had submitted the Performance Bank Guarantee,
but the respondents had failed in their obligation to
provide 90% ''right of way'' of the project to carry out the
work. According to the petitioner, the work could have
been commenced only after the right of way was
provided so as to enable the petitioner to undertake the
work. The petitioner contends that the work of
Bituminous road (strengthening) for 21 kms and rigid
pavement/concrete of 12.25 kms had been carried out
and 50 Nos. of structures were also constructed. The
traffic continued to ply on the project Highway wherein
the petitioner was to undertake the work. The
respondent No.3 was required to close the project
highway for vehicular traffic and handover the same to
the petitioner in terms of Article 8.1 and Schedule-A to
the EPC agreement. The concrete road/rigid pavement
could have been carried out only if the road was
completely blocked as the work also involved the
construction of Culverts, Earthwork, Dry lean Concrete,
Pavement quality concrete.
The petitioner further reiterates about the right
of way not being provided and that the respondent No.3
had verbally informed the petitioner to not carry out the
work in the stretch from KM 216.000 to KM 237.000 as
there is likely to be variation/ change in the scope of
work which was recorded in the meeting dated
04.12.2015. It is further contended that due to the
heavy rainfall in the region the work cannot also be
carried out between May to October. Hence the
possibility of carrying on with the work is only between
November to April. Despite not handing over the right of
way the respondents forced the petitioner to procure
construction material and equipment upto the extent of
50% of the entire project. It is contended that due to
the action of the respondents they were forced to invoke
Article 26 of the agreement for dispute resolution and
sought for appointment of the Conciliator. Despite all
this the respondents illegally issued the notice of
termination on 02.12.2016 without complying the
natural justice. The petitioner in that view filed a
petition under Section 9 of the Arbitration and
Conciliation Act for interim measure and injunction
against invoking the bank guarantee was obtained.
Petitioner contends that the four laning of KM 189.700
at Hassan to KM 237.000 at Maranahally of NH 48 was
awarded to respondent No.4 without informing the
petitioner and it came to their knowledge only
subsequently. Due to such action of the respondents,
the petitioner has approached this Court.
Respondent No.3 has filed a detailed objection
statement. At the outset it is contended that the parties
are governed by an arbitration clause contained in the
agreement and as such the instant petition is not liable
to be entertained. It is contended that the petitioner
has already approached the City Civil Judge, Bengaluru
in a petition under Section 9 of the Arbitration and
Conciliation Act seeking to restrain the respondent No.3
from encashing the demand drafts. Even prior to the
order the same had been encashed. The petitioner
instead of availing an appropriate remedy for dispute
resolution has filed the instant writ petition only to
avoid the natural consequences that would flow on
termination. In that regard the petitioner is seeking to
overcome Section 2 and Articles 2.1.19 and 2.1.19.3 of
the EPC agreement insofar as the contract as entrusted
to the petitioner. It is pointed out that the tenders
called by the respondent No.4 is for the stretch
commencing from KM 189.700 to KM 237.00. The
entire stretch was sought to be rigid pavemented and
required a four-line Highway and it cannot be
considered as a substitution of the contract entrusted to
the petitioner and is in addition to that work entrusted
to the petitioner. The petitioner has failed to adhere to
the work entrusted to them and is only putting forth
excuses to overcome the non-performance and breach.
Insofar as the contract awarded to the petitioner from
KM 216.000 to KM 237.000 and from KM 250.620 to
KM 263.000, the allegations as made by the petitioner
relating to appointment of consulting Engineer and the
report submitted are all disputed and the further
contention that the right of way was not handed over is
also disputed.
It is contended by respondent No.3 that the
performance guarantee was delivered by the petitioner
on 25.11.2015 and it is only at the delivery of the
performance guarantee the respondent was required to
handover possession. The possession is claimed to have
been handed over on 23.12.2015 and the
acknowledgement has also been reduced into writing.
The use of the road from Nelamangala to Mangaluru is
referred to with the details of the route through which it
passes. The steps taken to provide a road by keeping in
view the problem of maintenance in the Western Ghats
is referred to in detail. In that light, the work that was
required to be performed keeping in view that the
complete closure will not be possible due to various
villages located in the transit way is highlighted. Hence,
it is contended that the contract does not cast any
obligation to close or stop the flow of traffic. The
petitioner-company was aware of the challenges. As
indicated in Article 2.5, these aspects were also taken
note prior to bidding and it was done after visiting the
project site. With the knowledge of all these aspects the
petitioner had offered to ensure collection of 60% of the
material by the end of December 2015 after which the
respondent No.3 had indicated that the road would be
closed. Despite the same, the petitioner did not ensure
collection of the material. In that light the respondent
No.3 on making further reference to the specific Articles
contained in the agreement has disputed the claim of
the petitioner about the petitioner having been ready to
perform their part and the respondent not having made
appropriate arrangement for closure of the road as
alleged. With regard to the issues raised by the
petitioner relating to the bill not having been paid, it is
contended that the RA Bill No.1 itself would indicate
that it was prepared on 04.01.2017 and submitted on
05.01.2017 subsequent to the termination. Thus the
respondent No.3 contends that there are serious
disputed questions which arise for adjudication and in
that light, they seek dismissal of the petition.
Respondent No.4 have filed their separate
objection statement limiting it only insofar as the nature
of the work being performed by them and the contention
relating to the work is reiterated in the same manner as
has been put forth by respondent No.3 whereby it is
contended that there is no overlap of the work being
performed by them and the petitioner. The said
respondent also seeks for dismissal of the petition.
Heard Sri. Udaya Holla, learned senior counsel
on behalf of Sri. Venkat Satyanarayana, learned counsel
for the petitioner, Sri. Krishna Dixit, Sri. S.V.Giridhar,
Ms. Shilpa Shah, learned counsel for the respective
respondents and perused the petition papers.
As evident from the records and the rival
contentions, the contract entered into between the
parties is terminated by the communication dated
04.01.2017. It is impugned in this petition at
Annexure-A. The contract between the parties is the
EPC agreement dated 06.11.2015 entered into for
undertaking the work of strengthening from KM
216.000 to KM 237.000 and providing rigid pavement
from KM 250.620 to 263.000 (Shiradi Ghat) of NH 48
Bangalore- Mangalore Section in the State of Karnataka.
The termination of the contract has been made since
the respondent No.3 based on the report of the
Authority Engineer and the Superintending Engineer
concluded that the petitioner has not been able to
complete the work as provided under the contract. If in
that light a dispute has arisen between the parties, the
mechanism for resolution thereof is provided under
Article 26 of the EPC agreement as it is to be resolved by
arbitration.
The learned counsel for the respondent No.3 at
the outset would therefore contend that the dispute
resolution mechanism as provided under the EPC
agreement is the appropriate remedy to be availed if the
petitioner is aggrieved by the termination of the contract
and as such the instant petition is not maintainable. It
is pointed out that the petitioner in that regard, for the
purpose of interim measure having filed a petition under
Section 9 of the Arbitration and Conciliation Act in A.A.
No. 08/2017 cannot now invoke the writ remedy. Hence
the petition is liable to be dismissed in limine, is the
contention.
Learned senior counsel for the petitioner in
order to counter the said contention and to contend that
the writ petition will be maintainable has relied on the
decision in the case of Uttar Pradesh State Bridge
Construction Corporation Limited, Lucknow -vs-
Bangalore Development Authority and Others
[2005 (5) Kar. L.J. 112 (DB)] wherein the Hon''ble
Division Bench of this Court has held that the writ
petition against the State and its instrumentality arising
out of contractual obligation is maintainable and
judicial review is permissible both at the pre-contract
stage and post-contract stage since the action of the
State should be fair, just, reasonable and devoid of
arbitrariness which are the basic requirements of
Article 14 of the Constitution. In the said case the
termination of the contract which had been made by
BDA was upheld by this Court on taking note of the
procedure that was followed.
The decision in the case of Zonal Manager,
Central Bank of India -vs- Devi Ispat Limited and
Others [(2010) 11 SCC 186] is relied, wherein the
Hon''ble Supreme Court has held that even in
contractual matters, mandamus can be issued against
the authorities discharging the ''State'' functions. That
was a case where despite the repayment of the entire
loan the documents were not returned by the bank. In
that situation, it was held that it is not the DRT alone
which should look into such matter but a writ can also
be issued. The learned senior counsel has also relied on
the decision in the case of Union of India and Others
-vs- Tantia Constructions Private Limited [(2011) 5
SCC 697] wherein, in respect of a contractual matter
which contained an arbitration clause, it is held that an
alternative remedy is not an absolute bar to the
invocation of the writ jurisdiction of the High Court or
the Supreme Court and a writ petition without
exhausting that remedy will be maintainable.
Learned counsel for the respondent No.3 in
order to rebut the same and to contend that in the
present facts the exercise of jurisdiction by this Court is
not called for, has relied on a later decision of the
Hon''ble Supreme Court in the case of Joshi
Technologies International Inc. -vs- Union of India
[(2015) 7 SCC 728] wherein the Hon''ble Court with
reference to its earlier decisions has summarised the
position as hereunder,
"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said made of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.
Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations.
70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, Involving examination and cross- examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the court can direct the aggrieved party to resort to alternate remedy of civil suit etc.
70.4. Writ jurisdiction of High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/instrumentality and/or agency of State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract. This Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.
Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded."
In the above background, the legal position is
clear that there is no bar for a writ Court to entertain a
writ petition in contractual matters even if the
alternative remedy is provided in the contract, but it is
only in the exceptional circumstances carved out, the
writ is to be entertained and not as a matter of routine.
Normally, if there are factual disputes involved relating
to performance or non- performance of the contract, the
parties are to be relegated to the appropriate remedy. In
that back ground, if the facts in the instant case is
noticed, it is not that even as per the case of the
petitioner the work has been completed. On the other
hand, the contention is that the work could not be
undertaken as there was breach on the part of the
respondent No.3 in not providing the right of way by
blocking the road and enabling them to undertake the
work and the allegation is also that there is overlap of
the work as entrusted to the petitioner and being
undertaken by the respondent No.4. Hence it is in the
nature of a justification being put forth for the work not
being progressed and the blame of committing the
breach is being shifted on the other party to the
contract.
On those aspects relating to the contract, the
learned senior counsel for the petitioner has made
reference to Article 10.3.1 with regard to the time frame
within which the work is to be performed from the
appointed day i.e., the date on which the petitioner has
delivered the performance security and on which day
90% of the ''right of way'' is to be provided. In that
context, the Site as described in Article 8.1 and
Schedule-A is referred and in that regard, it is
contended that though the vehicles were to be blocked
the same had not been done which prevented the
petitioner from undertaking the work. The learned
senior counsel has referred to the documents produced
along with the additional statement of facts with regard
to the portion of the work performed in Sakleshpur
Town as depicted in Annexure-AA, which is a part of the
contract and the petitioner having procured the
materials and machinery as per the requirement, the
work could not be done in the remaining portion as the
''right of way'' was not provided.
Learned counsel for respondent No.3 on these
aspects would seriously dispute the position and would
refer to Article 23.1 wherein the procedure for
termination is provided and despite the notice being
issued to cure the defects and the cure period having
lapsed, there was no progress and in that light the
termination has been made. Reference is made to the
definition of ''Right of Way'' as contained in Article 28 of
the EPC agreement relating to the constructive
possession of the site and in that context, reference is
made to Article 6.1.1 where the disclaimer is provided
due to which the petitioner being aware of the terrain
and all working conditions had agreed to undertake the
work which is further contained in the Instruction to
bidders in Clause 2.5.1. The letter dated 16.12.2015
(Annexure-R2) whereunder the petitioner was requested
to depute the authorised person to take over the project
site is relied. The letter dated 19.03.2016 addressed to
the petitioner will also indicate that the site was
inspected on 26.12.2015 and instruction was issued to
start the work immediately but the work had not
progressed which was also referred therein. To point
out that the complete closure of the road was not a
condition agreed upon and on the contrary the
petitioner had agreed to maintain the road to keep it in
road worthiness for the plying traffic as contained in
Article 10.4 relating to maintenance during construction
period is also referred. In this regard, reference is also
made to Article 16 relating to the traffic regulation to be
made by the Contractor. The newspaper reports relating
to road closure are all reports of the earlier contract
period and not relating to the present one. Even
otherwise the stoppage of traffic would have arisen only
if the petitioner had stored the construction material
and the equipments to the extent of 60% as agreed in
the contract, which the petitioner had failed to fulfil.
Insofar as the overlapping of work as
contended by the petitioner, due to which they claim
that they could not perform the work, a comparative
reference is made to the work assigned to the petitioner
which is described in page 70 of the petition papers
which states the work as Strengthening from KM
216.000 to 237.000 and providing Rigid Pavement from
620 to 263.000 (Shiradi Ghat) of NH-48, whereas
the work undertaken by respondent No.4 is referred to
in Section 1 of the Agreement as available in page 457
of the petition papers and is described as Package-I-
Four Laning of Hassan (Existing Km 189+700, Design
Ch 184+912) to Maranahally (Existing km 237+000,
Design Ch 230+060) section of NH-75 (Old NH No 48).
Though the petitioner has relied on the communication
dated 17.12.2016 (Annexure-Q) to contend that there
was change in scope of work, the learned counsel for
respondent No.3 has referred to the contents to point
out that it was not a decision taken. The schedule as
per which the work should have been completed is
stated in paragraph-30 of the objection statement which
is on the basis as contained in Schedule-J of the EPC
agreement. The bill dated 04.01.2017 as at Annexure-R
is pointed out to contend that if the same is taken into
consideration only about 10% of the work was done as
on the date of termination. The letter dated 05.05.2016
of the petitioner is referred to point out that the reasons
put forth therein is not what is sought to be contended
herein, but it was the difficulty faced by the petitioner at
their end which had delayed the work. The notice dated
30.06.2016 (Annexure-R3) calling upon to cure the
defects will point out that all the details had been
indicated and thereafter the termination was made.
In the background of the contentions urged, it
will indicate that there are several disputed factual
aspects relating to the site in the context of ''right of way''
not being available since the traffic had not been closed
and as to whether it was necessary at all in view of the
terms agreed in the contract. The materials having been
collected in that background also raises disputed
questions and the contention that only 10% of the work
having been completed at the time of termination of the
contract and the reasons there for, are issues which
require adjudication to come to a conclusion as to who
had committed the breach. The scope of work is also
being disputed in the context of the work being
undertaken by respondent No.4. Therefore in that
context, even though the decisions cited above indicate
about the writ petition in contractual matters that too
when alternative remedy is available being maintainable
as a proposition of law, the question is whether it is to
be entertained in a situation when it raises several
disputed questions of fact which will require resolution
in an appropriate manner.
This Court while examining such disputed
contentions in W.P.Nos.11091-92/2016 disposed on
20.03.2017 had taken note of a decision of the
Hon''ble Supreme Court in the case of State of
Kerala and Others -vs- M.K.Jose [(2015) 9 SCC 433]
wherein it is observed, what precisely was the quantum
of work done and whether there had been a breach by
the owner or the contractor are required to be gone into
by the appropriate legal forum. It is held therein that a
writ Court should ordinarily not entertain a writ
petition, if there is a breach of contract involving
disputed questions of fact. In the instant facts as
already noticed above, there are several factual disputes
which require determination based on evidence. As
noticed, Article 26 of the EPC agreement provides for a
detailed dispute resolution mechanism. The petitioner
being aware of the legal remedy has already resorted to
the same for the purpose of interim measure by filing
the petition under Section 9 of the Arbitration and
Conciliation Act in A.A.No.08/2017. Hence it would be
open for the petitioner to avail that remedy which is
provided to them under law, due to which I do not deem
it appropriate to decide the disputed questions between
the parties in the narrow scope available in a writ
petition, when prima facie it is seen that the respondent
No.3 has terminated the agreement by following the
procedure contemplated under the agreement. Whether
the reason for which it was terminated is justified or
not, if not, what relief is to be provided to the petitioner
are matters to be decided in the appropriate legal forum
as otherwise in a writ proceedings, it is not expected to
grant specific performance of the contract or quantify
the damages, if the breach is proved. The observations
herein being only for the purpose of consideration of
this writ petition, the contentions on merits are to be
left open which shall be considered by the appropriate
forum based on the evidence available before it, without
being prejudiced by any of the observations.
In that view the petition is dismissed, leaving it
open to the petitioner to avail the appropriate remedies
open to them in accordance with law. No costs.