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Fusion Foods & Hotels Pvt Ltd. v/s Union of India

    Writ Appeal No. 242 of 2019
    Decided On, 24 September 2019
    At, High Court of Andhra Pradesh
    By, THE HONOURABLE ACTING CHIEF JUSTICE MR. C. PRAVEEN KUMAR & THE HONOURABLE MR. JUSTICE M. SATYANARAYANA MURTHY
    For the Petitioner: K. Lalitha, Advocate. For the Respondent: B Krishna Mohan, Asst Solicitor General of India.


Judgment Text

C. Praveen Kumar, ACJ.

1. Heard both sides and perused the record. With the consent of both parties, the main appeal itself is heard and disposed of at the admission stage.

2. This appeal, under Clause 15 of the Letters Patent, is filed, questioning the order of the learned single Judge, dated 29.07.2019, in W.P.No.2827 of 2019, wherein the learned single Judge held that the dispute in issue is arbitrable, as per the terms of arbitration agreement and that it is not a case for invoking the writ jurisdiction.

3. The issue involved in the present writ petition is as under:

The deponent in the writ petition is the Managing Director of the petitioner company which has participated in the tender for a licence to operate a restaurant and snack bar at Visakhapatnam Airport. Being successful in the said contract, the petitioner company entered into a license agreement with the Airports Authority of India on 18.08.2010 for a period of ten years i.e., from 08.07.2010 to 07.07.2020. It is averred in the writ affidavit that the contract came to be terminated before the expiry period by giving 180 days notice in writing from either side and without assigning any reason except stating that it was on account of unsatisfactory performance. It is said that the site was handed over to the petitioner on 21.05.2010 and since then, the petitioner is running business without violating the conditions of the agreement and without any complaints from any corner.

4. While so, one of the employees of the petitioner company, by name, J. Srinivas, is said to have attacked the leader of the opposition with a cock fight knife. Pursuant thereto, a show cause notice, dated 10.11.2018, was issued calling upon the petitioner to explain as to why action should not be initiated for termination of the contract under Clause 10 of the General Information Guidelines of NIT and Agreement. It is said that by virtue of the act of the employee of the petitioner company and since the petitioner failed to engage persons of good character, the image of the Airports Authority of India and Vizag Airport in particular came to be tarnished.

5. A reply to the show cause notice was given on 14.11.2018 stating that the appointment of every person was subject to receiving clearance from the police, which procedure was followed even in the case of Mr. J. Srinivas. Hence, it is pleaded that there is no violation of Clause 10 of the General Terms and Conditions. It is further stated in the reply that on 25.10.2018, when the incident took place, Mr. J. Srinivas went on his duty break at 11.30 a.m. and that the petitioner was not aware as to how he approached the VIP lounge and entered the restricted area. It is further stated that on 26.10.2018 itself, the 5th respondent issued a show cause notice to the petitioner company seeking explanation as to how the said person entered the restricted area. The petitioner company submitted explanation in the month of December, 2018 expressing its shock on the attack by one of its employees. It is further pleaded that the instrument used in the attack does not belong to the petitioner company and that the incident happened due to serious security lapse.

6. It is stated that the impugned order, which came to be passed in the month of February, 2019, is silent to the explanation submitted by the petitioner company, which shows that the authorities are predetermined to terminate the contract of the petitioner. It is further pleaded that the respondent authorities are trying to dispossess the petitioner and if they are successful in doing so, the petitioner will be put to irreparable hardship and injustice.

7. After considering the rival submissions and also the material placed on record, the learned single Judge held that this is not a case for exercise of power of judicial review and that the writ petition is not maintainable. Accordingly, dismissed the same, by an order, dated 18.02.2019. Assailing the same, the present writ appeal came to be filed.

8. One of the main grounds urged by the learned counsel for the appellant/petitioner is that availability of an alternative remedy cannot be a ground to reject the writ petition. It is urged that availability of an alternative remedy is a rule of discretion but not one of compulsion. It is also urged that when an instrumentality of the State acts contrary to public interest, unfairly, unjustly and unreasonably in its contractual, constitutional or statutory obligations, the constitutional Court has to exercise its jurisdiction under Article 226of the Constitution of India. It is further urged that even in the case of Jagadish Mandal v. State of Orissa, the Apex Court held that the writ Court will get the jurisdiction if the process adopted or decision made is mala fide or intended to favour others. It is thus pleaded that in spite of availability of an alternative remedy by way of arbitration and or by way of a suit, still the appellant cannot be non-suited and ought to have entertained and allowed the writ petition.

9. On the other hand, learned counsel appearing for the Airports Authority of India would submit that there is no illegality or arbitrariness or violation of any fundamental right in terminating the licence agreement. It is pleaded that if the petitioner company intends to challenge the termination of licence agreement, it has to invoke Clause 29 of the General Terms and Conditions which provide for an arbitration clause. Since the dispute has arisen out of a commercial transaction/contract, the power of judicial review cannot be permitted to be invoked to protect private interest at the cost of public interest or to decide contractual disputes. It is further urged that the termination was not done only on account of the incident which took place on 25.10.2018 but also due to unsatisfactory performance of the petitioner company, as per Clauses 1(b), 18 and 19 of the Licence Agreement and Clause 10 of the General Terms and Conditions. It is stated that the petitioner company, which has employed persons without verifying their proper background, is responsible for the action of its employees and their activities. Coming to the issue of not giving proper opportunity, it is pleaded that a reply to the show cause notice was given by the petitioner vide letter dated 14.11.2018 and not on 16.11.2018 and that the respondents have not received any letter dated 31.12.2018 as alleged by the petitioner company. Considering the explanation submitted and having regard to the fact that the termination was done based on non-compliance of Clauses 1(b), 18 and 19 of the Licence Agreement and Clause 10 of the General Terms and Conditions, due to unsatisfactory performance of the petitioner, besides failure to ensure employment of good character employees by the petitioner, he pleads that order impugned warrants no interference.

10. Though various grounds are urged in the writ petition touching the merits of the case, the only ground on which the learned single Judge rejected the writ petition was that the issue involved herein is arbitrable as per the arbitration agreement and that it is not a case for invoking writ jurisdiction.

11. Relying upon the decisions in Harbanslal Sahnia v. Indian Oil Corporation Limited (2003) 2 SCC 107 and Deep Industries Limited v. Oil and Natural Gas Corporation Limited AIR 2018 AP 45, the learned counsel for the appellant/petitioner would contend that the petitioner cannot be driven to initiate arbitration proceedings and that there is no bar for the Court to entertain the same. It is further stated that arbitration clause is not a bar to invoke the writ jurisdiction when injustice is caused and the rule of law is violated.

12. The counsel for the appellant/petitioner also placed reliance on the judgment of the Apex Court in Maharashtra Chess Association v. Union of India (Civil Appeal No.5654 of 2019, dated 29.07.2019). The issue in the said case was whether a private agreement entered into between the appellant therein and the 2nd respondent therein in the form of Constitution and Bye Laws of the latter can confer exclusive jurisdiction on the Courts at Chennai, ousting the writ jurisdiction of the Bombay High Court under Article 226of the Constitution. After reference to Clause 21 of the Constitution and Bye Laws of the 2nd respondent therein, the Apex Court held as under:

"26. It is certainly open to the High Court to take into consideration the fact that the appellant and the second respondent consented to resolve all their legal disputes before the courts at Chennai. However, this can be a factor within the broader factual matrix of the case. The High Court may decline to exercise jurisdiction under Article 226 invoking the principle of forum non convenience in an appropriate case. The High Court must look at the case of the appellant holistically and make a determination as to whether it would be proper to exercise its writ jurisdiction. We do not express an opinion as to what factors should be considered by the High Court in the present case, nor the corresponding gravity that should be accorded to such factors. Such principles are well known to the High Court and it is not for this Court to interfere in the discretion of the High Court in determining when to engage its writ jurisdiction unless exercised arbitrarily or erroneously. The sole and absolute reliance by the Bombay High Court on Clause 21 of the Constitution and Bye Laws to determine that its jurisdiction under Article 226 is ousted is however one such instance."

13. From the judgment referred to above, it is clear that any suit/legal action against the Federation shall be instituted only in the Courts at Chennai where the registered Office of All India Chess Federation is situated or at the place where the Secretariat of the All India Chess Federation is functioning. That being the position, the Court felt that the Bombay High Court shall not oust its jurisdiction under Article 226of the Constitution of India. The finding of the Bombay High Court ousting its jurisdiction under Article 226of the Constitution was found to be erroneous.

14. In ABL International Limited v. Export Credit Guarantee Corporation of India (2004) 3 SCC 553, the Apex Court observed that having failed to persuade the first respondent to adhere to the contract of insurance between it and the appellant, the appellant filed a writ petition before a single Judge of the High Court praying the Court for quashing the letters of repudiation issued by the first respondent. It also consequently prayed for a direction to the first respondent to make payment of the dues to it under the contract of insurance. After hearing the parties, the learned single Judge came to the conclusion that though the dispute between the parties arose out of a contract, the first respondent being a part of the State for the purpose of Article 12, was bound by the terms of the contract; therefore, for such non-performance, a writ is maintainable and accordingly issued the writ. An appeal came to be filed before the Division Bench which reversed the findings of the learned single Judge holding that the claim of the writ petitioner involves disputed questions of fact which could not be adjudicated in a writ proceeding under Article 226. Challenging the same, the writ petitioner approached the Apex Court. Dealing with the same, the Apex Court held that a writ petition involving serious disputed questions of fact, which requires consideration of evidence which is not on record, will not normally be entertained by a Court in the exercise of its jurisdiction under Article 226of the Constitution, but there is no absolute rule that in all cases involving disputed questions of fact the parties should be relegated to a civil suit. Referring to Gunwant Kaur v. Municipal Committee, Bhatinda ((1963) 3 SCC 769), the Apex Court held that in an appropriate case, the writ Court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact. The issue in the said case was a dispute raised by the first respondent with regard to interpretation of a clause in the insurance contract. Therefore, the Court held that merely because the first respondent disputes the meaning of a clause in the insurance contract, it does not become a disputed fact, however if such an objection as to disputed questions or interpretations is raised in a writ petition the Courts can very well go into the same and decide that objection, if facts permit. The Apex Court in the said case went on to hold that the High Court can intervene under Article 226 if the State or its instrumentality acts in an arbitrary manner even in a matter of contract.

15. The above mentioned two judgments, in our view, may not be of any help to the appellant. The issue that the writ petition can be entertained under Article 226of the Constitution of India, if the State or its instrumentality acts in an arbitrary manner even in respect of a contract, is not in dispute. But in the instant case, the question is whether the learned single Judge was right in rejecting the request, on the ground that the Terms and Conditions of the contract contain an arbitration clause. Clause 29 of the General Terms and Conditions of the contract deal with arbitration, which reads as under:

"All disputes and differences arising out of or in any way touching or concerning this Agreement (except those the decision whereof is otherwise herein before expressly provided for or to which the Public Premises (Eviction of Unauthorised Occupants) Act and the rules framed thereunder which are now enforce or which may hereafter come into force are applicable), shall be referred to the sole arbitration of a person to be appointed by the Chairman/Member of the Authority. The award of the arbitrator so appointed shall be final and binding on the parties. The Arbitration & Conciliation Act 1996 shall be applicable."

16. As seen from the record, the writ petitioner entered into a licence agreement with the Airports Authority of India to run a restaurant and snack bar in NITB at Visakhapatnam Airport for a period of ten years. The conditions of licence agreement would indicate that the Airports Authority of India can terminate the lease agreement on a short notice on account of unsatisfactory performance. The interpretation of this clause and also as to whether the writ would lie, fell for consideration before a Division Bench of the Delhi High Court in Saptagiri Restaurant v. Airports Authority of India 2014 SCC Online Del 1906. It was also a case where a notice was issued to the writ petitioner giving 180 days time of termination of licence granted for operating a snack bar counter in the ground floor check-in area of Anna International Terminal Building at Chennai Airport and licence granted for operation of snack bar counter in the car park area of Kamaraj Domestic Terminal Building at Chennai Airport. Dealing with the said aspect and after referring to the judgment of the Apex Court in the Corporation of Calicut v. K. Sreenivasan ((2002) 5 SCC 361), the Division Bench judgment of the Kerala High Court in Trivandrum Golf Club v. State of Kerala, and the judgment of the Delhi High Court in Gesture Hotels and Food Pvt.Ltd. v. the New Delhi Municipal Council (2014 DLT 359), the Apex Court observed as under:

"The appellant, in the license agreements entered into with the respondent, having expressly agreed that the respondent may terminate the said license at any time with 90 days notice and without even assigning any reason, we are unable to find any error whatsoever in the reasoning given by the learned Single Judge. We may further refer to the Corporation of Calicut v. K. Sreenivasan (2002) 5 SCC 361 laying down that owing to section 64of the Indian Easements Act, 1882, a licensee, if evicted, even though grounds for revocation of licence do not exist, or is forcefully evicted, his only remedy is to recover compensation from grantor and not to resume occupation. The same view was also taken by a Division Bench of the Kerala High Court in Trivandrum Golf Club v. State of Kerala and interim injunction against dispossession sought, declined. The Supreme Court, in appeal preferred there against, vide judgment reported in (2010) 12 SCC 723, refused to interfere. We have also in Gesture Hotels and Food Pvt. Limited v. The New Delhi Municipal Council 210 (2014) DLT 359 following the same view held that no injunction against dispossession of a licensee can be granted. The appellant, for the said reason also is not entitled to the relief sought of continuation as a licensee."

17. Both the counsel also relied upon a decision of the Apex Court in Jagdish Mandal v. State of Orissa (2007) 14 SCC 517. The issue in the said case relates to award of construction contracts to Jagdish Mandal and Laxman Sharma. It was a case where rejection of a tender, lead to filing of W.P.No.4769 of 2005 seeking a direction to the respondents 1 to 4 not to award the contract to Jagdish Mandal or any other contractor, and a further direction for awarding the work to him. The authority, however, accepted the offer of Jagdish Mandal and awarded the work to him under an agreement dated 18.04.2005. The High Court by its judgment dated 25.01.2006 allowed the writ petition filed by the 5th respondent therein and quashed the agreement between the Department and Jagdish Mandal and further directed the Committee to reconsider the case of Narayan Mohanty by accepting the TD passbook submitted by him as valid, vis--vis other tenderers and take a final decision in regard to award of the contract de novo, which was challenged before the Apex Court in S.L.P.No.3196 of 2006 by Jagdish Mandal. After referring to various aspects of law and judgments, the Apex Court observed as under:

"Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, Courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil Court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;

Or

Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largess (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."

18. From a reading of the findings arrived at, it is very clear that power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor can always seek damages in a civil Court. A Court before interfering in tender or contractual matters in exercise of power of judicial review should pose itself as to whether the process adopted or decision made is to favour anyone or whether the process adopted or decision made is so arbitrary and irrational that the decision is such that no responsible authority acting reasonably could have reached. If the answers to these two questions are in the negative, there cannot be any interference under Article 226of the Constitution of India.

19. In the instant case, it is not in dispute that the decision taken to terminate the contract was not to favour others. There is absolutely no allegation that the licence agreement came to be terminated to favour others. Therefore, it cannot be said that the decision taken to ter

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minate the contract was quite arbitral in nature. Be that as it may, it is also to be noted here that Clause 2 of the General Terms and Conditions refers to arbitration clause which states that all disputes and differences arising out of or in any way touching or concerning this Agreement except those specified therein shall be referred to the sole arbitration of a person to be appointed by the Chairman/Member of the Authority. All the cases referred to by the counsel for the appellant/petitioner deal with maintainability of a writ petition under Article 226of the Constitution where a party has acted contrary to the terms and conditions of the contract. It is no doubt true that the jurisdiction of the writ Court is not ousted altogether because of the alternate remedy. But, as held by the Apex Court, it depends upon the facts and circumstance of each case. 20. As stated above, the terms and conditions of the licence agreement contain an arbitration clause and having regard to the fact that the order of termination came to be passed after issuing show cause notice and considering the reply thereto, we do not intend to exercise our discretion on factual aspects and also as to whether the authorities have received the second explanation dated 31.12.2018. As held earlier, the termination of contract was not to favour any third party. In view of the judgment of the Apex Court in Saptagiri Restaurant case (4 supra) wherein similar issue fell for consideration. We are of the opinion that it would be just and proper for the appellant/writ petitioner to avail the remedy as per the Terms and Conditions of the contract, if so advised. However, having regard to the facts and circumstances of the case and since the appellant/writ petitioner is now running a restaurant and in view of the interim orders granted by this Court directing the respondents not to take any coercive steps against the appellant pursuant to the impugned proceedings, we direct status-quo be maintained with regard to the functioning of the restaurant in issue for a period of four (4) weeks from today, so as to enable the appellant/writ petitioner to avail the remedy as per the Terms and Conditions of the contract. 21. With the above observation, the writ appeal is dismissed. There shall be no order as to costs. Consequently, miscellaneous petitions, if any, pending in the appeal shall stand closed.
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