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M/s. GVR Infra Projects Limited, Rep. by its Assistant Vice President a Gopal Krishna v/s Union of India, Through its Secretary & Others

    Writ Petition No. 1819 of 2017 (GM-RES)

    Decided On, 12 April 2017

    At, High Court of Karnataka


    For the Petitioner: Uday Holla, Sr. Counsel a/w K. Venkat Satyanarayana, Advocates. For the Respondents: R1, Krishna S Dixit, ASG, R2, R.B. Satyanarayan Singh, AGA, R3, S.V. Giridhar, R4, Shilpa Shah, Advocates.

Judgment Text

(Prayer: This Petition is filed under Article 226 of the Constitution of India, with a prayer to quash the Impugned Letter Dtd.04.01.2017 vide Annex-A issued by the R-3 to the petitioner thereby terminating the agreement and direct the Appropriate Authority for initiation of an enquiry into the Gross Acts of Omission and Commission on the part of the R-1 to 3 in playing fraud upon the petitioner.)

1. 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.

2. 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.

3. 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.

4. 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 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

70. 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.

71. 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."

13. 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.

14. 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.

15. 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.

16. 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 250. 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.

17. 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 t

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he 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. 18. 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.