w w w . L a w y e r S e r v i c e s . i n



The Board of Trustees for the Port of Kolkata & Another v/s Hindustan Steelworks Construction Limited & Others

    M.A.T. No. 287 of 2021 with I.A. No. CAN .No. 1 of 2021

    Decided On, 11 March 2022

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE SUBRATA TALUKDAR & THE HONOURABLE MS. JUSTICE KESANG DOMA BHUTIA

    For the Appellants: Jaydip Kar, Ashok Kumar Jena, Amit Kumar Nag, Swarajit Dey, Advocates. For the Respondents: R1, Dhiraj Trivedi, Bikash Kumar Singh, Sushmita Adhikari, R2, Sunil Kumar Singhania, R3, Bijoy Adhikari, Siddharta Lahiri, Advocates.



Judgment Text

Subrata Talukdar, J.

Under challenge in this appeal is the Judgement and Order dated 4th of February 2021 in the writ petition being WPA 4795 of 2020 along with its connected applications. The writ petitioner, i.e. Hindustan Steelworks Construction Ltd. (for short HSCL), is the Respondent No.1 in this appeal. The Board of Trustees for the Port of Kolkata or, the Kolkata Port Trust (for short KoPT), the Respondent in the writ petition, is the Appellant. One Fairfax Industries Ltd. (for short Fairfax) is the Respondent No.3 to this appeal. The Union of India through its Secretary, Ministry of Heavy Industry and Public Enterprises of the Department of Public Enterprises (for short hereinafter referred to only as the Ministry) is the Respondent No.2 to the appeal

The issue before the Hon’ble Single Bench was the termination of the contract for installation, operation and maintenance of weighbridges awarded to HSCL by KoPT for the Haldia Dock Complex (for short HDC). The termination of the contract was on the basis of the alleged assignment of the contract by HSCL in favour of Fairfax.

HSCL had argued before the Hon’ble Single Bench that it is a Government Company and therefore governed by regulations of the Ministry/other relevant regulations of the Union of India as issued from time to time. Such regulations forbid HSCL from engaging manpower on its own and also to directly avail of obligations imposed qua payment of Provident Fund and other statutory dues.

HSCL had pointed out before the Hon’ble Single Bench that it was however not barred from participating in a work of the nature as contemplated by the installation, operation and maintenance of weighbridges through tender called by KoPT. It was further submitted that KoPT was in knowledge of the fact that HSCL could perform the works under the contract through engagement of an appropriate agency, in this case Fairfax. The Hon’ble Single Bench was also apprised of the fact that the status of HSCL as a Government Company which could be the beneficiary of a tender through performance of the works by an agency of its choice was not only known to KoPT but, similar contracts for installation, operation and maintenance of weighbridges with respect to the Kolkata Dock Complex (for short KDC) had been earlier awarded by KoPT in favour of HSCL .

It was submitted before the Hon’ble Single Bench that the earlier contracts at the KDC were being successfully installed, operated and maintained by HSCL through appointment of an appropriate agency. KoPT had acted qua the earlier contracts with HSCL in a manner which recognized the role of HSCL as the sole awardee of the tender responsible for discharging all statutory obligations required by the tender contract. It was therefore urged before the Hon’ble Single Bench by the writ petitioner that with respect to a similar and the latter contract in respect of HDC, KoPT could not turn around and terminate the contract after issuing the Commissioning Certificate in favour of HSCL although KoPT was completely apprised of the fact that the contract was to be performed by an agency appointed by HSCL under its full control.

The above arguments also form the basis of the stand of HSCL before the Appellate Court.

Per Contra, KoPT submitted before the Hon’ble Single Bench that the terms of the works to be performed by the agency, i.e. Fairfax qua the Memorandum of Understanding (MoU) entered into between HSCL and Fairfax, demonstrate that it is not merely an assignment of works/ services under the contract but an assignment of the contract itself. KoPT took the stand before the Hon’ble Single Bench that the assignment of the entire contract is barred by the terms of the contract itself entered into inter se KoPT and HSCL .

It is submitted that the installation, operation and maintenance of weighbridges at the KDC is altogether an earlier and different contract. The performance of an earlier and different contract cannot be pressed into service by HSCL qua the dispute arising out of the present contract pertaining to HDC .

It is the stand of the KoPT that upon coming to know of the fact that HSCL has entered into a MoU with Fairfax being of a nature where Fairfax is the dominant entity connected to installation, operation and maintenance of the weighbridges, under the present contract, KoPT was within its rights to write to HSCL and seek an explanation by way of a reply to a Show-Cause Notice (SCN) explaining the alleged assignment of the contract in favour of Fairfax . It has been submitted before the Hon’ble Single Bench by KoPT that HSCL ’s reply to the SCN would show that HSCL admitted the assignment of the contract to Fairfax .

It was argued that the terms of the MoU with regard to revenue sharing, deployment of manpower and several other performance factors pertaining to the contract for installation, operation and maintenance of weighbridges were heavily weighted in favour of Fairfax with HSCL being in a junior position. Therefore, the terms of the MoU prove that HSCL had assigned the contract in favour of Fairfax and, such assignment being contrary to the terms of the contract itself as well as without the prior consent of KoPT, the contract was liable to be terminated and has been terminated upon complying with the principles of natural justice.

The tenor of the submissions and/or the stand taken by HSCL before the Hon’ble Single Bench has been reiterated before the Appellate Court. The Respondent No.3/ Fairfax as well as the Respondent No.2/ the Ministry have affirmed the stand of the Respondent No.1 to this appeal, i.e. the writ petitioner/ HSCL . It would be relevant to mention at this stage that the KoPT / the present appellant/ the Respondent No.1 in the writ petition, also took the stand before the Hon’ble Single Bench that the issues involved in the writ petition relate to a commercial contract and such issues could not be therefore amenable to the writ jurisdiction of the Hon’ble Court (for short referred to as the writ jurisdiction). It was argued on the strength of judicial authorities by KoPT that where several complicated factual issues are involved, the Writ Court will not generally interfere.

In the present case, several factual issues have emerged for consideration connected to the alleged assignment of the contract and the conduct of the parties arising out of such assignment. It is the stand of KoPT that HSCL had arrived before the Hon’ble Single Bench with the writ petition alleging unfair termination on the ground that internal administrative instructions of KoPT mandate that a dispute of such nature be referred for resolution by an internal administrative mechanism.

This Court has been made cognisant with the interim protection granted by the Hon’ble Single Bench in favour of HSCL permitting HSCL to continue with the installation, operation and maintenance of the weighbridges under the contract on the basis of the Commissioning Certificate till the parties were given the opportunity to place their stand on affidavits for ultimate consideration by the Writ Court.

This Court has been further apprised of the fact that the interim protection as granted by the Hon’ble Single Bench was carried by the Hon’ble Division Bench which, however, did not affirm the reasoning of the Hon’ble Single Bench , inter alia, holding that the writ petition be ultimately decided on merits.

The order of the Hon’ble Division Bench was thereafter carried before the Hon’ble Supreme Court by way of a Special Leave Petition by HSCL. The Hon’ble Apex Court vide its order dated 29th June, 2020 did not interfere with the order of the Hon’ble Division Bench. However the parties, meaning thereby HSCL and KoPT, were granted the liberty to take recourse to arbitration in the meantime.

Rebutting the stand of KoPT qua the requirement of arbitration in the present dispute, HSCL took the position that the alternate remedy by way of invocation of writ jurisdiction is not barred in view of the admitted facts arising out of the contract itself. It is HSCL’s contention that KoPT being aware of all facts connected to engagement of an agency by HSCL qua similar earlier contracts as well as the contract in issue as established by the correspondence, communication on record between the parties, i.e. HSCL and KoPT, renders the termination ex facie illegal. There is no bar on the Writ Court in exercising jurisdiction to strike out the illegality. It was argued by HSCL that the step taken by KoPT to issue the SCN and thereafter terminate the contract is an afterthought. The termination was effected post the issuance of the Commissioning Certificate in favour of HSCL by KoPT. It is the stand of HSCL that a similar contract to install, operate and maintain weighbridges was awarded by KoPT in favour of one M/s. Uma Corporation. It is alleged that it is at the behest of M/s. Uma Corporation that KoPT has taken the step of initiating the show-cause proceedings with the intention to terminate the contract with HSCL so that in the meantime the benefits arising out of handling the heavy cargo traffic at HDC can be reaped by M/s. Uma Corporation.

It has been argued that M/s. Uma Corporation had filed two writ petitions before two respective Hon’ble Single Benches of this Court alleging the illegality of the contract entered into between KoPT and HSCL. The basis of the allegations levelled by M/s. Uma Corporation against the contract between KoPT and HSCL are the same which have been now decided by the Hon’ble Single Bench in its Judgement and Order now under appeal before this Court.

It was submitted by HSCL that the two writ petitions of M/s. Uma Corporation had been dismissed by the two Hon’ble Single Benches. The two writ petitions are numbered as WP 16876(W) of 2017 and WP 5285(W) of 2018. An appeal against the final Judgement and Order of dismissal in WP 16876(W) of 2017 being MAT 1261 of 2017 was also dismissed. Hence, it was submitted before the Hon’ble Single Bench by HSCL and, such is also the submission before the Hon’ble Division Bench, that the legal effect of such dismissal operates as Estoppel against KoPT from raising such issue again before any other forum/ Court.

The Hon’ble Single Bench vide the Judgement and Order impugned, inter alia, held that the Writ Court need not consider the question of taking further evidence when facts are admitted. The Hon’ble Single Bench held that the nature of the work involved in issue partakes of a public character inasmuch as HSCL, a Government Company, was engaged by KoPT, an allied public entity for discharge of works which contain ingredients of public interest pertaining to clearance of cargo through ports/ docks. Apropo the SCN issued by KoPT followed by the termination notice, the Hon’ble Single Bench minutely combed through the provisions of Clause 1 of the contract in issue along with its Sub-Clauses.

Upon minute examination of Clause 1(supra), the Hon’ble Single Bench further considered the correspondence pertaining to the contract upto the stage of termination and came to the conclusion that the control and supervision of the entire project was retained by HSCL. Holding the MoU between HSCL and KoPT to be a mutual arrangement, the Hon’ble Single Bench concluded that the terms of the MoU did not assign the contract as a whole to Fairfax.

Further holding that the rule of estoppel would apply against KoPT qua termination of the contract, the Hon’ble Single Bench noticed that two writ petitions and an appeal arising out of the complaint of ineligibility raised by M/s. Uma Corporation against HSCL had been decided both by the Hon’ble Single Benches and the Hon’ble Division Bench in favour of HSCL and the issue cannot be revisited by KoPT afresh by terminating the contract. It was noticed that KoPT had not only granted tenders of a similar nature to HSCL permitting execution of identical works through its appointed agency and, in the facts of this case after issuance of the Commissioning Certificate, KoPT was now estopped from turning around and questioning HSCL’s eligibility.

The Hon’ble Single Bench therefore held that the issue of HSCL’s eligibility to perform the works under the contract stood settled by the pronouncement of the two Hon’ble Single Benches in WP 16876(W) of 2017 and WP 5285(W) of 2018 as well as of the Hon’ble Division Bench in MAT 1261 of 2017. It was concluded that the contract as a whole was not assigned by HSCL to Fairfax but, works under the contract were only assigned to be performed by the appointed agency. Therefore, all obligations and liabilities under the contract were to be performed by HSCL and none else.

Having heard the parties and considering the materials placed, this Court is required to notice the interim order dated 15th of May 2020 passed in the writ petition, i.e., WP No. 4795(W) of 2020, wherein the Hon’ble Single Bench, inter alia, held that prima facie there was substance in the argument of HSCL that the impugned order of termination of the contract suffers from a jurisdictional error inasmuch as pursuant to the Office Memo. Dated 22nd of May 2018 of KoPT, a dispute or difference between the public entity, in this case, KoPT and the contractor/HSCL needs to be referred to the AMRCD, which is the internal administrative dispute resolving mechanism.

Therefore, the Hon’ble Single Bench found a jurisdictional error in the action of KoPT to terminate the contract without referring the matter to the AMRCD. The Hon’ble Single Bench also found that prior litigation initiated by M/s. Uma Corporation has not altered the position that HSCL was competent to execute such contracts under the KoPT.

The Hon’ble Single Bench accordingly granted an interim order restraining the respondents from giving effect or further effect to the impugned order of termination dated 1st January 2020 and the notice dated 27th of April 2020 for a specified period.

The aforesaid order of the Hon’ble Single Bench was carried in appeal by KoPT. By Order dated 2nd June 2020, the Hon’ble Division Bench in MAT 443 of 2020, inter alia, observed and held as follows:

“A joint reading of the aforesaid Clauses of the Office Memorandum give an impression that an in-house redressal mechanism was sought to be created by the State for resolution of disputes or differences relating to commercial contracts between public sector enterprises. The Office Memorandum, however, does not appear to have any statutory force and is in the nature of an administrative instruction to public sector undertakings.

Learned counsel for the HSWCL has strenuously argued that the aforesaid administrative instruction was required to be strictly adhered to by all public sector undertakings including KoPT and departure therefrom was necessarily prohibited. Although strict compliance is envisaged in clause (8) of the Office Memorandum, no express prohibition upon public sector enterprises to directly approach the courts of law to resolve disputes has been rightly engrafted therein. Furthermore, neither the terms of the Office Memorandum nor the in-house disputes redressal mechanism created therein could take away the right of a party to invoke the terms of a contract, namely, the termination clause. The parties may or may not be justified in doing so. However, its right to terminate the contract cannot be eclipsed by the terms of the Office Memorandum. To do so, would deny a legal entity to 7 remedies under the law of the land which is impermissible in law. On the other hand, the terms of the Office Memorandum may entitle the aggrieved party to knock the doors of the AMRCD before challenging the alleged unlawful termination in court of law. It may be apposite to bear in mind that the existence of a similar in-house mechanism and award passed by it was held by the Apex Court not to operate as an absolute embargo to access to justice in Northern Coalfields Ltd. Vs Heavy Engg. Corpn. Ltd. [(2016) 8 SCC 685]. In the said report the Court held:

“Remedies which are available to the Government on the administrative side cannot substitute remedies that are available to a losing party according to the law of the land.” (see para 27)

Hence, we are unable to concur with the learned Single Judge that the existence of the Office Memorandum operated as a jurisdictional bar upon a contracting party to terminate a terminable contract.

The other issue which appears to have weighed with the First Court was a prior litigation instituted at the behest of one M/s. Uma Corporation challenging the allotment of work order in favour of HSWCL. It is contended that the issue of an assignment of work order by HSWCL had fallen for consideration in the earlier proceeding and KoPT was fully aware that Fairfax had been appointed merely as an agent of Respondent No.1 to work out the contract. We are unable to accept such contention also.

A Division Bench while disposing of the appeal arising from the earlier writ proceeding had, inter alia, observed that alleged assignment of the contract, if any, by the writ petitioner must be with the prior permission of KoPT. Neither the Memorandum of Understanding executed between HSWCL and Fairfax was the subject matter of adjudication in the earlier writ petition nor the same has been referred to in the earlier communications between the parties prior to the issuance of show cause notice upon HSWCL by KoPT.

Whether the terms of the MoU would amount to assignment of contract in favour of Fairfax, and if so whether KoPT has consented thereto are disputed matters and may be adjudicated at the stage of final hearing subject, however, to the issue of maintainability of the lis.

However, it is pertinent to note that the termination clause did not envisage an immediate severance of contractual obligations inter-parties as would appear from Clause (b) para 7.10 which reads as follows:-

“(b) During the termination period of three months as at (a) above, the contractor may be asked by KoPT to continue to discharge its obligations under the contract which the contractor would be capable of performing and as may be mutually agreed upon with the object, as far as possible of ensuring continued availability of the weighbridge facilities and services to the port users.”

Clause (b) was, in fact, invoked by KoPT while terminating the contract vide letter dated 01.01.2020. Purport and intent of the aforesaid clause in the contract is to maintain smooth functioning of port services 9 particularly availability of weigh bridges to port users for sometime notwithstanding unilateral termination by KoPT. This aspect of the matter particularly the necessity of continuation of smooth functioning of port services must be borne in mind pending adjudication of disputes between the parties. We are also not unmindful of the fact that the country presently is going through an extraordinary situation due to the pandemic. Under such circumstances, although we are not inclined to pass an order of injunction staying operation of the letter of termination dated 01.01.2020, we direct the stop gap arrangement envisaged in clause (b) of para 7.10 of the contract may continue to ensure availability of weigh bridges and other services to port users. Consequentially order dated 27th April, 2020 is also stayed.

The aforesaid arrangement shall continue for a period of 10 weeks from date.

Learned Single Judge will be at liberty to extend, modify or alter the aforesaid arrangement on the application of the parties in the event the writ petition is not disposed of in course of the aforesaid arrangement after giving adequate opportunity of hearing to all the parties in accordance with law.

We make it clear that observations made by us are for the purpose of disposal of the appeal and would not have any bearing at the time of final hearing of the writ petition and all issues including the issue of maintainability of the 10 writ petition may be decided independently upon exchange of affidavits as directed by the learned Single Judge.

The appeal and all the connected applications are accordingly disposed of.

As affidavits had not been called for, allegations made in the memo of appeal/applications shall not be deemed to be admitted by the respondents.”

The Order of the Hon’ble Division Bench dated 2nd June 2020 (supra) was carried before the Hon’ble Apex Court by HSCL. By Order dated 29th June 2020 the Hon’ble Apex Court held as follows:

“Heard learned counsel for the parties.

We are not inclined to interfere in this Special Leave Petition. The Special Leave Petition is dismissed accordingly.

However, the dismissal of this Special Leave Petition will not preclude the petitioner from taking recourse to arbitration mechanism as provided for in the contract, if so advised.

All contentions available to both the parties in that behalf are left open.

We may not be understood to have expressed any opinion either way on the merits of the subject matter of pending or proposed proceedings between the parties.

Pending applications, if any, stand disposed of.”

Having closely considered the factual matrix connected to the issues raised in this appeal, this Court cannot sweep under the carpet the large fact that interpretation of the Clause of the contract connected to whether there was assignment of contract itself or only assignment of works under the contract could be best addressed by an Arbitral Tribunal rather than a Writ Court. Any interpretation of the contract qua the MoU by a Writ Court cannot substitute a factual exercise by an Arbitral Tribunal to settle the issue once and for all.

In the opinion of this Court the admitted communication and the attending circumstances connected to the contract and the MoU are subject to an interpretative exercise which can be better addressed by an Arbitral Tribunal, also since no material on record relied upon by one of the parties before the Hon’ble Single Bench can be taken to be admitted which is denied and disputed by the other party. At this stage this Court is also not foreclosed from noticing the solemn direction of the Hon’ble Apex Court vide its order dated 29th June 2020 which does not preclude the petitioner, i.e. HSCL, from taking recourse to the arbitration mechanism as provided for in the contract.

Accordingly, to the above extent, the Judgement and Order impugned of the Hon’ble Single Bench stands set aside and the parties are granted liberty to approach the appropriate Arbitral Tribunal.

Also, this Court finds that the Hon’ble Division Bench in MAT 443 of 2020 had opined vide its Judgement and Order dated 2nd June, 2020 that the MoU between HSCL and Fairfax was not the subject matter of the earlier writ petition nor the same has been referred to in the earlier communication between the parties prior to the SCN served upon HSCL by KoPT. The Order in MAT 443 of 2020 (supra) has not been interfered with by the Hon’ble Apex Court.

In the above view of the matter, the finding of the Hon’ble Single Bench holding that Estoppel shall operate against KoPT from raising the issue again, cannot be accepted.

This Court is now required to consider the merits of the interim arrangement directed to be maintained qua the installation, operation and maintenance of weighbridges.

It is on record that the Hon’ble Single Bench vide its order dated 15th of May 2020 in the writ petition which is presently under appeal, i.e. WP 4795(W) of 2020, restrained KoPT from giving effect or further effect to the impugned order of termination dated 1st of January 2020 and the notice dated 27th of April 2020 for a specified period. The Hon’ble Single Bench kept the writ petition for final hearing after expiry of the period granted for exchange of affidavits.

The Hon’ble Division Bench vide its Order dated 2nd of June 2020 challenging the order of the Hon’ble Single Bench dated 15th of May 2020, although refusing to stay the letter of termination dated 1st of January 2020, permitted a stop gap arrangement in terms of Sub-Clause (b) of Clause 7.10 of the contract to continue for ensuring availability of weighbridges and other services to port users. Accordingly, the Hon’ble Division Bench was pleased to stay the order dated 27th of April, 2020 issued in furtherance of the termination dated 1st January, 2020. The Hon’ble Division Bench was further pleased to permit the Hon’ble Sing

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le Bench to extend, modify or alter the aforesaid interim arrangement by permitting the parties to apply in the event the writ petition could not be disposed of, as also directed. For the benefit of this discussion, Sub-Clause (b) of Clause 7.10 of the contract reads as follows: “7.10 Termination (a ) ….. (b) During the termination period of 3 months as at (a) above, the Contractor may be asked by KoPT to continue to discharge its obligations under the contract which the contractor would be capable of performing and as may be mutually agreed upon with the object as far as possible of ensuring continued availability of the weighbridge facilities and services to the port users.” It is pertinent to note that the Hon’ble Supreme Court vide its order dated 29th June 2020 dismissed the Special Leave Petition directed against the order of the Hon’ble Division Bench dated 2nd of June 2020. However, at the same time, the Hon’ble Apex Court did not preclude the petitioner (HSCL) from taking recourse to the arbitration mechanism provided in the contract. It is therefore a fact that pending resolution of the dispute between the parties, the interim arrangement for installation, operation and maintenance of the weighbridges in issue were permitted to be continued by the Hon’ble Single Bench and the Hon’ble Division Bench having regard to the public interest involved in handling large volumes of the port traffic vide Orders dated 15th of May 2020 and 2nd of June 2020 (supra) and, such directions were not interfered with by the Hon’ble Apex Court. In the above view of the matter the interim arrangement as directed by the Hon’ble Division Bench vide Order dated 2nd June, 2020 in terms of Clause 7.10 Sub-Clause (b) of the Contract shall continue. It will be open to the Arbitral Tribunal to modify the interim order in the event any change in circumstances is brought to its notice by the parties. M.A.T. 287 of 2021 with I.A. No. CAN 1 of 2021 stand accordingly disposed of. Parties shall be entitled to act on the basis of a server copy of this Judgement and Order placed on the official website of the Court. Urgent Xerox certified photocopies of this judgment, if applied for, be given to the parties upon compliance of the requisite formalities I agree. (Kesang Doma Bhutia, J.) Later: Mr. Jena, Learned Counsel for the KoPT, seeks stay of the part of the order of this Court pertaining to grant of the interim arrangement pending the arbitration proceedings. Prayer for stay is considered and rejected. I agree. (Kesang Doma Bhutia, J.) (Subrata Talukdar, J.)
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