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Judgment
By this application under Article 226 of the Constitution the petitioners Boving Fouress Ltd. and a Director thereof have prayed for issuing an appropriate writ directing the respondent State of Arunachal Pradesh to pay to the petitioner company an amount of Rs. 933.50 lacs in respect of works executed and supplies made in three Micro Hydel Projects in Arunachal Pradesh.
I have heard at length Mr. Bharati Agarwal, learned sr. counsel for the petitioners assisted by Mr. Dhrub Agarwal and Mr. MK Choudhury, learned counsel for the petitioners as well as Mr. P. Chidambaram, learned sr. counsel assisted by Mr. S. Sarma and Mr. A. Choudhury, learned counsel for the respondents. I have also carefully considered the records of the case and the voluminous documents produced by the parties.
The brief facts not in dispute are that on 28.1.1993 the Department of Power, Govt. of Arunachal Pradesh, invited tenders for execution of three Micro Hydel Projects at Sirnyuk, Domkhrong and Kush in Arunachal Pradesh. All the three contracts were awarded to the petitioner company being the lowest bidder vide three separate agreements, all dated 29.10.1993, between the petitioner company and the Govt. of Arunachal Pradesh for turnkey execution of the respective projects. The petitioner company completed the construction, erection and commissioning of the units 1 and 2 of the Sirnyuk Project in October, 1996 and October, 1997 respectively.
It is alleged in the writ petition, without stating therein anything about the progress of works in the other two projects, that the petitioner company had been raising invoices from time to time in respect of the supplies made and works done in terms of the contract, but the respondents, had been regularly defaulting in making the payments despite repeated reminders vide Annexures,-3, 4 and 5. It is claimed that the respondent No. 4 Chief Engineer, Deptt of Power, Govt. of Arunachal Pradesh, admitted the outstanding dues of Rs. 943.73 lacs vide his letter dated 9.6.1999 (Annexure-6) in respect of the three projects, but paid only the meagre amount of Rs. 10,232,64 on 23.9.1999 - hence this writ petition for issuing an appropriate writ directing the respondents to pay to the petitioner company the balance amount of Rs. 933.50 lacs.
The State respondents have contested the petitioners'' claim by filing an affidavit in opposition. The State respondents have attributed laches and negligence on the part of the petitioner company. It is alleged that while the Sirnyuk project has been commissioned, the works on the other two projects is lagging behind the time schedule provided under the respective agreements - in Domkhrong project the petitioner company suspended work form April, 1999 without any justification though amounts over and above the estimated value of the work had already been released; and in the Kuch project the construction work has not been commenced as yet though substantial amounts had been released. It is averred that with respect to each of the contracts the State respondents have substantial and valid claims against the petitioner. It is averred in para 6 of the affidavit-in-opposition that the petitioners'' claim of "the amount of Rs. 943.73 lacs has not been admitted by the respondents at any point of time," that no right to receive Rs.943.73 lacs arises out of the letter dated 9.6.1999 of the Chief Engineer, Deptt of Power, Govt. Arunachal Pradesh on which the petitioners have placed reliance, that the only message that was sought to be conveyed by the said letter was that release of payments against the works and supply items of the pending projects would be considered. The Chief Engineer was transferred by an order dated 9.6.1999 and on that day he issued the letter in question. His letter refers to the petitioner company''s letter dated 5.6.1999 which was received on 9.6.1999 and on that very day he issued the letter in question. It Is. averred that while hurriedly responding to the petitioner company''s letter by a reply issued on the same day, the then Chief Engineer did not apply his mind to the details, and that in view of the serious differences of opinion between the parties on the matter of computation of the amount towards price variation, the petitioner''s contention that the said letter of the Chief Engineer dated 9.6.1999 tentamounts to admission of the liability to pay Rs.943.73 lacs is wholly unbounded. That to the knowledge of the petitioner company the respondents had never accepted the method of computation under PVC sought to be adopted by the petitioner company, on subsequent assurance given by the petitioner company vide letter dated 31.8.1999 (Annexure-B to the affidavit in opposition) to restart the Domkhrong project, an amount of Rs. 10,23,264 was paid; that as the petitioner company has not restarted the work, no further payment have been considered on that account and in the petitioner company''s letter dated 31.8.1999 there was no reference to the Chief Engineer''s letter dated 9.6.1999.
It is alleged that Sirnyuk project though completed, has not been handed over to the State respondents because of non-finalisation of accounts of spare parts amounting to Rs. 121.60 lacs. It is claimed that an amount of Rs.764.94 lacs is receivable form the petitioner company on account of concession as per its offer which is agreed upon against all the three projects which was subsequently disputed and is yet to be settled; and further unadjusted mobilistion advance amounting to Rs. 238.76 lacs is recoverable form the petitioner company. The details of a sum of Rs. 1005.65 lacs are given in para 27 of the affidavit-in-opposition. It is averred that in terms of clause 18 of the General Conditions of Contract under para 2, the Department of Power, Govt. of Arunachal Pradesh is entitled to deduct from the contract price as liquidated damages a sum equivalent to 1% of the price of the unperformed services for each week of delay until actual performance upto a maximum deduction of 10% of delayed services contract price if the contractor fails to perform the services within the time periods specified in contract/agreement. As the petitioner company failed to complete the Domkhrong project and Kuch project as per time schedule stipulated in the contract, an amount of Rs. 86.50 lacs is recoverable from the bill amount as liquidated damages as detailed in para 28 of the affidavit-in-opposition.
The State respondents claimed that altogether an amount of Rs. 1212.84 lacs is recoverable/receivable from the petitioner company s detailed in paragraph 29 of the affidavit-in-opposition and hence there is no question of making payment of Rs. 933.50 lacs to the petitioner company. It is contended that the present proceedings involve disputed questions of fact and as such the proper forum is arbitration and conciliation proceedings or civil court and this writ petition is liable to be dismissed for not availing the alternative remedies available.
In the affidavit-in-reply it is denied that the petitioner company is any way responsible for the delay in executing the works under the contract. It is alleged that the respondents, besides having delayed in handing over the site in time, have also repeatedly delayed and defaulted in supplying the materials, such as, cement, steel etc. In time leading to the delay in execution of the works. It is also denied that the petitioner company suspended work of the Domkhrong project from April, 1999. It is further denied that substantial amount over and above the estimated value of the work had already been released to the petitioner company. It is stated that the present contract is "Item Rate" contract and that the respondents vide corrigendum dated 12.8.1997 had agreed to the clause of price variation arising under the contract. It is stated that the respondent No.4 Chief Engineer by his letter dated 9.6.1999 admitted the petitioners'' claim of Rs. 943.73 lacs and that it is for the first time the respondents have disputed the petitioner''s claim in their affidavit -in-opposition to this writ petition in an attempt to give it a shape of a dispute so as to get it out of the Jurisdiction of this court under Article 226 of the Constitution.
Mr. Bharatji Agarwal, learned sr. counsel for the petitioner submits that since the present writ petition is confined to the admitted amount of Rs. 933.50 lacs, this court is competent to grant relief under Article 226 of the Constitution and in this regard has placed reliance on Nripendm Royv. State of Assam 1995(1) GLJ 12, Satya Deo Prasad v. State of Assam. 1996 (3) GLJ 355 and National Dairy Development Board v. State of Assam (copy thereof at Annexure-9 to the writ petition), and several other decisions. It is not necessary for me to refer to those other decisions as I am inclined to agree with Mr. Agrawal in case there is material on record sufficient to establish that the petitioners'' claim of Rs. 933.50 lacs was ever admitted by the State respondents. The sheet anchor of learned Sr. counsel Mr. Agrawal''s stand on this point is that the Chief Engineer, Department of Power by his letter dated 9.6.1999 (Annexure-6) admitted the liability of Rs. 933.50 lacs. Mr. Agrawal submits that the Chief Engineer, Department of Power, has the authority and his acknowledgement of the liability is the acknowledgement of liability of the Govt. of Arunachal Pradesh and that the State respondents are bound and liable to pay the outstanding dues as admitted by the Chief Engineer. Mr. Agrawal submits that since it was the Chief Engineer who was the person directly responsible and interacting with the petitioners'' company throughout - right from the notice inviting tenders, entering into contract, issuance of the corrigendum, issuing the directions, getting the work done, getting the payments released - the petitioner company accepted the authority of the Chief Engineer as the authority of the State of Arunachal Pradesh. In this regard reference has been made to a decision of the Court of appeal in Hely Hutchinson v. Brayhead. Ltd and Anr., reported in (1967)3 AELR 98 wherein it has been held:-
"Ostensible or apparent authority is the authority of an agent as it appears to others. It often coincides with actual authority. Thus, when the board appoint one of their number to be managing director, they invest him not only with implied authority, but also with ostensible authority to do all such things as fall within the usual scope of that office."
Mr. Agrawal submits that the petitioner company is not supposed to question the authority of the Chief Engineer who has been acting on behalf of the Govt. of Arunachal Pradesh and that reference to the Business Rules of the Govt. of Arunachal Pradesh by the State respondents is of no consequence because the petitioners being contractors are not required to be aware of the internal management of the State respondents. This submission has been made in reply to the contention of the State respondents that under the Business Rules of the Govt. of Arunachal Pradesh an executive act on behalf of the Governor of Arunachal Pradesh has to be authenticated by the Secretary to the Government of Arunachal Pradesh on the department concerned.
In Union of India and others Vs. M/s. Graphic Industries Co. and others, the respondent contractor had made a grievance about non-payment of bills of about half a crore and certain correspondences between the local MP and the Railway Minister, and between the Addl. Private Secretary to the Minister and the Controller of Stores were sought to be relied on in seeking a mandamus for payment of the said amount. The learned Single Judge took the view that such correspondences could not be treated as decision of the President of India as visualised by Article 377 of the Constitution and dismissed the writ petition. On appeal, the non-carrying out of the instructions by the General Manager was taken by the Division Bench to be flouting of the order of the Minister, Head of the Railway Ministry. The Division Bench observed that it was a duty of the General Manager to act fairly, properly and reasonably and that the Railways had no authority to sit-over the matters by folding their hands. The Division Bench allowed the appeal and directed the respondents to make payments after due verification. The Apex Court set aside the order of the Division Bench and restored the judgment passed by the learned Single Judge. It was held :-
"9. We, therefore, propose to confine our attention to the ground of unfairness mentioned in the impugned judgment and see whether in the facts and circumstances of the case it could justifiably be said that the appellants had acted unfairly in withholding the payments of the respondents. A perusal of the judgment shows that the Bench came to the conclusion of unfairness, not on the basis of any independent examination of the matter by it (indeed in the absence of a counter by the appellants no such factual assessment was possible by the Bench), instead, what has been said about unfair act of the Railways is based on what has been mentioned in the aforesaid letter of the Addl Private Secretary. This would be clear from the fact that in the letter reference has been made about rejection of materials also as to which it has been stated that the defects which led to the rejection of the materials be communciated to the firm; and it is this which the Bench too in its aforesaid operative order directed. It is thus clear to us that the view taken by the Bench relating to unfairness is solely based on what found place in the aforesaid letter.
Having come to the conclusion that the materials which the Division Bench noted do not make out a case of unfairness, it is not necessary to examine the question as to whether in the field covered by contractual rights and obligations it would always be permissible to invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution. It would be enough to say that this remedy being discretionary, it would be open to the High Court to take a view on the fact situation before it that invocation of power under Article 226 would not be proper exercise of discretion, leaving the aggrieved person to seek remedy in some other forum, or to take recourse to arbitration if that be visualised by the agreement between the parties."
It is one thing to say that the Chief Engineer, Department of Power, is the appropriate authority to admit the liability of the Government of Arunachal Pradesh to pay Rs. 933.50 lacs to the petitioner company, it is quite another thing to say that what the Chief Engineer wrote in the letter dated 9.6.1999 tentamounts to admission of the liability of the Government of Arunachal Pradesh to pay Rs.933.50 lacs to the petitioner company. The full text of this letter dated 9.6.1999 is reproduced below not only as a ready reference but also to facilitate proper appreciation of the contents therein:
" To Dated 9/06/99 M/s Boving Fouress Limited, Abotani House Itanagar. Sub : Your outstanding payment of Rs. 943.73 lakhs against your on-going projects - Simyuk, Domkhrong & Kush MHS. Ref : Your letter No. BFL/ITA/KGVM/43/99-00 dated 05.06.99. Dear Sir, With reference to discussion held on 31.05.1999 we are constrained to release your outstanding dues of Rs. 943.73 lakhs which includes PVC amount owing to paucity of funds. However, we will consider release of payment against works and supply items of Simyuk and Domkhrong Projects looking into allocation of AGP for the year 1990-2000. Please bear with us. Yours faithfully,
Elaborate arguments have been addressed by Mr. P Chidambaram, learned Sr. counsel for the State respondents, urging that there is no unambiguous unqualified admission of liability to pay Rs. 933.50 lacs in the above letter dated 9.6.1999. Mr. Chidambaram has submitted that no minutes of the discussion held on 31.5.1999 referred to in the above letter has been produced. Mr. Chidambaram has pointed out that the amount of Rs. 943.73 lacs claimed by the petitioner company relates to all the three projects -Sirnyuk, Domkhrong and Kush (Paper Book pages 221, 239 and 332) but the Chief Engineer''s letter dated 9.6.1999 simply says "we will consider release of payment against works and supply items of Sirnyuk and Dokhrong Projects" and Kush has been omitted and that the amount of Rs. 10,23,264 was paid not against any admitted liability of Rs. 943.73 lacs but only against Domkhrong Project -Civil Works (Paper Book page 353). Mr. Chidambaram has further pointed out that the expression "admission of liability" has not been used in the subsequent letters of the petitioner company (Paper Book Pages 335, 344, 349, 350, 354} which shows that the petitioner company itself did not consider the letter dated 9.6.1999 as an unqualified admission of the liability. Mr. Chidambaram has highlighted the circumstances under which the said letter was issued, as under: -
The said letter was issued in reply to the petitioner company''s letter dated 5.6.1999.
The petitioner company''s letter dated 5.6.1999 was received on 89.6.1999 (PB page 239)
On 9.6.1999 itself the said letter was issued by way of reply to the petitioner company''s letter dated 5.6.1999.
No reference in the note sheet about receipt of the petitioner company''s aforesaid letter dated 5.6.1999 about consideration of the said letter, and about issuance of any reply to the same.
Serious allegations against the then Chief Engineer led to his transfer initiated on 31.5.1999.
On 9.6.1999 the then Chief Engineer was transferred and posted as O.S.D. with immediate effect and on the date of his transfer he issued the letter in question dated 9.6.1999.
The above circumstances appear to me quite intriguing. Under such circumstances it is quite possible that the Chief Engineer did not apply his mind to the details. What the then Chief Engineer wrote in the letter dated 9.6.1999 is only a reference to the amount of Rs. 943.73 lacs claimed by the petitioner company. The Chief Engineer has not stated therein that the Government would pay that amount. He has only stated that the Govt. would "consider (as distinguished from an assurance to make payment) release of payments against works and supply items", and that too in respect of Sirnyuk and Domkhrong Projects, though the amount of Rs. 943.73 lacs claimed by the petitioner company relates to all the three projects including Kush Project. This clearly shows that there is no assurance to consider payment of the entire amount of Rs. 943.73 lacs.
It is submitted that the alleged admission depends upon the circumstances in which it was made, and that an admission in order to be competent and to have the value and effect should be clear, certain and definite, and not ambiguous, vague or confused Ajodhya Prasad Bhargava Vs. Bhawani Shanker Bhargava and Another,
In view of what has been stated above, I am of the opinion that there is no unambiguous, unqualified admission of liability to pay Rs. 943.73 lacs in the letter dated 9.6.1999 of the Chief Engineer, Department of Power, Govt. of Arunachal Pradesh. There is no other material on record to show that the State respondents had ever admitted the liability to pay Rs.943.73 lacs to the petitioner company. That being so, the State respondents cannot be found fault with for disputing this amount in their affidavit-in-opposition filed in the instant writ petition.
In the affidavit in opposition, the State respondents have not only disputed the liability to pay Rs. 933.50 lacs but also have made counter-claim to the tune of Rs. 1212.84 lacs and has submitted that there is, therefore, no question of making payment of Rs.933.50 lacs to the petitioner company. It is contended that even in a case of unambiguous admission of liability, if there is a counter-claim, which is not frervolus or illusory, the court cannot give relief to the claimant until the counter-claim is also adjudicated upon, and that after both the claim and counter-claim have been considered, the claimant may be found not entitled to any monetary relief and it may be found that the claimant is liable to pay to the counter claimant. In this regard the decision in State Bank of India Vs. Midland Industries and Others, has been relied upon wherein it has been held:-
"7. It was similarly held by a Division Bench of Jammu & Kashmir High Court in Union of India v. Feroze and Co. that:
Ajudgment on admission under Order 12, Rule 6 is matter of discretion and not a matter of right and the Court would not entertain an application for such judgment when the case involves questions which cannot be conveniently dealt with in a motion under the rule. In order that a judgment may be obtained under Order 12, Rule 6 the admission must be unconditional, clear and unequivocal.
In the case in hand not only admission is not unequivocal but further also the defendants have raised certain preliminary pleas which must be decided before (he plaintiff can be held to be entitled to a decree. The preliminary objections raised by the defendants in this case go to the very root of the suit and are likely to non-suit the plaintiff if these were found against the plaintiff. Keeping in view of all these facts, I do not think that a case has been made out under Order 12, Rule 6, C.P.C. for passing a decree in favour of the plaintiff for the sum of Rs. 5,98,000 and as such I find no merit in this application and this application is liable to be dismissed and is dismissed.".
It is urged that this writ court should decline to examine the merits of the case under Article 226 of the Constitution. I am inclined to agree since the counter-claim made by the State respondents cannot be said to be frivolous or illusory without investigation of the disputed facts which cannot be determined from the materials on record before this court.
It is submitted that even on the pleadings of the parties, it is evident that there are numerous disputed questions of fact as to whether the contract is "turnkey" or "item rate", which is the date to be reckoned as starting of the project, whether there was delay in handing over the site, whether there was default in supply of cement, steel etc., whether the petitioner company suspended the work in Domkhrong in April, 1999 whether the petitioner company executed additional work not part of the original contract, whether there was agreement on price variation clause, whether concession had been taken into account by the petitioner company while raising their invoices, whether concessions were offered and agreed upon by the petitioner company for such contract, whether the State respondents actually paid more than the original contractual price in Sirnyuk and Domkhrong projects, whether the State respondents are entitled to claim huge amounts against the petitioner company by way of valuation of concession, unadjusted mobilisation advance, unperformed civil work, liquidated damages and value for spare parts not supplied, whether the State respondents are entitled to recover larger amount form the petitioner company on account of non-commissioning in time etc. It is submitted that the petitioner company itself has disclosed that in respect of the balance of the alleged claim of about Rs. 26 crores it can go to the appropriate forum, and in that case that forum can equally give the petitioner company relief on the basis of the so-called admission of liability, and it is contended that the balance of the claims has to be decided by the arbitrators, the disputes questions of fact enumerated above are also to be decided by the arbitrators, and any expression of opinion by this court would prejudice the arbitrators and hence this court should decline to do so. In the facts and circumstances of the case, the above contention cannot be brushed aside as of no substance.
In paragraph 7 of the affidavit-in-reply the petitioners have stated-"It is true that the contract provides for the resolution of all the disputes and differences between the parties through arbitration but it is a well settled law that there should be a dispute and there can only be a dispute when a claim is asserted by one party and denied by the other. Mere failure or inaction to pay does not lead to the inference of the existence of the dispute". Reiterating this Mr. Agrawal, learned sr. counsel for the petitioners has argued that in spite of various letters written by the petitioner company demanding Rs. 943.73 lacs, the state respondents did not deny their liability to pay the amount and hence the question of going to arbitration never arose for that question in view of the decision in Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, I am not impressed by this argument for the simple reason that the instant case is not one of mere failure or inaction to pay, as is evident from the discussions in the preceding paragraphs.
It is submitted that only in the affidavit-in-reply, petitioner company has admitted that there is an arbitration clause, viz., 19 (Page 111 of the agreement dated 29.10.1993). No reference is made to this arbitration clause in the writ petition, and only parts of the terms and conditions of the agreement have been disclosed starting with clause 28 (P.B. pages 13, 60, 89) suppressing clause 19, and has also suppressed Annexures-A, B and C to the letter dated 4.10.1993 (PB page 27). It is submitted that this writ petition is liable to be dismissed on the ground of suppression of a material fact.
It is also submitted that an arbitration clause containing words such as the ones found in clause 19 is of the widest amplitude Renusagar Power Co. Ltd. Vs. General Electric Company and Another, and is contended that whereas the petitioner company asserts that there was "admission of liability" and the respondents deny such admission, this itself is a question falling under arbitration clause 19 as it arises "upon or in relation to or in connection with the contract" covered by clause 19.
Mr. Chidambaram, learned sr. counsel, has lastly contended that where there is an arbitration clause, the court will not exercise jurisdiction under Article 226 of the Constitution. Reliance has been placed on the decision in State of U.P. and others Vs. Bridge and Roof Co. (India) Ltd., wherein it has been held:-
"16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, may be, also by certain provisions of the Sales of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition.
There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing, inter alia, for settlement of disputes by reference to arbitration (clause 67 of the contract). The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising form the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy - in this case, provided in the contract itself -is a good ground for the court to decline to exercise its extraordinary Jurisdiction under Article 226.".
Having given my anxious consideration to the rival contentions of Mr. Agrawal, learned sr. counsel for the petitioner company and Mr. P Chldambaram, learned sr. counsel appearing for the State respondents, I am of the opinion that in any view of the matter the prayer in this writ petition for issuing a writ of mandamus to direct the State respondents to pay to the petitioner company an amount of Rs. 933.50 lacs is not a prayer which can be granted by this court under Article 226 of the Constitution.
The petitioner company may either raise a dispute and ask for a reference of such dispute to arbitration provided in the contract agreement, or approach the Civil Court according to law.
In the result, this writ petition is dismissed. In the facts and circumstances of the case, parties are left to bear their own costs.