Chadalavada Intratech Ltd. vs Chamundeshwari Electricity Supply Corporation Ltd. and Others

A.S. Bopanna, J—The petitioner is before this Court assailing two final order notices for short-close of the contracts, both dated 17.06.2015, impugned at Annexure-A and B respectively. The e-procurement portal dated 20.06.2015 inviting bids for completion of the remaining work is impugned at Annexure-C.

The respondents had awarded two contracts to the petitioner for carrying out the work of strengthening the electrical distribution in N.R. Mohalla and V.V. Mohalla Divisions of Mysuru. Though the two works are separate and all documents and correspondence are made separately, all actions are on the same date for both the contracts. Hence, the dates and correspondence referred will be applicable to both.

The case of the petitioners is that there was modification of the work to be performed, as against what was initially entrusted, as such there was delay in commencement and after that the petitioner has undertaken the work in all earnestness but the first respondent without proper notice or complying the due procedure has terminated the contract by issue of notice dated 17.06.2015 which is not justified. It is contended that the said termination is also without reference to the fact that in the decision taken on 30.04.2015, the time had been extended up to 30.06.2015. The huge investments made and the materials procured by the petitioner is referred to in the petition.

The respondents have filed a detailed objection statement seeking to justify their action. The various notices issued to the petitioner are referred and it is pointed out that the Final order dated 17.06.2015 is made with reference to all the notices. It is contended that the minutes of the meeting dated 30.04.2015 had not fructified into an order extending the time up to 30.06.2015. It is contended that the petitioner had always put forth excuses which were all related to the internal problems of the petitioner. Though right of way was one of the reasons referred there was no such issue. The work completed was only 41.06% and 38.02% and as such there was no way the petitioner would have completed the work. It is their contention that these are all questions arising in a contractual matter which cannot be resolved in a writ petition.

Heard Sri Vivek Reddy, learned senior counsel for the petitioner and Sri. S. Sriranga, learned counsel for the respondents and perused the petition papers.

The learned counsel for the respondents, apart from relying on multiple decisions to contend that the petition is without sufficient pleadings; the petitioner has not approached the Court with clean hands and hence the petition is liable to be dismissed in limine, has also relied on the following decisions to contend that a writ petition in contractual matter is not to be entertained. They are, in the case of Pimpri Chinchwad Municipal Corporation and Others Vs. Gayatri Construction Company and Another, (2008) 4 BC 542 : (2008) 3 CLT 846 : (2008) 2 CTLJ 351 : (2008) 9 JT 1 : (2008) 11 SCALE 142 : (2008) 8 SCC 172 wherein the earlier decisions were referred indicating that in contractual matters where disputed questions arise, writ petition should not be entertained and it was held that the High Court ought not to have entertained the writ petition; and in the case of Joshi Technologies International Inc. Vs. Union of India and Others(2015) 8 AD (SC) 428 : (2015) 277 CTR 409 : (2015) 374 ITR 322 : (2015) 4 MLJ 739 : (2015) 6 SCALE 632 : (2015) 7 SCC 728 : (2015) 232 TAXMAN 201 wherein after analysing the entire conspectus on this aspect, it is held that the State acts purely in its executive capacity at the stage of entering into contract and is bound by the obligations of fairness; even in contractual field the State is under obligation to act fairly and cannot practice discrimination and it is further held that if the facts are disputed and require assessment of evidence, the aggrieved party should resort to alternate remedy of civil suit. It is further held that the writ jurisdiction is not intended to facilitate avoidance of obligation voluntarily incurred and as such writ petition is not maintainable to avoid contractual obligation as occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed in the contract can provide no justification. It is held that ordinarily a party complaining of breach may sue for specific performance or for damages.

The learned senior counsel for the petitioner on the other hand would contend that even in contractual matters whether the decision taken is an informed one, whether all relevant materials were considered before the decision was taken, whether the decision taken is a fair one or as to whether it is arbitrary could still be examined in the writ jurisdiction. In that regard, the following decisions are relied upon:

"(i) The case of Smt. S.R. Venkataraman Vs. Union of India (UOI) and Another, AIR 1979 SC 49 : (1979) 1 LLJ 25 : (1979) 2 SCC 491 : (1979) 2 SCR 202 : (1979) 11 UJ 14 wherein it is held that there will be an error of fact when a public body is prompted by a mistaken belief in the existence of a non-existing fact or circumstance. That will be so clearly unreasonable that what is done under such mistaken belief might almost be said to have been done in bad faith.

(ii) The case of Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, AIR 1991 SC 537 : (1990) 4 JT 211 : (1991) 1 SCC 212 : (1990) 1 SCR 625 Supp : (1991) 1 UJ 645 wherein an observation in an earlier decision is referred to the effect that even in contractual matters, every action of the State or an instrumentality of the State, must be informed by reason and actions uninformed by reasons may be questioned as arbitrary in proceedings under Article 226 or 32 of the Constitution.

(iii) The case of ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, (2004) 118 CompCas 213 : (2004) 1 CTLJ 1 : (2003) 10 JT 300 : (2003) 10 SCALE 81 : (2004) 3 SCC 553 wherein it is held that the Court entertaining the petition under Article 226 of the Constitution is not always bound to relegate the parties to suit merely because one of the parties raises a dispute in regard to the facts of the case. The State or an instrumentality of the State which is a party to the contract has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution. Therefore if the impugned action is contrary to the same, the writ Court can issue suitable directions to set right the arbitrary actions of such authority.

(iv) The case of Kalabharati Advertising Vs. Hemant Vimalnath Narichania and Others, AIR 2010 SC 3745 : (2010) 9 JT 382 : (2011) 1 RCR(Civil) 216 : (2010) 9 SCC 437 : (2010) 10 SCR 971 wherein it is held that the State is under obligation to act fairly without ill will or malice, in fact or in law. Exercise of statutory power improperly will be conscious violation of the law to the prejudice of another, a depraved inclination on the part of the authority to disregard the rights of others, which intent is manifested by its injurious acts."

Having noticed the position of law as enunciated by the Hon''ble Supreme Court in the decisions cited on behalf of both the parties, it is clear that, though this Court will not refuse to entertain the petition merely because it arises of a contractual matter, the scope of consideration in a matter of the present nature where there was a concluded contract between the parties and the same is short closed on the ground of non performance as per the agreed terms, the scope for consideration would be limited. The examination will be only to find out as to whether the respondents have acted in such an arbitrary manner that it will call for interference in writ petition. While examining the same if it is found that a fair procedure is followed, this Court will not thereafter enter into the arena of contractual terms or the nature of work that was required to be performed or as to whether there was justification for non performance, as those issues will have to be ironed out in an appropriate proceedings.

In that light, a reference to facts involved in the case on hand will disclose that the letter of intent no doubt was issued on 07.10.2011, but the contract agreement for supply and erection was entered into on 21.11.2011. As per Clause - 3.3.1 of the agreement, the parties had agreed that the time schedule will be strictly adhered to and time was made the essence of the contract. The detailed work was awarded on 06.01.2012 wherein under clause 3 it was agreed that the work shall be completed in 18 months including the monsoon period. As per the contention of the respondents the work as per the said schedule was to be completed on or before 05.07.2013. The petitioner however contends that the said schedule cannot be taken into consideration since the respondents had revised the quantity of work due to which the completion period was extended but the benefit of the same is not provided.

There is however no dispute to the fact that by the Official Memorandum dated 26.09.2012 the first respondent revised the quantity of work. But the first respondent contends that will not alter the situation since scope of work was in fact reduced. As per the details worked out and furnished to this Court, it is stated that in respect of one contract it was reduced by 0.45% and in the other it was reduced by 7.23%. Hence, it is contended that the modification cannot be a justification to seek for extension of time nor has the petitioner made that as the basis earlier while seeking extension of time.

The respondent in that regard has relied on the letters dated 03.04.2014 (Annexure-R.10), dated 03.11.2014 (Annexure-R.28) and dated 22.05.2015 (Annexure-R.22) addressed by the petitioner seeking extension of time to complete the contract. In all these letters, the petitioner has referred to the internal problems within the company, its financial problems and problems with the bankers, Labour problems, problems with the vendors and also problems due to Telangana issues. The said letters will not only disclose that the petitioners had their own problems and drawbacks due to which they were unable to meet the schedule and were seeking extension of time. While taking note of the same, this Court will also have to keep in view the anxiety of the respondents in securing completion of public utility work and as contended, the sword of the grants being converted as loan if the project was not completed within the time frame was also hanging on the respondents.

Despite the above, the respondents by the Official Memorandum dated 17.05.2014 had extended the completion period up to 31.12.2014 but with penalty (Annexure-R. 11). The petitioner did not raise any issues with regard to the penalty being imposed since at that point it was not their case that the delay was on account of the respondents. As noticed, though the subsequent letters dated 03.11.2014 and 22.05.2014 were addressed by the petitioner seeking extension, it was entirely due to the difficulties faced by the petitioner. In that scenario, it is seen from the Annexure produced along with the objection statement, that as many as seventeen notices were issued to the petitioner both before the extension being granted and thereafter, calling upon the petitioner to complete the work and the action that would be taken in that regard, if there is failure to complete the work.

If in that light the impugned final order of short close dated 17.06.2015 is seen, the same on the face of it has referred to all the notices that were issued earlier and also the relevant reply of the petitioner. The learned senior counsel for the petitioner would however contend that notwithstanding the same, the final order does not refer to the vital aspect of another extension which was made on 30.04.2015 extending the time up to 30.06.2015 which would go to the root of the matter and as such it is not only without application of mind to the relevant fact, but is arbitrary and will call for interference.

To consider that aspect in its correct perspective, what is necessary to be noticed is that, as pointed out by the learned counsel for the respondents, it is seen that when the extension of completion period was granted on the earlier occasions, the Official Memorandum was issued by way of order. On the other hand the right being claimed by the petitioner up to 30.06.2015 is based on the minutes of the proceedings dated 30.04.2015. As pointed out, it is the minutes of the meeting recorded on the said date, but there is nothing to indicate that the same was put into action by issuing an order and communicating it to the petitioner. Moreover, when the final notice dated 21.05.2015 (Annexure-R.21) was issued, which obviously was after 30.04.2015 but before 30.06.2015 and when the petitioner replied to the same on 22.05.2015 (Annexure-R.22), the petitioner was still promising to commence the work in full swing from 25.05.2015 and was seeking extension up to November 2015 and there was no reference whatsoever to the right to complete before 30.06.2015 nor the assurance to complete by that date. Hence, the contention that the final order dated 17.06.2015 being arbitrary, not informed of relevant reasons or for extraneous consideration calling for interference in writ jurisdiction cannot be accepted. That apart as pointed out by the respondents, only 41.06% and 38.02% of the work was completed as on the date of short closure in respect of a contract which was commenced in the year 2011-12 having the completion period of 18 months.

The further contention is that the termination is bad for non issue of notice in terms of the requirement under clause 44.1 of the tender conditions. The respondents on the other hand have relied on Clause 43.1 whereunder it provides for the procedure in the event of Contractor''s default. In the instant case, prima facie it is seen that several notices have been issued. In any event when on the first aspect this Court is satisfied that this is not a matter where interference is called for in exercise of the writ jurisdiction, it is appropriate that all other aspects relating to the nature of default, whether on facts it was justified and the financial implications thereof are all issues which should be left open for the parties to agitate the same in an appropriate proceedings if such right is made out in law.

In the result, the writ petitions stand dismissed. No costs.