C.R. Narayanaswamy vs State of Kerala

A.M. Shaffique, J.—These appeals are filed against the common judgment in W.P.(C) Nos. 11113 and 24163 of 2013. Petitioners in the above writ petitions are the appellants.

W.P.(C) No. 24163/2013 is filed by the appellant in W.A. No. 1166/2014 seeking to quash Exts. P9 and P10 proceedings and for a direction to the 2nd respondent to refer the dispute in regard to Ext. P2 agreement to the 1st respondent as contemplated in clause 25 of the said agreement and for other consequential relief''s including a direction not to allot the remaining work to any third party until a final adjudication is made by the 1st respondent.

The facts involved in the above writ petition would disclose that in terms with the power policy of the State Government, Bhoothathankettu Small Hydro Electric Project with an installed capacity of 16MW was allotted to M/s. Silcal Metallurtic Limited (hereinafter referred to as ''the Company''), a Company incorporated under the Companies Act. An agreement in that regard was executed between the company and the Kerala State Electricity Board (for short ''the Board''). Ext. P2 is the said agreement. According to the petitioner, though the project had to be completed within 36 months, on account of various factors, the company was not in a position to complete the project and accordingly, by Ext. P8 dated 19.5.2010, the Government decided to cancel the contract with the company and to complete the project with private participation of M/s. Hindustan Industries Ltd.

Thereafter, a hearing was conducted and Ext. P9 order was passed by the 1st respondent State of Kerala, cancelling the contract. Ext. P10 is the consequential order passed by the Board pursuant to Ext. P9. The main contention urged by the petitioner was that as per clause 25 of Ext. P2, any dispute between the parties had to be referred to the Government. Despite the fact that the 1st respondent has to act as independent arbitrator, by Ext. P7 dated 6.1.2010, the 1st respondent called upon the company to show cause why the contract should not be cancelled and had arrived at a decision in that regard. This, according to the petitioner, has resulted in substantial prejudice to the company in so far as they have lost a provision for resolving the disputes on a reference to the Government. Yet another argument taken is that the decision to cancel the contract is by virtue of Ext. P8 minutes and therefore a further hearing on the basis of show cause notice was unwarranted. Further, it is contended that the company was wound up as per order dated 11.12.2006 of the High Court of Madras and thereafter the official liquidator was not heard before passing Exts. P9 and P10. That apart, it is contended that the work already done by the company was not quantified and no steps were taken in that regard.

Counter affidavit is filed by the 2nd respondent inter alia contending that the petitioner had no right to file a writ petition on behalf of the company as the company had already been wound up by orders passed by the High Court of Madras. It is further contended that when Ext. P2 agreement confers power on the Government, it is open for the Government to take a decision in the matter if there is violation of the terms of agreement. As per the terms of the agreement, the entire project, after due completion and execution, had to be handed over to the Board at the end of the stipulated period of 30 years from the date of commissioning within the time stipulated in the agreement. On account of the inaction on the part of the company and non-completion of the work, the Government was compelled to cancel the agreement and fresh tenders were called for by way of publication. The contention that the Board has proposed to hand over the project to Hindalco Industries Ltd., has been denied. The allegation that the company was unable to carry out the work on account of various other hindrances has been denied by the 2nd respondent. Further, it is contended that the company has not paid any amount towards electricity charges with respect to the factory at Palakkad and the arrears would come to Rs. 77,02,67,651/- as on 20.12.2012. It is reiterated that the contract had to be cancelled on account of the fact that no steps were taken by the company to proceed with the work in accordance with the terms and conditions of the contract.

Additional counter affidavit is also filed by the 2nd respondent inter alia stating that the official liquidator appointed by the Madras High Court was aware of the proceedings and had taken possession of the assets of the company on 22.4.2009 and 23.4.2009 which included plant and machinery and other movables available at the Scheme area and deployed security guards to safeguard the assets of the company. The assets were valued by an agency. The machinery were put to public auction. The Board has also filed an application before the company Court as C.P. No. 141/1999. Further, it is stated that the Board has floated national competitive tenders for the project and several companies participated in the tender with a proposal to execute a project. Tender proceedings have been completed and they are in the final stage of awarding the work.

W.P.(C) No. 11113/2013 has been filed by a contractor of the company seeking to quash Exts. P5 to P12 orders and for a direction to the 2nd respondent to quantify the work done for the site by the petitioner by way of a joint inspection and for settlement of the bill in terms with the current schedule rate.

The petitioner in the said case alleges that he was a sub-contractor of the company in respect of the said project work. Ext. P3 is the contract executed between the petitioner and the company. He had done several items of work. But, thereafter, on account of various factors, the work could not proceed further. The work done by him has not been quantified so far and in the meantime, the company was wound up and so far the petitioner has not been paid the amounts legally due to him and there is no proper quantification of the work done.

Counter affidavit is filed in this case by the 2nd respondent inter alia stating that they have no contractual obligation with the writ petitioner, who has no locus standi to file the writ petition. His claim against the Company can be taken up only by filing appropriate application before the Company Court. That apart, it is contended that all the work done by the company had been measured by the Department and therefore there is no reason to further quantify the work done.

Having regard to aforesaid pleadings, the learned Single Judge dismissed the writ petitions. The learned Single Judge dismissed the writ petitions on the ground of delay and laches. However, it was made clear that dismissal of the writ petitions will not stand in the way of the petitioners from instituting appropriate proceedings seeking redressal of their grievances including claim for payment for the work done.

Learned counsel for the appellant in W.A. No. 1166/2014 relying upon a judgment of the Supreme Court in Tukaram Kana Joshi and Others thr. Power of Attorney Holder Vs. M.I.D.C. and Others, , contends that though delay and laches is adopted as a mode of discretion to decline to exercise jurisdiction to grant relief, the Court is required to exercise judicial discretion which depends upon the facts and circumstances of each case. Delay and laches are not an absolute impediment for granting the relief''s. Mitigating factors, continuity of cause of action etc. are to be looked into. That apart, if the factual situation shocks the judicial conscience, the Court should exercise the discretion and especially when no third party interest is involved.

Another judgment relied upon is N. Balakrishnan Vs. M. Krishnamurthy, , in which this Court has condoned the delay of 883 days in filing an application to set aside an ex parte decree. In the said case, the Supreme Court held that rules of limitation is founded on public policy and not meant to destroy the right of parties. They are meant to see that the parties do not resort to dilatory tactics and seek their remedy promptly. It is contended that in so far as there was no deliberate attempt on the part of the petitioner to delay the process, the learned Single Judge ought to have entertain the writ petition.

Heard the learned counsel for the appellants in these cases, the learned Government Pleader and the learned standing counsel appearing for the KSEB.

The first question to be considered in these appeals is with reference to the locus standi of the petitioners. The petitioner in W.P.(C) No. 24163/2013 is an erstwhile Chairman of the Company, which is in liquidation. Admittedly, the Company had been wound up and an Official Liquidator has been appointed. The writ petition does not disclose that this writ petition has been filed on behalf of the Company after getting permission from the Company Court, in which winding up proceedings are pending. It cannot be disputed that under Section 457 of the Companies Act, 1956, it is for the liquidator in a winding up, with the sanction of the court, to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company and to carry on the business of the company so far as may be necessary for the beneficial winding up of the company and other matters relating to the same.

The Company has to be represented in a proceeding only by the Official Liquidator appointed by the Company Court. The relief''s sought for is challenging Exts. P9 and P10 orders passed cancelling the contract. The Official Liquidator or any other person can file the above proceedings with leave of the Company Court only. Under such circumstances, we are of the view that the very initiation of the writ petition is without locus and the writ petition is liable to be dismissed on that ground alone.

That apart, Exts. P9 and P10 are orders cancelling the contract on the ground that the company did not carry on with the contractual obligations within the specified time. In other words, cancellation of the contract is based on the fact that the company in liquidation has committed breach of contract. If the Company has a case different from what has been stated, it is for the Company to take appropriate proceedings in accordance with law. Further, a writ court cannot decide on the validity or otherwise of the reasons stated in the order terminating the contract, as it involves disputed questions of fact. The contention urged with reference to Clause 25 of the agreement can be agitated only in appropriate proceedings, after obtaining leave of court. Even otherwise, it is always open for the Government to form an opinion that since the Company had been wound up there is no necessity to continue with the contract.

As far as W.A. No. 1203/2014 is concerned, the appellant has no contractual obligation with KSEB and the State of Kerala as the case may be. He was only a contractor of the Company in liquidation. The only contention urged by the learned counsel for the appellant is that an opportunity should be given to him to quantify the work done.

In so far as the appellant has no connection whatsoever with the respondents, his remedy is to approach his principal and seek appropriate relief''s. As already indicated, since the Company, which had undertaken the contract, has been wound up by orders passed by the High Court of Madras, he has to approach the said court seeking appropriate relief''s. Therefore, even if delay and laches in filing the writ petition is condoned, still the petitioner has no locus to file the writ petition and for that reason, the writ petition was liable to be dismissed.

In the result, no grounds are made out to interfere with the judgment of the learned Single Judge. The writ appeals are therefore dismissed.