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Judgment
V. Dhanapalan, J.—This petition has been filed, calling in question, the proceedings in Se.Mu.Ka. No. 15/2002-03 Ka.Ka. dated
06.10.2007 on the file of the fifth respondent and the consequential proceedings thereto made in Letter No. Bank Guarantee LC 363/2003-04
Ka.Ka. dated 14.11.2007 and 26.11.2007.
The case of the petitioner which is a Private Limited Company, could be narrated thus:
2.1 It is a Class-I Contractor carrying on business in the field of contract works such as construction of bridges, etc. and it was awarded with the
contract work of construction of a Road Over Bridge (ROB) in between Koodal Nagar and Madurai Junction Railway Station by virtue of an
agreement dated 26.02.2003 entered into with the fourth respondent. The contract period for the said work, though originally fixed as 18 months
from the date of the agreement, was subsequently extended by the respondents upto 31.12.2007. As per the terms of contract, it submitted its
Alternate Design with continuous span arrangement which was found accepted by the respondents. A portion of the site, pursuant to the agreement
dated 26.02.2003, was handed over to the petitioner-company on 03.03.2003, the land acquisition proceedings in respect of remaining portion of
worksite, not being completed. Still, it commenced the work in the area handed over to it on 03.03.2003 and marked the alignment as per the
departmental proposal. This alignment was not approved by the fourth respondent for the reason that the original alignment proposed by the
Department requires modification. On 09.05.2003, the Chief Engineer/Projects and the Chief Engineer/Designs, together with departmental
officials, inspected the workspot and shifted the alignment in total deviation of the estimated plan. On 29.05.2003, the petitioner-company,
reporting to the respondents that the change in alignment requires substantial increase in quantity of work, requested them to incorporate an
Escalation Clause in the agreement. In response, it was by the respondents assured orally that the claim for escalation would be considered
favourably as done in other cases in the past. The first set of design and drawings submitted by the petitioner-company based on continuous span
arrangement was approved six months later than the date of agreement. Accordingly, after it had constructed about 12 out of 15 pillars before
31.03.2004, the fourth respondent, on 19.03.2004, directed it to change the superstructure design from continuous span superstructure
arrangement to simply supported span arrangement, necessitating it submit a revised design. In turn, on 15.04.2004, the petitioner-company
submitted its revised design which was approved on 12.08.2005, i.e. sixteen months from the date of submission of the re-design. Though the
approval for Pre Stressed Concrete Beams was granted on 12.08.2005, the petitioner-company was not able to execute the work for the reason
that the approval of Deck Slab Design was awaited and it got cleared only on 28.02.2006 which is about 22 months subsequent to the submission
of revised design. Yet, the petitioner-company launched the fully finished beam within 15 days from the date of approval of Deck Slab design and
drawings and in fact, proceeded with the execution of the work even beyond the contract period regardless of its claim for escalation which is
pending consideration and completed the work to the tune of Rs. 4,74,75,216/-.
2.2 This being the position, while the second respondent recommended on two occasions for incorporation of Escalation Clause in the agreement,
thereby admitting that the delay was attributable to the Department on the score of incomplete land acquisition, change in alignment, belated
approval of revised design, etc. which matter was subsequently forwarded to the Government, the petitioner-company made representations
before the competent authorities signifying the need for inclusion of Escalation Clause in the agreement inasmuch as it had incurred a loss of Rs.
3,03,06,729/- as on 31.12.2005 and at one stage, it also expressed its inability to proceed further in the absence of a final decision being taken on
the issue of inclusion of Escalation Clause in the agreement. Subsequently, a joint meeting involving the petitioner-company and the respondents
was convened before the District Collector, Madurai on 13.03.2007 in which the petitioner-company explained its plight and this factum of
convening the meeting was duly reported by the petitioner-company to the first respondent vide its communication dated 21.03.2007.
2.3 While so, the fifth respondent issued a show-cause notice dated 12.04.2007 to the petitioner-company calling for explanation as to why the (i)
agreement should not be terminated under Clause 109.05 and 109.07 of the Standard Specifications for Roads and Bridges (""SSRB"" for short),
re-tender in respect of balance work ordered at the cost and risk of the petitioner-company and its Earnest Money Deposit and Security Deposit
forfeited. The petitioner- company submitted its reply on 28.04.2007 justifying its claim for escalation which is pending consideration and the
petitioner-company''s reply was negatived by the fifth respondent vide his communication dated 03.08.2007 stating that: the petitioner-company
could have carried out the work on the Madurai side but has not done;
a sum of Rs. 63,00,000/- was paid to the petitioner-company for design and drawing and therefore, it is its duty to carry out the revised design;
and there was possibility to proceed further with the work, but, the petitioner- company has not chosen to do so.
2.4 On receipt of the afore-said communication from the fifth respondent, the petitioner-company gave its reply dated 23.08.2007 requesting to
consider its earlier self-explanatory representations. Yet, the fifth respondent, by his order dated 06.10.2007, terminated the petitioner''s contract
stating that it did not show any progress of work in spite of levying fine and failed to submit the programme chart, thereby not evincing any interest
to complete the work in spite of extension of validity of the contract period. Not stopping with that, the fifth respondent, by his order dated
22.10.2007, directed the bank not to disburse the amounts covered by bank guarantees representing the Earnest Money Deposit and Security
Deposit but to send a demand draft for the same amount. Further, by order dated 26.11.2007, the fifth respondent, directed the petitioner to send
demand draft for Rs. 18,14,000/- representing the Earnest Money Deposit and Security Deposit. As already stated, challenging these three orders
dated 06.10.2007, 22.10.2007 and 26.11.2007, the present writ petition has come to be filed.
Amongst the various grounds, the main grounds raised in this writ petition are that:
i the petitioner-company was prevented from executing the contract due to non-availability of the entire worksite, change in alignment, frequent
inconsistency of the departmental authorities in the process of decision-making;
ii though the petitioner-company has completed the work to the tune of Rs. 4,74,75,216/- despite the abnormal delay in granting approval of
revised design and has also signified its willingness to complete the work in the event of inclusion of Escalation Clause in the agreement, keeping in
mind the public interest and the importance of work, no final decision has been taken on the said issue;
iii the impugned orders are liable to be quashed inasmuch as they are arbitrary, misconceptual of facts and are vitiated by lack of jurisdiction for the
reason that it is only the fourth respondent who is the competent authority and non-application of mind and are also hit by Wednesbury''s principle
of unreasonableness;
iv the fifth respondent has passed the impugned orders without jurisdiction and without adverting to the relevant facts of the case which constitute
error apparent on the face of the record and hence, on this score, they are liable to be set aside;
v even assuming but without conceding that the fifth respondent has jurisdiction, the impugned orders are liable to be set aside since the
Government who is the employer has not ratified the act of the fifth respondent as provided in Clause 102.04 of SSRB;
vi the impugned orders are the result of official bias, mala fide exercise of power and pre-determination of issue by the fifth respondent even
without waiting for the final decision of the State Government on the petitioner-company''s claim for inclusion of Escalation Clause;
vii they are liable to be set aside for being violative of equality clause enshrined in Article 14 of the Constitution despite the fact that the Chief
Engineer has recommended inclusion of Escalation Clause and also considering the fact that such relief has been granted in an identical case; and
viii when it is a settled proposition of law that once time has been extended for a contract of this nature without reserving right to claim any
damages, no damages can be claimed in view of principles underlined in Section 5 read with Section 63 of the Contract Act and the impugned
orders to the effect of forfeiting Earnest Money Deposit and Security Deposit are wholly unsustainable.
The fifth respondent who has passed the orders challenged in this petition has filed his counter stating that:
i according to Clause 32.5 of the Agreement, the drawings, specifications and quantities of work proposed in the tender documents are subject to
variation in consonance with site condition and technical reasons and the petitioner is bound to do the work in accordance with those changes and
no extra rates or claims would be considered for the changes inasmuch as the petitioner is responsible for completing the work according to para
AS 105.05 and 110.04 of SSRB, Volume-I, Part-I;
ii only upon the report of the petitioner-company that shifting of alignment is required on the Madurai side approach due to the orientation of the
railway pier RP2 and so also land acquisition in this regard, the Chief Engineer-Projects-I and Chief Engineer Designs and Investigation, Chennai
jointly inspected the marked alignment by the petitioner-company and gave suitable instructions to shift the alignment to 4 degree towards the
Vaigai River Side to match with the original alignment without affecting the existing BCC road and the nearby locations and that only after getting
the approval of shifted alignment, the petitioner-company prepared the alternate design and drawings for the entire work;
iii it is only the petitioner-company which is responsible to get the Design and Drawings approved by the Chief Engineer (Highways) by taking
special care, the subject work being an Alternate Design;
iv since a sum of Rs. 63,00,000/- has already been paid to the petitioner-company towards cost of conducting necessary sub-soil exploration,
preparation of bore-log and also preparation, submission and getting clearance of Alternate Design, it is the look out of the petitioner to get the
Design approved without any delay;
v the proposal to include the Escalation Clause was recommended by the then Chief Engineer-Projects just to cooperate with the petitioner-
company to complete the work in time and yet, the petitioner-company has stopped the work stating that he would proceed only upon approval of
inclusion of Escalation Clause in the agreement which is a fundamental breach of Clause 109.5 of SSRB;
vi as per Clause 21.3 of the agreement, the petitioner-company cannot cite the delay in land acquisition process as a reason since enough extension
of time has been granted to cover such delay;
vii the problem of land acquisition on Dindigul side has since been solved and the respective individuals also have been paid their due compensation
whereas the petitioner-company has not come forward to start the further work despite the payment of Rs. 31,00,000/- made towards the cost of
supply of Elastomeric bearing;
viii for the various works done by the petitioner-company amounting to Rs. 1,20,00,000/- during the agreement period of 18 months, a sum of Rs.
63 lakhs has already been paid towards preparation and submission of Alternate Design and Drawings and as such, the petitioner-company has
constructed physical structures to the tune of Rs. 57,00,000/- only;
ix any extra-ordinary claim has to be sorted out only by means of Arbitration or by way of a Civil Suit and not by way of this petition and further,
ratification order has since been issued by the Government to the fifth respondent who has passed the impugned orders and as such, they warrant
no interference on the score of non-issuance of ratification order;
x for the Madurai side approach, the petitioner-company could have completed all the works upto super structure including solid fill portions
without any delay by engaging larger amount of labour force and machinery which is not so and the petitioner-company has received 24 lumpsum
part bills in pro- rata basis for the period of three years, the maximum bill amount being Rs. 40 lakhs and the minimum bill amount being Rs. 1.87
lakhs and despite receipt of such payments, the petitioner-company was only finding fault with the respondents to escape from the execution of
work; and
xi in fact, the petitioner-company forced the respondents to prepare deviation proposals and escalation proposals though they were not covered in
the agreement and blamed the respondents for the delay made by them without instead of speeding up the work at the site.
Heard Mr. R. Krishmnamurthy, learned Senior Counsel appearing for the petitioner and Mr. T. Raja, learned Additional Advocate General
appearing for the respondents.
The learned Senior Counsel appearing for the petitioner-company, at the threshold of his arguments, has contended that the impugned orders
passed by the fifth respondent are unsustainable on the ground that he is not the competent authority in this regard inasmuch as it is only the fourth
respondent who has entered into the agreement with the petitioner-company on behalf of the Government. His second limb of argument is that
despite the fact that the entire site was not handed over to the petitioner-company till the date of termination of contract and the Escalation Clause
also was not included in the agreement though it was recommended by the Chief Engineer twice, the petitioner- company had carried out works to
the tune of Rs. 4,74,75,216/- and as such, the stand of the fifth respondent taken in the impugned order dated 06.10.2007 that the petitioner-
company is not interested in completing the pending works in full, does not have legs to stand and has to fall to ground.
It has been further contended by the learned Senior Counsel appearing for the petitioner-company that the respondents, having delayed the
approval of the revised design for about 16 months, are estopped from taking such a stand that the petitioner-company is not willing to complete
the pending works in time. The learned Senior Counsel has further contended that the impugned orders are the result of malafideness, official bias,
vindictiveness and pre-determination of the issue.
To put it in a nutshell, the learned Senior Counsel appearing for the petitioner has argued that the impugned orders of the fifth respondent are
arbitrary in nature and they have come to be passed by colourable exercise of power and non-application of mind and are hit by the
Wednesbury''s principle of unreasonableness.
In support of his contention that judicial review is permissible in case the policy decision taken is arbitrary in nature and is a consequence of non-
application of mind, the learned Senior Counsel appearing for the petitioner-company has placed reliance on the following judgments:
i Union of India and Others Vs. Dinesh Engineering Corporation and Another etc., : (para 12)
A perusal of the letter dated 23.10.1992 does not show that the Board was either aware of the existence of the writ petitioner or its capacity or
otherwise to supply the spare parts required by the Railways for replacement in the governors used by it, an ignorance which is fatal to its policy
decision. Any decision, be it a simple administrative decision or a policy decision, if taken without considering the relevant facts, can only be
termed as an arbitrary decision. If it is so, then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of the
Constitution.
ii (2006) 8 SCC 200, Jayrajbhai Jayantibhai Patel v. Anilbhai Nathubhai Patel (para 18)
Having regard to it all, it is manifest that the power of judicial review may not be exercised unless the administrative decision is illogical or suffers
from procedural impropriety or it shocks the conscience of the court in the sense that it is in defiance of logic or moral standards but no
standardised formula, universally applicable to all cases, can be evolved. Each case has to be considered on its own facts, depending upon the
authority that exercises the power, the source, the nature or scope of power and the indelible effects it generates in the operation of law or affects
the individual or society. Though judicial restraint, albeit self-recognised, is the order of the day, yet an administrative decision or action which is
based on wholly irrelevant considerations or material; or excludes from consideration the relevant material; or it is so absurd that no reasonable
person could have arrived at it on the given material, may be struck down. In other words, when a court is satisfied that there is an abuse or misuse
of power, and its jurisdiction is invoked, it is incumbent on the court to intervene. It is nevertheless, trite that the scope of judicial review is limited
to the deficiency in the decision- making process and not the decision.
Contending that the subject matter is not one arising purely out of an agreement and as such, interference in illegal termination of contract under
Article 226 of the Constitution of India can be made by this Court, the learned Senior Counsel appearing for the petitioner-company has drawn the
attention of this Court to a decision of the Supreme Court in Verigamto Naveen Vs. Government of Andhra Pradesh and Others, , the relevant
portion of which goes thus:
On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court
ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High
Court in Y.S. Raja Reddy v. A.P. Mining Corporation Ltd. and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation ComMr. ,
Radhakrishna Agarwal v. State of Bihar, Ramlal & Sons v. State of Rajasthan, Shiv Shankar Dal Mills v. State of Haryana, Ramana Dayaram
Shetty v. International Airport Authority of India and Basheshar Nath v. CIT. Though there is one set of cases rendered by this Court of the type
arising in Radhakrishna Agarwal case much water has flown in the stream of judicial review in contractual field. In cases where the decision-
making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision
is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the
Government and its agencies. We may advert to three decisions of this Court in Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of
Bombay, Mahabir Auto Stores v. Indian Oil Corpn. and Shrilekha Vidyarthi (Kumari) v. State of U.P. Where the breach of contract involves
breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of
action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The
freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public
interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it
cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand
is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also
stands rejected.
As regards the maintainability of the writ petition, reliance has been placed by the learned Senior Counsel appearing for the petitioner-company
on the following judgments:
i (2004) 13 SCC 510, Travancore Devaswom Board v. Panchamy Pack (P) Ltd. (para 10)
The other decisions relied upon by the respondent in Harbanslal Sahnia v. Indian Oil Corporation Ltd. and ABL International Ltd. v. Export Credit
Guarantee Corporation of India Ltd. relate to the power of the Court under Article 226 to entertain a matter even where disputed questions of fact
are involved. The proposition is well settled. However, it is equally well settled that this Court normally does not interfere with the exercise of
discretion by the High Court in refusing to entertain a petition under Article 226 on the ground that disputed questions of fact were involved. In
Harbanslal Sahnia case this Court indicated the exceptional circumstances in which the High Court could exercise its jurisdiction under Article 226,
despite the existence of an alternative remedy. These have been stated in SCC p. 110, para 7 of the report where it is said that the High Court
may exercise its jurisdiction under Article 226 in at least three contingencies even when an alternative remedy was available, namely,
(i) where the writ petition seeks enforcement of any of the fundamental rights;
(ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an
Act is challenged.
ii Mrs. Sanjana M. Wig Vs. Hindustan Petro Corporation Ltd., (para 13)
However, access to justice by way of public law remedy would not be denied when a lis involves public law character and when the forum
chosen by the parties would not be in a position to grant appropriate relief.
12 In addition to the above, the learned Senior Counsel appearing for the petitioner-company, in support of his arguments, has placed reliance on
the following judgments:
i. Dr. S.P. Kapoor Vs. State of Himachal Pradesh and Others, (para 33)
Though before the High Court it does not appear that Dr Jiwan Lal had alleged any mala fides to anybody he has alleged in the SLP that the
constitution of the Departmental Promotion Committee and the process of selection and appointment were obviously mala fide and that they were
appointed on the date on which Mr Yadav, the regular Secretary, Health and Family Welfare Department, was on leave and that this haste
suggests that he would not have agreed to carry out the political wish of the then Chief Minister in making the appointments in the post-haste
manner. Though it is not possible to accept the belated contention that there was any mala fides on the part of the then Chief Minister in the matter
of constitution of the Departmental Promotion Committee with his Principal Secretary as one of its members in the place of the regular Secretary,
Health and Family Welfare, we are of the opinion that there is room for suspecting the reason why the whole thing was completed in haste on
November 3, 1979 after the preparation of the final seniority list on November 2, 1979, in the light of the admitted position that the Deputy
Directors and Director of Health Services, Himachal Pradesh were holding ad hoc appointments from 1973. The matter was not such as could not
have been put off by a few days. Such rush is not usual in any State Government. The post-haste manner in which these things have been done on
November 3, 1979 suggests that some higher-up was interested in pushing through the matter hastily when the regular Secretary, Health and
Family Welfare was on leave. Therefore, we are of the opinion that the matter requires to be considered afresh.
ii State of Karnataka and Another Vs. All India Manufacturers Organization and Others, : (paras 59, 61 & 62)
Mr Divan strongly urged that the relief granted was wholly beyond the jurisdiction of the High Court under Article 226 of the Constitution, as it
would amount to granting a decree for specific performance in writ jurisdiction. A reading of the relief granted by the High Court does not
persuade us that it is so. The High Court merely directed that the Project and the FWA, as conceived originally and upheld by the High Court in
Somashekar Reddy, should be implemented ""in letter and spirit"". In other words, the High Court said that there is no scope for raising frivolous and
mala fide objections for ulterior purposes. This, the High Court was fully entitled to do. It is trite law that when one of the contracting parties is
State"" within the meaning of Article 12 of the Constitution, it does not cease to enjoy the character of ""State"" and, therefore, it is subjected to all
the obligations that ""State"" has under the Constitution. When the State''s acts of omission or commission are tainted with extreme arbitrariness and
with mala fides, it is certainly subject to interference by the constitutional courts in this country. We may refer to Gujarat State Financial
Corporation v. Lotus Hotels (P) Ltd. in which a statutory corporation (the Gujarat State Financial Corporation) arbitrarily refused to grant the
sanction of loans to entrepreneurs who had already acted on the basis of the sanction and had incurred expenditure and liabilities. The argument
that the transaction was purely a contractual arrangement between the parties and, therefore, not amenable to writ jurisdiction, was categorically
rejected by the following observations:
Now if appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the
statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct, to the respondent.
In such a situation, the Court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to
perform its statutory duty. A petition under Article 226 of the Constitution would certainly lie to direct performance of a statutory duty by ''other
authority'' as envisaged by Article 12.
Thus, it appears that no exception could be taken to relief granted in the judgment of the High Court impugned before us. All that the High
Court has done is to reaffirm and require the State Government and its instrumentalities, as ""State"" under the Constitution, to act without
arbitrariness and mala fides, especially in the matter of land acquisition. It is pertinent to note that the State had agreed (vide Clause 5.1.1.1 of the
FWA) in respect of the lands required under the FWA, that:
GOK shall use its best efforts and cause its governmental instrumentalities to use their best efforts, to exercise its and their legal right of eminent
domain (or other right of similar nature) under the laws of India to acquire the acquired land. Prior to acquiring any acquired land, GOK will obtain
from the Company written confirmation of its willingness to purchase such acquired land from GOK at the purchase price (whether in the form of
cash or comparable land) required under the laws of India (the ''acquired land compensation''). GOK shall offer to the expropriated owners of the
land the rehabilitation package specifically worked out for this Infrastructure Corridor Project with mutual consultation of the consortium and the
Revenue Authorities in accordance with the applicable rules.
In these circumstances, we find no reason to interfere with the said directions of the High Court. In the future also, we make it clear that while
the State Government and its instrumentalities are entitled to exercise their contractual rights under the FWA, they must do so fairly, reasonably
and without mala fides; in the event that they do not do so, the Court will be entitled to interfere with the same.
iii ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, (paras 8,9,19 & 27)
As could be seen from the arguments addressed in this appeal and as also from the divergent views of the two courts below, one of the questions
that falls for our consideration is whether a writ petition under Article 226 of the Constitution of India is maintainable to enforce a contractual
obligation of the State or its instrumentality, by an aggrieved party.
In our opinion this question is no more res integra and is settled by a large number of judicial pronouncements of this Court. In K.N. Guruswamy v.
State of Mysore1 this Court held: (AIR pp. 595-96, para 20)
The next question is whether the appellant can complain of this by way of a writ. In our opinion, he could have done so in an ordinary case.
The appellant is interested in these contracts and has a right under the laws of the State to receive the same treatment and be given the same
chance as anybody else.... We would therefore in the ordinary course have given the appellant the writ he seeks. But, owing to the time which this
matter has taken to reach us (a consequence for which the appellant is in no way to blame, for he has done all he could to have an early hearing),
there is barely a fortnight of the contract left to go.... A writ would therefore be ineffective and as it is not our practice to issue meaningless writs
we must dismiss this appeal and leave the appellant content with an enunciation of the law.
Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts
of the case, the court entertaining such petition under Article 226 of the Constitution is not always bound to relegate the parties to a suit. In the
above case of Gunwant Kaur this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be
taken. This clearly shows that in an appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of
fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed
questions of fact.
From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all
cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
iv R.S. Garg Vs. State of U.P. and Others, (paras 21 to 23)
In A. Umarani, it was opined: (SCC p. 125, paras 39-41)
Regularisation, in our considered opinion, is not and cannot be the mode of recruitment by any ''State'' within the meaning of Article 12 of the
Constitution of India or any body or authority governed by a statutory Act or the Rules framed thereunder. It is also now well settled that an
appointment made in violation of the mandatory provisions of the statute and in particular, ignoring the minimum educational qualification and other
essential qualification would be wholly illegal. Such illegality cannot be cured by taking recourse to regularisation. (See State of H.P. v. Suresh
Kumar Verma.)
It is equally well settled that those who come by back door should go through that door. (See State of U.P. v. U.P. State Law Officers Assn.)
Regularisation furthermore cannot give permanence to an employee whose services are ad hoc in nature.
An appointment dehors the Rules would render the same illegal and not irregular as has been held in Umadevi in the following terms: (SCC p. 36,
para 43)
Thus, it is clear that adherence to the rule of equality in public employment is a basic feature of our Constitution and since the rule of law is the
core of our Constitution, a court would certainly be disabled from passing an order upholding a violation of Article 14 or in ordering the
overlooking of the need to comply with the requirements of Article 14 read with Article 16 of the Constitution. Therefore, consistent with the
scheme for public employment, this Court while laying down the law, has necessarily to hold that unless the appointment is in terms of the relevant
rules and after a proper competition among qualified persons, the same would not confer any right on the appointee.
It was further observed: (SCC p. 36, para 43)
It has also to be clarified that merely because a temporary employee or a casual wage worker is continued for a time beyond the term of his
appointment, he would not be entitled to be absorbed in regular service or made permanent, merely on the strength of such continuance, if the
original appointment was not made by following a due process of selection as envisaged by the relevant rules. It is not open to the court to prevent
regular recruitment at the instance of temporary employees whose period of employment has come to an end or of ad hoc employees who by the
very nature of their appointment, do not acquire any right. The High Courts acting under Article 226 of the Constitution of India, should not
ordinarily issue directions for absorption, regularisation, or permanent continuance unless the recruitment itself was made regularly and in terms of
the constitutional scheme.
However, in the case of irregular appointment, the Constitution Bench in Umadevi stated as follows:
One aspect needs to be clarified. There may be cases where irregular appointments (not illegal appointments) as explained in S.V.
Narayanappa, R.N. Nanjundappa and B.N. Nagarajan and referred to in para 15 above, of duly qualified persons in duly sanctioned vacant posts
might have been made and the employees have continued to work for ten years or more but without the intervention of orders of the courts or of
tribunals. The question of regularisation of the services of such employees may have to be considered on merits in the light of the principles settled
by this Court in the cases above referred to and in the light of this judgment. In that context, the Union of India, the State Governments and their
instrumentalities should take steps to regularise as a one-time measure, the services of such irregularly appointed, who have worked for ten years
or more in duly sanctioned posts but not under cover of orders of the courts or of tribunals and should further ensure that regular recruitments are
undertaken to fill those vacant sanctioned posts that require to be filled up, in cases where temporary employees or daily wagers are being now
employed. The process must be set in motion within six months from this date. We also clarify that regularisation, if any already made, but not sub
judice, need not be reopened based on this judgment, but there should be no further bypassing of the constitutional requirement and regularising or
making permanent, those not duly appointed as per the constitutional scheme.
v Suresh Jindal Vs. BSES Rajdhani Power Limited and Others, : (para 37)
Before embarking on other questions raised at the Bar, we would like to place on record that the High Court had placed strong reliance on the
rationale of replacing the existing meters with electronic meters, but, we are of the opinion that the same is not at all relevant as in the event it is held
that the respondent had no authority to replace the existing meters with electronic meters, rationale or other justifications in support thereof would
not legalise an illegal act.
vi Arjuna and Others Vs. State of Maharashtra and Others, : (para 3)
In that view of the matter, ground 5 has remained undisputed. The appeal is, accordingly, allowed on that terms and the order of the High Court is
set aside. In case the respondents were declared to be within the ceiling limit, liberty is given to them to file a review petition within a period of two
months from today.
vii Raj Bahadur Sharma (Dead) Thr. L.RS. Vs. Union of India and Others, : (paras 10 & 11)
Learned Counsel appearing for the appellant submitted that though it was brought to the notice of the Tribunal that the appellant was not at fault in
not joining at the transferred place, without giving any finding on that, the Tribunal has deprived the appellant of the salary for the period in
question. He also brought to our notice that there was a specific plea, namely, that the appellant could not join at the transferred place in the
absence of relieving order and necessary passes. The respondents never came forward to deny that assertion of the appellant. In other words,
while the appellant was prepared to join the duty it was the administration which disabled the appellant to join the duty and, therefore, the appellant
cannot be blamed.
Learned Counsel appearing for the respondents could not deny the position and as a matter of fact, in the counter-affidavit filed instead of directly
replying the point it is stated as follows:
That in reply to para 2(ix) it is submitted that there is no material on record to show that the pass etc. were not issued to the petitioner."" There is no
plea positively denying the averments of the appellant in para 2(ix) in the appeal.
viii Smt. Naseem Bano Vs. State of U.P. and others, (para 9)
The aforesaid reply would show that on behalf of respondents 1 to 4, it was not disputed that 40 per cent posts which have to be filled up by
promotion had not been filled up and the denial of promotion to the appellant was justified on the sole ground that she was not qualified to be
promoted to L.T. grade. This shows that in the pleadings before the High Court, there was no contest on the question that the post of L.T. grade
which was sanctioned on August 29, 1977 was required to be filled up by promotion for the reason that 40 per cent posts had not been so filled.
Even though there was no contest on this question the High Court has gone into it and has held that the appellant has failed to establish her case
that at the time of the appointment of respondent 6 by direct recruitment 40 per cent of the total number of posts in the College were not filled up
by promotion as prescribed by Regulation 5(2)(a) of the Regulations. Since no dispute was raised on behalf of respondents 1 to 4 in their reply to
the averments made by the appellant in the writ petition that 40 per cent of the total number of posts had not been filled by promotion, inasmuch as
the said averments had not been controverted, the High Court should have proceeded on the basis that the said averments had been admitted by
respondents.
ix P. Balamani and A. Saraswathi Vs. The District Magistrate and District Collector and The Chief Engineer, Power Grid Corporation of India
Ltd. (A Government of India Enterprise), : (para 25)
A careful analysis of the impugned proceedings passed by the District Magistrate/District Collector, pursuant to the orders of this Court, would go
to show that they are non-speaking orders, as the District Magistrate has not at all gone into the objections in detail to consider the same
independently, by applying his mind. Reasoning is the heartbeat of every conclusion and without the same, the conclusion becomes lifeless. The
rationale behind it is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is
spelling out reasons for the order made. Therefore, I am not inclined to go into the other aspects of the matter, which the learned Counsel on either
side have advanced their arguments. I am only inclined to interfere with the impugned orders, as they are non-speaking ones. As such, the
impugned orders cannot be sustained and are set aside, remitting the matters back to the District Collector for consideration.
The learned Additional Advocate General, per contra, by drawing the attention of this Court to Clause 11 of the agreement, has contended
that in case of any dispute or difference between the parties, the same can be referred to the Sole Arbitrator if the money value of the claim is less
than Rs. 2 lakhs or to a Civil Court if the money value of the claim exceeds Rs. 2 lakhs and as such, this writ petition has to be dismissed on the
score of maintainability itself. In this regard, reliance has been placed by him on the following judgments:
i 2006 (1) CTC 769, Rajam Engineering Contractors v. State of Tamil Nadu represented by its Secretary to Government, Highways Department,
Fort St. George, Chennai 9 and Ors.: (para 8)
In reply, Mr. N.R. Chandran, learned Advocate General contended that the words ""be referred to Court"" should be understood in the proper
perspective and the interpretation suggested by the petitioners is incorrect. u/s 20 of the old Act, an application is filed in a Court to file an
arbitration agreement and then reference is made by the Court to an Arbitrator u/s 23 of the old Act. Therefore, the term ""be referred to Court
can only mean that party is referred i.e. Directed to move the Civil Court for adjudication. He submitted that the arbitration clause beween the
parties is clear that the claim shall be filed before the Court having jurisdiction for decision and with regard to claims of below Rs. 2 lakhs the
matter shall be referred to departmental arbitrator, who shall be the Superintending engineer. He further submitted that the State never took a stand
conceding the position pleaded by the respondents, but on the other hand disputed the interpretation suggested by the petitioners, which was not
accepted by the Court. Therefore, the doctrine of issue estoppel can never be applied, especially when the litigation is not between the same
parties. Learned Advocate General also brought to our notice that two former Chief Justices of this Court namely, Hon''ble Shri Justice B.
Subhashan Reddy and Hon''ble Shri Justice Markandey Katju categorically held that the said Governmental Order does not contemplate an
arbitration agreement where the value is more than Rs. 2 lakhs. According to the learned Advocate General the matter is no more res integra and
while considering a similar Governmental Order of the Andhra Pradesh Government the Supreme Court in State of A.P. v. Obulu Reddy 2001
(10) SCC 30 held that the question of reference to arbitration would not arise if the claim was above the amount of Rs. 50,000/-. The learned
Advocate General submitted that the interpretation suggested by the petitioners is contrary to the law laid down by the Supreme Court.
ii The General Manager, Northern Railway Vs. The Metal Powder Company Limited and Indian Overseas Bank, : (paras 13 and 21)
It is obligatory on the part of the Court if it is brought to the notice of the Court that there exists an agreement containing a clause to refer the
matter for arbitration. The arbitrator has got ample power to decide whether there is an existence of the arbitration clause in the agreement or he
can give his own ruling about the validity of the arbitration agreement. At this juncture, it is useful to refer to Section 16(1) of the said Act which
reads as follows:
Section 16. Competence of Arbitral Tribunal to rule on its jurisdiction:
1 The Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration
agreement, and for that purpose,
a. an arbitration clause which forms part of a contract shall be treated as an agreement, independent of the other terms of the contract; and
b. a decision b the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
Therefore, in case where there is an arbitration clause in the agreement, it is obligatory for the Court to refer the matter in terms of the arbitration
agreement and nothing remains to be decided in the original action, namely, in the suit that has been instituted by the first respondent herein, after an
Application is made u/s 8(3) of the Act, except to refer the dispute to the arbitrator. It is nothing but mandatory for the Civil Court to refer the
dispute to the arbitrator. In view of the mandatory language provided u/s 8 of the Act, the Court below has no option, but to refer the dispute to
arbitration. The main objects of the Act itself are as under:
i to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;
ii to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;
iii to provide that the Arbitral Tribunal gives reasons for its arbitral award;
iv to ensure that the Arbitral Tribunal remains within the limits of its jurisdiction;
v to minimise the supervisory role of Courts in the arbitral process;
vi to permit the Arbitral Tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of
disputes;
vii to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court;
viii to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an
arbitral award on agreed terms on the substance of the dispute rendered by an Arbitral Tribunal;
ix to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international
conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.
iii Ford Credit Kotak Mahindra Limited Vs. M. Swaminathan, : (paras 5, 7 & 15)
The Honourable Supreme Court, while setting aside the order of the trial Court as well as the High Court held that judicial authorities are mandated
to refer the parties to arbitration, once existence of clause is pointed out an such reference is obligatory.
...In case of arbitration without the intervention of the Court, the parties must rigorously stick to the agreeent entered into between the two. If the
arbitration clause names an arbitrator as the one already agreed upon, the appointment of an arbitrator poses no difficulty.
Where the parties by contract have agreed to refer their disputes to arbitrator, the Court should, as far as possible proceed to give opportunity for
resolution of disputes through arbitration rather than by judicial adjudication. Followed State of Punjab Vs. Geeta Iron and Brass Works Ltd., .
To substantiate his contention that Courts cannot interfere in a case where the subject matter arises out of a contract, the learned Additional
Advocate General has placed reliance on the judgment of the Supreme Court in Life Insurance Corporation of India and Another Vs. Smt. S.
Sindhu, ""At the outset, what should be noticed, is that the amount that is paid by LIC in regard to a lapsed policy, is not ""refund of the premiums
paid on various dates"", but a reduced lump sum (calculated as per condition 4 of the policy) instead of the assured sum. When what is paid by LIC
is not refund of premiums, the question of treating the amount paid by LIC as refund of premiums paid and then directing payment of interest
thereon from the respective dates of payment of premium does not arise. That would amount to treating the premiums paid in respect of a policy
which lapsed by default, as fixed deposits repayable with a hefty rate of interest. Surely, the intention is not to reward defaulting policy-holders.
Moreover, the courts and tribunals cannot rewrite contracts and direct payment contrary to the terms of the contract, that too to the defaulting
party. Be that as it may.
Pointing out that the contract period has been extended by the respondents upto 31.12.2007, the date of agreement being 26.02.2003 and the
work period being 18 months, the learned Additional Advocate General has contended that though the petitioner-company has been reminded on
as many as nine occasions by way of letters/reminders/show cause notice to complete the contract work in time, it has miserably failed to respond
to fulfil the terms of the agreement and therefore, the action of the fifth respondent, who has got the power to terminate the contract, in terminating
the petitioner-company''s contract by way of the impugned orders, does not warrant any sort of interference whatsoever.
I have given careful consideration to the arguments advanced by the learned Counsel on either side and have also perused the documents
available on record besides paying my heedful attention to the citations relied on by the learned Counsel on both sides.
From a pragmatic approach to the issue on hand, upon perusing the entire pleadings and the relevant documents and upon hearing the learned
Counsel on either side, the following points emerge;
The petitioner-company was awarded with the contract work of construction of ROB between Koodal Nagar and Madurai Junction Railway
Station and accordingly, an agreement was entered into between the petitioner-company and the fourth respondent on 26.02.2003. Though the
contract period was for 18 months, it was extended by the respondents upto 31.12.2007. As there was a need for change in alignment, the
petitioner-company submitted its Alternate Design which was approved by the respondents 16 months later. Since the Alternate Design and the
extension of contract work resulted in procurement of additional raw materials and labour, the petitioner-company insisted upon the need to
include the Escalation Clause in the agreement which was recommended by the then Chief Engineer. Since the contract work remained incomplete
even after extension of contract period, the fifth respondent issued a show cause notice dated 12.04.2007 seeking explanation from the petitioner-
company as to why the contract should not be terminated under Clause 109.5 and 109.7 of SSRB and also as to why the balance of work should
not be re-tendered at the cost and risk of the petitioner-company in addition to forfeiture of Earnest Money Deposit and Security Deposit.
Unconvinced with the petitioner-company''s reply dated 28.04.2007, the fifth respondent issued a communication dated 03.08.2007 negativing the
petitioner''s pleas therein in response to which the petitioner- company sent its reply dated 23.08.2007 seeking to consider its earlier
representations. Not being satisfied with the petitioner-company''s approach, the fifth respondent, observing that the petitioner-company has not
completed the contract work despite several reminders including show-cause notice and imposition of daily penalty of Rs. 100/- from 05.05.2006
and Rs. 500/- from 08.09.2006 and has also not submitted its schedule of work after 18.10.2006 and construing that the petitioner-company is
not inclined to complete the work, terminated the contract vide his proceedings dated 06.10.2007 as per Clause 109.05 and 109.07 of SSRB,
giving paramount importance to public interest. It was further ordered in the said proceedings to forfeit the Earnest Money Deposit and Security
Deposit and also to re-tender the remaining work at the cost and risk of the petitioner-company.
In the light of the above , I have to examine
i whether the writ petition is maintainable when an alternative remedy is available to the petitioner-company before the Civil Court?
ii whether there is violation of fundamental rights guaranteed in the Constitution of India?
iii whether there is violation of principles of natural justice?
iv whether the impugned orders are wholly without jurisdiction? and
v whether the action of the fifth respondent in terminating the contract involves arbitrariness, unreasonableness and colourable exercise of power
and whether there is violation of terms and conditions of the agreement?
Before embarking on the above aspects, it would be relevant to refer to relevant clauses of the agreement dated 26.02.2003 which read as
under:
11 In case of any dispute or difference between the parties to the contract either during the progress or after the completion of the work or after
the determination/abandonment of the contract or any matter arising thereunder and if the claims value exceeds Rs. 2.00 lakhs (Rupees Two Lakhs
only) the same shall be settled by filing a civil suit before a Civil Court having jurisdiction for decision. If the claims monetary value is less than Rs.
2.00 lakhs (Rupees Two Lakhs only) the dispute shall be referred for arbitration to a sole arbitrator. The Superintending Engineer (Highways),
Project-I, Circle Coimbatore or his successor in his office shall be the Arbitrator for this purpose. The arbitration proceedings will be governed by
Arbitration and Conciliation Act - 1996.
21.3 The contractor will not have any claim in case of delay by the Employer or removal of Trees, or shifting of Telephones/Electric lines, posts or
acquisition of land or removal of structure if any which may come in the way of the work. However, suitable extension of time can be granted to
cover such delays.
32.5 The drawings, specifications and quantum of work proposed in this tender documents are subject to variation according to the site condition
and according to the technical reasons. The contractor is bound to do the work according to that changes and no extra rates or claims of the
contractor will be considered for the changes as the contractor is responsible for completing the work according to Para P.S. 105.05 & 110.04 of
SSRB, Vol.-I, Part-I.
Apart from the above, it would also be relevant to refer to relevant clauses of SSRB and they are as under:
101-03 Engineer
The Divisional Engineer of the Tamil Nadu Highways and Rural Works Department in charge of the work; or his authorised representative limited
by the particular duties entrusted to him
102.04 Delegation of powers
Any decision to be made or orders to be issued by the Engineer or by any higher departmental authorities under the contract may be made by any
person or persons authorised to act for the Engineer or higher authority for that purpose and may be made in such a manner and on such evidence
or information as such person or persons shall think fit.
Provided always that the authority who has accepted the agreement for the work shall make no delegation of powers to his subordinates in respect
of orders and decisions concerning the extension of time for completing the contract or the determination of the contract or any other matter in
which his decision is to be final and conclusive, the orders of the Engineer in these matters shall be subject to his ratification.
105.04 Special Work
Should any construction or requirements not covered by these specifications be anticipated on any proposed work, special provisions for the same
will be prepared and referred to in the tender documents, which special provisions shall be considered as a part of these specifications the same as
though contained fully herein.
105.05 Increased or decreased quantities
The right is reserved, any time during which the contract is in force, to make any alterations in the work, that may be in the opinion of the Engineer
be necessary and for that purpose he shall have power to order that Contractor to do and the Contractor shall do any of the following:
1 Increase or decrease in quantities of any item of work included in the contract.
2 To omit any portions of work.
3 Change the specification for any item of work.
4 Change the lines, levels, positions and dimensions of any part of the work.
5 Execute additional work necessary for the completion of the work and
6 Alterations in the plans.
Such alterations shall be ordered in writing before starting the work on such alterations. No signed drawing shall be taken as in itself as an order for
variation, unless accompanied by a covering letter from the Engineer confirming that the drawing is an authority for variation. Alterations as referred
to above shall not be considered as a waiver of any condition of contract nor invalidate any of the provisions thereof. The contractor shall execute
the work at the same rates as in the agreement, for quantities upto 25% increase or decrease of the agreement quantity of the relevant item listed in
Schedule A.
109.04 Rescinding the contract by the Engineer
In case where the Engineer under the terms of the contract is liable to supply any materials, or articles, or things to the contractor for the
performance by him of his part of the contract and the Engineer for any reasons is unable to supply such materials, articles or things either within
the time specified or within the extended time as per article 109.03 of PS to SSRB, the Engineer may be himself or at the request of the Contractor
rescind the whole or any part of the contract which cannot be performed by reason of the failure to supply such materials, articles or things and the
contractor shall not be entitled to claim any damages or compensation in respect of such rescinding. The Contractor shall however be paid the
value of the work already done by him and the cost of the materials, articles or things if any collected by him upto the date of such rescinding and
left unused on the work spot (which shall be taken over by the Engineer) either at the contract rates or at values deduced from through rates
included in the contract, when the contract is rescined at the discretion of the Engineer, he shall give notice in writing to the contractor and the
decision of the Engineer to rescind to the contract shall be final and binding on the contractor.
109.05 Determination of contract due to default or failure of the Contractor
The Engineer may without prejudice to his rights against the Contractor in respect of any delay or inferior workmanship or otherwise or to any
claims for damage in respect of any breaches of the contract and whether the date for completion has or has not elapsed, by notice in writing
absolutely determine the contract in any of the following cases.
a If the contractor, having been given by the Engineer a notice in writing to rectify, reconstruct or replace any defective work or a notice in writing
that the work is being performed in an inefficient or otherwise improper manner or that the commencement of the work is being delayed or that the
execution of the work is being delayed has been suspended so that, in the judgment of the Engineer, the Contractor will be unable to secure the
completion of the work by the date for completion or he has already failed to complete the work by that date, shall omit to comply with the
requirements of such notice for a period of seven days thereafter, such notice shall not be unreasonable or vexatiously given, and must signify that it
purports to be a notice under the provisions of this Article, and must specify the act or default on the part of the Contractor upon which it is
based....
109.07 Provisions in case of absolute determination of contract
If the Engineer shall in the exercise of the power contained in PS: 109.05 and for any of the reasons set forth in paragraphs (a) to (f) therein
determine the contract, then the following provisions shall take effect.
a) The earnest money taken as security and additional security deposit at the time of execution of the agreement shall stand forfeited to the
Government.
109.10 Special powers of determination
These powers shall be exercised in the event of complete stoppage or abandonment of whole or portion of work under the orders of Government.
a) The Engineer shall in addition to any other power enabling him to determine the contract, have power to determine the contract, at any time, by
notice in writing to the Contractor, and upon receipt by the Contractor of the notice, the contract shall be determined but without prejudice to the
rights of the parties accrued to the date of determination and to the operation of the following provisions of this article.
Coming to the first point as regards the maintainability of this writ petition, especially in a contractual matter such as this, despite the availability
of alternative remedy, the proposition of law well settled by the Supreme Court is that a writ petition involving serious disputed question of facts
which require consideration of evidence on record, will not normally be entertained under Article 226 of the Constitution of India. However, it is
also settled that in a case where any disputed questions of fact pertaining to interpretation / meaning of the documents are involved, the Courts can
very well go into the same and decide the objections, if facts permit. It is also trite that merely because one of the parties wants to dispute the
meaning of a document or part thereof, that would not make it a disputed fact to entertain a writ petition. But, in the instant case, in case of any
dispute or difference between the parties to the contract either during the progress or after the completion of the work or after the determination /
abandonment of the contract or any matter arising thereunder, alternative remedy is provided under Clause 11 of the agreement.
It is urged before this Court by the learned Senior Counsel appearing for the petitioner-company that the clauses of the agreement require
interpretation. But, I am of the considered view, there is nothing on record to suggest that the clauses of the agreement demand any sort of
interpretation. However, strong reliance has been made by the learned Senior Counsel appearing for the petitioner-company on the decision of the
Supreme Court reported in ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, wherein it is
held that in an appropriate case, the writ court has jurisdiction to maintain a writ petition involving disputed question of fact and that there is no
absolute bar in regard thereto. There can be no controversy over this proposition of law laid down in the decision referred to above and as such,
this Court does certainly have jurisdiction in a matter involving disputed questions of fact pertaining to interpretation or meaning of document.
Further reliance has been placed in Verigamto Naveen case in which it has been held by the Supreme Court that where breach of contract involves
breach of a statutory obligation and order complained of has been made in exercise of statutory power by a statutory authority, though cause of
action arises out of or is related to contract, the dispute is brought within the sphere of public law because the power exercised is apart from
contract. But, in the instant case, in the absence of any disputed fact involving serious interpretation / meaning of the terms and conditions of the
agreement, I am of the firm view that this writ petition cannot be maintained, more so, in view of Clause 11 of the agreement extracted above
providing for alternative remedy. Accordingly, the first point for consideration is answered against the petitioner-company.
As regards the second point for consideration that the fifth respondent has acted in violation of Article 14 of the Constitution by not including
the Escalation Clause in the agreement while the same has been included in certain other identical cases and while the respondents have even gone
to the extent of pre-closing contract works, whereas, in the instant case, they have not only not considered pre-closure but have also terminated
the contract even before the issue of inclusion of Escalation Clause was decided and thus, the petitioner-company is singled out and shown a
discriminatory treatment, this Court is of the opinion that though it has been pleaded so, the issue on hand and those identical cases cannot be
compared in the absence of any material whatsoever produced before this Court to that effect. Accordingly, this point for consideration is
answered in negative.
Coming to the third point for consideration as to whether there is violation of principles of natural justice, it is seen that the petitioner- company
was awarded the contract work of construction of ROB and an agreement was entered into on 26.02.2003 to this effect, the period of the said
contract being 18 months which was extended upto 31.12.2007. It is also seen that the petitioner-company had constructed about 12 out of 15
pillars in the site handed over to it before 19.03.2004 and upon direction from the fourth respondent to change the superstructure design from
continuous span superstructure arrangement to simply supported span arrangement, it had submitted its revised design which was approved on
12.08.2005, nearly sixteen months from the date of submission of the re-design. Despite the approval for Pre Stressed Concrete Beams which
was granted on 12.08.2005, the petitioner-company could not execute the work since it awaited the approval of Deck Slab Design which was
cleared only on 28.02.2006, i.e. about 22 months subsequent to the date of submission of the revised design. When such is the position, by
various correspondences such as show cause notice dated 03.03.2004, notice dated 09.03.2004, letter dated 22.03.2005, notices dated
03.02.2006 and 14.02.2006 and report dated 16.02.2006 all indicating slow progress of work, letters dated 08.09.2006 and 29.08.2007
imposing fine and show cause notice dated 03.09.2007, the respondents have, time and again, urged the petitioner-company to complete the
contract work. Apart from the above, there was a show cause notice to the petitioner-company issued on 12.04.2007 seeking explanation as to
why the contract should not be terminated under Clause No. 109.05 and 109.07 of SSRB and also as to why the balance of work should not be
re-tendered at the cost and risk of the petitioner-company in addition to forfeiture of Earnest Money Deposit and Security Deposit. To this show-
cause notice, there was a reply on 28.04.2007 from the petitioner-company and not satisfied with the same, the fifth respondent, on 03.08.2007,
negatived the petitioner-company''s plea to consider its earlier representations. Since the petitioner-company has not proceeded with the contract
work due to non-consideration of its representations by the respondents, the impugned proceedings have come to be passed. Thus, it is crystal
clear that the relevant procedures required to be undergone have been complied with on the side of the respondents before the petitioner''s
contract was terminated and in such view of the matter, certainly, it cannot be said that the principles of natural justice have been violated and the
third point for consideration too is thus answered favouring the respondents.
In respect of the fourth point for consideration as regards the competency of the fifth respondent in passing the impugned orders, it is
vehemently contended on the side of the petitioner-company that it is only the Superintending Engineer-Highways, the fourth respondent who has
entered into the agreement with the petitioner-company and as such, he is the only competent person to terminate the contract work awarded to
the petitioner-company by virtue of the agreement and not the fifth respondent who has passed the impugned orders without having any jurisdiction
whatsoever.
While replying to the above question, the learned Additional Advocate General has brought to the notice of this Court the relevant clauses of
SSRB. In Clause 101.03 of SSRB, the word ""Engineer"" means the Divisional Engineer of the Tamil Nadu Highways and Rural Works Department
in charge of the work or his authorised representative limited by the particular duties entrusted to him. Further, Clause 102.04 which deals with the
power of delegation provides that any decision to be made or orders to be issued by the Engineer or by any higher departmental authorities under
the contract may be made by any person or persons authorised to act for the Engineer or higher authority for that purpose and may be made in
such a manner and on such evidence or information as such person or persons shall think fit, provided always that the authority who has accepted
the agreement for the work shall make no delegation of powers to his subordinates in respect of orders and decisions concerning the extension of
time for completing the contract or the determination of the contract or any other matter in which his decision is to be final and conclusive and the
orders of the Engineer in these matters shall be subject to his ratification.
Yet another aspect of the matter that has been pointed out by the learned Additional Advocate General is that Clause 11 of the agreement
which deals with Arbitration Clause gives power to the Superintending Engineer (Highways) Project - II Circle Coimbatore or his successor in his
office to act as the Sole Arbitrator in case of any dispute or difference between the parties to the contract either during the progress or after the
completion of the work or after the determination/abandonment of the contract or any other matter arising thereunder and if the claims value is less
than Rs. 2 lakhs. When the term ""Engineer"" is construed as the Superintending Engineer, naturally, he himself cannot be the Sole Arbitrator for the
resolution of disputes between the parties. Thus, when the Divisional Engineer, the fifth respondent herein is vested with ample powers and the
Superintending Engineer, the fourth respondent is to act as the Sole Arbitrator in case of a dispute or difference between the parties to the
contract, it can safely and easily be concluded that the Divisional Engineer is not wholly bereft of jurisdiction to pass the impugned orders and in
such view of the matter, the impugned orders cannot be found fault with on the jurisdictional issue and fourth point for consideration also is
answered against the petitioner-company.
With respect to the last point for consideration, it is argued by the learned Senior Counsel appearing for the petitioner-company that
subsequent to the submission of Alternate Design by the petitioner-company, non- consideration of its request for inclusion of Escalation Clause in
the agreement despite the assurance of the then Chief Engineer in this regard and the termination of the petitioner company''s contract vitiates the
entire proceedings as it suffers from arbitrariness, colourable exercise of power and unreasonableness. Yet another important point urged before
this Court is that the fifth respondent ought to have proceeded only in accordance with Clause 109.10 instead of Clauses 109.05 and 109.07 of
the SSRB as extracted above. Therefore, in the absence of any violation of fundamental rights, principles of natural justice and arbitrariness and
when the fifth respondent is competent enough to pass the impugned orders, this Court lacks jurisdiction to entertain this writ petition in which a
dispute or difference in contractual agreement is involved. As already stated, in view of Clause 11 of the agreement which states that any dispute or
difference between the parties either during the progress or after the completion of the work or after the determination/abandonment of the
contract or any other matter arising should be dealt with by a Civil Court having jurisdiction, I am of the considered opinion that this point for
consideration which deals more about increase in raw-materials and deployment of additional labour force consequent to submission of Alternate
Design, inclusion of Escalation Clause, delay in land acquisition process, ratification, etc., is too technical an aspect for this Court to decide and as
such, cannot be gone into by this Court which can never act as a fact-finding body. In such view of the matter, the petitioner-company has to move
only the Civil Court having jurisdiction to adjudicate this point.
Thus, from the foregoing discussion, while it is made crystal clear that the petitioner-company has not made out any case to maintain this writ
petition under Article 226 of the Constitution of India, this Court holds that it is only for the appropriate Civil Court having jurisdiction to deal with
the issue as to whether there is violation of terms and conditions of the agreement or not or any other issue inasmuch as the agreement itself, vide
Clause 11, provides for an alternative remedy in case of any dispute or difference between the parties. In view of the same, this writ petition is
disposed of with the following directions:
i the petitioner-company shall move the Civil Court having jurisdiction in respect of the dispute or difference as regards compliance of the terms
and conditions of the agreement or any other issue, within a period of two weeks from the date of receipt of a copy of this order; and
ii the Civil Court concerned, not being influenced by this order, may dispose of the petitioner-company''s case as expeditiously as possible,
keeping in mind, the urgency involved in the matter.
No costs. Consequently, connected Miscellaneous Petition is closed.