Present:
(Hon. Mr. Justice Amitava Lala & Hon. Mr. Justice Ashok Srivastava) Appearance:
For the Petitioner : Mr. V.K. Singh, Sr. Advocate, Mr. S. Shekhar, & Mr. Rajiv Gupta.
For the Respondents : Mr. Shashi Nandan, Sr. Advocate, Mr. Mohd. Ali, & Mr. M.C. Tripathi.
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Amitava Lala, J.-- The petitioner, which is a registered firm, entered into a contract on 10th May, 2009 with the National Highways Authority of India (hereinafter in short called as the ''authority') as a collecting entity for collection of user fees at Km. 351.500 (Anantram Toll Plaza) for Km. 321.100 to Km. 393.000 on Etawah-Sikandra (Kanpur Dehat) Section of National Highway No. 2, for a period of one year or for the extended period, if any.
By means of this writ petition, the petitioner wants to get an order quashing the impugned notice dated 01st July, 2010 issued by the authority, respondent no. 1 herein, inviting tenders for collection of user fees on the aforesaid toll plaza and also prayed for a direction upon the respondent no. 1 to release certain amount for the purpose of payment of salary/wages to the employees of the petitioner firm since January, 2010 till the continuance of agency of the petitioner firm. By an amendment dated 13th September, 2010 the petitioner has incorporated two other prayers, which are as follows:
"(v) To declare the imposition of penalty illegal, arbitrary and unlawful.
(vi) To command the Respondents to release to a sum of Rs.78,46,857/- withheld as penalty."
By an interim order dated 18th February, 2011 passed by a Division Bench of this Court, the admitted amount of Rs.18,70,852/- was directed to be paid by the respondent authority to the petitioner and, according to the parties, it has already been paid. Now the petitioner's contention is that the penalty which has been imposed by the respondent authority upon it for a sum of Rs.78,46,857/-, which according to the respondent-authority is Rs. 72,50,795/-, is arbitrary in nature. According to the petitioner, the respondent-authority has given a chart at page 8 of its counter affidavit, from which it would be apparent that since certain amount of fees was not collected by the petitioner, even then penalty has been imposed upon it. The petitioner has relied upon Section 74 of the Indian Contract Act, 1872 (hereinafter in short called as the ''Contract Act') to establish that the penalty can be claimed, at best, double the amount of the claim, particularly in view of the Illustrations (a), (d) and (e) under such section. Section 74 of the Contract Act with Explanations and Illustrations (a), (d) and (e) are quoted below:
"74. Compensation for breach of contract where penalty stipulated for.-- When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
Explanation.--A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
Explanation.--When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.--A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.
Illustrations
(a) A, contracts with B, to pay B, Rs.1,000, if he fails to pay B, Rs.500 on a given day. A, fails to pay B, Rs.500 on that day. B, is entitled to recover from A, such compensation, not exceeding Rs.1,000 as the Court considers reasonable.
(b) ... .... ....
(c) ... .... ....
(d) A, gives B, a bond for the repayment of Rs.1,000 with interest at 12 per cent at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent, from the date of default. This is stipulation by way of penalty, and B, is only entitled to recover from A, such compensation as the Court considers reasonable.
(e) A, who owes money to B, a money-lender, undertakes to re-pay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable compensation in case of breach.
(f) ... .... .....
(g) ... .... ....."
The petitioner contended that in view of the provisions of Section 74 of the Contract Act, the penalty clause, being Clause 25(i) of the contract, is totally arbitrary in nature and the same was inserted in the contract in terrorem. Clause 25 (i) of the contract is quoted hereunder:
"25 (i) In case of missing vehicles (vehicles which have crossed the plaza without payment of prescribed user fee) detected during any checks fifty times of number of such missing vehicles multiplied by single rate of fee of the particular vehicle will be charged as penalty."
We find from the contract that one of its clauses provides that the collecting entity also undertakes to get itself licensed under the provisions of Contract Labour (Regulations & Abolition) Act, 1970 and registered with under the provisions of the Shops & Establishments Act, 1954. However, upon going through the contract, we find that there is an arbitration clause being Clause 28, which is as follows:
"28 ARBITRATION:
(a) All disputes and/or difference arising between the parties out of this Contract shall be settled by Arbitration under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The Chairman of the Authority or his nominee shall be the sole Arbitrator. The award made and published in pursuance of such Arbitration proceedings shall be final and binding on both the parties.
(b) The proceedings of the Arbitration shall be held in English language and shall be held at such place as may be decided by the Chairman of the Authority or his nominee. The award of the Arbitration shall be final and binding on both the parties to the Contract."
Mr. V.K. Singh, learned Senior Counsel appearing for the petitioner, has relied upon several judgements of the Supreme Court on two points: firstly, alternative remedy is no bar to the jurisdiction of the Court under Article 226 of the Constitution and secondly, if the conditions are imposed in terrorem, the Court can decide reasonable amount as provided under Section 74 of the Contract Act.
In respect of the first point, Mr. Singh has relied upon paragraph 9 of the judgement reported in JT 1999 (3) SC 61 (Hindustan Petroleum Corporation Ltd. & anr. Vs. Dolly Das) to show that in such judgement the Supreme Court has held that where interpretation of a contract arises in relation to immovable property and in working such contract or relief thereof or any other fall out thereto may have the effect of giving rise to an action in tort or for damages, the appropriate remedy would be a civil suit. But if the facts pleaded before the court are of such nature which do not involve any complicated questions of fact needing elaborate investigation of the same, the High Court could also exercise writ jurisdiction under Article 226 of the Constitution in such matters. There can be no hard and fast rule in such matters. When the High Court has chosen to exercise its powers under Article 226 of the Constitution, we can not say that the discretion exercised in entertaining the petition is wrong. Relying upon paragraph 7 of 2003 (2) SCC 107 (Harbanslal Sahnia and another Vs. India Oil Corpn. Ltd. and others) he wanted to establish that suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (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. [See Whirlpool Corpn. Vs. Registrar of Trade Marks, (1998) 8 SCC 1]. He also relied upon paragraph 53 of the judgement reported in JT 2003 (10) SCC 300 (ABL International Ltd. & anr. Vs. Export Credit Guarantee Corporation of India Limited & ors.) to establish that when an instrumentality of the State acts contrary to public good and public interest, unfairly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations, it really acts contrary to the constitutional guarantee found in Article 14 of the Constitution. Ratio of Harbanslal Sahnia (supra) has also been followed by a Division Bench of this Court in paragraph 15 of the judgement reported 2009 (7) ADJ 509 (DB) (M/s. B.P. Sharma & Company Vs. Bharat Petroleum Corporation Ltd. and another), which has been relied upon by Mr. Singh.
So far as second point is concerned, Mr. Singh has relied upon the judgements of the Supreme Court reported in AIR 1963 SC 1405 (Fateh Chand Vs. Balkishan Dass) (paragraphs 8, 10, 11 & 15), AIR 1970 SC 1955 (Maula Bux Vs. Union of India) (paragraph-7), and AIR 1987 SC 1257 (K.P. Subbarama Sastri and others Vs. K.S. Raghavan and others) (paragraph 5). Upon going through all such judgements we find that those are not arising out of the writ jurisdiction but from the regular civil appeals arose out of the respective suits. On merit, all three judgements speak about reasonable compensation under Section 74 of the Contract Act.
So far as contesting respondent i.e. authority is concerned, Mr. Shashi Nandan, learned Senior Counsel appearing for it, has relied upon Clause 23 (d) of the contract to establish that the collecting entity shall be responsible for payment of fee not recovered from any user, for whatsoever reasons, otherwise liable to pay.
According to us, it is not a matter between employer and employee when both the parties stand on an unequal bargaining position in executing the contract. Solvency of a party is required to be considered to engage it for the purpose of collecting toll etc. as collecting entity. Therefore, when a party keeping its eyes open entered into a contract and enjoyed the usufruct out of it, such party can not turn around and complain about the conditions of the contract later on. In the instant case, the contract contains a clause, which provides that in case of missing vehicles (vehicles which have crossed the plaza without payment of prescribed user fee) detected during any checks, fifty times of number of such missing vehicles multiplied by single rate of fee of the particular vehicle will be charged as penalty. Now the petitioner has come with a case by giving several figures as to how much fees it has not collected, and disputed the figure of penalty imposed by the respondent authority upon it. However, we find that the contract is available before us and on the basis of the penalty clause of such contract, the penalty has been imposed upon the petitioner, therefore, the imposition of penalty under such clause can not be said to be arbitrary in nature. The dispute, if any, is with regard to quantum i.e. (a) whether the quantum as figured out by the respondent-authority is arithmetically correct; (b) whether the figures under the imposed penalty are correct; (c) whether the penalty clause has been inserted in the contract dehors the provisions of Section 74 of the Contract Act; and (d) in such case which amount is to be treated as reasonable for the purpose of imposition of penalty. All such questions are within the domain of an arbitrator to be appointed upon being called. The judgements cited on the second point appear to have determined the quantum of penalty only by way of suit or proceeding before the arbitrator. Therefore, though it is correct to say that alternative remedy is a rule of discretion and not of compulsion yet such type of disputes are required to be adjudicated upon by the appropriate civil Court or forum to come to a definite finding. Writ Court can not assess reasonable quantum on the assertion of facts. When the arbitrator is the sole authority to adjudicate the issue, the matter is required to be laid before the arbitrator to adjudicate the matter on the basis of the facts and on the strength of law. Presently, under the Arbitration and Conciliation Act, 1996 power of an arbitrator is exhaustive. It has power to decide not only with regard to the facts but also the question of law even upto the extent of its own jurisdiction.
Against this background, we do not find any reason not to send the matter to the arbitrator for the purpose of entertaining the reference on merit and for adjudicating the same by passing an appropriate order as early as possible.
By and large, the writ Court does not interfere with the disputed amount of claim but when the claim is admitted, it passes an order for the purpose of payment thereof to avoid unnecessary litigations and in this case such type of order has already been passed at an interim stage on 18th February, 2011. Such amount has already been paid by the respondent authority and the petitioner has received the same. Therefore, by sending the matter to the arbitrator, the payment of such amount can not be re-agitated, particularly when the claim is restricted only with regard to penalty. Hence, the interim order passed by this Court for such payment is hereby confirmed.
Thus, the writ petition is disposed of finally with a direction upon the petitioner to invoke the arbitration clause as early as possible preferably within a period of 15 days from the date of getting certified copy of this order for adjudication of the cause. Except the same no other relief can be granted to the petitioner.
However, no order is passed as to costs.
(Justice Amitava Lala) I agree.
(Justice Ashok Srivastava) Dated:23 May, 2011.
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Hon'ble Amitava Lala, J.
Hon'ble Ashok Srivastava, J.
Under the authority of the Hon'ble Chief Justice additional cause list has been printed for the purpose of delivery of judgement and the same has been delivered at 2.00 P.M. in the Court upon notice to the parties.
The writ petition is disposed of, however, without imposing any cost.
Dt./-23.05.2011.
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For judgement and order, see order of the date passed on the separate sheets (eight pages).
Dt./-23.05.2011.
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