The petitioner is a Registered Contractor with the Tamil Nadu Public Works Department. The petitioner has filed the above writ petition challenging the order passed by the second respondent dated 19.01.2009, by which the contract awarded in favour of the petitioner was determined, and for a further direction to direct the respondents to extend the time for completion of work, which was subject matter of the contract.
2. The facts leading to the writ petition are as follows:
(i) The first respondent invited tenders for the construction of Groyne at Yenayputhandurai Village in Kanyakumari District. The petitioner was the successful bidder in the said contract and the estimated value of the contract was Rs.350.00 Lakhs and the contract after negotiation was accepted by the Tender Award Committee by proceedings dated 12.04.2009 in favour of the petitioner, who had offered to complete the work with the approximate value of Rs.3,53,45,998/-.
(ii) An agreement was entered into between the first respondent and the petitioner on 11.05.2007 and under the terms and conditions of the agreement, the petitioner was required to commence the work on or before 01.06.2007. According to the petitioner the site itself was handed over only on 01.09.2007 and as per the period stipulated under the contract namely 12 months, the work ought to have been completed on or before 31.08.2008.
(iii) It is the case of the petitioner that upto July 2008 they have completed 143 meters of the said work out of the total length of 169 meters. Due to tidal waves in the sea between 23.07.2008 and 25.07.2008, substantial portion of the work completed by the petitioner was washed away and the machinery worth about Rs.45,00,000/- was also drawn into the sea and could not be retrieved.
(iv) Under the terms and conditions of the agreement, the petitioner was required to take an Insurance Policy to cover all risks and the Policy was to stand in the joint name of the petitioner and the second respondent. The petitioner after having suffered damage, submitted a claim before the Insurance Company and in response to the said claim, the Insurance Company by reply dated 19.01.2009 had informed the petitioner that the quantum of loss could be assessed only on completion of the repairs / reinstatement of the damaged part of the Groyne under construction and the petitioner was advised to go through the policy conditions and more particularly condition No.5 of the general condition of the contract, which states that the liability of the Company under the insurance policy in respect of any item sustaining damage shall seize, if the said item if not repaired without delay. Thus quoting this provision, the petitioner was advised to complete the reinstatement of the damaged portion and furnish the required details to the Surveyor as it has been already informed to the petitioner.
(V) Simultaneously, the first respondent by proceedings dated 19.01.2009 determined the petitioner's contract and also stated that in respect of the balance work to be completed, the same shall be at the risk and cost of the petitioner in terms of clause Nos.57.3 and 57.4 of the general conditions of the contract, which deals with the delay in commencement of progress or neglect of work or suspension of work by the contractor forfeiture of earnest money, security deposit and withheld amount. The said order dated 19.01.2009 is impugned in the present writ petition.
3. Petitioner's Contentions:
Mr.K.Srinivasan, the learned counsel appearing for the petitioner assailed the correctness of the impugned order by raising the following contentions.
(a) That the impugned order has been passed without considering the terms and conditions of the contract and the same is contrary to law. Firstly, the learned counsel would contend that the total length of the work to be completed is 169 meters out of which, as on July 2008, the petitioner had completed 143 meters and there was only a balance of 26 meters and if the respondents Department had granted further time, the same could have been completed by the petitioner. Therefore, the learned counsel would submit that the termination of the contract is an inequitable grounds and deserves to be interfered with.
(b) Next it is contended by the learned counsel that the order determining the contract had been passed by the relying upon Clause Nos.57.1 and 57.2 of the general conditions of the contract and on a careful reading of those two conditions, it would be clear that the second respondent is only entitled to either impose penalty or to determine the contract and cannot do both and in the instant case, the penalty of Rs.20,000 has already been imposed and therefore, the question of termination could not be resorted to.
(c) The third contention raised by the learned counsel is that the petitioner was unable to complete the contract owing to force majeur conditions and the fact that there was tidal waves between 23.07.2008 and 25.07.2009, has been accepted and acknowledged by the respondents 1 and 2 as well as by the third respondent insurance company. The fact that the petitioner has lost their excavator worth about Rs.45,00,000/- cannot be disputed and therefore, the termination cannot be resorted to under the Clause Nos.57.1 and 57.2, without considering the scope of Clause No.47 of the contract.
(d) The next contention of the learned counsel would be that in terms of clause 47 of the contract, the work executed by the contractor shall be maintained at his risk until the work is taken over by the Executive Engineer and the Contractor shall accordingly arrange his own insurance against fire and other usual risk during the said period unless otherwise specified. In terms of Clause No.47.2, it has been provided that the Contractor shall not be liable for all or any loss or damage arising out of the acts of God. Therefore, the learned counsel would submit that the power under clause Nos.57.1 and 57.2 cannot be invoked in isolation in the present case and it has to be read along with clause No.47.2 and if that had been done, the question of termination does not arise.
(e) The next contention being that the Department is a joint insurance holder along with the petitioner and after the damage was assessed at Rs.66,15,420/- and the Insurance Company having taken a stand that the petitioner has to reinstate / repair the damaged portion of the Groyne, the respondent Department ought to have extended time granted and also persuaded the Insurance Company to settle the claim and not put a condition that the work has to be reinstated and then only the compensation amount could be assessed.
(f) Finally, the learned counsel would contend that though an arbitration clause has been provided under the agreement, considering the facts and circumstances of the case, there was sufficient power to grant extension and already extension was granted upto 31.12.2008, no prejudice would have been caused if further time was granted, since, the petitioner had already completed 143 meters out of the total length of 169 meters, out of which around 55 meters had been washed away. Therefore, based on the above contentions, the learned counsel would submit that the impugned order has to be set-aside and the petitioner should be granted time to complete the contract.
4. Judgments relied on by the Petitioner's Counsel:
The learned counsel appearing for the petitioner would place reliance on the following decisions:
(i) (2009) 6 SCC 171, MEERUT DEVELOPMENT AUTHORITY v. ASSN. OF MANAGEMENT STUDIES - for the preposition that though the invitation to tender is not open to judicial review, however, a limited judicial review may be available in cases, where it is established that there was no fairness in the procedure adopted and there has been violation of
Article 14 of the Constitution of India.
(ii) (2009) 4 MLJ 520, [PSA Ennore Pte. Ltd. v. U.O.I.] -By placing reliance upon the said Judgment, the learned counsel would submit that the interference in the contractual matters is permissible if decision making process is illegal, arbitrary, there is procedural impropriety and the decision does not meet the tests of the reasons and relevance.
(iii) (2008) 10 SCC 404, [UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI DHARMASINHBHAI GAJERA] This Judgment was relied by the learned counsel appearing for the petitioner in support of the contention that the third respondent Insurance Company being a Government company, there is no escape from the fact that they are part of the "State" within the meaning of
Article 12 and the role of such Insurance Company is different from that all private insurance companies.
(iv) (2007) 14 SCC 517, [JAGDISH MANDAL v. STATE OF ORISSA] This Judgment was relied by the learned counsel appearing for the petitioner, in support of the contention that certain tests have been laid down by the Hon'ble Supreme Court in the said Judgment, where interference in the contractual matters in exercise of power of judicial review is permissible and the case of the petitioner would satisfy all the three tests laid down therein and therefore, the writ petition is maintainable and the impugned order deserves to be set-aside.
(v) (1998) 8 SCC 1, [WHIRLPOOL CORPN. v. REGISTRAR OF TRADE MARKS] This Judgment was relied by the learned counsel appearing for the petitioner in support of the contention that existence of the alternate remedy of arbitration in the impugned agreement between the parties would not operate as a bar for filing the above writ petition especially when the impugned order is arbitrary and violation of the principle of natural justice.
5. Respondents' Defence:
Mr.S.Ramasamy, learned Additional Advocate General, appearing for the respondents 1 and 2 by placing reliance on the counter affidavit filed and the documents produced would contend that the writ petition is liable to be dismissed on the sole ground of existence of efficacious alternate remedy in terms of clause 69 of the General Conditions of the contract, which provides for that in case of any case of dispute of difference between the parties after the determination of the contract, shall be referred to the arbitration and that the contract between the petitioner and the respondent department is purely a commercial transaction and this Court would decline to interfere in such contractual matters and would refuse to entertain the claim of the petitioner, which is in the nature of a relief of specific performance of a contract, which has been determined in accordance with the provisions of the agreement.
5.1 On facts that the learned Additional Advocate General contended that the period of contract was 12 months and the agreement was signed on 11.05.2007 and the petitioner ought to have commenced the work on or before 01.06.2007. But, the site was taken over by the petitioner on 01.09.2007, after several notices by the second respondent on 23.05.2007, 05.06.2007, 29.06.2007 and 26.07.2007, the petitioner failed to carryout the work as per the tabulated norms and the work was performed in a slow manner and without expediting the work, he wrote letters to the Department, accusing the Department in respect of the loss, which had occurred due to the stormy sea waves between 23.07.2008 and 30.07.2008.
5.2 The Surveyor of the third respondent insurance company had conducted a survey and the second respondent had also prepared estimates for making the insurance claim by the petitioner and the same was sent to the company and in response to the said claim the insurance company as advised the petitioner for re-construction / reinstatement of the damaged portions to enable them to assess the damages and the second respondent was requested to advise the petitioner to commence the reinstatement work at an early date to avoid further loss and escalation. However, the petitioner failed to adhere to the said direction and refused to carry out any work.
5.3 Though, the department had paid Rs.204.89 lakhs upto February 2008 and the same was received by the petitioner and the quantum of work done from March 2008 to 22.08.2008 for Rs.12.28 lakhs which has been recorded in the M- Book maintained for the project and the petitioner has not demanded any further payment after February 2008 nor he has come forward to execute the work after 22.07.2008. That in terms of clauses 57.1 and 57.2 of the General Conditions of the contract, a penalty was imposed for the slow progress of work and this does not preclude the Department from determining the contract in terms of the conditions contained therein.
5.4 In terms of clause 12, under the head risk, all risks of loss or damage to the works etc., in consequence of the performance of the contract are the responsibility of the Contractor. The request made by the petitioner on 26.08.2008, seeking extension of time was accepted and time was granted upto 31.12.2008 to rectify the damaged portion, but, the petitioner failed to execute the work as promised by him in his requisition of extension of time.
5.5 On account of the failure of the petitioner to commence the work, the intention of the Government to overcome to the National disaster and the save the lives of fishermen of Yenayputhandurai Village has been lost, since they were put to untold misery and sufferings during the monsoon and this was precisely the reason to make the contract a time bound contract.
5.6 The petitioner lost site of the fact that the rectification or reinstatement of the work as well as the completion of the balance work ought to have been completed before first week of June 2009 or otherwise the whole work would be engulfed by sea and also would result in heavy damages to the houses located, which were near of the Groyne.
5.7 That the petitioner has been issued with nearly 14 communications between 23.05.2007 till 24.10.2008, advising the petitioner to commence work. However, the petitioner ignoring the public interest involved, refused to commence work, which resulted in the invocation of clauses 57.1 and 57.2 of the General Conditions of the contract for determining the contract.
5.8 That the agreement more particularly Clauses 47.1 and 47.2 were amended and the amended conditions were incorporated, which clearly stated that the contractor was to maintain at his risks, until the work is taken over the Executive Engineer and he shall arrange for own insurance including matters arising out of force majeur conditions and the Government shall not be liable for any loss. It is submitted that as per the rate of progress column of the contract, the petitioner should have completed 80% of the work by 30.06.2008. But, he had completed only 61.45% work upto 22.07.2008.
5.9 The learned Additional Advocate General would contend that the entire correspondence would clearly establish that the petitioner was not interested in completing the contract, therefore, after determination, the Department has proceeded to complete the contract, upto 55 meters of the work had been carried out and restored, for the balance a fresh tender has already been called for by a Tender Notification dated 02.02.2009, bids have been invited, one of the bidders in the said auction has challenged his rejection of his pre- qualification bid by filing writ petitions before this Court W.P.Nos.7447 of 2009 and 2314 of 2007, the same are pending and an interim orders have also been granted, not to award work in favour of any third parties.
5.10 Therefore, based on the above contention, the learned Additional Advocate General would contend that there is no arbitrariness or unfairness in the auction, there is no violation of the principle of natural justice, since the petitioner had been given sufficient opportunity, the department cannot be called upon to indefinitely wait till the petitioner decides to commence the work and the work in question is urgently to be carried out, considering the public interest involved and therefore the determination of the contract is legal and valid and there is no arbitrariness or illegality and the allegation that there is violation of
Article 14 of the Constitution of India is unfounded and the writ petition is liable to be dismissed.
6. Heard the learned counsel for the petitioner and the learned Additional Advocate General appearing for the respondents and also perused the entire materials available on record.
7. Conclusion The petitioner entered into an agreement with the respondent Department on 11.05.2007 for the purpose of carrying out the construction of groyne at the Enayam Puthantharuvai Village in Villavencode Taluk. As per the terms and conditions of the said agreement, the time shall be considered as the essence of the agreement and the petitioner agreed to commence the work as soon as the agreement is accepted by the competent authority as defined under the Public Works Department Code and the site has been handed over to them as provided for in the conditions. The petitioner further agreed to complete the work within twelve months including the rainy season from the date of such handing over of the site and the petitioner was also required to show the progress as defined in the tabular statement "Rate of Progress" subject to of course extension being granted in terms of clause 56 of the General Conditions of Contract.
8. As per the rate of progress which formed part of the agreement, the percentage of work to be completed on the contract was clearly mentioned on month to month basis. Along with the agreement, certain special conditions were also incorporated by which, under clause 12, all the risk of loss of or damage to work, physical property and of personal injury and death which arise during and in consequence of the performance of the contract, are the responsibility of the Contractor. In terms of clause 13, the petitioner was required to provide in the joint names of the Engineer and the petitioner, an Insurance Cover from the start date to six months from the completion of work and the said Insurance Cover would cover loss of or damage to works, plant and material, loss of damage of property in connection with the Contract and personal injury or death.
9. Further, it is to be seen that under the General Conditions of Contract clause No.47, as amended, deals with contractors risks and insurance. In terms of 47.1, the work has to be maintained by the petitioner at his risk until the work taken over by the Executive Engineer and the petitioner should arrange his own insurance against fire, floor, volcanic eruption etc. and all other natural calamities arising out of the acts of God during such period and the Government shall not be liable for any loss or damage arising out of acts of God. Clause 47.2 provided that the Contractor shall not be liable for any loss or damage arising out of acts of foreign enemies, invasion, etc. Clause 55 deals with date of commencement, completion delay, extension, suspension of work and forfeiture. Clause 56 deals with extension of time. In terms of clause Nos.56.1, the petitioner is not entitled to claim for compensation on account of delays or hindrance to the work from any cause whatever shall lie except as provided under the said clause. The said clause provides that reasonable extension will be allowed by the Executive Engineer for unavoidable delays which are undoubtedly beyond the control of the Contractor. The assessment of such unavoidable delay was solely at the assessment of the Executive Engineer and if in his opinion that the delay was avoidable and the Contractor failed to maintain the rate of progress, it was lawful for the Executive Engineer to impose penalty or order forfeiture from deposit and sanction the extension of time such delay.
10. Clause 57 deals with commencement or progress and neglect of work or suspension of work by Contractor. As stipulated under the agreement, time to be considered as the essence of the contract at any time. The Executive Engineer would be of the opinion that the Contractor is delaying the commencement of work neglecting or delaying the progress, as per the rate of progress chart, shall suspend the work or sublet the portion thereof without the sanction of the Executive Engineer or violates any previous of the contract and if the contractor neglects to comply with demand made by the Executive Engineer within seven days from the receipt of notice, it was lawful for the Executive Engineer to impose penalty or forfeiture.
11. The said provision also provided for determination of contract, which carry with it forfeiture of the security deposit and after such determination, the Executive Engineer shall have power to give any part of the work to any other Contractor, which shall be at the risks and costs of the Contractor. Clause 69 of the General Conditions deals with the settlement of disputes, which contemplates that any dispute or difference between the parties either during the progress or after the completion of the work or after the determination, abandonment or breech of contract, shall be referred to the Superintending Engineer for arbitration.
12. Above are some of the salient features of the agreement entered into between the parties in the said case. The point which has to be considered in the present case is whether the order passed by the respondent department determining the contract in favour of the petitioner is valid and as to whether it suffers from any arbitrariness or unreasonableness or has there been any violation of principles of natural justice. The second issue to be considered as to whether the petitioner is entitled to invoke the jurisdiction of this Court under
Article 226 of the Constitution of India questioning such determination and seeking for further direction to grant extension of the time of the contract.
13. It is seen that the second respondent by proceedings dated 23.05.2007, advised the petitioner to send a program chart immediately, requested to take necessary action to commence the work immediately and complete the same within the contract period. However, no action was taken by the petitioner. The second respondent has sent another communication on 05.06.2007 stating that inspite of 21 days having lapsed from the date of signing the agreement, no steps have been taken to commence the work. By a further communication dated 29.06.2006, the petitioner was advised to take over the site and complete the same within the period of agreement. Thereafter, the second respondent by another communication dated 26.07.2007, by referring to the earlier letters informed to the petitioner that if the work is not commenced, he would compelled to address the first respondent, recommending for cancellation of the contract. By a further communication dated 24.05.2008, the petitioner was informed that the site in question was taken over by the petitioner only on 01.09.2007, after prolonged correspondence from the Department and as per the time schedule, the work has to be completed on or before 31.08.2008 and as on the said date, only 65% of work have been completed and there are three months due from the contract date. Further, by referring to the earlier letters dated 07.05.2008 and 15.05.2008, it was reiterated that the petitioner has been informed to resume the work immediately and safeguard the already constructed structures before the south- west monsoon.
14. Further, the petitioner was informed that they are well aware of the condition of the site and a sum of Rs.5000/- was imposed as per the clauses 57.1 and 57.2 of the General Conditions of the contract and the petitioner is fully responsible for all risk of loss or damage to work already done as per clause 12 of the Special Conditions of the Contract. Therefore, the petitioner was advised to resume the work at once, show good progress and complete it before 31.08.2008. It appears that no progress was made by the petitioner and the second respondent by another communication dated 30.05.2008 informed the petitioner, furnishing certain details about the variation in the depth by stating that the variation is meager. It was further informed that the petitioner has done work upto 143 meters length to a height of in addition to 2.501 meters and also informed that the total length of Groyne has to be reduced to 151 meters instead of 169 meters length.
15. It was further informed that the petitioner has executed 68 metric tones stones and the balance quantity of 42 metric tones have to be executed and as the south-west monsoon is approaching, they were requested to safeguard the already constructed structure before the ensuing south-west monsoon and also informed that they are fully responsible for all risk of loss, damage to work already done as per the clause 12 of the General Conditions of the Contract.
16. The first respondent by a communication dated 16.06.2008, after having found that there is gross delay in completion of the work and in view of the fact that south-west monsoon is likely to start early, requested the petitioner to resume work. This was also reiterated by the second respondent by further communications dated 17.06.2008 and 10.07.2008. The second respondent by a communication dated 28.08.2008, informed the petitioner that extension of time has been granted to the petitioner upto 31.12.2008 and requested them to complete the same within the extended period.
17. As stated by the learned counsel on either side, between the 23.07.2008 to 25.07.2008 on account of high tidal waves, there has been damage to the work executed by the petitioner as well as damaged to the equipment. Parallel steps have been taken for assessing the damage and submitted a claim to the Insurance Company. However, it is to be seen that the Insurance Company has stated that they would not be in a position to assess the quantum payable unless and until the petitioner does the reconstruction of the damaged portion of Groyne. By proceedings of the second respondent dated 27.08.2008, the Insurance Company was informed that due to the heavy sea waves attacking Groyne between 23.07.2008 to 31.07.2008, major portion of the stones has been washed away and scattered and they are not retrievable and the estimate for damaged portion to Rs.66,15,420/- has been forwarded for claiming insurance and requested for release of the claim. In the same letter, the petitioner was requested to rectify the washed away portion in the Groyne as the sea is in calm condition and rectification work may be done before 31.12.2008. Since, the petitioner did not proceed further in the matter, a further communication sent on 24.10.2008 reiterating the earlier direction and directing them to complete the balance work before the expiry of the extended time i.e.31.12.2008. Despite all these communications, since the petitioner had not complied with the directions given, the contract came to be determined by the impugned order.
18. Therefore, from the sequence of events it is seen that the petitioner had sufficient opportunity and had been put on notice by the respondent Department before resorting to the determination of the contract. The petitioner now contends that unless and until the insurance claim was settled, the petitioner could not be compelled to proceed with the work. This contention raised on behalf of the petitioner, in my opinion is wholly untenable and contrary to the terms of the Agreement.
19. As seen from the various conditions of the contract, the risk of maintaining the completed work was always on the Contractor until the same was taken over to the Executive Engineer. That apart the petitioner has also been given an opportunity by extending the time to 31.12.2008 and even during the extended period, the petitioner has not shown any progress. As seen, time is the essence of the said contract and there is a chart showing the rate of progress and from the facts of the present case, it is seen that the progress has not been in accordance with the said specification. Therefore, in my view, I do not see any arbitrariness in the decision taken by the respondent Department in determining the contract. More so, since, there has been series of communications even prior to taking over of the site from May 2007 onwards till the determination of the contract, I find that there is no arbitrariness or unreasonable and there is no violation of the principles of natural justice, since the petitioner has been afforded sufficient opportunity before the contract was terminated. Hence, Point No.1 is answered against the petitioner.
20. The second issue which has to be decided is as regards the maintainability of the above Writ Petition.
21. As seen earlier, the prayer in the writ petition is to quash the order dated 19.01.2009, by which the contract in favour of the petitioner has been determined and the petitioner has sought for a further relief to direct the respondents to extend the period of contract to enable them to complete the work. The Hon'ble Supreme Court, while considering the issue as regards the scope of interference under
Article 226 of the Constitution of India in contractual matters held as follows:
(i) In STATE OF GUJARAT V. MEGHJI PETHRAJ SHAH CHARITABLE TRUST reported in (1994) 3 SCC 552, the Hon'ble Supreme Court has observed as follows:
"22. We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alterm partem) is void. The termination is not a quasi-judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is not also an executive or administrative act to attract the duty to act fairly. It was as has been repeatedly urged by Shri Ramaswamy - a mater governed by a contract /agreement between the parties. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law filed e.g. Where the matter is governed by a non-statutory contract. Be that as it may, in view of our opinion on the main question, it is not necessary to pursue this reasoning further."
(ii) In STATE OF U.P. Vs. BRIDGE & ROOD CO. (INDIA) LTD., reported in (1996) 6 SCC page 22, the Hon'ble Surpreme Court in paragraph Nos. 15 and 16 has held as follows:
"15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings i.e. in the Writ Petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D(1).
16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, may be, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition viz. To restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which would be granted by the High Court under
Article 226. In deed, the High Court has not granted the said prayer."
(iii) On the question of whether a contract is a statutory contract or a non-statutory contract and as to whether the dispute relating to interpretation of the terms and conditions of such a non-statutory contract could be agitated under
Article 226, the Hon'ble Supreme Court in KERALA SEB VS KURIEN E.KALATHIL reported in (2000) 6 SCC 293, has held as follows:
"10. We find that there is a merit in the first contention of Mr.Raval. Learned counsel has rightly questioned the maintainability of the writ petition. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. Whether the contract envisages actual payment or not is a question of construction of contract. If a term of a contract is violated, ordinarily the remedy is not the writ petition under
Article 226. We are also unable to agree with the observations of the High Court that the contract was seeking enforcement of a statutory contract. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. Clearly, the High Court fell into an error in coming to the conclusion that the contract in question was statutory in nature.
11. A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its function. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under
Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies."
(iv) In yet another decision in NATIONAL HIGHWAYS AUTHORITY OF INDIA V. GANGA ENTERPRISES reported in (2003) 7 SCC 410, the Hon'ble Supreme Court held that it is settled law that disputes relating to contract cannot be agitated under
Article 226 of the Constitution of India. The relevant paragraph of the said Judgment being paragraph 6, reads as follows:
"6. The respondent then filed a writ petition in the High Court for refund of the amount. On the pleadings before it, the High Court raised two questions viz.: (a) whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to
section 5 of the Contract Act; and (b) whether the writ petition is maintainable in a claim arising out of a breach of contract. Question (b) should have been first answered as it would go to the root of the matter. The High Court instead considered Question (a) and then chose not not to answer Question (b). In our view, the answer to Question (b) is clear. It is settled law that disputes relating to contract cannot be agitated under
Article 226 of the Constitution of India. It has been so held in Kerala SEB V. Kurien E.Kalathil, State of U.P. V. Bridge & Roof Co. (India) Ltd., and Bareilly Development Authority V. Ajai Pal Singh. This is a settled law. The dispute in this case was regarding the terms of offer. They were thus contractual disputes in respect of which a writ court was not the proper forum. Mr.Dave, however, relied upon Verigamto Naveen V. Govt. of A.P. And Harminder Singh Arora V. Union of India. These, however, are cases where the writ court was enforcing a statutory right or duty. These cases do not lay down that a writ court can interfere in a matter of contract only. Thus on the ground of maintainability the petition should have been dismissed."
22. The above Judgments have been referred to in a recent Judgment of the Hon'ble Supreme Court in PIMPRI CHINCHWAD MUNICIPAL CORPN. V. GAYATRI CONSTRUCTION CO. reported in (2008) 8 SCC 172. In the said case, the Hon'ble Supreme Court was dealing with the Writ Petition challenging the action of the respondent relating to an advertisement inviting fresh tenders in respect of the work awarded to the respondent in the said case and consequently the attempt to terminate the contract in favour of the said respondent. The Hon'ble Supreme Court after considering the law laid down in the various decisions, held that the High Court ought not to have entertained the writ petition since the matter was a non statutory contract and merely because one of the contracting parties is a "State", such cancellation of termination cannot be gone into in a writ petition.
23. The learned counsel for the petitioner had placed reliance on the decision of the Hon'ble Supreme Court in MEERUT DEVELOPMENT AUTHORITY referred supra. The said case pertains to an advertisement inviting tenders in respect of several plots meant for Educational Institutions. While considering the scope of such tenders and the various factual aspects, the Hon'ble Supreme Court was considering scope of judicial review in contractual matters and after referring to the case of TATA CELLULAR V UNION OF INDIA reported in (1994) 6 SCC 651 and other decisions, held that the Courts can certainly examine whether the decision making process was reasonable, rational and un-arbitrary and violative of
Article 14 of the Constitution of India.
24. As factually discussed in the preceding paragraphs, there has been several correspondence emanating from the Office of the second respondent calling upon the petitioner to complete the work, within the time stipulated and despite such communications, no positive steps had been taken by the petitioner to complete the work within the extended period. Therefore, in my view, there is no un-reasonableness, irrationality or arbitrariness in the decisions taken by the respondent Department. Therefore, the scope of interference in such matter is very limited and the facts of the present case does not call for such interference.
25. The learned counsel for the petitioner also placed reliance on the decision of this Court in PSA ENNORE PTE. LIMITED V. UNION OF INDIA AND ANOTHER reported (2009) 4 MLJ 520. In the said case, this Court was concerned about the action taken by the Ennore Pte. Limited in not shortlisting the petitioners for the next stage of bid in the bidding process. After discussing the law and the subject on the scope of interference in the contractual matters, this Court reiterated the position of law by stating that the interference in contractual matters is permissible if decision making process is illegal, irrational, arbitrary and there is procedural impropriety. Since on facts of the present case, it has already been found that there is no impropriety or illegality, the decision of the said case does not render much assistance to the case of the petitioner.
26. In the case of UNITED INDIA INSURANCE COMPANY as referred above, the Hon'ble Supreme Court has held that the Writ Court would ordinarily not grant specific performance of a contract even if it is found that there exists a renewal clause or there has been a breach of contract on the part of the appellant, a writ of mandamus shall not issue in case of a breach of contract.
27. Therefore, for all the above reasons and especially in the facts and circumstances of the present case, I find that the scope of interference in matters relating to determination of contract in accordance with the procedure laid down under the agreement cannot be interfered with by way of a present Writ Petition under
Article 226 of the Constitution of India and that the petitioner cannot seek for specific performance of such contract which had been determined. Further, it is to be noted that the Department has already completed 55 mts of the groyne length which was damaged due to the tidal waves and in respect of the balance work, already fresh tenders have been called for, bidders have participated and Writ Petitions have also been filed before this Court challenging the rejection of one of the bidders at the pre-qualification stage. Therefore, in view of the facts of the case as well as the subsequent events also, more particularly the fact that the area which had been washed away had been re-constructed by the Department itself, I find no reason to entertain the Writ Petition.
28. Accordingly, the above Writ Petition fails and the same is dismissed. No costs.
rpa/krk To
1.The Superintending Engineer Public Works Departmental Tamirabarani Basin Circle Water Resource Organisation Tirunelveli 2.
2. The Executive Engineer Public Works Department Anti Sea Erosion Division Water Resources Organisation Nagercoil 629 001
3. The Divisional Manager The National Insurance Company Ltd., 1st Floor, Angel Villa Building North Car Street, Nagercoil 1.