Madhya Pradesh High Court
Power And Instrumentation (Guj.) ... vs Indore Smart City Development Limited on 24 September, 2019
Author: S.C.Sharma
Bench: Shailendra Shukla, S.C.Sharma
Writ Petition No.13719/2019
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HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE
Division Bench : HON'BLE MR. JUSTICE S. C. SHARMA AND
HON'BLE MR. JUSTICE SHAILENDRA SHUKLA
Writ Petition No.13719/2019
Power & Instrumentation (Guj.) Ltd.
Versus
Indore Smart City Development Ltd. & Anr.
Shri Jerry Lopez, learned counsel for the petitioner.
Shri Rishi Tiwari, learned counsel for the respondent.
O R D E R
(Delivered on this 24th day of September, 2019) Per : S. C. Sharma, J.
The petitioner before this Court, a Company registered under the Companies Act, has filed present petition being aggrieved by letter dated 11/07/2019 issued by Indore Smart City Development Limited, again a Company registered under the Companies Act owned and controlled by State of Madhya Pradesh, by which the respondent No.1 has revoked the bank guarantee furnished by the petitioner.
02- The petitioner's contention is that a "Request for Proposal"
(RFP) was issued on 17/10/2017 and work was awarded to the petitioner by work order dated 01/01/2018. The petitioner submitted a Performance Bank Guarantee issued by Axis Bank for a sum of Rs.85,81,725/- and thereafter, an agreement was executed between the parties on 24/01/2018. The work order was issued on Writ Petition No.13719/2019 -2- 29/01/2018 and the petitioner's contention is that respondent No.1 failed to provide the work front / site / location to the petitioner.
03- The petitioner has further stated that again an additional work order was issued on 27/02/2018 and sites were not made available to the petitioner. The petitioner has received Mobilisation Advance and submitted Mobilisation Advance Bank Guarantee on 12/07/2018, however, again work site was not made available and additional work order was issued on 05/10/2018.
04- The petitioner's grievance is that sites were not made available and it was the petitioner, who made request for closure of the contract, however, the respondents have issued impugned letter invoking the Performance Bank Guarantee and the Mobilisation Bank Guarantee. The petitioner in the present petition has prayed for the following reliefs:-
"It is therefore most humbly prayed that this Hon'ble court may be pleased to issue a writ, order or appropriate direction of appropriate nature thereby:
(i) Quashing and setting aside the impugned letter dated 11.07.2019 (annexure P-1) issued by Respondent No.1 invoking the Mobilisation Advance Bank Guarantee, or in alternative, directing the Respondent No.1 to recall the impugned letter dated 11.07.2019 issued by Respondent invoking the Mobilisation Advance Bank Guarantee;
(ii) Declaring the impugned letter dated 11.07.2019 issued by Respondent No.1 thereby invoking the Mobilisation Advance Bank Guarantee as illegal;
(iii) Any other relief deemed fit and proper in the facts and circumstances of the case; and / or
(iv) Costs be awarded to the petitioner."
05- A reply has been filed in the matter and the respondents have Writ Petition No.13719/2019 -3- stated that the present petition involves purely commercial and contractual dispute and adjudication of such dispute involves disputed question of fact and hence, the remedy available to the petitioner is to invoke Dispute Resolution System provided under Clause-12 of the general conditions of the contract. respondents in the return have stated that the petitioner has concealed the fact that it did not execute the work on the front made available to it and even after the work sites were made available to the petitioner, nothing was done by the petitioner and as the petitioner was not carrying out the work, they were left with no choice except to invoke bank guarantee. The respondents have also stated that they have issued a show cause notice to the petitioner in the matter and thereafter, they have invoked the bank guarantee.
06- The respondents have also stated that a sum of Rs.2,20,20,297/- has already been paid to the petitioner and most of the equipment and materials purchased by the petitioner were not mobilized to the site and therefor, the respondents were left with no other choice except to encash the bank guarantee.
07- Heard learned counsel for the parties and perused the record.
In the present case, the facts reveal that a Request for Proposal was issued on 17/10/2017 and the petitioner's bid was accepted on 01/01/2018. The petitioner submitted Performance Bank Guarantee of Rs.85,81,725/- issued by the Axis Bank and an agreement was Writ Petition No.13719/2019 -4- executed between the parties on 24/01/2018. The work order was issued on 29/01/2018 and additional work order was issued on 27/02/2018. The petitioner again submitted a Mobilisation Advance Bank Guarantee on 12/07/2018.
08- In the writ petition, the petitioner is raising a grievance that the sites were not made available to him to carry out the work and on the contrary the respondents have contended that inspite of availability of sites the petitioner has not carry out the work. The respondents have also stated that petitioner was paid Mobilisation Advance to the tune of Rs.2,20,20,297/- (approximately Rs.2.25 Crores) and inspite of receiving the aforesaid amount, the petitioner has not mobilized the equipment and material to the site of the work.
09- The facts also reveal that a show cause notice was issued to the petitioner and the respondents were left with no other choice except to cancel the contract and to encash the bank guarantee.
Clause-12 of general conditions of the contract provides for the Dispute Resolution System and the same reads as under:-
"12. Dispute Resolution System:-
12.1 No dispute can be raised except before the Competent Authority as defined in Contract data in writing giving full description and grounds of Dispute. It is clarified that merely recording protest while accepting measurement and/or payment shall not be taken as raising a dispute. 12.2 No issue of dispute can be raised after 45 days of its occurrence. Any dispute raised after expiry of 45 days of its first occurrence shall not be entertained and the Employer shall not be liable for claims arising out of such disputes.Writ Petition No.13719/2019 -5-
12.3 The Competent Authority shall decide the matter within 45 days.
12.4 Appeal against the order of the Competent Authority can be preferred within 30 days to the Appellate Authority as defined in the Contract data. The Appellate Authority shall decide the dispute within 45 days.
12.5 Appeal against the order of the Appellate Authority can be preferred before the Madhya Pradesh Arbitration Tribunal constituted under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.
12.6 The contract shall have to continue execution of the works with due diligence notwithstanding pendency of a dispute before any authority or forum."
10- Learned counsel for the petitioner has placed reliance upon a judgment delivered by the Hon'ble Supreme Court in the case of ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others reported in (2004) 3 SCC
553. It is certainly true that the writ petition is maintainable and there is no absolute bar in entertaining the writ petition, however, the fact remains that in the present case their are allegations and counter allegations made on affidavit by the parties and in the considered opinion of this Court and in the facts and circumstances of the case, such disputed question of facts cannot be adjudicated without appreciation of evidence adduced by the parties in respect of their averments and the same can be done under the Dispute Resolution Mechanism provided under the agreement, which has been executed between the parties and therefore, the judgment delivered by the Hon'ble Supreme Court does not help the petitioner.
11- Learned counsel for the petitioner has placed reliance again Writ Petition No.13719/2019 -6- upon a judgment delivered by the Hon'ble Supreme Court in the case of U. P. State Sugar Corporation Vs. Sumac International Ltd. reported in (1997) 1 SCC 568. In the aforesaid case also finally in last paragraph i.e. paragraph No.18 an Arbitrator was appointed and Hon'ble Justice Shri R. M. Sahai (Retired) was appointed as an Arbitrator and therefore, the judgment does not help the petitioner again.
12- Reliance has also been placed upon judgments in the case of U. P. Cooperative Federation Ltd. Vs. Singh Consultants and Engineers (P) Limited reported in (1988) 1 SCC 174, Vinitec Electronics Private Limited Vs. HCL Infosystems Limited reported in (2008) 1 SCC 544 and Himadri Chemicals Industries Limited Vs. Coal Tar Refining Company reported in (2007) 8 SCC
110. This Court has carefully gone through the aforesaid judgments relied upon by the learned counsel, however, the fact remains that in the present case there is alleged serious breach on the part of the petitioner as alleged by the respondent No.1 in respect of terms and conditions of the contract and is not a case where the petitioner has prayed for quashment of the order cancelling the contract. The petition is confined only to the action by which the bank guarantee has been revoked / encashed and therefore, the judgments do not help the petitioner at all.
Writ Petition No.13719/2019 -7-13- This Court in the case of Garon Dehydrates Pvt. Ltd. Vs. Union of India and Others (Writ Petition No.17075/2018, decided on 10/08/2018) in similar circumstances has declined to interfere in a contractual dispute as there was a remedy of arbitration available.
A Division Bench of this Court in the case of A to Z Infrastructure Ltd. Vs. Urban Administration (Writ Petition No.6922/2015, decided on 20/01/2016) has again declined to interfere in the matter of termination of contract and forfeiture of security deposit as a remedy of arbitration was available.
14- This Court again in the case of T. R. Trehan Construction Pvt. Ltd. Vs. M. P. Audyogik Kendra Vikas Nigam (Indore) Limited and Others (Writ petition No.8546/2014, decided on 26/03/2015) in similar circumstances has declined to interfere in a contractual dispute. Again the Division Bench of this Court in the case of M/s. Moschip Semiconductor Technology Limited Vs. The Indore Municipal Corporation and Others (Writ Petition No.1227/2019, decided on 10/04/2019) has declined to interfere in a similar contractual dispute as the Dispute Resolution Mechanism was in existence. This Court again in the case of M/s. S. S. Construction Vs. State of M. P. and Others (Writ Petition No.2520/2019, decided on 29/04/2019) in paragraph No.2 to paragraph No.10 has held as under:-
"2. A reply has been filed in the matter and it has been stated that as per clause 12 there is Dispute Resolution Mechanism Writ Petition No.13719/2019 -8- and the petitioner is certainly entitled to take shelter of the Dispute Resolution Mechanism and thereafter he can raise an arbitration dispute before the Madhya Pradesh Arbitration Tribunal constituted under the The Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. The Dispute Resolution System reads as under:-
"12. Dispute Resolution System 12.1 No dispute can be raised except before the Competent Authority as denied in Contract data in writing giving full description and grounds of Dispute. It is clarified that merely recording protest while accepting measurement and/or payment shall not be taken as raising a dispute. 12.2 No issue of dispute can be raised after 45 days of its occurrence. Any dispute raised after expiry of 45 days of its first occurrence shall not be entertained and the Employer shall not be liable for claims arising out of such disputes. 12.3 The Competent Authority shall decide the matter within 45 days.
12.4 Appeal against the order of the order of the Competent Authority can be preferred within 30 days to the Appellate Authority as denied in the Contract data. The Appellate Authority shall decide the dispute within 45 days.
12.5 Appeal against the order of the Appellate Authority can be preferred before the Madhya Pradesh Arbitration Tribunal constituted under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.
12.6 The contractor shall have to continue execution of the works with due diligence notwithstanding pendency of a dispute before any authority or forum."
3. In light of the aforesaid, as there is Dispute Resolution Mechanism, the petitioner does have remedy of appeal and thereafter does have remedy to approach the Tribunal for arbitration. Similar view has been expressed by this Court in W.P. No.17075 of 2018 (Garon Dehydrates Vs. Union of India) decided on 10.08.2018, relevant para of the same are reads as under:-
"Undisputedly, a show cause notice was issued in the matter and after receiving the reply of the petitioner, the respondents have terminated the contract. Shri Rawal, learned Additional Solicitor General of India has straightaway drawn the attention of this Court towards arbitration clause under Part 3, Clause 9 and the same provides for arbitration of Writ Petition No.13719/2019 -9- dispute of any kind.
In the considered opinion of this Court, as there is an arbitration clause in respect of dispute, the question of interference by this Court at this juncture does not arise. Parties shall be free to raise all grievance before the Arbitrator and the matter shall be decided keeping in view the arbitration clause, which is in existence. However, the respondents are directed to conclude the arbitration, if any, as expeditiously as possible preferably within a period of six months from the date the matter is referred to Arbitrator.
With the aforesaid, writ petition stands disposed of.
Certified copy as per rules"
4. In the case of A to Z Infrastructure Ltd. Vs. Urban Administration and Development Department (W.P. No.6922/2015) decided on 20 th January, 2016, this Court in paras 9, 10, 11 and 13 has held as under:-
9. In view of the aforesaid, the contention that the petitioner that he has been black listed for a period of 5 years has no force nor decision cited by petitioner in the case of Erusian Equipment & Chemicals Ltd V/s.State of West Bengal & Anr.
reported as AIR 1975 SC 266 and Sourthern Painters V/s. AIR 1994 SC 1277 will be applicable nor the petitioner will get any help from the aforesaid judgments because at present no action of black listing the petitioner for a period of 5 years as stated by the petitioner has been taken and thus, if petitioner received any show cause notice from the Municipal Corporation, Indore, he may file his reply and point out both the decisions of the Apex Court before the learned authority, so that action be taken accordingly after applying the principles laid down by the Apex Court.
10. It has also been pointed out by the learned counsel for the Municipal Corporation that against the impugned order the petitioner has filed two applications for grant of interim injunction before the District Court under Section 9 of the Arbitration and Conciliation Act, 1996.
11. In earlier round of litigation the writ petition filed by the petitioner was dismissed by order dated 15.5.2015 passed in W.P.No.3294/2015, which reads as under :-
"Heard on the question of admission.
2. By this writ petition under Article 226 of the Constitution of India, the petitioner is praying for the following relief:-
7.1 Issue a writ, order or direction in the name of CERTIORARI to quash the termination notice ANNEXURE P/1 dated 19.03.2015.Writ Petition No.13719/2019
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7.2 Issue a writ, order or direction in the nature of CERTIORARI to compel the respondents to hold an investigation in terms of clause 39 of the Agreement ANNEXURE P/2 giving full opportunity to the petitioner into the question whether the petitioner has failed to properly perform the operations in accordance with the agreement;
7.3 In the event of the investigation as above leading to the conclusion that there was failure on the part of the petitioner to perform the operations in accordance with the agreement, direct the respondents by a writ, order or direction in the nature of MANDAMUS to give opportunity to the petitioner in terms of Clause 39 of the Agreement ANNEXURE P/2 to rectify the failure within a reasonable time;
7.4 Issue a writ, order or direction in the nature of MANDAMUS to the respondents to hold an enquiry whether the petitioner was guilty of a serious/major default in terms of clause 38.b of the Agreement ANNNEXURE P/2;
7.5 Issue a writ, order or direction in the nature of MANDAMUS to appoint a Committee comprising of a retired Judge of this Hon'ble Court and a senior Chartered Accountant having a standing of at least 15 years or any other independent and objective committee to examine the records of the Indore Municipal Corporation and determine (a) the amount payable by the Indore Municipal Corporation to the petitioner as tipping fee for collection and transportation of municipal solid waste as envisaged in the Agreement ANNEXURE P/2 until the date of this writ petition and (b) the illegal deductions and thereafter commanding the Indore Municipal Corporation to make the payment along with interest @ 24% per annum on the tipping fees found payable to the petitioner;
7.6 Issue a writ, direction or order in the nature of MANDAMUS to compel the Indore Municipal Corporation to make payment of the pending admitted bills and future monthly bills of the petitioner into the petitioner's Account No.543701010050185 in Vijay Nagar, Indore Branch of the Union Bank of India;
7.7 Issue a writ, direction or order in the nature of MANDAMUS to compel the Indore Municipal Corporation to take steps in terms of clause 52.c of the Agreement ANNEXURE P/2;
7.8 Issue a writ, direction or order in the nature of MANDAMUS to direct the above Committee of a retired Judge of this Hon'ble Court and a senior Chartered Accountant to examine the loss and Writ Petition No.13719/2019
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damages, if any, which may be claimed by the Indore Municipal Corporation against the petitioner;
7.9 Alternatively, issue a writ, order or direction in the nature of MANDAMUS to compel the Indore Municipal Corporation to sit with the petitioner to determine loss or damage which may be claimed by the Indore Municipal Corporation fairly and objectively;
7.10 Issue a writ, order or direction in the nature of MANDAMUS commanding the Indore Municipal Corporation to refrain from forfeiting the bank guarantees lying deposited with Commissioner of the Indore Municipal Corporation drawn upon IDBI Bank Limited amounting to Rs.5 Crores with further directions to refrain from forcing the petitioner to further renew the bank guarantee in view of the fact of delay in implementation of agreement by the Indore Municipal Corporation.
7.11 Issue any further or other writ order or direction as this Hon'ble Court may deem fit and proper under the facts and circumstances of the case.
7.12 Award the cost of the petition in favour of the petitioner.
3. Brief facts of the case are that the Contract for collection, segregation, transportation and disposal of municipal solid wastes at designated sites, implementation of scientific solid waste management systems and renovation, operation, maintenance and construction of garbage dumping centres, landfill sites, workshops sites and public convenience sites as per the instructions and guidelines issued by local authorities has been awarded to the petitioner in accordance with Municipal Solid Waste (Management and Handling) Rules, 2000.
4. An agreement was signed with the petitioner on 24/01/2009. As per the agreement, the petitioner is responsible to create an effective garbage collection and transportation at Indore.
5. Clause 39 and 40 deals with the termination of contract due to event of default which reads as under:-
39. Termination of Contract Due to Event of Default:
Contractor event of default:
At any time after the Commencement Date, the Competent Authority may investigate where the Contractor has failed to properly perform the operations in accordance with this contract. The Writ Petition No.13719/2019
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Competent Authority shall issue a notice to the Contractor, instructing him to rectify the failure within a reasonable time.
An event of default on the part of the Contractor, which results from the Contractor being unable to fulfill his service obligations under the contract, shall be deemed as serious default, and is said to have occurred due to any of the following causes:
The Contractor
(i) has repudiated the Contract, or
(ii) without reasonable excuse has failed to commerce operations in accordance with this contract and or failed to complete the activities/operations within the time stipulated for completion.
Gross misconduct of the Contractor;
(i) Despite previous warning from the Competent Authority, in writing, is otherwise persistently or flagrantly neglecting to comply with any of his obligations under the Contract;
(ii) The Contractor persistently fails to follow Good Operating Practices in execution of the Contract;
(iii) The Contractor stops providing the operations and the stoppage has not been authorized by the Competent Authority;
(iv) The Competent Authority gives notice that failure to correct a particular defect is a fundamental breach of contract and Contractor fails to correct it within a reasonable period of time determined by the Competent Authority;
(v) If the Contractor is in breach of any law or statute governing the Operations;
(vi) The Contractor, in the judgment of the Corporation, has engaged in Corrupt and Fraudulent Practices in competing for or in carrying out the Operations under the Contract;
(vii) The Contractor (in case of a consortium) has modified the composition of the consortium and/or the responsibility of each member of the consortium without prior approval of the Corporation;
(viii) The Contractor is unable to maintain the composition and structure of his organization due to any of the following causes:
The Contractor enters into voluntary or involuntary bankruptcy, or liquidation;Writ Petition No.13719/2019
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The Contractor becomes insolvent;
A receiver, administrator, trustee or liquidator is appointed over any substantial part of its assets, and Any act is done or event occurs with respect to the Contractor or his assets, which, under any applicable law has substantially similar effect to any of the foregoing acts or events.
40. Termination of Contract Due to Event of Default Without prejudice to any other right or remedy which IMC may have in respect thereof under this contract, upon the occurrence of Contractor Event of Default, the IMC may, subject to the provisions of this contract, terminate this contract in the manner as set out under
(a) If IMC decides to terminate this contract upon the occurrence of a Contractor to the major Default, in the first instance, he shall issue preliminary notice to the Contractor. Within fifteen (15) days of receipt of preliminary notice, the Contractor shall submit to IMC through the Competent Authority in sufficient detail, the manner in which he proposes to cure the underlying Event of Default. In case of non submission of the Contractor's proposal to rectify within the said period of fifteen (15) days, IMC shall be entitled to terminate this Contract by issuing termination notice and to appropriate Security Deposit and carry out the operations through a Successor Contractor or by Corporation at the risk and cost of the Contractor. If the total amount due to the Corporation exceeds any payment due to the Contractor, the difference shall be a debt payable to the Corporation.
(b) If the Contractor's proposal to rectify the underlying event of default is submitted within he period stipulated therefore, the Contractor shall have further period of fifteen (15) days to remedy/cure the underlying event of default. If, however the contractor fails to remedy/cure the underlying event of default within such further period allowed, IMC shall be entitled this contract, by issue of termination notice and to appropriate to security deposit and carry our the operations through a Successor Contractor or by Corporation at the risk and cost of the Contractor. If the total amount due to the Corporation exceeds any payment due to the Contractor, he difference shall be a debt payable to the corporation.
6. The Municipal Corporation, Indore issued various notices to the petitioner for deficiencies in Writ Petition No.13719/2019
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services vide letter dated 1/08/13, 10/3/14, 13/04/14 and 26/05/2014 but no sincere effort was made by the petitioner for improvement in services. On 19/03/2015(Annexure-P/1), termination notice has been issued to the petitioner as to why agreement for collection and transportation of municipal solid waste dated 24/01/2009 was not terminated.
7. Learned Senior Counsel for the petitioner submits that today the Indore Municipal Corporation, Indore is going to terminate its contract. He submits that 300 employees are working from last since 6 years and action of termination is contrary to the terms and contract of agreement and prayed that the respondents be restrained from taking any adverse action against him.
8. It is not in dispute that the procedure has been prescribed for disputes and arbitration. Clause 45 of the agreement reads as under:-
45. Procedure for Disputes & Arbitration If a dispute(s) of any kind whatsoever arises between the Contractor and the Competent Authority's Representative, the same shall be referred to the Competent Authority for his decision with detailed justification. Such reference shall be stated that it is in pursuance to this clause and is for reviewing and giving decisions by the Competent Authority. The Competent Authority shall give its decision within fifteen (15) days of receipt of notice. If Contractor is not satisfied with the decision of the Competent Authority fails to give the decision within the period of fifteen (15) days from the date of receipt of notice under this clause, such a dispute may be referred to arbitration as per Arbitration and Conciliation Act, 1996 All legal matters are subjected to Indore Jurisdiction only.
9. On due consideration of the arguments of the learned Senior Counsel for the petitioner, firstly, the contract between the parties is a contract in the realm of private law. 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 not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for Civil court as the case may be 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.Writ Petition No.13719/2019
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10. Accordingly, the writ petition filed by the petitioners restraining the respondents from taking any adverse action against him is wholly misconceived and is not maintainable in law.
11. There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration. The Arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extra-ordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy - in this case, provided in the contract itself - is a good ground for the court to decline to exercise its extra-ordinary jurisdiction under Article 226. The said Article was not meant to supplant the existing remedies at law but only to supplement them in certain well-recognized situations. As pointed out above, the prayer of the petitioner is wholly misconceived.
13. The contract in question between the parties is a contract in the realm of private law. It is governed by the provisions of the Indian Contract Act. The dispute relating to interpretation of the terms and conditions of such contract cannot be adjudicated in a writ petition. That is a matter of either for arbitration as provided by the contract as the arbitrator can decide both the questions of fact as well as questions of law. The petitioner is not seeking to enforce any statutory right of theirs nor he was seeking to enforce any statutory obligation cast upon the respondents.
5. In the case of S. Singh & Company Vs. State of M.P. (W.P. No.12665/2014) decided on 18th September, 2015, the Court in paras 7 & 9 has held as under:-
7. In the matter of black listing or suspending the registration of a contractor, a writ court exercising jurisdiction under Article 226 of the Constitution has a very limited role to play. It is only to be seen as to whether proper opportunity of hearing before taking the impugned action is granted and the requirement of the principles of natural justice followed. What is subjected to judicial review in such cases is only the decision making process and not the decision itself.
Judicial review in such cases is limited to extent to see as to whether the decision taken is so perverse or arbitrary in nature that the Wednesbury theory of reasonableness get attracted. That being the limited Writ Petition No.13719/2019
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scope of review, we propose to consider the matter in the light of the legal principle as indicated hereinabove.
9. As far as second ground with regard to handing over site after land acquisition and payment of compensation is concerned, it is found that upto 27.5.2012, 1.6.2012, 8.6.2012, 25.12.2012 more than 8000 to 11310 running meters of area were made available, layout for the same was also provided. There was no complaint either to the department or the police authority with regard to any obstruction by the agriculturists with regard to this area and authorities found that when 8000 to 11310 running meters were made available and no work was started, the complaint of the petitioner that delay is caused due to availability of land is found to be unsustainable. If the reasonings given by the authorities as are indicated in the order, particularly the appellate authority as indicated above, is taken note of, we find that contention of the petitioner as is made out in the writ petition to say that the drawings were made available to him only 4 days prior to the period of 12 months, therefore the work could not be completed seems to be incorrect. On the contrary, departmental submissions and the findings of the appellate authority go to show that adequate land, maps and drawings were provided to the petitioner and even this work was not satisfactorily concluded. This being the reasons which have come on record, we are of the considered view that this is not a fit case where we can take a different view and interfere. We see no error apparent on the face of record in the order of the appellate authority on the decision taken by the department. In this case the requirement of the principles of natural justice has been followed and based on material available a reasonable decision has been taken which cannot be termed as perverse to the extent that a prudent man approach is not undertaken, the respondents have considered the matter in accordance with requirement of law and now, we see no ground to interfere into the matter. That apart, the question involved in the matter with regard to making available the land and the drawings is also a disputed question of fact which cannot be adjudicated by us in these proceedings. Ultimately, if the Arbitration Tribunal where the dispute is sub- judice comes to a conclusion and gives a finding that termination of contract was illegal, the petitioner can always claim damages.
6. In the case of T. R. Trehan Construction Pvt. Ltd. Vs. M.P. Audyogik Kendra Vikas Nigam (Indore) Limited (W.P. Writ Petition No.13719/2019
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No.8546/2014) decided on 26th March, 2015, this Court in para 20 has held as under:-
20. In the instant case, however, the second requirement is fulfilled as it is specifically mentioned in the letter dated 28.12.2013 (Annexure P/5) that it will be proposed to get their firm blacklisted and thereafter, after taking the reply of the present petitioner into consideration the impugned order (Annexure P/7) dated 12.03.2014 was passed in which the firm was prohibited for five years from participating in the tender process of works of respondent No.1. As such, the requirement of contents of notice as held by the Hon'ble Supreme Court in the case of Gorkha Security Services (supra) is fulfilled in the present case.
7. In the case of Land Mark Engineer Vs. Chief Executive Officer (W.P. No.6574/2014) decided on 7th January, 2015, this Court has held as under:-
Having heard learned counsel for the parties and on perusal of the orders relied upon by the parties, it is clear that this is not a case of blacklisting of petitioner firm. However, the action has been taken against the petitioner under the special condition no.4.3 of the agreement which read thus;
4.3 Past Performance of the contractors in PMGSY will also be taken into account. Contractors who have abandoned/left work incomplete or performance was poor and consequently their agreement was rescinded by MPRRDA, are not eligible to participate in the tenders and will be disqualified even if tender form have been issued to them unless otherwise decided by MPRRDA in any case.
If the action taken is in violation to the aforesaid Clause of the agreement, then the petitioner has to take recourse to remedy available before the Madhya Pradesh Arbitration Tribunal, as agreed to by the parties.
This question has also been considered by this Court in W.P. No. 1191/2014 and after considering the provisions of Clause 4.3, similar contention has been rejected and following findings have been recorded:
"We find much force in the arguments of the learned counsel for the respondents as once the action has been taken for cancellation in accordance with the agreement Writ Petition No.13719/2019
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between the parties, it is not appropriate for us to interfere in the matter, exercising limited jurisdiction in a petition under Article 226 of the Constitution, particularly when remedy of approaching the Madhya Pradesh Arbitration Tribunal under the provisions of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, is available to the petitioner."
Keeping in view of the aforesaid, in this case also in the light of Clause No.4.3 the general principle as is relied upon by the petitioner will not apply. Once the action has been taken for cancellation in accordance with the agreement between the parties, it is not appropriate for us to interfere in the matter exercising limited jurisdiction in a petition under Article 226 of the Constitution of India.
Accordingly, finding no ground to interfere, this petition is dismissed with liberty to the petitioner to take recourse to the aforesaid remedy.
Certified copy as per rules.
8. In the case of M/s. Moschip Semiconductor Technology Ltd. Vs. The Indore Municipal Corporation and Others (W.P. No.1227/2019) decided on 10th April, 2019, this Court in paras 24 to 26 has held as under:-
24. This Court has carefully gone through the aforesaid judgments and it is true that only on the ground of alternative remedy, a person cannot be thrown out. However, the issue of alternative remedy differs from cases to cases depending upon the facts of a particular case. In the present case, due process of law, so far as principles of natural justice and fair play are concerned, has been followed by the Indore Municipal Corporation. It has been alleged that the project of great public importance was being delayed by the petitioner and in those circumstances, the contract has been terminated, and therefore, this Court is of the considered opinion that all the disputed question of facts and the dispute raised by the petitioner can be decided only after the evidence is adduced by the parties before the Tribunal and not by this Court specially when there are counter claims and claims made by the parties in the matter against each other.
25. Reliance has been placed by the respondents on several judgments delivered by this Court in the cases of Garon Dehydrates Pvt. Ltd. v/s Union of India dated 10.08.2018 in W.P. No.17075/2018, A to Z Infrastructure Limited v/s Urban Writ Petition Writ Petition No.13719/2019
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No.1227/2019 15 Administration & Development Department dated 21.01.2016 in W.P. No.6922/2015, M/s S. Singh & Co. v/s State of Madhya Pradesh dated 18.09.2014 in W.P. No.12665/2014, T.R. Trehan Construction Pvt. Ltd. v/s M.P. Audyogik Kendra Vikas Nigam (Indore) Limited dated 26.03.2015 in W.P. No.8546/2014 & M/s Landmark Engineer v/s The Chief Executive Officer dated 07.01.2015 passed in W.P. No.6574/2014 and it has been argued that in light of the arbitration clause, the matter has to be looked into by the Arbitration Tribunal.
26. This Court after taking into account the facts and circumstances of the case, is of the considered opinion that the dispute in the present case can be resolved by the Arbitration Tribunal and in case, the petitioner approaches the Arbitration Tribunal, the Tribunal shall decide the reference in accordance with law.
With the aforesaid, the present writ petition stands dismissed.
9. In the present case, as the Appellate Authority has passed an order, the petitioner straightway can approach the Madhya Pradesh Madhyastham Adhikaran under the Adhiniyam, 1983 and the Clause related to appeal will not come in the way of the petitioner and the Tribunal shall decide the matter on merits.
10. With the aforesaid, the present petition stands disposed of."
In light of the aforesaid judgments as the bank guarantee is a contract between the respondent No.1 and the petitioner Bank, the bank guarantee has rightly been encashed and the petitioner does have a remedy to approach the the Dispute Resolution Mechanism.
15- The apex Court in the case of Vinitec Electronics Private Limited (Supra) in paragraphs No.11 to 14 has held as under:-
11. The law relating to invocation of bank guarantees is by now well settled by a catena of decisions of this court. The bank guarantees which provided that they are payable by the guarantor on demand is considered to be an un-conditional bank guarantee. When in the course of commercial dealings, unconditional guarantees have been given or accepted the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. In U.P. State Sugar Writ Petition No.13719/2019
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Corporation vs. Sumac International Ltd., this court observed that : (SCC p.574, para 12) "The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would over ride the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. The two grounds are not necessarily connected, though both may coexist in some cases.µ"
12. It is equally well settled in law that bank guarantee is an independent contract between bank and the beneficiary thereof. The bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and of no consequence. In BSES Limited vs. Fenner India Ltd. this court held : (SCC pp. 733-34, para 10) "10. There are, however, two exceptions to this Rule. The first is when there is a clear fraud of which the Bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non- intervention is when there are special equitiesµ in favour of injunction, such as when irretrievable injuryµ or irretrievable injusticeµ would occur if such an injunction were not granted. The general rule and its exceptions has been reiterated in so many judgments of this court, that in U.P. State Sugar Corpn. V. Sumac International Ltd. (1997) 1 SCC 568 (hereinafter Writ Petition No.13719/2019
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U.P. State Sugar Corpnµ) this Court, correctly declare that the law was settledµ."
13. In Himadri Chemicals Industries Ltd. V. Coal Tar Refining Company , this court summarized the principles for grant of refusal to grant of injunction to restrain the enforcement of a bank guarantee or a letter of credit in the following manner :
"14.. . . . . (i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the Beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.
(ii) The Bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.
(iii) The courts should be slow in granting an order of injunction to restrain the realization of a bank guarantee or a Letter of Credit.
(iv) Since a Bank Guarantee or a Letter of Credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guarantees or Letters of Credit.
(v) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation.
(vi) Allowing encashment of an unconditional Bank Guarantee or a Letter of Credit would result in irretrievable harm or injustice to one of the parties concerned.µ"
14. In Mahatama Gandhi Sahakra Sakkare Karkhane vs. National Heavy Engg. Coop. Ltd and anr. , this court observed :
(SCC p. 471b-d) "If the bank guarantee furnished is an unconditional and irrevocable one, it is not open to the bank to raise any objection whatsoever to pay the amounts under the guarantee. The person in whose favour the guarantee is furnished by the bank cannot be prevented by way of an injunction from enforcing the guarantee on the pretext that the condition for enforcing the bank guarantee in terms of the agreement entered between the parties has not been fulfilled. Such a course is impermissible. The seller cannot raise the dispute of whatsoever nature and prevent the purchaser from enforcing the bank guarantee by way of injunction except on the ground of fraud and Writ Petition No.13719/2019
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irretrievable injury.
What is relevant are the terms incorporated in the guarantee executed by the bank. On careful analysis of the terms and conditions of the guarantee in the present case, it is found that the guarantee is an unconditional one. The respondent, therefore, cannot be allowed to raise any dispute and prevent the appellant from encashing the bank guarantee. The mere fact that the bank guarantee refers to the principle agreement without referring to any specific clause in the preamble of the deed of guarantee does not make the guarantee furnished by the bank to be a conditional one.µ" (Paras 22 and 28) [Emphasis supplied]"
In light of the aforesaid, as it was an unconditional bank guarantee, the same has rightly been encashed by respondent No.1. No case for interference is made out in the matter.
16- In the case of Singh Cold Storage Pvt. Ltd., Ujjain Vs. Parle Biscuits Pvt. Ltd., Mumbai and Others reported in 2014 (3) MPLJ 120, the law relating to bank guarantee has been dealt with.
Paragraphs No.16 to 24 of the aforesaid judgment reads as under:-
"16. Learned District Judge after taking into account the aforesaid statutory provision of law and the law laid down by the apex court in various cases has rejected the application for grant of injunction preferred by the plaintiff. It has been observed that the plaintiff has not been able to establish the irreparable loss nor has established the balance of conveniences enabling the court to grant an injunction. The matter relating to grant of injunction has been considered by the apex court in various cases and the apex court in the case of Dwarikesh Sugar Vs. Prem Heavy Engg. (supra) in paragraphs -29, 30, 31, 32 and 33 held as under :-
"29. It is unfortunate that the High Court did not consider it necessary to refer to various judicial pronouncements of this Court in which the principles which have to be followed while examining an application for grant of interim relief have been clearly laid down. The observation of the High Court that reference to judicial decisions will not be of much importance was clearly a method adopted by it in avoiding to follow and apply the law as laid down by this Court. Yet another serious for Writ Petition No.13719/2019
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which was committed by the High Court, in the present case, was not to examine the terms of the bank guarantee and consider the letters of invocation which had been written by the appellant. If the High Court had trail the trouble of examining the documents on record, which had been referred to by the trial court, in its order refusing to grant injunction, the court would not have granted the interim injunction. We also do not find any justification for the High Court in invoking the alleged principle of adjust enrichment to the facts of the present case and then deny the appellant the right to encash the bank guarantee. If the High Court had taken the trouble to see the law on the point it would have been clear that in encashment of bank guarantee the applicability of the principle of undue enrichment has no application.
30. We are constrained to make these observation with regard to the manner in which the High Court had dealt with this case because this is not an isolated case where the courts, while disobeying or not complying with the law laid down by this Court, have at time been liberal in granting injunction restraining encashment of bank guarantees.
31. It is unfortunate, that notwithstanding the authoritative the pronouncements of this Court, the High Courts and the courts subordinate thereto, still seem intent on affording to this Court innumerable opportunities for dealing with this area of law, thought by this Court to be well settled.
32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.
33. Before concluding we think it appropriate to mention about the conduct of the respondent - bank which has chosen not to be in this case. From the facts stated hereinabove it appears to us that the respondent bank has not shown professional efficiency, to say the least, and has acted in a partisan manner with a view to help and assist respondent no. 1. At the time when there was no restraint order from any Court, the bank was under a legal and moral obligation to honour its commitments. It, however, failed to do so. It appears that Writ Petition No.13719/2019
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the bank deliberately dragged its feet so as to enable respondent no.1 to secure favourable order of injunction from the Court. Such conduct of a bank is difficult to appreciate We do not wish to say anything more but it may feel that it will be prejudicial in the event of the appellant taking action against it."
17. Keeping in view the aforesaid judgment delivered by the apex court and also keeping in view the fact that the bank guarantee it is unconditional and irrecoverable, this court is of the considered opinion that the learned District Judge has rightly rejected the injunction application, keeping in view the judgment delivered in the case of Dwarikesh Sugar Vs. Prem Heavy Engg (supra), it is not a case where a fraud has taken place or a bank guarantee was obtained by coercion and, therefore, in absence of established fraud and keeping in view the bank guarantee, the trial court has rightly declined prayer for grant of injunction and from restraining the respondents from encashment of the bank guarantee.
18. This court in the case of Gopal Narayan Vs. State of M.P. reported in 1979 MPLJ 284 while again dealing with the factors for grant of interim injunction in paragraph-7 has held as under :-
"7. Even on merits, there is no prima-facie case in favour of the plaintiff-appellant. Mere institution of a suit challenging vires of provisions of law and an assessment order passed by a competent authority cannot entitle a plaintiff to claim as of right issuance of interim injunction to restrain recovery of tax-imposed and assessed on him. Three factors have to be shown to co-exist by a plaintiff to claim and / or sustain a grant of interim injunction viz., (a) prima-facie case, (b) balance of convenience and (c) irreparable injury, if any of the aforesaid factors is not shown to exist then interim injunction cannot be issued."
19. Keeping in view the aforesaid, as no primafacie case was established before the trial court nor balance of convenience was established before the trial court and no irreparable damages was established before the trial court, the trial court has rightly declined to grant injunction in the matter.
20. The apex court in the case of State Bank of India Vs. Mula Sahakari reported in (2006) 6 SCC 293 in paragraphs 24 to 28 has held as under:-
"24. The said document, in our opinion, constitutes a document of indemnity and not a document of guarantee as is clear from the fact that by reason thereof the Appellant was to indemnify the cooperative society against all losses, claims, damages, actions and costs which may be suffered by it. The document does not contain the usual words found in a bank guarantee furnished by a Bank as, for example, "unequivocal condition", "the cooperative society would be entitled to Writ Petition No.13719/2019
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claim the damages without any delay or demur" or the guarantee was "unconditional and absolute" as was held by the High Court.
25. The High Court, thus, misread and misinterpreted the document as on scrutiny thereof, it had opined that it was a contract of guarantee and not a contract of indemnity.
26. The document was executed by the Bank in favour of the cooperative society. The said document indisputably was executed at the instance of Pentagon.
27. We have hereinbefore noticed the surrounding circumstances as pointed out by Mr. Naphade as contained in Clauses 15.2.4 and 15.2.5 of the contract vis-a-vis the letters exchanged between the parties dated 6.4.1985, 11.4.1985, 16.4.1985 leading to execution of the document dated 07.09.1985 by the First Appellant in favour of the cooperative society.
28. We are, however, unable to accept the submissions of the learned Senior Counsel that the bank guarantee must be construed in the light of other purported contemporaneous documents. A contract indisputably may be contained in more than one document. Such a document, however, must be a subject matter of contract by and between the parties. The correspondences referred to hereinbefore were between the cooperative society and Pentagon. The said correspondences were not exchanged between the parties hereto as a part of the same transaction. The Appellant understood that it would stand as a surety and not as a guarantor."
21. Keeping in view the aforesaid this court is of the considered opinion that merely because parties have entered into an agreement and later on Bank guarantees have been furnished, it does not mean that its a conditional bank guarantee. The bank guarantee, whether it is conditional bank guarantee or unconditional bank guarantee ? whether it is a revocable or irrevocable ? has to be seen by going through the relevant clause mentioned in the bank guarantee itself and, therefore, in the present case as the bank guarantees are not conditional nor revocable, the question of restraining the respondents from encashing the bank guarantees does not arise. Not only this, it is a well settled proposition of law that a bank guarantee is a contract between the bank and beneficiaries as held by the apex court in the case of Vinitec Electronics (P) Ltd., Vs. HCL Infosystems Ltd.,reported in (2008) 1 SCC 544. The apex court in the aforesaid case has held as under :-
"12. It is equally well settled in law that bank guarantee is an independent contract between bank and the beneficiary thereof. The bank is always obliged to honour it guarantee as long as it is an unconditional and Writ Petition No.13719/2019
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irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and of no consequence. In BSES Ltd. V. Fenner India Ltd. this Court held :(SCC pp. 733-34, para 10) "10. There are, however, two exceptions to this rule. The first is when there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention is when there are 'special equities' in favour of injunction, such as when 'irretrievable injury' or ''irretrievable injustice' would occur if such an injunction were not granted. The general rule and its exceptions has been reiterated in so many judgments of this Court, that in U.P. State Sugar Corpn. V. Sumac International Ltd. (hereinafter 'U.P. State Sugar Corpn.) this Court, correctly declared that the law was 'settled'."
22. This court is of the considered opinion that in the present case also the bank guarantee is an independent contract between the Bank and the respondent No.1. It is unconditional irrevocable one and therefore the learned District Judge was justified in dismissing the injunction application. Not only this, this is a case wherein the present appellant has categorically stated in the memo of appeal as well as at various other places that the outstanding amount of Rs. 182 crores has to be paid to the respondent No.1. It has also been stated that they have not disputed the amount, though it is an illegal demand. The bank guarantees are amounting to only about 96 lacs only, which is certainly less than the admitted amount. The balance of convenience is infact in encashment of the bank guarantees. The learned District Judge has not committed any jurisdictional error nor the order suffers from any patent illegality and therefore this court does not find any reason to interfere with the order passed by the learned District Judge.
23. Before closing the matter, this court would like to observe that in the present case a caveat has been filed by the respondent No.1. The noting made by the Registry reflects that the caveat was on record. However, the respondent No.1 against whom injunction has been sought has not been heard while passing an interim order. However, as matter has now been finally decided by dismissing the present appeal, the respondent Bank is directed to encash the bank guarantees forthwith.
24. Learned counsel appearing for the respondent No.2 Bank, Mr Nitin Bhati, who is present in court and as order has been dictated in open court undertakes to inform the Bank about the order passed today.
The appeal stands dismissed."
Writ Petition No.13719/2019- 27 -
The aforesaid petition was arising out of a civil dispute in which an application was preferred under Order XXXIX Rule1 and 2 of the CPC restraining the defendant therein from encahsment of bank guarantee and the application under Order XXXIX Rule 1 and 2 was rejected, against which an appeal was preferred before this Court and the appeal has also been dismissed by this Court.
17- In light of the aforesaid, it can be safely gathered that bank guarantee is an independent contract between Bank and respondent No.1. It is an unconditional irrevocable one and therefore, the respondent No.1 was justified in encashing the bank guarantee.
18- Resultantly, no case for interference is made out in the matter and the writ petition is dismissed. However, a liberty is granted to the petitioner to seek redressal of his grievance under the Dispute Resolution Mechanism. Any observation made by this Court will not come in way of the parties in the matter of resolution of dispute and the order passed by this Court is confined only to the extent the bank guarantee has been ordered to be revoked in the matter.
Certified copy as per rules.
(S. C. SHARMA) (SHAILENDRA SHUKLA)
JUDGE JUDGE
Tej
Digitally signed by
Tej Prakash Vyas
Date: 2019.09.24
15:24:34 +05'30'