Patna High Court - Orders
Mora Tollways Limited vs The State Of Bihar & Ors on 21 December, 2016
Author: Navaniti Prasad Singh
Bench: Navaniti Prasad Singh
IN THE HIGH COURT OF JUDICATURE AT PATNA
Letters Patent Appeal No.2158 of 2015
In
Civil Writ Jurisdiction Case No. 7259 of 2015
======================================================
Mora Tollways Limited, a company incorporated under the provisions of
the Companies Act, 1956 and having its registered office at 302, Shree
Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla Road, Andhri
(East), Mumbai-400059, a Special Purpose Vehicle created by Atlanta
Limited, 101, Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri
Kurla Road, Andhri (East), Mumbai-400059 through its authorized
representative and Project In Charge, Mr. Pillai Ponipass Packiriswami, Son
of Late C.K. Packiriswami, permanent resident of flat no. 306, Jalalpur City,
Gola Road, Police Station- Rupaspur, District-Patna.
.... .... Appellant.
Versus
1. The State of Bihar through Principal Secretary, Road Construction
Department, Government of Bihar, Patna.
2. The Principal Secretary, Road Construction Department, Government of
Bihar, Patna.
3. Bihar State Road Development Corporation Limited through its
Managing Director, office at RCD Central Mechanical Workshop
Campus, Sheikhpura, Patna.
4. The Managing Director, Bihar State Development Corporation Limited,
office at RCD Central Mechanical Workshop Campus, Sheikhpura,
Patna.
5. The Chairman, Bihar State Development Corporation Limited, office at
RCD Central Mechanical Workshop Campus, Sheikhpura, Patna.
6. The Directors, Bihar State Development Corporation Limited, office at
RCD Central Mechanical Workshop Campus, Sheikhpura, Patna.
7. The Chief General Manager, Bihar State Development Corporation
Limited, office at RCD Central Mechanical Workshop Campus,
Sheikhpura, Patna.
8. The General Manager, Bihar State Development Corporation Limited,
office at RCD Central Mechanical Workshop Campus, Sheikhpura,
Patna.
9. The Deputy General Manager, Bihar State Development Corporation
Limited, office at RCD Central Mechanical Workshop Campus,
Sheikhpura, Patna. .... .... Respondents.
WITH
Letters Patent Appeal No.2084 of 2015
IN
Civil Writ Jurisdiction Case No. 7259 of 2015
======================================================
1. Bihar State Road Development Corporation Limited through its
Managing Director, office at RCD Central Mechanical Workshop
Campus, Sheikhpura, Patna.
2. The Managing Director, Bihar State Road Development Corporation
Limited, office at RCD Central Mechanical Workshop Campus,
Sheikhpura, Patna.
3. The Chairman, Bihar State Road Development Corporation Limited,
Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016
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office at RCD Central Mechanical Workshop Campus, Sheikhpura,
Patna.
4. The Director, Bihar State Road Development Corporation Limited,
office at RCD Central Mechanical Workshop Campus, Sheikhpura,
Patna.
5. The Chief General Manager, Bihar State Road Development
Corporation Limited, office at RCD Central Mechanical Workshop
Campus, Sheikhpura, Patna.
6. The General Manager, Bihar State Road Development Corporation
Limited, office at RCD Central Mechanical Workshop Campus,
Sheikhpura, Patna.
7. The Deputy General Manager, Bihar State Road Development
Corporation Limited, office at RCD Central Mechanical Workshop
Campus, Sheikhpura, Patna. .... .... Appellants.
Versus
1. Mora Tollways Limited, a company incorporated under the provisions
of the Companies Act, 1956 and having its registered office at 302,
Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla
Road, Andhri (East), Mumbai-400059, a Special Purpose Vehicle
created by Atlanta Limited, 101, Shree Amba Shanti Chambers,
Opposite Hotel Leela, Andheri Kurla Road, Andhri (East), Mumbai-
400059 through its authorized representative and Project In Charge, Mr.
Pillai Ponipass Packiriswami, Son of Late C.K. Packiriswami,
permanent resident of flat No.38, Triveni Chaul, Police Station Santa
Cruz and presently residing at flat no. 306, Jalalpur City, Gola Road,
Police Station- Rupaspur, District-Patna.
2. The State of Bihar through Principal Secretary, Road Construction
Department, Government of Bihar, Patna.
3. The Principal Secretary, Road Construction Department, Government of
Bihar, Patna. .... .... Respondents.
WITH
Letters Patent Appeal No.2131 of 2015
IN
Civil Writ Jurisdiction Case No. 7259 of 2015
======================================================
1. The State of Bihar through the Principal Secretary, Road Construction
Department, Govt. of Bihar, Patna.
2. The Principal Secretary, Road Construction Department, Govt. of Bihar,
Patna. .... .... Appellants.
Versus
1. Mora Tollways Ltd. a Company incorporated under the Provision of the
Companies Act, 1956 and having its registered office at 302, Shree
Amba Shanti Chambers Opposite Hotel Leela, Andheri Kurla Road,
Andhari ( East ), Mumbai - 400059, a Special Purpose Vehicle Created
by Atlanta Limited, 101 Shree Amba Shanti Chambers, Opposite Hotel
Leela, Andhari Kurla Road, Andhari ( East Mumbai - 400059 through
its Authorized representative and Project In Charge, Mr. Pillai Ponipass
Packiriswami, Son of Late C.K. Packiriswami, Permanent Resident of
Flat No. 38, Triveni Chaul, Police Station Santa Cruz and Presently
residing at Flat No. 306 Jalalpur City, Gola Road, Police Station
Rupaspur, District - Patna.
Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016
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2. Bihar State Road Development Corporation, Ltd., through its Managing
Director, office at RCD, Central Mechanical Workshop, Campus,
Sheikhpura, Patna.
3. The Managing Director, Bihar State Road Development Corporation,
Ltd., office at RCD, Central Mechanical Workshop, Campus,
Sheikhpura, Patna.
4. The Chairman, Bihar State Road Development Corporation, Ltd., office
at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna.
5. The Director, Bihar State Road Development Corporation, Ltd., office
at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna.
6. The Chief General Manager, Bihar State Road Development
Corporation, Ltd., office at RCD, Central Mechanical Workshop,
Campus, Sheikhpura, Patna.
7. The General Manager, Bihar State Road Development Corporation,
Ltd., office at RCD, Central Mechanical Workshop, Campus,
Sheikhpura, Patna.
8. The Deputy General Manager, Bihar State Road Development
Corporation, Ltd., office at RCD, Central Mechanical Workshop,
Campus, Sheikhpura, Patna. .... .... Respondents.
======================================================
Appearance :
(In LPA No.2158 of 2015)
For the Appellant : M/s Y.V. Giri, Sr. Adv., Sanjeev Kumar,
Nagdeo Pandey and Dayanand Singh, Advocates.
For the Respondents : M/s Dushyant Dave, Sr. Adv., Ranjit Prakash,
Amit Jajoo, Anshuman Pande, Mahima Sareen,
Vikash Kumar, Harish Kumar, Advocates.
(In LPA Nos.2084 of 2015 & 2131 of 2015)
For the Appellants : M/s Dushyant Dave, Sr. Adv., Chitranjan Sinha,
PAAG-II, Vikas Kumar Akshay Malhotra, Pragya
Omri and Mahima Sareen, Advocates.
For the Respondents : M/s Y.V. Giri, Sr. Adv., Sanjeev Kumar,
Nagdeo Pandey and Dayanand Singh, Advocates.
For the State : Mr. Harish Kumar, G.P.-8.
======================================================
CORAM: HONOURABLE MR. JUSTICE NAVANITI PRASAD SINGH
C.A.V. JUDGMENT
Dated: 21.12.2016
A writ petition, being C.W.J.C. No.7259 of 2015,
was filed by Mora Toll Ways Limited (hereinafter referred to as the
writ petitioner-Company) complaining against the action taken/not
taken by the respondents, the State of Bihar and the Bihar State
Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016
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Road Development Corporation Limited (hereinafter in short
referred to as „Corporation‟). The writ petition was filed on
07.05.2015and was disposed of by a learned Single Judge of this Court on 22.09.2015. The parties being aggrieved filed three Intra- Court appeals, being L.P.A. No.2158 of 2015 as preferred by the writ petitioner Company; L.P.A. No.2084 of 2015 as preferred by the Corporation and L.P.A. No.2131 of 2015 by the State of Bihar. All the three Intra-Court appeals were heard by Division Bench and disposed of by judgment and order dated 12.05.2016 by two separate opinions. The two Hon‟ble Judges agreed with the judgment and order of the learned Single Judge on some of the aspects but there was divergence of opinion on two aspects and hence this reference under Clause 28 of Letters Patent of the Patna High Court.
2. The writ petition was filed by M/s Mora Toll Ways Limited, a Company incorporated under the provisions of the Companies Act, 1956, which was a Special Purpose Vehicle created by M/s Atlanta Limited for the purposes of building a part of the National Highway-30 in the State of Bihar, from Kms. 0.000 to Kms.116.760, on the Mohania - Ara section thereof. There was a Concessionaire agreement between the said Company and the State of Bihar through the Bihar State Road Development Corporation Limited for four laning the said highway on Design, Build, Finance, Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -5- Operate and Transfer basis (DBFOT).
3. In course of executing the said agreement, there were certain disputes. The Company gave a notice to cure defects to the Corporation as envisaged under Clause 37.2 of the Concessionaire agreement and, allegedly, the defects not having been cured by the Corporation, the Company cancelled the agreement and demanded termination payment, as envisaged therein. The Corporation not taking steps in the matter, the writ petition was filed.
4. During pendency of the writ petition, the Corporation gave a notice under Clause 37.1.2 to the Company for curing defects and, thereafter, allegedly, the defects not being cured, the Corporation then purported to cancel the Concessionaire agreement. The latter two actions of the Corporation were then challenged by way of amendment petition filed by the Company in the writ petition, which was allowed.
5. The writ petition, after counter affidavits and rejoinders were filed, was heard on merit by the Hon‟ble Single Judge. On behalf of the Corporation and the State of Bihar, a preliminary objection was raised as to maintainability of the writ petition on two grounds. Firstly, the matter having arisen out of a contract, whatever may be complained by the Company, the writ petition was not the remedy being a post contractual dispute and, secondly, there Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -6- being an arbitration clause in the agreement, resort to arbitral proceedings was a must, disentitling maintainability of the writ petition.
6. State primarily relied, for the first proposition, on the judgment of the Apex Court in the case of Radhakrishna Agarwal & Ors. Vs. State of Bihar since reported in (1977) 3 Supreme Court Cases 457 and for the second proposition on the judgment of Joshi Technologies International Vs. Union of India and others since reported in (2015) 7 Supreme Court Cases 728. In reply thereto, on behalf of the Company, the writ petitioner, reliance, inter alia, was placed on the judgment of Kumari Shrilekha Vidyarthi and others Vs. State of U.P. and others since reported in (1991) 1 Supreme Court Cases 212 and in particular paragraphs-22, 24, 28 and 31 thereof, wherein it has been stated that even post contractual matters, State actions are open to judicial review under Article-14 of the Constitution. Reliance was also placed by the Company, inter alia, on the judgment in the case of Verigamto Naveen Vs. Government of A.P. & Others since reported in (2001) 8 Supreme Court Cases 344 wherein the decision of the Radhakrishna Agarwal (supra) was considered and in para 21 of the reports it was held that much water has flown in the stream of judicial review in the contractual field since then. In respect of arbitration clause with Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -7- reference to Joshi Technologies case (supra) itself, it was submitted that mere existence of arbitration clause was not an absolute bar to the maintainability of the writ petition.
7. The learned Single Judge, before whom the writ petition was argued and heard, came to a finding, on both the issues, regarding maintainability and rightly so, as against the State. The learned Single Judge clearly held that notwithstanding the dispute being post contractual and there being an arbitration clause, the writ petition was maintainable.
8. Then, the learned Single Judge took the view that as the Concessionaire agreement was first cancelled by the writ petitioner Company, if the Corporation or the State disputed the same for any reason, it was open to the Corporation or the State, if so permitted, to move for settlement of dispute through arbitration, as provided in Article 44 of the Concessionaire agreement.
9. The learned Single Judge further held that once the Concessionaire agreement had been terminated by the writ petitioner Company, it was not open to the Corporation to unilaterally declare the termination to be illegal and then proceed to terminate the agreement afresh. The learned Single Judge held that an agreement terminated by one party cannot thereafter be terminated by the other party to the agreement as there was no agreement remaining to be Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -8- terminated.
10. Thus, upholding the maintainability of the writ petition, setting aside the subsequent termination by the Corporation, the writ petition was allowed giving a liberty to the Corporation, if they so chose, to dispute the termination by the writ petitioner Company, in an arbitration proceeding.
11. Though the writ petition was allowed, it was only to that extent but so far as substantive relief, sought for, by the writ petitioner-Company in regard to payment of termination benefit is concerned, the learned Single Judge was of the view that detail investigation into facts and resolution thereof were necessary, which was not possible in the writ proceedings and as such no direction for payment of termination benefits could be issued. The parties could resort to arbitral proceedings to resolve the highly disputed questions of facts, upon which the validity of the termination notice depended, consequent to which was the right to receive termination benefits.
12. Being aggrieved by the decision of the learned Single Judge in the writ proceedings, three Intra-Court Appeals were filed. L.P.A. No.2158 of 2015 was filed by the writ petitioner-Company, challenging the decision of the learned Single Judge, in so far as it refused to decide the dispute on merits on the grounds of disputed question of facts and having failed to direct the payment of Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -9- termination benefits, as provided in the agreement. L.P.A. No.2084 of 2015 and L.P.A. No.2131 of 2015 were filed by the Corporation and the State independently, respectively, challenging the decision of the learned Single Judge in allegedly, upholding the termination by the writ petitioner-Company of the agreement aforesaid, as also the maintainability of the writ petition and the judgment in so far as it held the termination by the Corporation to be invalid.
13. All the Intra-Court appeals were heard by a Division Bench consisting of Hon‟ble Mr. Justice I.A. Ansari, the then Acting Chief Jusitce and Hon‟ble Mr. Justice Chakradhari Sharan Singh. Two separate opinions were given by the two Hon‟ble Judges on 12.05.2016.
14. In so far as the first issue, as decided by the learned Single Judge, is concerned, with regard to maintainability of the writ petition, both the Hon‟ble Judges in the Intra-Court appeals agreed by his finding that notwithstanding a post contractual dispute, the actions of the State and its Corporation was amenable to judicial review. With regard to maintainability of the writ petition, in view of arbitration clause in the contract, both the learned Judges again held that the writ petition was maintainable and on that ground alone, it could not be dismissed. Thus, on the issue of maintainability there was no difference in the two opinions so also Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -10- there does not seem to be any difference of opinion in respect of invalidating the action of the Corporation in cancelling the contract after it had already been cancelled by the writ petitioner-Company.
15. The difference in the two opinions, was only in respect of two matters i.e. whether the Writ Court ought or ought not to have gone into the merits and directed payment of termination benefits to the writ petitioner-Company, as envisaged under the contract. The then learned Acting Chief Justice held after detailed examination of facts in dispute, that in fact, there was no dispute and the termination by the writ petitioner-Company being valid, the termination payment automatically became due and even in respect of quantification thereof, there could be no dispute and, according to his opinion, quantified payment was due and directed for its payment. He further held that neither the State nor the Corporation had claimed privilege with regards the use of the written opinion of learned Principal Additional Advocate General (hereinafter in short as „PAAG‟) as given to the Corporation prior to the writ proceeding, there being no absolute bar against its user, there could be no occasion for disapproving its user or imposing exemplary cost.
16. On the other hand, Hon‟ble Mr. Justice Chakradhari Sharan Singh was of the opinion that there being substantial disputes as to the validity of the termination agreement by the writ petitioner- Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -11- Company, the dispute could not be resolved in a summary jurisdiction in the writ proceedings and as such the parties could move for the settlement of the dispute in the forum provided under the arbitration clause in the agreement and no termination benefit could be ordered in such circumstances. He further held that the action of the writ petitioner-Company, in procuring and referring to an opinion given by the learned PAAG to the State/Corporation to be inappropriate practice and accordingly imposed an exemplary cost on the writ petitioner-Company of Rs.5 lakhs to be paid by the Company to the Corporation.
17. Thus, the divergence of opinion of the two Hon‟ble Judges is only on two aspects i.e. whether or not the matter ought to be left to the parties for settlement in accordance with the arbitration provision in the agreement and, secondly, whether the cost could be imposed for having brought on record the legal opinion.
18. In view of this divergence of opinion, all the three Letters Patent Appeals, in view of the provisions of the High Court Rules and the Letters Patent, has been referred to this Court for its opinion as to which of the opinion of the two Hon‟ble Judges is appropriate in the facts of the case.
19. I would first deal with the second issue with regard to divergence of opinion between the two Hon‟ble Judges. This is with Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -12- regard to use of the opinion given by the learned PAAG to the respondents, in the writ proceedings, prior to the proceedings, and its use by the writ petitioner-Company in the writ proceedings. The then Hon‟ble Acting Chief Justice, in his opinion, did not find anything objectionable in the said user but, Hon‟ble Mr. Justice Chakradhari Sharan Singh, took strong objection holding it to be highly inappropriate and, for such an action, imposed exemplary cost of Rs.5 lakhs on the writ petitioner-Company.
20. To me, the law in regards to use of an opinion given by a Lawyer to his client is well settled. It is a privileged communication. The question would be whether at any point of time State or the Corporation raised the issue of privilege or objected to the appropriateness of its user by the writ petitioner-Company? The answer is no. This is because when dispute arose, inter alia, as to the consequence of the demand of the writ petitioner-Company, seeking extra cost reimbursement for getting the aggregates (the stone chips) from outside the State and they gave notice to cure the defect, to the Corporation, followed by termination notice, the Corporation sought legal opinion from the learned PAAG. The learned PAAG gave an opinion that considering the facts and circumstances, the conditional bid of the writ petitioner Company having been accepted by the State Cabinet, he agreed with the view Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -13- of the Chief General Manager of the Corporation, that the petitioner Company was entitled to payment of additional cost for getting the aggregates (stone chips) from outside the State of Bihar. He also noticed that this would entail additional cost to the State of about Rs.200 crores spread over the period of contract. But, if the matter was to be re-tendered the cost escalation would increase the cost of project to over Rs.1500 crores. To persuade the Court and buttress their plea that the writ petitioner Company was entitled to additional cost for getting the aggregates (stone chips) and that not having been agreed to be paid, a defect remained to be cured and termination by the writ petitioner Company was justified entitling them to termination payment as envisaged under the Concessionaire agreement, this opinion was brought on record by the writ petitioner. Neither the State nor the Corporation raised any issue of privilege. They could have raised such an issue, but, the reason for not raising the issue was obvious, inasmuch as the said opinion of the PAAG was referred to in various communications and proceedings in between the parties and, having been referred and discussed with the writ petitioner by the Corporation and others. It had come out in public domain. That being the situation, the party which could have claimed privilege, but not having done so, in my view, it was not open to the Court to make an issue out of it and then impose Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -14- exemplary cost for the alleged inappropriate practice. In my opinion, what the Court could do, at best, was to discard the same from any consideration but it is not a case where it could either be held to be highly improper and inappropriate practice much less a practice that could require to be discouraged by imposition of exemplary cost.
21. For the reasons aforesaid, I am unable to subscribe to the opinion of Hon‟ble Mr. Justice Chakradhari Sharan Singh in this regard and I would agree with the view of the then Hon‟ble Acting Chief Justice in this regards. It may be noted that the learned Single Judge, who first dealt with the writ petition, also did not make an issue of this fact.
22. Now, coming to the main issue of divergence between the two Hon‟ble Judges. As noted earlier, Hon‟ble the then Acting Chief Justice was of the view that in fact there was no dispute. The dispute was sought to be created after litigation commenced. He also noticed that the learned Single Judge had held "that the writ petitioner Company had rightly terminated the contract". In view of the aforesaid, the consequence of termination would be payment of termination benefits, as per quantification formula given in the agreement itself, which would flow as a matter of right to the writ petitioner Company.
Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016-15-
23. On the other hand, Hon‟ble Mr. Justice Chakradhari Sharan Singh held that the learned Single Judge was correct in holding that the correctness of termination of the agreement by the writ petitioner Company was seriously being disputed by the Corporation and he agreed with the learned Single Judge that in view of the dispute raised by the Corporation, the Corporation should resort to arbitral proceedings for settling the dispute and payment of termination benefits would, thus, depend on the said resolution. Termination benefits, being contingent upon resolution of dispute with regard to termination of agreement no order was required to be made for payment of termination benefits. This being the main divergence of opinion, this Court is required to opine, which of the view, which of the legal approaches, is correct.
24. First, in my view, theoretically, I am in line and would agree with the approach of the Hon‟ble Mr. Justice Chakradhari Sharan Singh. The reason is simple. The writ petition was virtually for payment of termination benefits as envisaged under the Concessionaire agreement. In substance, what is provided in the agreement is, that if for the fault of the Corporation, the agreement is terminated by the Concessionaire, the Concessionaire would be liable to be compensated in the manner as provided in the Concessionaire agreement. It naturally presupposes a valid and Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -16- binding termination. Termination is itself dependent upon unwillingness or inability of the Corporation to cure defect within the stipulated period, after it is so required to be cured by the Concessionaire. This presupposes existence of valid defects requiring remedial action. Thus, the demand of payment of termination benefits is dependent upon existence of defects and non- curing thereof. If both these matters are itself in serious dispute then, without resolving the same, the right to receive termination/benefit, which is a contingent right, would not arise. The learned Single Judge and Hon‟ble Mr. Justice Chakradhari Sharan Singh held that there being serious dispute with regard to the validity of termination, as done by the writ petitioner Company, the Corporation, which raised the dispute, could have moved the arbitral tribunal and, thus, did not go into the question of right to receive termination benefits. This, in my view, in the facts of the case, is the appropriate decision to take.
25. Now, coming to the opinion of the then Hon‟ble Acting Chief Justice. The first thing, I would like to notice is that much emphasis has been given to the view of the learned Single Judge in paragraph-12 of his judgment, which reads as follows:
".....on the merits of the present case, this Court finds no error in the action of the Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -17- petitioner in issuing the termination notice......"
26. The then Hon‟ble Acting Chief Justice takes this as affirmance of the learned Single Judge to the validity of the action taken by the writ petitioner Company, in terminating the contract itself. In my view, if the judgment of the learned Single Judge is read as a whole, this interpretation is not sound, for if this was the judgment of the learned Single Judge then, he would not have opined that the Corporation, which disputed the termination notice, could go for arbitration to resolve the dispute. That would be a foregone conclusion. The learned Single Judge by observing that the Corporation could initiate arbitral proceedings for resolution of validity of termination, itself, shows that what the learned Single Judge intended to say was that the fact that termination notice had been issued was a undeniable fact. It was for the party disputing the same, to initiate arbitral proceedings and not for the writ petitioner Company to first resort to arbitral proceedings and then to terminate the agreement.
27. Then, the then Hon‟ble Acting Chief Justice holds, after examining the facts, that there was no dispute prior to termination notice. According to him, dispute arose only thereafter. I am unable to subscribe this view. Inasmuch as, in my view, there Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -18- was not one dispute but several serious disputes amongst the parties and it is as a consequence thereof that the writ petitioner Company had first given a notice to cure the defects and then being of the opinion that the defects required to be cured by the Corporation and were not being cured, the termination notice was given.
28. In this regard both the Hon‟ble Judges have noticed various facts. I would only briefly notice the facts to show that there were disputes which required resolution even before termination could be held to be valid. I may notice here itself that though one of the main disputes was with regard to payment of extra costs incurred in getting the aggregates (stone chips) from outside the State but that was not the only dispute.
29. The salient facts necessary, for what I have pointed out above, may be noted as under:
There was a road connecting Ara, the town next to Patna, to Mohania in the district of Kaimur, which is the border of Bihar and Uttar Pradesh. It is the shortest road from Patna to exit Bihar on the four lane National Highway leading to Mughalsarai -
Banaras onwards to Delhi, being a part of old Grand Trunk Road, now Sher Shah Suri Marg. To provide better access to Mohania from Ara, the said stretch of about 116.760 Kms., on this section of National Highway-30, was decided to be made into a four lane Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -19- highway with toll. The proposal was to build it on the basis of design, build, finance, operate and transfer basis (DBFOT) through private entrepreneurs.
30. Accordingly, the Bihar State Road Development Corporation Limited, which was made the implementing Authority, on 16.07.2010, issued notice/request for qualification for the said project from the private-entrepreneurs.
31. It is not in dispute that pursuant to notice aforesaid, there was no response. It was republished twice with no response. Then, upon re-advertisement on 03.11.2010, the writ petitioner- Company applied and filed its bid, which was valid only up to 02.04.2011. There was no positive response from the Corporation or the State but the writ petitioner-Company was asked to extend the validity thereof on three occasions. The writ petitioner-Company first extended the validity to 02.05.2011, then 01.06.2011, then again, upon request of the Corporation, on or about 15.06.2011, by its communication dated 16.06.2011, the writ petitioner- Company agreed to extend the validity of its bid. But, this time, specifically subject to condition that it would be granted mining lease in respect of three mines in the district of Rohtas for getting the aggregates (stone-chips) to be used in the project.
32. It may be pertinent to note here that for mining and Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -20- obtaining stone-chips for road construction, State Government had earlier taken a decision to prohibit grant and/or renewal of mining leases to protect environment but, apparently, on or about 04.02.2010, the State Government amended the Bihar Mining Mineral Concession Rules, 1972 to provide for certain relaxations in the said policy of prohibition of mining activity, in public interest. Apparently, this was because large scale infrastructural development including State Highway/National Highway and roads were undertaken by the Government in which, substantial requirement of aggregates (stone chips), was there. As has been pointed out by the "Independent Engineers", as appointed by the Corporation, that it was a fact that the Mix Design for concrete had been approved with aggregate sourced from Gaya (Annexure-3, point no.4.2). Apparently, it is on basis thereof, the writ petition-Company had filed their bids.
33. Again, the writ petitioner-Company waited for a positive response. But, there being none, it queried from the Corporation. The Corporation, by its communication dated 13.07.2011, informed that the matter was under advance stage of approval by government and as such requested for extension of the validity up to 15.08.2011, which was done by the writ petitioner- Company, subject to the grant of mining lease from the mines in the Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -21- vicinity of the work site, from Rohtas itself.
34. It appears that the writ petitioner-Company‟s bid with all correspondences, evaluations were sent to the State Government and Cabinet approval was sought for, which was apparently granted. Accordingly, the concession agreement was entered into between the Bihar State Road Development Corporation Limited and the writ petitioner-Company, Volume-I whereof has been annexed as Anneuxre-1 to the writ petition. It may be noted that this agreement is referred to as Concession Agreement, for the reason that development, construction and maintenance of Highways is essentially a public function with public duty involved but, for effecting the same, the State is granting the concession or delegating its public duty to private entrepreneurs, thus, to perform the public function, which was otherwise reserved or meant for State. Apart from others, the notable provisions in the agreement are briefly noted as follows:
35. Article-4 of the agreement lays down certain conditions precedent with regard to grant of and obtaining various permissions for facilitating the execution of the agreement. Clauses 4.2 and 4.3 thereof, inter alia, provided for quantifiable damages for delay by the Authority and quantifiable damages for delay by the Concessionaire respectively. It may be mentioned that „Authority‟ Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -22- is the Corporation. Article-5 of the agreement deals with obligations of the Concessionaire. Article-6 deals with obligation of the Authority which, inter alia, included support and cooperation of the Authority to facilitate the Concessionaire in implementation and operation of the project. Article-9 provided for formal security and its appropriation. Article-12 deals with construction of the project high way and Clause 12.1 (d) is important and quoted hereunder:
12.1 Obligations prior to commencement of constructions Prior to commencement of Construction Works, the Concessionaire shall:
(a).....
(b)....
(c) ....
(d) make its own arrangements for quarrying of materials needed for the Project Highway under and in accordance with the Applicable Laws and Applicable Permits.
36. This clause is of some importance because one of the contentions on behalf of the writ petitioner was that they had tendered for the project taking into account availability of aggregates from Gaya/Rohtas Region, as also noticed by Independent Engineers, but, as mining lease was not to be granted by the State, they would be required to get the same from outside the State, hence substantial extra cost would be incurred, which could not be absorbed. It is because of this they had made a conditional Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -23- extension of bid with clear stipulation of grant of mining lease near the construction site. State would argue that the aforesaid Clause 12.1 (d) clearly stipulated that the Concessionaire would make its own arrangement for quarrying the material, to which the writ petitioner would submit, that question of quarrying would arise only after lease was granted by the State. It is pertinent to mention that the letter of conditional extension of bid of the writ petitioner was also a part of consideration by the State while granting approval of awarding the work to the writ petitioner. I would deal with it further appropriately later.
37. Then, we have Article-13 which deals with monitoring of construction. Hereunder the Independent Engineers are to receive information with regard to progress of construction and supervise the quality and progress and report to the Corporation. Article-23 deals with Independent Engineers. They are to be appointed by the Authority and they, as noted earlier, also are to perform the duties and functions as mentioned in Schedule-Q. A reference to Schedule-Q would show that the role and function of Independent Engineers includes determining the cost of any work or service and/or their reasonableness, assisting the parties in resolution of disputes in relation to agreement in terms of good industry practice. They had also the responsibility of monitoring, reviewing and Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -24- advising as to curing of defects and deficiencies by the Concessionaire.
38. Then, I may refer to Article-37 which deals with termination. Article 37.1 deals with termination for Concessionaire‟s default and Clause 37.1.2 gives the Authority, upon occurrence of Concessionaire‟s default, to take action to terminate, subject to notice as provided therein. Similarly, Clause 37.2 deals with termination for Authority‟s default. Clause 37.2.1 provides that if default on part of Authority appears and the Authority fails to cure the same within cure period of 90 days, then the Concessionaire, under Clause 37.2.2, have authority to issue notice of termination. Clause 37.3 deals with termination payment and Clause 37.3.1 provide that upon termination, on account of Concessionaire‟s default, the Authority shall pay the Concessionaire by way of termination payment, inter alia, amount equal to 90% of debt due less insurance cover.
39. Clause 37.3.2 deals with termination upon default of Authority and stipulates the termination payment, which is quoted hereunder:
37.3.2 Upon Termination on account of an Authority Default, the Authority shall pay to the Concessionaire, by way of Termination Payment, an amount equal to :Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -25-
(a) Debt Due; and
(b) 150% (one hundred and fifty per cent) of the Adjusted Equity.
40. I have quoted this because one of the learned Judges was of the view that there being no dispute and there being a default of the Authority, this is the quantified payment due. It merely had to be calculated. Clause 37.4 provides for other rights and obligations of the Authority, upon termination for any reason whatsoever which, inter alia, includes taking over possession and control by the Authority, of the project highway.
41. Article 44 deals with dispute resolution. It, inter alia, provides that first disputes would be tried to settle by conciliation, whereby the Independent Engineers are to mediate and assist the parties to arrive at an amicable settlement. It further provides that upon failure to resolve any dispute amicably by conciliation, as provided under Clause 44.2, it shall finally be decided in reference to Bihar Arbitral Tribunal in accordance with Bihar Public Works Contracts Arbitration Tribunal Act, 2008 and the rules framed there- under.
42. The agreement having been entered into, the petitioner Company requested the Corporation to write to and persuade the District Magistrate-cum-Collector, Rohtas to grant mining lease to the petitioner Company for captive usage of aggregates. The Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -26- Corporation, accordingly, sent a letter of request dated 03.11.2011 to the Collector, Rohtas but regrettably there was no progress there.
43. The Company then alleged that on account of various defaults by the Authority, falling within the scope of condition precedent (Article-4), the Concessionaire was entitled to damages in terms of Clause 4.2 and it raised claims accordingly. The Authority by minutes of proceedings dated 04.09.2014 asked the Concessionaire to get the matter arbitrated by independent arbitrator and, accordingly, it is not in dispute that this matter now stands referred to an independent Arbitral Tribunal, as agreed by the parties, created for the said purpose, consisting of Former Chief Justice of India, Hon‟ble Mr. Justice R.M. Lodha, appointed by the Authority, Hon‟ble Mr. Justice B.P. Singh, former Judge of the Hon‟ble Supreme Court, appointed by the Concessionaire and the umpire, being Hon‟ble Mr. Justice G. B. Pattanaik, former Chief Justice of India. At the Bar, I have been informed that the matter is pending before the said Arbitral Tribunal.
44. It appears that as the work had to start and no mining lease was being granted by the State, the Concessionaire was forced to procure aggregates (stone-chips) from the neighbouring State of Uttar Pradesh at a considerable extra cost. The obvious extra cost was because of substantial extra distance that they had to be Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -27- carried/transported, various taxes that had to be paid in the State of Uttar Pradesh as well as taxes that had to be paid by virtue of entry into Bihar. There are correspondences on record to show that the Authority, upon representation of the petitioner-Company, assured, while requesting the petitioner-Company, to carry on with the work, their grievances would be redressed. But, that part of the bills, as raised by the petitioner-Company for the extra cost, was not being paid. Various correspondences, including correspondence dated 26.09.2013, the petitioner Company specifically brought to the notice of the Authority that they had made a conditional extension of their bid. The impact of procurement of aggregates, being brought from outside the State, would be enormous i.e. in excess of Rs.400 crores, as calculated by the Independent Engineers itself, which should be reimbursed.
45. Here, it may be important to note that, pursuant to request of the petitioner-Company, the Authority asked the Independent Engineers to look into this aspect and make its recommendation, which recommendation was made by the Independent Engineers on 31.05.2013, who calculated that there would be additional cost of about Rs.410.13 crores. It recommended that either the Authority should impress upon the State Government to allot mines, as requested by the Concessionaire, or, in alternative, Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -28- to agree to reimburse the cost of excess lead, based upon actual cost incurred, which would be in the larger interest of the project and the State.
46. It may be mentioned that correspondences and agenda items discussed in various meetings between the parties would show that there were serious disputes with regard to various other issues as between the parties. The extra cost of aggregates was only one of them. One has already been noticed with regard to delay in condition precedent which was already referred to an independent arbitral body. Ultimately, it seems that various matters came to ahead and, on 09.08.2014, the petitioner Company gave notice in terms of Clause 37.2 of the agreement, pointing out various defaults, as were continuing, on part of the Authority and requesting them to cure the default within 90 days, failing which the Concessionaire would take steps for termination of the agreement for Authority‟s default with consequences. The list of default is long and involves different heads, one of which was the expenses over longer lead to get aggregates.
47. It appears that immediately upon receipt of the said notice to cure the defects, the Authority referred the matter once again to the Independent Engineers. The Independent Engineers again gave its report dated 09.09.2014 on various aspects. Their Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -29- conclusion was that so far cost of extra lead in relation to aggregate is concerned, in public interest and to avoid delay in completion of the project, the Authority may take a decision for cost reimbursement. It also pointed out that the cost of re-tendering would be enormous. It would delay the project and increase the cost heavily. It clearly pointed out that payment of additional cost due to extra lead would be far less to the government exchequer, than payment of termination cost and cost of re-tendering.
48. Faced with this situation, it appears that the Authority approached the learned PAAG for its opinion on the matter. The recommendation of the General Manager of the Corporation (Authority) was in favour of the writ petitioner Concessionaire and having discussed the matter, the learned PAAG, by his opinion dated 31.10.2014, agreed with the same.
49. It appears that the Authority was not in a position to take a decision on its own and, therefore, the matter was referred to the Road Construction Department for the State Government to take a decision. This was done vide the Corporation/Authority letter dated 21.11.2014, which gives the entire sequence of events and also refers to the opinion of the learned PAAG. It appears that the then Principal Secretary, Department of Road Construction, Government of Bihar, then vide its letter dated 23.03.2015, referred the mater to Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -30- the Managing Director of State Infrastructure Development Authority. He also concurred to the recommendation of the Independent Engineers. The opinion of the learned PAAG dated 31.10.2014 also pointed out that the writ petitioner Concessionaire had already given a notice to terminate the agreement and, as such, requested the order be taken from the government for payment of extra cost involved. In the meantime, the Authority wrote to the petitioner Company vide their letter dated 06.11.2014 that they were looking into the aspect of the matter and promised to cure the defects at the earliest. Later on, vide letter dated 16.02.2015, the Authority/Corporation wrote to the petitioner-Company disputing the claims as made by the petitioner Company under various heads and requested the petitioner-Company to withdraw the notice dated 09.08.2014 to cure the defects. Again, this was responded to by the petitioner Company by their communication dated 20.02.2015 on various aspects.
50. One thing that must be noticed here is that, by this time, the State had once again amended the Mineral Concession Rules and provided that mining leases would now be granted and the same would be settled by public auction. The petitioner Company was asked to accordingly apply and participate in auction. The petitioner Company pointed out that it was not buying or procuring aggregates Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -31- for sale as a business venture. It was to use it for captive consumption in government project. It had to get leases assigned by the State, without the speculative auction, where they may or may not get it. These matters were also touched upon in various deliberations and, ultimately, when they found that the defects were not being cured by the Authority to their satisfaction, on 20.02.2015, they gave final termination notice to the Authority and, thereby, also invoked the termination cost as provided under Clause 37.3.2, claiming that debt due was about Rs.308 crores and 150% of adjusted equity came to about Rs.302 crores. After this notice was given, it is not in dispute that immediately the Authority took control of all the assets on the work site belonging to the petitioner Company. This action is contemplated as a consequence of termination of the agreement. When termination payments were not being made, as demanded by the petitioner Company, they approached this Court by the writ petition.
51. During pendency of the writ petition, the Authority/Corporation issued a notice to the petitioner Company to resume work and cure defects and, subsequently, upon alleged failure to cure defects, the Authority also terminated the agreement for the alleged Concessionaire‟s default. These actions were challenged by way of amendment, which action of Corporation in Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -32- terminating agreement, as noticed above, all the learned Judges have held to be bad, on the simple ground that once the Concessionaire had terminated the agreement, there could be no notice to cure the defect by the Authority, much less termination of a terminated agreement by the Authority.
52. From the copious documents annexed to the writ petition, various meetings and the agendas thereto, between the parties, it is apparent there are serious issues of facts that have been raised with regard to various defaults alleged by one party as against the other. Of course, one of the major issues is with regard to cost of extra lead for brining aggregates (stone chips) from outside the State but that was not the only dispute. All these facts and disputes need to be resolved before one can come to the conclusion, whether and which party was at default and the extent of default, because, it is upon the correctness of action of the petitioner Company, in terminating the agreement and only when this is found to be in favour of the petitioner Company, the question of termination payment arise.
53. Here, I may notice that even when we come to termination payment, though at the stage of reference to this Court, State got a reassessment done as to the debt and equity considerations for termination payment, which was at great variance Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -33- with the claim of the petitioner Company, the validity of this assessment was questioned by the writ petition Company before this Court at the stage of reference, but, I need not go into this because, this contingency would arise only upon assessment of validity of termination itself, which, in turn, would be dependent upon the validity of notice to cure the defect as issued by the petitioner Company.
54. Upon perusal of the various communications, meetings and deliberations therein, I am of the opinion that it is not wholly correct, as has been held by the then Hon‟ble Acting Chief Justice, that there was no dispute of facts and no disputed issues till the matter came in the writ proceedings, as even prior to that, the Authority did dispute the right of the Concessionaire to issue notice for curing defect with a request to withdraw the same.
55. Thus found, in my view, in view of the nature of disputed facts, Justice Chakradhari Sharan Singh was correct in agreeing with the view of the learned Single Judge, while disposing of the writ petition, that as the Corporation disputed the actions of the writ petitioner-Company, it was open for them to move for settlement of dispute through arbitral proceedings. Thus, in my view, as already indicated, the opinion of Justice Chakradhari Sharan Singh, in the peculiar facts and circumstances of the case, Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -34- appears to be correct and commends acceptance, though so far as the exemplary cost imposed on the petitioner Company, as already indicated, was not correct because from what I have shown earlier not only the Authority were referring the opinion of the Principal Additional Advocate General, they had not claimed any privilege in respect thereof.
56. Before closing, lest I am misunderstood, it is not that if there are any disputes the writ petition would not be entertained. If the court finds that it is a mere pretence of a dispute, the writ court would entertain the writ petition and decide the same. If the dispute is such which can be easily and conveniently resolved in the summary writ proceedings, the High Court is not powerless to adjudicate to and grant relief where it is due. It is only when the dispute is a bona fide dispute, which can be conveniently adjudicated and decided in the writ proceedings that the parties would be relegated to other appropriate forums.
57. I have already noticed that both the parties, i.e. the Corporation and the writ petition Company, have already agreed to refer the matters to an independent arbitral body, consisting of three very senior former Judges of the Hon‟ble Supreme Court and, as informed, at the Bar, the said arbitral forum, consisting of Hon‟ble Mr. Justice G. B. Pattanaik, Hon‟ble Mr. Justice R.M. Lodha and Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -35- Hon‟ble Mr. Justice B.P. Singh is already ceased with the matter. It would only be appropriate, that all these disputes be also taken up and tried to be resolved by the said body. I am noting this for more than one reason. As noted above, this project is of vital importance for the public at large and especially of the State. Piece meal arbitration would only delay the matter, because, so long as this matter of resolution of dispute remains pending, the work remains abandoned. Not only is it causing great inconvenience to the public, as the old road has become damaged, virtually beyond use, everyday there is cost escalations. The longer it takes to resolve the dispute, ultimately, it is the public and the tax payers who would suffer. Had the Authority and the State taken a conciliatory attitude, at the very beginning, this impasse could have been avoided and phenomenal amount of money of the State exchequer and the public saved. I really wonder who has benefited from this dispute or litigation. Non-expeditious resolutions of this dispute, to me it appears, all parties, including the public, are losers and there is no gainer.
58. I would, accordingly, agree with the view of Justice Chakradhari Sharan Singh, to the extent as indicated above, being unable to persuade myself to agree with the view of the then Hon‟ble Acting Chief Justice. In the facts and circumstances, I would further recommend, that the dispute as a whole be settled by Patna High Court LPA No.2158 of 2015 (21) dt.21-12-2016 -36- the very learned panel of arbitrators, expeditiously in the interest of the State and the public at large.
59. The reference is answered accordingly.
(Navaniti Prasad Singh, J.)
Trivedi/
AFR/NAFR NAFR
CAV DATE 15.09.2016
Uploading Date 21.12.2016
Transmission N.A.
Date