Telangana High Court
Telangana State Civil Supplies ... vs M/S Lakshmi Narsimha Transport on 1 April, 2019
Author: A.Rajasheker Reddy
Bench: Thottathil B.Radhakrishnan, A.Rajasheker Reddy
THE HON'BLE THE CHIEF JUSTICE SRI THOTTATHIL B. RADHAKRISHNAN
AND
THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY
W.A.NO.1352 OF 2018
JUDGMENT (Per the Hon'ble Sri Justice A.RAJASHEKER REDDY)
This appeal is filed against the order dated 21.08.2018 passed by the learned single judge in W.P.No.8870 of 2017.
2. 1st respondent herein, was awarded contract by the appellant - Telangana State Civil Supplies Corporation (for short 'the Corporation'), represented by its Vice Chairman and Managing Director, for transportation of essential commodities in the Warangal District for the year 2016-17 and an agreement was entered on 18-04-2016. The case of the Corporation is that the transport contractor has to bear the incidental expenditure in terms of Clause (2)(1) of the agreement, and as the 1st respondent / contractor refused to pay the mamuls (incidental expenditure to the loading for purchase of tea, etc.,) to hamalies, they refused to load rice into the trucks and this resulted in not commencing of movement of rice. On this ground, the Corporation issued notice in Rc.No.PDS.50/2016-17 dated 27-05-2016 to the 1st respondent and the same was replied. However, vide proceedings in PDS.2/Movt/FGS(1)/Stage-I Tenders/2016-17/1248/WGL dated 09-08-2016, the Corporation, finding that the 1st respondent has not agreed to move the stocks by paying the additional expenditure incurred at the time of 2 loading and unloading of the food grains; terminated the contract. Further, vide proceedings No. DS.2/Movt/Fg.5(1)/Stage I Tenders/2016- 17/1248/TS/WGL dated 28-02-2017, the Corporation, holding that the 1st respondent - contractor, violated the agreement entered into between the parties, issued orders forfeiting the security deposit and bank guarantee furnished by the contractor /1st respondent. Challenging the proceedings dated 28-02-2017, 1st respondent filed W.P.No.8870 of 2017.
3. The Learned Single Judge, by the impugned order, held that it is not the 1st respondent herein, but the Corporation committed breach of agreement between the parties by unreasonably directing the 1st respondent to pay the hamali/handling charges, which it was not obligated to pay under the terms of agreement and that the respondents did not act in a fair and reasonable manner in terminating the agreement of the 1st respondent and in forfeiting the bank guarantee of Rs.36,00,000/- and Rs.50,00,000/- towards EMD, and accordingly while setting aside the proceedings dated 28-02-2017, directed the Corporation to refund the bank guaranty and EMD amount, totaling to Rs.86,00,000/-, within two weeks from the date of receipt of copy of the order in the writ petition, with interest at the rate of 9 per cent per annum from the date of encashment/forfeiture, till the date of payment and the appellant - Corporation was also directed to pay costs of Rs.20,000/- to the 1st respondent. Assailing the order of the learned single Judge, the present 3 writ appeal has been filed by the Corporation under Clause 15 of Letters Pattent Act.
4. Mr. A.Jagan, learned Standing Counsel for the appellant - Corporation, reiterating the grounds taken before the learned Single Judge, stated that the contractors, whoever were awarded contract of transportation of rice and other essential commodities, used to pay mamuls i.e., the incidental expenditure, to the Hamalies (loading and unloading workers), after the work, for tea, and that expenditure which forms incidental as per Clause (2)(I) of the agreement entered into between the parties, has to be borne by the contractor. As the contractor failed to pay the amount, the hamalies refused to load the rice into the lories and as a result, movement of rice has not commenced, and Corporation had to spent about Rs.90,67,000/- (Rupees ninety lakhs, sixty seven thousand only), for making alternative arrangements. Further, the contractor has not installed GPS devices to the lorries, which is mandatory under clause 26(b) of the terms and condition of the tender, to avoid malpractice. In view of the violation of terms and conditions, the Corporation, after issuing notice and complying with the principles of natural justice, and further as the contractor failed to rectify and commence the transportation of goods, invoking Clause 36 of tender conditions, forfeited the bank guarantee and EMD amounts. He contended that in contractual matters, where disputed questions of fact 4 are involved, this court will not normally entertain the writ petition and would relegate the parties to the civil court. He stated that clause 24 of the agreement entered into between the parties provides for 'arbitration'. He contended that in view of alternative remedy by way of arbitration, writ petition cannot be entertained under Article 226 of the Constitution of India. He contends that as the learned single Judge has not considered these issues in proper perspective, the impugned order may be set aside and the parties may be directed to work out their remedies under the arbitration clause in the agreement.
5. Sri Vedula Venkataramana, learned Senior Counsel appearing for the 1st respondent - contractor, supporting the impugned order of the learned single Judge, sought to dismiss the writ appeal.
6. The main issues urged by the learned counsel for the appellant is with regard to entertaining the writ petition in spite of arbitration clause in the contractual agreement entered into between the parties, and also exercising the judicial review under Article 226 of the Constitution of India, in contractual matters, which involve disputed questions of fact.
7. To consider the issue "whether presence of such arbitration agreement is a bar for filing the writ petition", learned single Judge has relied on the judgment of the Apex Court in UNION OF INDIA v. TANTIA 5 CONSTRUCTION (P) Ltd.1, wherein it was held that existence of arbitration clause is not an absolute bar to the invoking of writ jurisdiction and the constitutional powers vested in the High Court cannot be fettered by any alternative remedy available to the authorities and whenever and wherever injustice takes place it has to be struck down as an anathema to the Rule of Law and the provisions of the Constitution; and accordingly answered the issue holding that writ petition can be entertained notwithstanding the existence of arbitration clause. In view of the judgment of the Apex Court, the contention of the learned counsel for the appellant that writ petition cannot be entertained in view of the arbitration clause in the agreement, cannot be countenanced.
8. With regard to scope of judicial review in contractual matters, the Apex Court in ABL INTERNATIONAL LTD. v. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD2, held as under:
"23. It is clear from the above observations of this court, once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set aside the arbitrary actions of the first respondent.
...
28. However, while entertaining an objection as to the maintainability of a writ petition under Section 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade marks {(1998)8 SCC 1}. And this plenary right of the 1 (2011) 5 scc 697 2 (2004)3 SCC 553 6 High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
9. In another judgment in NOBLE RESOURCES LTD. v. STATE OF ORISSA3, the Apex Court, relying on its earlier decision (2 supra) and other judgments, reiterated the position holding that State and its authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts and that contractual matters are not beyond the realm of judicial review.
10. In the present case, the complaint of the 1st respondent is that the Corporation, which is the instrumentality of the State, has not acted in a fair, just and reasonable manner, in repudiating its claim for refund of bank guarantee and EMD amount. Therefore, in the light of the judgments of the Apex Court (2 and 3 supra), exercise of jurisdiction under Article 226 of Constitution of India, by learned single Judge, warrants no interference.
11. The work entrusted under the contract pertains to transportation of rice from godowns to destination points. It is an admitted fact on record, and even as per the impugned order dated 28.02.2017, the hamali charges have to be borne by the Corporation as per the practice in vogue, but the incidental charges have to be borne 3 (2006)10 SCC 236 7 by transport contractor. When the Corporation is bearing the hamali charges, requiring the contractor to pay mamuls (additional expenditure), to the hamalies, is incomprehensible. The learned single Judge considering the nature of contract awarded to the 1st respondent vis-à-vis the clause under (2)(I) of the agreement, which deals with incidental expenditure to be incurred by the contractor; held that such incidental expenditure could only be the expenditure connected with the work entrusted to the contractor in the sense that it would include cost of petrol, wages of drivers or cleaners of the transport vehicles provided by it etc., and it cannot be extended to cover expenditure, which would be incurred in loading and unloading food grains on the vehicles of the contractor. Having regard to the facts and circumstances of the case and the nature of contract awarded ie., transportation of rice, Corporation is not justified in trying to mulct the additional expenditure on the contractor, and the learned single Judge, rightly found fault with the same.
12. Coming to the grounds of termination of contract vide proceedings dated 09-08-2016, it could be seen that the contract was terminated on the ground that 1st respondent has not agreed to move the stocks by paying the additional expenditure at the time of loading and unloading of the food grains, but however in the impugned order of forfeiture dated 28-02-2017, apart from the said ground, there is also 8 reference to the failure on the part of the 1st respondent in installing GPS devises to the lories. This ground was not raised at the time of termination of contract, and further the other ground that 1st respondent refused to bear additional charges at the time of loading and unloading of the food grains, is found fault with by this court. Therefore, forfeiting the amount on these non-existent grounds, tantamount to violation of principles of natural justice, and exercise of power by the Corporation, which is an instrumentality of the State, in an arbitrary manner. Hence, as per the judgments of the Apex Court (2 and 3 supra), this court, in exercise of judicial review under Article 226 of the Constitution of India, is empowered to issue suitable directions to set right the arbitrary action of the Corporation.
13. Considering the facts and circumstances of the case, in our considered view, the learned single Judge, appreciating the material on record, found that the Corporation has committed breach of agreement and directed return of bank guarantee and EMD amount to the 1st respondent. We do not find any cogent reasons to differ with the findings arrived by the learned single Judge in this intra-court appellate jurisdiction, which is discretionary in nature (See Asha Devi v. Dukh Sao4, 4 AIR 1974 SC 2048 9 Umabai v. Nilkanth Dhondiba Chavan5, and B.Venkatamuni v. C.J.Ayodhya Ram Singh6).
14. For the foregoing reasons, we do not find any merit in the writ appeal and the same is accordingly dismissed.
15. Interlocutory applications pending, if any, shall stand closed. No costs.
---------------------------------------------------- THOTHATHIL B. RADHAKRISHNAN,CJ
-----------------------------------------------------
A.RAJASHEKER REDDY,J DATE: 01--04--2019 AVS 5 (2005)6 SCC 243 6 (2006)3 SCC 449