Gauhati High Court
Atul Bora vs Union Of India (Uoi) And Ors. on 9 March, 2006
Equivalent citations: 2007(4)GLT332
JUDGMENT B.P. Katakey, J.
1. This writ petition is directed against the orders dated 4.3.98, 17.3.98, 21.5.98 and 12.11.99 issued by the authorities of North Eastern Frontier Railway (in short N.F. Railway), giving notice for recession of contract, rescinding the contract, issuance of tender at the risk and cost of petitioner and recovery of the differences of the amount due to risk and cost sale.
2. The facts in brief is that a notice inviting tender was issued by the authority of N.F. Railway in the name of President of India for the Earthwork filling to form embankment, construction of minor bridges and other ancillary works in Section XIII from field chainage 52000m to 61850m in Amjonga-Rangjuli-Dhupdhara of G-J Project. The petitioner submitted his bid and in pursuant to which the said work was allotted to the petitioner. A contract agreement dated 28.10.1990 was executed between the President of India acting through the Railway administration and the petitioner for due execution of the said work with the stipulation that the contract is to be executed on or before the 11th July 1992 and for maintenance of the said work for a period of 12 (twelve) calendar months from the certified date of their completion. As the petitioner could not complete the work within the stipulated period for completion, several extensions were given for completion of the work on the basis of the applications filed by the petitioner contractor. The N.F. Railway authority because of the failure of the petitioner contractor to carry out the work in time issued the notice dated 20.2.98 with reference to their earlier letters dated 25.11.97, 1.12.97 and 9.2.98, extending the period for completion up to 31.3.98 and also asking him to make good the default in execution of the contract within a period of seven days, failure of which would attract taking further action in terms of the General Conditions of Contract 1979 edition, (in short GCC, 1979) as well as intimating the contractor that in spite of various opportunities given, he has not been able to complete the work and his progress is very poor. The said notice was also issued in terms of the Clause 61(1)(vi) & 61(1)(viii) renumbered as 62(1)(vi) & 62(1)(viii) of GCC, 1979. The Dy. Chief Engineer thereafter vide order dated 4.3.98, because of the failure of the petitioner contractor to make the good the default within seven days notice period, issued a further notice giving 48 hours time, under the said clauses, to improve the progress of the work intimating him that in case of his failure, the Railway administration reserves the right to rescind the contract and to get the balance work completed through another agency at his own risk and cost. By order dated 17.3.98 the Railway administration rescinded the contract with effect from the 17.3.98 in terms of the provision of Clause 61 of GCC 1979 and informed the petitioner that the left over work will be executed at his risk and cost. Accordingly the notice inviting tender was issued on 21.5.98 for completion of remaining work at the risk and cost of the petitioner. The Dy. Chief Engineer vide order dated 12.11.99 requested the petitioner to deposit a sum of Rs. 96, 81, 169/- as the risk amount against the termination of contract and directed the authority under the Railway administration to realize the said amount from the petitioner. Hence, the present writ petition.
3. I have heard Mr. R. Hussain, learned Counsel for the petitioner and Mr. J. Singh, learned standing Counsel, N.F. Railway appearing on behalf of the respondents.
4. Mr. Hussain, learned Counsel for the petitioner challenging the notice dated 4.3.98 giving 48 hours to make good the default, order of recession of contract dated 17.3.98 and order for realization of the differences of amount due to the fresh settlement of the work at the risk and cost of the petitioner, has submitted that the authority having extended of period for completion of work up to 31.3.98 vide order dated 20.2.98 ought not to have issued the notice dated 4.3.98 giving 48 hours time to make good the default otherwise threatening to rescind the contract and get the balance work completed through another agency at the petitioner's risk and cost as well as ought not to have rescind the contract vide order dated 17.3.98, as the delay in execution of the contract is because of lapses on the part of the Railway authority to perform their part of obligation under the contract. The learned Counsel also submits that as the authority of N.F. Railway has extended the period of completion up to 31.3.98 they cannot issue any notice asking the petitioner to complete the work within 48 hours and on failure of the same terminate the contract on 17.3.98 and decide to complete the remaining work through another agency at the petitioner's risk and cost. Challenging the order dated 12.11.99 where by it was directed to realize the amount on account of the settlement of the remaining work at the risk and cost of the petitioner, the learned Counsel has submitted that the authority before finalizing the amount is required to assess the same through an independent agency, which has not been done in the instant case. It has further been submitted by the learned Counsel that as the authority before passing order dated 12.11.99 did not issue any notice giving an opportunity to the petitioner to show cause as to why such amount shall not be realized from him, the said order dated 12.11.99 is bad in law being in violation of principles of natural justice. The learned Counsel for the petitioner submits that such notice is required as the said order has an adverse civil consequences and the amount has been assessed as payable by him. In any case, the learned Counsel submits that as the notice dated 4.3.98 and the order of recession of contract dated 17.3.98 are bad in law, the subsequent action of recovery of any amount on account of the risk and the cost settlement also bad in law. Mr. Hussain, learned Counsel for the petitioner, however, submits that though the petitioner has also challenged the notice inviting tender dated 21.5.98 for settlement of the work allotted to the petitioner at his risk and cost, he is not pressing the said prayer challenging the said NIT as the work has already been allotted and completed by other agency. The learned Counsel has further submitted that as the petitioner's contract was rescind without notice and the amount is sought to be recovered from him without making any assessment by an independent authority with notice to the petitioner, the writ petition is maintainable. The learned Counsel in support of his contention has placed reliance on Union of India v. Raman Iron Foundary , The State of Karnataka etc. v. Shri Rameshwara Rice Mills Thirthahalli etc. reported in (1987) 2 SCC 160, Canara Bank and Ors. v. Debasis Das and Ors. , State of Bihar and Ors. v. Industrial Corporation (P) Ltd. and Ors. and Creative Entrepreneurs and Anr. v. Mahanagar Telephone Nigam Ltd. and Anr. reported in 2004 (3) Recent Arbitration Judgment 649 (Delhi).
5. Mr. J. Singh, learned standing Counsel appearing on behalf of the respondents supporting the action of the respondent authorities in issuing the notices, in terminating the contract as well as in issuing the direction to realize the amount, has submitted that as the petitioner in spite of giving several extensions to complete the work could not complete the same and even could not make good the default in execution of the work, the authority had no alternative but to issue the notice asking the petitioner to make good the default and thereafter because of the failure of the petitioner, rescind the contract. The learned standing Counsel submits that the petitioner was given a notice dated 20.2.98 to improve his progress within seven days as contemplated under Clause 61(1)(vi) & 61(1)(viii) renumbered as 62(1)(vi) & 62(1)(viii) of GCC, 1979. Another notice dated 4.3.98 was issued to the petitioner under the said Clauses as he did not take proper action to make good the default within seven days of the notice period, asking him to improve the progress of his work. The petitioner was also informed that otherwise the authority reserves the right to rescind the contract and get the balance work completed through another agency at his risk and cost. As the petitioner in spite of such notices could not take satisfactory steps for progress of the work and to make good the default, the contract was rescind and the difference of the amount, due to settlement at the petitioner's risk and cost, was directed to be realized from him. Therefore, the learned standing Counsel submits that it is not that no notice was issued before termination of the contract or intimating him that the differences of the amount for the risk and cost sale will be realized from him in the event of the recession of the contract and getting the said work done through another agency. It has further been submitted by the learned standing Counsel that the principle of natural justice have duly been complied with by the Railway Administration. Mr. Singh, the learned Counsel has further contended that order dated 20.2.98 has two parts, firstly extension of the period for completion of the work up to 31.3.98 and secondly giving seven days notice to the petitioner to make good his default in execution of the work. Therefore, though the period of completion was extended up to 31.3.98, the authority because of the failure of the petitioner to make good his default within the notice period, as required under the terms of the contract, issued another notice giving 48 hours time to improve the progress of the work and ultimately because of the failure of the petitioner the contract has to be determined. The learned Counsel therefore, submits that even though the period of completion of work was extended, the authority, because of the failure of the petitioner to make good the default had to take action in terms of the contract between the parties. It has further been contended by the learned standing Counsel that the petitioner is bound by the terms of agreement arrived at between the parties in performing the work and the authority has acted in terms of such agreement between the parties. Mr. Singh further submits that in any case the termination of the contract being not a quasi-judicial act, there is no requirement for issuance of any notice before termination and even before realization of any amount on account of risk and cost settlement as the said action flows from the contract entered into between the parties. Mr. Singh, further submits that the action taken by the Railway Administration is not executive or administrative act to attract the duty to act fairly but an action taken in pursuant to such contract between the parties. It has further been submitted that there is no scope for further adjudication of the amount payable by the petitioner for the risk and cost settlement by any other independent agency as it is not a damage which is sought to be recovered, which requires further adjudication to ascertain the amount, but the difference of the amount offered by the petitioner and by the other agency through whom the work was executed, such amount is payable by the petitioner under the provision of Clause 61(1)(e) renumbered as 62(1)(c) of the GCC, 1979. The learned Counsel during the course of argument denies that the delay in execution of the work by the petitioner contractor is attributable to the Railway authority. Challenging the maintainability of the writ petition in a contractual matter, governs by the contract/agreement between the parties, the learned Counsel submits that the writ petition is not maintainable, since it is a public law remedy and is not available in private law field i.e. where the matter is governed by a non-statutory contract, more so when there is a Clause for arbitration in the contract entered into between the parties. The remedy available to the petitioner, according to the learned standing Counsel is to seek arbitration and not the writ petition.
6. The learned standing Counsel in support of his contention has placed reliance on Food Corporation of India and Ors. v. L.C. Bhakat and Ors. reported in 1993 Suppl. (3) SCC 636, State of Gujarat and Ors. v. Meghji Pethraj Shah Charitable Trust and Ors. , State of U.P. and Ors. v. Bridge & Roof Company (India) Ltd. and a division bench judgment of this court in Indian Oil Corporation Ltd. and Ors. v. Deka Consultancy & Agency Services reported in 1999 (2) GLT 217 : 1999 (2) GLJ 312.
7. I have considered the submissions of the learned Counsel for the parties and also perused the pleadings.
8. The petitioner's contention is that as the period for completion of work has already been extended up to 31.3.98 by order dated 20.2.98, no notice can be issued under Clause 61 renumbered as Clause 62 of the GCC, 1979 asking him to make good the default within the notice period and rescind the contract on the ground of not making good the default, that too without issuing any further notice. The further contention of the petitioner is that before passing the order of realization of the differences of the amount on account of settlement at the risk and cost of the petitioner, the amount is required to be assessed by an independent agency and as the same has not been done the order for realization of the amount cannot be sustained. The further contention of the petitioner is that as the order dated 12.11.99 invites adverse civil consequences, the petitioner is entitled to a notice before taking such action. In any case as the delay in execution of the contract is not attributable to the petitioner, there cannot be any recession of contract on the ground of delay in execution of the work. On the other hand the contention of the Railway is that though the period of completion of the work was extended up to 31.3.98, the petitioner was asked to make good the default up to that stage by order dated 20.2.98. Further notice was also issued on 4.3.98 giving further opportunity to make good the default and the petitioner having failed to do so, the contract was determined. The petitioner was informed by the aforesaid order rescinding the contract that the work will be executed through other agency at his risk and cost, therefore, the Railway has not committed any illegality in issuing the notices, rescinding the contract and also in issuing direction to realize the amount because of risk and cost settlement, which have been done in terms of the contract only, according to the respondents. The further case of the Railway is that the petitioner being bound by the conditions of the contract cannot say that he is entitled to a notice and no action can be taken by the authority in terms of the conditions of contract. The respondent has also questioned the maintainability of the writ petition more particularly on the ground of the existence of Clause for arbitration in the contract.
9. I shall first deal with the point raised by the learned standing Counsel for the Railway regarding the maintainability of the writ petition in a contractual matter, more so in view of the existence of a clause relating to the arbitration in the contract.
10. Clause 63 provides for an arbitration in case of any dispute or difference between the parties as to the construction or operation of the contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to. For better appreciation Clause 63(1) of GCC, 1979 is quoted below:
63 (1). In the event of any dispute or difference between the parties hereto as to the construction or operation or this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or deference on any account, or as to the with-holding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within a reasonable time, then and in any such case, but except in any of the "excepted matters" referred to in Clause 62 of these conditions the Contractor, after 90 days of his presenting his final claim on disputed matters may demand in writing that the dispute or difference be referred to arbitration. Such demand for arbitration shall specify the matter which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other, shall be referred to arbitration.
11. In the instant case, according to the petitioner the work could not be completed because of the lapse on the part of the Railway Administration to provide work site, specification etc. in time and therefore, according to the petitioner, the delay in execution of the work cannot be solely attributable to him. On the other hand the case of the Railway Administration is that the petitioner could not complete the work within time and even could not make good the default in progress of the work in spite of the notices issued for, that purpose. Therefore, it is a disputed question of fact whether the delay caused in execution of the work or for making good the default was solely attributable to the petitioner or such delay was for the Railway Administration to perform their part of the contract. The writ court in exercise of its jurisdiction under Article 226 of Constitution of India cannot decide a disputed question of fact, which is required to be decided by the competent authority under the contract. The parties having agreed to refer the matter in dispute arising out of the contract to arbitration, such disputed question of fact can only be decided in such arbitration proceeding only and not by the High Court in exercise of his power under Article 226 of the Constitution of India.
12. The contract between the petitioner and the Railway Administration is a contract in the realm of private law and is not a statutory contract. The parties are bound by the contract and by the terms and conditions of the agreement arrived at between them. Any dispute relating to the contract or relating to the interpretation of the any Clause of the contract or the terms and conditions of such contract cannot be agitated in a writ petition and such matter is required to be decided either in a arbitration proceeding as provided under the contract or by a competent civil court, as the case may be. The petitioners in the present writ petition by challenging the notices as well as the termination of the contract and the decision to realize the amount on account of the risk and cost settlement, is asking this court to interpret the terms of contract entered into between him and the Railway Administration and to give a decision as to whether such action can be taken by the Railway authority under Clause 61 renumbered as Clause 62 of the GCC, 1979, which provides for issuance of such notice, recession of contract as well as recovery of the differences of the settlement amount in case of performing the work through another agency because of risk and cost settlement. This court in exercise of its power of judicial review cannot enter into that aspect of the matter, which requires determination of question of fact before coming to any definite finding. More over the parties have agreed for an arbitration in case there is any dispute and differences between them relating to any matter arising out of the contract.
13. The petitioner in the present writ petition is seeking a writ of mandamus commanding/directing the respondent authorities to forthwith recall and/or forbear from giving effect to the notices, or to recession of contract and its decision to recover the differences of amount on account of risk and cost settlement and also for quashing the said action. A writ of mandamus is a command directing performance of a public legal duty. The person seeking a writ of mandamus must establish a legal right in himself and the same is issued to a person who has a legal duty to perform the same but failed on neglected to perform. The object of mandamus is to prevent disorder from a failure of justice and is required to be granted in all cases where law established no specific remedy and where justice, despite demand has not been granted. It is trite that the court will not exercise its jurisdiction to entertain a writ petition wherein public law element is not involved.
14. In the instant case as discussed above the petitioner by filing present writ petition is sought to invoke the jurisdiction of this court under Article 226 of the Constitution of India in the matter arising out of a private contract between the parties which has no statutory force and which is not a statutory contract. A division bench of this court in a very recent judgment in Writ Appeal No. 257 of 2005 (State of Manipur represented by the Chief Secretary and Ors. v. Shri Moirangthem Chaoba Singh) reported in 2006 (J) GLT 19, while dealing with the remedy under the public law and private law has held that a writ of mandamus lies, for enforcing the public duties by public authorities. The remedy is available when a public authority fails to do its duty entrusted to it by law, the remedy covers the field of governmental powers and duties. A writ is issued against a person who has a legal duty to perform but has failed and/or neglected to do so. Such legal duty may emanate from either in discharge of a public duty or by operation of law. The Court will not exercise its jurisdiction under Article 226 of the Constitution of India to entertain a writ petition wherein public law element is not involved. It has further been held that when the parties having voluntarily entered into nonstatutory contract and agreed to settle the dispute, if any, by arbitration, cannot have recourse to any other remedy without invoking the remedy by way of arbitration and public law remedy is not available in such a situation even if one of the parties to the contract is State or its instrumentality. The relevant portion of the said judgment is quoted below:
25. It is thus clear that the parties having voluntarily entered into a non-statutory contract and having agreed to settle disputes, if any, arising between them by arbitration cannot have recourse to any other remedy without invoking the remedy by way of arbitration. Public law remedy is not available in such a situation even if one of the parties to the contract is State or its instrumentality. In our considered opinion, ABL International Ltd. v. Export Credit Guarantee Corporation of India and Ors. (supra) in no manner supports the contention of the respondent-writ petitioners that in contractual matters remedy under Article 226 of the Constitution of India is always available even if the contract itself provides a mode for settlement of dispute arising from out of the contract.
The submission made by the learned Counsel for the Respondent-writ petitioners that the contracts entered into by them are statutory in nature needs a mention only for its rejection. Every contract or agreement entered by the State or its departments is not a statutory contract. Statutory contracts are those whose terms and conditions are regulated by the Stature itself. The commercial contracts entered into by the Respondent-Writ petitioners with the State or its departments are ordinary contracts where the terms and conditions are regulated by the covenants. Such terms and conditions and the covenants are not traceable to any Statute or statutory instruments. The submission made in this regard is totally devoid of any merit. It is accordingly rejected.
26. For the aforesaid reasons, we hold that a writ of mandamus does not issue for enforcement of private rights, not is it available for obtaining interim relief till cross-claims between the parties are determined in arbitration where-from such a provision is made in the contract itself. It is axiomatic that relations between the parties in concluded non-statutory contract are governed by the terms and conditions thereof; and rights and obligations of parties inter se are required to be decided elsewhere. The relations are purely contractual and rights and obligations are governed only by the contract. A writ does not lie for enforcement of contractual rights.
15. In Food Corporation of India (supra), the Apex Court has held that the High Court in exercise of the power under Article 226 of the Constitution of India should not go into the question of contractual obligation when the terms and conditions of the contract permitted the termination of agreement by either of the parties. In the State of Gujarat and Ors. v. Meghji Pethraj Shah Charitable Trust and Ors. (supra) the Apex Court has held that the termination of contract being not a quasi-judicial act by any stretch of imagination, it is not necessary to observe the principle of natural justice and the said action being not an administrative or executive action will not attract the duty to act fairly. In the State of U. P. and Ors. v. Bridge & Roof Company (India) Ltd. (supra) the Apex Court has held that the contract between the parties is a contract in the realm of private law, not a statutory contract and therefore it is governed by the provision of the Contract Act. Any dispute relating to the interpretation of the terms and conditions of such a contract can not be agitated and could not have been agitated in a writ petition, which is a matter either for arbitration as provided by the contract or for the civil court, as the case may be and therefore prayer in a writ petition to restrain the authority from deducting a particular amount from the bill of the writ petitioner cannot be granted by the High Court in exercise of its power under Article 226 of the Constitution of India. It has further been held that when the contract provides for mode of settlement of dispute arising from the contract, there is no reason the parties should not follow and adopt that remedy and invoke the extra ordinary jurisdiction of High Court under Article 226 of the Constitution of India.
16. A division bench of this court also in Indian Oil Corporation (supra), relying on the Apex Court's decision in State of U.P. and Ors. v. Bridge and Roof Company (India) Ltd. has refused to entertain the writ petition, in a matter covered by the contract between the parties.
17. In view of the aforesaid discussions and also the law laid down by the Apex Court as well as in view of the Division Bench decision of this court, I am of the view that since the disputed question of fact is involved in the present writ petition and the petitioner has sought for a writ of mandamus challenging the notices issued by the Railway authority as well as order rescinding the contract and also recovery for an amount in terms of the contract agreement between the parties, the present writ petition is not maintainable, more so, when the parties by entering into an agreement have agreed to settle their dispute by way of arbitration.
18. The contention of the learned Counsel for the petitioner that the authority before issuing the impugned notices and orders is bound to adhere the principles of natural justice, which having not been done in the instant case, the writ court can, in spite of the fact that such notices/orders were issued in terms of the contract between the parties, interfere with such notices/orders in exercise of the writ jurisdiction, cannot be accepted as what the petitioner claims is his rights under a contract, which is not statutory and governs by its terms and conditions. It is no doubt that availability of an alternative remedy may not operate as a bar where the writ petition has been filed for the enforcement of any fundamental rights or where there has been a violation of principles of natural justice in passing an administrative or quasi-judicial order or where such order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. But in the instant case the petitioner is claiming right under a non-statutory contract and challenging the orders passed by the authority in a contractual matter in terms of the conditions of contract. The question whether the petitioner is entitled to any notice before issuance of the order for recovery of the amount or whether there has to be an adjudication about the amount recoverable from him by an independent body, is dependent on the terms of the contract entered into between the parties, which are binding on them. The said question cannot be gone into in a writ proceeding which depends on the construction or interpretation of the terms of the contract between the parties, more so when the parties have agreed to go for arbitration in case of any differences between them relating to the said contract.
19. In view of the aforesaid findings recorded by me I refrain myself from dealing with the points raised by the learned Counsel for the petitioner on the merit of the case i.e. relating to the legality and validity of the notices and order of termination as well as the recovery order issued by the Railway authority, as giving a decision of those points in the present proceeding may cause prejudice to either of the parties, which is required to be settled by the way of arbitration as agreed to by the parties in the contract agreement. Therefore, the case laws cited by the learned Counsel for the petitioner on the point whether the notice is required to be issued before passing the order of recovery or whether there should be an adjudication by any independent authority before issuance of such order, whether there was proper interpretation of clauses of the contract or not, are not discussed in the present case.
20. In view of the aforesaid discussions, I am of the view that the writ petition is not maintainable and hence the same is dismissed.
21. However, this shall not preclude the petitioner. to seek arbitration as contemplated under the clause for arbitration in the contract agreement entered into between the parties, in accordance with law and subject to terms of the said agreement. Keeping in view the facts and circumstances of the entire case I do not make any order as to cost.