Delhi District Court
Scs Enterprises vs Union Of India on 18 September, 2023
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (I) (Comm) No. 66 of 2023
CNR No. DLND01-007438-2023
In the matter of:
SCS Enterprises
Through its Prop Sh. Ashok Bhatia
1790, 1st Floor, Pratap Street,
Chuna Mandi, Paharganj, New Delhi-110055
........ Petitioner
Versus
1. Union of India,
Through Secretary,
Ministry of Civil Aviation
Rajiv Gandhi Bhawan,
Safdarjung Airport,
New Delhi
2. Ministry of Civil Aviation
Through its Secretary
Rajiv Gandhi Bhawan,
Safdarjung Airport,
New Delhi
3. Bureau of Civil Aviation Security (HQs)
Through its Secretary,
A Wing, I, II, III Floors,
Janpath Bhawan, Janpath
New Delhi
......Respondents
Date of institution of suit : 25.08.2023
Judgment reserved on : 04.09.2023
Date of Judgment : 18.09.2023
OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 1 of 15
Appearance : Ms. Sujata Kashyap & Ms. Medha Gaur Ld.
Counsel for plaintiff.
Sh. Shashank Shekhar & Sh. Ankit Raj, Ld.
Counsel for defendant.
JUDGMENT
1. The present petition has been filed by the petitioner under Section 9 of Arbitration & Conciliation Act, 1996 (in short 'the Act') against the respondent seeking relief as follows:
• Pass necessary direction in restraining the respondent no. 3 from floating any kind of contract and / or awarding the contract GEMC-511687710428761 dated 02.08.2023 or engaging previous / other vendors for this purpose during the pendency of this petition as well as till the conclusion of arbitration proceedings and the services of the petitioner, who had been a successful bidder for the award of the contract as on record and services be resumed with immediate effect. • To direct the respondents to preserve the records pertaining to the contract awarded to the petitioner, who had been awarded contract on 02.08.2023 being L-1 in the tender dated 17.03.2023.
• Any other relief, which this Court may be fit & proper.
• Cost of litigation.
2. Facts necessary for disposal of present petition are that the petitioner, MSME Enterprise is a Manpower Services Provider catering to several Government Departments / Industries since early 2014. The respondent no. 1 is the Union Ministry of Civil Aviation, Respondent no. 2 i.e. Ministry of Civil Aviation is under control of respondent no. 1 and respondent no. 3 i.e. Bureau of Civil Aviation Securities (HQs) (BCAS) is Buyer Department. Bid for providing the services - Manpower Outsourcing Service - Data Entry Operator (DEO) was invited by BCAS on Government OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 2 of 15 e-marketing Portal hereon as GeM Portal. Subsequently, the petitioner participated in the tender and petitioner being L-1 successfully bidder was awarded the contract dated 02.08.2023 with the approval of Secretary, Civil Aviation w.e.f. 10.08.2023 at an estimated yearly expenditure of Rs. 94,51,478/- vide Contract No. GEMC-511687710428761 dated 02.08.2023. The Service Level Agreement was executed between the petitioner and respondents. According to the petitioner, one of the Terms & Conditions of Service Level Agreement i.e. 4.1 (x) - Buyers obligation, in case, the buyer has selected the option in the bid for retention of existing resource / resources of previous service provider, then service provider shall retain those resources. In such cases, the buyer shall be responsible for ensuring the qualification, eligibility of those resources as per the contract requirement. It is the case of the petitioner that vide email dated 05.08.2023 addressed to the BCAS, it has informed that all the 14 existing resources / outsource personnel must enrolled with their firm in compliance with proper documentation for their retention before 08.08.2023 to avoid any interruption in commencement of their services to the department. It was also informed that all concerned may be directed to report to the petitioner's office with original certificates for verification / documentation in compliance with tender conditions positively before 08.08.2023. It is further case of the petitioner that reminder email dated 09.08.2023 was also sent to this effect with a caveat that non compliance will have made cascading effect in the commencement of their services OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 3 of 15 from day one. According to the petitioner, in pursuance to their reminder dated 09.08.2023, the erstwhile outsourced personnel of the previous vendor reported at petitioner's instance for enrollment / documentation / screening only on the day of the commencement of man power services i.e. 10.08.2023 deliberately. After screening, it was established that erstwhile personnel of the previous vendor did not meet the minimum eligibility criteria. The respondent too failed to comply with Mandatory Contract Labour (Regulation & Abolition) Act, 1970 by virtue of absence of license. It is the case of the petitioner that the respondents on 10.08.2023 vide its email arbitrarily terminated the contract dated 02.08.2023 casting allegations against the petitioner that petitioner had violated Clause 7 of the Agreement. It is alleged that buyer department has never bothered to consult or response to the emails dated 05th & 09th of August 2023 before terminating the contract. It is alleged by the petitioner that the contract is still alive in the GeM Portal and the petitioner apprehends that in order to subvert the petitioner, the respondent may engage the previous vendor or any other vendor outside GeM in a malafide manner in view of this contract, in which, the petitioner had been the L-1 bidder after successfully qualifying the same. The awarded contract was terminated arbitrarily outside GeM through email dated 10.08.2023 in violation of rules. The petitioner apprehends that because of arbitrary termination by the respondent no. 2, the image of petitioner would be affected having five star rating on GeM, which shall cause irreparable loss & OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 4 of 15 injury. Balance of convenience is also lies in favour of petitioner against the respondent. The petitioner has prima facie case in its favour.
3. Ld. Counsel for the petitioner argued that the termination notice issued by respondent is without any application of mind and without consideration of various emails of the petitioner dealing with the allegations made by the respondent. As per Tender Contracts Service Legal Agreement, Rule (x) of 4.1, it was the duty of the buyer department BCAS that in case the buyer has availed the auction in the bid of retaining of existing resources of previous service provider, then service provider herein petitioner shall retain those resources. In such cases, the buyer shall be responsible for ensuring the qualification eligibility of both resources as per the Contract Agreement. It is argued that the petitioner has sent emails herein dated 05.08.2023 informing the BCAS that all the 14 existing resources must enrolled with the petitioner before 08.08.2023 to avoid any instruction in commencement of its service. Subsequent, trail email dated 09.08.2023 reminding the same was sent, however, the respondent deliberately not acted upon. No response were sent by the respondent BCAS to these emails. It is further argued that the none of 14 DEOs of the erstwhile retainers were meeting the criteria as set out in the tender document. Ld. Counsel further argued that respondents are bound to act fairly and reasonably the petitioner is having a prima facie case, whereby, making petitioner OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 5 of 15 entitled to the reliefs as prayed in the instant petition. It is further argued that contract is not per se determinable contract and in any event, the respondents are in obligation to act fairly and in an unarbitrary manner. It is further submitted that this Court has territorial jurisdiction as per Clause 16.2 (vi) of General Terms & Condition of GeM 4.0 dated 13.02.2023, the seat of the arbitration shall be at the place, where, principle place of business of buyer department / organization is located. The Bureau of Civil Aviation Buyer Department, where the services were to be executed in compliance with tender conditions / award / contract is situated within the territorial jurisdiction of this Court.
4. The respondent resisted the contention of the petitioner alleging that the contract dated 02.08.2023 was the determinable contract. Once the contract has been terminated by the respondents in accordance with the terms of the contract, specific performance of the contract cannot be sought by the petitioner. It is not disputed that bid for providing the services of Data Entry Operator was invited by BCAS on GeM and being L-1 successful bidder with the approval of Secretary, Civil Aviation, the contract for engagement 25 Data Entry Operators (outsource) against the vacant sanctioned post was awarded to L-1 firm, petitioner herein, w.e.f. 10.08.2023 at an estimated yearly expenditure of Rs. 94,51,478/- vide order dated 02.08.2023. One of the condition of the bid document was that the successful bidder need to on board existing 14 DOs providing their services to BCAS through the OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 6 of 15 earlier contracted agencies M/s Bhupendra Singh, whose contract was valid till 09.08.2023 i.e. the date prior to the day i.e. 10.08.2023, when the petitioner was to provide its services to BCAS. The 14 existing DOs were invited by the petitioner to submit the necessary documents for their registration with on 08th & 09th August 2023. However, on returns of the said agency, some of the existing DOs reported to the Sr. Office in BCAS that petitioner has demanded Rs. 30,000/- each from them to allow to continue in BCAS. Such illegal gratification demanded by the petitioner is in clear violation of Clause 7 of SLA of GeM. It is submitted that taking into gross violation of contract condition with the approval of BCAS, the contract of petitioner was terminated w.e.f. 10.08.2023 itself subsequently, a contract cancellation was also generated on GeM portal.
5. Ld. Counsel appearing on behalf of respondent vehemently opposed the instant petition and submitted that it is devoid of any merit and is liable to be dismissed. During the course of arguments, Ld. Counsel referred to the email dated 10.10.2023 at 2:02 PM and submitted that contents clearly show breach of Clause 7 of the contract service. It is submitted that a mere perusal of Clause 7, it is clear that there is no embargo on party to exercise its right under this clause. He further argued that contract in question is determinable in nature, hence, in view of specific statutory provision under the Specific Relief Act, 1963, no injunction could be granted to restrain the respondent from OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 7 of 15 floating any kind of contract and / or awarding the contract or engaging previous or other vendors. It is submitted by virtue of Section 14 (1) (c) of Specific Relief Act, 1963, the contract which in its nature determinable cannot be specifically enforceable. It is submitted that if eventually the termination is illegal, then also, in view of provisions of Section 41 (c) of Specific Relief Act, 1963, the petitioner is also not entitled for any interim order of stay of termination. The respondents were well within their rights to terminate the contract. Under Section 14 (b) of the SRA, such a determinable contract cannot be specifically enforced by seeking injunction against action of termination of contract by the respondent and its consequences thereof. Ld. Counsel further argued that on the other hand, in the action of the respondent held to be bad, eventually, the petitioner can always be suitably be compensated in terms of damages. Therefore, neither the balance of convenience in favour of petitioner nor the petitioner would suffer irreparable loss, in case, injunction is refused. The petition is liable to be dismissed.
6. I have heard argument advanced by the Ld. Counsels for the parties and gone through the record.
7. The substantive provisions covering grant of interim relief of the nature of temporary injunction is contained in Section 94 Code of Civil Procedure, 1908 (in short CPC). It provides that in order to prevent the ends of justice from being defeated, the OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 8 of 15 court, if so prescribed may issue a warrant of arrest; direct for furnishing security; grant temporary injunction; appoint receiver; make any other order as may appear to be just and convenient. Order XXXIX CPC speaks about temporary injunctions and interlocutory orders and lays down elaborately the manner for grant of temporary injunction, circumstances in which it can be granted and of consequence of disobedience of injunction order. Injunction, temporary or permanent, is a kind of specific relief and grant or refusal of injunction is covered by the Specific Relief Act, 1963. The said Act in Sections 36 to 42 lays down the manner in which injunctions of temporary and perpetual nature or mandatory can be granted or refused. Thus, the substantive law relating to injunctions is contained in Section 94 CPC and Sections 36 to 42 of Chapter 3 of the Specific Relief Act,1963 whereas the procedural part is laid-down in Order XXXIX CPC.
8. It is well settled law that Section 9 of the Act authorizes the grant of temporary injunction at all the three stages of the arbitral proceedings. The aforesaid provision apart from laying down the matters for which purpose interim measures may be ordered by the court provide that court may pass interim order, as may appear to be just and convenient and in exercise of such power it shall have the same powers as in any other such proceedings, but it does not lay down the manner and circumstances for the exercise of interim measures. Section 9 (1) of the Act is quoted below:-
"9. Interim measures etc. by Court.-- A party may, before or OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 9 of 15 during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely,-
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter or the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."
9. In Arvind Constructions Company Private Limited Vs. Kallinga Mining Corporation Limited and Others (2007) 6 SCC 798 the Hon'ble Supreme Court took the view that exercise of power under Section 9 of the Act must be based on well recognized principles governing grant of interim injunctions and other matters of interim protection or the appointment of a receiver. The Hon'ble Supreme Court approved the application of the principles governing grant of temporary injunctions as laid down under the Specific Relief Act and Order XXXIX CPC ie., prima-facie case, balance of convenience and irreparable loss as the three essential conditions for grant of temporary injunction.
OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 10 of 1510. Similarly, in Adhunik Steel Limited Vs. Orrisa Manganese and Minerals Private Limited (2007) 7 SCC 125 it was again reiterated that the well recognized principles applicable for grant of interim injunction as contained in Order XXXIX Rule 1 CPC would be applicable while granting protection as an interim measure under Section 9 of the Act.
11. It is worth noting that Section 9 of the Act does not lay down any specific condition or any procedure for grant of interim relief. Therefore, when a party approaches a court of law for the grant of relief by way of injunction in the absence of any special set of rules in the special Act, the ordinary rules followed by the court would continue to govern the exercise of power of granting interim relief. Thus, the grant of interim measure under Section 9 of the Act has to be in accordance with the well recognized principles governing grant of interim relief by way of temporary injunctions in consonance with Special Relief Act as well as the provisions of C.P.C.
12. The basic object of granting interim measure is to protect and preserve the subject matter of litigation and at the same time not to allow the ends of justice to be defeated. In exercise of such powers, the Hon'ble Apex Court has consistently held that the court should not pass an interim order even though just and convenient, which amounts to granting the final relief and in passing orders of such interim measures the court ought not to OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 11 of 15 be oblivion of the issues of public interest apart from host of other relevant factors including those set out under the Specific Relief Act and the provisions of C.P.C. In short in the matter of grant of interim relief the court is obliged to consider the nature of relief which the party is claiming as a interim measure and the relief which is ultimately available to him in law.
13. In case of Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and others (1991) 1 SCC 533, Amritsar Gas Service was awarded distributorship for sale of L.P.G. under the agreement with the Indian Oil Corporation. The distributorship was terminated allegedly for breach of conditions of the agreement. The distributor i.e. Amritsar Gas Service filed a suit against the termination of the distributorship. In the suit corporation filed application under Section 34 of the Arbitration Act 1940 for its stay but the same was rejected and the revision preferred to the Hon'ble High Court was also dismissed. Thus, the matter was taken to the Hon'ble Supreme Court where an arbitrator was appointed. The arbitrator made an award holding the corporation guilty of breach of contract and liable for restoration of distributorship and for compensation.
14. In the aforesaid facts and circumstances, the Hon'ble Supreme Court while considering the question of relief which could have been granted by the arbitrator, held that as the agreement was terminable/revocable, the only relief which could OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 12 of 15 have been granted to the distributor was by way of award of compensation for the loss of earning instead of restoration of distributorship which was in contravention of Section 14(1)(c) of the Specific Relief Act. Thus, the learned Arbitrator was held to have fallen in error in directing for restoring the distributorship of the dealer.
15. A similar view was expressed by another three Judges Bench of the Hon'ble Supreme Court in the case E. Venketakrishina Vs. Indian Oil Corporation and another (2000) 7 SCC. In the said case also, while considering the correctness of the award made by the arbitrator in connection with distributorship agreement with the Indian Oil Corporation, Hon'ble Court upheld the view of the Division Bench of the High Court to the effect that the question of restoration of distributorship would not arise under the agreement which was revocable by either of the parties and as such the arbitrator was held to be in error in directing for restoring the distributorship.
16. In another case Bharat Petroleum Corporation Ltd. Vs. M/s Khaybar Transport Pvt. Ltd. 2011 (86) ALR 511, the distributorship licence was cancelled and a suit was filed for declaring the cancellation to be illegal arbitrary void and effective and for restoration of supplies. Hon'ble court following the decision in Amritsar Gas Service (Supra) held that the suit for restoration of distributorship was not maintainable in law and OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 13 of 15 stand specifically barred by Section 14(1)(c) of the Specific Relief Act and the remedy available to the distributorship is to lay a claim for damages.
17. Reverting to the facts of the case in hand, considering breach of contract condition in terms of Clause 7 of SLA, with the approval of Competent Authority, the respondent BCAS, terminated the contract on 10.08.2023 itself and as per the respondent, a contract cancellation request was also generated on GeM portal. In given facts & circumstances, the interim protection claimed by the petitioner is to stay respondent no. 3 for floating any kind of contract or awarding the contract or engaging previous / other vendors for this purpose meaning thereby to restore the services of the petitioner. These services cannot be restored once the contract has been terminated and the stay of termination of contract would tentamount to restoring of the contract, which cannot be granted by way of interim measure in view of the bar contained in Section 14 (1) (c) r/w Section 41 (e) of the Specific Relief Act and as appropriately guided by judgments in the Amritsar Gas Service (supra) and E. Venktakrishna (supra). In fact, Clause 7 under the head 'Undertaking', the service provider undertakes that it would not indulge in any unethical practices and acknowledges that any non compliance of undertaking will be treated as material breach of contract. It is this precise clause, which has been invoked while terminating the contract no. GEMC-511687710428761 dated 02.08.2023 for engagement of OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 14 of 15 Data Entry Operators at BACS Headquarters for a period of one year w.e.f. 10.08.2023. With regard to the contention on merit of the matters including the reason of termination of contract, this Court is of view that it is only an Arbitral Tribunal, which can adjudicate upon the same, after thorough examination of pleadings and materials placed on record and it is not competent for this Court to decide the same or meet any observation regarding the same.
18. In view of above discussion, a relief, which is per se is not admissible, cannot be granted as an interim measure in the exercise of jurisdiction under Section 9 of the Act as the power is circumscribed by the provisions of CPC & Specific Relief Act. In the aforesaid facts & circumstances, no case is made out for grant of interim relief as prayed for, hence, the petition stands dismissed. Nothing mentioned herein shall tentamount to be an expression of opinion of merits of the case. Parties are left to bear their own costs.
19. File be consigned to record room.
Pronounced in the open Court (VINEETA GOYAL)
on this 18.09.2023 District Judge (Commercial-03)
Patiala House, New Delhi
OMP (Comm) No. 66/2023 SCS Enterprises Vs. Union of India & Ors. Page 15 of 15