Andhra HC (Pre-Telangana)
Srinivasa Fertilizers Corporation, ... vs Rasthriya Ispat Nigam Limited, ... on 10 October, 2007
Equivalent citations: 2008(1)ALD667
ORDER P.S. Narayana, J.
1. This Court ordered notice before admission on 23.05.2007 and it issued Rule Nisi on 20.06.2007. Initially, interim suspension was granted for a period of four weeks and the same was continued until further orders. W.V.M.P. No. 2185 of 2007 is filed to vacate the interim order. Sri K.V.N. Bhupal, learned Counsel representing the writ petitioner and Sri V. Ravinder Rao, learned Counsel representing respondents made submissions in elaboration. In the light of the respective submissions and also on a request made by both the learned Counsel, for final disposal, the writ petition itself is being disposed of finally.
2. Sri K.V.N. Bhupal, learned Counsel representing writ petitioner, had taken this Court through the affidavit filed in support of the writ petition and would contend that merely because there is a clause relating to arbitration and merely because it is stated that the matter is concerned with the contractual obligations, the writ petition cannot be dismissed as not maintainable, on that ground itself, if otherwise, the petitioner is able to satisfy that the action is arbitrary, discriminatory and hit by Article 14 of the Constitution of India. Learned Counsel also pointed out the relevant portions of counter-affidavit and would maintain that in the facts and circumstances, the communication of the third respondent vide Debit Note No. 11, dated 30.04.2007, demanding return of bonus Rs. 1,73,654/-credited to the account of the petitioner for the period ending 2005-06 to be declared as illegal and arbitrary. Learned Counsel also would maintain that further suitable directions are given as prayed for in the writ petition.
3. Per contra, Sri V. Ravinder Rao, learned Counsel representing the respondents, had taken this Court through the contents of the counter-affidavit and would maintain that the power of judicial review in relation to contractual obligations being very limited, normally to enforce such obligations, Article 226 of the Constitution of India cannot be invoked. Learned Counsel would also maintain that in the light of the specific stand taken in the counter-affidavit, it is clear that the petitioner is having a remedy to invoke the arbitration clause, and hence, viewed from any angle, the writ petition cannot be maintained under Article 226 of the Constitution of India and the same is liable to be dismissed, if necessary giving liberty to the petitioner to invoke the arbitration clause.
4. Heard the learned Counsel.
5. The writ petition is filed for a writ of mandamus declaring the communication of the third respondent vide Debit Note No. 11, dated 30.04.2007, demanding return of the bonus of Rs. 1,73,654/- credited to the account of the petitioner for the period ending 2005-06 as illegal and arbitrary and direct the respondents to release the fertilizers required to be released in favour of the petitioner in the current quarter of the year 2006-07 without deducting the alleged claim for refund mentioned in the impugned order, dated 30.04.2007, and pass such other orders.
6. The petitioner - M/s. Srinivasa Fertilizers Corporation (Registered Firm), Tenali, Guntur District, represented by its Managing Partner, N. Venkata Krishna Mohana Rao, filed the present writ petition praying for the reliefs specified supra. It is averred in the affidavit filed in support of the writ petition that the petitioner is a registered dealer in fertilizers. The respondent is supplier of ammonium sulfate to it in accordance with the predetermined schedule of assuring on either side by an agreement, dated 08.07.2006, under the long term contract scheme and received the relevant agreement for the year 2005-2006 and the same is filed as material paper. While indicating for the fertilizers ammonium sulphate to be supplied by the respondents, the rule is that the petitioner shall at least take 90% of the minimum guaranteed quantity for each quarter and such indents shall in no month fall below 80% of the minimum guarantee prescribed for that quarter. The relevant clause 2.5.0 in the agreement reads as follows:
The Commitment bonus of Rs. 100/- per PMT shall be applicable for all LTC customers on the total quantity lifted during the contract period by the purchaser. The Commitment bonus is inclusive of taxes and duties and credit note for quantity discount will indicate the sales tax. The above applicable commitment bonus shall be payable to the purchaser at the end of above LTC subject to fulfillment of following conditions:
The purchaser lifts minimum of 80% of committed quantity in each month and 90% of the committed quantity by the end of each quarter.
It is also stated by the petitioner that the meaning and substance of this Rule is that it shall indent not less than 90% of minimum guaranteed quantity by the end of each quarter. In doing so, it shall not draw in any quarter less than 80% of the minimum guaranteed for each month and it can indent for quantity in excess of 80%, if any quarter it draws quantities in excess of 80%, he can do so and if he draws less than the minimum, but fulfilling the 90% over all minimum guaranteed for the quarter is not acting in any manner contrary to the fulfillment of the said rule. It is submitted that the 4th respondent has offered a bonus scheme for the long term contractor in the case of those dealers, who draw the minimum quantity of fertilizers from the respondents as per the above rule. This is what the respondent has stated in his communication MKTG/BP/2005-2006/10/776, dated 03.03.2006, and permitted the petitioner to draw 103 tonnes of ammonium sulphate for the month of March 2006 and end of that quarter and when the petitioner has so fulfilled the terms, he was awarded a bonus of Rs. 1,73,654/- to a Credit Note No. 035, dated 27.07.2006, granted to the petitioner by the respondent company. This communication has come to be issued after the petitioner has indented for 157 tonnes of ammonium sulphate for the month of March 2006, as against which, the 4th respondent has fixed 103 tonnes as the balance is to be lifted for the said quarter. The 4th respondent has, in fact, issued offer letter to the extent of 103 tonnes only as the appropriate quantity to be lifted to satisfy fully the terms of the agreement. To give the details of the position as on the relevant time, it may be stated while the 90% of the quantity to be lifted as 405 tonnes, the petitioner has lifted 302 tonnes before February, 2006 and the balance to be lifted is 103 tonnes. Accordingly, the 4th respondent confirmed this position by letter, dated 03.03.2006, and issued offer letter to lift 103 tonnes. It is, thus, apparent that the petitioner himself had offered to lift 157 tonnes. It is because of the respondents' offer, and accordingly, the petitioner lifted only 103 tonnes by the end of the quarter in the month of March 2006. After the said transaction is completed, the respondents have confirmed that the above calculation to be correct by letter No. MKTG-BP/2005-2006/10/177, dated 03.07.2006, by offering a bonus of Rs. 1,73,654/-. It is further averred in para 5 of the affidavit that the petitioner was granted another long term contract agreement for the next year 2006-07 vide agreement, dated 10.07.2006. While so, the respondents are giving different interpretation to the clause relating to minimum guarantee and bonus and claiming that the petitioner has lifted less than 80% in the month of March 2006, relevant to the earlier agreement of sale of 2005-2006, revoked the grant of said bonus and directed the petitioner to refund the amount vide letter, dated 18.04.2007, and the same was followed by issuance of impugned debit note No. 11, dated 30.04.2007, in spite of the petitioner's protest. It is also stated that the real meaning and content of the rule is that the petitioner shall indent for each quarter 90% of the minimum guaranteed quantity and in doing so, it may increase or decrease the indent in such a manner that in no month the indented quantity shall fall below 80%. In this case, the petitioner has indented above 80% of the required quantity for the first two months and has indented on the advice of the 4th respondent under his reference No. MKTG/BP/2005-2006/10/177, dated 03.03.2006, which happens to fall below 80%. Since main condition that the petitioner shall lift 90% of the quarterly committed quantity, minimum guarantee having been fulfilled, the petitioner is entitled to the bonus and accordingly, it was given the credit note, dated 27.07.2006, for the business done in the year 2005-2006. When the contract for the said year had been successfully closed, it is not open to the respondents to reopen the matter after the next agreement one executed and have come into operation. When the contract for the year 2005-2006 successfully implemented and the account is also closed, it is also not open to the respondents to claim refund of the bonus rights guaranteed and to threaten the petitioner that unless it pays the amount, subsequent indents raised under the different contracts would not be released is patently illegal and the petitioner's right to do business guaranteed under the Constitution cannot be impaired. It is also further averred in para 7 of the affidavit filed in support of the writ petition that the impugned order, dated 30.04.2007, is arbitrary. A mere change of opinion, which also happens to be highly improper, cannot be sustained on any ground whatsoever. The respondents induced the petitioner to take less than the minimum quantity prescribed for the month of March, 2006, that too, after the petitioner has offered to lift the full quantity amounts to be estopped, resulting in grave monetary loss to the petitioner. Further, it is stated that there is no specific term in the agreement, which deprives the petitioner of its claim for bonus, when it is declared to have completed its assignment at 100%. More over, the impugned order was passed against the principles of natural justice and that it was made without giving any reasonable opportunity of representation and hearing. On the other hand, the impugned order does not confirm any reasons whatsoever and it is liable to be declared as void and inoperative as being contrary to law. Further, it is stated that the petitioner has been long term contractor for the last several years and has good record for full compliance of all the terms. The contract involves very high stakes requiring large amount of investment. Under these circumstances, if the impugned order is not suspended, the petitioner will be put to serious loss and injury. If the respondents are not directed to release the minimum quantity of fertilizers required to be released in favour of the petitioner in the current quarter of the year 2006-2007 without deducting the alleged claim for refund of amount mentioned in the impugned order, dated 30.04.2007, the petitioner will be put to irreparable loss and hardship. Hence, the petitioner approached this Court for immediate redressal. In the circumstances, the present writ petition is filed praying for appropriate reliefs, specified supra.
7. In the counter-affidavit filed by the respondents, a specific stand had been taken that the writ petition is filed questioning the action of the respondents, which emanates out of a non-statutory contract and the impugned action is governed by the terms and conditions of the contract between the parties and the matter was also involved disputed questions of fact, and hence, the writ petition is not maintainable. It is also stated in para 4 of the counter that the petitioner entered into a long term contract, dated 08.07.2005, with the 1st respondent for purchase of ammonium sulphate, which the 1st respondent would supply. The said agreement provides for various terms and conditions of supply. The agreement, inter alia, also provides for payment of commitment bonus by the respondents to a customer committed by a long term contract, if, during that contract period, the petitioner has purchased 80% of the committed quantity in each month and 90% of the contracted quantity by the end of each quarter. The relevant clause 2.5.0 of the agreement is reproduced below:
Clause No. 2.5.0: The commitment bonus of Rs. 100/- per Metric Ton shall be applicable for all long term contracts, customers on the total quantity lifted during the contract period by the purchaser. The commitment bonus is inclusive of taxes and duties and credit notes for quantity discount will indicate the sales tax. The above applicable commitment bonus shall be payable to the purchaser at the end of above long term contract subject to fulfillment of the following conditions:
The purchaser lifts minimum of 80% of committed quantity in each month and 90% of the committed quantity by the end of each quarter.
It is further averred in para 5 of the counter that with regard to the terms and conditions of the contract and pratice in vogue on finalising the price of a by-product for the month, a communication, to that effect, will be sent to the purchaser by the respondents. An offer letter will also be issued to the purchaser for the quantity agreed to be lifted for month, if material is available, and the purchaser is willing to lift more, additional quantities would also be offered. Clause 2.5.4 of the long term contract provides for forfeiture of the security deposit and termination of contract in the following terms:
Clause 2.5.4: in case of any customer fails to lift committed quantity i.e., 80% of the long term contract quantity consecutively two months (in a quarter) or minimum 90% of the quarterly quantity, security deposit shall be forfeited and contract will be terminated and the customer is not eligible for entering into long term contract for a period of two years.
In para 7 of the counter, it is stated that as a part of customer service, the 4th respondent issued letters to all the customers about their status and quantity to be lifted to fulfill the above condition. Even though, the petitioner has not complied with the condition in clause 2.5.0, inadvertently bonus is released in its favour. Further, it is stated that in terms of agreement, the petitioner had an obligation to purchase 1800 MT of ammonium sulphate at the rate of 150 MT per month (Clause 2.0) during the year 2005-06. In terms of Clause 2.5.0 for being eligible to the commitment bonus, the petitioner is bound to purchase a minimum of 120 MTs per month i.e., 80% of 150 MTs. In addition, the petitioner has also to purchase a minimum quantity of 405 MTs i.e., 90% per quarter. The contract was in operation from 01.07.2005 to 30.06.2006. During the 3rd quarter of the year i.e. during January, February and March of 2006, the petitioner purchased 152 MTs, 150 MTs and 103 MTs, respectively. Thereby, the petitioner had defaulted in the month of March by failing to purchase 80% of the committed quantity in March, 2006. It is also stated that on a misconception of the terms of agreement, the 4th respondent by his letter, dated 03.03.2006, informed the petitioner to purchase 103 MTs, having recorded the fact that in the months of January and February, the petitioner had purchased 153 MTs & 152 MTs. The 4th respondent was under a misconception that by lifting 103 MTs, the petitioner would satisfy the requirement of lifting 90% of the committed quantity. Further, it is averred in para 10 that the petitioner being aware of the terms of agreement relating to commitment bonus, instead of insisting on purchasing a minimum of 120 MTs, purchased only 103 MTs, this has resulted in a default, insofar as his entitlement to commitment bonus. It is also submitted that a mistake that has crept in the letter, dated 03.03.2006, is evident from the fact that on 01.03.2006, an offer letter was sent to the petitioner offering initial quantity of 150 MTs, as against which the petitioner has purchased only a quantity of 92 MTs by 08.03.2006. Subsequently, a further quantity of 60 MTs was offered to it on 08.03.2006, as against the same the petitioner purchased only a quantity of 11 MTs. Copies of letter, dated 03.03.2006, and offer letters, dated 01.03.2006 and 08.03.2006 and also invoice letter in proof of the quantity purchased are filed herewith. The above referred offer letters and invoices show that in spite of offering more than 150 MTs during March 2006, i.e. 210 MTs, in total, the petitioner lifted only a quantity of 103 MTs. In this connection, it is submitted that the petitioner's claim of covering the shortfall quantity in subsequent months and fulfilling 90% of quarter, is contrary to the fulfillment of Clause No. 2.5.0 and the quantity falls in the next quarter. Further, it is stated in para 11 of the counter that on a misconception of the manner in which entitlement to commitment bonus is to be worked, the petitioner was paid the commitment bonus on 27.07.2006. Subsequently, on noticing the mistake, a letter, dated 18.04.2007, was sent to the petitioner with a request to remit a sum of Rs. 1,73,654/- received by it towards commitment bonus, on account of wrong payment. Instead of making the said payment, which it received on account of a mistake and not being entitled to, the petitioner approached this Court by filing the present writ petition, which is not maintainable, as it is in the realm of a non-statutory contract. The petitioner is not justified in retaining the amount, which was paid, on account of mistake.
8. These are the respective stands taken by the parties in the respective pleadings.
9. The terms and conditions of the contract agreed upon between the parties, in a way, had been clearly set up in the respective pleadings of the parties. The relative clauses had been referred to and under what circumstances the mistake had been committed and the same had been noticed, and the letter, dated 18.04.2007, had been sent to the petitioner with a request to remit Rs. 1,73,654/-, received by it towards commitment bonus, on account of wrong payment, had been explained. Clauses 2.5.0 and 2.5.4 also had been referred to. Certain defaults committed by the petitioner also had been specified in the counter-affidavit.
10. There is no serious controversy between the parties that the agreement governing the authorities, Parties contains relating to jurisdiction under 2.12.0 and also relating to arbitration under 2.14.0 and the said clause relating to arbitration reads as under:
ARBITRATION: In the event of any dispute or difference between the parties hereto on the construction of any clause herein contained or rights, duties and liabilities of the parties hereto arising out of these presents including difference in price referred to in clause above, the same shall be referred to the Chairman-cum-Managing Director, Rashtriya Ispat Nigarn Limited, or his nominee as the sole Arbitrator. The decision of the sole Arbitrator shall be final and binding on both the parties to this Agreement. The arbitration proceedings shall be governed by the Indian Arbitration Act, 1940 and rules framed thereunder. The venue of Arbitration shall be at Visakhapatnam.
11. In contractual obligations, in normal circumstances, principles of judicial review cannot be invoked to enforce such obligations. But, when the contractual power is being used for public purpose, it is amenable to judicial review as observed in Binny Limited v. V. Sadasivan 2005 (6) SCJ 156. Article 226 of the Constitution of India applies to contractual powers of Government and its instrumentalities to prevent arbitrariness on favortism within limitations and Article 14 of the Constitution of India to be kept in mind as held in Thota Venkateshwara Prasad v. Government of Andhra Pradesh . In Deepika Constructions v. Government of Andhra Pradesh , the enforcement of contractual obligations arising out of terms and conditions of agreements had been dealt with. The decision in Government of A.P. v. Sri Rama Engineering Constructions was distinguished and the decision in ABL International Ltd., v. Export Credit Guarantee Corporation of India Ltd. had been followed. It is no doubt true that it cannot be laid down as broad proposition that in a contractual field, when the parties are governed by contractual obligations, the writ jurisdiction under Article 226 of the Constitution of India cannot be invoked, at all, under any circumstances. It may be that on the touch stone of Article 14 of the Constitution of India or otherwise, and within the permissible limits, may be, the writ Court may exercise the power of judicial review. But, the same to be within the clear specified limitations and not beyond thereto. Normally, the writ Court would be very slow in interfering with such matters, where the parties are governed by the contractual obligations, especially in a non-statutory contract.
12. In the light of the facts and circumstances, and in view of the fact that several factual controversies are involved in the matter and also in the light of the availability of arbitration clause, the petitioner is given liberty to invoke the arbitration clause, if the petitioner is so advised and no relief, as prayed for, in the writ petition, can be granted.
13. Accordingly, with the above observations, the writ petition is disposed of. It is needless to say that the interim order granted earlier by this Court stands vacated. There shall be no order as to costs.