Jharkhand High Court
M/S. Hindustan Produce Company vs Steel Authority Of India Ltd on 14 February, 2018
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No.-2693 of 2017
M/s. Hindustan Produce Company, a Partnership Firm having its
office at- 7 Clyde Road, Hastings, Kolkata, West Bengal through one
of its partners Mr. Puneet Keyal, son of Mr. Surendra Kumar Keyal,
resident of - 98, Christopher Road, Brindavan Garden Building, B-2,
6th Floor, Flat no. 3, P.O.- Govind Khatik Road, P.S.- Topsia, Kolkata
(West Bengal) ...Petitioner
-V e r s u s-
1. Steel Authority of India Ltd, a Public Sector Undertaking,
through its Managing Director, Bokaro Steel Plant having his office
at Ispat Bhawan, Bokaro Steel Plant, Bokaro Steel City, Bokaro
2. SAIL Refractory Unit (Bokaro), a Unit of Steel Authority of
India Ltd. through its Deputy General Manager (Materials
Management Department), having its office at Indira Gandhi Marg,
Sector-IV, Bokaro Steel City, Bokaro
3. SAIL Refractory Unit (Bhilai), a Unit of Steel Authority of India Ltd.
through its Deputy General Manager (Materials Management Department)
having his office at- Maranda, PO and P.S.- Civic Center, Bhilai, District-
Durg (Chhatisgarh)
4. SAIL Refractory Unit (Ranchi Road), a Unit of Steel Authority of
India Ltd. through its Deputy General Manager (Materials Management
Department) having his office at SRU Ranchi Road Plant, PO & PS- Marar,
District- Ramgarh (Jharkhand)
.... Respondents
CORAM: - HON'BLE MR. JUSTICE RAJESH SHANKAR For the Petitioner :- Mr. M.S. Mittal, Sr. Advocate For the Respondents-SAIL :- Mr. Shresth Gautam, Advocate Order No.-14 Dated: 14.02.2018 The present writ petition has been filed for quashing the communication dated 25.03.2017 and 31.03.2017 whereby the recovery of Rs.1,90,35,675/- against the petitioner on account of Risk Purchase Differential Action relating to Purchase Order No. P38.0/P 126/91042 dated 19.02.2007 has been made. It has further been prayed for directing the respondents to forthwith release all the amount payable to the petitioner under the contracts entered between them.
2. The factual matrix of the case as stated in the writ petition is that pursuant to a Global Notice Inviting Tender dated 31.08.2015 issued by the respondent no.2, the petitioner participated in the 2 tender and was declared a successful bidder and consequently a Purchase Order dated 19.03.2016 bearing Ref. No. SAIL- SRU/HO/16-17/900-GR 96%/1110000092 for supply of 900 tons of 96% Natural Flaky Graphite for SRU, BRP was issued by the respondent no. 2 to the petitioner for supply of the concerned materials at the site location of SAIL Refractory Unit (Bhilai) (respondent no. 3). The petitioner supplied the complete quantity of 900 Tons of Materials to respondent no. 3 with the last supply made on or around 24.02.2017. The respondents paid the due amount to the petitioner from time to time as per the supply and the invoices raised by it. The respondents issued a Repeat Order dated 03.02.2017 bearing Ref. No. SAIL-SRU/HO/16-17/FG96/110000169 to the petitioner for supply of 105 MT of Graphite 96% to SAIL Refractory Unit, Ranchi Road, RRP (respondent no.4). Since the petitioner had not initially submitted the Bank Guarantee for an amount of Rs. 22,67,181/- as security deposit in terms with the Purchase Order dated 19.03.2016, the bill of equal amount was withheld as security deposit. Subsequently, the petitioner submitted its Bank Guarantee of Rs.2267181/- and prayed for release of its bill which was withheld in lieu of the security deposit. The respondent no. 3 intimated the petitioner vide email dated 25.03.2017 that as per the direction of the respondent no.2, Rs. 1,90,35,675/- is recoverable from it and therefore the amount withheld against security deposit from its running bill will be released only after clearance from the respondent no. 2. The petitioner raised objection with regard to withholding of its running bill as security deposit and also for recovery of alleged dues. The purchase account department of the respondent no. 1 vide e-mail dated 31.03.2017 informed the petitioner that the recovery has been contemplated as per Risk Purchase Differential Action against the petitioner relating to Purchase Order No. P38.0/P126/91042 dated 19.02.2007.
3. Mr. M.S Mittal, learned Senior Counsel appearing on behalf of the petitioner submits that the order of recovery has been passed without any notice to the petitioner and as such it vitiates due to violation of the principles of natural justice. It is further submitted 3 that the Purchase Order against which an amount of Rs.1,90,35,675/- has been demanded relates to the Purchase Order No. P38.0/P126/91042 dated 19.02.2007. Under 2007 Purchase Order, the petitioner was to supply 225 MT of Ferro Chrome Low Carbon to the respondents. As per the terms and condition of the Purchase Order, the inspection was to be carried out by the respondents before delivery. The respondents inspected 100 MT and out of which 90 MT was approved and the same was supplied. However, the rest material was not inspected by the respondents in spite of the inspection request of the petitioner. Thereafter, the respondents issued a letter dated 08.02.2008 under the 2007 Risk Purchase Order alleging that the respondents will purchase the balance materials from the alternative sources. The petitioner filed Misc. Case No. 1732 of 2008 before the City Civil Court, Calcutta in which stay was granted during the pendency of the said case. It is further submitted that though the arbitration clause exists in the agreement, yet it does not fetter the plenary power of this Court in writ jurisdiction. The learned Senior Counsel put reliance upon a judgment rendered by the Hon'ble Supreme Court in the case of Gangotri Enterprises Limited Vs. Union of India & Others reported in (2016) 11 SCC 720 and submits that if a party commits breach of contract, the other party has the remedy to file a suit for damages, it however has no right to appropriate the amount of the party from other pending bills.
4. Per contra, Mr. Shresth Gautam, learned counsel appearing on behalf of the respondents submits that there is an arbitration clause in the tender agreement, hence the present writ petition is not maintainable. It is further submitted that the recovery has been sought as per the terms and conditions of the contract. It is also submitted that Misc. Case No. 1732 of 2008 filed by the petitioner before the City Civil Court, Calcutta has already been dismissed on 17.03.2012 on the ground of maintainability with an observation that the Civil Court, Bokaro Steel City has the jurisdiction to entertain the matter. The petitioner has not agitated the matter before the Civil Court, Bokaro till date in terms with the observation 4 of the City Civil Court, Calcutta. As per the conditions of the contract, if material is not supplied as per the delivery schedule, dispatch clearance is to be obtained from the purchase department of the respondent no. 1 before making the supply, failing which materials are not to be accepted. The petitioner had supplied only 90 MT and as such 135 MT remained unsupplied for which the petitioner was sent reminders but it failed to supply as per the terms of the Purchase Orders. The petitioner was served with a notice dated 07.03.2008 to complete the supply making it clear that in the event of failure, the SAIL will have no option but to procure the unsupplied materials from alternative sources at the risk and cost of the petitioner. It is further submitted that the petitioner did not intimate the respondents about the filing of Misc. Case No. 1732 of 2008 and as such during the pendency of Misc. Case No. 1732 of 2008, the respondent no. 1 considering the urgency, purchased 135 MT of materials from M/s Kothari Metals Ltd., Kolkata on 15.07.2008 and thus the respondent no. 1 suffered loss of Rs.1,90,35,675/- which it is entitled to recovere from the petitioner with interest. Learned counsel appearing on behalf of the respondents puts reliance on a judgment of the Hon'ble Supreme Court rendered in the case of H.M. Kamaluddin Ansari and Co. Vs. Union of India and Others reported in (1983) 4 SCC 417 and submits that an injunction order restraining the respondents from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay the said amount to the contractor.
5. Heard the learned counsel for the parties and perused the materials available on record. The respondents have raised preliminary objection with regard to maintainability of the writ petition on the ground of presence of an arbitration clause in the tender agreement as well as the observation made by the City Civil Court, Calcutta in Misc. Case No. 1732 of 2008 to the effect that the Civil Court, Bokaro Steel City has the jurisdiction to entertain the matter. On the other hand, the learned senior counsel for the petitioner has submitted that mere presence of an arbitration 5 clause in the agreement does not oust the jurisdiction of the writ court, particularly considering the arbitrary action of the respondents taken against the petitioner.
6. The Hon'ble Supreme Court in the case of Harbanslal Sahnia & Anr. versus Indian Oil Corporation Ltd. & Ors. reported in [2003] 2 SCC 107 has held as under:-
"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act and is challenged. 11. The present case attracts applicability of first two contingencies. Moreover, as noted, the petitioners dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."
7. In another case i.e. The Empire Jute Co. Ltd. and Ors. versus The Jute Corporation of India Ltd. and Anr. reported in [2007] 14 SCC 680 the Hon'ble Supreme Court as held under :
"19. Similar question arose for consideration in M/s. Bisra Stone Lime Co. Ltd. etc. Vs. Orissa State Electricity Board and another [AIR 1976 SC 127] wherein it was held that the High Court may refuse to exercise its jurisdiction, if there exists a valid arbitration clause stating;
24. It is then submitted that this Court should not use its discretion in favour of arbitration in a matter where it is a pure question of law as to the power of the Board to levy a surcharge. This submission would have great force if the sole question involved were the scope and ambit of the power of the Board under Sections 49 and 50 of the Act to levy a surcharge, as it was sought to be initially argued. The question in that event may not have been within the content of clause 23 of the agreement. But all questions of law, one of which may be interpretation of the agreement, need not necessarily be withdrawn from the domestic forum because the court has discretion under Section 34 of the Arbitration Act or under Article 226 of the 6 Constitution and that the court is better posted to decide such questions. The arbitration clause 23 is a clause of wide amplitude taking in its sweep even interpretation of the agreement and necessarily, therefore, of clause 13 therein. We are therefore, unable to accede to the submission that we should exercise our discretion to withhold the matter from arbitration and deal with it ourselves.
20. A similar view was taken by this Court in Sanjana M. Wig (Ms) Vs. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242 holding;
12. The principal question which arises for consideration is as to whether a discretionary jurisdiction would be refused to be exercised solely on the ground of existence of an alternative remedy which is more efficacious. Ordinarily, when a dispute between the parties requires adjudication of disputed question of facts wherefor the parties are required to lead evidence both oral and documentary which can be determined by a domestic forum chosen by the parties, the Court may not entertain a writ application
13. However, access to justice by way of public law remedy would not be denied when a lis involves public law character and when the forum chosen by the parties would not be in a position to grant appropriate relief."
8. On perusal of both the aforesaid judgments of the Hon'ble Supreme Court, it would appear that the presence of arbitration clause in the agreement does not by itself oust the writ jurisdiction of the High Court. The High Court may exercise writ jurisdiction in three situations; (i) when the writ petition seeks enforcement of any of the Fundamental Rights; (ii) where there is failure of observance the principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. However, if there exists disputed question of facts where the parties are required to lead evidence both oral and documentary which can be determined by a domestic forum chosen by the parties, the court may not exercise a writ jurisdiction.
9. The Hon'ble Supreme Court rendered in the case of Joshi Technologies International Inc. v. Union of India, reported in (2015) 7 SCC 728, held as thus:-
"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no 7 doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances."
10. In the aforesaid case, the Hon'ble Supreme Court has held that if a particular mode of settlement is provided in the contract itself, the High Court may refuse to exercise its discretion and relegate the party to the said mode of settlement. When the relief sought in the writ petition is primarily a monetary claim arising out of contractual obligations, the writ petition is to be entertained only in exceptional circumstances.
11. Now coming back to the factual context of the present case. The dispute between the parties is with regard to supply of materials in pursuance of Purchase Order No. P38.0/P126/91042 dated 19.02.2007. The contention of the petitioner is that 125 MT material was not inspected by the respondents in spite of its request and suddenly letter dated 08.02.2008 was issued under the Risk Purchase Order dated 19.02.2007 alleging that the respondents would purchase the balance materials from the alternative sources. The respondents have however alleged that 125 MT material was neither supplied nor an inspection was offered by the petitioner in spite of repeated requests of the respondents, as a result of which letter dated 08.02.2008 was issued to the petitioner. The said allegations and counter allegations made by the parties cannot be 8 adjudicated in the writ jurisdiction as the same requires adducing of evidences by both the sides. The respondents have also contended that purchase of the materials from M/s. Kothari brothers caused monetary loss to them which is sought to be recovered from the petitioner. However, ascertainment of the actual damage caused to the respondents also requires leading of evidences by the parties. Moreover, the monetary claim/ counter claim made by both the parties relating to the subsequent purchase order also arises out of the contractual obligation between the parties. As such, in view of the judgment of the Hon'ble Supreme Court passed in Joshi Technologies International (supra), the present writ petition is not maintainable. Moreover, the petitioner had earlier moved before the City Civil Court, Calcutta by filing a Misc. Case No. 1732 of 2008 which has already been dismissed vide order dated 17.03.2012 for want of jurisdiction.
12. In view of aforesaid facts and circumstance, I am not inclined to entertain the present writ petition. The same is accordingly dismissed. However, the petitioner is at liberty to agitate the matter before the appropriate forum in accordance with law.
(Rajesh Shankar, J.) Ritesh/ A.F.R