Madhya Pradesh High Court
A To Z Infrastructure Ltd. Thru. Rahul ... vs Urban Administration And Development ... on 20 January, 2016
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W.P. No.6922/2015
20.1.2016
Shri V. Lashkari, learned counsel for the petitioner.
Shri Manoj Munshi, learned counsel for respondents
No.3,4 and 5.
Heard.
2. By this writ petition under Article 226 of the Constitution of India, the petitioner is praying for the following relief :-
"(a) That the impugned termination order Dt.28.8.2015 (Annexure P/21) may kindly be ordered to be quashed.
(b) That the Respondents may kindly be directed to refund the amount encashed from the Bank Guarantees (Annexure P/2) up till finalization of the adjudication of the dispute raised by the Petitioner Company in terms of the agreed terms and conditions of the contract as also in view of the Full Bench Decision of the Hon'ble Madhya Pradesh High Court by further directing to the Respondents to refund the amount with interest and an exemplary amount of cost or compensation may kindly be awarded.
(c) That the order of Debarment of the petitioner company passed on 28.8.2015 by respondent (Annexure P/21) may kindly be quashed.
(d) That any other relief which this Hon'ble Court may deem fit may also be kindly given, with cost."
3. It is not in dispute that the contract in question contains an arbitration clause in terms of Section 7 of the Arbitration and Conciliation Act, 1996. Clause 45 reads as under :-
"If a dispute(s) of any kind whatsoever arises between the Contractor and the Competent Authority's Representative the same shall be referred to the Competent Authority for his decision with detailed justification. Such reference shall be stated that it is in pursuance to this clause and is for reviewing and giving decisions by the
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Competent Authority. The Competent Authority shall give its decision within fifteen (15) days of receipt of notice. If contractor is not satisfied with the decision of the Competent Authority of the Competent Authority fails to give the decision within the period of fifteen days from the date of receipt of notice under this clause, such dispute may be referred to arbitration as per Arbitration and Conciliation Act, 1996."
4. From the perusal of the aforesaid, it is clear that the mechanism for resolution of dispute through arbitration has been provided under clause 45 of the contract that in case the contractor is not satisfied with the decision of Competent Authority or the Competent Authority fails to give decision within the period of 15 days, such dispute may be referred to arbitration as per Arbitration and Conciliation Act, 1996.
5. The present dispute is in respect of termination of the contract due to non-performance by the petitioner, would squarely falls within the ambit of Clause 45 of the contract.
6. The petitioner had committed a breach of terms of agreement from time to time and, therefore, the bank guarantee has been encahsed under Clause 51 and 52 of the agreement.
7. In respect of refund of performance security, which has been released by encashing the bank guarantee as provided under Clause 51 and 52 of the contract of the petitioner after following due process of law, as the bank guarantee has already been encashed by the Municipal Corporation, Indore and
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therefore, the proper course of petitioner is to file a civil suit for recovery of the bank guarantee amount.
8. Learned counsel for the petitioner placed reliance in the matter of B.B. Verma & Anr. V/s. State of M.P. & Anr. reported as 2008 (1) M.P.H.T. 17. In case of B.B. Verma & Anr. V/s.
State of M.P. & Anr. (supra) the issue was pertaining to recovery of the additional expenses from the original contractor by the State Government for getting the unexecuted part of the work completed by another Contractor in terms of clause 4.3.3.1 of the agreement, which was before the Hon'ble Court in that case.
The Full Bench of this Court has termed such recovery as in the nature of damages under Section 73 of the Indian Contract Act.
Whereas, in the present case, there is no recovery of damages as provided under Section 73 of the India Contract Act and, therefore, the said judgment is distinguishable on the facts of present case. In respect of imposition of prohibition for a period of 5 years to take part in any bid or contract of the Corporation in future is concerned till today the Municipal Corporation has not taken any step for imposing prohibition except mentioning its intention and rights to impose such prohibition and other punitive actions. The statement has been made at bar by Shri Manoj Munshi, learned counsel for respondents No.3, 4 and 5 that no notice has yet been served upon the petitioner. The Corporation
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has terminated the contract subject to imposition of penalties including imposition of prohibition and has reserved it's right to take appropriate steps in future. The relevant para of termination notice reads as under :-
"Please note that the termination of the Contract is subject to levy of penalty and other charges as provided in the agreement and also under the applicable laws, including imposition of prohibition for a period of 5 years upon you to take part in any bid or contract of the corporation in future. The Corporation reserves all its rights to levy penalties, to claim compensation, losses and damages due to non-performance and breaches of terms of the Agreement as committed by you."
9. In view of the aforesaid, the contention that the petitioner that he has been black listed for a period of 5 years has no force nor decision cited by petitioner in the case of Erusian Equipment & Chemicals Ltd V/s.State of West Bengal & Anr.
reported as AIR 1975 SC 266 and Sourthern Painters V/s. AIR 1994 SC 1277 will be applicable nor the petitioner will get any help from the aforesaid judgments because at present no action of black listing the petitioner for a period of 5 years as stated by the petitioner has been taken and thus, if petitioner received any show cause notice from the Municipal Corporation, Indore, he may file his reply and point out both the decisions of the Apex Court before the learned authority, so that action be taken accordingly after applying the principles laid down by the Apex
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Court.
10. It has also been pointed out by the learned counsel for the Municipal Corporation that against the impugned order the petitioner has filed two applications for grant of interim injunction before the District Court under Section 9 of the Arbitration and Conciliation Act, 1996.
11. In earlier round of litigation the writ petition filed by the petitioner was dismissed by order dated 15.5.2015 passed in W.P.No.3294/2015, which reads as under :-
"Heard on the question of admission.
2. By this writ petition under Article 226 of the Constitution of India, the petitioner is praying for the following relief:-
7.1 Issue a writ, order or direction in the name of CERTIORARI to quash the termination notice ANNEXURE P/1 dated 19.03.2015.
7.2 Issue a writ, order or direction in the nature of CERTIORARI to compel the respondents to hold an investigation in terms of clause 39 of the Agreement ANNEXURE P/2 giving full opportunity to the petitioner into the question whether the petitioner has failed to properly perform the operations in accordance with the agreement;
7.3 In the event of the investigation as above leading to the conclusion that there was failure on the part of the petitioner to perform the operations in accordance with the agreement, direct the respondents by a writ, order or direction in the nature of MANDAMUS to give opportunity to the petitioner in terms of Clause 39 of the Agreement ANNEXURE P/2 to rectify the failure within a reasonable time; 7.4 Issue a writ, order or direction in the nature of MANDAMUS to the respondents to
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hold an enquiry whether the petitioner was guilty of a serious/major default in terms of clause 38.b of the Agreement ANNNEXURE P/2;
7.5 Issue a writ, order or direction in the nature of MANDAMUS to appoint a Committee comprising of a retired Judge of this Hon'ble Court and a senior Chartered Accountant having a standing of at least 15 years or any other independent and objective committee to examine the records of the Indore Municipal Corporation and determine (a) the amount payable by the Indore Municipal Corporation to the petitioner as tipping fee for collection and transportation of municipal solid waste as envisaged in the Agreement ANNEXURE P/2 until the date of this writ petition and (b) the illegal deductions and thereafter commanding the Indore Municipal Corporation to make the payment along with interest @ 24% per annum on the tipping fees found payable to the petitioner;
7.6 Issue a writ, direction or order in the nature of MANDAMUS to compel the Indore Municipal Corporation to make payment of the pending admitted bills and future monthly bills of the petitioner into the petitioner's Account No.543701010050185 in Vijay Nagar, Indore Branch of the Union Bank of India;
7.7 Issue a writ, direction or order in the nature of MANDAMUS to compel the Indore Municipal Corporation to take steps in terms of clause 52.c of the Agreement ANNEXURE P/2; 7.8 Issue a writ, direction or order in the nature of MANDAMUS to direct the above Committee of a retired Judge of this Hon'ble Court and a senior Chartered Accountant to examine the loss and damages, if any, which may be claimed by the Indore Municipal Corporation against the petitioner; 7.9 Alternatively, issue a writ, order or direction in the nature of MANDAMUS to compel the Indore Municipal Corporation to sit with the petitioner to determine loss or damage which may be claimed by the Indore Municipal
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Corporation fairly and objectively; 7.10 Issue a writ, order or direction in the nature of MANDAMUS commanding the Indore Municipal Corporation to refrain from forfeiting the bank guarantees lying deposited with Commissioner of the Indore Municipal Corporation drawn upon IDBI Bank Limited amounting to Rs.5 Crores with further directions to refrain from forcing the petitioner to further renew the bank guarantee in view of the fact of delay in implementation of agreement by the Indore Municipal Corporation.
7.11 Issue any further or other writ order or direction as this Hon'ble Court may deem fit and proper under the facts and circumstances of the case.
7.12 Award the cost of the petition in favour of the petitioner.
3. Brief facts of the case are that the Contract for collection, segregation, transportation and disposal of municipal solid wastes at designated sites, implementation of scientific solid waste management systems and renovation, operation, maintenance and construction of garbage dumping centres, landfill sites, workshops sites and public convenience sites as per the instructions and guidelines issued by local authorities has been awarded to the petitioner in accordance with Municipal Solid Waste (Management and Handling) Rules, 2000.
4. An agreement was signed with the petitioner on 24/01/2009. As per the agreement, the petitioner is responsible to create an effective garbage collection and transportation at Indore.
5. Clause 39 and 40 deals with the termination of contract due to event of default which reads as under:-
39. Termination of Contract Due to Event of Default:
Contractor event of default:
. At any time after the Commencement Date,
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the Competent Authority may investigate where the Contractor has failed to properly perform the operations in accordance with this contract. The Competent Authority shall issue a notice to the Contractor, instructing him to rectify the failure within a reasonable time.
. An event of default on the part of the Contractor, which results from the Contractor being unable to fulfill his service obligations under the contract, shall be deemed as serious default, and is said to have occurred due to any of the following causes:
. The Contractor
(i) has repudiated the Contract, or
(ii) without reasonable excuse has failed to commerce operations in accordance with this contract and or failed to complete the activities/operations within the time stipulated for completion.
. Gross misconduct of the Contractor;
(i) Despite previous warning from the Competent Authority, in writing, is otherwise persistently or flagrantly neglecting to comply with any of his obligations under the Contract;
(ii) The Contractor persistently fails to follow Good Operating Practices in execution of the Contract;
(iii) The Contractor stops providing the operations and the stoppage has not been authorized by the Competent Authority;
(iv) The Competent Authority gives notice that failure to correct a particular defect is a fundamental breach of contract and Contractor fails to correct it within a reasonable period of time determined by the Competent Authority;
(v) If the Contractor is in breach of any law or statute governing the Operations;
(vi) The Contractor, in the judgment of the Corporation, has engaged in Corrupt and Fraudulent Practices in competing for or in carrying out the Operations under the Contract;
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(vii) The Contractor ( in case of a consortium) has modified the composition of the consortium and/or the responsibility of each member of the consortium without prior approval of the Corporation;
(viii) The Contractor is unable to maintain the composition and structure of his organization due to any of the following causes:
. The Contractor enters into voluntary or involuntary bankruptcy, or liquidation; . The Contractor becomes insolvent; . A receiver, administrator, trustee or liquidator is appointed over any substantial part of its assets, and . Any act is done or event occurs with respect to the Contractor or his assets, which, under any applicable law has substantially similar effect to any of the foregoing acts or events.
40. Termination of Contract Due to Event of Default Without prejudice to any other right or remedy which IMC may have in respect thereof under this contract, upon the occurrence of Contractor Event of Default, the IMC may, subject to the provisions of this contract, terminate this contract in the manner as set out under
(a) If IMC decides to terminate this contract upon the occurrence of a Contractor to the major Default, in the first instance, he shall issue preliminary notice to the Contractor. Within fifteen (15) days of receipt of preliminary notice, the Contractor shall submit to IMC through the Competent Authority in sufficient detail, the manner in which he proposes to cure the underlying Event of Default. In case of non-
submission of the Contractor's proposal to rectify within the said period of fifteen (15) days, IMC shall be entitled to terminate this Contract by issuing termination notice and to appropriate Security Deposit and carry out the operations through a Successor Contractor or by Corporation
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at the risk and cost of the Contractor. If the total amount due to the Corporation exceeds any payment due to the Contractor, the difference shall be a debt payable to the Corporation.
(b) If the Contractor's proposal to rectify the underlying event of default is submitted within he period stipulated therefore, the Contractor shall have further period of fifteen (15) days to remedy/cure the underlying event of default. If, however the contractor fails to remedy/cure the underlying event of default within such further period allowed, IMC shall be entitled this contract, by issue of termination notice and to appropriate to security deposit and carry our the operations through a Successor Contractor or by Corporation at the risk and cost of the Contractor. If the total amount due to the Corporation exceeds any payment due to the Contractor, he difference shall e a debt payable to the corporation.
6. The Municipal Corporation, Indore issued various notices to the petitioner for deficiencies in services vide letter dated 1/08/13, 10/3/14, 13/04/14 and 26/05/2014 but no sincere effort was made by the petitioner for improvement in services. On 19/03/2015(Annexure-P/1), termination notice has been issued to the petitioner as to why agreement for collection and transportation of municipal solid waste dated 24/01/2009 was not terminated
7. Learned Senior Counsel for the petitioner submits that today the Indore Municipal Corporation, Indore is going to terminate its contract. He submits that 300 employees are working from last since 6 years and action of termination is contrary to the terms and contract of agreement and prayed that the respondents be restrained from taking any adverse action against him.
8. It is not in dispute that the procedure has been prescribed for disputes and arbitration. Clause 45 of the agreement reads as under:-
45. Procedure for Disputes & Arbitration
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If a dispute(s) of any kind whatsoever arises between the Contractor and the Competent Authority's Representative, the same shall be referred to the Competent Authority for his decision with detailed justification. Such reference shall be stated that it is in pursuance to this clause and is for reviewing and giving decisions by the Competent Authority. The Competent Authority shall give its decision within fifteen (15) days of receipt of notice. If Contractor is not satisfied with the decision of the Competent Authority fails to give the decision within the period of fifteen (15) days from the date of receipt of notice under this clause, such a dispute may be referred to arbitration as per Arbitration and Conciliation Act, 1996 All legal matters are subjected to Indore Jurisdiction only.
9. On due consideration of the arguments of the learned Senior Counsel for the petitioner, firstly, the contract between the parties is a contract in the realm of private law. It is governed by the provisions of the contract Act or may be,also by certain provisions of the sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for Civil court as the case may be and the further question whether retention or refusal to pay any amount by the Government is justified, or not are all matters which cannot be agitated in or adjudicated upon in a writ petition.
10 Accordingly, the writ petition filed by the petitioners restraining the respondents from taking any adverse action against him is wholly misconceived and is not maintainable in law.
11. There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing inter a1ia for settlement of disputes by reference to arbitration. The Arbitrators can decide both
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questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extra-ordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy - in this case, provided in the contract itself - is a good ground for the court to decline to exercise its extra-ordinary jurisdiction under Article 226. The said Article was not meant to supplant the existing remedies at law but only to supplement them in certain well-recognized situations. As pointed out above, the prayer of the petitioner is wholly misconceived.
12. For the reasons mentioned hereinabove, we dismiss the writ petition. It shall be open to the petitioner, if it so chooses, to either raise a dispute and ask for reference of the dispute to arbitration as provide by the contract or to approach the civil court according to law, as the case may be."
12. As per Annexure P/15, the arbitration case has been filed by the petitioner under Section 9 of the Arbitration and Conciliation Act, 1996.
13. The contract in question between the parties is a contract in the realm of private law. It is governed by the provisions of the Indian Contract Act. The dispute relating to interpretation of the terms and conditions of such contract cannot be adjudicated in a writ petition. That is a matter of either for arbitration as provided by the contract as the arbitrator can decide both the questions of fact as well as questions of law. The petitioner is not seeking to enforce any statutory right of theirs nor he was seeking to
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enforce any statutory obligation cast upon the respondents.
14. For these reasons, the writ petition filed by the petitioner has no merit and is accordingly dismissed.
However, it shall be open to the petitioner, if it so chooses to either raise a dispute and asked for reference for the dispute to arbitration as provided by the contract or approach the M.P. Arbitration Tribunal / Civil Court in accordance with law, as the case may be, in the circumstances of the case.
(P.K. JAISWAL) (JARAT KUMAR JAIN)
JUDGE JUDGE
ss/-