Kerala High Court
Apex Hvac Services Pvt. Ltd vs Union Of India on 8 January, 2025
Author: T.R.Ravi
Bench: T.R.Ravi
W.P.(C)No.7485 of 2024
2025:KER:690
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE T.R.RAVI
WEDNESDAY, THE 8TH DAY OF JANUARY 2025 / 18TH POUSHA, 1946
WP(C) NO. 7485 OF 2024
PETITIONER:
APEX HVAC SERVICES PVT. LTD.,
E-190, KRISHNA MARKET, -1,
LAJPAT NAGAR,
NEW DELHI,
REPRESENTED BY ITS DIRECTOR,
MR. KAPIL KUMAR TYAGI,
AGED 40 YEARS,
S/O. SHEORAJ SINGH TYAGI,
PIN - 110024
BY ADVS.
SRI PERCIVAL BILLIMORRIA (SR.)
SRI GIRISH KUMAR M S
SRI AKASH S.
RESPONDENT/S:
1 UNION OF INDIA
REPRESENTED BY ITS SECRETARY,
MINISTRY OF DEFENCE, SOUTH BLOCK,
NEW DELHI, PIN - 110011
2 CHIEF ENGINEER (NW}
MILITARY ENGINEER SERVICES,
NAVAL BASE P.O., KOCHI.,
PIN - 682004
W.P.(C)No.7485 of 2024
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3 GARRISON ENGINEER (P),
MILITARY ENGINEER SERVICE, INA EZHIMLA POST,
KANNUR, PIN - 670310
BY ADVS
SRI G.HARIKUMAR (GOPINATHAN NAIR)
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
4.6.2024,THE COURT ON 08.01.2025 DELIVERED THE FOLLOWING:
W.P.(C)No.7485 of 2024
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T.R. RAVI, J.
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W.P.(C)No.7485 of 2024
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Dated this the 8th day of January, 2025
JUDGMENT
The prayer in the writ petition is to quash Exts.P1 and P31 and for a direction to the 2 nd respondent to issue an order extending the time for completion of work "Setting up of Single Accommodation for Officers as a part of Infrastructure Augmentation at INA, Ezhimala (Phase II)", till 31.01.2024. Ext.P1 is an order in C.M.(Arb.)No.2 of 2023 passed by the Commercial Court, Kochi on 19.01.2024. Ext.P31 is a notice of e-tender for the work "Completion of incomplete works for Setting up Single Officers' Accommodation as a part of Augmentation of Infrastructure and Facilities at INA, Ezhimala (Phase- II)".
2. The petitioner was the successful bidder for the above work which was tendered on 10.01.2019 as per Ext.P2 and Ext.P3 dated 24.5.2019 is the letter of acceptance. Ext.P4 is the work order issued to the petitioner on 4.6.2019. The period for completion was 18 months, to end on 30.11.2020. Ext.P5 is the W.P.(C)No.7485 of 2024 2025:KER:690 -4- General Conditions of Contract. Clause 11 of Ext.P5 says time is the essence of the contract and provides for a reasonable extension in case of force majeure. Clause 70 is the arbitration clause which will be dealt with later.
3. On 3.10.2020, the petitioner sent Ext.P6 letter seeking extension of time for completion of the work from 1.12.2020 to 30.11.2021. By Ext.P7 dated 26.12.2020, the time was extended till 23.08.2021. On 8.4.2021, the respondent wrote to the petitioner stating that the progress of work, even after two years, was only 18%, and the petitioner was directed to accelerate the work. The letter is produced as Ext.R2(b) along with the counter affidavit of the respondent. Ext.R2(c) dated 3.5.2021 is an undertaking by the petitioner to increase the work force and the pace of the work. Before the extended time expired on 23.8.2021, the petitioner sent Ext.P10 letter dated 7.7.2021, again seeking an extension till 31.3.2022. By Ext.P14 dated 1.2.2022, the time was extended till 31.3.2022. However, the work was not completed. On 19.5.2022, the respondent issued Ext.R2(d) notice to the petitioner stating that even after three years, the progress of work is only 33.5%, that the average number of labour deployed was 7 W.P.(C)No.7485 of 2024 2025:KER:690 -5- to 8 against a minimum of 30 required, for progress at the desired rate, and that despite earlier notices, the petitioner neither accelerated the work nor increased the labour force. The petitioner was directed to improve the state of affairs in 15 days. On 14.6.2022, the petitioner wrote Ext.P15 letter seeking an extension of time till 13.11.2022. On 12.7.2022, Ext.P16 letter was sent, seeking an extension of time till 30.11.2022. The petitioner re-started work from 12.7.2022 with 8 labourers and assured to increase it to 25 to 30 within the next 4 to 5 days. Even thereafter the work did not progress. On 20.4.2023, the respondent sent Ext.P18 notice referring to the video conferencing held on 2.1.2023, wherein the petitioner had sought 1½ half months' time for improving the rate of progress and pointing out that the rate of progress was less than one percent and the number persons employed was only 2 to 3. The petitioner was again asked to improve the state of affairs in the next 15 days. On 9.5.2023, by Ext.P19, the respondent rejected the request for the extension of time. The respondent noted that all the claims made by the petitioner were baseless and that the total progress of work in the preceding six months was only 0.5%.
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4. On 10.5.2023, the respondent invoked clause 54 of the agreement and issued Ext.P20, terminating the contract. As can be seen, against the completion period of 18 months, four years were granted to the petitioner, and the progress of work was only 34.5%. Despite the termination of the contract, the petitioner sent Ext.P21 dated 2.6.2023, seeking an extension of time till 31.12.2023. The petitioner also filed W.P.(C)No.18066 of 2023, seeking directions to the 2nd respondent to consider and pass orders on Ext.P21 request. The writ petition was disposed of by Ext.P24 judgment, directing consideration of Ext.P21 after hearing the petitioner. The petitioner was thereafter heard, and by Ext.P30 dated 27.6.2023, the respondent rejected the request made in Ext.P21. The request of the petitioner to revoke the cancellation of the contract was also rejected. Thereafter, the petitioner filed W.P.(C)No.27285 of 2023, which was dismissed as not pressed, as per Ext.P33 judgment, granting liberty to the petitioner to approach this Court again, if necessary.
5. Thereafter, the petitioner filed C.M.(Arb.)No.2 of 2023 under Section 9 of the Arbitration and Conciliation Act, 1996 ('the 1996 Act' for short), praying for an order of injunction, restraining W.P.(C)No.7485 of 2024 2025:KER:690 -7- the respondents from awarding the contract for completion of the work which had been undertaken by the petitioner to a different contractor and for a direction to the respondents to extend the time for completion of the work by 6 to 7 months. By order dated 19.1.2024, the Commercial Court rejected the petition filed under Section 9 of the 1996 Act. It is aggrieved by the said order that this writ petition is filed.
6. Heard Senior Advocate Sri Percival Billimoria, instructed by Sri Girish Kumar M.S., on behalf of the petitioner and Sri Harikumar G., CGC, for the respondents.
7. The main contention on behalf of the petitioner is that Clause 70 of the General Conditions of Contract has a proviso which can be misconstrued to mean that an aggrieved party cannot seek the injunctive relief under Section 9 of the 1996 Act. It is contended that such a clause would defeat the statutory right. The relevant portion of Condition No.70 is extracted below;
"70. Arbitration.- All disputes, between the parties to the Contract(other than those for which the decision of the C.W.E. or any other person is by the Contract expressed to be final and binding) shall, after written notice by either party to the Contract to the other of them, be referred to the W.P.(C)No.7485 of 2024 2025:KER:690 -8- sole arbitration of an Engineer officer to be appointed by the authority mentioned in the tender documents.
Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Work or termination or determination of the Contract under Condition Nos. 55, 56 and 57 hereof.
Provided that in the event of abandonment of the Works or cancellation of the Contract under Condition Nos. 52, 53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Works completed by or through any other Contractor or Contractors or Agency or Agencies.
xxxxxxx xxxxxxx xxxxxxx "
8. The Senior Counsel sought to support the contention by referring to the decisions of the Hon'ble Supreme Court in Voestalpine Schienen GMBH v. DMRC Ltd. [(2017) 4 SCC 665], Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. [(2020) 20 SCC 760], Lombardi Engineering Ltd. V. Uttarakhand Jal Vidyut Nigam Limited [(2024) 4 SCC 341], Unitech Ltd. & Ors. v. Telengana State Industrial Infrastructure Corporation & Ors. [(2021) 16 SCC 35], Welspun Specialty Solutions Ltd. v. ONGC Ltd. (Civil Appeal Nos.2826-2827 of 2016) and the judgment of the Bombay High W.P.(C)No.7485 of 2024 2025:KER:690 -9- Court in L&T Finance Ltd. v. Diamond Projects Ltd. & Ors.
[Commercial Arbitration Petition No.1430 of 2019]. Reference is also made to the decision of a learned Single Judge of this Court in M/s. Ivrcl Limited v. Union of India [2015 SCC OnLine Kerala 13527] wherein this Court had considered the effect of clause No.70 referred above.
9. The counsel for the respondent contended that Ext.P1 order of the Commercial Court must be challenged in an appeal under Section 13 of the Commercial Courts Act and the petitioner is not entitled to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. It is also contended that without challenging Ext.P20 termination of the contract and Ext.P29 order rejecting the request for cancellation of the termination of the contract, there can be no challenge to Ext.P31, which is only an order rejecting the request for extension of time to complete the contract. It is also contended that since the contract between the parties is in the realm of private law and is not a statutory contract, the same cannot be the subject matter of a writ petition under Article 226 of the Constitution. Reliance is placed on the decision in Rajasthan Industrial Development and W.P.(C)No.7485 of 2024 2025:KER:690 -10- Investment Corporation & Anr. v. Gem Development Corporation & Anr. [(2013) 5 SCC 470]. On the merits, the counsel contends that the petitioner had been granted more than sufficient time to complete the work and even the normal working time for a day was relaxed till 8 p.m. to enable the completion of the work. It is further submitted that Ext.P1 order is not an order rejecting the petition for want of jurisdiction, but is an order on merits, holding that the petitioner is not entitled to an injunction, since Clause 70 has been inserted intentionally in the project of the defence sector, which has a direct nexus to the security of the nation. It is further submitted that even though arguments were raised assailing the proviso to Clause 70 of Ext.P5, there is no prayer for a declaration that the proviso is arbitrary and illegal and that this Court will not be justified in entertaining an argument that the proviso cannot be given effect to, in such circumstances. The counsel points out that a reading of the proviso to Clause 70 would show that it only casts a limited restriction in situations where the work is abandoned by a contractor or the contract is terminated under conditions 52, 53, or 54, which relate to corrupt acts by the contractor, insolvency, subletting by contractor or W.P.(C)No.7485 of 2024 2025:KER:690 -11- contractor's default. Another contention raised is that the petitioner has entered into the contract with open eyes and had worked under the said contract for more than four years and is now not entitled to plead invalidity of a clause, and that too, after the contract was terminated for non-performance.
10. I have considered the arguments advanced by the counsel for either side in extenso. Voestalpine Schienen (supra) was a case where the Apex Court was considering whether a party to a contract can appoint an arbitrator unilaterally and does not deal with the power of the Court under Section 9 of the Act to grant an injunctive relief. Perkins Eastman (supra), was also a case of appointment of an arbitrator by a party having interest in the dispute or its outcome. The above decisions are cited to support the contention that a part of the arbitration clause, which is objectionable, can be struck down. It is contended that the proviso to Clause 70, which restricts the reference, would affect the right of a party to file a petition under Section 9 of the Act. I do not find anything objectionable in the proviso, which has only a limited operation in cases of termination of the contract under Clauses 52, 53, or 54 alone. The proviso only has the effect W.P.(C)No.7485 of 2024 2025:KER:690 -12- of delaying the reference to arbitration in certain circumstances. The right of the party to the contract to challenge the termination of the contract is not in any manner taken away. The rights of a party to a contract in cases of wrongful termination are also not taken away. An application under Section 9 of the Act is also not affected, provided it is preferred prior to the termination of the contract under Clause 54. On the other hand, if the contention of the Senior Counsel is accepted and taken to its logical end, it would, in effect, be giving a premium for non-performance and the right to the awarder of the contract to invoke Clauses 52, 53, and 54 would become otiose.
11. The Senior Counsel relied on the decision in Lombardi (supra) to submit that the arbitration agreement cannot fall foul of any of the provisions of the Act or the Constitution of India. It was contended that the concept of "party autonomy" cannot be stretched to an extent where it violates the fundamental rights guaranteed under the Constitution. It is submitted that asymmetric conditions cannot be imposed. Such a situation does not arise in this case. This is not a case where the petitioner has invoked the arbitration clause and seeks reference to arbitration. W.P.(C)No.7485 of 2024
2025:KER:690 -13- The attempt of the petitioner is only to prevent the consequences that flow out of the termination of the contract, and that too, without challenging the termination. None of the fundamental rights or statutory rights of the petitioner are violated/affected by the order of the Commercial Court. Reliance was placed on the decision of the Hon'ble Supreme Court in Welspun (supra), to submit that time is not the essence of the contract. The Apex Court held that the mere reason that there is an explicit clause is not sufficient to make time the essence of the contract. Even if it were to be held that time is not the essence of the contract, in the case on hand, that would not in any manner render the Clauses 52,53 and 54 otiose, and the said clauses will also have their area of operation. Moreover, since the petitioner has not challenged the order of termination, the question whether the time is the essence of the contract does not arise for consideration.
12. The Bombay High Court in L&T Finance Limited (supra), held that the consideration of an application under Section 9 of the Act does not depend on the validity or otherwise of the arbitration agreement between the parties and has to be judged on the parameters of the three-fold test of prima facie W.P.(C)No.7485 of 2024 2025:KER:690 -14- case, the balance of convenience and irreparable injury or loss to the applicant, if relief is not granted. When an appeal is available as a remedy, this Court will not be justified in exercising its extraordinary discretionary jurisdiction under Article 226 to go into the merits of such issues. The decision in Unitech (supra) would not arise in the fact situation since this Court is not going into the question of maintainability of the writ petition but is refusing to exercise the discretion, as it is not called for. This is not a case where the application under Section 9 was rejected on the question of maintainability. The court has rejected the prayer for injunction finding that the proviso to Clause 70 has been inserted with a purpose. The purpose of the proviso to Clause 70 is only to ensure that the completion of the work is not hindered by a contractor, who has not admittedly completed the work even after 4 years. It is settled law that this Court cannot alter the contract entered into between parties.
13. In Ivrcl (supra), the learned Single Judge of this Court was considering the effect of Clause 70, on the law of limitation. The question before the Court was whether the period of limitation would start to run from the date of the breach of the contract or W.P.(C)No.7485 of 2024 2025:KER:690 -15- would be postponed to a future date, which would mean that the Department could delay the rearrangement of work and defeat the claim of the contractor. It was in that context that this Court held that the proviso is only an enabling provision and cannot be treated as a fetter on the right of the petitioner to seek remedies for breach of the contract. The said decision also does not apply to the facts of this case.
14. In Rajasthan Industrial Development and Investment Corporation (supra), the Hon'ble Supreme Court considered the contours of the jurisdiction of the writ court in matters relating to terms of a contract and held that the writ court cannot be the forum to seek any relief based on terms and conditions incorporated in the agreement between the parties. The Apex Court held that the writ does not lie to create or to establish a legal right, but to enforce one that is already established. It was further held that discretion in such cases should be exercised on grounds of public policy, public interest, and public good. It was also held that the contract has to be interpreted strictly, without altering the nature of the contract, as it may affect the interest of either of the parties adversely. The above judgment justifies the W.P.(C)No.7485 of 2024 2025:KER:690 -16- earlier conclusion of this Court that this is not a case in which this Court should be exercising its extraordinary discretionary jurisdiction under Article 226 of the Constitution of India.
The writ petition is dismissed. The dismissal will not in any manner prejudice the petitioner's right to challenge the termination of the contract before the appropriate forum, if so advised.
Sd/-
T.R. RAVI JUDGE dsn W.P.(C)No.7485 of 2024 2025:KER:690 -17- APPENDIX OF WP(C) 7485/2024 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE ORDER DATED 19/01/2024 PASSED BY SRI. ARSHAD KHAN, A.R. COMMERCIAL COURT, (SUB JUDGE) KOCHI IN CMA (ARB) NO.
02/2023Exhibit P2 TRUE COPY OF THE RELEVANT PAGES OF THE NOTICE INVITING TENDER ISSUED BY THE SECOND RESPONDENT DATED 10/01/2019 Exhibit P3 TRUE COPY OF THE LETTER OF ACCEPTANCE DATED 24/05/2019 ISSUED BY RESPONDENT NO. 2 Exhibit P4 TRUE COPY OF THE WORK ORDER DATED 04/06/2019 ISSUED BY THE 3RD RESPONDENT Exhibit P5 TRUE COPY OF THE RELEVANT EXTRACT OF THE GENERAL CONDITIONS OF CONTRACT IAFW 2249 Exhibit P6 TRUE COPY OF THE REQUEST DATED 03/10/2020 SUBMITTED BY THE PETITIONER TO RESPONDENT NO. 3 Exhibit P7 TRUE COPY OF THE ORDER OF RESPONDENT NO. 2 DATED 26/12/2020 Exhibit P8 TRUE COPY OF THE LETTER OF THE PETITIONER TO THE REGULATING OFFICER, INA EZHIMALA DATED 03/04/2021 Exhibit P9 TRUE COPY OF THE LETTER TO RESPONDENT NO. 3 DATED 28/05/2021 Exhibit P10 TRUE COPY OF THE REQUEST DATED 07/07/2021 SUBMITTED BY THE PETITIONER Exhibit P11 TRUE COPY OF THE REQUEST DATED 12/08/2021 SUBMITTED BY THE PETITIONER W.P.(C)No.7485 of 2024 2025:KER:690 -18- Exhibit P12 TRUE COPY OF THE REQUEST DATED 27/08/2021 SUBMITTED BY THE PETITIONER Exhibit P13 TRUE COPY OF THE REQUEST DATED 07/10/2021 SUBMITTED BY THE PETITIONER Exhibit P14 TRUE COPY OF THE ORDER DATED 01/02/2022 PASSED BY RESPONDENT NO. 2 Exhibit P15 TRUE COPY OF THE LETTER DATED 14/06/2022 SENT BY THE PETITIONER TO RESPONDENT NO. 2 Exhibit P16 TRUE COPY OF THE LETTER DATED 12/07/2022 SENT BY THE PETITIONER TO THE 2N" RESPONDENT Exhibit P17 TRUE COPY OF THE LETTER DATED 19/01/2023 OF THE PETITIONER TO THE 2"D RESPONDENT Exhibit P18 TRUE COPY OF THE LETTER DATED 20/04/2023 SENT BY RESPONDENT NO. 2 Exhibit P19 TRUE COPY OF THE LETTER DATED 09/05/2023 SENT BY RESPONDENT NO. 2 Exhibit P20 TRUE COPY OF THE ORDER DATED 10/05/2023 PASSED BY RESPONDENT NO. 2 Exhibit P21 TRUE COPY OF THE REPRESENTATION DATED 26/05/2023 SENT BY THE PETITIONER TO THE 2°D RESPONDENT Exhibit P22 TRUE COPY OF THE LETTER DATED 02/06/2023 OF THE PETITIONER Exhibit P23 TRUE COPY OF THE LETTER DATED 03/06/2023 OF THE PETITIONER Exhibit P24 TRUE COPY OF THE JUDGMENT DATED 06/06/2023 OF THIS HON'B1E COURT BY WAY OF W.P. (C) NO.
18066/2023 TITLED AS 'APEX HVAC SERVICES PVT. LTD. V/S UNION OF INDIA & ORE.
Exhibit P25 TRUE COPY OF THE W.P©NO.18066/2023, WITHOUT W.P.(C)No.7485 of 2024 2025:KER:690 -19- ITS EXHIBITS Exhibit P26 TRUE COPY OF THE LETTER DATED 10/06/2023 OF THE 2ND RESPONDENT Exhibit P27 TRUE COPY OF THE LETTER DATED 14/06/2023 OF THE PETITIONER TO THE 2ND RESPONDENT Exhibit P28 TRUE COPY OF THE LETTER DATED 16/06/2023 OF THE PETITIONER TO THE RESPONDENTS Exhibit P29 TRUE COPY OF THE ORDER DATED 20/06/2023 OF TEH RESPONDENTS Exhibit P30 TRUE COPY OF THE ORDER DATED 27/06/2023 PASSED BY THE RESPONDENTS Exhibit P31 TRUE COPY OF THE TENDER DATED 24/07/2023 Exhibit P32 TRUE COPY OF THE ORDER DATED 18.08.2023 OF THIS HON'BLE COURT IN WP(C) NO. 27285/2023 Exhibit P33 TRUE COPY OF THE ORDER DATED 30.11.2023 OF THIS HON'BLE COURT IN WP(C) NO. 27285/2023 RESPONDENT EXHIBITS EXHIBIT R2(A) A TRUE COPY OF THE SRO 177/2020 ISSUED BY GOVERNMENT OF KERALA EXHIBIT R2(B) A TRUE COPY OF THE LETTER DATED 08.042021 ISSUED BY THE 2 RESPONDENT EXHIBIT R2(C) A TRUE COPY OF THE LETTER DATED 03.05.2021 ISSUED BY THE PETITIONER EXHIBIT R2(D) A TRUE COPY OF THE NOTICE DATED 19.05.2022