Karnataka High Court
M/S American Road Technology And ... vs Bruhat Bengaluru Mahanagara Palike on 27 September, 2023
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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NC: 2023:KHC:35353
WP No. 7725 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF SEPTEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
®
WRIT PETITION NO. 7725 OF 2023 (LB-BMP)
BETWEEN:
M/S AMERICAN ROAD TECHNOLOGY
AND SOLUTIONS PVT. LTD.,
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE AT:
604 B, QUEENS APARTMENT, QUEENS CIRCLE,
BANGALORE - 560 001.
REPRESENTED BY ITS AUTHORISED SIGNATORY
MRS. BHANU PRABHA.
...PETITIONER
(BY SMT. JAYNA KOTHARI, SENIOR ADVOCATE FOR
SRI. NAVEEN CHANDRA V., ADVOCATE)
AND:
Digitally signed
by 1. BRUHAT BENGALURU MAHANAGARA PALIKE,
NARAYANAPPA N.R. SQUARE, BENGALURU,
LAKSHMAMMA
Location: HIGH KARNATAKA - 560 002.
COURT OF REPRESENTED BY ITS COMMISSIONER.
KARNATAKA
2. EXECUTIVE ENGINEER
(TRAFFIC ENGINEERING CELL-R1),
BRUHAT BANGALORE MAHANAGRA PALIKE,
2ND FLOOR, ANNEXE BUILDING-3,
BBMP HEAD OFFICE, N.R. SQUARE,
BANGALORE - 560 002.
3. STATE OF KARNATAKA,
URBAN DEVELOPMENT DEPARTMENT,
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NC: 2023:KHC:35353
WP No. 7725 of 2023
BANGALORE - 560 001.
REPRESENTED BY ITS
PRINCIPAL SECRETARY.
...RESPONDENTS
(BY SMT. B.P. RADHA, AGA FOR R3;
SRI. N.K. RAMESH, ADVOCATE FOR R1 AND R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA, 1950 PRAYING TO-DIRECT THE R-
1 AND 2 TO CLEAR ALL PAYMENTS DUE TO THE PETITIONER UNDER
PACKAGE F FOR WORK ORDER DATED:26.05.2014 OF
RS.93,21,667/- AND UNDER PACKAGE B FOR WORK ORDER
DATED:4.1.2017 OF RS.2,24,93,87.40 ALONG WITH APPLICABLE
INTEREST RATE FORTHWITH AND ETC.,
THIS WRIT PETITION, COMING ON FOR FURTHER HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
1. The petitioner is before this Court seeking for the following reliefs:-
i. To issue a writ, order(s), directions, writ(s) in the nature of the mandamus or any other writ or order directing the Respondent Nos.1 and 2 BBMP to clear all payment due to the Petitioner under Work Order for Package-F dated 26.5.2014 bearing No.EE/TEC/W.O./05/14-15, produced herein as ANNEXURE-B, of Rs.93,21,665/- (Rupees Ninety Three Lakhs Twenty One Thousand Six Hundred and Sixty Five only) along with interest at 18% per annum;
ii. To issue a writ, order(s), directions, writ(s) in the nature of the mandamus or any other writ or order directing the Respondent Nos.1 and 2 BBMP to clear all payment due to the Petitioner under Package-B for Work Order dated 4.2.2017 bearing No.EE/TEC/W.O./46/2016-17, produced herein as ANNEXURE-C amounting to Rs.2,24,93,871.40 (Rupees Two Crores, Twenty-Four Lakhs Ninety Three Thousand Eight Hundred and Seventy One -3- NC: 2023:KHC:35353 WP No. 7725 of 2023 and Forty paise) along with interest at 18% per annum; and iii. To pass any such further orders as this Hon'ble Court deems fit in the interest of justice and equity.
2. The petitioner claims to be a leading service provider which does repairs of potholes on roads using the 'Python' machine. The petitioner was issued two work orders by respondent-Bruhath Bengaluru Mahanagara Palike ('BBMP' for short) for Package-F and Package-B for pothole repair and road maintenance.
3. The grievance of the petitioner is that despite bills/invoices having been raised, the payments thereof have not been made, which, according to the petitioner, is arbitrary and as such, the petitioner is before this Court seeking for the aforesaid reliefs.
4. Smt.Jayna Kothari, learned Senior Counsel appearing for the petitioner, would submit that; -4-
NC: 2023:KHC:35353 WP No. 7725 of 2023 4.1. The work order for Package-F, having been issued on 26.05.2014, and for Package-B having been issued on 04.01.2017, repair as also maintenance works have been carried out and completed by the petitioner and the bills have been raised, which have not been paid. 4.2. Despite reminders which have been issued to all the concerned officers of BBMP, including the Chief Commissioner, no action has been taken, even though the Chief Commissioner had directed for the file to be put up for discussion and action as also for fixing responsibility on the persons who have delayed the payment of the due amounts.
4.3. The petitioner being a Micro, Small and Medium Enterprises ('MSME' for short), has not received the amounts due, which has caused tremendous pressure on the finances of the petitioner and the banks with which the -5- NC: 2023:KHC:35353 WP No. 7725 of 2023 petitioner performs its business had refused to extend credit to the petitioner on account of non-payment of the dues to the said bank, which was in-turn relatable and attributable to BBMP, not having paid the amounts due. 4.4. At no point of time the BBMP has replied to any of the representations, replies and reminders which have been issued by the petitioner calling upon the BBMP to make payment of the due amounts and as such, there is no defence on the part of the BBMP to make payment of the due amounts and in that background, she submits that the non-payment of amounts being highly arbitrary, the works which have been executed by the petitioner is in furtherance of the tender floated and in discharge of the public duties of BBMP having public element, as such, the writ petition is -6- NC: 2023:KHC:35353 WP No. 7725 of 2023 maintainable for agitating the claim of the petitioner.
4.5. In this regard, she relies upon the decision of the Hon'ble Supreme Court in the case of M/s. Ravi Constructions and Anr. v. State of U.P. and Ors. in Civil Appeal No.2897/2023, dated 18.4.2023 more particularly paras 3 and 5 which are reproduced for easy reference:-
3. "The appellant- firm is a duly approved Class 'A' Contractor undertaking civil construction works with the U.P. Irrigation Department. The appellants entered into an agreement on 11-02-
2006 with the Respondent- Authorities for different kinds of civil and construction works. Those works were duly completed to the satisfaction of the Authorities and final bill for payment was raised in December, 2009. Since the entire payment was not made, the appellants made a representation for the release of outstanding amount of Rs.21,09,000/- and Rs.7,38,000/- deducted towards security. As both these payments were not released, the appellants approached the High Court of Judicature at Allahabad by way of a Writ petition which has been dismissed vide impugned order dated 19.4.2016 primarily on the ground of non-maintainability as the appellants have got an alternative remedy to file a civil suit or initiate arbitration proceedings."
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5. Consequently, the appeal is allowed. The impugned order dated 19.04.2016 of the High Court is set aside with a direction to the respondent-Authorities to determine the balance amount payable to the appellants along with security amount and release the due payment within a period of eight weeks from the date of receipt of a copy of this order."
4.6. Relying on the above, she submits that whenever a petition is filed before this Court contending that amount under contract has not been paid then the Court ought not to relegate such a petitioner to an alternative remedy but should first direct the said authority to determine the balance amount payable and make payment of the admitted amount. 4.7. In the case of Uttar Pradesh Power Transmission Corporation Limited and Another v. CG Power and Industrial Solutions Limited and Another, (2021) 6 SCC 15, more particularly para 66, which is reproduced hereunder for easy reference:- -8-
NC: 2023:KHC:35353 WP No. 7725 of 2023
66. "Even though there is an arbitration clause, the petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the counter-affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition."
4.8. Relying on the above, she submits that merely because an arbitration agreement exists, the same is not a bar for filing a writ petition seeking for payment of the due amounts under a contract.
4.9. The decision of the Hon'ble Andhra Pradesh High Court in Kathupalli Venkata Sowmya v.
The State of Andhra Pradesh in W.P.No. 2511/2022 dated 22.03.2022 more particularly, paras 5, 12, 13, 19 and 20, reproduced for easy reference.
"5) Learned counsel for the petitioner submits that since the petitioner completed the work long back and bill was prepared and approved on 08.02.2019, till date the bill amount was not released and the Respondents are dragging on the issue. Aggrieved by the same, the present writ petition has been filed.-9-
NC: 2023:KHC:35353 WP No. 7725 of 2023
12) This Court is unable to accept the contention of the Respondents that the Petitioner has to avail alternative remedy as per the terms and conditions of the Agreement to approach the arbitrator and the petitioner is not entitled for interest in view of the condition of waiver of interest in the Agreement in view of the admitted facts of this Case that the respondents themselves violated the terms and conditions of the Agreement by not clearing the bill of the petitioner for abnormal period from the date of submission of the bill.
13) This Court opine that when the State or its instrumentalities failed to act legally within reasonable period to make payment to the petitioner for the works executed by her and infringed the fundamental rights of the petitioner, we hold that the Writ Court is having jurisdiction to entertain the claim of the petitioner and as such, this Writ Petition is maintainable.
19) In the considered opinion of this Court, not releasing the amount for which the petitioner is legitimately entitled is nothing but depriving the rights of the petitioner. Due to illegal action of non-payment of the amount promptly by clearing the bill submitted by the petitioner after execution of works, the petitioner could not feed and look after the welfare of her family properly, she could not make payment to employees/workers and she could not make payments to the material procured and she has to pay interest for the debts incurred by the petitioner for execution of works. Due to this situation, petitioner's respect and dignity in the society will be deteriorated. As such, the petitioner's right to life with respect and dignity will be defeated which is violative of Article 21 of the Constitution of India.
20) As such, this Court holds that withholding the amount, for which the petitioner is legally entitled, is illegal, arbitrary, and unjust and violative of Article 21 of the Constitution of India."
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NC: 2023:KHC:35353 WP No. 7725 of 2023 4.10. Relying on the above, she submits that whenever the State or instrumentality of a state fails to act within a reasonable period and make payment under a contract, the Constitutional Courts like this Court ought to intervene in the matter and protect the petitioner from the infringement of fundamental rights. The deprivation of payment of monies under a contract would also have an impact on the life of the contractor, thereby impinging upon the fundamental right to life under Article 21 of the Constitution.
4.11. The decision of the Hon'ble Apex Court in the case of Joshi Technologies International Inc. v. Union of India and Others, (2015) 7 SCC 728, more particularly, paras 69 and 70, reproduced hereunder for easy reference:-
"69. The position thus summarized 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 doubt,
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NC: 2023:KHC:35353 WP No. 7725 of 2023 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, 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.
70. Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness. 70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross- examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business. 70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after
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NC: 2023:KHC:35353 WP No. 7725 of 2023 holding that action could not have been taken without observing principles of natural justice. 70.8 If the contract between private party and the State/instrumentality and/or agency of State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction. 70.9 The distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a
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NC: 2023:KHC:35353 WP No. 7725 of 2023 legitimate expectation forms part of the principle of non-arbitrariness. 70.11 The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes."
4.12. Relying on the above she submits that the Hon'ble Apex Court has very clearly and categorically dealt with all possibilities as regards when this Court ought to exercise jurisdiction in a commercial matter even if relating to a contract and it is not that all matters relating to a commercial contract are barred from consideration. This Court ought to exercise its discretion whether to exercise jurisdiction or not in a given matter taking into account all the circumstances.
4.13. In so far as the present matter is concerned by applying the said principles, she submits that there being a gross delay on part of the BBMP
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NC: 2023:KHC:35353 WP No. 7725 of 2023 in making payment of amounts which are admitted, this Court ought to come to the rescue of the petitioner who is an MSME. 4.14. The decision of the Hon'ble Apex Court in Gas Authority of India Limited v. Indian Petrochemicals Corporation Limited and Others, (2023) 3 SCC 629, paras 21, 22 and 29, are reproduced for easy reference:-
21. Although the dispute arises from a commercial contract, we find that the writ petition challenging the clauses was maintainable. It is not disputed that GAIL is a Public Sector Undertaking and thus qualifies under the definition of 'State' as per Article 12 of the Constitution. At the time of entering into contract, GAIL was enjoying a monopolistic position with respect to the supply of natural gas in the country. IPCL, having incurred a significant expense in setting up the appropriate infrastructure, had no choice but to enter into agreement with GAIL. Thus, there was a clear public element involved in the dealings between the parties. Further, writ jurisdiction can be exercised when the State, even in its contractual dealings, fails to exercise a degree of fairness or practices any discrimination. We are fortified in our view by this Court's decision in ABL Enterprises Ltd., v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553 and Joshi Technologies International Inc. v.
Union of India, (2015) 7 SCC 728. .
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22. In the present case, GAIL's action in levying 'loss of transportation charges' was ex facie discriminatory, insofar as IPCL was mandated to build its own pipeline in terms of the allocation letter and was not using GAIL's HBJ pipeline at all. Thus, it cannot be said that merely because an alternative remedy was available, the Court should opt out of exercising jurisdiction under Article 226 of the Constitution and relegate the parties to a civil remedy. ***
29. We thus dismiss the appeal(s) qua the aspect of maintainability of the writ petition and the quashing of the clauses dealing with loss of transportation charges in the case of IPCL. However, we deem it fit to restrict the relief to period of three years insofar as refund is concerned from the date of filing of the writ petition, i.e., 09.03.2006."
4.15. By relying on the above she submits that even when the State or the Instrumental authority were to deny payment the grounds of such denial can be examined by the Constitutional Courts to ascertain whether such denial is proper or not? Moreso, when same is discriminatory or if the authority fails to act with a degree of fairness and in such circumstance the existence of the alternative remedy will not be a ground to dismiss the writ
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NC: 2023:KHC:35353 WP No. 7725 of 2023 petition or relegate the petitioner to such alternative forum.
4.16. On the basis of the above, she submits that even in respect of contractual matters, even though there may be an alternative efficacious remedy in terms of a civil suit or arbitration proceedings, whenever an authority of the State has acted in a manner which can be said to be arbitrary or contrary to the principles of natural justice, as also, contrary to fair play, this Court would have to exercise its jurisdiction under Article 226 and 227 of the Constitution of India and come to the rescue of the citizen who is deprived of the monies due on the bills raised even under a contract entered into between a citizen and the State or any instrumentalities of the State.
4.17. The submission is that, in the present matter, the exceptions which have been culled out by
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NC: 2023:KHC:35353 WP No. 7725 of 2023 the Hon'ble Apex Court in various decisions, more particularly in Joshi Technologies International Inc. case would not be applicable, inasmuch as, there is no dispute per-se, which is evident from the records relating to the bills which have been raised and as such, there is no excuse which is available to the respondent BBMP, but to make payment of the due amounts.
4.18. On the above basis, she submits that the above writ petition requires to be allowed and the respondent Nos.1 and 2- BBMP be directed to make payments of the amounts due as claimed in the prayers extracted hereinabove.
5. Sri. N.K.Ramesh, learned counsel appearing for respondent Nos.1 and 2 would submit that 5.1. There is an alternative efficacious remedy, inasmuch as, there is an arbitration clause in
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NC: 2023:KHC:35353 WP No. 7725 of 2023 the work order which is issued in favour of the petitioner and if at all the petitioner has any claim, the petitioner would have to approach the said alternative forum of arbitration by invoking the arbitration clause. 5.2. His further submission is that the amounts due having not been determined as of now and without determination, the payment cannot be made and until then, it cannot be said that the dispute has arisen. Therefore, he submits that until the petitioner follows the methodology of amicable settlement as prescribed under the Contract, the petitioner could not have approached this Court and as such, the petition is premature.
5.3. He also relied on the decision of the Hon'ble Apex court in Joshi Technologies International Inc. case and submits that the present matter would be covered under the
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NC: 2023:KHC:35353 WP No. 7725 of 2023 embargo of exercising jurisdiction in contractual matters as enumerated in the said decision. 5.4. When there are disputes pointed out by the statutory authority like BBMP, this Court ought not to exercise its discretion under Article 226 and 227 of the Constitution of India, which are discretionary in nature and the petitioner ought to be relegated to either civil court or the remedy of arbitration.
5.5. On these grounds, he submits that the petition requires to be dismissed.
6. Heard Smt. Jayna Kothari, learned Senior Counsel appearing for the petitioner and Sri. N.K. Ramesh, learned counsel appearing for respondent Nos.1 and 2-BBMP. Perused the papers.
7. The points that would arise for determination in the present matter are:-
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1. Whether in all contractual matters where the contract provides for an arbitration clause, would the jurisdiction of this Court be ousted, requiring the petitioner to be relegated to the remedy of arbitration or a civil suit?
2. Whether in the present case, the petitioner has made out a ground for this Court to exercise jurisdiction?
3. What order?
8. I answer the above points as under;
9. Answer to point No.1:- Whether in all contractual matters where the contract provides for an arbitration clause, would the jurisdiction of this Court be ousted, requiring the petitioner to be relegated to the remedy of arbitration or a civil suit?
9.1. The aspect of jurisdiction to be exercised by this Court in respect of contractual matters has been succinctly dealt with by the Hon'ble Supreme Court in Joshi Technologies case supra, more particularly at para 69 and 70, which have been extracted hereinabove. 9.2. A perusal of para 69 would categorically indicate that the Hon'ble Apex Court has laid
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NC: 2023:KHC:35353 WP No. 7725 of 2023 down when this Court would have to restrain itself from exercising jurisdiction in contractual matters and those instances and examples have been detailed in both paras 69 and 70, much of which deals with situations when there are disputed questions of facts, this Court would normally not exercise jurisdiction. 9.3. In the present case, the main contention which has been raised is that there is an arbitration clause in the agreement and further before initiating the arbitration, the amicable resolution process has not been followed, there is infact no particular dispute raised as regards the liability of making payment or not. 9.4. Merely stating there is an arbitral clause would not come to the rescue of the BBMP, inasmuch as, the Hon'ble Supreme Court in Ravi Constructions, Uttar Pradesh Power Transmission case supra has categorically
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NC: 2023:KHC:35353 WP No. 7725 of 2023 come to a conclusion that mere existence of an arbitration clause would not come in the way of this Court exercising jurisdiction under Article 226 and 227 of the Constitution of India, when there is a manifest error or arbitrary exercise of power which is pointed out.
9.5. The State and its constituents enter into various contractual relations under which there are obligations which are required to be discharged by both the parties. Like the State being a model employer in respect of its employees and workman, the State is also required to be a model employee in respect of the contractors. The contractors bid for tenders and take up work on the basis that the payment would be made in time and that the State has all the necessary funds for doing so and as such their interest is secured.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 9.6. More often than not a contractor would avail loans and/or financial facilities from Banks and financial institutions to generate the working capital required for such works, which is what the petitioner has done in the present matter. It is therefore required that the State and its instrumentality as aforesaid act as such model employer in respect of contracts also and the bills which are submitted by the contractors are processed at the earliest without any delay in terms of the contract and whatever payments are due are so made at the earliest. Of course, there may be a dispute as regards the determination, assessment and payment which are factual in nature which would require those disputes to be agitated before the concerned Courts or Arbitral Tribunal.
9.7. However, insofar as the undisputed amounts are concerned, they could always be
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NC: 2023:KHC:35353 WP No. 7725 of 2023 determined and paid subject however to there been no counter claim on behalf of the State or its authorities. In the present case there is no dispute as such raised as regards the amounts due, nor is any counter claim raised by the BBMP.
9.8. Thus, whether a contract provides an arbitrational clause or not, whether the matter could be agitated before the Civil Court or not. In so far as the admitted amounts concerned or in so far as the determination due amounts are concerned this Court could always direct the State or its authorities to so determine the amounts due and only in relation to the disputed amounts, facts or issues relegate the petitioner to the alternative remedy of an arbitration or a Civil Suit.
9.9. Thus, I answer point No.1 by holding that whenever there is an arbitrary exercise of
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NC: 2023:KHC:35353 WP No. 7725 of 2023 power pointed out by the petitioner, this Court would be bound to exercise its jurisdiction under Article 226 and 227 of the Constitution of India and come to the rescue of the petitioner who knocks on the doors of this Court seeking for redressal of its grievance.
10. Answer to point No.2:- Whether in the present case, the petitioner has made grounds for this Court to exercise the jurisdiction? 10.1. The main contention of the respondent BBMP is that there is an arbitral clause and before invocation of the arbitral clause, the process of amicable settlement would have to be resorted to. The contention of Sri. N.K. Ramesh., learned counsel appearing for respondents No.1 and 2 is that if the petitioner had approached the Chief Commissioner for an amicable resolution, the same could have been worked out.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 10.2. A perusal of the petition and documents indicates several letters/representations which have been addressed by the petitioner from as far back as the year 2016, first of then being on 08.08.2016, the second being on 23.08.2018, wherein the Chief Commissioner has categorically called upon the Executive Engineer to resolve the matter by categorically stating that this is a serious issue and if the same is not resolved, responsibility would have to be fixed, it is not known as to what the Executive Engineer has done thereafter, since no documents have been produced in that regard by the BBMP.
10.3. Thereafter, further letters/representations have been addressed by the petitioner on 11.11.2019, 07.12.2019, 30.01.2020 which letters bear the endorsement by the Commissioner calling upon the respective
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NC: 2023:KHC:35353 WP No. 7725 of 2023 Executive Engineers to get the certification done and put up the file for releasing payments, the following letter on 29.07.2020, again bears the endorsement by the Commissioner calling upon the Executive Engineer to check and put up the file, since the agency has submitted that the roads are maintained pothole free, the following letter on 17.04.2021 again bears the endorsement by the Commissioner, this time addressed to the Special Commissioner(finance) to examine and put up the file, as also to ascertain where the bill is. The letter dated 28.06.2021 bears the endorsement by the Commissioner to two different Executive Engineers to jointly report on the claim of the petitioner.
10.4. Thereafter, there have been several more letters which bear similar kind of endorsements made by the Commissioner. When so many
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NC: 2023:KHC:35353 WP No. 7725 of 2023 letters have been issued by the petitioner to the Commissioner calling upon for the payment and the Commissioner has called upon its Officers to put up the file for its certification as also to ascertain where the bill is, and that in the absence thereof, responsibility would have to be fixed, it cannot lie now for the BBMP to contend that if the petitioner had approached for amicable settlement, the Commissioner could have gone ahead with it.
10.5. The matter being pending for the last seven years, if at all, the BBMP had any semblance of interest in resolving the matter, it ought to have done so within that period and the Commissioner and its officers could have taken up the matter for resolving the issue amicably. 10.6. As pointed out by Smt.Jayna Kothari., learned senior counsel payments have been made from the year 2017-2019 and from the year 2021
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NC: 2023:KHC:35353 WP No. 7725 of 2023 onwards. It is only for the year 2020 that the payment has not been made insofar as the maintenance activities are concerned. 10.7. The fact that the payments have been made until 2019 and from year 2021 onwards would also give raise to an inference that the due amounts of the year 2020 ought to have been paid. Without making payments of bills for the year 2020, the respondents have prevailed upon the petitioner to continue its services which has been rendered for the year 2021 onwards. Which in my considered opinion is completely malafide it and abuse of the powers vested with the respondents.
10.8. It is expected of the State and its authorities to come forward and discharge its due to any contractor as and when dues arise and not delay the same, definitely not driving a person to litigation.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 10.9. The State and its instrumentality are admittedly parties to the highest number of litigations before the Courts. There is an obligation on the part of the State to see to it that unnecessarily litigation is not resorted to or encouraged let alone be driven to. The Litigation Policy of the State of Karnataka is a welcome step in resolving the disputes between the parties amicably.
10.10. In terms of the above, it is clear that necessary steps would have to be taken by all concerned to minimize the litigation and encourage alternate dispute resolution this obligation would also have to be discharged by the BBMP and the Chief Commissioner would have to put in place a system to amicably resolve such disputes as regards the payment which arises as regards which General Directions are also being issued.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 10.11. In the present matter, the fact that as late as in the year 2022, the Commissioner has called upon the Executive Engineers to certify the bills and put up the same could also probably indicate that there is no certification done until the year 2022, when the works have been carried out from the year 2017 to 2020, which is the subject matter of the present writ petition.
10.12. In the absence of certification to be carried out, the respondent BBMP cannot now contend that there are no payments which are due or that the petitioner ought to invoke the arbitration clause and approach the Arbitral Tribunal. 10.13. The manner in which the above matter has been conducted by the BBMP leaves much to be desired. The delay which has been caused in non-payment of the due amounts to an MSME and the manner in which the delay has been
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NC: 2023:KHC:35353 WP No. 7725 of 2023 caused by the officers of respondent BBMP would only indicate the same to be arbitrary and mala-fide.
10.14. In that view of the matter, I am of the considered opinion that the petitioner has made out a case for this Court to exercise its jurisdiction under Article 226 and 227 of the Constitution of India. Hence, point No.2 is answered accordingly.
Karnataka State Dispute Resolution Policy, 2021
11. Chapter-II of the Karnataka State Dispute Resolution Policy, 2021 deals with the scope and applicability of this policy more particularly clause 2 thereof is reproduced hereunder for easy reference;
2. This Policy is applicable to all disputes involving the Departments of the Government of Karnataka. However, PSUs, Statutory Bodies and instrumentalities of State under Article 12 of the Constitution of India are encouraged to apply the principles contained herein and treat this as a Model Policy for their functioning. The disputes concerned include those involving questions of public law, commercial or contractual matters, service law matters, criminal cases or any other
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NC: 2023:KHC:35353 WP No. 7725 of 2023 matters. It also applies to inter-se disputes between two Departments of the State. It applies to all disputes whether they are pending before any Court or Tribunal, arbitrations, lok adalats and also to those disputes that involve the State as quasi-judicial authorities.
12. Chapter-VII of the Karnataka State Dispute Resolution Policy, 2021 recommends or rather mandates adopting alternative dispute resolution mechanisms. The same reads as under;
Chapter VII ADOPTING ALTERNATIVE DISPUTE RESOLUTION
1. Need for Alternative Dispute Resolution 1.1. Alternative Dispute Resolution (ADR) refers to a range of dispute resolution procedures, that are mainly perceived as alternatives to litigation. ADR mechanisms are grouped as such, typically because they are non-judicial and out-of-court methods of resolving disputes. However, a deeper analysis would reveal that ADR is a mere overarching term for a wide variety of mechanisms. The term includes voluntary settlement-based mechanisms such as negotiation, mediation, conciliation etc.; private adjudicatory mechanisms such as arbitration; hybrid and flexible mechanisms such as ombudspersons, grievance redressal officers, med-arb, online dispute resolution etc. Therefore, ADR does not refer to a single uniform mechanism, but a range of dispute resolution options available to disputing parties, outside court. 1.2. Dispute Prevention and Dispute Resolution are the chief objectives of any ADR. While parties resort to litigation upon a conflict being escalated to a full- fledged dispute, ADR options can be designed to prevent dispute escalation and further resolve any disputes through voluntary settlement or private adjudicatory mechanisms. Therefore, this Policy encourages the adoption and use of ADR to prevent
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NC: 2023:KHC:35353 WP No. 7725 of 2023 and resolve government disputes, mainly through following main recommendations:
1.2.1. This Policy recommends establishment of a Dispute Resolution Board in each Department. Most individual officers hesitate from ADR settlement processes, as they apprehend false allegations of underhanded settlements. It is therefore recommended that any settlement be authorized by and be subject to approval of the Dispute Resolution Board at the Department level.
1.2.2. There shall be an Inter-Departmental Alternative Dispute Resolution Working Group, led by the Office of the Advocate General. The Working Group shall assist each Department in evolving an ADR Strategy and identifying disputes/dispute areas suitable for ADR.
1.2.3. In order to resolve inter-departmental disputes, i.e., disputes arising between two or more State Departments, there shall be an Inter-Departmental Dispute Redressal Committee, headed by the Chief Secretary or Additional Chief Secretary. The Committee shall use suitable ADR mechanisms to address the conflict and resolve disputes, as far as practicable without resort to litigation. The Committee shall also recommend suitable ways of resolving disputes without resort to litigation.
1.2.4. In determining suitability of disputes to ADR processes, suitability standards as laid out by the Hon'ble Supreme Court must be adopted to guide identifications of disputes/dispute areas for ADR.
2. Typology of ADR Mechanisms
2.1. To design a suitable system or opt for a suitable ADR process, Stakeholders must be aware of the range of ADR options. The following Tables offer a non- exhaustive typology of ADR mechanisms. The Tables provide a starting point, from which stakeholders can develop suitable ADR system designs for their disputes/dispute areas.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 TABLE A- Voluntary Settlement-Based ADR Mechanisms ADR Nature and Core Relevant Law Mechanism Features Negotiation Negotiation is a Section 89 and voluntary, settlement- Order 23 Rule 3 of based process, where Code of Civil parties directly Procedure,1908 negotiate with each other and explore the possibility of settling the dispute on mutually agreeable terms.
Core Features of the
Process: Party
autonomy (self-
determination),
voluntariness and
confidentiality. Final
agreement is final and
binding on the parties.
Mediation Mediation is a Section 89 and
voluntary, settlement- Order 23 Rule 3 of
based process, where Code of Civil
a neutral third-party Procedure, 1908;
mediator, assists Karnataka Civil
parties in arriving at a Procedure
settlement.
(Mediation) Rules,
Core Characteristics 2005; See also
of the Process: Party Section 12A of the
autonomy (self- Commercial Courts
determination), Act, 2015;
voluntariness and Commercial Courts
confidentiality. Final (Pre-institution
agreement is final and Mediation and
binding on the parties. Settlement) Rules,
2018; Chapter V of
the Consumer
Protection Act,
2019
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Conciliation Conciliation is similar Section 89 and
to mediation, where a Order 23 Rule 3 of
neutral third party Code of Civil
conciliator assists Procedure, 1908;
parties in arriving at a Part III -
settlement. The Arbitration and
Conciliator also puts Conciliation Act,
forth settlement 1996
proposals for the
parties to consider
during the process.
Core Characteristics of
the Process: Party
autonomy (self-
determination),
voluntariness and
confidentiality. Final
agreement is final and
binding on the parties
Judicial The term judicial Legal Services
Settlement settlement refers to a Authorities Act,
and Lok voluntary settlement 1987 and the
Adalat of a dispute with the Karnataka State
help of a judge who Legal Service
has not been assigned Authority Rules,
to adjudicate upon the 1996
dispute. The matter is
referred to judicial
settlement only when
parties show interest
to settle dispute and
give their consent.
Core Characteristics of
the Process: Party
autonomy (self-
determination),
voluntariness. Final
agreement is final and
binding on the parties
Dispute Dispute Review Dispute Review
Review Boards is a board Boards are set up
Boards/ constituted before the by virtue of a
Dispute commencing of the contract between
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Adjudication construction projects the parties. Parties
Boards by including a clause usually
in the contracts in contractually bind
construction projects. themselves to the
The Board may process and
consist of neutral outcome of the
third-party mediators Board.
and also experts.
Core Characteristics of
the Process: Party
autonomy (self-
determination),
voluntariness and
confidentiality. Final
agreement is final and
binding on the parties
Table B: Private Adjudication/Determination (Consensual Submission of Dispute, Binding Outcome) ADR Nature and Relevant Law Mechanism Core Features Arbitration Arbitration is an Arbitration and adjudicatory Conciliation Act, procedure that 1996 applies to disputes only when parties voluntarily consent to resort to arbitration. The dispute is adjudicated by an arbitrator (or a panel of arbitrators) appointed by the parties, concluding with a final arbitral award that is binding on the parties. The proceedings and final arbitral award are confidential.
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Expert Expert Parties are
Determination Determination is an contractually
ADR process where bound by Expert
the parties Determination.
contractually agree Enforcement of
to appoint an the determination
independent third- would be in the
party expert to same form as
make a enforcement of
determination of the contract.
dispute, which is
binding on both
parties.
Expert
Determination is a
suitable option for
valuation disputes
and disputes
involving technical
questions for
determination.
Table C: Hybrid/Flexible Mechanisms Med-Arb This hybrid process involves a two-step or multi-step procedure of resorting to mediation and arbitration at different stages to resolve the process.
Mini trial This is akin to
mediation, where a
highly experienced
professional hears the
dispute, much like a
brief trial from both
sides, and offers
advice on settlement
to the parties.
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Ombudsperson Ombudsperson are See for example,
offices or single Insurance
officers, who address Ombudsman
complaints against Rules, 2017;
certain authorities. The Banking
functions of the Ombudsman
Ombudspersons are Scheme 2006;
determined through and Lokpal and
rules. Various models Lokayukta Act,
are adopted by 2013
different regulatory
authorities to
determine the
functions of the
ombudspersons. For
instance, the Banking
Ombudsman and
Insurance Ombudsman
in India provide that
the Ombudsman act as
both the mediator and
the adjudicatory
authority to resolve
complaints.
Ombudsperson such as
Lokpal or Lokayukta
act as inquiry
authorities to inquire
on complaints on
abuse of power by
governmental
authorities.
Early Neutral An experienced neutral
Evaluation party is appointed to
(E.N.E.): evaluate the facts,
evidence, claims,
defences to provide an
opinion at an early
stage to avoid
expensive litigation.
Online dispute Online dispute
resolution resolution is one of the
methods of settling
disputes outside of the
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courts, by combining
technology and ADR. It
is a fast-developing
mechanism, offering
potential to resolve
disputes faster and at
scale.
3. Benefits of ADR
3.1.ADR mechanisms generally offer broad ranging procedural and outcome benefits to stakeholders. While benefits are mostly dependent on the specific ADR mechanism, it is useful to consider how ADR in general, positively contributes to the dispute resolution process:
3.1.1. ADR mechanisms provide systemic relief to courts by diverting cases away from litigation towards alterative processes. Since the government is the biggest litigator, resolution of government disputes through ADR will also contribute to relieving the burden of the legal system.
3.1.2. The flexibility of ADR processes fosters speedy resolutions and speedy justice, contributing to efficient dispute management and disposal. When employed effectively, ADR also lowers costs of disputes, particularly when compared to time and costs involved in waging protracted legal battles.
3.1.3. ADR processes and designs assist dispute prevention objectives. Mediation, conciliation, grievance redressal and consultation processes are instrumental in early stage conflict management, thereby preventing escalation of disputes. Further, arbitral awards and mutually agreed settlements attain a great degree of finality under law, with very narrow scope for further disputes by appeals etc. 3.1.4. ADR processes can be more suited and responsive (than litigation) for the requirements of certain disputes and parties. Negotiation and mediation processes allow interest-based settlement.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 Arbitration allows ease in trial and evidentiary process and offers a better forum for complex disputes and disputes requiring subject-matter expertise. ADR designs also allow collaborative decision-making and resolution. Therefore, ADR is more suited for parties for whom quick negotiated agreements offer better solutions than litigation; for parties interested in maintaining working or business relationships, while resolving conflict (example, service and workplace dispute); and for parties who benefit from collaborative decision-making to resolve conflict than from an adversarial process. 3.1.5. ADR can increase party satisfaction with process and outcome. While litigation functions in a standard and rigid environment, ADR mechanisms can be more flexible to incorporate and address the interests of the party, thereby increasing their satisfaction in the process and outcome. 3.1.6. ADR processes allow growth opportunities for parties. Collaborative, communicative, and problem- solving features of ADR provides the government with opportunities to rework and re-design executive, policy and regulatory decisions and protocols. This can prevent floodgate of future litigation on the same issue.
4 Government Disputes and ADR: Overcoming Perceived Obstacles 4.1. Despite the above benefits, Stakeholders have not resorted to ADR in government disputes. This is despite the policy commitment under the Karnataka Litigation Policy, 2011 as well as the National Litigation Policy, encouraging use of ADR in managing government disputes. Consultations with stakeholders revealed certain perceptions that acted as obstacles in their way of employing ADR mechanisms for government disputes. It is important to address and respond to these perceived obstacles and suggest measures to overcome them:
4.1.1. Perceived Obstacle: ADR is inherently unsuitable for the public nature of government disputes and government's functions
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NC: 2023:KHC:35353 WP No. 7725 of 2023 Response: It is important to distinguish between disputes of public importance and disputes where government is merely an involved party. Government is a party to various contracts, commercial transactions, employment agreements, individual permits etc., where it only transacts with individuals and addresses private interests. Further, government disputes also include several intra- department and inter-department disputes, disputes between PSUs and Department etc. These offer opportunities to introduce suitable ADR mechanisms. The suggested measure to overcome this obstacle is to first understand the scope and suitability of each ADR mechanism, (for example, for arbitrability, refer to the law laid down by the Hon'ble Supreme Court); and thereafter systematically identify disputes or dispute areas suitable for ADR. Dispute Prevention mechanisms such as multi-stakeholder initiatives, public consultations, etc., are also suitable for certain government disputes.
4.1.2. Perceived Obstacle: Choice to resort to ADR is not in government's control (since government is the respondent in most cases and the petitioner has already chosen litigation).
Response: The fact that government is the respondent in majority of pending cases, must not prevent the government from attempting and incorporating ADR suitably. Two recommendations tackle the said obstacles: first, dispute prevention and early conflict redressal measures at the Department level, to prevent as many disputes reaching courts. (Consider grievance redressal systems, Ombudsman, mediation, ADR clauses in contracts etc.). Second, since courts are always encouraging of settlement, Law Officers and concerned Departments must express willingness and commitment to explore possibilities of ADR for suitable cases.
4.1.3. Perceived Obstacle: Individuals representing the government do not have authority to negotiate or agree to terms on
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NC: 2023:KHC:35353 WP No. 7725 of 2023 government's behalf. Further, any agreement entered into by an individual officer, is vulnerable to attack as an underhanded deal. Response: This is a common concern across all Stakeholders and is most prevalent in exploring voluntary settlement-based ADR, such as mediation/negotiation. Given that most Stakeholder offices are hierarchical, and require approvals at various levels, individual officers (e.g., briefing officers/LCOs in Departments; Government Advocates/Pleaders in government Law Offices) are hesitant to assume authority to enter settlements on behalf of the government. This is a valid concern:
most voluntary settlement-based processes are only effective if the parties at the mediation/negotiation table are those with authority to negotiate. However, measures can be taken to overcome this obstacle. It is important to develop predetermined protocols and structures to assure authorization and accountability in the ADR process. This Policy recommends the constitution of Dispute Resolution Board in each Department. The Board shall be constituted by Department officers/officials with official decision- making authority in the Department and may also include retired judicial members. The Board will issue authorization and instructions to individual officers and Law Officers, to negotiate on behalf of the Department. Further, any settlement will be subject to review and approval by the Board. The Board shall also ensure that all necessary approvals from other authorities (such as Finance Department etc.) shall be taken before entering into the settlement. This will ensure effective authorized participation, maintain accountability of the entire Department, while also protecting individual officers from baseless allegations. In fact, such an authorization process is also endorsed recently by the Hon'ble Supreme Court in National Co-operative Development Corporation v. Commissioner of Income Tax, Delhi. (Civil Appeal Nos. 5105-5107/2009 dated 11-09-2020) 4.1.4. Perceived Obstacle: Participation in Voluntary settlement-based ADR will be seen as weakness and settlements will set bad precedent.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 Response: This is a misconceived perception without empirical basis. Government Litigation Policy at the central and state levels fortify the legitimacy of ADR, offering adequate motivation to participate in ADR processes. The fact that mediation/negotiation are voluntary processes, based on party-autonomy and interests, indicates that the government also has bargaining powers. This assures that settlement from such processes only results in closure and prevention of floodgate litigation for the government and not a bad precedent.
4.2. It is seen that most obstacles discussed above are long held perceptions of Stakeholders, reflective of a legal culture where litigation is predominant and ADR mechanisms are relatively new and untested. Therefore, introducing ADR effectively is also a matter of changing dispute resolution culture. While various measures to change the legal culture are suggested here, the first step is to assess the suitability of ADR mechanisms to disputes or dispute areas.
5. Suitability and Identification of Disputes/Dispute Areas for ADR 5.1. ADR mechanisms cannot be blindly adopted for all disputes, i.e., irrespective of suitability. Assessing suitability is important for three reasons: first, certain disputes are considered by law to be unsuitable for certain ADR mechanisms; therefore, ADR in such disputes will be legally invalid. Second, ADR mechanisms are only effective when they are suitable to prevent or resolve disputes. Third, each ADR mechanism offers different benefits and Stakeholders will benefit from choosing the right ADR mechanism for their specific structures. Therefore, suitability is an important assessment that leads to identification of areas or disputes for specific ADR processes.
5.2. In case of government disputes, there are three stages at which suitability must be addressed. First, suitability of ADR vis-à-vis the government's role and capacity to participate. Second, suitability of the area
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NC: 2023:KHC:35353 WP No. 7725 of 2023 of dispute for reference to ADR. Third, identifying and choosing the most suitable ADR mechanism for a given dispute or dispute area.
5.3. Regarding the first stage, as discussed above, a general perception that ADR itself is not suitable for government disputes is misconceived and must be overcome. In fact, in case of suits by or against the government, the Code of Civil Procedure 1908, specifically mandates the court to encourage settlement. Order XXVII Rule 5B states that in suits against the government, "it shall be the duty of the court" to enable a settlement and also grant additional adjournment in case any such settlement was in progress. Therefore, the law has not only recognized the suitability of ADR for government disputes, but further mandated the court to encourage it. It is therefore recommended that Stakeholders seriously consider these commitments and incorporate ADR mechanisms for government disputes.
5.4. Regarding the second stage of suitability, i.e., based on the area of dispute for ADR, it is recommended that Stakeholders incorporate suitability standards subject to the limits laid down by law. For instance, the Hon'ble Supreme Court has evolved the test of 'arbitrability' of disputes, i.e. the suitability of arbitration to specific subject-matter of disputes in several cases.
5.5. Arbitrability standards have also been incorporated by several High Courts across the country in referring disputes to ADR.14 Stakeholders must be guided by the above classification and standard in identifying dispute areas that are suitable for ADR. Each stakeholder Department, in consultation with Law Officers, must undertake the exercise of identifying dispute areas suitable for ADR, falling within the Department's jurisdiction. This exercise will reveal the dispute population which is available for ADR.
5.6. Once that identification is complete, the third stage of suitability involves matching the dispute or dispute area with the most suitable ADR mechanism.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 Some disputes may be better determined by private adjudication such as arbitration, while certain disputes are better resolved through a voluntary facilitative settlement-based process. To ensure a smart adoption of the right ADR mechanism, stakeholders, particularly Departments, must develop a suitable ADR strategy that aims at dispute prevention as well as dispute resolution. The following section offers recommendations on the considerations to be employed while choosing ADR mechanisms.
6. Incorporating ADR in Government Dispute System 6.1. In government disputes, ADR can be incorporated at two levels - first, at the Department level, where the conflict emerges (in case of inter- departmental disputes, ADR can be incorporated at the time that the conflict emerges between departments); secondly, at adjudication level, where the conflict is escalated and involves Law Officers representing the government. Two objectives must drive each of these two levels: dispute prevention and dispute resolution. It is recommended that there is an ADR strategy developed by Stakeholder Representatives at each of these levels. 6.2.In order to resolve inter-departmental disputes, i.e., disputes arising between two or more State Departments, there shall be an Inter-Departmental Dispute Redressal Committee, headed by the Chief Secretary. The Inter-Departmental Dispute Redressal Committee shall be an ad-hoc committee that shall be constituted by such persons as the Chief Secretary or Additional Chief Secretary may appoint, to resolve specific disputes. The Committee shall use suitable ADR mechanisms to address the conflict and resolve disputes, as far as practicable without resort to litigation. The Committee shall also recommend suitable ways of resolving disputes without resort to litigation. For instance, in high-stake or major cases where a Department is considering the suitability of filing appeals or pursuing litigation, the Committee shall assist in providing its opinion on ADR
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NC: 2023:KHC:35353 WP No. 7725 of 2023 alternatives to resolve the dispute and end the conflict.
6.3.Each Stakeholder Department shall develop an ADR Strategy and ensure its implementation. The said ADR strategy shall be outlined and documented in each Department's ADR Policy and/or ADR Plan. There shall be an Inter-Departmental Alternative Dispute Resolution Working Group, led by the Office of the Advocate General and consisting of representatives of each State Department, government Law Officers, and dispute resolution experts (among lawyers, mediators, arbitrators and other professionals). The Working Group shall assist and facilitate each state Department in framing and implementing its ADR strategy. The Working Group may further create sections for implementation of ADR in specific subject areas, especially those that involve multiple state Departments. For example, a section on commercial contracts may involve the Department of Industries and Commerce, Mines and Geology Department etc. 6.4.In addition, the Office of the Advocate General shall also incorporate ADR commitments of Law Officers into the ADR Strategy, to ensure that Law Officers identify ADR opportunities and implement them.
6.5. In formulating the ADR strategy and drafting the ADR Policy and Document, the following shall be considered as necessary components:
6.5.1. Policy Commitment: Each Stakeholder shall express a policy commitment to incorporate ADR suitably. This policy commitment may be expressed in the ADR policy document of each Stakeholder or by making a Policy Statement. Further, as part of its ADR strategy, each Stakeholder Department must consider how to include ADR in the draft legislations and policies under its jurisdiction.
6.5.2. Contractual Commitment: Each Stakeholder shall consider the inclusion of ADR clauses in government contracts. The clause may indicate at a single ADR mechanism (eg: single option to
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NC: 2023:KHC:35353 WP No. 7725 of 2023 arbitrate) or lay out a multi-level ADR structure (eg:
first negotiate; on negotiation failure, attempt third party mediation; on mediation failure, resort to adjudication). ADR strategy documents must advise and provide draft templates.
6.5.3. Identification of Disputes/Dispute areas for ADR: Each stakeholder Department shall, in consultation with the Law Officers, identify disputes/ dispute areas that are suitable for ADR. In doing so, a reasonable metric or model may be adopted to determine which disputes must be referred to ADR.
For instance, metrics may be based on value, risk, issues involved, classes of parties involved etc. Stakeholders will benefit from using the data management system to tag and identify cases suitable for ADR.
6.5.4. Dispute Prevention: Each Department shall formulate a suitable dispute prevention plan, to provide early stage conflict resolution. Various mechanisms such as Grievance Redressal Officers, Ombudsperson, Expert Panels, Stakeholder Committees, Mediation etc., are suitable as dispute prevention mechanisms. Each Department shall, with the assistance of the Working Group, evolve a suitable dispute prevention system customized to its requirements.
6.5.5. Setting Suitable ADR Models: In adopting an ADR mechanism, Stakeholders shall consider different models in designing the ADR. For instance, in case of Ombudsperson, in some cases, single decision-maker model is adopted with a single Ombudsperson to process all complaint. Some other models adopt an Ombudsperson Panel approach. 6.5.6. Participation Protocol in Settlement- Based Processes: As suggested above, the ADR strategy must involve a participation protocol, which eases authorization process and provides a level of immunity to the officer involved in the ADR process. Dispute Resolution Boards aid such participation. ADR Strategy must address such additional protocols.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 6.5.7. Preserving Foundational Tenets of ADR:
Most ADR mechanisms such as arbitration, mediation and negotiation have very set foundational tenets. In mediation, party autonomy, self-determination and neutrality are integral to the process. It must be ensured that these foundational tenets are followed in government disputes. This is also important to consider in designing ADR systems. For instance, today most Ombudsman Schemes, such as Banking Ombudsman Scheme, 2006 and Insurance Ombudsman Scheme provide for the Ombudsman to act both as the mediator and adjudicatory authority on the same complaint. This compromises party- autonomy in the settlement process, for fear of adverse award if a settlement as advised by the Ombudsman is rejected.
6.5.8. ADR Knowledge and Training: In appointment of HLCs and Law Officers, their knowledge of ADR shall be one of the factors for consideration. Further, all Stakeholders shall commit to training programs on ADR to increase learning and share knowledge on incorporating ADR into their systems.
6.5.9. Budget and Staffing: Each Stakeholder must determine the budget for the effective implementation of its ADR strategy and make all attempts to seek approval of the budget. Further, each Stakeholder Department must also consider its additional staffing needs to seek the necessary human resource support for its ADR efforts. This must also include designation of dispute resolution experts and counsels to assist in designing the ADR structure or to assist on complex matters.
6.5.10. Performance Evaluation of ADR:
Stakeholders must ensure that evaluation models on ADR do not merely cover disposal and settlement rates. High disposal rate is not the ultimate objective of ADR, but merely a benefit. Therefore, success evaluation must also be based on whether the foundational principles have been followed in the ADR process. Performance Indicators must therefore be placed to evaluate these considerations as well.
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7. While previous litigation policies recommend ADR, Stakeholders have failed to adequately resort to ADR, since there has been no commitment towards systematic strategy and implementation. It is necessary that ADR for government disputes is not merely a paper goal but an implementable measure and a strategic choice. Therefore, Stakeholders must focus on rigorously implementing the recommendations in this chapter to make real progress in adopting ADR for government disputes.
13. A perusal of the same would indicate that ADR options are designed to prevent dispute escalation and thereby to prevent litigation in relation thereto. The policy also takes into account the hesitation on part of the officers to take up ADR settlement processes on account of apprehended false allegations against them and it is in that background that an Inter-departmental Dispute Resolution Working Group is contemplated which is required to assist each Department in evolving an ADR Strategy and identifying disputes/dispute areas suitable for ADR. The typology of ADR mechanisms also having extracted hereinabove, it is required that the same is implemented.
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14. As observed in the said policy itself any reform is only as good as its implementation and as such it becomes imperative that a reformative policy as contained under the Karnataka State Dispute Resolution Policy, 2021 is implemented, if not in totality to the extent possible. The doubts and/or obstacles have also been dealt with in the policy which have been extracted hereinabove for easy reference.
15. A perusal of the above would indicate the manner in which any doubt or perceived obstacles could be overcome by the department or by the officer at the time of resolving the dispute.
16. Clause (6) of chapter VII thereof deals with incorporating ADR in Government Dispute System which requires ADR to be restored firstly at the time conflict emerges and secondly at adjudication level. Thus, the emphasis now is on disputes/litigation containment at the time when conflict arises, so that same does not escalate to a full-fledged dispute
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NC: 2023:KHC:35353 WP No. 7725 of 2023 before a Court or an arbitral forum. It is required that the same is brought into effect and operationalized, the Chief Secretary and Advocate General, Government of Karnataka would have to look into this aspect, do and get done the needful for the same.
17. In the present case, when the demand was raised by the petitioner for payment of monies, and it was contended by the petitioner that the payments have not been made was the stage when a conflict emerged or was likely to emerge requiring necessary steps to be taken for dispute resolution by the invoking ADR methodology.
18. If the same had been done, the present matter would not have been before this Court requiring adjudication or order to be passed. Hence, in this regard General Directions are being issued;
19. General Directions:
19.1. The Chief Secretary and Advocate General, Government of Karnataka would have to
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NC: 2023:KHC:35353 WP No. 7725 of 2023 operationalize the Karnataka State Dispute Resolution Policy, 2021, a Detailed Project Report in this regard to be prepared and placed on record within a period of 4 weeks from date of receipt of a copy of this order. 19.2. The Chief Commissioner, BBMP in association with the Principal Secretary, e-Governance Department as also the Principal Secretary, Finance Department to devise a methodology for uploading on its portal.
19.2.1. all details relating to the tender/contract, 19.2.2. All agreements executed, 19.2.3. All work orders, purchase orders etc., issued under the contract, 19.2.4. All correspondence exchanged between the parties, 19.2.5. All instructions and or change orders issued under the contract, 19.2.6. Details of the bills submitted by the contractor including the bill/s,
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NC: 2023:KHC:35353 WP No. 7725 of 2023 19.2.7. Verification made as regards the said bills from measurement books, etc., with date of verification and details of the person verifying it as also verification report, 19.2.8. Date on which the bills were certified with the detailing of the said certifying authority and certification report, 19.2.9. The date on which the bills were approved with the details of the approving authority and approval order, 19.2.10. The date on which the payments were made with details of payments.
19.2.11. If any of the claims were rejected, the reasons for the rejection as also the rejection order.
19.2.12. If there is a time limit for each action in the above stages, the same to be calculated in terms of the contract and if
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NC: 2023:KHC:35353 WP No. 7725 of 2023 there are any delays necessary remainders to be system generated. 19.3. All the uploading to be time and date stamped with adequate security so that same cannot be manipulated. The details on this portal to be available to the concerned officers as also the contractor on the basis of user credentials namely user id and password or such other secure mechanism.
19.4. With all details of a tender/contract being available in one place, it is expected that the same can be processed at the earliest, without requiring the Chief Commissioner to write to all the officers to provide details, which are not so provided by them, which has rendered the chief commissioner helpless in this case. This would also enable fixation of responsibility and adherence to the timeline which in turn would enable a resolution of a probable conflict
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NC: 2023:KHC:35353 WP No. 7725 of 2023 restricting its escalation to a dispute and later on to a litigation.
19.5. In the event of any claim or demand being made by a contractor against the BBMP, then the principles and procedures enunciated in the Karnataka State Dispute Resolution Policy, 2021 to be made applicable to try and contain the conflict so that conflict does not escalate into a dispute.
19.6. A detailed project report in this regard to be got ready and placed before this Court within a period of four weeks from the date of receipt of copy of this order.
19.7. Learned AGA is directed to communicate the above order to Chief Secretary, Advocate General, Principal Secretary, e-Governance Department, Principal Secretary, Finance Department and such other authority as required for implementation of the above directions.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 19.8. Registry is directed to print the name of learned AGA in the cause list to enable the co- ordination of filing compliance report/s. 19.9. Sri.N.K.Ramesh., learned counsel appearing for BBMP is directed to inform the above order to the Chief Commissioner and co-ordinate for the filing of compliance report with learned AGA.
20. Answer to point No.3: What order?
In that background, I pass the following;
ORDER i. The Writ petition is allowed in Part. ii. The respondent BBMP is directed to determine the balance amount payable to the petitioner within two weeks from the date of receipt of a copy of this order and make payment of such determined amount within two weeks thereafter.
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NC: 2023:KHC:35353 WP No. 7725 of 2023 iii. In the event of the Petitioner not being satisfied with the payments made, the petitioner would always have the liberty to file a suit or seek for Resolution of disputes by way of Arbitration in terms of the contract.
iv. The petitioner is permitted to furnish a printout of the uploaded copy of this order, which shall be acted upon by the respondent without insisting for certified copy. In the event of the respondent having any doubt on the veracity of the same, the respondent can scan the QR code on this order to ascertain the validity and veracity of the order by visiting the website of this court.
v. Though the matter is disposed off, relist on 21.11.2023 for reporting compliance with the general directions. It is made clear that
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NC: 2023:KHC:35353 WP No. 7725 of 2023 compliance with general directions would not come in the way of earlier compliance of the operative portion of this order at (ii) above.
Sd/-
JUDGE MN/SR List No.: 1 Sl No.: 38