Calcutta High Court (Appellete Side)
The Board Of Trustees For The Port Of ... vs Hindustan Steel Works Construction ... on 2 June, 2020
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02.06.2020
S/L No.1
AP/ss
MAT 443 of 2020
With
CAN 3134 of 2020
With
CAN 3135 of 2020
With
WP 4795(W) of 2020
(Through Video Conference)
The Board of Trustees for the Port of Kolkata and Anr.
Vs.
Hindustan Steel Works Construction Ltd. & Ors.
Mr. S.N. Mukherjee, Senior Advocate
Mr. Amit Kumar Nag
...for the Appellants.
Mr. Haradhan Banerjee, Senior Advocate
Mr. Partha Pratim Mukhopadhyay,
Mr. Sunil Sighania
...for the Respondents
With the consent of the parties the appeal is taken up
for hearing dispensing with all necessary formalities.
Respondent No.1 writ petitioner ('HSWC Ltd.' for short)
had been awarded work contract for installation,
commissioning and operation of two weigh bridges in the
Haldia Dock Complex of appellant Kolkata Port Trust
('KoPT' for short). As per Para 79(e) of the terms of contract
respondent No.1 HSWC Ltd. was not entitled to assign or
transfer the weigh bridges and the associate facilities to
any party without permission from KoPT. Alleging that the
contractor had without permission of KoPT assigned or
transfer weigh bridges to the 3rd respondent namely
Fairfax Industries Limited in violation of the terms of the
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contract, KoPT as per para 7.10 of the contract terminated
the contract vide letter dated 01.01.2020. By the said
letter in order to ensure smooth functioning of weigh
bridge facilities services to port users, HSWCL was
directed to discharge its obligation for a period of three
months i.e. 31st March, 2020 as and when called upon by
KoPT as per clause (b) of the termination provision. Before
the expiry of the aforesaid arrangement between the
parties, HSWCL moved a writ petition before this Court,
inter alia, assailing the impugned letter of termination and
other consequential relief. Since the matter was not taken
up by this Court, HSWCL approached the Apex Court
under Article 32 of the Constitution of India (Writ Petition
(Civil) Diary No.11154 of 2020) which was disposed of by
the Apex Court with the following directions:-
"a) We permit the petitioner to move the High Court
immediately and get the pending matter listed before
the High Court for appropriate orders;
b) In order to facilitate such exercise on behalf of
the petitioner, ad-interim protection is granted for a
period of two weeks from today or till the date
application is moved before the High Court, whichever
is earlier; and
c) In the meantime, the respondent is directed to not
to take any steps pursuant to order of termination
dated 01.01.2020 and further notice dated
27.04.2020."
Pursuant thereto, the matter was taken up for hearing
by the learned Single Judge and the impugned order dated
15.05.2020 came to be passed whereby appellant KoPT
was restrained from giving effect or further effect to the
order of termination dated 1st January, 2020 and the
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consequential notice dated 27th April, 2020 for removal of
weigh bridges for a period of ten weeks from date.
Mr. Mukherjee, learned Senior Counsel appearing for
the appellant-KoPT assailed the impugned order on
various grounds. Firstly, it is argued that the First Court
erred in coming to a finding that the Alternate Mechanism
for Resolution of Commercial Disputes ('AMRCD' in short)
provided in the office memorandum in respect of public
sector enterprises was a jurisdictional interdict in
terminating the contract. He submitted that the contract
had been terminated in terms of the para 7.10 contained
therein and the commercial dispute inter parties was not
amenable to writ petition as an arbitration clause is
engrafted in the contract itself. Under such circumstances,
invocation of the public law remedy for interpreting the
terms of the contract and adjudicating the justification of
its termination was impermissible in law.
On the other hand Mr. Banerjee, learned Senior
Counsel for HSWCL submitted that the office
memorandum dated 22nd May, 2018 providing for an
alternative mechanism for resolution of disputes or
differences with regard to interpretation of terms of the
contract between public sector enterprises is mandatory in
nature and applied to on going contracts like the present
one. Such mechanism ought to have been resorted to
before terminating the contract. Termination order is
wholly mala fide and such malice is evident as in the
earlier communications between the parties and a prior
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litigation at the behest of once Uma Corporation make it
amply clear that KoPT was fully aware that HSWCL had
deployed Fairfax Industries Limited as an agent for
working out the contract. Hence, resort to para 7.9(e) of
the terms of the contract to terminate the same for
assigning it without permission of KoPT was wholly unjust
and arbitrary. Contract operated in the public field as the
work order provided for installing, commissioning and
operating weigh bridges for the port users which is an
essential service for movement of goods and/or services
through the port. Importance of smooth functioning of
the weigh bridge facilities is evinced by incorporation of
Clause (b) in the termination clause which, inter alia, gave
option to KoPT to utilize the services of the contractors for
a period of three months from the date of termination, that
is, 31st March, 2020 in the present case. HSWCL had
approached this Court prior to 31st March 2020 and the
contractual arrangement between the parties was
continuing as per the letter of termination. He further
argued existence of alternative remedy by way of
arbitration is not an absolute bar in invocation of writ
jurisdiction in appropriate cases.
We have perused the impugned order passed by the
First Court. The Court was persuaded to pass an order of
injunction in favour of the contractor primarily on the
ground that the termination letter issued by KoPT suffered
from a jurisdictional error in view of the Office
Memorandum dated 22nd May, 2018.
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The said Office Memorandum, inter alia, provides for
an alternate mechanism for resolution of disputes relating
to commercial contracts between public sector enterprises.
Clauses 3, 6, 7, 8 of the Office Memorandum reads as
follows:-
"3. Applicability
In the event of any dispute or difference relating to the
interpretation and application of the provisions of
commercial contract(s) between Central Public Sector
Enterprises (CPSEs)/ Port Trusts inter se and also
between CPSEs and Government
Departments/Organizations (excluding disputes
concerning Railways, Income Tax, Customs & Excise
Departments), such dispute or difference shall be
taken up by either party for its resolution through
AMRCD.
..........................................
6. Arbitration Clause
(i) The CPSEs will ensure inclusion of a clause in all the existing and future commercial contracts between CPSEs, inter-se and CPSEs and Government Departments/Organizations as under:-
"In the event of any dispute or difference relating to the interpretation and application of the provisions of commercial contract(s) between Central Public Sector Enterprise (CPSEs)/Port Trusts inter se and also between CPSEs and Government Departments/Organizations (excluding disputes concerning Railways, Income Tax, Customs & Excise Departments), such dispute or difference shall be taken up by either party for resolution through AMRCD as mentioned in DPE OM No. 4(1)2013-DPE(GM)/FTS- 1835 dated 22.05.2018".
(ii) The on-going contracts shall also be suitably amended accordingly."
7. Disposal of pending cases in PMA All pending cases with Sole Arbitrator-PMA and Appellate Authority shall stand transferred with immediate effect to concerned administrative Ministries/Departments to be dealt with as per above mentioned laid down mechanism of dispute resolution. All cases in which the hearing has been completed by Sole Arbitrator, the award will be made Sole Arbitrator. Appeal if any, made against such cases will lie with the Cabinet Secretary at Second level (tier). 6
8. All the administrative Ministries/Departments concerned with Central Public Sector Enterprises / Port Trusts etc. are requested to bring these guidelines to the notice of all CPSEs under their administrative control for strict compliance."
A joint reading of the aforesaid Clauses of the Office Memorandum give an impression that an in-house redressal mechanism was sought to be created by the State for resolution of disputes or differences relating to commercial contracts between public sector enterprises. The Office Memorandum, however, does not appear to have any statutory force and is in the nature of an administrative instruction to public sector undertakings. Learned counsel for the HSWCL has strenuously argued that the aforesaid administrative instruction was required to be strictly adhered to by all public sector undertakings including KoPT and departure therefrom was necessarily prohibited. Although strict compliance is envisaged in clause (8) of the Office Memorandum, no express prohibition upon public sector enterprises to directly approach the courts of law to resolve disputes has been rightly engrafted therein. Furthermore, neither the terms of the Office Memorandum nor the in-house disputes redressal mechanism created therein could take away the right of a party to invoke the terms of a contract, namely, the termination clause. The parties may or may not be justified in doing so. However, its right to terminate the contract cannot be eclipsed by the terms of the Office Memorandum. To do so, would deny a legal entity to 7 remedies under the law of the land which is impermissible in law. On the other hand, the terms of the Office Memorandum may entitle the aggrieved party to knock the doors of the AMRCD before challenging the alleged unlawful termination in court of law. It may be apposite to bear in mind that the existence of a similar in-house mechanism and award passed by it was held by the Apex Court not to operate as an absolute embargo to access to justice in Northern Coalfields Ltd. Vs Heavy Engg. Corpn. Ltd. [(2016) 8 SCC 685]. In the said report the Court held:
"Remedies which are available to the Government on the administrative side cannot substitute remedies that are available to a losing party according to the law of the land." (see para 27) Hence, we are unable to concur with the learned Single Judge that the existence of the Office Memorandum operated as a jurisdictional bar upon a contracting party to terminate a terminable contract.
The other issue which appears to have weighed with the First Court was a prior litigation instituted at the behest of one M/s. Uma Corporation challenging the allotment of work order in favour of HSWCL. It is contended that the issue of an assignment of work order by HSWCL had fallen for consideration in the earlier proceeding and KoPT was fully aware that Fairfax had been appointed merely as an agent of Respondent No.1 to work out the contract. We are unable to accept such contention also.8
A Division Bench while disposing of the appeal arising from the earlier writ proceeding had, inter alia, observed that alleged assignment of the contract, if any, by the writ petitioner must be with the prior permission of KoPT. Neither the Memorandum of Understanding executed between HSWCL and Fairfax was the subject matter of adjudication in the earlier writ petition nor the same has been referred to in the earlier communications between the parties prior to the issuance of show cause notice upon HSWCL by KoPT.
Whether the terms of the MoU would amount to assignment of contract in favour of Fairfax, and if so whether KoPT has consented thereto are disputed matters and may be adjudicated at the stage of final hearing subject, however, to the issue of maintainability of the lis. However, it is pertinent to note that the termination clause did not envisage an immediate severance of contractual obligations inter-parties as would appear from Clause (b) para 7.10 which reads as follows:-
"(b) During the termination period of three months as at (a) above, the contractor may be asked by KoPT to continue to discharge its obligations under the contract which the contractor would be capable of performing and as may be mutually agreed upon with the object, as far as possible of ensuring continued availability of the weighbridge facilities and services to the port users."
Clause (b) was, in fact, invoked by KoPT while terminating the contract vide letter dated 01.01.2020. Purport and intent of the aforesaid clause in the contract is to maintain smooth functioning of port services 9 particularly availability of weigh bridges to port users for sometime notwithstanding unilateral termination by KoPT. This aspect of the matter particularly the necessity of continuation of smooth functioning of port services must be borne in mind pending adjudication of disputes between the parties. We are also not unmindful of the fact that the country presently is going through an extraordinary situation due to the pandemic. Under such circumstances, although we are not inclined to pass an order of injunction staying operation of the letter of termination dated 01.01.2020, we direct the stop gap arrangement envisaged in clause (b) of para 7.10 of the contract may continue to ensure availability of weigh bridges and other services to port users. Consequentially order dated 27th April, 2020 is also stayed.
The aforesaid arrangement shall continue for a period of 10 weeks from date.
Learned Single Judge will be at liberty to extend, modify or alter the aforesaid arrangement on the application of the parties in the event the writ petition is not disposed of in course of the aforesaid arrangement after giving adequate opportunity of hearing to all the parties in accordance with law.
We make it clear that observations made by us are for the purpose of disposal of the appeal and would not have any bearing at the time of final hearing of the writ petition and all issues including the issue of maintainability of the 10 writ petition may be decided independently upon exchange of affidavits as directed by the learned Single Judge. The appeal and all the connected applications are accordingly disposed of.
As affidavits had not been called for, allegations made in the memo of appeal/applications shall not be deemed to be admitted by the respondents.
(Suvra Ghosh, J.) (Joymalya Bagchi, J.)