Delhi High Court
Bretton Woods Finlease Ltd. And Anr. vs Mahanagar Telephone Nigam Ltd. on 28 October, 2005
Equivalent citations: 2005(2)CTLJ236(DEL), 125(2005)DLT69, 2005(85)DRJ207
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
Page 1853
1. Rule.
2. There are no disputed questions of fact as counsel for the parties have fully argued their respective cases on the basis of documents available on the record. I, therefore, proceed to finally dispose of the Writ Petition.
3. The Prayers in this Petition are for the issuance of a Writ, Order or Direction quashing the impugned Order dated 27.8.2004 and directing the Respondents to immediately release a sum of Rs.35,56,794/- to the Petitioner. The impugned Order reads as follows:
"Sub: Call Centre-1500-Tender Enquiry No.AGM (Admn.) Sales-S/NTF/CC/2002-03 Reference this office letter No.GM (Sales)/MTNL/1500-Call Centre/2004-05/28 dated 12.8.2004 and your reply thereto dated 19.8.2004. The reply furnished by you has been examined in detail and has been duly considered. It is regretted that you have not even cared to address the main issues and have rather chosen to reiterate your earlier know stand on the issue of compliance with the provisions of Labour Laws. By your acts of omission & commission and misdemeanor you have not only willfully violated the contract condition but also blatantly disregarded the provisions of Labour Laws. Even your reply does not reflect any sense of regret or remorse on your part.
Page 1854 After due application of mind and pursuant to carefully considering your reply MTNL is constrained to blacklist your firm and debar you from further tendering in MTNL for a period of two years.
De (Cass Centre-1500)"
4. The facts of the case are that the Petitioner responded to the Respondent's invitation in June, 2003 for supply of trained manpower for 1500 Call Centres of MTNL situated at Kidwai Bhawan on 1st August, 2003. The Petitioner was issued a Letter of Intent pursuant to which a contract was executed and a Performance Guarantee of Rs.4,75,200/- was furnished. The contract was eventually executed on 14.8.2003 by which the Petitioner had agreed to supply 60 Agents and 4 Supervisors to be paid Rs.5100/- and Rs.6000/- per month respectively. The Petitioner was to make deductions on account of Provident Fund and ESIC Fund and deposit these amounts with the concerned Department. The Bank Guarantee furnished by the Petitioner could be forfeited in case of its failure to make compliance with the terms and tenor of the contract. The tenure of the Agreement was for one year from 15.8.2003 to 14.8.2004.
5. MTNL addressed a letter dated 12th August, 2004 to the Petitioner informing it that it was not complying with various terms and conditions of the Agreement as well as the provisions of Labour laws, specifically that it was not depositing EPF and ESI amounts in respect of the employees working in the Call Centre. Reference was duly made to the Petitioners' letter dated 15.7.2004 in which it had been explicitly stated by the Petitioner that EPF Act and ESIC Act were not applicable to the employees of their Call Centres as they were being paid salaries in excess of those prescribed in the contract thus bringing them beyond the purview of these two statutes. This is also what had been stated by the Petitioner in its earlier letter dated 1.7.2004. The Petitioner had also confirmed to the Respondent that all salaries were being paid by cheque as required by the latter. The position was reiterated in the letter dated 19th August, 2004. In the letter dated 3.9.2004 the Petitioner had remonstrated against the threatened blacklisting and had requested MTNL to refer the case to the Provident Fund Department for a decision whether EPF Act and ECI Act were applicable in regard to the salaries paid by the Petitioner to their Agents/Supervisors. It would be appropriate to highlight the fact that the Show Cause notice dated 12.8.2004 came to be issued two days prior to the expiry of the contract.
6. It is well settled that a party cannot be permitted to travel beyond the stand adopted and expressed by it in the impugned decision. If authority is required for this proposition it can be found in the celebrated decision on Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi, of which reads as follows:
"8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the Page 1855 beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji :
"Public orders publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the acting and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself".
Orders are not like old wine becoming better as they grow older.
In Babu Verghese v. Bar Council of Kerala, , the Apex Court had to consider a case under the Advocates Act, and while doing so it applied to principles of Taylor v. Taylor (1875) 1 Ch D 426 and in Nazir Ahmad v. King Emporer . The Apex Court observed as follows:
"It is the basic principles of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. The origin of this rule traceable to the decision in Taylor v. Taylor which was followed by Lord Roche in Nazir Ahmad v. King Emperor."
7. In Tata Cellular v. Union of India, the Supreme Court has opined in these words:
The duty of the court is to confine itself to the question of legality. Its concern should be:
1. Whether a decision/making authority exceeded its powers?
2. Committed an error of law.
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilllment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:
(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must given effect to it.
Page 1856
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, "consider whether something has gone wrong of a nature and degree which requires its intervention".
Wednesbury reasonableness derives its origin in Associated Provincial Picture Homes Limited v. Wednesbury Corporation (1947) 2 All E.R. 680 and has been explained to require that the "person entrusted with discretion must, so to speak, direct himself properly in law. He must cal his attention to matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules he may truly be said to be acting unreasonably. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority".
8. Learned counsel for the Petitioner has relied on the observations made in Vinay Construction Co. v. Municipal Corporation of Delhi, . Sanjay Kishan Kaul, J. had observed that blacklisting without granting a proper hearing amounted to severe punishment resulting in civil consequences. A similar approach had also been preferred by Badar Durrez Ahmad, J. in SPS Engineering Ltd. v. Indian Oil Corporation Ltd., . In that case the Writ Petitioner had been debarred from entering into any contract with the Respondent thereby blacklisting it for a period of three years. Disputed questions were found to be pending before the Arbitrator. The Petitioner had not been afforded an opportunity of hearing prior to the passing of the impugned Order, which was set aside with liberty granted to pass further Orders after granting an opportunity of hearing to the affected party.
9. Learned counsel for the Respondent has drawn attention to the existence of an Arbitration Clause in the subject contract. However, no explanation is forthcoming from his side as to why the MTNL did not refer the matter to an Arbitrator instead of rushing to pass a blacklisting order. Learned counsel for the Petitioner has explained that the Arbitration Clause would not have any applicability to a blacklisting order which is not within the sweep of the contract itself. I am of the view that the Arbitration Clause would not preclude this Court from entertaining and deciding the present Writ Petition. This decision of the Hon'ble Supreme Court in Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd., , is of great relevance and guidance, even though the legal nodus in that case was the interplay between the Arbitration and Conciliation Act 1996 Page 1857 and the Companies Act. The following passage is self explanatory, and on its strength it can be concluded that the Company Court retains jurisdiction over all matters except those specifically falling within the purview of the Special Courts Act. The following passage is self explanatory - Sub-section (1) of Section 8 provides that the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide.
The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this, that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company. The matter which is pending before the High Court in which the application was filed by the petitioner herein was relating to winding up of the Company. That could obviously not be referred to arbitration and, therefore, the High Court, in our opinion was right in rejecting the application."
10. Learned counsel for the Respondent has relied on People's Union for Democratic Rights v. Union of India, , in which it has been observed that statutory benefits are enforceable against the State (re: MTNL) as the principal employer. It had also been held that a Writ can be maintained against the Government for ensuring compliance by private contractors of welfare legislation affecting a large number of persons engaged in development works initiated by such Government. Reliance on this decision, however, begs the question, since it is the Petitioners' stand that it falls beyond the purview of the Provident Fund and ESIC's statutes.
11. On the dictates of the decision in Mohinder Singh Gill, the impugned Order must sustain itself on its contents alone. Explanations or justifications contained in the Counter-Affidavit can only be supplemental or adjunctory in nature. If the Counter-Affidavit for the first time sets out the reasons which are essential to uphold the impugned decision, it would not be in order to rely on these pleadings. There may be a bona fide doubt as to whether the Petitioner was actually paying sums in excess of those which it had contracted to pay to the Agents and Supervisors in terms of the contract. Learned counsel for the Respondent has belabored this aspect of this case and has contended that it is inconceivable that any entrepreneur would pay salaries higher than those stipulated in the contract. Learned counsel for the Petitioner has countered this argument by stating that there may be many reasons for doing so including the practicality from the Petitioner standpoint of paying higher salaries so as to take the employment beyond statutory stipulations. It is not in dispute that this controversy has been referred to the Provident Fund Department, and is presently in adjudication before the Provident Fund Commissioner. If the MTNL was nevertheless desirous of blacklisting the Petitioner notwithstanding the Page 1858 absence of a finding against the Petitioner by the Provident Fund Commissioner, it should have articulated and amplified reasons for coming to this conclusion in the impugned Order itself. There is no dispute on the factum of the Petitioner paying salaries to the Agents and Supervisors in excess of those it had contracted to pay by cheque. There is no stipulation in the contract barring such payments. Where civil consequences of gargantuan proportions are bound to follow because of draconian decisions such as blacklisting, Authorities are not empowered to act on their hunches and conjectures. Learned counsel for the Petitioner has justifiably drawn attention to the fact that no complaints have been received from any of these employees to the effect that while they had been paid their salaries by cheque, some amounts had been refunded to the Petitioner in cash. The Respondents were not precluded from instituting an enquiry in this regard and from recording statements of the employees concerned. The Respondents would then have arrived at a reasoned conclusions based on available evidence. Instead it has hastely handed out the impugned Order based on conjectures and surmises. In order to justify this decision, the Respondents must be in a position to establish that the accusation of non-compliance with statutory obligations by the Petitioner, engineered by demanding back a portion of the salaries in cash, had been proved either by the admission of the Petitioner or by cogent evidence. This has not been made good.
12. Several decades ago the Hon'ble Supreme Court had in U.O.I. v. Raman Iron Foundry, , struck down the arbitrary exercise of power by the Government or Authority in withholding amounts which were hotly disputed by the Claimant. This caution ought not to be thrown to the winds. There must be some adjudication by an independent Authority before it can be predicated that any amounts have fallen due. The fact that the Respondents have rushed to a decision without waiting for the decision of the Provident Fund Commissioner lends credence to the Petitioners' allegations that the MTNL had not acted in a bona fide manner. The Respondent has not affirmatively elaborated the manner in which the Petitioner has violated Labour laws.
13. The Writ Petition succeeds. The Respondent is directed to pay the Petitioner a sum of Rs.35,56,794/- which is stated to reflect payment already made by the Petitioner to its Agents and Supervisors for services rendered during the tenure of the contract. It is also not in dispute that the Respondent has invoked the Bank Guarantee of Rs.4,75,200/- which would be adjustable wholly or in part against its statutory remedy in case it is found that statutory dues had not been deposited by the Petitioner. Further, the approach followed by my Learned Brother Badar Durrez Ahmad commends itself in this case also. Accordingly, the impugned Order is set aside. MTNL may however conduct a formal enquiry on the charges and accusations that the Petitioners have pressurized and compelled or coerced its Agents and Supervisors to refund a part of the salary paid to them by cheque. If evidence exists to sustain these charges, the blacklisting Order may be passed after stating the reasons for arriving at this conclusion.
14. Parties to bear their respective costs.