James Joseph v. Food Corporation of India — 1984 DIGILAW 145 (KER)

JUDGMENT Balakrishna Menon, J. 1. Judgment of the Court was delivered by - This writ appeal is against the decision of a learned Single Judge of this Court in O.P. No. 11015 of 1983-N dismissing the writ petition on the ground that the remedy under Art.226 of the Constitution is not available against the termination of a contract and the alleged breach of its terms and conditions. 2. The 1st respondent the Food Corporation of India, Trivandrum, invited tenders for transporting, clearing, forwarding and handling of food grains and other commodities arriving at the Cochin Port by Sea and in the Harbour Terminus by Rail. The tender submitted by the petitioner being the lowest was accepted by the 1st respondent Corporation as per its telegram, dated 13th December 1983 produced along with the counter affidavit as Ext. R-1(a) Ext. R-1(a) shows that the petitioner's tender was accepted and the contract was awarded to him for a period of two years with effect from 14th December 1983. The telegram required the petitioner to commence the work forthwith. 3. Clause.10 of the tender notification extracted at page 2 of the writ appeal is as follows: "The successful tenderer will be advised of the acceptance of his tender by a letter/telegram or formal acceptance of tender. Where acceptance is communicated by telegram the formal acceptance of tender will be forwarded to the contractor as soon as possible, but the telegram must be acted upon immediately." Clause 10(a) of the tender notification extracted at page 5 of the Original Petition empowers the Regional Manager of the 1st respondent Corporation to terminate the contract on failure of the contractor to observe any of the provisions of the contract and to get the work done for the unexpired period at the cost and risk of the contractor. The 1st respondent Corporation is also entitled to claim from the contractor any loss that the Corporation may suffer on account of the failure of the contractor to comply with the terms and conditions of the contract. There is a similar provision in Clause.10(b) empowering the Senior Manager of the 1st respondent Corporation to terminate the contract on breach of any of the conditions of the contract by the contractor, and to get the work done at the risk and cost of the contractor. 4. There is a similar provision in Clause.10(b) empowering the Senior Manager of the 1st respondent Corporation to terminate the contract on breach of any of the conditions of the contract by the contractor, and to get the work done at the risk and cost of the contractor. 4. On acceptance of the terms and conditions of the tender notification the petitioner was bound to commence the work on receipt of Ext. R-1(a) telegram. The petitioner admits that he received the telegram on 14th December 1983. The petitioner could not however commence work as according to him, the Food Corporation of India Worker Union had submitted a charter of demands and there were conciliation proceedings before the Labour Commissioner in which the petitioner, the District Manager of the 1st respondent Corporation and the Union leaders had participated. A letter, dated 14th December 1983 confirming Ext. R-1(a) telegram was received by the petitioner on 22nd December 1983 which requires the petitioner to furnish a security deposit of Rs. 50,000 within one week from the date of receipt of the same. This letter is produced as Ext. P-3. 5. On receipt of Ext. P-3, the petitioner sent a reply a copy of which is produced as Ext. P-4, wherein he expressed his readiness to remit the security deposit within the time allowed. Thereafter the 1st respondent by Ext. P-5 telegram terminated the contract for the reason that the petitioner had failed to commerce the work in breach of the terms and conditions of the contract. In Para.6 of the Original Petition the petitioner alleges that he had made all arrangements to start the work, had spent more than rupees one and a half lakhs and had also incurred the establishment expenses. The Original Petition is filed to quash the decision in Ext. P-5 to terminate the contract and to direct the respondents to permit the petitioner to carry on the work in terms of his tender accepted by the 1st respondent. 6. In the counter affidavit dated 2nd January 1984 the reasons for the termination of the contract are given in detail. It is a condition of the contract as disclosed in Clause.10 of the tender notification that the work should be commenced immediately on receipt of the telegram accepting the tender. 6. In the counter affidavit dated 2nd January 1984 the reasons for the termination of the contract are given in detail. It is a condition of the contract as disclosed in Clause.10 of the tender notification that the work should be commenced immediately on receipt of the telegram accepting the tender. It is averred in the counter affidavit that the petitioner was not able to commence work in terms of the contract, even though he was granted time till 22nd December 1983, for the reason that he was not able to raise the required finances. A settlement with the labourers failed for the reason of the failure of the petitioner to pay the recoverable advances to them, the public distribution system was very badly affected for the reason of the petitioner's failure to commence work and it was in that context that the contract was terminated and the work entrusted to the Chettinad Corporation (P) Ltd. whose tender was the next lowest. In his letter, dated 17th December 1983 marked as Ext. R-1(b), the petitioner had stated that he had taken steps to come to a settlement with the labourers with a view to start the work at the earliest. In his letter Ext. R-1(c), dated 17th December 1983 addressed to the District Collector, Ernakulam, the petitioner has clearly admitted that the contract was for a period of two years with effect from 14th December 1983. He refers to the labour dispute and requests the District Collector to intervene and make a settlement to avoid disruption of the food distribution system. As per the telegram Ext. R-1(d), dated 15th December 1983, the petitioner was informed that the District Manager had reported the non commencement of work even on the 15th, the discharge of the vessel is in progress and immediate arrangements have to be made for clearance without any further delay. Ext. R-1(e) is a copy of the telegram, dated 16th December 1983 by the 1st respondent Corporation to the petitioner wherein the petitioner was informed that for his failure to commence work the Food distribution system had come to a stand-still. He was also informed that wagons and rice consignments remain unloaded. The petitioner was therefore requested to commence work without any further delay. Ext. R-1(f) is a further telegram, dated 16th December 1983 requiring the petitioner to commence work forthwith and informing him that the demurage, transitudes etc. He was also informed that wagons and rice consignments remain unloaded. The petitioner was therefore requested to commence work without any further delay. Ext. R-1(f) is a further telegram, dated 16th December 1983 requiring the petitioner to commence work forthwith and informing him that the demurage, transitudes etc. that may be incurred will be recovered from him. By Ext. R-1(g), telegram, dated 21st December 1983 the petitioner was told that from his conduct it is clear he is not capable of commencing the work, the public distribution and ship discharge are badly affected and unless he commences work and informs by reply telegram a fresh contractor will be appointed on the 22nd at the petitioner's risk and cost. Since there was no reply the contract was cancelled as per Ext. P-5 telegram. 7. Learned counsel for the appellant submits that the petitioner had incurred loss as stated in Para.6 of the Original Petition acting on the basis of the solemn promise contained in the contract between the parties, and the respondents will be estopped from backing out of their obligations arising out of the contract. Counsel relies on the decision of the Supreme Court in Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd. ( 1983 (3) SCC 379 ). It is slated at page 385: "9. It was next contended that the dispute between the parties is in the realm of contract and even if there was a concluded contract between the parties about grant and acceptance of loan, the failure of the Corporation to carry out its part of the obligation may amount to breach of contract for which a remedy lies elsewhere but a writ of mandamus cannot be issued compelling the Corporation to specifically perform the contract. It is too late in the day to contend that the instrumentality of the State which would be 'other authority' under Art.12 of the Constitution can commit breach of a solemn undertaking on which other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract. It was not disputed and in fairness to Mr. It was not disputed and in fairness to Mr. Bhatt, it must be said that he did not dispute that the Corporation which is set up under S.3 of the State Financial Corporation Act, 1955 is an instrumentality of the State and would be 'other authority' under Art.12 of the Constitution. By its letter of offer, dated July 24, 1978 and the subsequent agreement, dated February 1, 1979 the appellant entered into a solemn agreement in performance of its statutory duty to advance the loan of Rs. 30 lakhs to the respondent. Acting on the solemn undertaking, the respondent proceeded to undertake and execute the project of setting up a 4-star hotel at Baroda. The agreement to advance the loan was entered into in performance of the statutory duty cast on the Corporation by the statute under which it was created and set up. On its solemn promise evidenced by the aforementioned two documents, the respondent incurred expenses, suffered liabilities to set up a hotel. Presumably, if the loan was not forthcoming, the respondent may not have undertaken such a huge project. Acting on the promise of the appellant evidenced by documents, the respondent proceeded to suffer further liabilities to implement and execute the project. In the back drop of this incontrovertible fact situation, the principle of promissory estoppel would come into play. In Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of U.P. this court observed as under: [S.C.C. para 8, p. 425: SCC (Tax) p. 160] The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not. 10. 10. Thus the principle of promissory estoppel would certainly estop the Corporation from backing out of its obligation arising from a solemn promise made by it to the respondent." This decision is an authority for the proposition that even though the representation or promise is founded on a contract if the party to whom the representation or promise is made has acted to his prejudice on its faith the principle of promissory estoppel would nevertheless apply. If however there is no case for the applicability of the principle of promissory estoppel the remedy under Art.226 of the Constitution is not available against a mere breach of contract. 8. In the decision of the Supreme Court in M/s Radhakrishna Agarwal and others v. State of Bihar and others ( AIR 1977 SC 1496 ), it is stated at page 1501: "17. Learned counsel contends that in the cases before us breaches of public duty are involved. The submission made before us is that, whenever a State or its agents or officers deal with the citizen, either when making a transaction or, after making it, acting in exercise of powers under the terms of a contract between the parties, there is a dealing between the State and the citizen which involves performance of 'certain legal and public duties.' If we were to accept this very wide proposition every case of a breach of contract by the State or its agents or its officers would call for interference under Art.226 of the Constitution. We do not consider this to be a sound proposition at all." The same principle is reiterated in a later decision of the Supreme Court in AIR 1981 SC 1368. 9. There is no scope for the applicability of the principle of promissory estoppel in the present case, on the facts adverted to above. It was a condition of the tender notification itself that the work should be commenced immediately on receipt of the telegram informing the acceptance of the tender. The work is of such a nature as could not brook any delay and the petitioner had been informed time and again that unless he commences the work forthwith the 1st respondent Corporation will be constrained to entrust the work to some other contractor at the petitioner's risk and loss. The work is of such a nature as could not brook any delay and the petitioner had been informed time and again that unless he commences the work forthwith the 1st respondent Corporation will be constrained to entrust the work to some other contractor at the petitioner's risk and loss. This appears to be a case where the petitioner was not able to commence work in terms of the contract - may be he had justifiable reasons. The petitioner was also fully aware of the urgency of the situation as he had been informed by the several telegrams referred to above. Being a party to the contract he also knew that the work had to be commenced immediately on receipt of the telegram accepting his tender. Under these circumstances, there will be no estoppel against the respondents. 10. In the decision of the Supreme Court in Chhaganlal Keshavlal Mehta v. Patel Narandas Haribhai ( AIR 1982 SC 121 ), it is stated at page 125: "23. To bring the case within the scope of estoppel as defined in S.115 of the Evidence Act: (1) there must be a representation by a person or his authorised agent to another in any form a declaration, act or omission; (2) the representation must have been of the existence of a fact and not of promises de futuro or intention which might or might not be enforceable in contract; (3) the representation must have been meant to be relied upon; (4) there must have been belief on the part of the other party in its truth; (5) there must have been action on the faith of that declaration, act or omission, that is to say, the declaration, act or omission must have actually caused another to act on the faith of it, and to alter his former position to his prejudice or detriment; (6) the misrepresentation or conduct or omission must have been the proximate cause of leading the other party to act to his prejudice; (7) the person claiming the benefit of an estoppel must show that he was not aware of the true state of things. If he was aware of the real state of affairs or had means of knowledge, there can be no estoppel; (8) only the person to whom representation was made or for whom it was designed can avail himself of it. If he was aware of the real state of affairs or had means of knowledge, there can be no estoppel; (8) only the person to whom representation was made or for whom it was designed can avail himself of it. A person is entitled to plead estoppel in his own individual character and not as a representative of his assignee." For the aforesaid reason, we do not see any valid ground to interfere with the decision of the learned Single Judge. The writ appeal fails and is dismissed. We make no order as to costs.