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2008 DIGILAW 741 (PAT)

Surendra Singh v. State of Bihar

2008-05-29

body2008
JUDGMENT 1. Heard the parties. 2. In this writ application the petitioner has assailed the advertisement dated 25.4.2008 published in Dainik Jagran of Patna Edition, whereby and whereunder, a fresh tender has been invited for construction and completion of Ara-Buxar Road. A further prayer has been made that the respondents be directed not to create obstruction in smooth progress of the work of road repairing undertaken by the petitioner on N.H. 84 (Ara-Buxar Road). 3. The facts which are not in dispute and necessary to be noticed for disposal of this case would reveal that pursua1t to a tender notice dated 31.1.2007 the petitioner was awarded a contract for work in question, being repair and' construction of Ara-Buxar Road by a work order dated 19.3.2007 for a total sum of Rs. 5,89,16,985/-. Agreements for this work was executed on 10.7.2007, but the date of commencement of work has kept 19.3.2007, and the same was to be completed within a period of six months i.e. by 19.9.2007. The petitioner claims that it has undertaken the work alloted to him with all seriousness but the respondents without fulfilling the terms and conditions under the agreement had suddenly cancelled the work order and the agreement by an order dated 21.4.2008. The petitioner has alleged in the writ application that such decision taken on 21.4.2008 was absolutely arbitrary and consequently the advertisement dated 25.4.2008 re-advertising the work earlier allotted to him for fresh allotment of tender also suffers from the vice of arbitrariness. 4. The respondents have filed a counter affidavit wherein a preliminary objection has been raised that the writ application is not maintainable in view of specific clause in the agreement that any dispute arising out of the aforementioned contract reduced in the form of agreement could be settled through arbitration and as such if the respondents have taken action within the terms and conditions of the agreement, the same cannot be questioned by any other methods save and except by arbitration. 5. 5. The respondents in their counter affidavit have further explained that the work given to the petitioner for repairing and construction of Ara-Buxar Road was for 14 kilometre but the petitioner in a period from 19.3.2007 to 21.4.2008 had merely completed 10% work in the stipulated period of one year and as such when it was found that the petitioner was incapable of completing the work, the authorities including the respondents of the Roads Department had been left with no option but to cancel the contract by invoking the provisions of terms and conditions of the agreement. 6. The petitioner by way of rejoinder has filed document to show that for non-completion of work he cannot be blamed as certain obligations which were sought to be fulfilled by the department and the concerned Engineers were not fulfilled and the same in fact led to obstruction in the undertaking and completing of the work by the petitioner with full speed within the specified time. 7. Mr. Vinod Kanth, learned Senior Counsel appearing on behalf, of the petitioner, however, had made a very short submission on 23rd May, 2008 and had given an officer that it would serve the public interest if the petitioner was allowed to complete the work, inasmuch as, the earlier work allotted to the petitioner which has been sought to be cancelled by the impugned order was re-advertised on two occasions by advertisement issued by the department including one dated 25.4.2008, which has been impugned in this writ application, but no one had even submitted an offer to undertake the said work. He had further emphasized that for the new work the Government was going to spend an additional sum of Rs. 180 lacs by way of additional cost, whereas, the petitioner was prepared to work on the old rate which in terms would save the public exchequer of the aforesaid amount and at the same time petitioner also will be able to complete his work so as to keep his records clean as with regard to his credibility of completing the work in question. 8. This Court having taken into note the aforementioned submission that the petitioner through his counsel had expressed his willingness to complete the work within the period of two months, in order to test the bona fide of such claim had also asked Mr. 8. This Court having taken into note the aforementioned submission that the petitioner through his counsel had expressed his willingness to complete the work within the period of two months, in order to test the bona fide of such claim had also asked Mr. Kanth as to whether the petitioner was ready to give additional Bank guarantee of Rs. 5 crores (total work being worth Rs.5.89 crores approximately) so that if he could not complete the work in question within the period of two months, as was being impressed by the petitioner for being re-allotted the same work, the same could be recovered by way of the loss sustained by the Government. Mr. Kanth in that context had submitted that he was prepared not only to complete the work, but would also furnish the additional Bank guarantee of Rs. 5 crores for the aforesaid period of two months, which could be invoked by the Government when the work in question was not completed. 9. Keeping the aforementioned public interest of parmount importance wherein the Government could have got not only work completed through a contractor-petitioner within a period of two months in a situation where the Government was not getting any fresh offer even after issuance of the impugned advertisement dated 25.4.2008 and accepting offer of the petitioner to be genuine as he had not get it communicated through his counsel that he was prepared to give Bank guarantee of Rs. 5 crores, this Court had requested the learned Advocate General to take specific instruction as to whether the Government was prepared to reconsider its decision that with regard to canceling the work order in favour of the petitioner dated 21.4.2008 and allow the petitioner to complete the project within a period of two months if the petitioner had also submitted Bank guarantee of Rs. 5 crares by way of additional security by way of undertaking being given by him to complete the work in a period of two months. 10. The learned Advocate General had appeared on 26.5.2008 and had placed before this Court letter No. 159/Confidential dated 23.5.2008 written by Mr. 5 crares by way of additional security by way of undertaking being given by him to complete the work in a period of two months. 10. The learned Advocate General had appeared on 26.5.2008 and had placed before this Court letter No. 159/Confidential dated 23.5.2008 written by Mr. R.K. Singh, Secretary, Road Construction Department to the Advocate General wherein it has been stated that the department is prepared to allow the petitioner to complete the assigned work if the petitioner undertook to complete the work within a period of two-months and also would furnish additional Bank guarantee of Rs. 5 crores with a condition that in case of default the additional Bank guarantee so furnished by him could be invoked aria forfeited. 11. Such offer of the learned Advocate General, which is inconformity with the earlier stand taken by Mr. Kanth, learned Senior Counsel of the petitioner, was however orally refused by Mr. Nand Kishore Singh, learned counsel for the petitioner, who had appeared on 26.5.2008 in absence of Mr. Kanth, learned Senior counsel for the petitioner. Mr. Singh, learned Counsel for the petitioner now took a stand that the period of two months should not include such period which may be wasted due to rainy season in which coal tar work could not be carried out for repairing and construction of the road in question. Additionally; it was also conveyed by him that as the petitioner had already furnished Bank guarantee of Rs. 1 crore for obtaining original work order which has been invoked and forfeited by the department which was still in custody of the department itself as well as certain payment for the work already done by the petitioner to the tune of Rs. 2 crores were still in the hands of the authorities of the department, the petitioner may be exempted from depositing of additional Bank guarantee of Rs. 5 crores. 12 Apparently, this is a complete departure from an offer which was given by the petitioner through his Senior Counsel on the last Friday, i.e., 23rd May, 2008 and therefore this Court would express no opinion on the bona fide of the petitioner but would definitely deprecate such practice of misleading this Court by giving assurance which was readily accepted by the respondents through the aforementioned offer of the learned Advocate General. 13. 13. Coming to the preliminary objection of the Respondents, this Court is of the opinion that a writ application for enforcing the terms and conditions of a contract is clearly not maintainable as was held way back in the judgment of the Apex Court in the case of Radha Krishna Agrawal and Others Vs. State of Bihar and Others reported in AIR 1977 SC 1496 , laying down that remedy under Article 226 of the Constitution would not be available "where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract and the petitioner complains about breach of such contract by the State". 14. A bare reference to the impugned order terminating the contract of the petitioner by order dated 21.4.2008 would go to show that the Engineer Incharge, Executive Engineer had given a show cause notice to the petitioner as to why his contract should not be terminated and when the petitioner., did not choose even to respond the said show cause within the stipulated period, the competent authority had sought to terminate the contract of the petitioner under clause 59 of the agreement. Clause 59 for the sake of clarity is quoted hereinbelow "59. Termination. 59.1. The employer or the Contractor may terminate the Contract if the other party causes a fundamental breach of the Contract. 59.2. Clause 59 for the sake of clarity is quoted hereinbelow "59. Termination. 59.1. The employer or the Contractor may terminate the Contract if the other party causes a fundamental breach of the Contract. 59.2. Fundamental breaches of Contract include, but shall not be limited to the following: (a) the Contractor stops work for 28 days when no stoppage of work is shown on the current programme and the stoppage has not been authorized by the Engineer; (b) the Engineer instructs the Contractor to delay the progress of the Works and the instruction is not withdrawn within 28 days; (c) the Employer of the Contractor is made bankrupt or goes into liquidation other than for a reconstruction or amalgamation; (d) a payment certified by the Engineer is not paid by the Employer to the Contractor within 56 days of the date of the Engineer's certificate; (e) the Engineer gives Notice that failure to correct a particular Defect is a fundamental breach of Contract and the Contractor fails to correct it within a reasonable period of time determined by the Engineer; (f) the Contractor does not maintain a security which is required; (g) the Contractor has delayed the completion of works by the number of days for which the maximum amount of liquidated damages can be paid as defined in the Contract data; and (h) if the Contractor, in the judgment of the Employer has engaged in corrupt or fraudulent practices in competing for or in executing the Contract. For the purpose of this paragraph: "corrupt practice" means the offering, giving, receiving or soliciting of any thing of value to influence the action of a public official in the procurement process or in contract execution. "Fraudulent practice" means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of Borrower, and includes collusive practice among Bidders (prior to or after bid submission) designed to establish bid prices at artificial non-competitive levels and to deprive the Bore rower of the benefits of free and open competition." 59.3. When either party to the Contract gives notice of a breach of contract to the Engineer for a cause other than those listed under Sub. Clause 59.2 above, the Engineer shall decide whether the breach is fundamental or not. 59.4. Notwithstanding the above, the Employer may terminate the Contract for convenience. 59.5. When either party to the Contract gives notice of a breach of contract to the Engineer for a cause other than those listed under Sub. Clause 59.2 above, the Engineer shall decide whether the breach is fundamental or not. 59.4. Notwithstanding the above, the Employer may terminate the Contract for convenience. 59.5. If the Contract is terminated the Contractor shall stop work immediately, make the Site safe and secure and leave the Site as soon as reasonably possible." 15. The submission of the learned counsel for the petitioner that the writ petition would still be maintainable and as termination of contract was made de hors the terms of the contract, is absolutely misconceived specially when it is found from the order dated 21.4.2007 itself that the petitioner had failed to complete the project within the period of six months as was originally allotted to him in the work order dated 19.3.2007. In this context it has also been explained in the counter affidavit that the petitioner himself had violated the terms of the agreement and did not complete the work, having failed to achieve the work programme as per four work programme submitted by him from time to time. In this context not only in the impugned order, but even in the counter affidavit it has been explained that as the condition of the road of Ara-Buxar was very bad and needed urgent repairing, the petitioner was issued work order on 19.3.2007 with a clear directive to complete the work within a period of six months as specified in the work order and the consequential agreement, but the petitioner right from beginning had shown an indifferent attitude despite repeated reminders to start work between 25.3.2007 to mid July, 2007 on one pretext or other. It has further been stated that the plea of the petitioner of some additional work on account of which delay had taken place in completing the work was not correct as this additional work involved only 14% of the total work and in any event he could have executed the work for the remaining 86% within the scheduled period of six months. The Engineer Incharge had himself sworn the counter affidavit and has explained that all such plea of the petitioner was examined and they being mere excuse were also rejected by the department way back on 1.11.2007. The Engineer Incharge had himself sworn the counter affidavit and has explained that all such plea of the petitioner was examined and they being mere excuse were also rejected by the department way back on 1.11.2007. It has therefore been summed up in the counter affidavit that the petitioner was given all the cooperation from time to time in the interest of work and was also paid mobilization advance for the materials as well as was facilitated by payment of bills even for smaller piece of work for smooth progress of the work in question, but the petitioner completely failed to follow the work programme submitted by him and did not even invest the amount given to him as mobilization advance, plant and machinery advance. The respondents have also clearly denied the claim of the petitioner that he could have completed the work and in this context it has been stated that whereas repair and construction of the road work was to be completed in six months, i.e. by 19th September, 2007, the petitioner could not complete the same even to the extent of 10% of the total work in a period of thirteen months. 16. In this background the plea of the petitioner that the order terminating his contract dated 21.3.2007 cannot be said to be de hors the terms of the agreement, inasmuch as, time scheduled for completing the total work of repairing of 14 kilometre Ara-Buxar Road within a period of six months from the date of issuance of work order, i.e. 19.3.2007 was an integral part of the contract. The breach of such contract and issues arising therefrom has to be looked into and decided strictly as per terms of the contract wherein there is provision of arbitration. The case of the petitioner is therefore squarely covered by the ratio of the judgment in the case of Radha Krishna Agrawa, Inasmuch as, the contract in question is non-statutory contract and enforcement of any terms and conditions of such contract can be only resolved by the mode of arbitration and not in a writ petition under Article 226 of the Constitution of India. Reliance placed by the petitioner on the judgment of this Court in the case of Pancham Singh Vs. State of Bihar, reported in 1991 (1) PLJR page 352 is thus wholly misplaced. 17. Reliance placed by the petitioner on the judgment of this Court in the case of Pancham Singh Vs. State of Bihar, reported in 1991 (1) PLJR page 352 is thus wholly misplaced. 17. The dispute which now is sought to be raised before this Court by the petitioner virtually amounts to examining him claim on merits as to whether he had completed the work as per terms and conditions of the agreement or was obstructed in doing so by certain omissions and commissions on the part of the authorities of the department. The stand of the petitioner is that he had proceeded to complete the work in real earnestness but he could not complete the work within the specified period of six months on account of hardships created by the officers of the department including its Engineer Incharge. On the other hand, the respondents have brought materials on record to show that the petitioner had merely completed 10% work of repairing and construction of 14 kilometre Ara-Buxar Road. These disputed questions cannot be gone into by this Court in exercise of power under Article 226 of the Constitution of India. 18. As a matter of fact, for this purpose the parties, i.e., respondents and the petitioner in the agreement had agreed to resolve any dispute or difference through Board of Arbitration. The relevant clause of the agreement is incorporated under Clauses 24, 25 and 26 of the agreement which reads as follows:- "24. Disputes. 24.1. If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Dispute Review Expert within 14 days of the notification of the Engineer's decision. 25. Procedure for Disputes. 25.1. The Dispute Review Expert (Board) shall give a decision in writing within 28 days of receipt of a notification of a dispute. 25.2. The Dispute Review Expert (Board) shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Dispute Review Expert. 25.2. The Dispute Review Expert (Board) shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Dispute Review Expert. Either party may give notice to the other to refer a decision of the Dispute Review Expert to an Arbitrator, within 28 days of the Dispute Review Expert's written decision. If neither party refers the dispute to arbitration within the next 28 days, the Dispute Review Expert's decision will be final and binding. 25.3. The arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract. Dispute Review Expert to be provided for works costing upto Rs. 50 Crores. Dispute Review Board of three members (One from Employer, one from Contractor and One to be nominated by IRC Council and agreed by the representative members of the Employer and Contractor) for works costing more than Rs. 50 Crores. Arbitration (GCC Clause 25.3) The procedure for arbitration will be as follows:- 25.3 (a) In case of Dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such dispute or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The parties shall make efforts to agree on a sole arbitrator and only if such an attempt does not succeed and the Arbitral Tribunal consisting of 3 arbitrators one each to be appointed by the Employer and the Contractor and the third Arbitrator to be chosen by the two Arbitrators so appointed by the parties to act as Presiding Arbitrator shall be considered. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Council, Indian Roads Congress. (b) The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties, and shall act a presiding arbitrator. (b) The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties, and shall act a presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Council, Indian Roads Congress. (c) If one of the parties fails to appoint its arbitrator in pursuance of sub-Clause F(a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Council, Indian Roads Congress shall appoint the arbitrator. A certified copy of the order of the Council, Indian Roads Congress, making such an appointment shall be furnished to each of the parties. (d) Arbitration proceedings shall be held in India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (e) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself. (f) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings. 26. Replacement of Dispute Review Expert. 26.1. Should the dispute Review Expert resign or die, or should the Employer and the Contractor agree that the Dispute Review Expert is not fulfilling his functions in accordance with the provisions of the Contract, a new Dispute Review Expert will be jointly appointed by the Employer and the, Contractor. In case of disagreement between the Employer and the Contractor, within 30 days, the Dispute Review Expert shall be designated by the Appointing Authority designated in the Contract Data at the request of either party, within 14 days of receipt of such request." 19. In case of disagreement between the Employer and the Contractor, within 30 days, the Dispute Review Expert shall be designated by the Appointing Authority designated in the Contract Data at the request of either party, within 14 days of receipt of such request." 19. From the aforementioned provisions made in the agreement itself it is absolutely clear that there is an arbitration clause and therefore for the dispute in question the petitioner could not have filed a writ petition as he has effective, efficacious and alternative remedy. 20. The question of maintainability of the writ petition in presence of an arbitration clause as quoted above has been gone into both by the Apex Court as well as by this Court and it has been held that once the parties had elected a forum of arbitration, they cannot choose to get their dispute settled/resolved through any other methods including by filing a writ application under Article 226 of the Constitution of India. In fact the refusal of writ jurisdiction under Article 226 of the Constitution in a case where the parties are bound by an earlier agreement providing for arbitration by now is a well settled law. Reference in this connection may be made to the judgment of the Apex Court in the case of state of U.P. Vs. Bridge & Roof Co. (India) Ltd. reported in (1996)6 SCC 22 wherein the Apex Court had held as follows:- "Further, the contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration. The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy-in this case, provided in the contract itself-is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226." 21. The same view infact has been reiterated by the Apex Court even in the case of ABL International Ltd. Vs. The existence of an effective alternative remedy-in this case, provided in the contract itself-is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226." 21. The same view infact has been reiterated by the Apex Court even in the case of ABL International Ltd. Vs. Export Credit Guarantee Corporation Ltd. reported in (2004)3 SCC 553 where in it had been held that:- "It is well known that if the parties to a dispute had agreed to settle their dispute by arbitration and if there is an agreement in that regard, the courts will not permit recourse to any other remedy without invoking the remedy by way of arbitration, unless of course both the parties to the dispute agree on another mode of dispute resolution." 22. In view of the fact that in the present case also, the petitioner is bound by the clauses of his agreement, this Court would hold that the writ application enforcing a term of contract or assailing any decision taken under the terms of the contract is not maintainable and the only option for him is to avail the remedy of arbitration as provided in agreement. 23. Faced with the situation, counsel for the petitioner had submitted that as a matter of fact when the respondents had passed the order dated 21.4.2008 cancelling the work and agreement of the petitioner in purported exercise of their power in Clauses 59.1, 59.2 and 59.4, the petitioner had already invoked the arbitration clause by its letter dated 29.4.2008 and in this context the learned counsel had referred to paragraphs 7 and 8 thereof which reads as follows:- "7. that if your honour is all serious to deprive me from doing the work then I lay my claim against the agreement as under treating your actions to be breach of the same. (i) Payment due work done subject to final measurement in my presence Rs. 50,00,000/-. Payment of materials dumped at the work site like Bitumen, stone chips stone metal 45,00,000/-. (iii) Retention money from bill on account of extension of time .Rs.11,50,000/-. (iv) Liquidated damage recovered from running bills on illegal grounds 3,50,000/-. (v) Refund of security deducted from running bills 6,50,000/-. (vi) Return of performance security Rs. 17,90,200/-. (vii) Compensation as loss of profit on the remaining value of work of four crores at the rate of 10% comes to Rs. 40,00,000/-. (iv) Liquidated damage recovered from running bills on illegal grounds 3,50,000/-. (v) Refund of security deducted from running bills 6,50,000/-. (vi) Return of performance security Rs. 17,90,200/-. (vii) Compensation as loss of profit on the remaining value of work of four crores at the rate of 10% comes to Rs. 40,00,000/-. (viii) Interest under Section 3 of the Interest Act 1978 on the entire amount stated above from the date of service of this notice to the date of payment. (ix) The amount of advance received against machineries remaining up paid is liable to be adjusted from the above amount. 8. That by this notice the Executive Engineer Road Construction Division, National Highway Division, Patna West being signatory to the agreement is hereby required requested and called upon to pay the abovesaid amount within a period of fifteen days and or may be pleased to treat this petition as raising of contractual dispute under Clause 24 of the agreement and be further pleased to adopt the procedure prescribed under clause 25 of the agreement including the said period. His decision in the matter determine the procedure for arbitration." 24. From the aforementioned quoted portion of letter of the petitioner dated 29.4.2008 it does not appear that he has invoked the arbitration clause with all clarity and atleast in terms of Clauses 24 to 26 of the agreement read with its special condition of contract quoted above, but then he has still option to do so. In any event, on his own showing when the petitioner had already invoked the arbitration clause as is claimed by him on 29.4.2008, filing of this writ application on 2.5.2008 with a certificate and assertion in paragraph 24 of the writ petition that he has got no alternative and efficacious remedy, is itself found to be incorrect. 25. In the result, this writ application is held to be not maintainable and is consequently dismissed. However, dismissal of this writ application would not stand in the way of the petitioner from taking recourse to the arbitration proceeding in terms of Clauses 24, 25 and 26 of the agreement read with its special condition of contract.