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2010 DIGILAW 627 (JK)

Vethesta Constructions--Good Luck Constructions v. State Of J&K

2010-12-16

Hasnain Massodi

body2010
1. Heard. Admit. 2. The petition, having regard to controversy involved, is with the consent of learned counsel for the parties taken up for final disposal, at the initial stage. M/s Vethestha Constructions and M/s Good Luck Constructions -- two construction companies, as a joint venture, responded to the Notice inviting tenders, issued by respondent No.3 on 12.09.2008, for upgradation of road from Achabal Soumbran to Chatpal. The joint venture/petitioner herein bagged the contract for upgradation of the aforementioned road at a cost of Rs.18,86,81,944.00 (Rupees eighteen crores, eighty six lacs, eighty one thousand, nine hundred and forty four only) and letter of acceptance No.CE/PMGSY/J&K/Sgr/667-83 dated 23rd January 2009 was duly delivered to the petitioner. The petitioner was required to furnish performance security in the form of Bank Guarantee/Fixed Deposit Receipt for an amount of Rs.47.17 Lacs, within a period of ten days. The petitioner duly furnished the Performance Bank Guarantee - BG No.04/2009 dated 29th May 2009 from J&K Bank Limited, whereafter respondent No.3 vide No.CE/PMGSY/J&K/S/1499-1503 dated 30th May 2009, asked petitioner to proceed with the work in accordance with the contract documents. The parties executed a formal agreement on 30th May 2009. The Contract Data, Special Conditions of Contract, General Conditions of Contract, and Specifications, Drawing etc., were agreed to be read and construed as part of agreement. 3. The petitioner, vide No.VCC/8111/ R-23/1585-86 dated 11th June 2009, made a request to respondent No.5 for handing over of the site, free from any interference of local inhabitants, Revenue and Forest department etc. The respondent No.6, in turn vide No.AEE/ PMGSY-Breng(L)104-05 dated 24th June 2009, informed the petitioner that no steps were taken by the petitioner to commence work and that the petitioner had not even established office/field lab at the site, mobilized resources and submitted the works programme. The upgradation work as per work plan, later submitted by the petitioner as also the terms of agreement, was to commence in July 2009, to be completed by December 2010. The work plan submitted by the petitioner, gave details of dates of commencement of different stages of work and the date of their completion. To illustrate survey/investigation /site clearance as also earth work excavation/ filling was to commence in July 2009, to be completed by December 2009. The work plan submitted by the petitioner, gave details of dates of commencement of different stages of work and the date of their completion. To illustrate survey/investigation /site clearance as also earth work excavation/ filling was to commence in July 2009, to be completed by December 2009. Similarly, construction of slab decked culverts, H.P. culverts, vented cause way, laying of 750 mm pipes, construction of cement concrete drain etc., was to be completed by December 2009. The petitioner appears not to have been able to adhere to the work plan submitted by him and approved/accepted by the respondent No.5, vide No.EE/PMGSY/Ang/528-31 dated 15th July 2009. 4. The petitioner, instead of making any progress as regards upgradation of road on ground, exchanged a series of communications/letters with the respondents. The respondent No.5 anguished that the petitioner was not showing any interest in execution of the allotted work and the petitioner complaining that site, free from encumbrances was not being delivered to the petitioner, so as to enable the petitioner to commence work. In the middle of the allegations counter allegations, benchmarks agreed by the parties were not followed and an ambitious project started with great enthusiasm to provide better road connectivity to thousands of people of an underdeveloped area, has failed to take off. It appears that after, repeated requests and reminders from respondents, allegedly failed to prompt the petitioner to speed up execution of contract work and even a warning that failure of the petitioner to abide by the revised work plan submitted by the petitioner, may entail termination of contract, went unnoticed, the respondent No.3 vide No.CE/PMGSY/1084-88 dated 28th May 2010 terminated the petitioner's contract. The respondent 3 seemingly took action pursuant to Clause 52 General Condition of Contract, whereunder respondents claim to have authority to opt for such a course/action, in the event of fundamental breach of contract by the petitioner. 5. The respondents as a follow up to termination order appear to have repeatedly approached the petitioner for taking measurements of the works executed by the petitioner, in his presence, without any response from the petitioner. The respondent No.5, thereafter, vide NIT No.04/PMGSY/Anantnag of July 2010 dated 26th July 2010, has invited fresh tenders for the work in question. 6. 5. The respondents as a follow up to termination order appear to have repeatedly approached the petitioner for taking measurements of the works executed by the petitioner, in his presence, without any response from the petitioner. The respondent No.5, thereafter, vide NIT No.04/PMGSY/Anantnag of July 2010 dated 26th July 2010, has invited fresh tenders for the work in question. 6. The petitioner aggrieved of communication No.PMGSY/Div/Ang/356-360 dated 15th May 2010, addressed by respondent No.5 to respondent No.4, recommending termination of contract in question and communication No.CE/PMGSY/1084-88 dated 28th May 2010, whereby contract in question has been terminated by respondent No.3 as also NIT No. 04/PMGSY/Anantnag of July 2010 dated 26th July 2010, whereby fresh tenders have been invited for the work allotted to the petitioner, has filed instant petition. The petitioner on the strength of averments made in the petition, seeks following reliefs:- i- Certiorari, thereby quashing the Communication No. PMGSY/Div/Ang/ 356-360 dated 15.05.2010 (Annexure-W). ii- Certiorari, quashing the impugned Communication No. CE/PMGSY/1084-88 dated 28.05.2010 issued by respondent No.3 (Annexure-Z1). iii- Certiorari, quashing the notice for invitation of tender issued vide NIT No.04/PMGSY/Anantnag of July 2010 dated 26.07.2010 (Annexure Z-9). iv- Mandamus, commanding respondents to allow the petitioners company to execute the work in pursuance of Annexure D, E, F and Annexure -- G. v- Prohibition, thereby prohibiting the respondents from proceeding with the fresh tenders in pursuance of Annexure Z-9. vi- Mandamus, commanding respondents to extend the time of execution of work in light of the recommendations made by Minister concerned (Annexure-Z). 7. The petition is bed-rocked on the grounds that the respondents and not the petitioner are responsible for delay in execution of the road upgradation and widening project in question inasmuch as respondents neither supplied important documents to the petitioner in time nor handed over the site free from all encumbrances and encroachments to the petitioner with proper dispatch, so as to enable the petitioner to commence the work. It is pleaded that the respondents failed to follow the procedure laid down under the agreement entered into by the parties, while dealing with the appeal preferred by the petitioner against the communication No.PMGSY/Div/ Ang/356-360 dated 15th May 2010, as also communication No.CE/PMGSY/1084-88 dated 28th May 2010. The respondents are said to have violated the procedure laid down in Clause 52 and 53 of the agreement, while making the termination order in question. The respondents are said to have violated the procedure laid down in Clause 52 and 53 of the agreement, while making the termination order in question. The petitioner while throwing challenge to what petitioner calls Executive Fiat of the respondents, whereby the contract has been terminated and the petitioner debarred from participating in fresh tenders, insists that the respondent No.3 has disregarded the recommendation of Minister concerned to extend the time period for completion of contract in question by one month and thus rendered the termination order void. The petitioner dilating on the steps not taken by the respondents to make it possible for the petitioner to commence work, has averred that the respondents failed to obtain "No Objection" from the Sericulture and Forest Departments to felling of mulberry and other protected trees from the roadside, pay compensation to the estate holders/building owners, whose land/buildings were to come the road on either side on its extension and to remove buildings, electric polls, water supply pipes from either side of the road. 8. The respondents resist the petition, inter-alia, on the grounds that the writ petition raises disputed question of facts, which cannot be dealt with by the Court while exercising extra ordinary writ jurisdiction. The petition is said to have been filed by incompetent person and to contain allegations of malafides without arraying the person against whom malafides are alleged as party -- respondent to the petition. The respondents deny that the respondents in any manner contributed to delay in execution of project. Respondents on other hand pinpoint the lapses committed by petitioner, like non submission of works programme within the stipulated period, failure to set up field laboratory with the prescribed equipments within stipulated time, etc. The respondents controvert all the factual averments made in the petition and insist that 75% of the site was available to the petitioner free from any encumbrance inasmuch as the road already existed and was only to be widened and upgraded. The respondents claim to have considered representation made by the petitioner on 22nd of May 2010. It is denied that the principles of natural justice were violated while terminating the contract vide communication dated 28.05.2010. The petitioner, it is pleaded, failed to revalidate the bank guarantee as required under the contract. The respondents claim to have considered representation made by the petitioner on 22nd of May 2010. It is denied that the principles of natural justice were violated while terminating the contract vide communication dated 28.05.2010. The petitioner, it is pleaded, failed to revalidate the bank guarantee as required under the contract. The respondents insist that the order, terminating the contract, is justified and inconformity with the relevant clauses of contract documents and that invitation of tenders for balance work, is a natural corollary to termination order. 9. I have gone through the pleadings as also the record pertaining to controversy in question made available by learned counsel for the parties and have heard counsel for the parties at length. 10. It is well settled preposition of law that the judicial review is concerned with reviewing not merits of the decision/order of Government or its functionaries, questioned before the Court but the decision making process. It is not an appeal from a decision but a review of mode and manner, in which decision was made. The Court cannot, under guise of exercising its judicial review jurisdiction, assume the role of an appellate court, decide whether it would have arrived at the same conclusion as arrived at by the Government, had the Court opportunity to take impugned decision and in the process usurp powers of decision making authority. It is equally well settled law that the Government must have freedom of contract and extra ordinary writ jurisdiction may not be exercised in the contractual field unless of course the action, complained of on the part of State, is violative of Article 14 of Constitution of India. Again while scrutinizing decisions made by the Government and its functionaries in the realm of contract, a distinction is to be made between a matter which is at the threshold of a contract and a breach of contract. Whereas in the former the Court's scrutiny would be more searching and intrusive, in the latter as is the case in hand the Court may not ordinarily exercise its discretionary jurisdiction of judicial review unless it is found to be violative of equality clause. The Court is to step in and subject the contractual powers of State and its functionaries to judicial review in order to prevent arbitrariness, unfairness or favoritism on their part. The Court is to step in and subject the contractual powers of State and its functionaries to judicial review in order to prevent arbitrariness, unfairness or favoritism on their part. In case of breach of contract, the remedy available to aggrieved party falls within the realm of contract law and the party aggrieved of breach ordinarily may bring an action for damages or in case the contract is specifically enforceable, ask for its specific performance. The High Court would be slow in exercising its discretionary and extra writ jurisdiction unless there is a "public law element" involved in the impugned order. In order to draw conclusion whether a "public law element" is involved in the impugned decision, the Court is required to trace the source of action complained of. In case the impugned decision has been taken in exercise of statutory power, the relief to the aggrieved party is available under Article 226 Constitution of India read with Section 103 J&K Constitution. On the other hand if the decision, questioned before the Court, has been taken in exercise of power under the contract the decision may not be held to have a "public law element". Whenever the source of power is statutory, the matter is to be held to have a public law element to render its open to judicial review. Again where a breach is complained of a statutory contract the remedy lies in a writ petition, and the party aggrieved can seek judicial review. However, a contract would not become statutory only because it is entered into by the Government or its functionaries or that it is for construction of a public utility and has been awarded by the statutory body. In Kerala State Electricity Board and another v. Kurien E. Kalathil and others ( 2000 (6) SCC 293 ), Supreme Court held: "A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law." In Ramachandra Murarilal Bhattad & ors v. State of Maharashtra & ors ( 2007 (2) SCC 588 ), the law was reiterated as under: "A power to deal with a contractual matter and a power of a statutory authority to exercise its statutory power in determining the rights and liabilities of parties are distinct and different. Whereas reasons are required to be assigned in a case where civil or evil consequences may ensue, the same may not be necessary where it is contractual in nature, save and except in some cases e.g. Star Enterprises." 11. It is to be kept in mind that a public law right or obligation is one, the source whereof is the Constitution or statute, or executive or administrative decision or instruction, and for enforcing a right or obligation, the source whereof is a pure ordinary non-statutory contract, a writ petition under Article 226 is not maintainable, even if one of the parties to the contract is a State within the meaning Article 12. In such case remedy, if any, of the aggrieved party is before the ordinary civil court or the forum provided by the contract. After brief survey of law, governing the subject of judicial review in contractual matters, where the State or public authorities are party to the contract, let us divert our attention to petitioner's case. The petitioner, as is clear by now after his offer to upgrade and widen road from Achabal Soumbran to Chatpal on payment of Rs.18 crores and odd found acceptance of the respondents, entered into a formal agreement with respondents on 30th of May 2009. The petitioner, as is clear by now after his offer to upgrade and widen road from Achabal Soumbran to Chatpal on payment of Rs.18 crores and odd found acceptance of the respondents, entered into a formal agreement with respondents on 30th of May 2009. The agreement laid down the terms and conditions of the contract, mapped out the time schedule, within which the contract was to be executed as also deadlines/cut off dates for achieving various benchmarks during its execution. The agreement, in its para 24 lays down the dispute redressal system. Para 24.1 makes provision for reference of dispute or difference of any kind whatsoever in connection with or arising out of contract or execution of works under the contract whether before its commencement or during the progress of work or after termination, for settlement to the Chief Engineer, who in terms of Para 25.1 is required to hand down his decision in writing within 45 days of the receipt of notification of the dispute. The agreement in its para 25.2 gives parties a right to refer the decision of Chief Engineer (competent authority) to arbitration within 28 days after the Chief Engineer makes decision. The agreement makes the provisions of J&K Arbitration and Conciliation Act 1997 applicable to arbitration, if any, initiated at the instance of either of the parties to the agreement. Para 25.3 lays down the procedure to be followed in the arbitration proceedings. Para 52 gives a right to the respondents to terminate the contract if the petitioner (contractor) causes a fundamental breach of contract. Para 52.2 enumerates and details the lapses on the part of petitioner that would amount to fundamental breach of contract, conferring right on the respondents to terminate the contract. It is in exercise of the rights available to the respondents under the terms and conditions of the contract -- Para 52, of the agreement, to be specific, that the respondent has terminated the contract. The action has been taken only after the petitioner was given opportunity to adhere to time schedule of execution of contract and afforded an opportunity to show cause against the proposed action. In the circumstances, the impugned decision has been taken by the respondents in a non-statutory contract, in exercise of rights available under the contract and not under any Statute or any rules and regulations or instructions having flavour of statutory rules. In the circumstances, the impugned decision has been taken by the respondents in a non-statutory contract, in exercise of rights available under the contract and not under any Statute or any rules and regulations or instructions having flavour of statutory rules. There is thus no "public law element" involved in the decisions/orders, impugned in the petition. The matter falls within the realm of contract and appropriate option available to petitioner is to fall back upon "Dispute Redressal System" mutually agreed and laid down in the agreement dated 30th May 2009. The petitioner thus, has not a right to file a writ petition Constitution read with Article 226 Constitution of India read with Section 103 J&K Constitution or ask judicial review of the communications dated 15.05.2010, 28.5.2010 and NIT dated 26.7.2010. 12. Further more, the issues raised in the petition are factual in character and are to be solved on assessment of evidence as may be adduced by the parties in support of their respective stands. The petitioner's case is that the petitioner was not able to execute the contract work because of a number of lapses committed by the respondents. It is pleaded that in the first place, contract site free from all encumbrances and encroachments was not handed over to the petitioner and that the respondents took no step to get permission from the concerned authorities to remove mulberry and other protected trees, electric polls, water supply pipes buildings from the roadside nor were steps taken for acquisition of private property on either side of the road proposed to be upgraded and payment of compensation to the estate holders -- property owners. 13. The respondents, on the other hand, insist that it was the petitioner, who without any cause or excuse, failed to take even initial steps for execution of the contract work like setting up of site laboratory, office etc. despite having received "resources mobilization advance" and in any case as the road existed on the spot and is required to be widened and upgraded 75% of the site was already available to the petitioner for proposed upgradation. 14. The disputes raised cannot be adjudicated upon in summary proceedings, where extra ordinary powers are invoked. despite having received "resources mobilization advance" and in any case as the road existed on the spot and is required to be widened and upgraded 75% of the site was already available to the petitioner for proposed upgradation. 14. The disputes raised cannot be adjudicated upon in summary proceedings, where extra ordinary powers are invoked. For said reason also the writ petition is not maintainable and appropriate forum to be approached by the petitioner, where the full facts can be ascertained and contractual rights of the parties adjudicated upon, is one provided under the agreement entered into by the parties or any other civil remedies provided to the parties under law. 15. For the reasons discussed above the writ petition is dismissed with all connected CMP(s), and interim direction vacated.