The Delhi High Court interpreted that the term "determinable" should not be narrowly limited to contracts where termination can occur without cause or in the absence of an event or breach. The High Court emphasized that the power to terminate a contract, whether it is for cause or any other reason, while still preserving the contractual relationship, falls within the purview of Section 14(d) of the Specific Relief Act, 1963 (hereinafter referred to as “SRA”).
Brief Facts:
The Contract Agreement between the petitioner and the respondents was executed, with the Appointed Date for the project set as 01 July 2020. National Highways and Infrastructure Development Corporation Ltd. (hereinafter referred to as “NHIDCL”) claimed that the petitioner was obliged to complete the construction work by 30 June 2022, but the petitioner requested an extension. The completion time was subsequently extended twice.
Confronted with the above circumstances, the respondent issued a Cure Notice to the petitioner. However, NHIDCL claims that the petitioner did not take effective measures to complete the project on time or achieve Milestone-IV, which is the Scheduled Completion Date.
Hence, Petition has been filed before the High Court seeking an interim stay on the effect and operation of the Termination Notice issued by the respondent and National Highways and Infrastructure Development Corporation Ltd.
Contentions of the Petitioners:
It was argued that only contracts that are “inherently determinable” should be considered under Section 14(d) of the SRA.
It was argued that a careful reading of Clause 23.1 of the Contract Agreement demonstrated that it was not inherently determinable. The termination of the contract was dependent on specific events, breaches, or defaults by the contractor, rather than a general power of termination without cause.
Contentions of the Respondents:
It was asserted that a straightforward examination of the Contract Agreement provisions would unequivocally demonstrate it as a determinable contract. It was argued that the contract's recognition as inherently determinable should not be undermined simply because the power to terminate was conditional upon various specified eventualities.
Observations of the Court:
It was noted that Section 14 of the SRA specifies contracts that are unenforceable. Specifically, Clause (d) of Section 14 states that a contract that is inherently determinable cannot be specifically enforced.
Consequently, the High Court concluded that granting an injunction for such a contract was prohibited under Section 41(e) of the SRA, which states that an injunction cannot be granted to prevent the breach of a contract that cannot be specifically enforced. The Court emphasised that Section 14(d) applies not only to voidable contracts but also to those contracts that allow termination upon the occurrence of a specific event.
The Bench opined that the term "determinable" should not be limited to contracts where termination can occur without cause or in the absence of an event or breach. The power to terminate, whether for cause or otherwise, while preserving the contract, falls within the scope of Section 14(d) of the SRA.
The decision of the Court:
The Delhi High Court accordingly dismissed the petition.
Case Title: M/S Ksheeraabd Construction Pvt. Ltd. v National Highways and Infrastructure Development Corporation Ltd. & Anr.
Case No.: Original Miscellaneous Petition Commercial 128 of 2023
Coram: Hon'ble Mr. Justice Yashwant Varma
Advocates for Petitioner: Advs. Mr. Vikas Mehta , Ms. Anshula Grover.
Advocates for Respondent: Advs. Mr Kunal Tandon, Ms. Richa Sharma
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