M/S Dhanush Infotech Pvt. Ltd. vs The State Of Andhar Pradesh
2021 Latest Caselaw 3820 AP

           HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO


                  W.P.Nos.8834 and 12375 of 2021

COMMON ORDER:


      As both these writ petitions have been filed by the same petitioner

in relation to the same contract, though with different prayers, these writ

petitions are being disposed of by this common order.

      2.     The 3rd respondent, acting as the agent of the 1st

respondent, had invited bids for transforming 7514 sub-centres into E-

sub-centres by way of tender notification No.10.1/APMSIDC/Equipment/

2018-19, dated 14.08.2018. The petitioner, which had participated in the

said tender process, was declared as L1 and subsequently awarded the

contract for up-gradation of 3010 sub-centres into E-sub-centres in

Zone-III. The petitioner and the respondents had entered into a contract

on 12.01.2019. Thereafter, the petitioner had commenced execution of

the said contract from 02.02.2019 and was able to upgrade 502 sub-

centres into E-sub-centres. It is the case of the petitioner that even while

the up-gradation of the aforesaid 502 sub centres were going on, the

District Health Officials and the 3rd respondent were called upon by the

petitioner to permit the petitioner to upgrade the remaining 2508 sub-

centres. However, since necessary clearances were not given, the

petitioner approached this Court by way of W.P.No.8834 of 2021 for a

direction to the 2nd respondent to permit the petitioner to upgrade the

remaining 2508 sub-centres and for payment of a sum of Rs.19.32 crores,

which was due to the petitioner.

      3.     While this writ petition was pending, the 2nd respondent

terminated the contract dated 12.01.2019, by way of proceedings bearing

Rc.No.540/CHFW/NHM/2020, dated 25.06.2021.
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W.P.Nos.8834 & 12375 of 2021

4. The petitioner has approached this Court by way of

W.P.No.12375 of 2021 for a declaration that the said termination is illegal,

arbitrary and contrary to condition No.7(a) of the contract / MOU, dated

12.01.2019 and to set aside the same and pass such other orders as may

be proper. It is the case of the petitioner that even though the petitioner

was always ready and willing to upgrade all the 3010 sub centres, it was

not able to do so, in relation to 2508 sub centres, on account of the non-

cooperation of the respondents and non-payment of the outstanding

invoice amounts of Rs.23.47 crores.

5. It is the case of the petitioner that even while W.P.No.8834

of 2021 was pending before this Court, a show cause notice dated

17.04.2021 was issued by the 2nd respondent calling upon the petitioner

to show cause why the contract / MOU dated 12.01.2019 should not be

cancelled and terminated. The show cause notice is said to have set out

eight grounds for cancellation of the contract. Thereupon, the petitioner is

said to have filed his reply to the show cause notice by way of a

communication dated 23.04.2021. The 2nd respondent, after considering

the objections raised in the show cause notice, had issued the impugned

order of termination by way of proceedings in Rc.No.540/CHFW/NHM

/2020-1, dated 25.06.2021.

6. The petitioner being aggrieved by the said order has

approached this Court by way of W.P.No.12375 of 2021.

7. The contention of the petitioner in W.P.No.8834 of 2021 is

that for reasons best known to the respondents, the respondents stopped

implementation of the contract and refused to pay the amounts due to the

petitioner to an extent of Rs.19.32 crores.

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W.P.Nos.8834 & 12375 of 2021

8. The contention of the petitioner in W.P.No.12375 of 2021 is

that none of the allegations made out in the show cause notice dated

17.04.2021 are borne by the record or true and correct grounds on which

termination of the contract could be affected. The said allegations in the

show cause notice read as follows:

I. Could not establish telemedicine and other services as per the scope of services in 3010 sub centres within 90 days from entering into agreement i.e. by 14.04.2019. As on date of issue of this notice service provider could establish telemedicine and other services partially at 500 sub centres only as against agreed 3010 sub centres. II. Service provider is not providing the diagnostic tests as per the MoU in 500 sub centres.

III. Service provider not developed the IT solution to be used for e-sub-centre for integration with Praja Sadhikara Survey (Smart Pulse Survey) of GoAP and ANM Digi and with her and there by violated the MoU.

IV. Service provider is not dispensing the 40 types of drugs through drug vending machine.

V. Service provider not screened the 30+ population for 1. Breast Cancer, 2. Cervical Cancer, 3. Oral Cancer, 4. Diabetes, 5. Hypertension, initial screening. VI. Service provider not conducted Ante-natal Check-ups (ANCS) at the sub centre.

VII. As per the para 14, service provider shall ensure best quality of services and shall submit a half yearly report of audit done by a third party as nominated by the authority. Service provider failed to implement this clause and there by violated MoU.

VIII. Service provider failed maintain the daily records of telemedicine consultancies performed, number of patients visiting the sub centres, the log book of record of any breakdown services at the sub centres and the soft copies of e-prescription for every consultancy across all the sub centres. A copy of such records shall be submitted to the purchaser on a monthly basis."

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W.P.Nos.8834 & 12375 of 2021

9. It is the further contention of the petitioner that out of the

eight allegations, allegation No.2, 4, 5 and 6 are vague and general

allegations, which do not set out any details on the basis of which the

petitioner can give a proper reply. As far as the first allegation is

concerned, it is the case of the petitioner that it is the respondent, which

have to identify the facilities in which the up-gradation is to be done and

in the absence of such identification, the respondents cannot raise any

ground of non-performance against the petitioner. Similarly, the case of

the petitioner in relation to allegation Nos.3, 7 & 8 are concerned the

respondent is seeking to throw the burden of compliance on the petitioner

when the said burden was on the respondents themselves.

10. Respondents 1 and 2 have filed their counter affidavit. It is

the case of the respondents that the agreement required the petitioner to

complete up-gradation of all the 3010 sub centres within 30 days from

12.01.2019, which was the date of the contract. However, the petitioner

did not take any steps for up-gradation of 2508 sub-centres. Apart from

that the petitioner had not complied with the other requirements of the

contract and the excuses being given by the petitioner are after thoughts

to cover up the non-performance of the petitioner.

11. Heard Sri C. Raghu, appearing for the petitioner, the learned

Government Pleader for Medical and Health and Sri Chittem Venkata

Reddy appearing for respondent No.3.

12. The General scope of the contract, as set out in recital-A to

the agreement, is the provision of services for standardising and

refurbishing of Government owned telemedicine facilities at sub-centres in

the Districts constituting Zone-III in the State of Andhra Pradesh. The

total number of facilities in Zone-III are shown as 3010 facilities. The 5 RRR,J.

W.P.Nos.8834 & 12375 of 2021

detailed scope of work as contained in Clause-3 of the agreement would

show that the service provider was essentially required to upgrade and

standardise the facilities and infrastructure of the sub-centres apart from

ensuring various that other services provided in the said sub-centres do

not face any disruption.

13. A perusal of the show cause notice, the reply given to the

show cause notice and the impugned order would clearly demonstrate

that there are fundamental differences in the understanding of the scope

of work set out under Clause-3 of the agreement between the 2nd

respondent and the petitioner. The petitioner has understood the said

scope to mean that the petitioner would provide the necessary

infrastructure and equipment including consumables for certain tests and

ensure that the staff in the upgraded sub-centres are able to carry out

their duties without any disruption. The 2nd respondent understood the

scope of the work to mean that the petitioner would not only provide for

infrastructure and equipment but would also be involved in the functioning

of the sub-centres including participating in the conduct of tests etc.

14. It is the case of the petitioner that the 2nd respondent while

passing the impugned order has not only violated the principles of natural

justice, but has also misunderstood the scope of the work that requires to

be executed by the petitioner. On the other hand, the stand of the 2 nd

respondent is that the petitioner has not discharged its responsibilities

under the agreement and is relying upon a wrong interpretation of the

scope of the work to set up a defence that the petitioner has been

discharging its responsibility fully.

15. It is true that certain aspects, including Clauses 2, 4, 5, are

general objections to which the petitioner may not be in a position to 6 RRR,J.

W.P.Nos.8834 & 12375 of 2021

answer. As such, a ground of violation of principles of natural justice could

be raised by the petitioner.

16. However, to the mind of this Court, the differences between

the petitioner and the 2nd respondent are on a fundamental difference of

opinion relating to the scope of work that needs to be executed by the

petitioner. In the circumstances, there is every requirement for the

adjudication of this issue and on the question as to whether there are any

shortcomings on the part of the petitioner. This would require adjudication

on the scope of the work to be conducted by the petitioner and on the

questions of fact relating to the work done by the petitioner and

shortcomings in such work, if any.

17. Clause-7 of the agreement provides for reference of disputes

to arbitration and resolution by mutual consultation. In the present case,

this Court on 04.08.2021 had directed the parties to attempt resolution of

the differences and disputes by way of mutual negotiations as required

under Clause-7 of the agreement. However, both sides had reiterated that

the said negotiations could not resolve the disputes between the parties.

In such circumstances, it would still be open to the parties to resolve

these differences by way of a reference to arbitration.

18. A similar view has been taken by the Hon'ble the Supreme

Court in Joshi Technologies International Inc. v. Union of India1, at

paragraphs 69 & 70, as under:

"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact

(2015) 7 SCC 728 : 2015 SCC OnLine SC 490 7 RRR,J.

W.P.Nos.8834 & 12375 of 2021

or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:

69.1. The Court may not examine the issue unless the action has some public law character attached to it.

69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.

69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.

69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.

70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:

70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discriminations.

70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.

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W.P.Nos.8834 & 12375 of 2021

70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business. 70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages. 70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.

70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.

70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant 9 RRR,J.

W.P.Nos.8834 & 12375 of 2021

factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.

70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.

70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes."

19. For the aforesaid reasons W.P.No.12375 of 2021 is disposed

of leaving it open to the petitioner to avail of the alternative remedy of

arbitration.

20. W.P.No.8834 of 2021 has been filed seeking a direction to

the respondents to permit the petitioners to complete the upgradation of

2508 sub-centres into E-sub-centres. As the contract itself has been

terminated, the said writ petition would become infructuous unless

W.P.No.12375 of 2021 is allowed. As the said writ petition is also being

disposed of without setting aside the order of termination, the

W.P.No.8834 of 2021 would have to be dismissed as infructuous. There

shall be no order as to costs.

As a sequel, pending miscellaneous petitions, if any, shall stand

closed.

                                                  ________________________
                                                  R. RAGHUNANDAN RAO, J
29th September, 2021
Js
                         10                             RRR,J.
                                 W.P.Nos.8834 & 12375 of 2021




     HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO




          W.P.Nos.8834 and 12375 of 2021




               29th September, 2021
Js