Radhey Shyam Pandey vs Union Of India & Ors
2022 Latest Caselaw 1804 Cal

                      IN THE HIGH COURT AT CALCUTTA
                     CONSTITUTIONAL WRIT JURISDICTION
                              APPELLATE SIDE

Present:
The Hon'ble Justice Moushumi Bhattacharya

                          WPA 10668 of 2021

                         Radhey Shyam Pandey
                                  Vs.
                          Union of India & Ors.

For the Petitioner                  : Mr. Saptarshi Roy, Adv.
                                        Ms. Kakali Das Chakraborty, Adv.


For the North Eastern Railways      : Mr. Shankar Ranjan Sen, Adv.


For the Respondent no. 5            : Mr. Subhankar Chakraborty, Adv.
                                        Mr. Saptarshi Bhattacharjee, Adv.
                                        Ms. Ruchira Manna, Adv.


Last Heard on                       : 17.03.2022.


Judgment on                         : 06.04.2022.

Moushumi Bhattacharya, J.

1. The petitioner seeks a direction on the North Eastern Railway to

withdraw a letter of termination dated 31st March, 2021 issued by the

Senior Divisional Commercial Manager, being the respondent no. 4

herein. By the said impugned communication, the petitioner's security

deposit of Rs.23,02,661/- was forfeited and the petitioner was

restrained from taking part in the tender of the North Eastern Railway

for the next two years. The impugned letter referred to Scenario-3 of a

letter dated 3rd December, 2020 which provides for termination of the

contract between the Railways and the Leaseholder (petitioner).

2. The petitioner emerged as the successful bidder for a tender for

lease of 23 tonnes parcel space and a Lease Agreement was executed

between the petitioner and the Railways for a period from 17th January,

2020 to 16th January, 2025. The operation of the trains was suspended

by the Railways by reason of the Covid-19 pandemic. The petitioner

thereafter declined to accept the offer of the Railways for a substitute

train for limited operation. The petitioner invoked clause 23.1 of the

Lease Agreement by a letter dated 6th February, 2021 with 60 days prior

notice and the Railways issued the impugned communication of 31st

March, 2021 under clause 23.2 of the Lease Agreement and terminated

the contract.

3. According to learned counsel appearing for the petitioner, the

petitioner's right to terminate the contract emanates from clause 23.1 of

the Lease Agreement and the Railway Board Circular dated 3rd

December, 2020 (Scenario-2 of the Circular). The petitioner sought

refund of the security deposit under the said clause. The Railways

however, without taking into account the petitioner's invocation, issued

the impugned communication by applying Scenario-3 of the Circular

and forfeited the security deposit of the petitioner. Counsel submits that

the petitioner was blacklisted for two years without there being any

provision for such under the relevant Agreement. It is submitted that

the Lease Agreement pertained to a specific train i.e. Train

No.13020/13019. It is also submitted that the petitioner is entitled to

freight adjustment in the event of suspension of service and that the

Railways are under a statutory obligation for guaranteed supply of Lease

Space. Counsel submits that the petitioner has a right to approach the

Writ Court and that the alternative remedy in the form of recourse to

arbitration would not apply in the present case.

4. Learned counsel appearing for the respondent Railways submits

that the facts of the present case do not give rise to a cause of action

which would confer jurisdiction on this Court and that this Court

should not interfere in the case of a determinable contract. Counsel

relies on the clauses in the Agreement which entitle the respondent to

forfeit the security deposit and that the contract was liable to be

terminated since the petitioner (Leaseholder) failed to operate the

contract continuously for 10 days without giving any notice. Counsel

places emphasis on clause 23.2 of the Agreement under which the North

Eastern Railway has right to terminate the contract as a punitive

measure without giving any notice for breach of agreement. Counsel

urges that the Railways suffered huge monetary loss by reason of the

petitioner failing to start the work as would be evident from letters

exchanged between the parties. It is also submitted that the Agreement

contains an arbitration clause and the petitioner has an alternative

remedy available to invoke.

5. Since a point of maintainability has been raised by the respondent

Railways, this point is being dealt with first. The impugned letter of

termination dated 31st March, 2021 was received by the petitioner in

Howrah, within the jurisdiction of this Court. The entire cause of action

of the writ petitioner arises from this letter of termination. The

impugned letter not only terminated the Lease Agreement but also

debarred the petitioner from taking part in tenders for the next two

years. The impugned letter was served on the petitioner at his registered

office and the punitive effect of the said letter was received and

continued within the jurisdiction of this Court. Besides this fact, the

petitioner participated in the tender from his office situated within the

jurisdiction of this Court, the security deposit submitted by the

petitioner was drawn on a bank, namely ICICI Bank, Howrah, within the

jurisdiction of this Court and the respondent Railways sought to

liquidate the security deposit from the said bank within the jurisdiction

of this Court. Article 226(2) of The Constitution of India empowers a

High Court exercising jurisdiction in relation to the territories within

which the cause of action, wholly or in part, arises, to issue directions,

orders or writs notwithstanding that the seat of the Government or

authority is outside the territories. In Om Prakash Srivastava vs Union of

India; (2006) 6 SCC 207, the Supreme Court held that in order to

maintain a writ petition, a writ petitioner must establish that a legal

right claimed by him has prima facie either been infringed or is

threatened to be infringed by the respondent within the territorial limits

of the Court's jurisdiction and such infringement may take place by

causing him actual injury or threat. This view was reiterated in Nawal

Kishore Sharma vs Union of India; (2014) 9 SCC 329.

6. With regard to the objection taken as to the petitioner having an

alternative remedy in respect of an arbitration clause in the Lease

Agreement, the decisions cited by the petitioner are of relevance and

assist the petitioner. In a recent decision of Supreme Court in Uttar

Pradesh Power Transmission Corporation Limited vs CG Power And

Industrial Solutions Limited; (2021) 6 SCC 15, the Supreme Court opined

that availability of an alternative remedy does not prohibit the High

Court from entertaining a writ petition in an appropriate case

particularly where the writ petition seeks enforcement of a fundamental

right; where there is failure of principles of natural justice; where the

impugned order is wholly without jurisdiction or the vires of an Act is

under challenge. The Supreme Court relied on Whirlpool Corpn v

Registrar of Trade Marks; (1998) 8 SCC 1 in coming to this view. The

Supreme Court also referred to Harbanslal Sahnia vs Indian Oil Corpn.

Ltd.; (2003) 2 SCC 107 wherein it was held that the rule of exclusion of

writ jurisdiction by availability of an alternative remedy is a rule of

discretion and not one of compulsion. In another recent decision of the

Supreme Court in Unitech Limited vs Telangana State Industrial

Infrastructure Corporation; 2021 SCC OnLine SC 99, the Supreme Court

held that the recourse of a public law remedy despite the presence of an

arbitration clause needs to be decided on a case to case basis. This

Court is of the view that since the petitioner has pleaded breach of his

fundamental rights in being debarred from participating in any tender

and suffering a termination by the act of the Railways, the issue of

breach of the petitioner's fundamental rights is patently evident from

the facts. The petitioner has also been blacklisted without being afforded

an opportunity of being heard which is also a breach of principles of

natural justice. The petitioner hence has a right to approach the Writ

Court notwithstanding the arbitration clause in their Agreement. The

arbitration clause (clause 26.4) is in any event, limited to dispute arising

out of construction or operation of the contract and other matters stated

therein and excluding the excepted matters referred to in clause 63 of

the conditions.

7. In Oil and Natural Gas Commission vs Utpal Kumar Basu; (1994) 4

SCC 711, cited by the respondent, the Supreme Court was of the view

that the facts pleaded in the writ petition did not show that part of the

cause of action had arisen within the territorial jurisdiction of the

Calcutta High Court and that mere reading of an advertisement at

Calcutta and submitting the offer from Calcutta would not constitute

facts forming an integral part of the cause of action. Food Corporation of

India vs Jagannath Dutta; 1993 Supp (3) SCC 635, also cited by the

respondent, was a policy decision taken by the FCI for terminating

storage agencies in West Bengal. Kerala State Electricity Board vs Kurien

E. Kalathil; (2000) 6 SCC 293, was concerned with interpretation of the

terms and conditions of a contract and the Supreme Court was of the

view that this was a matter to be considered by a Civil Court. Datar

Switchgears Ltd. vs Tata Finance Ltd.; (2000) 8 SCC 151, is only for the

proposition that a party who has not disputed the arbitration clause is

normally bound by it and is obliged to comply with the procedure laid

down under it. In Jagdish Mandal vs State of Orissa; (2007) 14 SCC 517,

the Supreme Court formulated two points which should be considered

by a Writ Court before interfering in tender or contractual matters.

These points were whether the decision made by the authority is mala

fide, arbitrary or irrational and whether public interest is affected.

National Agricultural Coop. Marketing Federation India Ltd. vs Gains

Trading Ltd.; (2007) 5 SCC 692 is only for the proposition of the

severability of an arbitration clause from the underlined contract.

Assistant Excise Commissioner vs Issac Peter; (1994) 4 SCC 104, has

been cited for the proposition that the doctrine of fairness could not be

invoked to amend, alter or vary the express terms of the contract

between the parties. This decision is of no relevance since there is no

attempt on the part of the petitioner to alter the terms of the Agreement.

8. With regard to the merits of the writ petition, it is evident that the

respondent Railways has invoked clause 23.2 of the Agreement in

terminating the contract. Clause 23.2 gives the right to the Railways "to

terminate the contract/agreement for any reason whatsoever after serving

one month's notice to the lease holder. However, Railway shall reserve

the right to terminate the contract as a punitive measure without any

notice and at any time in case of breach of agreement or serious violation

of any of the stipulation of policy.....". Clause 23.2 hence requires the

Railways to give one month's notice of termination to the Leaseholder

except in cases of breach of agreement. The Railways have not sent any

intimation or notice to the petitioner alleging breach of the terms. The

clarification sent by the Railways on 3rd December, 2020 contains

guidelines for dealing with cases relating to non-commencement of

leased contract of parcel space and indicates Scenario-3 where a

Leaseholder has not commenced contract corresponding Passenger

Special Train service. The Railways have not alleged any breach of the

contractual terms even in this letter but appears to have invoked

Scenario-3 in terminating the contract by the letter dated 31st March,

2021. It is an admitted fact that the termination was made without

giving any notice to the petitioner as required under clause 23.2 of the

Agreement. It should also be noted that clause 23.2 does not contain

any provision for blacklisting the Leaseholder in case of violation of the

terms or under any other condition.

9. It is also significant that the termination letter was issued by the

Railways only after and as a counterblast to the petitioner's letter of 6th

February, 2021 by which the petitioner served 60 days notice under

clause 23.1 of the Agreement to terminate the contract and sought

refund of the security deposit. Clause 23.1 provides for the

Leaseholder's right to terminate the Agreement after giving 60 days

notice to the Railway administration after the Leaseholder has

completed ten months (plus two months notice period) of the contract.

The petitioner's right of termination is supported by clause 23.1. It is

also relevant that the Lease Agreement executed between the parties

was only in relation to a specific train name and number 13020/13019

for transportation of parcels from Kathgodam to Howrah and back. It

does not provide for the petitioner plying any other train which the

petitioner was compelled to do by the action of the respondent Railways.

The facts in the present case reflect a wholly arbitrary action taken on

behalf of the Railways which also includes breach of the petitioner's

right to a hearing before such action was taken against the petitioner.

10. The impugned letter of termination therefore falls foul of the

contractual terms between the parties. The letter of termination is also

in violation of the petitioner's right to a fair hearing before the

Agreement was terminated and the petitioner's security deposit forfeited.

The action of debarring the petitioner from future tenders is high-

handed, arbitrary and against the contractual terms executed between

the parties. As recognised by the Supreme Court in M/s. Erustan

Equipment & Chemicals Ltd. vs State of West Bengal; (1975) 1 SCC 70,

blacklisting has the effect of preventing a person from the privilege and

advantage of entering into a lawful relationship with the Government for

purposes of gains. The Supreme Court was also of the view that

fundamentals of fair play require that the person concerned should be

given an opportunity to represent his case before he is put on the

blacklist. This view was also echoed by the Supreme Court in Jagdish

Mandal vs State of Orissa; (2007) 14 SCC 517 where the Supreme Court

held that cases involving blacklisting or imposition of penal

consequences on a contractor require a higher degree of fairness in

action.

11. For the reasons as stated above, this Court finds the impugned

letter of termination dated 31st March, 2021 liable to be revoked and set

aside. WPA 10668 of 2021 is accordingly allowed and disposed of in

terms of prayers (a) and (b). The respondent Railways is restrained from

giving any further effect to the impugned letter of termination dated 31st

March, 2021.

Urgent Photostat certified copies of this judgment, if applied for,

be given to the respective parties upon fulfillment of requisite

formalities.

(Moushumi Bhattacharya, J)