Innovative B2B Logistics ... vs Uoi & Anr.
2011 Latest Caselaw 3435 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI


                             Judgment delivered on: 20.07.2011

                          W.P.(C) No. 4814/2011

Innovative B2B Logistics Solutions Ltd.             ...... Petitioner.

                        Through: Mr. P.V. Kapoor, Sr. Advocate with
                                 Mr. Pankaj Prakash, Advs.


                         Versus

UOI & Anr.                                   ......Respondents

Through: Mr. R.V. Sinha, Adv.

Ms. Satya Siddiqui, Adv.

CORAM:

HON'BLE MR. JUSTICE KAILASH GAMBHIR

1. Whether the Reporters of local papers may
    be allowed to see the judgment?                           Yes
2. To be referred to Reporter or not?                         Yes
3. Whether the judgment should be reported                    Yes
     in the Digest?


KAILASH GAMBHIR, J. Oral:




 1.            By        this petition filed under Article   226 of the

Constitution of India, the petitioner seeks to quash           and set

aside the letter no. 2008/TT-III/73/16 dated 21st June 2010,

letter no. BB/C/364/WA/MILK/B2B11 dated 3rd May, 2011 and

letter no. 2008/TT-III/73/16 dated 3rd June 2011. The

petitioner also seeks to direct the respondent No.2 not to

take any further steps or measures in implementation of the

aforesaid letters.

2. Brief facts of the case relevant for deciding the

present petition are that the petitioner company on 4.1.2007

entered into a concession agreement with the respondent No.

2 to operate the container trains on Indian Railways Network

and agreed for a rail terminal facility for the petitioner at

Kalamboli. The respondent vide its letter dated 21.6.2010

asked the petitioner as to how it had been running trains in

violation of the provisions of the agreement on the NCR route

to which the petitioner replied vide letter dated 28.6.2010

explaining that the trains on the NCR route were of the other

private operators and they were using the terminal facilities of

the petitioner at Kalamboli. The respondent on 3.5.11 issued

an order banning movement of other container train operators

from Kalamboli unless co-use permission was granted by them

and by a subsequent order dated 3.6.2011, the respondent

held the petitioner breaching the terms of agreement by

violating Article 4.1.1 of the said agreement and directed the

petitioner to deposit a sum of Rs. 40 crores with the

respondent within 60 days or otherwise the agreement to be

terminated by the respondents. Feeling aggrieved with the

same, the petitioner has preferred the present petition.

3.            Mr.       P.V.   Kapoor,   learned     Senior   Advocate

appearing for the petitioner vehemently contended that               in

blatant violation         of the principles of      natural justice the

respondents have passed the order dated 3.6.2011, whereby

they have directed the petitioner to remit a sum of Rs.40

crores with FA&CAO, Northern Railway within a period of 60

days of receipt of the notice failing which they would be

terminating the Concession Agreement entered into between

the petitioner and the respondent in terms of Article 17 of the

Concession Agreement. The contention of the counsel for the

petitioner is that no show cause notice was issued and no

opportunity of hearing has been afforded to the petitioner

before taking such a harsh decision of terminating the

licence of the petitioner on its failure to remit a sum of Rs. 40

crores. Counsel for the petitioner further argued that the

petitioner has not violated any of the terms of the Concession

Agreement and the entire premise based on which the said

licence of the petitioner is under threat of termination is

unfounded and baseless by wrongly interpreting the relevant

Article 4.1.1 of the Concession Agreement. The contention

raised by the counsel for the petitioner is that under Article

4.1.1 of the Concession Agreement, the petitioner is well

within its right to extend its rail terminal facilities to the

other Private Container Train Operators (PCTOs) who were

also duly licensed by the railway administration. Counsel also

submits that in fact the respondents have been committing

an illegal act by mentioning the name of the petitioner as

consigner in respect of all the private trains of other PCTOs

loading and unloading their trains at the private terminal of

the petitioner. Counsel also submits that no such practice is

being followed by the respondent in the rail terminals of

other container train operators where the railway receipt is

being issued by the respondents in the name of actual

container train operators and therefore the counsel submits

that the said act of the respondents to terminate the contract

of the petitioner is also arbitrary, discriminatory and mala

fide.

4. On the question of maintainability of the present

writ petition due to an existence of the arbitration clause in

the Concession Agreement, the contention of the petitioner

is that the existence of the arbitration clause would not bar

the remedy of the petitioner to invoke the writ jurisdiction of

this court. Counsel also submits that this court cannot refuse

to entertain the present petition even if there is an

involvement of some disputed questions of facts. In support

of his arguments, counsel for the petitioner has placed

reliance on the judgment of the Apex Court in Union of India

& Ors. Vs. Tantia Construction Pvt. Ltd (2011 (4) SCALE 745),

ABL International Ltd. & Anr. Vs. Export Credit Guarantee

Corporation of India Ltd. & Ors. (2004) 3 SCC 553.

5. Mr. R.V. Sinha, learned counsel for the respondent

strongly opposes the present petition on the ground of

maintainability. Counsel submits that a show cause notice

was duly served upon the petitioner vide notice dated

21.6.2010 and the same was also replied to by the petitioner

vide its reply dated 28.6.2010 but since the petitioner

continued to violate the terms of the Concession Agreement

by permitting the train operators to use their rail terminal,

therefore, the decision taken by the respondent vide their

letter dated 3.6.2011 to terminate the licence agreement of

the petitioner cannot be called either illegal or in violation of

principles of natural justice. Counsel also submits that the

petitioner at best can invoke the arbitration clause than

invoking the plenary powers of the writ Court.

6. I have heard learned counsel for the parties at

length at the preliminary stage.

7. So far the argument of the counsel for the

petitioner with regard to alleged violation of principles of

natural justice is concerned, vide letter dated 21.6.2010, the

respondent brought to the notice of the petitioner that their

company had booked and moved rakes from Kalamboli to rail

terminals located at Noli, Asoti and Patli and the said

movements on the NCR route were not permitted under

the category of licence granted in favour of the petitioner.

The petitioner had submitted a detailed reply vide letter

dated 28.6.2010 to the said communication of the

respondents taking a stand that there was no violation on the

part of the petitioner in permitting the trains of the other

private operators passing through the rail terminal of the

petitioner and various destinations namely Noli, Asoti and

Patli. Not being satisfied with the said reply given by the

petitioner, the petitioner was again informed by the

respondents vide letter dated 3.5.2011 that no inward or

outward movement of any trains other than that of the

petitioner is permitted at the terminal of the petitioner

unless it is approved as Private Freight Terminal (PFT) or co-

use permission is given by the railways. As per the

respondents, the petitioner unabatedly continued its illegal

action of permitting the other private container train

operators for loading and unloading their trains at various

destinations including Noli, Asoti and Patli from the private

rail terminal of the petitioner in Kalamboli due to which the

respondent vide their order dated 3.6.2011 advised the

petitioner to remit a sum of Rs.40 crores within a period of 60

days otherwise non payment will result in termination of the

Concession Agreement in terms of the Article 17 of the

agreement.

8. Undoubtedly, in the concession agreement duly

executed between the parties, there is an arbitration clause

stipulated for resolution of disputes but despite that the

petitioner has invoked the writ jurisdiction of this Court. It is

no more res integra that there is no absolute bar to invoke the

writ jurisdiction merely because there exists an arbitration

clause in the agreement between the parties. However, the

crucial question to be answered by this court is whether in a

dispute involving interpretation of terms of the contract,

remedy of writ can be invoked or not and also where serious

disputed and intricate questions of facts are involved. In

the present case one of the disputed question is whether the

petitioner was authorized to permit the other private

container train operators to use the private terminal of the

petitioner at Kalamboi for loading and unloading their trains

or any specific permission was required for permitting the

PCTOs from the respondents in terms of the concession

Agreement. Both the parties have also raised serious dispute

with regard to the interpretation of Article 4.1.1 of the

concession agreement which article as per the counsel for the

petitioner permitted the petitioner to allow the PCTOs to

operate their containers from their private terminal without

seeking any prior approval from the respondent. On the

other hand counsel for the respondent has taken a stand that

the said article no where gives any authority to the petitioner

to allow the other PCTOs to operate their containers from the

private terminal of the petitioner. Another and equally

important question is as to under what circumstance the

name of the petitioner in the railway receipts was being

mentioned as consigner even in respect of those private

trains which belonged to the other PCTOs is again a debatable

point and cannot be adjudicated in exercise of writ

jurisdiction of this court under Article 226 of the Constitution

of India.

9. The Supreme Court in Kisan Sahkari Chini Mills

Ltd. & Ors. Vs. Vardan Linkers & Ors. (2008) 12 SCC 500

clearly held that the writ court should desist from giving a

finding on disputed or complicated questions of facts as to

the existence of a contract and should relegate the writ

petitioner to the remedy of the civil suit. It would be pertinent

to reproduce the relevant para of the said judgment here:

"If the dispute was considered as purely one relating to existence of an agreement, that is, whether there was a concluded contract and whether the cancellation and consequential non-supply amounted to breach of such contract, the first respondent ought to have approached the Civil Court for damages. On the other hand, when a writ petition was filed in regard to the said contractual dispute, the issue was whether the Secretary (Sugar), had acted arbitrarily or unreasonably, in staying the operation of the allotment letter dated 26.3.2004 or subsequently cancelling the allotment letter. In a civil suit, the emphasis is on the contractual right. In a writ petition, the focus shifts to the exercise of power by the authority, that is whether the order of cancellation dated 24.4.2004 passed by the Secretary (Sugar), was arbitrary or unreasonable. The issue whether there was a concluded contract and breach thereof becomes secondary. In

exercising writ jurisdiction, if the High Court found that the exercise of power in passing an order of cancellation was not arbitrary and unreasonable, it should normally desist from giving any finding on disputed or complicated questions of fact as to whether there was a contract, and relegate the petitioner to the remedy of a civil suit. Even in cases where the High Court finds that there is a valid contract, if the impugned administrative action by which the contract is cancelled, is not unreasonable or arbitrary, it should still refuse to interfere with the same, leaving the aggrieved party to work out his remedies in a Civil Court. In other words, when there is a contractual dispute with a public law element, and a party chooses the public law remedy by way of a writ petition instead of a private law remedy of a suit, he will not get a full fledged adjudication of his contractual rights, but only a judicial review of the administrative action. The question whether there was a contract and whether there was a breach may, however, be examined incidentally while considering the reasonableness of the administrative action. But where the question whether there was a contract, is seriously disputed, the High Court cannot assume that there was a valid contract and on that basis, examine the validity of the administrative action."

10. The Supreme Court in Pimpri Chinchwad Municipal

Corporation & Ors. Vs. Gayatri Construction Company & Anr.

(2008) 8 SCC 172 after drawing a distinction between the

statutory contracts and the private contracts awarded by the

statutory bodies and after placing reliance on the various

earlier judgments of the Supreme Court held in following

paras as under:

"7. In matters relating to maintainability of writ petitions in contractual matters there are catena of decisions dealing with the issue.

8. In National Highways Authority of India v. Ganga Enterprises : AIR2003SC3823 , it was inter alia held as follows:

6. The respondent then filed a writ petition in the High Court for refund of the amount. On the pleadings before it, the High Court

raised two questions viz.: (a) whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act; and (b) whether the writ petition is maintainable in a claim arising out of a breach of contract. Question (b) should have been first answered as it would go to the root of the matter. The High Court instead considered Question (a) and then chose not to answer Question (b). In our view, the answer to Question (b) is clear. It is settled law that disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India. It has been so held in the cases of Kerala SEB v. Kurien E. Kalathil : AIR2000SC2573 ; State of U.P. v.Bridge & Roof Co. (India) Ltd. MANU/SC/0969/1996 : AIR1996SC3515 and Bareilly Development Authority v. Ajai Pal Singh : [1989]1SCR743 . This is settled law. The dispute in this case was regarding the terms of offer. They were thus contractual disputes in respect of which a writ court was not the proper forum. Mr Dave, however, relied upon the cases of Verigamto Naveenv. Govt. of A.P. MANU/SC/0570/2001 : AIR2001SC3609 ) and Harminder Singh Arora v. Union of India : [1986]3SCR63 . These, however, are cases where the writ court was enforcing a statutory right or duty. These cases do not lay down that a writ court can interfere in a matter of contract only. Thus on the ground of maintainability the petition should have been dismissed.

9. In Kerala State Electricity Board and Anr. v. Kurien E. Kalathil and Ors. : AIR2000SC2573 , this Court dealt with the question of maintainability of petition under Article 226 of the Constitution and the desirability of exhaustion of remedies and availability of alternative remedies, as also difference between statutory contracts and non-statutory contracts. In paras 10 and 11 of the judgment it was noted as follows:

10. We find that there is a merit in the first contention of Mr Raval. Learned Counsel has rightly questioned the maintainability of the writ petition. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. Whether the contract envisages actual payment or not is a question of construction of contract. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. Clearly, the High Court

fell into an error in coming to the conclusion that the contract in question was statutory in nature.

11. 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. 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 the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies.

10. Reference can also be made to State of Gujarat and Ors. v. Meghji Pethraj Shah Charitable Trust and Ors : [1994]3SCR163 . In para 22 it was observed as follows:

22. We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alteram partem) is void. The termination is not a quasi-judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is not also an executive or administrative act to attract the duty to act fairly. It was -- as has been repeatedly urged by Shri Ramaswamy -- a matter governed by a contract/agreement between the parties. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, e.g., where the matter is governed by a non- statutory contract. Be that as it may, in view of our opinion on the main question, it is not necessary to pursue this reasoning further.

11. Again in State of U.P. and Ors. v. Bridge & Roof Company (India) Ltd. : AIR1996SC3515 , this Court dealt with the issue in paras 15 and 16 in the following manner:

15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8D(1).

16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer.

12. At para 11 of India Thermal Power Ltd. v. State of M.P. and Ors. : [2000]1SCR925 , it was observed as follows:

11. It was contended by Mr. Cooper, learned Senior Counsel appearing for appellant GBL and also by some counsel appearing for other appellants that the appellant/IPPs had entered into PPAs under Sections 43 and 43A of the Electricity Supply Act and as such they are statutory contracts and, therefore, MPEB had no power or authority to alter their terms and conditions. This contention has been upheld by the High Court. In our opinion the said contention is not correct and the High Court was wrong in accepting the same. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board. As regards the determination of tariff for the sale of electricity by a generating company to the Board, Section 43(1)(2) provides that the tariff shall be determined in accordance with the norms regarding operation and plant-load factor as may be laid down by the authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined from time to time by the Central Government by

a notification in the Official Gazette. These provisions clearly indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is to be determined in accordance with the provision contained in Section 43A(2) and notifications issued thereunder. Merely because a contract is entered into in exercise of an enabling power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If a contract incorporates certain terms and conditions in it which are statutory then the said contract to that extent is statutory. A contract may contain certain other terms and conditions which may not be of a statutory character and which have been incorporated therein as a result of mutual agreement between the parties. Therefore, the PPAs can be regarded as statutory only to the extent that they contain provisions regarding determination of tariff and other statutory requirements of Section43A(2). Opening and maintaining of an escrow account or an escrow agreement are not the statutory requirements and, therefore, merely because PPAs contemplate maintaining escrow accounts that obligation cannot be regarded as statutory.

13. Therefore, the High Court ought not to have entertained the writ petition. Additionally, it appears that by order dated 17.1.2007 interim stay of the impugned order was granted and was continued by order dated 12.2.2007. It is pointed out by learned Counsel for the appellants that since the order of the High Court was stayed and there was urgency in the matter fresh tenders were called for. Three persons submitted the bids and the work has already been allotted and a considerable portion of the work has already been completed. In view of aforesaid, we set aside the impugned order of the High Court and direct dismissal of the writ petition. It is however open to the respondents-writ petitioners to seek such remedy, if so advised, as is available in law. We do not express any opinion in that regard."

11. Applying the aforesaid principles to the facts of the

present case, it would be quite evident that the present case

also involves interpretation of the terms of the contract and,

therefore, the disputes involving interpretation of the terms of

the contract cannot be agitated by invoking the writ

jurisdiction of this Court under Article 226 of the Constitution

of India. It is also evident that the dispute does not merely

involve the interpretation of the terms of the contract, but

there are other serious disputed questions of facts which too

cannot be adjudicated upon by the writ Court. So far the

contention raised by counsel for the petitioner that the

existence of an alternative remedy provided in the Concession

agreement through the forum of arbitrator will not debar the

remedy of the petitioner to invoke the writ jurisdiction is

concerned, this Court does not dispute this legal position as it

is well established that when the State or instrumentality of

the State acts contrary to the public good and public interest

unfairly, unjustly and unreasonably in its discharge of

constitutional or statutory obligations then in the given facts

of the case the existence of an alternative remedy will not be

an absolute bar to the invocation of the writ jurisdiction of the

Court, but the controversy before this Court relates to the

interpretation of the terms of the contract for which the public

law remedy of the writ Court cannot be invoked.

 12.           So far       the argument of the counsel for the

petitioner      that    the principles of    natural justice   were not

followed by the respondent, this court does not find any merit

in the argument of the counsel for the petitioner. Notice dated

21.6.2010 was duly served upon the petitioner and the reply

dated 28.6.2010 thereto was also submitted by the petitioner

and in such circumstances the petitioner cannot complain that

it was not put to notice by the respondent for committing

breach or violating the terms of the concession agreement.

In the aforesaid background of facts involved in the present

case and the legal position discussed above, the two

judgments cited by the counsel for the petitioner would not be

applicable.

13. In the light of the above discussion, this court does

not find any merit in the present petition and the same is

accordingly dismissed. However, while taking the aforesaid

view since 60 days period in terms of the order of the

respondent dated 3.6.2011 for terminating the contract in

terms of Article 17 of the concession contract is yet to

expire, therefore to subserve the ends of justice, the

respondent No. 2 is directed to decide the representation of

the petitioner dated 15.6.2011 before the expiry of the said 60

days period after giving due opportunity of hearing to the

petitioner.

14. It is ordered accordingly.

July 20, 2011                              KAILASH GAMBHIR, J
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