Delhi High Court
M/S Tpf Engineering Pvt. Ltd & Anr. vs Union Of India, Ministry Of Road ... on 17 June, 2022
$~44
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 17th June, 2022
+ O.M.P.(I) (COMM.) 198/2022 & I.A. 9728-29/2022
M/S TPF ENGINEERING PVT. LTD & ANR. ..... Petitioners
Through: Ms. Kanika Agnihotri, Advocate with
Ms. Yashodhara Gupta, Ms. Snehal, Mr. Ankit
Khera and Mr. Rohan Anand, Advocates.
versus
UNION OF INDIA, MINISTRY OF ROAD
TRANSPORT AND HIGHWAYS & ORS. ..... Respondents
Through: Mr. Bhagvan Swarup Shukla, Central
Government Standing Counsel with
Ms. Kamaldeep and Mr. Sarvan Kumar,
Advocates.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JYOTI SINGH, J (ORAL)
1. This is a petition under Section 9 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as the '1996 Act'), filed by the Petitioners
praying for an interim order staying the operation of t h e im pugned n otice
dated 30.04.2022 issued by Respondents No.1 & 2 (hereinafter referred to as
the 'Respondents') seeking to terminate the Consultancy Agreement with the
Petitioners.
2. The disputes between the parties emanate from the Contract
Agreement dated 14.06.2017 executed between the Petitioners as
'Authority's Engineer' and the Respondents for the Work of Replacement of
Superstructure of Existing Four-Lane Mahatma Gan dhi Set u over Gan ga
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River in NH-19, Patna, Bihar, from 212.72 KM to 218.295 KM on
Engineering, Procurement and Construction Mode.
3. Learned counsel appearing on behalf of the Petitioners challenging the
impugned notice and seeking stay of its operation, raises several contentions,
inter alia: (a) Respondents have issued stagewise completion cert ificate t o
the Petitioners on being satisfied with the services rendered by them; (b) t h e
action is malafide being initiated at the fag en d of t h e con tract wh en t he
tenure of the contract has entered the phase of maintenance and the
60 months long contract was to be concluded in the next 17 days;
(c) conjoint reading of Clauses 2.8 and 2.9 of the Agreement establishes
beyond certitude that the Petitioners were to be afforded an opportunity of
remedying any defects/defaults, if any, prior t o n otice of su spension an d
only on failure to remedy, a notice of termination of 60 days could be issu ed
which has not happened in the present case since n o n otice of su spension
was issued and no opportunity was given to remedy a purported failure;
(d) the report rendered by the Petitioners has been duly accepted by the
Respondents; and (e) Completion Certificates dated 30.09.2020 and
16.03.2022 have been issued in favour of the Petitioners expressing
satisfaction qua their work.
4. Lastly and emphatically, it was urged by the learned counsel that
Clause 2.9.6 of the Consultancy Agreement provides that if either party
disputes whether an event specified in paragraphs (a) t o (e) of Clau se GC
2.9.1 or 2.9.2 has occurred, such party may within 45 days aft er receipt of
termination notice refer the matter to arbitration and this contract shall not be
terminated on account of such event except in accordance with the t erms of
any resulting arbitral award.
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22:56:25
5. Relying on an order dated 29.04.2021, passed by a Co-ordinate Bench
of this Court in Egis India Consulting Engineers Private Limited v. Pawan
Hans Limited, in OMP(I)(COMM.) 148/2021 wherein, reliance was placed
on an earlier order dated 22.10.2018 in M/s Eptisa Servicios De Ingeniera
S.L. v. National Highways and Infrastructure Development Corporation
Limited, in OMP(I)(COMM.) 371/2018, it is argued that based on a sim ilar
clause in the Agreements before the said Courts, interim orders st aying t he
operation of the impugned termination notices have been granted. It is
submitted that the Agreement in the present case contains Clause 2.9.6
which contemplates resolution of disputes pertaining to termination of
Agreement through arbitration and the Petitioners have invoked the
arbitration clause within the stipulated period albeit on the 45th day.
6. Mr. Shukla, on the other hand, opposes the grant of interim relief on
the ground that the Agreement in question is a determ inable con tract. Th e
effect of breach of a contract by a party seeking to specifically en force t he
contract under the Indian Law is enshrined in Section 16(c) read with
Section 41(e) of the Specific Relief Act, 1963 and the latter provision clearly
provides that injunction cannot be granted to prevent the breach of a
contract, performance of which cannot be specifically enforced.
Reliance is placed on the judgment of a Division Bench of this Court in
Rajasthan Breweries Ltd. v. The Stroh Brewery Company, 2000 SCC
OnLine Del 481.
7. It is further submitted that the impugned notice terminates the contract
of the Petitioners and the Petitioners are no longer working on t he sit e an d
thus even otherwise no interim order can be granted in t heir favour at t his
stage, which fact is disputed by the learned counsel for t h e Petitioners by
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filing an affidavit dated 17.06.2022 stating therein t hat t he Pet itioners are
working on the site as on date and photographs to that effect have been
annexed to the affidavit.
8. I have heard the learned counsel for the parties.
9. Issue notice.
10. Mr. Bhagvan Swarup Shukla, learned Central Government St anding
Counsel accepts notice on behalf of Respondents No.1 & 2.
11. Let reply be filed within two weeks from today.
12. Rejoinder, if any, be filed before the next date of hearing.
13. Issue notice to Respondent No.3, through all permissible modes,
returnable on 14.07.2022 before the Roster Bench.
14. There is no dispute on the proposition of law put forth by the learned
counsel for the Respondents with respect to the provisions of t h e Specific
Relief Act relied upon and ordinarily, this Court would not stay the
operation of a termination notice under Section 9 of the 1996 Act which, n o
doubt, would amount to directing a mandatory in junction. However, t his
Court is persuaded to interdict the termination on the basis of Clause 2.9.6 of
the Agreement which reads as follows:-
"2.9.6 Disputes about Events of Termination
If either Party disputes whether an event specified in
paragraphs (a) through (e) of Clause GC 2.9.1 or in Clause GC
2.9.2 hereof has occurred, such Party may, within forty-five
(45) days after receipt of notice of termination from the other
Party, refer the matter to arbitration pursuant to Clause GC 8
hereof, and this Contract shall not be terminated on account of
such event except in accordance with the terms of any resulting
arbitral award."
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15. In this context, I may refer to an order passed by the Co-ordinate
Bench in Egis India Consulting Engineers Private Limited (supra), wh ere
a similar clause was under consideration and a petit ion u nder Sect ion 9 of
the 1996 Act was filed seeking an interim order st aying t he t ermination.
Interpreting Clause 2.9.6 GCC and relying on the order in M/s Eptisa
Servicios De Ingeniera S.L. (supra), the Court observed t hat if on e reads
Clause 2.9.6 carefully, it appears prima facie that issuance of a t erm ination
notice does not ipso facto result in termination of the contractual relationship
and if within 45 days of receipt of the notice, contractor refers the m atter t o
arbitration, the contract shall not be terminated except in accordance wit h
resulting in arbitral award and the parties have t hus crafted a prot ocol for
termination of the contract. After so observing, the Court stayed the
operation of the termination notice. Relevant paras are as under:-
"10. Mr. Nakul Dewan, learned senior counsel for the
petitioner, has placed reliance on the judgment of a coordinate
Bench of this court in Eptisa Servicios De Ingeniera S.L v.
National Highways & Infrastructure Development Corp. Ltd.
That, too, was a case in which interim stay of operation of an
order of termination of the contract was sought on the ground
that Clause 2.9.1 (a) of the GCC, in that case, which required
providing a mandatory cure period to the contractor before
terminating the contract, was not complied with. It was sought
to be contended, by the respondent, before the Bench, that in a
proceeding under Section 9 of the 1996 Act, an order of
termination which had already taken effect could not be stayed.
This court, nevertheless, held that the termination was, prima
facie, violative of Clause 2.9.1(a) of the GCC (in that case),
and, on that ground, granted stay of operation of the
termination order, pending resolution of the dispute by
arbitration.
11. Ordinarily, this court would not, in exercise of its
jurisdiction under Section 9 of the 1996 Act, stay termination
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which has already taken place, as that would amount to
granting of a mandatory interlocutory injunction, directing the
restoration of status quo ante. There can be no gainsaying that
the order dated 13th April, 2021 does, in unequivocal terms,
terminate the contract between the petitioner and the
respondent.
12. Having said that, if one reads Clause 2.9.6 of the GCC
carefully, it appears, prima facie, that issuance of a notice of
termination does not ipso facto result in termination of the
contractual relationship between the parties. The clause
specifically provides that, if, within 45 days of receipt of notice
of termination, the contractor refers the matter to arbitration,
the contract "shall not be terminated on account of such event
except in accordance with the terms of any resulting arbitral
award". The parties have, therefore, ad idem, crafted a
protocol in which, even after a notice of termination of the
contract is issued, if the contractor refers the matter to
arbitration, the termination of the contract would not take effect
and would remain subject to the arbitral award which would
come to be passed.
13. While, therefore, I am not entirely in agreement with Mr.
Dewan's argument that the decision in Eptisa Servicios covers
the present case, there is substance in Mr. Dewan's contention
that even after a notice of termination has been issued by the
respondent, the contract would not stand terminated, if the
petitioner seeks resolution of the disputes by arbitration. In this
case, the notice of termination was issued on 13th April, 2021.
The petitioner, on 27th April, 2021, disputed the validity of the
letter of the termination order of the decisions to terminate the
contract and also sought reference of the disputes to
arbitration. Prima facie, therefore, it would appear that, in
such circumstances, Clause 2.9.6 of the GCC, would apply and,
pending resolution of the dispute in arbitration and subject to
the result of the arbitral award, the contract would continue to
subsist.
xxx xxx xxx
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Signing Date:21.06.2022
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17. Till the next date of hearing, there shall be ad interim
stay on operation of the impugned termination notice dated
13th 18. Subject to completion of pleadings, list for disposal on
20 April, 2021. The respondent shall stand restrained from
acting on the basis of the said notice, including, inter alia, by
way of invocation of the bank guarantees furnished by the
petitioner."
16. In the present case, the impugned notice of termination is dated
30.04.2022 and the Petitioners have disputed the validity of t h e said n otice
on several grounds and have invoked the arbitration agreement wit hin 45
days as envisaged in Clause 2.9.6, extracted above.
17. In view of the provisions of Clause 2.9.6 as well as the orders passed
by the two Co-ordinate Benches of this Court as aforementioned, it is
directed that till the next date of hearing, there shall be a stay on the
operation of the impugned notice dated 30.04.2022.
JYOTI SINGH, J
(VACATION JUDGE)
JUNE 17, 2022/rk
Signature Not Verified
Signing Date:21.06.2022
22:56:25
