Karnataka High Court
M/S Seundo Energy Pvt Ltd vs Mangalore Refinery And Petrochemicals ... on 10 February, 2025
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WA No. 1877 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF FEBRUARY, 2025
PRESENT
THE HON'BLE MR N. V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR JUSTICE M.I.ARUN
WRIT APPEAL NO. 1877 OF 2024 (GM-RES)
BETWEEN:
1. M/S. SEUNDO ENERGY PVT. LTD.
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE AT
# 733, 2ND FLOOR, LEO ARCADE
19TH MAIN, 9TH CROSS, MEI LAYOUT
BAGALUGUNTE, BENGALURU-560 073.
REP. BY ITS MANAGING DIRECTOR.
...APPELLANT
(BY SRI. S. SRIRANGA, SR. ADVOCATE A/W
SMT. ASHWINI N.RAVINDRA, ADVOCATE)
Digitally
signed by H AND:
K HEMA
Location: 1. MANGALORE REFINERY AND
High Court PETROCHEMICALS LIMITED
of Karnataka
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
SCHEDULE A GOVERNMENT OF INDIA
ENTERPRISE
HAVING ITS REGISTERED OFFICE
AT KUTHETHOOR P.O. VIA KATIPALLA
MANGALURU-575 030.
REP. BY ITS MANAGING DIRECTOR.
...RESPONDENT
(BY SRI. K.ARVIND KAMATH, ASGI A/W
SRI. V.G.PRASHANTH, ADVOCATE)
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WA No. 1877 of 2024
THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA
HIGH COURT ACT, 1961 PRAYING TO SET ASIDE THE ORDER
DATED 18.12.2024 PASSED BY THE LEARNED SINGLE JUDGE
IN WRIT PETITION No.26754/2024 (GM-RES) AND
CONSEQUENTLY GRANT THE ORDER SOUGHT AS ORDERS
IN THE WRIT PETITION, IN THE INTEREST OF JUSTICE.
THIS APPEAL, COMING ON FOR ADMISSION HEARING,
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE
N. V. ANJARIA
and
HON'BLE MR JUSTICE M.I.ARUN
ORAL JUDGMENT
(PER: HON'BLE MR. JUSTICE M.I.ARUN)
This intra court appeal is preferred against the order passed
in Writ Petition No.26754 of 2024 by the petitioner therein.
2. The appellant is a company incorporated under the
Companies Act and is involved in the business of Engineering
Procurement And Construction.
3. The respondent is a Government of India undertaking and
operates an Aromatic Complex, a petrochemical unit, capable of
producing 0.905 MMTPA of Para Xylena and 0.273 MMTPA of
Benzene. In relation to its business, it floated a tender for the
following purpose,
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"'Construction of completely new 110/33 Kv substation, named SS-
10 shall be engineered, procured (engineered items) and
construction adjacent to the existing MSEZ substation, GSS-03
besides other activities within the existing substation, SS-01A and
other areas within MRPL aromatic complex premises along with
installation of a single 110/34.5 Kv, 36/45 MVA free issued
transformer in SS-10 and laying of 33Kv free issued cables inside
the newly constructed (by others) RCC cable trench of
approximately 1.8 km length between the substation SS-10 and
SS-01A".
3. The appellant was the successful bidder and was entrusted
with the work. The said work was to be completed within nine
months from the date of letter of acceptance which was dated
04.08.2023. However, the appellant was not in a position to
complete the agreed work within the stipulated time and on several
occasions time was extended at the behest of the appellant and
finally it was extended up to 23.09.2024. However, the appellant
was not in a position to complete the said work and again
requested for extension of time (vide Annexure-Q to the writ
petition). However, the respondent terminated the contract (vide
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Annexure-S to the writ petition). Aggrieved by same, the petitioner
preferred Writ Petition No.26754 of 2024. Learned Single Judge on
the ground that the case on hand involves complex question of
facts necessitating appreciation of evidence and examination of
witnesses refused to exercise the writ jurisdiction and has
dismissed the writ petition. Aggrieved by the same, the present writ
appeal is field.
4. The case of the appellant is that there was no breach of
contract on part of the appellant and that respondent has
terminated the contract based on ulterior motives and irrelevant
considerations and the decision of the respondent is arbitrary and
unreasonable. It is also contended that the respondent has not
followed the principles of natural justice and an opportunity of
hearing has not been granted to the appellant before termination of
the contract. It is also submitted that the appellant has completed
77.4% of the work and the balance work could not be completed
within the time due to the fault of the respondent. It is further
submitted that learned Single Judge failed to appreciate these facts
and has erroneously dismissed the writ petition.
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5. Per contra, the respondent justifies the order passed by
learned Single Judge and prays for dismissal of the writ appeal.
6. Normally, the courts in exercise of its powers under Article
226 of the Constitution of India, do not entertain the dispute
pertaining to contractual matters unless the petitioner is in a
position to show arbitrariness, ulterior motives or irrelevant
considerations by the State in terminating the contract. The Hon'ble
Apex Court in Subodh Kumar Singh Rathour Vs The Chief
Executive Officer and Others [2024 SCC OnLine SC 1682) in
paragraphs 68, 69, 70 and 71 has held as under,
"68. The dictum as laid in Tata Cellular v. UOI
reported in (1994) 6 SCC 651 is that the judicial power of
review is exercised to rein in any unbridled executive
functioning. It was observed that the restraint has two
contemporary manifestations viz. one is the ambit of judicial
intervention and the other covers the scope of the court's
ability to quash an administrative decision on its merits.
These restraints bear the hallmarks of judicial control over
administrative action. It was held that the principle of judicial
review is concerned with reviewing not the merits of the
decision in support of which the application for judicial
review is made, but the decision-making process itself. It
was held that the principle of judicial review would apply to
the exercise of contractual powers by the Government
bodies in order to prevent arbitrariness or favouritism. It was
held that the duty of the court is to confine itself to the
question of legality and its concern should be whether a
decision-making authority exceeded its powers; whether it
committed an error of law or committed a breach of the
rules of natural justice or reached a decision which no
reasonable tribunal would have reached or, abused its
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powers. The grounds upon which an administrative action
can be subjected to judicial review are classified as
illegality, irrationality and procedural impropriety. In that very
decision, while deducing the principles from various cases
referred, it was held that the modern trend points to judicial
restraint in administrative action; that the Court does not sit
as a court of appeal but merely reviews the manner in which
the decision was made; that the court does not have the
expertise to correct the administrative decision and if a
review of the administrative decision is permitted, it will be
substituting its own decision, without the necessary
expertise which itself may be fallible; that the terms of the
invitation to tender cannot be open to judicial scrutiny
because the invitation to tender is in the realm of contract;
and, that the government must have freedom of contract,
i.e. a free-play in the joints is a necessary concomitant for
an administrative body functioning in an administrative
sphere or quasi-administrative sphere. However, the
decision must not only be tested by the application of
Wednesbury principle of reasonableness, but must be free
from arbitrariness not affected by bias or actuated by mala
fides. Moreover, quashing decisions may impose heavy
administrative burden on the administration and lead to
increased and unbudgeted expenditure.
69. To ascertain whether an act is arbitrary or not,
the court must carefully attend to the facts and the
circumstances of the case. It should find out whether the
impugned decision is based on any principle. If not, it may
unerringly point to arbitrariness. If the act betrays caprice or
the mere exhibition of the whim of the authority it would
sufficiently bear the insignia of arbitrariness. In this regard
supporting an order with a rationale which in the
circumstances is found to be reasonable will go a long way
to repel a challenge to State action. No doubt the reasons
need not in every case be part of the order as such. If there
is absence of good faith and the action is actuated with an
oblique motive, it could be characterised as being arbitrary.
A total non-application of mind without due regard to the
rights of the parties and public interest may be a clear
indicator of arbitrary action.
70. One another way, to assess whether an action
complained of could be termed as arbitrary is by way of
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scrutinizing the reasons that have been assigned to such an
action. It involves overseeing whether the reasons which
have been cited if at all genuinely formed part of the
decision-making process or whether they are merely a ruse.
All decisions that are taken must earnestly be in lieu of the
reasons and considerations that have been assigned to it.
The Court must be mindful of the fact that it is not supposed
to delve into every minute details of the reasoning assigned,
it need not to go into a detailed exercise of assessing the
pros and cons of the reasons itself, but should only see
whether the reasons were earnest, genuine and had a
rationale with the ultimate decision. What is under scrutiny
in judicial review of an action is the decision-making
process and whether there is any element of arbitrariness or
mala fide.
71. Thus, the question to be answered in such
situations is whether the decision was based on valid
considerations. This is undertaken to ensure that the
reasons assigned were the true motivations behind the
action and it involves checking for the presence of any
ulterior motives or irrelevant considerations that might have
influenced the decision. The approach of the court must be
to respect the expertise and discretion of administrative
authorities while still protecting against arbitrary and
capricious actions. Thus, now the only question that
remains to be considered is whether the action of the
respondent to cancel the tender could be termed as
arbitrary?"
7. Thus, the question that arises for consideration in the instant
case is whether the appellant is able to show on the face of it that
the order of termination of contract passed by the respondent is
arbitrary or unreasonable or based on malafide or irrelevant
considerations.
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8. Admittedly, the contract pertains to execution of certain work
relating to expansion of the manufacturing process of the
respondent entity. While examining as to who is responsible for
delay in execution of the work by the appellant, the court is
required to examine the question of facts. As already stated above,
this court normally in exercise of its powers under Article 226 of the
Constitution of India cannot examine the same. This court does not
sit as an appellate authority over the decision taken by the
respondent while exercising its powers under Article 226 of the
Constitution of India. It examines only, whether, on the face of it the
decision of the respondent is arbitrary, unreasonable or malafide.
The appellant in the instant case has prayed for setting aside the
termination order passed by the respondent and direct the
respondent to consider the representation of the appellant for
further extension of time. A perusal of the request of the appellant
to the respondent for further extension of time (Annexure-Q to the
writ petition) reveals that the delay was entirely due to the problems
that the appellant had with its bankers and its sub contractors or
suppliers. The said representation do not place any blame on the
respondent for any delay. It is more in the nature of requesting the
respondent to consider that the appellant has faced certain
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difficulties in its business, because of which, there is a delay and
that the appellant has now resolved those problems and is in a
position to complete the work. The said request has been rejected
by the respondent. Further, none of the documents produced by
the appellant shows prima facie that the respondent has acted
arbitrarily or unreasonably or its decision has been motivated by
ulterior motives or malafides. It is only in the pleadings of the writ
petition and writ appeal, the appellant has blamed the respondent.
9. The appellant having failed to show arbitrariness or
unreasonableness or malafides on part of the respondent, we are
of the opinion that learned Single Judge committed no error in
coming to the conclusion that the case on hand is a contractual
matter and a decision can be given only after examining the
disputed question of facts and it is not possible to decide the same
by this Court by exercising its powers under Article 226 of the
Constitution of India. We do not see any reason to interfere in the
well reasoned order of learned Single Judge. For the
aforementioned reasons, the writ appeal is dismissed.
10. It is needless to state that the dismissal of the writ appeal will
not come in the way of the appellant approaching Civil Court or
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Arbitration as the case may be if it so advised and that the Civil
Court or Arbitration shall decide the dispute independently without
being influenced by any of the observations made hereinabove.
Sd/-
(N. V. ANJARIA)
CHIEF JUSTICE
Sd/-
(M.I.ARUN)
JUDGE
PGG
