Kerala High Court
M/S Nath Infrastructures vs Union Of India on 8 July, 2025
Author: T.R.Ravi
Bench: T.R.Ravi
W.P(C)Nos. 8260
& 11720 of 2023
2025:KER:49496
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE T.R.RAVI
TUESDAY, THE 8TH DAY OF JULY 2025 / 17TH ASHADHA, 1947
WP(C) NO. 8260 OF 2023
PETITIONER:
M/S NATH INFRASTRUCTURES
REPRESENTED BY ITS MANAGING PARTNER
MR. V. RAJEENDRANATH, 28/309A1, NATH THONDAYAD,
KOTTOOLI, CHEVARAMBALAM,
KOZHIKODE DISTRICT., PIN - 673017
BY ADVS.
SRI.ADITHYA RAJEEV
SMT.S.PARVATHI
RESPONDENTS:
1 UNION OF INDIA
REPRESENTED BY ITS SECRETARY, MINISTRY OF HOME
AFFAIRS, GOVERNMENT OF INDIA, NORTH BLOCK,
CENTRAL SECRETARIAT, NEW DELHI,
PIN - 110001
2 STATE OF KERALA
REPRESENTED BY ITS SECRETARY, PUBLIC WORKS
DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM DISTRICT, PIN - 695101.
3 THE REGIONAL OFFICER
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS,
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& 11720 of 2023
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KERALA REGION, PUBLIC OFFICE BUILDING, MUSEUM
P.O., THIRUVANANTHAPURAM DISTRICT. PIN - 695033.
4 THE CHIEF ENGINEER
PUBLIC WORKS DEPARTMENT (NATIONAL HIGHWAY),
MUSEUM P.O, THIRUVANANTHAPURAM DISTRICT., PIN -
695033
5 THE SUPERINTENDING ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGH WAY NORTH
CIRCLE, OFFICE OF THE SUPERINTENDING ENGINEER,
KOZHIKODE DISTRICT., PIN - 673001
6 THE EXECUTIVE ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY
DIVISION, OFFICE OF THE EXECUTIVE ENGINEER,
KOZHIKODE DISTRICT., PIN - 673001
7 THE ASSISTANT EXECUTIVE ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY SUB
DIVISION, KODUVALLY, KOZHIKODE DISTRICT., PIN -
673573
8 THE ASSISTANT ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY
SECTION, KODUVALLY, KOZHIKODE DISTRICT., PIN -
673573
BY SPL.GOVT.PLEADER SRI K.G.MANOJ KUMAR
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 10.04.2025, ALONG WITH WP(C).11720/2023, THE
COURT ON 08.07.2025 DELIVERED THE FOLLOWING:
W.P(C)Nos. 8260
& 11720 of 2023
2025:KER:49496
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE T.R.RAVI
TUESDAY, THE 8TH DAY OF JULY 2025 / 17TH ASHADHA, 1947
WP(C) NO. 11720 OF 2023
PETITIONER:
M/S NATH INFRASTRUCTURES
AGED 64 YEARS
REPRESENTED BY ITS MANAGING PARTNER MR. V.
RAJEENDRANATH, 28/309A1, NATH THONDAYAD,
KOTTOOLI, CHEVARAMBALAM, KOZHIKODE DISTRICT., PIN
- 673017
BY ADVS.
SRI.ADITHYA RAJEEV
SMT.S.PARVATHI
RESPONDENTS:
1 UNION OF INDIA
REPRESENTED BY ITS SECRETARY, MINISTRY OF HOME
AFFAIRS, GOVERNMENT OF INDIA, NORTH BLOCK,
CENTRAL SECRETARIAT, NEW DELHI, PIN - 110001
2 THE REGIONAL OFFICER
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS, KERALA
REGION, PUBLIC OFFICE BUILDING, MUSEUM P.O,
THIRUVANANTHAPURAM DISTRICT., PIN - 695033
3 STATE OF KERALA
REPRESENTED BY ITS SECRETARY, PUBLIC WORKS
DEPARTMENT, GOVERNMENT SECRETARIAT,
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& 11720 of 2023
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-4-
THIRUVANANTHAPURAM DISTRICT., PIN - 695101
4 THE CHIEF ENGINEER
PUBLIC WORKS DEPARTMENT (NATIONAL HIGHWAY),
MUSEUM P.O, THIRUVANANTHAPURAM DISTRICT., PIN -
695033
5 THE SUPERINTENDING ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGH WAY NORTH
CIRCLE, OFFICE OF THE SUPERINTENDING ENGINEER,
KOZHIKODE DISTRICT., PIN - 673001
6 THE EXECUTIVE ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY
DIVISION, OFFICE OF THE EXECUTIVE ENGINEER,
KOZHIKODE DISTRICT., PIN - 673001
7 THE ASSISTANT EXECUTIVE ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY SUB
DIVISION, KODUVALLY, KOZHIKODE DISTRICT., PIN -
673573
8 THE ASSISTANT ENGINEER
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY
SECTION, KODUVALLY, KOZHIKODE DISTRICT., PIN -
673573
BY ADV
SHRI.T.C.KRISHNA, SENIOR PANEL COUNSEL
SHRI K.V.MANOJ KUMAR, SPECIAL GOVT.PLEADER
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 10.04.2025, ALONG WITH WP(C).8260/2023,
THE COURT ON 08.07.2025, DELIVERED THE FOLLOWING:
W.P(C)Nos. 8260
& 11720 of 2023
2025:KER:49496
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T.R.RAVI, J.
==========================
W.P(C)No. 8260 OF 2023
&
WP(C) No.11720 OF 2023
==========================
Dated this the 8th day of July, 2025
JUDGMENT
The petitioner in both these writ petitions is a partnership
firm engaged in road construction. The firm undertakes projects
for the Kerala Infrastructure Investment Fund Board (KIIFB), the
National Highway Authority, and the Public Works Department.
The Petitioner has satisfactorily completed several work
contracts, including the Kuttipuram-Puthuponnani National
Highway and National Highway 15/000 to 57/000 in Wayanad.
The prayers in these writ petitions are intrinsically connected,
and the writ petitions are being heard and disposed of together.
The references to the exhibits and the status of the parties are
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as per W.P.(C)No.11720 of 2023, which is treated as the main
case.
2. The 5th respondent, who had been entrusted with the
development, maintenance, and management of National
Highway 766 including the section from km 25/1000 to km
45/1000, by the 1st respondent, invited proposals from eligible
bidders for "strengthening and geometric improvements from km
25/1000 to km 45/1000 of NH 766 (old NH 212) in Kozhikode
District in the State of Kerala on Engineering, Procurement,
Construction ("EPC") mode." The petitioner was the successful
bidder. An Engineering, Procurement, and Construction
Agreement was executed on 07.08.2020. The site was handed
over on 18.09.2020, on which day the work was to commence.
The time for completion of the work was twelve months from the
date of commencing the work and was to end on 17.9.2021. The
petitioner had also executed a Bank guarantee as per the terms
of the contract.
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3. According to the petitioner, at the time of handing over
the site, there were thirty trees, eighty electric posts, ten
telephone poles, and one bus shelter at the site. The heavy rains
during the years 2020 and 2021, and the statewide lockdown
from 08.05.2021 to 30.06.2021 due to the outbreak of the
COVID-19 pandemic, affected the procurement of materials and
skilled labourers. The site was also earmarked as a Containment
Zone on various occasions, and several labourers had also tested
positive for the COVID-19 virus during that period. Even after
the lockdown period, the work was carried out strictly adhering
to the COVID-19 protocols, and all the above factors, according
to the petitioner, resulted in slow progress of the project. The
petitioner also submits that the structural works in different
stretches were delayed due to the non-shifting of utilities and
the failure to remove trees from the site. On 24.08.2021, the
petitioner applied for an extension of time to complete the work.
The request was forwarded by the 5 th respondent to the Ministry
of Road Transport & Highways (MoRTH), recommending the
grant of time extension, by imposing a penalty on the petitioner.
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& 11720 of 2023
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On 25.10.2021, the Executive Engineer wrote to the petitioner,
directing them to submit a proposal for extension of time. This
was followed by a letter from the Superintending Engineer
asking them to submit a proposal for extension of time, without
delay. The petitioner applied on 24.12.2021, seeking extension
of time till 30.06.2022. On 4.2.2022, the Executive Engineer
wrote to the Superintending Engineer, requesting that the time
for completion of the work by the petitioner be extended up to
30.6.2022.
4. The Ministry of Road Transport & Highways (MoRTH)
issued a Circular dated 11.04.2022, considering the COVID-19
pandemic, extending relief to contractors/developers of the road
sector, for the period from 03.06.2022 to 31.10.2022. Taking
note of the above circular, the 2 nd respondent returned the
proposal for extension of time to the 5 th respondent, directing
him to review and resubmit the proposal, avoiding the
recommendation for imposing a penalty. The petitioner
submitted a revised application before the 5th respondent on
20.5.2022, for the extension of time up to 31.10.2022. The
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application was received by the 5th respondent through the 6th
respondent, with a recommendation to extend the time to
complete the work, up to 31.10.2022, without charging any
penalty. The petitioner submits that, based on the assurances
from respondents 5 to 8 that the time for completion of the work
would be extended, the petitioner had carried out ancillary works
as per the Ext.P1 agreement. It is stated that, from 06.12.2021
to 24.03.2022, the petitioner had carried out the works of
scarifying, Granular Sub Base (GSB), Wet Mix Macadam (WMM),
Dense Bituminous Macadam (DBM), Interlocking tiles, drainage
constructions, Irish drains, and culverts. According to the
petitioner, they stopped executing the work on 14.7.2022 since
they could not submit the bills for the work executed after
17.9.2021, as their application for extension of time had not yet
been approved.
5. The petitioner points out that an amount of
Rs.26,92,948/- was retained by the 5th respondent from the
amounts payable on the first, second, and third part bills, and a
sum of Rs.45,50,369/- was withheld from the above-said bills,
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& 11720 of 2023
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citing the failure to meet the milestones within the stipulated
time. The petitioner contends that the failure to meet the
milestones was not deliberate and had been explained in detail in
the application for the extension of time submitted by the
petitioner. According to the petitioner, the respondents 5 to 8
had assured that the withheld amounts would be released upon
the grant of extension of time.
6. The 5th respondent sent Ext.P6 communication dated
02.08.2022 to the 4th respondent, recommending extension of
time up to 31.10.2022 without penalty, given the circular dated
11.04.2022 issued by the Ministry. Ext.P6 states that the
progress of the work was reviewed by the District Infrastructure
Co-ordination Committee, convened by the District Collector on
13.06.2022, in the presence of the Hon'ble Minister for Public
Works and Tourism. The Committee, after considering the
progress of the work, recommended termination of the contract
with the petitioner at the risk and cost of the petitioner. It is
stated that a final termination notice was issued to the petitioner
on 20.06.2022. According to the petitioner, no such notice had
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& 11720 of 2023
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been served on them. Ext.P6 also says that the petitioner had
appeared before the 5th respondent on 15.07.2022 in the
presence of the Executive Engineer, explained the reasons for
non-completion of work, and assured to complete the work by
31.10.2022. Since there was a delay in obtaining consent from
MoRTH for termination and rearrangement, the 5th respondent
requested an extension of time for the petitioner to complete the
work. On 1.9.2022, the Executive Engineer directed the
petitioner to commence the balance work. On 16.9.2022, the
petitioner submitted a revised programme chart and commenced
concrete drain works.
7. On 23.9.2022, the Chief Engineer, MORTH (South
Zone), convened a meeting to review the progress of the work
and suggested extending the time to a viable duration, if the
proposed time up to 30.10.2022 is not practically sufficient for
completion of the project. On 24.9.2022, the petitioner
submitted a request for extension of time till 31.12.2022. On
27.9.2022, the Executive Engineer wrote to the 5 th respondent
requesting extension of time till 30.10.2022 without a fine and
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from 30.10.2022 to 31.12.2022 with a fine. The 5th respondent
thereafter sent Ext.P7 letter dated 28.9.2022 to the 4 th
respondent, with an additional proposal for extension from
30.10.2022 to 31.12.2022 by imposing a fine as per the Rules.
Ext.P7 refers to the meeting dated 23.9.2022.
8. According to the petitioner, based on the directions of
respondents 5 to 8, they carried out drainage construction works
from September to October 2022 and, after completing the
work, submitted the Running Account Bill in respect of the work
amounting to Rs.7,76,361/-, to the 8th respondent, requesting to
audit the Running Account Bill and finalise the same.
9. When the respondents failed to release the payments
due on the 4th and 5th part Bills and to pass orders on the
application for extension of time, the petitioner issued Ext.P9
notice dated 18.10.2022 to the 5 th respondent informing him
that, unless extension of time is granted within 30 days of the
notice, the notice shall be treated as the final termination notice
issued under Clauses 23.2(i) (a), (f), and (g) of the contract.
W.P(C)Nos. 8260
& 11720 of 2023
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10. On 29.10.2022, the 6th respondent sent Ext.P10 reply
to Ext.P9 notice, stating that the authority has not committed
any material default in complying with any of the provisions of
the agreement, and that the authority as well as the 6 th
respondent had issued several notices to the petitioner directing
them to complete the balance work without delay. It is stated
that since the Interim Payment Certificate No.4 submitted on
15.07.2022 includes payment for works executed after the
period stated in the agreement, a supplementary agreement
needs to be executed for the period not covered by the existing
agreement. It was claimed that there was no violation of Clause
23.2(i) (a), (f), and (g) as alleged. In continuation of Ext.P9
notice, the petitioner sent Ext.P11 notice dated 10.11.2022 to
the 5th respondent, informing that the contract in respect of the
work was terminated on 8.11.2022, for the default on the part of
the authority. The petitioner also narrated the details of the
default in Ext.P11.
11. The petitioner thereafter issued notice dated
22.11.2022 seeking to initiate appropriate steps as per Clauses
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23.4 and 23.5 of the agreement to assess the value of works
completed and release the amounts due to them on the bills
submitted on 15.07.2022. In reply, the 5 th respondent sent
Ext.P13 notice dated 03.12.2022, contending that the petitioner
delayed the completion of the work and was in default, and the
termination of the contract by the petitioner is invalid. The
petitioner replied by Ext.P14, reiterating that the agreement is
terminated and demanding initiation of appropriate steps to
assess the value of work completed and release the amounts due
to them.
12. W.P(C) No. 8260 of 2023 was filed thereafter, praying
for directions to the respondents to release the amounts due
towards the 4th and Part Bill submitted by the petitioner; to
audit and finalise the 5th and Part Bill submitted by the petitioner
and to release the amounts so determined, to release the bank
guarantees executed by the petitioner towards Ext-P1 agreement
and to release the amounts retained and withheld on the first,
second, third and part bills, within a time frame. The writ
petition came up for admission on 10.03.2023, and this Court
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& 11720 of 2023
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directed the Counsel for the respondents to get instructions and
posted the case to 27.03.2023. On 15.03.2023, the 5 th
respondent issued Ext.P16 notice to the petitioner, stating that it
has been decided to terminate the contract at the risk and cost
of the contractor by invoking Clause 23.1 of the Agreement. The
notice states that the petitioner is obliged to shift the utilities at
the site and that the same cannot be claimed as a reason for the
delay in completing the work. Clause 10.3 of the Agreement is
also relied on to state that the petitioner had failed to achieve
milestones I, II, and III and did not attain necessary progress in
the work, as per the schedules submitted on 24.08.2021,
24.12.2021, 20.05.2022, and 24.09.2022. The petitioner
received the notice on 20.03.2023. The petitioner sent Ext.P17
reply to Ext.P16 notice, refuting the allegations in the notice,
pointing out that the agreement already stands terminated at
their instance, and requiring the 5 th respondent to withdraw the
notice dated 15.3.2023.
13. The bank guarantee for an amount of Rs.1,28,60,000/-
executed by the petitioner was valid up to 31.10.2022, and the
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& 11720 of 2023
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date of expiry of the claim was on 31.10.2023. The amount was
hence retained by the Bank. On 30.03.2023, the 5 th respondent
issued Ext.P19 order, intimating that the contract had been
terminated and directing the petitioner to vacate the site within
15 days and hand over all related documents and records to the
Authority, reserving the Authority's right to recover any
losses/damages and expenses for maintenance of the existing
project. The petitioner contends that the Ext.P19 order was
issued by the 5th respondent without affording an opportunity of
hearing to the petitioner and without adverting to the factual and
legal contentions raised by the petitioner in Ext.P17 reply, and is
mala fide, arbitrary, and unreasonable. It is contended that the
termination of a contract, which already stands terminated at the
instance of the petitioner, and that too, during the pendency of
the writ petition filed by the petitioner, evidences the mala fides
in the actions of the respondents. Apprehending that the 5 th
respondent will take steps to encash the bank guarantees
furnished at the time of execution of the contract, the petitioner
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has filed W.P.(C)No.11720 of 2023, praying to quash Exts.P16
and P19 notices.
14. The 5th respondent has filed a counter affidavit
contending that the writ petition is not maintainable as serious
factual disputes are involved in this case. It is stated that in the
Kozhikode district, and that too in the vicinity of the subject
work, the petitioner has a poor track record, and that the
following works were terminated:
"i. KIIFB 2016-17. Improvements to Thamarassery-
Varattiakkal road in Kozhikode district: Terminated by the
Project Director, PMU-KRFB on 08.04.2022. Agreed PAC is
Rs. 36 Crores. Work started on 12.02.2018 with time of
completion 11.08.2019 and the contractor did not complete
work till March 2022.
ii. KIIFB 2016-17. Kaithappoyil Kodenchery
Augusthiamuzhi road in Kozhikode district. Terminated by
the Project Director, PMU-KRFB
iii. CRIF 2018-19. Improvements to North Karassery-
Karamoola- Thekkumkutty- Maranchatty- Koombara-
Kakkadampoyil road in Kozhikode district: Terminated by
Superintending Engineer, National Highway North Circle on
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08.11.2022. Original time of completion is 09.04.2020. The
contractor did not complete work till October 2022.
iv. Improvements to Engapuzha Omassery road between
Km. 0/000 to 6/100 in Kozhikode district: Terminated by
Superintending Engineer, PWD Roads North Circle on
17.05.2022. Agreed PAC for the work is Rs.6,96,64,170/-."
15. It is stated that the site was handed over to the
petitioner on 19.07.2019, with the time of completion up to
18.04.2020, that the time of completion was extended 3 times
up to 31.12.2021, and that the contract was terminated at the
risk and cost of the contractor due to poor performance on their
part. It is contended that the petitioner, who completed only
20% of the work within the original period of 12 months and has
a poor record, cannot claim that he would have completed the
project if extension of time had been granted to him. It is
pointed out that even with the work claimed to have been
carried out without getting an extension of time, the progress
was only from 20% to 26%. It is hence contended that the
petitioner cannot terminate the agreement since they were in
default even during the original period of execution of the
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project. It is submitted that Clause 23.2 can operate only in
cases where there is a default on the part of the Authority, and
since there was no such default during the original tenure of the
work from 18.9.2020 to 17.09.2021 or thereafter, the petitioner
could not have legally invoked Clause 23.2. It is contended that
a declaration regarding breach is not a matter capable of being
adjudicated in a writ petition under Article 226 of the
Constitution of India.
16. Heard Sri Adithya Rajeev on behalf of the petitioner,
Sri T.C.Krishna, Senior Panel Counsel for the 1 st respondent and
Sri.K.V.Manoj Kumar, Special Government Pleader on behalf of
respondents 2 to 8.
CONSIDERATION:
17. The preliminary question that the respondents raised
was that the writ petition for a declaration regarding breach of
the contract is not maintainable. It is submitted that such
matters, that involve questions of fact, cannot be agitated under
Article 226 of the Constitution of India. Reliance is placed on the
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judgment dated 20.05.2020 and 05.08.2024, respectively, of the
Division Benches of this Court in W.A.No.609 of 2020
[Shamon P.S. v. The Station House Officer & Ors.] and
ISRO and Ors. v. Roopam Engineers and Contractors Pvt.
Ltd., W.A. No. 1262 of 2023, the judgment dated 23.02.2021
of a learned Single Judge of this Court in W.P.(C)No.13396 of
2020 [Marymatha Infrastructure Pvt. Ltd. v. State of
Kerala & Anr.], the judgments of the Hon'ble Supreme Court in
Empire Jute Company Ltd. & Ors. v. Jute Corporation of
India Ltd. & Anr. [(2007) 14 SCC 680], Rukmanibai Gupta
v. Collector, Jabalpur & Ors. [(1980) 4 SCC 556] and
Bhaven Construction Through Authorised Signatory
Premjibhai K. Shah v. Executive Engineer, Sardar Sarovar
Narmada Nigam Ltd. & Anr. [(2022) 1 SCC 75].
18. In Shamon P.S (supra), the Division Bench was
considering the question whether a writ petition can be filed
challenging an award passed by the Arbitrator. The Special
Government Pleader emphasised paragraphs 4 and 6 to 10 of
the judgment. The Division Bench had considered in detail the
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question regarding the maintainability of a writ petition under
Article 226 of the Constitution of India in cases where an
alternate remedy is available. After referring to the decisions,
the Court concluded that the writ petition was not maintainable
in the absence of a challenge to the award/order of the Arbitral
Tribunal in a manner known to law. The Court was primarily
concerned with the maintainability of a writ petition challenging
an award passed by the Arbitrator when specific provisions are
available under the Arbitration and Conciliation Act, 1996, for
challenging the award. In Mary Matha Infrastructure (supra),
the learned Single Judge of this Court was again considering a
case where the general conditions of the contract contained a
dispute resolution clause. Even though this Court found that the
adjudicator to whom the matter was referred did not decide
within the time prescribed in the contract, since serious
allegations were raised between the parties regarding the
procedure adopted by the Adjudicator, the same can be decided
only after adducing evidence. It was in the above circumstances
that this Court did not exercise the jurisdiction under Article 226
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on the facts and circumstances of the said case. In Empire
Jute Company (supra), the Hon'ble Supreme Court was
considering a case where there was an arbitration agreement
existing between the parties and the dispute related to the
liability to pay "carrying cost" under the terms of the contract in
the event of default in taking delivery of goods. Reliance was
placed on paragraphs 13 to 18 of the judgment. The Court
noticed that the issue involved was the construction of the
contract entered into between the parties. In paragraph 18 of
the judgment, the Apex Court held that the power of judicial
review vested in the superior courts undoubtedly has wide
amplitude, and it should not be exercised when there is an
arbitration clause. The Apex Court was considering a case where
the Division Bench of the High Court had gone by the arbitration
agreement regarding one part of the dispute, but proceeded to
determine the other part itself. The Hon'ble Supreme Court held
that the High Court should have refused to exercise its
jurisdiction, leaving the parties to avail of their remedies under
the agreement, and it should not have proceeded to determine a
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part of the dispute itself. The Hon'ble Supreme Court found that,
as there were disputed questions of fact and law, the parties
should have been left to avail their remedy under the Arbitration
Clause. In Rukmanibhai Gupta (supra), the Hon'ble Supreme
Court was considering a case where an award of the Arbitrator
was challenged under Article 226. The Hon'ble Supreme Court
held that writ jurisdiction cannot be invoked to avoid contractual
obligations, and the award ought to have been challenged under
the provisions of the Arbitration Act, 1940. In Bhaven
Construction (supra), the Hon'ble Supreme Court cautioned
that interference under Articles 226 and 227 of the Constitution
of India with an arbitral process is not permissible except in
exceptionally rare circumstances and cannot be beyond the
procedure established under the Arbitration and Conciliation Act,
1996. The Court further held that the power has to be exercised
in exceptional circumstances, wherein one party is left
remediless under the statute, or a clear bad faith shown by one
of the parties.
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19. The question is no longer res integra. In M.P. Power
Management Company Limited, Jabalpur v. Sky Power
Southeast Solar India Private Limited & Ors. [(2023) 2
SCC 703], the Hon'ble Supreme Court had elaborately
considered the issue and held that the principle that in the case
of a non-statutory contract, the rights would be governed only
by the terms of the contract, does not continue to hold good.
The Hon'ble Supreme Court held that the mere fact that the
relief was sought under a contract which is not statutory will not
entitle the State to avoid scrutiny of its action or inaction under
the contract, if the party complaining of such action or inaction
can establish that the same was per se arbitrary. The conclusions
of the Hon'ble Supreme Court, stated in paragraph 82 are
extracted below:
"82. We may cull out our conclusions in regard to the
points, which we have framed:
82.1. It is, undoubtedly, true that the writ jurisdiction is
a public law remedy. A matter, which lies entirely within
a private realm of affairs of public body, may not lend
itself for being dealt with under the writ jurisdiction of
the Court.
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82.2. The principle laid down in Bareilly Development
Authority [Bareilly Development Authority v. Ajai Pal
Singh, (1989) 2 SCC 116] that in the case of a non-
statutory contract the rights are governed only by the
terms of the contract and the decisions, which are
purported to be followed, including Radhakrishna
Agarwal [Radhakrishna Agarwal v. State of Bihar, (1977)
3 SCC 457] , may not continue to hold good, in the light
of what has been laid down in ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd.,
(2004) 3 SCC 553] and as followed in the recent
judgment in Sudhir Kumar Singh [State of U.P. v. Sudhir
Kumar Singh, (2021) 19 SCC 706 : 2020 SCC OnLine SC
847] .
82.3. The mere fact that relief is sought under a
contract which is not statutory, will not entitle the
respondent State in a case by itself to ward off scrutiny
of its action or inaction under the contract, if the
complaining party is able to establish that the
action/inaction is, per se, arbitrary.
82.4. An action will lie, undoubtedly, when the State
purports to award any largesse and, undoubtedly, this
relates to the stage prior to the contract being entered
into (see Ramana Dayaram Shetty [Ramana Dayaram
Shetty v. International Airport Authority of India, (1979)
3 SCC 489] ). This scrutiny, no doubt, would be
undertaken within the nature of the judicial review,
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which has been declared in the decision in Tata
Cellular v. Union of India [Tata Cellular v. Union of India,
(1994) 6 SCC 651] .
82.5. After the contract is entered into, there can be a
variety of circumstances, which may provide a cause of
action to a party to the contract with the State, to seek
relief by filing a writ petition.
82.6. Without intending to be exhaustive, it may include
the relief of seeking payment of amounts due to the
aggrieved party from the State. The State can, indeed,
be called upon to honour its obligations of making
payment, unless it be that there is a serious and genuine
dispute raised relating to the liability of the State to
make the payment. Such dispute, ordinarily, would
include the contention that the aggrieved party has not
fulfilled its obligations and the Court finds that such a
contention by the State is not a mere ruse or a pretence.
82.7. The existence of an alternate remedy, is,
undoubtedly, a matter to be borne in mind in declining
relief in a writ petition in a contractual matter. Again, the
question as to whether the writ petitioner must be told
off the gates, would depend upon the nature of the claim
and relief sought by the petitioner, the questions, which
would have to be decided, and, most importantly,
whether there are disputed questions of fact, resolution
of which is necessary, as an indispensable prelude to the
grant of the relief sought. Undoubtedly, while there is no
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prohibition, in the writ court even deciding disputed
questions of fact, particularly when the dispute
surrounds demystifying of documents only, the Court
may relegate the party to the remedy by way of a civil
suit.
82.8. The existence of a provision for arbitration, which
is a forum intended to quicken the pace of dispute
resolution, is viewed as a near bar to the entertainment
of a writ petition [see in this regard, the view of this
Court even in ABL [ABL International Ltd. v. Export
Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC
553] explaining how it distinguished the decision of this
Court in State of U.P. v. Bridge & Roof Co. (India)
Ltd. [State of U.P. v. Bridge & Roof Co. (India) Ltd.,
(1996) 6 SCC 22] , by its observations in SCC para 14
in ABL [ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553] ].
82.9. The need to deal with disputed questions of fact,
cannot be made a smokescreen to guillotine a genuine
claim raised in a writ petition, when actually the
resolution of a disputed question of fact is unnecessary
to grant relief to a writ applicant.
82.10. The reach of Article 14 enables a writ court to
deal with arbitrary State action even after a contract is
entered into by the State. A wide variety of
circumstances can generate causes of action for invoking
Article 14. The Court's approach in dealing with the
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same, would be guided by, undoubtedly, the
overwhelming need to obviate arbitrary State action, in
cases where the writ remedy provides an effective and
fair means of preventing miscarriage of justice arising
from palpably unreasonable action by the State.
82.11. Termination of contract can again arise in a wide
variety of situations. If for instance, a contract is
terminated, by a person, who is demonstrated, without
any need for any argument, to be the person, who is
completely unauthorised to cancel the contract, there
may not be any necessity to drive the party to the
unnecessary ordeal of a prolix and avoidable round of
litigation. The intervention by the High Court, in such a
case, where there is no dispute to be resolved, would
also be conducive in public interest, apart from ensuring
the fundamental right of the petitioner under Article 14
of the Constitution of India. When it comes to a
challenge to the termination of a contract by the State,
which is a non-statutory body, which is acting in
purported exercise of the powers/rights under such a
contract, it would be over simplifying a complex issue to
lay down any inflexible rule in favour of the Court turning
away the petitioner to alternate fora. Ordinarily, the
cases of termination of contract by the State, acting
within its contractual domain, may not lend itself for
appropriate redress by the writ court. This is,
undoubtedly, so if the Court is duty-bound to arrive at
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findings, which involve untying knots, which are
presented by disputed questions of facts. Undoubtedly,
in view of ABL [ABL International Ltd. v. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553] , if
resolving the dispute, in a case of repudiation of a
contract, involves only appreciating the true scope of
documentary material in the light of pleadings, the Court
may still grant relief to an applicant. We must enter a
caveat. The Courts are today reeling under the weight of
a docket explosion, which is truly alarming. If a case
involves a large body of documents and the Court is
called upon to enter upon findings of facts and involves
merely the construction of the document, it may not be
an unsound discretion to relegate the party to the
alternate remedy. This is not to deprive the Court of its
constitutional power as laid down in ABL [ABL
International Ltd. v. Export Credit Guarantee Corpn. of
India Ltd., (2004) 3 SCC 553] . It all depends upon the
facts of each case as to whether, having regard to the
scope of the dispute to be resolved, whether the Court
will still entertain the petition.
82.12. In a case the State is a party to the contract and
a breach of a contract is alleged against the State, a civil
action in the appropriate forum is, undoubtedly,
maintainable. But this is not the end of the matter.
Having regard to the position of the State and its duty to
act fairly and to eschew arbitrariness in all its actions,
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resort to the constitutional remedy on the cause of
action, that the action is arbitrary, is permissible (see in
this regard Shrilekha Vidyarthi v. State of
U.P. [Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC
212 : 1991 SCC (L&S) 742] ). However, it must be made
clear that every case involving breach of contract by the
State, cannot be dressed up and disguised as a case of
arbitrary State action. While the concept of an arbitrary
action or inaction cannot be cribbed or confined to any
immutable mantra, and must be laid bare, with reference
to the facts of each case, it cannot be a mere allegation
of breach of contract that would suffice. What must be
involved in the case must be action/inaction, which must
be palpably unreasonable or absolutely irrational and
bereft of any principle. An action, which is completely
mala fide, can hardly be described as a fair action and
may, depending on the facts, amount to arbitrary action.
The question must be posed and answered by the Court
and all we intend to lay down is that there is a discretion
available to the Court to grant relief in appropriate cases.
82.13. A lodestar, which may illumine the path of the
Court, would be the dimension of public interest
subserved by the Court interfering in the matter, rather
than relegating the matter to the alternate forum.
82.14. Another relevant criteria is, if the Court has
entertained the matter, then, while it is not tabooed that
the Court should not relegate the party at a later stage,
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ordinarily, it would be a germane consideration, which
may persuade the Court to complete what it had started,
provided it is otherwise a sound exercise of jurisdiction
to decide the matter on merits in the writ petition itself.
82.15. Violation of natural justice has been recognised
as a ground signifying the presence of a public law
element and can found a cause of action premised on
breach of Article 14. (See Sudhir Kumar Singh [State of
U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 : 2020
SCC OnLine SC 847] )."
20. The judgment of the Hon'ble Supreme Court in M.P.
Power Management Company Limited (supra) was considered
by a Division Bench of this Court in Writ Appeal No.1262/2023.
In paragraph 10, the Division Bench held thus:
"10. Firstly, we find ourselves unable to accept, as a
general proposition, the argument of the learned counsel
for the appellants that in every case where an entity that
answers to the description of "State" under Article 12 of
the Constitution of India enters into a non-statutory
contractual relationship with a private person, the writ
court would be denuded of its jurisdiction to interfere
with a contractual dispute that arises between the
parties. In M.P. Power Management Company
Limited, Jabalpur v. Sky Power Southeast Solar
India Private Limited and Others - [(2023) 2 SCC
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703], the Supreme Court, after a survey of all the
precedents on the issue, found that the principle that in
the case of a nonstatutory contract, the rights are
governed only by the terms of the contract may not
continue to hold good. It was observed that the mere
fact that relief is sought under a contract which is not
statutory, will not by itself, entitle the respondent State
in a case to ward-off scrutiny of its action or inaction
under the contract if the complaining party is able to
establish that the action/inaction is, per se, arbitrary. If
the actions of a State betray caprice or the mere
exhibition of the whim of the authority, it would
sufficiently bear the insignia of arbitrariness. Accordingly,
if there is an absence of good faith and the State action
is actuated with an oblique motive, it could be
characterised as being arbitrary. Similarly, a total non-
application of mind, without due regard to the rights of
the parties and public interest, would be a clear indicator
of arbitrary action. There would be a myriad
circumstances where there may not be any necessity to
drive a party to a litigation before the civil court
especially when the contention by the State, that there
are disputed questions of fact necessitating a recourse to
the civil court, is found to be merely illusory. As
reiterated by the Court, the need to deal with disputed
questions of fact, cannot be made a smokescreen to
guillotine a genuine claim raised in a writ petition, when
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the actual resolution of a disputed question of fact is
unnecessary to grant the relief to a writ applicant."
21. It is well established that the existence of an
alternative remedy is not an absolute bar to the invocation of
writ jurisdiction. After holding so, in Union of India & Ors. v.
Tantia Construction Pvt. Ltd [2011 KHC 4392], the Hon'ble
Supreme Court held that injustice, whenever and wherever it
takes place, has to be struck down as an anathema to the rule of
law and the provisions of the Constitution. It is hence open to
this Court to invoke the jurisdiction under Article 226 of the
Constitution of India and entertain a writ petition in cases
relating to contracts, where the State is one of the contracting
parties and is alleged to have committed a breach or in a case
where the interpretation of one of the clauses of the agreement
between the parties is involved [See also ABL International
Ltd. V. Export Credit Guarantee Corporation of India Ltd.
(2004) 3 SCC 553].
22. In the light of the legal position that has been
discussed above, I shall consider the facts before the Court.
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Clause 10.5 of Ext.P1 deals with the extension of the time for
completion of the work. Clause 10.5 (i) says that the contractor
shall be entitled to extension of time on the occurrence of a
Force Majeure Event, or for reason of delay, impediment, or
prevention caused by or attributable to the authority, the
authority's personnel, or the authority's other contractors on the
site, or for any other reason which entitles the contractor to
extension of time as per the provisions of the agreement.
Clause 10.5(iv) says that the Authority's Engineer shall, on
receipt of the claim under the provisions of Clause 10.5 (ii),
examine the claim expeditiously within the time frame specified
herein. If the Authority's Engineer requires any clarification
regarding the claim, he must seek the same within 15 (fifteen)
days from receiving the claim. On receiving any communication
from the Authority's Engineer requesting clarification, the
Contractor must furnish the same within 10 (ten) days. Within
30 (thirty) days of receipt of such clarifications, the Authority's
Engineer must inform the Contractor in writing the decision on
the time extension. Proviso to Clause 10.5(iv) says that when
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determining each extension of time under Clause 10.5, the
authority's Engineer should review previous determinations and
may increase, but shall not decrease, the total time extended.
23. Clause 23.2 of the Ext-P1 agreement contemplates
termination of the agreement for default committed by the
Authority. The dispute in this writ petition is centred around the
above clause. Clause 23.2 of Ext.P1 is extracted below, for
reference.
"23.2 . Termination for Authority Default.
(i) In the event that any of the defaults specified below
shall have occurred, and the Authority fails to cure such
default within a Cure Period of 90 (ninety) days or such
longer period as has been expressly provided in this
Agreement, the Authority shall be deemed to be in
default of this Agreement (the "Authority Default") unless
the default has occurred as a result of any breach of this
Agreement by the Contractor or due to Force Majeure.
The defaults referred to herein shall include:
(a) the Authority commits a material default in
complying with any of the provisions of this
Agreement and such default has a Material
Adverse Effect on the Contractor;
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(b) the Authority has failed to make payment of
any amount due and payable to the
Contractor within the period specified in this
Agreement;
(c) the Authority has failed to provide, within a
period of 180 (one hundred and eighty) days
from the Appointed Date, the environmental
clearances required for construction of the
Project Highway;
(d) the Authority becomes bankrupt or insolvent,
goes into liquidation, has a receiving or
administration order made against him,
compounds with its creditors, or carries on
business under a receiver, trustee or manager
for the benefit of its creditors, or if any act is
done or event occurs which (under Applicable
Laws) has a similar effect;
(e) the Authority repudiates this Agreement or
otherwise takes any action that amounts to or
manifests an irrevocable intention not to be
bound by this Agreement;
(f) the Authority's Engineer fails to issue the
relevant Interim Payment Certificate within 60
(sixty) days after receiving a statement and
supporting documents; or
(g) the whole work is suspended by Authority
beyond 120 (one hundred twenty) days for
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any reason which is not attributed to the
Contractor.
(ii) Without prejudice to any other right or remedy which
the Contractor may have under this Agreement, upon
occurrence of an Authority Default, the Contractor shall
be entitled to terminate this Agreement by issuing a
Termination Notice to the Authority; provided that before
issuing the Termination Notice, the Contractor shall by a
notice inform the Authority of its intention to issue the
Termination Notice and grant 15 (fifteen) days to the
Authority to make a representation, and may after the
expiry of such 15 (fifteen) days, whether or not it is in
receipt of such representation, issue the Termination
Notice.
If on the consideration of the Authority's representation
or otherwise, the contractor does not issue the
Termination Notice on such 15th (fifteenth) day and
prefers to continue with the project, it is deemed that the
cause of action of the Termination Notice has been
condoned by the Contractor and he would be deemed to
have waived any claim and forfeited any right to any
other remedy on that count or in relation to such action
or omission."
24. In the case at hand, an application for extension of
time was initially submitted on 24.08.2021 before the expiry of
the time to complete the work. The copy of the request has
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been produced along with a memo filed by the Senior
Government Pleader on 13.09.2024. The application clearly
states the reasons for the delay, which include the delay due to
COVID-19, the delay due to other works that were progressing
on the same site, and the delay due to cyclone and heavy rain.
On 23.11.2021, the 5th respondent directed the petitioner to
apply for extension of time and informed that failure to do so
would entail action under the agreement. It says that the
Hon'ble Minister had directed to continue the work on 17.9.2021,
but the same was not done. On 25.10.2021, the Executive
Engineer wrote to the petitioner stating that the request for
extension of time had not been submitted. This was followed by
an application for extension of time dated 24.12.2021, which has
been produced as document No.2 along with the memo filed by
the Senior Government Pleader on 13.09.2024. The fact that
applications were received is not disputed. The Executive
Engineer wrote to the Superintending Engineer on 04.02.2022,
requesting that the time be extended till 30.06.2022. The letter
specifically states that the reasons raised by the petitioner are
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genuine, but instead of 278 days, only 233 days can be
considered as hindrances, and for the balance 45 days,
extension may be granted after imposing a fine as per the Rules.
Pursuant to the circular issued by the MoRTH on 11.04.2022, the
respondents directed the petitioner to submit a fresh application
for extension of time, and such an application was also
submitted on 20.05.2022 by the petitioner. By Ext.P6 dated
2.8.2022, the 5th respondent had requested the 4th respondent
to extend the time till 31.10.2022, without imposing a penalty.
On 1.9.2022, the Executive Engineer wrote to the petitioner
asking him to commence the balance work. On 23.9.2022, the
Chief Engineer, MoRTH (South Zone) held a meeting to review
the progress of the work and suggested that if the proposed time
till 31.10.2022 was not practically sufficient, the extension of
time could be to a viable duration. On 24.9.2022, the petitioner
applied for extension of time till 31.12.2022. On 27.9.2022, the
Executive Engineer wrote to the Superintending Engineer
requesting to grant extension till 31.10.2022 without fine and
thereafter till 31.12.2022 with fine. Ext.P7 request dated
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28.9.2022 was thereafter sent by the 5th respondent to the 4th
respondent to grant extension till 31.10.2022 without imposition
of fine, and thereafter till 31.12.2022 by imposing a fine. The
respondents do not have a case that any specific order as
required under Clause 10.5 was issued granting extension of
time. It is admitted that work was being continued even during
this period, anticipating the grant of an extension of time. It is in
this background that the Ext.P11 notice issued by the petitioner
to the 5th respondent terminating the agreement by invoking
Clause 23.2 of the agreement must be viewed.
25. Clause 23.2(i)(a) specifically says "where the
Authority has committed a material default in complying with
any of the provisions of the Agreement and such default has a
material adverse effect on the Contractor". Clause 23.2(i) (f)
says "where Authority's Engineer fails to issue the relevant
Interim Payment Certificate within 60 (sixty) days after receiving
a statement and supporting documents" and Clause 23.2(i)(g)
says "where the whole work is suspended by Authority beyond
120 (one hundred twenty) days for any reason which is not
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attributed to the Contractor". The petitioner refers to these
clauses to submit that these are instances of default by the
authority, which can be sufficient reason for termination of the
agreement by the Contractor. It is submitted that the authority
has failed to issue any order on the application for extension of
time and has extracted work from the Contractor, on a promise
that the application will be considered favourably. There is no
reason to doubt the said statement of the petitioner since letters
issued by the Executive Engineer, Superintending Engineer, etc.,
clearly show that the applications submitted by the petitioner for
extension of time were favourably considered and extension was
recommended.
26. Though it is contended by the Senior Government
Pleader that the letters referred to and relied upon are only
official communication between the officers in the course of
business, the same cannot be ignored by this Court. The
communications are very much part of the file relating to the
agreement between the parties and are contemporaneous
documents which throw light on the actions taken on the
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application submitted by the petitioner for extension of time.
This Court is necessarily concerned with the decision-making
process while exercising its jurisdiction under Article 226 of the
Constitution of India, and the said process is discernible from the
file. The receipt of Exts.P9 and P11 notices is admitted, as is
evident from Ext.P10 reply issued by the Executive Engineer and
Ext.P13 notice issued by the Superintending Engineer. The fact
that work was being carried out even after 17.9.2021 is evident
from the interim payment certificate which has been produced
along with a memo filed by the Senior Government Pleader as
Document No.8. The said document shows that it is issued
against the bill dated 27.12.2022 and the bill period is from
15.7.2022 to 26.12.2022. It is overlooking all these facts that
the Ext.P16 notice was issued by the 5 th respondent on
15.3.2023, which is five months after Ext.P9 and four months
after Ext.P11 notice issued by the petitioner. Ext.P16 does not
say anything about the request for time extension submitted by
the petitioner, or the further proceedings initiated on the said
application by the author of Ext.P16 himself. Ext.P16 does not
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refer to the termination notice issued by the petitioner and the
reply issued by the author of Ext.P16. Without reference to the
entire facts, merely stating that milestones have not been
achieved and sufficient progress has not been obtained for the
work, the decision is taken to terminate the contract.
27. Ext.P16 says that a decision has been taken to
terminate the contract, and the contractor may make a
representation, if any. The very statement indicates that any
representation made by the Contractor would be only an empty
formality. This was followed by Ext.P19, which purports to be an
order of termination. This letter also does not state anything
about the termination of the contract by the petitioner and the
failure to decide on the application for extension of time.
Ext.P17 reply submitted by the petitioner to Ext.P16 notice has
been referred to as reference No.6 in Ext.P19. However, none of
the aspects pointed out in Ext.P17 have even been referred to in
the order. It is worthwhile to note that, except for referring to a
document at the beginning of the order, there is no consideration
of the contents of the document in the order. It can thus be
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seen that the respondents had, without complying with the
procedure to be followed in determining the application for
extension of time, admittedly extracted work from the contractor
without extending the time for completion of the contract. The
petitioner had acted under Clause 23.2 and terminated the
agreement, and the attempt on the part of the respondent had
been to neutralise the effect of the termination of the contract by
the contractor by issuing an order of termination at their
instance. While doing so, none of the factors that had preceded
have also been adverted to. The petitioner is hence fully justified
in approaching this Court challenging the arbitrary action of the
respondents.
28. I shall now consider the arguments advanced by the
Senior Government Pleader in support of the order of
termination. It is contended that the notice whereby the
petitioner had sought to terminate the contract by invoking
Clause 23.2 of Ext.P1 was itself without any basis. It is
submitted that Clause 23.2 only contemplates termination if
there is a default on the side of the authority. The default must
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be of the nature of a breach by the employer of the terms of the
contract, and it must have a material adverse effect. It is
submitted that the only case of the petitioner is that the
respondents failed to pass orders on the application for
extension of time. The counsel points out that the mere fact
that extension of time was not granted cannot be taken as a
default on the side of the authority. It is submitted that the
petitioner has no right whatsoever to have the time extended
and that there is no obligation on the part of the respondents to
extend the time. It is hence argued that Exts.P9 and P11 cannot
be sustained. It is further argued that since Exts.P9 and P11
cannot be sustained, there can be no fault attributed to the
termination of the contract by the State. The counsel points out
that the petitioner was directed on several occasions to continue
the work. It is submitted that the work was not restarted, and
extension of time was also not sought. It is further submitted
that the delay was not attributable to the employer. It is also
submitted that the existence of an arbitration clause would take
away the right of the petitioner to maintain the writ petition.
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29. The Senior Government Pleader further submits that
the question whether the Government is in breach cannot be
decided in a writ petition under Article 226 of the Constitution of
India and in a case where both sides have invoked their
contractual rights to terminate the contract, the remedy
available was to approach the Tribunal for arbitration and not a
writ petition. It is pointed out that at the time of admission of
the writ petition, this Court had not issued any interim orders,
and the only order was regarding the invocation of the Bank
Guarantee. The counsel pointed out that the request for
extension under Clause 10.5(iv) has to be made before the
Authority's Engineer. Authority's Engineer is defined in Article 18
of the contract. It is submitted that the duties and authority of
the Authority's Engineer are specified in Clause 18.2. As per
Clause 18.2(i)(a), the Authority's Engineer can pass orders on
any time extension with the written approval of the Authority.
Under Clause 18.2(ii), no decision or communication of the
Authority's Engineer shall be effective or valid unless it is
accompanied by an attested true copy of the approval of the
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authority for and in respect of any matter specified. It is
submitted that the extension of time is thus a matter that has to
be dealt with in terms of the contract and cannot be treated as
the right of the party and the mere absence of passing an order
of extension cannot by itself be termed as a breach of contract
or a default on the part of the authority. Clause 21.9 is referred
to, to submit that a dispute relating to the existence of a Force
Majeure Event is to be finally settled under the dispute resolution
procedure. Clause 23.1 is relied on to justify the termination of
the contract by the State.
30. It is submitted that the Contractor did not achieve the
project milestone, that the Contractor abandoned or manifested
intention to abandon the construction without prior written
consent of the authority and the contractor failed to proceed with
the work and thus there is a clear existence of the situations
stated in Clause 23.1(i) (c)(d) and (e). It is submitted that
under Clause 23(1)(ii), the authority is entitled to terminate the
agreement. Regarding the right of the Contractor to terminate
for Authority's default, it is submitted that the invocation of the
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clause is warranted only when there is a default and the
Authority fails to cure the default within a clear period of 90
days. It is submitted that under Clause 23.2(i)(a), what is
required is the Authority committing a material default in
complying with any of the provisions of the agreement, and such
default has a material adverse effect on the contractor. It is
submitted that material adverse effect has also been defined to
mean "a material adverse effect of any act or event on the ability
of either party to perform any of its obligations under, and in
accordance with, the provisions of this agreement and which act
or event causes a material financial burden or loss to either
party". The counsel also referred to Clause 26.1 relating to
dispute resolution. Clauses 26.1, 26.2, and 26.3 relate to dispute
resolution, conciliation, and arbitration, respectively. It is
submitted that since the termination by the Contractor is without
the fundamental requirements as per the contract, and the
contract already stands terminated at the instance of the
respondents, none of the prayers in the writ petition can be
granted.
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& 11720 of 2023
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31. Even if the State has a case that the termination
order issued by the petitioner has no justification, that is not a
justification for issuing a termination order five months after the
notice of termination was received from the petitioner. The State
had to challenge the exercise of rights by the contractor under
Clause 23.2 in appropriate proceedings and cannot ignore the
same. If power were to be conceded to the State, to ignore a
notice of termination issued by a contractor under Clause 23.2,
the said Clause would be rendered meaningless and otiose.
Clause 23.2 is intended to ensure that both the State as well as
the Contractor have a level playing field when it comes to the
execution of the agreement, and mutual rights are recognised
for each of the contracting parties when it comes to termination
of the agreement. The facts would show that there was no
justification for not passing orders on the application for
extension of time, particularly since the authority had extracted
work from the petitioner even after the expiry of the period of
the contract, and the concerned Engineers had recommended
extension of time, following the order of MoRTH. If the contract
W.P(C)Nos. 8260
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was to be terminated for want of progress even during the
original period of the contract, there was no reason even to
accept an application for extension of time and to consider the
same and recommend the extension. At any rate, no such order
could have been passed without notice to the petitioner,
particularly since the petitioner had already approached this
Court by filing W.P.(C)No.8260/2023, and Exts.P16 and P19 were
issued pending the said writ petition.
32. Even if it were to be said that the respondents are
having the right to terminate the contract under Clause 23.1 of
Ext.P1, de hors the exercise of right by the contractor under
Clause 23.2 of Ext.P1, the question whether Exts.P16 and P19
would be otherwise in accordance with law, is also to be
considered. Ext.P16 is issued solely based on the reason that the
petitioner had failed to achieve the milestones, entitling the
respondents to terminate the agreement as per Clause 10.3(ii).
After referring to three milestones that were not achieved,
Ext.P16 says;
W.P(C)Nos. 8260
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"The contractor violated the conditions of the EPC
contract vide Agreement No.14/2020-21/SE/NH/KKD
dated 7.8.2020. Hence, as per the directions vide
references (5),(6), and Article 23.1 of the contract
agreement, the authority has decided to terminate the
contract with M/s Nath Infrastructures at the Risk and
Cost of the contractor with immediate effect and granted
the contractor 15 days time to make a representation if
any."
If the contract stands terminated with immediate effect, one fails
to understand the purpose of the contractor making a
representation within 15 days. The contractor, however, made a
representation on 20.3.2023, a copy of which is produced as
Ext.P17. Thereafter, Ext.P19 was issued purporting to be the
order of termination. Ext.P19 refers to 6 documents and
references (5) and (6) are Exts.P16 and P17, respectively.
However, even without any consideration of the contents of
Exts.P16 and P17, Ext.P19 proceeds to terminate the contract
with immediate effect and states the consequences of the
termination. If Ext.P16 amounted to a termination of contract
with immediate effect, there was no need to issue Ext.P19. If, on
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the other hand, Ext.P16 was intended to be a notice of
termination, Ext.P19 should have dealt with Ext.P17
representation submitted by the contractor in reply to Ext.P16.
The only conclusion possible in such circumstances is that
Exts.P16 and P19 are arbitrary and unreasonable and have been
issued in violation of the principles of natural justice.
33. The petitioner is hence entitled to the reliefs.
Exts.P16 and P19 in W.P.(C)No.11720 of 2023 are quashed.
Since this Court had not ordered a stay of proceedings while
admitting the writ petitions, it will not be proper for this Court to
direct that the petitioner should be permitted to complete the
work. However, the petitioner is entitled to payment for the work
carried out on directions issued by the respondents. The
respondents are hence directed to consider the request for
payment for the work that has already been carried out and
make the payment accordingly, at the earliest, at any rate within
one month from the date of receipt of a certified copy of this
judgment. The respondents shall also release the Bank
Guarantees executed by the petitioner in relation to Ext.P1
W.P(C)Nos. 8260
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agreement. It is made clear that the above directions will not in
any manner affect any subsequent contract entered into by the
respondents for completion of the work. Since Exts.P16 and P19
produced in W.P.(C)No.11720 of 2023 have been quashed, the
respondents are directed not proceed with any coercive action
against the petitioner based on Exts.P16 and P19.
The writ petitions are disposed of as above.
Sd/-
T.R. RAVI
JUDGE
dsn/pn
W.P(C)Nos. 8260
& 11720 of 2023
2025:KER:49496
APPENDIX OF WP(C) 8260/2023
PETITIONER EXHIBITS
Exhibit-P1 A TRUE COPY OF THE RELEVANT PAGES OF THE
AGREEMENT EXECUTED BETWEEN THE PETITIONER AND
THE 5TH RESPONDENT DATED NIL ALONG WITH
LEGIBLE COPIES
Exhibit-P2 A TRUE COPY OF THE MEMO OF WORK TENDERED,
COUNTERSIGNED BY THE PETITIONER AND THE 5TH
RESPONDENT
Exhibit-P3 A TRUE COPY OF THE MEMORANDUM OF THE SITE
INVENTORY DATED 18.09.2020
Exhibit-P4 A TRUE COPY OF THE RELEVANT PAGES OF THE
APPLICATION FOR EXTENSION OF TIME DATED
24.09.2022 SUBMITTED BY THE PETITIONER BEFORE
THE 5TH RESPONDENT
Exhibit-P5 A TRUE COPY OF THE RELEVANT PAGES OF THE
DIGITAL MEASUREMENT BOOK, RUNNING ACCOUNT 4TH
AND PART BILL (ABSTRACT)
Exhibit-P6 A TRUE COPY OF THE COMMUNICATION DATED
02.08.2022 ISSUED BY THE 5TH RESPONDENT TO
THE 4TH RESPONDENT
Exhibit-P7 A TRUE COPY OF THE COMMUNICATION DATED
28.09.2022 ISSUED BY THE 5TH RESPONDENT
Exhibit-P8 A TRUE COPY OF THE NOTICE DATED 29-12-2022
SUBMITTED BY THE PETITIONER BEFORE THE 8TH
RESPONDENT
Exhibit-P9 A TRUE COPY OF THE NOTICE DATED 18.10.2022
SUBMITTED BY THE PETITIONER BEFORE THE 5TH
RESPONDENT
Exhibit-P10 A TRUE COPY OF THE REPLY DATED 29.10.2022
ISSUED BY THE 6TH RESPONDENT
Exhibit-P11 A TRUE COPY OF THE NOTICE DATED 10.11.2022
W.P(C)Nos. 8260
& 11720 of 2023
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SUBMITTED BY THE PETITIONER BEFORE THE 5TH
RESPONDENT ALONG WITH POSTAL RECEIPTS
Exhibit-P12 A TRUE COPY OF THE NOTICE DATED 22.11.2022
ISSUED BY THE PETITIONER ALONG WITH POSTAL
RECEIPTS
Exhibit-P13 A TRUE COPY OF THE NOTICE DATED 03.12.2022
ISSUED BY THE 5TH RESPONDENT
Exhibit-P14 A TRUE COPY OF THE REPLY DATED 19.12.2022
SUBMITTED BY THE PETITIONER BEFORE THE 5TH
RESPONDENT ALONG WITH POSTAL RECEIPTS
Exhibit-P15 A TRUE COPY OF THE NOTICE DATED 11.01.2023
ISSUED BY THE PETITIONER ALONG WITH POSTAL
RECEIPTS
W.P(C)Nos. 8260
& 11720 of 2023
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APPENDIX OF WP(C) 11720/2023
PETITIONER EXHIBITS
Exhibit-P1 A TRUE COPY OF THE RELEVANT PAGES OF THE
AGREEMENT EXECUTED BETWEEN THE
PETITIONER AND THE 5TH RESPONDENT DATED
NIL ALONG WITH LEGIBLE COPY
Exhibit-P2 A TRUE COPY OF THE MEMO OF WORK
TENDERED, COUNTERSIGNED BY THE
PETITIONER AND THE 5TH RESPONDENT
Exhibit-P3 A TRUE COPY OF THE MEMORANDUM OF THE
SITE INVENTORY DATED 18.09.2020
Exhibit-P4 A TRUE COPY OF THE RELEVANT PAGES OF THE
APPLICATION FOR EXTENSION OF TIME DATED
24.09.2022 SUBMITTED BY THE PETITIONER
BEFORE THE 5TH RESPONDENT
Exhibit-P5 A TRUE COPY OF THE RELEVANT PAGES OF THE
DIGITAL MEASUREMENT BOOK, RUNNING
ACCOUNT 4TH AND PART BILL (ABSTRACT)
Exhibit-P6 A TRUE COPY OF THE COMMUNICATION DATED
02.08.2022 ISSUED BY THE 5TH RESPONDENT
TO THE 4TH RESPONDENT
Exhibit-P7 A TRUE COPY OF THE COMMUNICATION DATED
28.09.2022 ISSUED BY THE 5TH RESPONDENT
Exhibit-P8 A TRUE COPY OF THE NOTICE DATED 29-12-
2022 SUBMITTED BY THE PETITIONER BEFORE
THE 8TH RESPONDENT
Exhibit-P9 A TRUE COPY OF THE NOTICE DATED
18.10.2022 SUBMITTED BY THE PETITIONER
BEFORE THE 5TH RESPONDENT
Exhibit-P10 A TRUE COPY OF THE REPLY DATED
29.10.2022 ISSUED BY THE 6TH RESPONDENT
Exhibit-P11 A TRUE COPY OF THE NOTICE DATED
W.P(C)Nos. 8260
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10.11.2022 SUBMITTED BY THE PETITIONER
BEFORE THE 5TH RESPONDENT ALONG WITH
POSTAL RECEIPTS
Exhibit-P12 A TRUE COPY OF THE NOTICE DATED
22.11.2022 ISSUED BY THE PETITIONER
ALONG WITH POSTAL RECEIPTS
Exhibit-P13 A TRUE COPY OF THE NOTICE DATED
03.12.2022 ISSUED BY THE 5TH RESPONDENT
Exhibit-P14 A TRUE COPY OF THE REPLY DATED
19.12.2022 SUBMITTED BY THE PETITIONER
BEFORE THE 5TH RESPONDENT ALONG WITH
POSTAL RECEIPTS
Exhibit-P15 A TRUE COPY OF THE NOTICE DATED
11.01.2023 ISSUED BY THE PETITIONER
ALONG WITH POSTAL RECEIPTS
Exhibit16 A TRUE COPY OF THE NOTICE DATED 15-03-
2023 ISSUED BY THE 5TH RESPONDENT
Exhibit-P17 A TRUE COPY OF THE REPLY SUBMITTED BY
THE PETITIONER TO THE 5TH RESPONDENT
ALONG WITH POSTAL RECEIPTS
Exhibit-P18 A TRUE COPY OF THE RELEVANT PAGES OF THE
PERFORMANCE SECURITY EXECUTED BY THE
PETITIONER
Exhibit-P19 A TRUE COPY OF THE ORDER DATED 30-03-
2023 ISSUED BY THE 5TH RESPONDENT
RESPONDENT EXHIBITS
EXHIBIT R5(A) TRUE COPY OF THE TERMINATION ORDER
NO.D3-RW/NH-12014/57/2019/EPC DATED
30.03.2023
