Madras High Court
Ranjit Buildcon Limited vs Rail Vikas Nigam Limited on 6 January, 2021
W.P.No.17888 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 06.01.2021
CORAM
THE HONOURABLE Mrs. JUSTICE PUSHPA SATHYANARAYANA
W.P.No.17888 of 2020
and
W.M.P. Nos.22172 & 24091 of 2020
Ranjit Buildcon Limited
Represented by its Authorised Signatory
Mr.Maheshkumar Narottamdas Patel
'Ranjit House'
Opp. Sun Residency
B/h.Bhagwat Bungalows
Rt. Side Road to Gora Maharaj Madir
Thatlej-Shilaj Road
Tatlej, Ahmedabad - 380059 .. Petitioner
Vs.
Rail Vikas Nigam Limited
Represented by its Chief Project Manager
Thirumailai Railway Station Building
Mylapore, Chennai - 600 004 .. Respondent
PRAYER : Writ Petition filed Under Article 226 of the Constitution of
India praying to issue a Writ of Mandamus, forbearing the
respondent from awarding the de-scoped portion of work of the
petitioner to any third party without following due process of law in
awarding the works by issue of a public open tender in a
transparent manner.
For Petitioner : Mr.Vijaynarayan, Sr.Counsel
for Mr.K.Harishankar
For Respondent : Mr.R.Sankaranarayanan
Additional Solicitor General
of India
Assisted by Mr.V.G.Suresh Kumar
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ORDER
The petitioner has sought for a Writ of Mandamus, forbearing
the respondent from awarding the de-scoped portion of work of the
petitioner to any third party, without following due process of law in
awarding the works by issue of a public open tender in a
transparent manner.
2. The petitioner is the contractor, who was awarded with the
contract of construction of Pamban Bridge, parallel to the existing
bridge No.346 at Km.655/000 - 657/200, including vertical lift span
between Mandapam and Pamban Railway stations in Madurai
Division of Southern Railway.
3. The Letter of Acceptance was given on 02.08.2019. Now,
the challenge is to the unilaterally de-scoped part of the works as
per the Letter of Acceptance. The petitioner is a contractor, who is
specialised in construction of Rail Over Bridges/Bridges/Fly-overs
and road works including water supply projects.
4. The respondent had issued a Notice Inviting Tender on
02.01.2019 for the re-construction of the famous Pamban Bridge,
which was originally built in the year 1914. The present bridge is a
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parallel one to the existing bridge. The earlier tender was in two
folds, namely technical and financial and the petitioner bagged the
contract work involving construction of 3.36 Km long railway bridge
over Pamban river that has the Bay of Bengal on one side. On
receipt of the Letter of Acceptance, a bank guarantee towards
Performance Security was furnished and a contract agreement was
executed on 06.03.2020. The petitioner blames the respondent for
certain deficiencies from the beginning. It is alleged that the
respondent did not provide the critical details for carrying out the
works or had provided details misguiding the petitioner. In addition
to the above allegation, the petitioner also had blamed the
respondent for:
(i) Failing to clarify the date of commencement;
(ii) The petitioner was required to take up the work from both
the approach ends of the project i.e. from Mandapam end and the
Pamban end, as per the contract provisions;
(iii) The petitioner proceeded with the work only from
Mandapam end for which the respondent declined to provide facility
to cross the railway track;
(iv) The petitioner had to wait for removal of hindrance and
encroachment for enabling movement of heavy and massive
mechanical equipments to reach the actual work site;
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(v) The geo-technical details furnished by the respondent did
not match as shown in the tender documents. The respondent was
also not ready with the design and drawing for the retaining wall at
the Mandapam end.
(vi) The start and end points were unavailable;
(vii) The information regarding the depth of the sea is false
and vague and the petitioner had to commence piling works despite
there being various deviations, mismatch etc. The depth of the pile
was actually different from what was indicated in the work drawing,
as the pile has to rest on the rock, the petitioner had to conduct SPT
test for the same pile at various depths to decide upon the pile
termination. The date of commencement was also not clear and it
was contrary to the bid provisions.
5. It is further stated by the petitioner that several details,
such as change in the location, access to site, change in
geography/depth of the sea water available etc. were at variance
from what was given at the time of tender and that there was a
delay in furnishing the same. In addition to the above, the nation-
wide lock-down due to COVID-19, brought the work to a standstill.
The petitioner had been informing the respondent about the
difficulties faced by it, by various letters. Despite pointing out the
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above difficulties and the unforeseen circumstances like COVID-19
Pandemic situation, the respondent had issued a Notice to Correct
on 08.10.2020. A reply was sent by the petitioner on 19.10.2020
reiterating the issues faced due to the respondent's lack of clarity
and inertness in the tender.
6. While so, on 30.10.2020, the respondent had issued a
Notice of Part Termination of the contract thereby unilaterally de-
scoped the part of the works awarded as per the Letter of
Acceptance dated 02.08.2019. Not stopping with that, the
respondent is attempting to award the de-scoped works, to satisfy
the third parties by having private negotiations with them.
According to the petitioner, all those deficiencies that were pointed
out by the petitioner with regard to the technical details, have now
been rectified making the job easier for the third party. The
petitioner still is willing to continue with the contract and expressed
hope to finish the same before August 2021, the deadline given as
per the contract.
7. It is also pointed out that the de-scoped work, as per
petitioner's contract was only around Rs.60.00 Crores, whereas now
the same has been estimated around Rs.135.00 Crores, which is
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more than the double the value of the work. Such high value of the
work should be awarded only by public open tender and not by
private negotiations. Therefore, the petitioner is seeking a
mandamus forbearing the respondent from awarding the de-scoped
work of the petitioner, to any third party, without following the due
process.
8. The respondent, namely Rail Vikas Nigam Limited, raised
certain preliminary objections on the maintainability of the writ
petition itself. The respondent is a Special Purpose Vehicle that
undertakes project development for creating rail transport capacity
on behalf of Ministry of Railways, Government of India. It is stated
that the work was proposed on a out of turn basis considering the
condition of the existing bridge, which has outlived its life. The
proposed bridge also has to serve the nation for at least 100 years.
9. The work was entrusted to the petitioner under the Letter
of Acceptance being the lowest among the five bidders, who
participated. The period of completion of the work was 24 months
i.e. the work has to be completed on or before 01.08.2021.
However, no work was started for more than seven months i.e. up
to March 2020 and whatever the mutual arrangements that were
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made also came to a grinding halt, after the spread of COVID-19
Pandemic followed by nation-wide lock down. Even after the State
Government had relaxed the safety protocol, the petitioner did not
show any urgency in completing the task entrusted to them. Even
after the expiry of 14 months, the progress of the work entrusted to
the petitioner was far from satisfactory. Hence it was decided to
terminate the part of the subject contract work from the scope of
the petitioner and allow the petitioner to continue with the other
works. Accordingly, a "Notice to Correct" was issued on 30.10.2020.
10. As per clause 15.2 of the general conditions of the
contract, the employer's election to terminate the contract, shall not
prejudice any other rights of the employer, under the contract or
otherwise. In accordance with the same, the respondent is taking
necessary steps to engage another agency to complete the work to
prevent the work from the scope of the petitioner. As the petitioner
had already taken substantial time without any progress, the
respondent had to take steps in finalising a new agency for
executing the de-scoped work from the petitioner.
11. As the completion of the project is utmost important for
running trains to Rameswaram, the bids were finalised after
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following the due process, as stipulated, for calling and acceptance
of Special Limited Tender (SLT). Besides, when it is a alleged breach
of contract, according to the petitioner, its remedy is elsewhere and
not before this court invoking Article 226 of the Constitution of
India. As the writ petition itself is not maintainable, the respondent
has sought for dismissal of the same.
12. Heard Mr.Vijayanarayan, learned senior counsel appearing
for Mr.K.Harishankar and Mr.R.Sankaranarayanan, learned
Additional Solicitor General of India, assisted by Mr.V.G.Suresh
Kumar. The materials available in the form of typed set, were also
perused.
13. The scope of the writ petition is very limited, as the
petitioner is only seeking a mandamus forbearing the respondent
from awarding the de-scoped part of the work of the petitioner to
any other third party. The undisputed facts are as follows:
14. Notice inviting Tender was on 02.01.2019. The letter of
acceptance was given to the petitioner on 02.08.2019. The contract
period was 24 months from the date of commencement of work as
per clause 8.1 and the defect liability period is 180 days from the
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date of taking over of the whole work. The value of the agreement
is Rs.220,97,51,604/- and the due date of completion is 01.08.2021
plus 180 days of defect liability period. It is an admitted fact that
the work was delayed. Hence the respondent had issued Notice to
Correct on 08.10.2020. Thereafter, within 20 days, Notice of part
termination of the contract, was issued on 30.10.2020, wherein de-
scoping part of the works awarded as per Letter of Acceptance
dated 02.08.2019, was issued. Now the termination of the part of
the contract done by the respondent is based on various grounds.
15. It is not out of place to mention that the said termination
notice dated 30.10.2020 is not challenged by the petitioner. The
petitioner is only seeking a mandamus not to award the de-scoped
work to any other third party. Clause 15.2 of the general conditions
of the contract provides for termination of the employer. The said
condition specifically empowers the employer to terminate the
contract with immediate effect and the employer's election to
prevent the contract shall not prejudice any other rights of the
employer under the contract or otherwise. It further provides that,
after termination, the employer may complete the works and/or
arrange for any other entities to do so. The employer and these
entities may then use any Goods Contractor's documents and other
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design documents made by or on behalf of the contractor for
completing the work.
16. The existing bridge is more than 100 years old and there
was a dire urgency in completing the new Pile bridge parallel to the
existing bridge and the same was to be raised in a time bound
manner. The delay in completion of the work would be detrimental
to the running of the train services. Thus the project is of national
importance and the work is public oriented. Once the project is
completed, it would attract tourists from within the country and also
from outside. The inordinate delay caused by the petitioner had
forced the respondent to de-scope the work under the conditions of
the contract mutually agreed upon and taking steps to finalise the
new agency for doing the rest of the work. Though the learned
senior counsel argued and pointed out several reasons for the
admitted delay in the execution of the contract, the termination of
the same is not challenged. Therefore, the correctness of the
termination of the contract, cannot be gone into this writ petition.
17. Clause 20.3 of the general conditions of the contract
provides for arbitration. The said clause stipulates that in case the
cumulative amount of claims in the contract is not exceeding 20%
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of the contract price, arbitration clause will not be applicable.
Therefore, where the claim, if any, that may be made by the
petitioner would exceed 20% of the contract price or not, has to be
decided and the arbitration clause can be invoked. Even presuming
that the respondent had committed breach of contract, the part
termination is not challenged by the petitioner. If the termination of
the contract is arbitrary, it is open to the petitioner to take recourse
under common law remedy. Therefore, when the general conditions
of the contract clause 15.2 specifically provides for completion of
the work through any other entity, the petitioner cannot challenge
the same, much less, ask for not awarding the contract to any third
party.
18. In support of his contention, the learned senior counsel
appearing for the petitioner placed reliance on the decision of the
Hon'ble Supreme Court in Sterling Computers Ltd. v. M&N
Publications Ltd. reported in (1993) 1 SCC 445, wherein at
paragraphs 12, 25 and 28, the Hon'ble Supreme Court held as
follows:
12. At times it is said that public authorities
must have the same liberty as they have in framing
the policies, even while entering into contracts because
many contracts amount to implementation or
projection of policies of the Government. But it cannot
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be overlooked that unlike policies, contracts are legally
binding commitments and they commit the authority
which may be held to be a State within the meaning of
Article 12 of the Constitution in many cases for years.
That is why the courts have impressed that even in
contractual matters the public authority should not
have unfettered discretion. In contracts having
commercial element, some more discretion has to be
conceded to the authorities so that they may enter into
contracts with persons, keeping an eye on the
augmentation of the revenue. But even in such matters
they have to follow the norms recognised by courts
while dealing with public property. It is not possible for
courts to question and adjudicate every decision taken
by an authority, because many of the Government
Undertakings which in due course have acquired the
monopolist position in matters of sale and purchase of
products and with so many ventures in hand, they can
come out with a plea that it is not always possible to
act like a quasi-judicial authority while awarding
contracts. Under some special circumstances a
discretion has to be conceded to the authorities who
have to enter into contract giving them liberty to
assess the overall situation for purpose of taking a
decision as to whom the contract be awarded and at
what terms. If the decisions have been taken in bona
fide manner although not strictly following the norms
laid down by the courts, such decisions are upheld on
the principle laid down by Justice Holmes, that courts
while judging the constitutional validity of executive
decisions must grant certain measure of freedom of
“play in the joints” to the executive.
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25. The cases aforesaid on which reliance was
placed on behalf of the appellants, have also reiterated
that once the State decides to grant any right or
privilege to others, then there is no escape from the
rigour of Article 14; the executive does not have an
absolute discretion, certain precepts and principles
have to be followed, the public interest being the
paramount consideration. It has also been pointed out
that for securing the public interest one of the methods
recognised is to invite tenders affording opportunity to
submit offers for consideration in an objective manner.
However, there may be cases where in the special facts
and circumstances and due to compelling reasons
which must stand the test on Article 14 of the
Constitution, departure of the aforesaid rule can be
made. This Court while upholding the contracts by
negotiation in the cases referred to above has
impressed as to how in the facts and circumstances of
those cases the decisions taken by the State and the
authorities concerned were reasonable, rational and in
the public interest. The decisions taken in those cases
by the authorities concerned, on judicial scrutiny were
held to be free from bias, discrimination and under the
exigencies of the situation then existing to be just and
proper. On the basis of those judgments it cannot be
urged that this Court has left to the option of the
authorities concerned whether to invite tenders or not
according to their own discretion and to award
contracts ignoring the procedures which are basic in
nature, taking into account factors which are not only
irrelevant but detrimental to the public interest.
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28. Philanthropy is no part of the management
of an undertaking, while dealing with a contractor
entrusted with the execution of a contract. The supply
of the directories to public in time, was a public service
which was being affected by the liberal attitude of the
MTNL and due to the condonation of delay on the part
of the UIP/UDI. There was no justification on the part
of the MTNL to become benevolent by entering into the
supplemental agreement with no apparent benefit to
the MTNL, without inviting fresh tenders from intending
persons to perform the same job for the next five
years. Public authorities are essentially different from
those of private persons. Even while taking decision in
respect of commercial transactions a public authority
must be guided by relevant considerations and not by
irrelevant ones. If such decision is influenced by
extraneous considerations which it ought not to have
taken into account the ultimate decision is bound to be
vitiated, even if it is established that such decision had
been taken without bias. The contract awarded for the
publication of the directories had not only a commercial
object but had a public element at the same time i.e.
to supply the directories to lakhs of subscribers of
telephones in Delhi and Bombay, every year within the
stipulated time free of cost. In such a situation MTNL
could not exercise an unfettered discretion after the
repeated breaches committed by UIP/UDI, by entering
into a supplemental agreement with the Sterling for a
fresh period of more than five years on terms which
were only beneficial to UIP/UDI/Sterling with
corresponding no benefit to MTNL, which they have
realised only after the High Court went into the matter
in detail in its judgment under appeal.
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19. Per contra, the learned Additional Solicitor General of
India appearing for the respondent, relied on the decision of the
Hon'ble Supreme Court in Joshi Technologies International Inc.
v. Union of India and others reported in (2015) 7 SCC 728. In
the said judgment, the law was exhaustively considered and at
paragraph Nos.69 and 70, the Hon'ble Supreme Court, held as
follows:
69. The position thus summarised in the
aforesaid principles has to be understood in the context
of discussion that preceded which we have pointed out
above. As per this, no doubt, there is no absolute bar to
the maintainability of the writ petition even in
contractual matters or where there are disputed
questions of fact or even when monetary claim is raised.
At the same time, discretion lies with the High Court
which under certain circumstances, it can refuse to
exercise. It also follows that under the following
circumstances, “normally”, the Court would not exercise
such a discretion:
69.1. The Court may not examine the issue
unless the action has some public law character
attached to it.
69.2. Whenever a particular mode of settlement
of dispute is provided in the contract, the High Court
would refuse to exercise its discretion under Article 226
of the Constitution and relegate the party to the said
mode of settlement, particularly when settlement of
disputes is to be resorted to through the means of
arbitration.
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69.3. If there are very serious disputed questions
of fact which are of complex nature and require oral
evidence for their determination.
69.4. Money claims per se particularly arising out
of contractual obligations are normally not to be
entertained except in exceptional circumstances.
70. Further, the legal position which emerges
from various judgments of this Court dealing with
different situations/aspects relating to contracts entered
into by the State/public authority with private parties,
can be summarised as under:
70.1. At the stage of entering into a contract, the
State acts purely in its executive capacity and is bound
by the obligations of fairness.
70.2. State in its executive capacity, even in the
contractual field, is under obligation to act fairly and
cannot practise some discriminations.
70.3. Even in cases where question is of choice or
consideration of competing claims before entering into
the field of contract, facts have to be investigated and
found before the question of a violation of Article 14
only be tested satisfactorily by taking detailed evidence,
involving examination and cross-examination of
witnesses, the case could not be conveniently or
satisfactorily decided in proceedings under Article 226 of
the Constitution. In such cases the Court can direct the
aggrieved party to resort to alternate remedy of civil
suit, etc.
70.4. Writ jurisdiction of the High Court under
Article 226 of the Constitution was not intended to
facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid
contractual obligation. Occurrence of commercial
difficulty, inconvenience or hardship in performance of
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the conditions agreed to in the contract can provide no
justification in not complying with the terms of contract
which the parties had accepted with open eyes. It
cannot ever be that a licensee can work out the licence
if he finds it profitable to do so: and he can challenge
the conditions under which he agreed to take the
licence, if he finds it commercially inexpedient to
conduct his business.
70.6. Ordinarily, where a breach of contract is
complained of, the party complaining of such breach
may sue for specific performance of the contract, if
contract is capable of being specifically performed.
Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive
action unsupported by law or even in respect of a
corporation there is denial of equality before law or
equal protection of law or if it can be shown that action
of the public authorities was without giving any hearing
and violation of principles of natural justice after holding
that action could not have been taken without observing
principles of natural justice.
70.8. If the contract between private party and
the State/instrumentality and/or agency of the State is
under the realm of a private law and there is no element
of public law, the normal course for the aggrieved party,
is to invoke the remedies provided under ordinary civil
law rather than approaching the High Court under
Article 226 of the Constitution of India and invoking its
extraordinary jurisdiction.
70.9. The distinction between public law and
private law element in the contract with the State is
getting blurred. However, it has not been totally
obliterated and where the matter falls purely in private
field of contract, this Court has maintained the position
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that writ petition is not maintainable. The dichotomy
between public law and private law rights and remedies
would depend on the factual matrix of each case and
the distinction between the public law remedies and
private law field, cannot be demarcated with precision.
In fact, each case has to be examined, on its facts
whether the contractual relations between the parties
bear insignia of public element. Once on the facts of a
particular case it is found that nature of the activity or
controversy involves public law element, then the
matter can be examined by the High Court in writ
petitions under Article 226 of the Constitution of India to
see whether action of the State and/or instrumentality
or agency of the State is fair, just and equitable or that
relevant factors are taken into consideration and
irrelevant factors have not gone into the decision-
making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation
of a citizen, in such a situation, may not by itself be a
distinct enforceable right, but failure to consider and
give due weight to it may render the decision arbitrary,
and this is how the requirements of due consideration of
a legitimate expectation forms part of the principle of
non-arbitrariness.
70.11. The scope of judicial review in respect of
disputes falling within the domain of contractual
obligations may be more limited and in doubtful cases
the parties may be relegated to adjudication of their
rights by resort to remedies provided for adjudication of
purely contractual disputes.
20. Following the judgment in Joshi Technologies, a Full Bench
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of the Supreme Court in State of U.P. vs. Sudhir Kumar Singh
and others reported in (2020) 8 MLC 359(SC), at paragraph
No.22 of the judgment, held as under:
22. In Rishi Kiran Logistics v. Board of Trustees
of Kandla Port and Others reported in (2015) 13 SCC
233, this court held that a writ petition under Article
226, being a public law remedy, a "public law
element" should be present on facts before Article
226 can be invoked. The law on this subject has been
laid down exhaustively in Joshi Technologies Inc. v.
Union of India and others reported in (2015) 7 SCC
21. Judged by the touchstone of these tests, this court is of
the view that the general conditions of the contract has cautiously
provided for the de-scope of the work and continue the same with
the new entity for the completion of the balance work. Therefore,
reading the contract, as per its express terms, it is open to the
respondent to award a contract to a third party to the extent the
work that has been de-scoped from the petitioner. Hence the
petitioner does not have any right to stop the respondent from
proceeding further with the work much less when it involves a
public interest.
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22. In view of the discussions and the decisions quoted supra,
the writ petition fails and the same is dismissed. However, there
shall be no order as to costs. Consequently, the connected writ
miscellaneous petitions are closed.
06.01.2021
Index : Yes / No
Internet : Yes / No
Asr
To
Rail Vikas Nigam Limited
Represented by its Chief Project Manager
Thirumailai Railway Station Building
Mylapore, Chennai - 600 004
Note:
Registry is directed to upload the order
copy on or before 07.01.2021.
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PUSHPA SATHYANARAYANA, J.
Asr
W.P.No.17888 of 2020
Date : 06.01.2021
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