Madras High Court
M/S.Ultra Tech Cement Ltd vs The Tamil Nadu Electricity Board on 12 January, 2022
W.P.No.30483 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 12.01.2022
CORAM :
THE HONOURABLE MR. JUSTICE S.M. SUBRAMANIAM
W.P.No.30483 of 2015
&
M.P.Nos.1 to 3 of 2015
M/s.Ultra Tech Cement Ltd.,
Reddipalayam Cement Works
(Previously Known as Samruddhi Cement Ltd.,
& Prior to that as Grasim Industries Ltd.,)
Represented by its Senior Vice President (F&C)
Ariyalur Taluk 621 704
Perambalur ... Petitioner
Vs.
1.The Tamil Nadu Electricity Board,
Rep. by its Chairman,
No.800, Anna Salai,
Chennai 600 002.
2.The Chief Engineer,
Civil Designs,
Tamil Nadu Electricity Board,
3rd Floor, NPKRR Maaligai,
No.144 Anna Salai, Chennai 600 002.
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W.P.No.30483 of 2015
3.The Chief Engineer,
Tamil Nadu Electricity Board,
Mettur Thermal Power Station,
Mettur Dam – 636 406. ... Respondents
Prayer : Writ Petition filed under Article 226 of the Constitution of
India for issuance of a Writ of Certiorarified Mandamus, calling for
the entire records of the 3rd respondent in
Lr.No.CE/SE/M.II/EE/O&AHS/MTPS-I/F shortcollection /
D.No.681/15 dated 11.09.2015 and quash the same as illegal and
arbitrary and consequently direct the 1st Respondent to issue
appropriate instructions to the 3rd Respondent to strictly comply
with the terms of the agreement between parties and not to levy any
penalty for short collection.
For Petitioner : Mr.Rahul Balaji
For Respondents : Mr.L.Jai Venkatesh
1&2
For Respondent 3 : Mr.Abdul Kalam
ORDER
The demand notice issued by the respondent TANGEDCO
invoking the terms and conditions of Memorandum of Understanding
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W.P.No.30483 of 2015
executed at Headquarters/TNEB with the petitioner company and the
TANGEDCO is under challenge in the present writ petition.
2. The petitioner is a company and the manufacturer of
cement. The petitioner states that they produce cement of high
quality and manufacture of cement involves several raw materials
including gypsum and fly ash. In this regard, admittedly, the
contract was signed between the petitioner company and the
respondent TANGEDCO. Based on the Memorandum of
Understanding between the parties, the petitioner was collecting the
fly ash and using the same for manufacturing of cements.
3. The respondents also conducted inspection regarding the
performance of the terms and conditions of the contract periodically
and invoked Clause-5 of the Memorandum of Understanding and
issued the impugned demand notice.
4. The learned counsel for the petitioner strenuously
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W.P.No.30483 of 2015
contended that no opportunity was provided to the petitioner
enabling them to submit their defects in respect of the lapses noticed
by the TANGEDCO authorities. Even the nature of lapses, loss, if
any, occurred and its details are absent in the impugned order. Under
those circumstances, the petitioner is constrained to move the
present writ petition.
5. The learned counsel for the petitioner is of an opinion
that the petitioner is entitled for an opportunity of presenting their
case and no such opportunity was offered and the demand notice
impugned was issued based on the unilateral decision taken by the
TANGEDCO authorities.
6. In support of the said contention, the learned counsel for
the petitioner relied on the judgment of the Hon'ble Supreme Court
of India in the case of State of Karnataka vs. Shree Rameshwara
Rice Mills, Thiruthahalli reported in (1987) 2 SCC 160,
particularly paragraphs 7 and 8, which reads as under:
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''7.On a consideration of the matter we find
ourselves unable to accept the contentions of
Mr.Iyenger. The terms of Clause 12 do not afford scope
for a liberal construction being made regarding the
powers of the Deputy Commissioner to adjudicate upon
a disputed question of breach as well as to assess the
damages arising from the breach. The crucial words in
Clause 12 are ?and for any breach of conditions set
forth hereinbefore, the first party shall be liable to pay
damages to the second party as may be assessed by the
second party?. On a plain reading of the words it is
clear that the right of the second party to assess
damages would arise only if the breach of conditions is
admitted or if no issue is made of it. If is was the
intention of the parties that the officer acting on behalf
of the State was also entitled to adjudicate upon a
dispute regarding the breach of conditions the wording
of Clause 12 would have been entirely different. It
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W.P.No.30483 of 2015
cannot also be argued that a right to adjudicate upon an
issue relating to a breach of conditions of the contract
would flow from or is inhered in the right conferred to
assess the damages arising from a breach of conditions.
The power to assess damages, as pointed out by the Full
Bench, is a subsidiary and consequential power and not
the primary power. Even assuming for arguments sake
that the terms of Clause 12 afford scope for being
construed as empowering the officer of the State to
decide upon the question of breach as well as assess the
quantum of damages, we do not think that adjudication
by the officer regarding the breach of the contract can
be sustained under law because a party to the agreement
cannot be an arbiter in his own cause. Interests of
justice and equity require that where a party to a
contract disputes the committing of any breach of
conditions the adjudication should be by an independent
person or body and not by the other party to the
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W.P.No.30483 of 2015
contract. The position will, however, be different where
there is no dispute or there is consensus between the
contracting parties regarding the breach of conditions.
In such a case the officer of the State, even though a
party to the contract will be well within his rights in
assessing the damages occasioned by the breach in view
of the specific terms of Clause 12.
8.We are, therefore, in agreement with the view
of the Full Bench that the powers of the State under an
agreement entered into by it with a private person
providing for assessment of damages for breach of
conditions and recovery of the damages will stand
confined only to those cases where the breach of
conditions is admitted or it is not disputed.?
7. In the case of J.G. Engineers Private Limited vs. Union
of India and another reported in (2011) 5 SCC 758 at paragraphs
19 and 20, which reads as under:
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W.P.No.30483 of 2015
''?........
19.In fact the question whether the other party
committed breach cannot be decided by the party
alleging breach. A contract cannot provide that one
party will be the arbiter to decide whether he committed
breach or the other party committed breach. That
question can only be decided by only an adjudicatory
forum, that is, a court or an Arbitral Tribunal.
20.In State of Karnataka v. Shree Rameshwara
Rice Mills this Court held that adjudication upon the
issue relating to a breach of condition of contract and
adjudication of assessing damages arising out of the
breach are two different and distinct concepts and the
right to assess damages arising out of a breach would
not include a right to adjudicate upon as to whether
there was any breach at all. This Court held that one of
the parties to an agreement cannot reserve to himself the
power to adjudicate whether the other party has
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W.P.No.30483 of 2015
committed breach. This Court held: (SCC p. 164, paras
7-8)
?7. ... Even assuming for argument's sake that
the terms of Clause 12 afford scope for being construed
as empowering the officer of the State to decide upon the
question of breach as well as assess the quantum of
damages, we do not think that adjudication by the
officer regarding the breach of the contract can be
sustained under law because a party to the agreement
cannot be an arbiter in his own cause. Interests of
justice and equity require that where a party to a
contract disputes the committing of any breach of
conditions the adjudication should be by an independent
person or body and not by the other party to the
contract. The position will, however, be different where
there is no dispute or there is consensus between the
contracting parties regarding the breach of conditions.
In such a case the officer of the State, even though a
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W.P.No.30483 of 2015
party to the contract will be well within his rights in
assessing the damages occasioned by the breach in view
of the specific terms of Clause 12.
8.We are, therefore, in agreement with the view
of the Full Bench that the powers of the State under an
agreement entered into by it with a private person
providing for assessment of damages for breach of
conditions and recovery of the damages will stand
confined only to those cases where the breach of
conditions is admitted or it is not disputed.?
8. Relying on the above judgments, the learned counsel for
the petitioner reiterated that the petitioner may be driven to the Civil
Court only in the event of permitting him to present their case. The
basis on which a decision is taken for issuing an order of demand
itself is not explained to the petitioner and under those
circumstances, the petitioner has chosen to file the present writ
petition. Thus, the order impugned is directly in violation of the
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W.P.No.30483 of 2015
principles of natural justice and the present writ petition is to be
considered.
9. The learned counsel appearing on behalf of the
respondents relying on the counter affidavit made a submission that
admittedly, the dispute arises based on the contractual obligation
between the parties. The impugned order is in tune with the contract
conditions, specifically condition No.5. Thus, the writ petition is not
maintainable, as such disputes are to be adjudicated before the
competent civil Court of law and not in a writ proceedings. The
respondents filed counter narrating facts and circumstances to
establish that the petitioner has violated certain terms and conditions
and the manner in which the calculations are made and the
impugned demand notices are issued.
10. However, this Court is of the considered opinion that
all such disputed facts cannot be adjudicated in a writ proceedings,
as it requires examination of documents in original and evidences
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W.P.No.30483 of 2015
and even oral evidences. Prima facie, it is raised that no opportunity
was provided to the petitioner, even to present their case and it is to
be considered. In a contractual obligation between the parties,
whether such a show cause notice or opportunity is required to be
given or not is to be considered. No doubt, it depends on the facts
and circumstances and also the terms and conditions agreed between
the parties. However, it cannot be concluded by holding that in each
and every case, a show cause notice and an opportunity of presenting
the case must be provided in contractual obligations. Thus, a writ
cannot be entertained merely on the ground that no opportunity to
present the case is given in the event of the dispute with reference to
the terms and conditions of the contract between the parties.
11. It is needless to state that the terms and conditions
agreed are known to the parties. Once agreed to the terms and
conditions are violated, the question of further opportunity by any
one of the parties would not arise. A dispute arises in the present
case, as the petitioner states that an opportunity is to be given to
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W.P.No.30483 of 2015
present their case. This Court is of an opinion that such a procedure,
which is not agreed between the parties need not be considered, as
providing of an opportunity is also a dispute, which is to be
considered with reference to the agreed terms and conditions of the
contract.
12. The concept of principles of natural justice can be
applied in a contract only in certain circumstances and the
performance of contractual obligation between the parties cannot be
compared with the statutory functions of the authorities. Though in
the present case, the Tamil Nadu Electricity Board is a State under
Article 12 of the Constitution of India. Thus, a distinction is to be
drawn between the contractual obligation between the parties and
the statutory functions and the powers to be exercised under the
statute by such officials of the State. These distinct factors are to be
demarcated when the facts are clear and more so relatable to the
terms and conditions of contract.
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W.P.No.30483 of 2015
13. Presuming that a writ Court examines the terms and
conditions of the contract, a doubt arises whether it is possible to
form an opinion with reference to the factual disputes which is to be
adjudicated in an elaborate manner with reference to the original
documents and evidences. Undoubtedly, there is a possibility of
error, omission, commission or otherwise, if any such opinion is
formed. That is the reason why the Constitutional Courts have taken
a consistent view that in the matter of contractual obligations
between the parties, they must approach the Civil Court of law as it
involves trial nature adjudication, which would provide an
opportunity to examine and cross examine the witnesses to cull out
the truth and resolve the issues in the manner known to law.
14. Per contra, based on the mere affidavit in a writ petition
and relying on certain xerox copies of the documents, which is
enclosed in the typed set of papers, such factually disputed issues
can never be adjudicated in a concrete manner so as to give complete
justice to the parties, who are all approaching the writ Court.
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W.P.No.30483 of 2015
15. With reference to the judgment relied upon by the
petitioner, the Hon'ble Apex Court of India in Shree Rameshwara
Rice Mills case cited supra at paragraphs-7 and 8 itself held that
''?the position will, however, be different where there is no dispute
or there is consensus between the contracting parties regarding the
breach of conditions. In such a case the officer of the State, even
though a party to the contract will be well within his rights in
assessing the damages occasioned by the breach in view of the
specific terms of Clause 12''?. Therefore, only in the event of no
dispute and there is a consensus between the contracting parties, the
writ Court may be in a position to take a decision in such nature of
issues and not otherwise. Therefore, the Hon'ble Supreme Court
entertained the argument in a particular case by distinguishing the
facts and ruled that the contractual obligations may be entertained by
the writ Court only if there is no dispute between the contracting
parties and there is a consensus. Even in paragraph-9, the Hon'ble
Supreme Court observed that recovery of the damages will stand
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confined only to those cases where, the breach of conditions is
admitted or it is not disputed.
16. In the present case, the demand notice is disputed by
the petitioner, the manner in which the TANGEDCO assessed the
damages or otherwise is also questioned by the petitioner, and not
providing an opportunity to present the case is also raised. In this
regard, examination in detail with reference to the terms and
conditions of the contract are imminent and require adjudication.
Even in the other case relied on by the petitioner, the proposition
laid down by the Hon'ble Supreme Court in J.G.Engineers Private
Limited case cited supra is referred and in paragraph-19 the Hon'ble
Apex Court observed that ?''a contract cannot provide that one
party with the arbiter to decide whether he committed breach or the
other party committed breach. That question can only be decided by
only an adjudicatory forum, that is, a Court or an Arbitral
Tribunal''?. Admittedly, in the present case, the parties have not
agreed for arbitration, thus, necessarily they have to approach the
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competent Court of law for the purpose of adjudicating issues.
17. Let us look into the reliance placed by the petitioner i.e.
Clause:5 of the Memorandum of Understanding. Clause-5 reads as
under:
'5.Performance of the cement company in
collecting 100% of Fly Ash will be reviewed for a period
of one year and penalty deemed fit will be imposed for
the short collection of Fly Ash due to the fault of
company after one year of the reviewed period.'
18. The above clause reveals that the collection of fly ash
will be reviewed for a period of one year and penalty deemed fit will
be imposed for the short collection of fly ash due to the fault of the
company. For understanding purposes, this Court is of an opinion
that the parties agreed that the performance of the petitioner
company will be reviewed and penalty deemed fit will be imposed.
Thus, the petitioner was very much aware and agreed regarding
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imposition of penalty by the TANGEDCO. Question arises whether
an opportunity is to be provided prior to issuance of any such
demand notice. In this regard, it is stated in the Clause that penalty
deemed fit will be imposed for short collection of fly ash due to the
fault of the company. This exactly is the dispute to be adjudicated as
the short collection of fly ash and the quantum of short collection and
the fault of the company or there is no fault of the company and the
quantum of penalty to be imposed are disputed facts, which cannot
be adjudicated in a writ proceedings.
19. These issues require an elaborate examination of the
records and evidences. As far as the opportunity is concerned, no
doubt if there is a consensus between the parties or if any doubt
arises with reference to the performance or otherwise, it is open to
the parties to the contract to negotiate and form an opinion and
resolve the issues in an amicable manner. Therefore, it is for the
petitioner to approach the competent authorities, if they agree for
such consensus or for a negotiation and settlement of issues.
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W.P.No.30483 of 2015
However, the impugned order is concerned, it is for the petitioner to
initiate appropriate steps for effective adjudication of the disputes
for the purpose of redressing their grievances in the manner known
to law.
20. The petitioner if chosen to approach the competent
Court of law for resolving the issues, the Court shall consider the
period in which the writ petition was pending before the High Court
for the purpose of condoning the delay, if any petition to condone the
delay is filed by the petitioner.
21. With these observations, the writ petition stands
dismissed. No costs. Consequently, connected miscellaneous
petitions are closed.
12.01.2022
kan
Internet : Yes
Index : Yes / No
Speaking order / Non Speaking order
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W.P.No.30483 of 2015
To
1.The Tamil Nadu Electricity Board,
Rep. by its Chairman,
No.800, Anna Salai,
Chennai 600 002.
2.The Chief Engineer,
Civil Designs,
Tamil Nadu Electricity Board,
3rd Floor, NPKRR Maaligai,
No.144 Anna Salai, Chennai 600 002.
3.The Chief Engineer,
Tamil Nadu Electricity Board,
Mettur Thermal Power Station,
Mettur Dam – 636 406.
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W.P.No.30483 of 2015
S.M. SUBRAMANIAM, J.
kan
W.P.No.30483 of 2015
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W.P.No.30483 of 2015
12.01.2022
https://www.mhc.tn.gov.in/judis
