B V G India Ltd vs State Of Rajasthan
2022 Latest Caselaw 1193 Raj/2

      HIGH COURT OF JUDICATURE FOR RAJASTHAN
                  BENCH AT JAIPUR

              S.B. Civil Writ Petition No. 5253/2021

B V G India Ltd., (A Bharat Vikas Group Company), Registered
Office At Bvg House, Premier Plaza, Pune- Mumbai Road,
Chinchwad,     Pune     (Maharashtra)            -    411019      Through     Its
Authorized Signatory         Omkar Manohar Sapre Son Of                      Shri
Manohar Atma Ram Sapre, Head - Corporate Administration,
Aged About 38 Years, Resident Of B-603, Swami Narayan Sun
City Road, Pune (Maharashtra) Presently Residing At B-801,
Dwarka Apartments, Mansarovar, Jaipur (Raj.).
                                                                   ----Petitioner
                                   Versus
1.     State Of Rajasthan, Through Its Principal Secretary,
       Urban Development And Housing, Secretariat, Jaipur
       (Rajasthan).
2.     Secretary,     Local     Self     Government,            Government    Of
       Rajasthan, Secretariat, Jaipur.
3.     Director, Local Self Government, Near Civil Lines Phatak,
       Jaipur (Rajasthan).
4.     Nagar Nigam, Jaipur Greater, Through Its Commissioner,
       Lal Kothi, Jaipur.
                                                                ----Respondents

For Petitioner(s) : Mr. Sudhir Gupta, Sr. counsel assisted by Mr. Sandeep Ladda, Adv.

Mr. Sandeep Singh Shekhawat, Adv. Ms. Shweta Chauhan, Adv.

Ms. Priya Pareek, Adv.

Ms. Sejal Harneja, Adv. } all through V.C.

For Respondent(s) : Mr. Anil Mehta, AAG Mr. Vimal Chand Choudhary, Adv. } both through V.C.

HON'BLE MR. JUSTICE INDERJEET SINGH

Order

02/02/2022

(2 of 31) [CW-5253/2021]

1. This writ petition has been filed by the petitioner with the

following prayer:-

"In view of the above reasons, law and circumstances of the case, it is most humbly prayed that this Hon'ble Court may kindly be directed to the respondent no. 4 Nagar Nigam, Jaipur Greater to execute contract, supplementary agreement in compliance of order dated 18.01.2021 passed by respondent no. 3 and respondents may kindly further be directed to allow the petitioner firm, to continue the work as per earlier agreement dated 24.03.2017 and work order dated 17.03.2017, moreover, release the legitimate dues of the petitioner, forthwith; and may pass any other order (s) which this Hon'ble Court deems just and proper in the facts and circumstances of the case in favour of the petitioner."

2. Brief facts of the case are that the petitioner entered into an

agreement with the Nagar Nigam Jaipur for collection, segregation

& transportation of municipal solid waste under the guidelines

Swachh Bharat Mission and the said agreement was executed

between the parties on 24.03.2017 for a period of seven years.

During the currency of the said agreement, the State Government

bifurcated the Nagar Nigam, Jaipur into two; Nagar Nigam Greater

and Nagar Nigam Heritage. The respondents issued a letter to the

petitioner seeking consent for continuation of the contract

executed between them, pursuant to which the petitioner

submitted its response to the Nagar Nigam Greater, Jaipur giving

its consent for continuance of the work.

3. On 18.01.2021, the Department of Local Self Government

issued an order granting approval for continuation of the contract

subject to entering into a supplementary agreement with the

petitioner for continuance of the work, thereafter, the petitioner

requested the Nagar Nigam Greater, Jaipur to enter into a

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supplementary agreement and when the Nagar Nigam Greater,

Jaipur failed to execute the supplementary agreement, the

petitioner approached this Court by filing the present writ petition

for implementation of the order dated 18.01.2021.

4. Mr. Sudhir Gupta, learned Senior Counsel appearing on

behalf of the petitioner submitted that the Nagar Nigam Greater,

Jaipur is under obligation to enter into supplementary agreement

with the petitioner-company as per the directions issued by the

Department of Local Self Government. He further submitted that

the legitimate expectation of the petitioner is that the respondent-

Nagar Nigam Greater must obey and comply the directions issued

by the Department of Local Self Government. Learned senior

Counsel further submitted that although there is clause of

arbitration in the agreement but there is no absolute bar

restraining the petitioner from invoking jurisdiction of this Court

under Article 226 of the Constitution of India.

5. Mr. Sudhir Gupta, learned Senior Counsel further submitted

that the arbitration clause invoked by the petitioner is with regard

to non-payment of its dues towards the work done by it as such

the present writ petition filed by the petitioner involving a

separate cause/relief seeking almost a different direction to the

respondents to execute the agreement deserves to be allowed. It

was further submitted that the issue raised in this writ petition is

with regard to sovereign function and duties of the State which

can only be considered by this court under Article 226 of the

Constitution of India.

6. In support of the contentions, learned Senior Counsel relied

upon the judgment passed by the Hon'ble Supreme Court in the

matter of Union of India & Ors. Vs. Tantia Construction

(4 of 31) [CW-5253/2021]

Private Limited reported in (2011) 5 SCC 697 where in para-32

& 33 it has been held as under:-

"32. The submissions made on behalf of the petitioners that in terms of Clause 23(2) of the agreement, the petitioners were entitled to alter and increase/decrease the scope of the work is not attracted to the facts of this case where the entire design of the rail over bridge was altered, converting the same into a completely new project. It was not merely a case of increase or decrease in the scope of the work of the original work schedule covered under Tender No.76 of 2006-2007, but a case of substantial alteration of the plan itself.

33. Apart from the above, even on the question of maintainability of the writ petition on account of the Arbitration Clause included in the agreement between the parties, it is now well-established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. 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."

7. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Unitech Limited & Ors. Vs.

TSIIC reported in 2021 SCC Online SC 99 wherein para 38 to

41 has held as under:-

"38. The Single Judge of the Andhra Pradesh High Court, in the course of the judgment dated 23 October 2018 computed as on 30 September 2018, an amount of Rs. 660.55 crores as due and payable. Interest on the basis of the SBI-

(5 of 31) [CW-5253/2021]

PLR was compounded annually in terms of the provisions of the Development Agreement. The Single Judge noted that the Respondents to the writ proceedings had not disputed (i) the dates of payment or (ii) interest at the rate of the SBI-PLR and no material to contradict the computation was submitted. In appeal, the Division Bench however directed that the claim for interest should be computed from 14 October 2015. This was the date on which Unitech addressed a communication seeking a refund of the 'compensatory payment' following the decision of this Court on 9 October 2015 on the absence of title to the land in the Government of Andhra Pradesh. The Division Bench has proceeded on the rationale that (i) Unitech was placed on notice that the award of the contract was subject to the outcome of the appeal in the High Court; and (ii) Unitech was aware of the outcome of the first appeal yet, as a developer, it wanted to continue with the project. The above circumstances have no bearing on whether Unitech is entitled to a refund of moneys from the date of initial payment. The entitlement of Unitech to a refund of the amounts paid is embodied in the terms of the contract which envisage that a default on the part of APIIC in conveying the land or the existence of political force majeure events would furnish a valid basis for the "compensatory payment". Moreover, the date from which compensatory payment has to be made is specifically provided: the Development Agreement provides that it will be "from the date on which the first payment of project price" is made. The Division Bench was in error in curtailing the right of Unitech to claim a refund with effect from the dates on which the respective payments were made.

Obviously, Unitech had entered into the project since it wished to pursue it. Unitech cannot be penalized for wanting to continue with the agreement, as APIIC navigated disputes over its claim to the land. While Unitech was put to notice of the existence of a litigation, the Development Agreement which stipulated an encumbrance-free handover also specified that its covenants would supersede all other understandings and that its terms would rank as the first, in

(6 of 31) [CW-5253/2021]

order of interpretive priority. The judgment of the Division Bench suffers from a clear and patent error in restricting the liability of paying interest with effect from 14 October 2015. The liability must date back, in terms of the Development Agreement, from the date on which the respective payments were made by Unitech. Interest at the contractual SBI-PLR rate has to be paid to Unitech. However, considering the facts and circumstances of this case, the conscionability of Article 14.3.1 read with Article 1(h) of the Development Agreement stipulating compensatory payment at the SBI-PLR, compounded annually, becomes suspect. Clause 17 of the LOA expressly mentioned that the title of the land is lis pendens and subject to the outcome of the proceedings pending before the Andhra Pradesh High Court. Unitech considered this circumstance and consciously entered into the Development Agreement. It continued to liaise with APIIC after an unfavorable judgment of the Andhra Pradesh High Court and did not issue a termination notice, until the title was conclusively denied by a judgment of this Court. A Constitution Bench of this Court, in the case of Central Bank of India v. Ravindra, when considering the question of penal interest rates, had observed:

39..... Pre-suit interest is referable to substantive law and can be subdivided into two sub-heads: (i) where there is a stipulation for the payment of interest at a fixed rate; and (ii) where there is no such stipulation. If there is a stipulation for the rate of interest, the court must allow that rate up to the date of the suit subject to three exceptions: (i) any provision of law applicable to moneylending transactions, or usury laws or any other debt law governing the parties and having an overriding effect on any stipulation for payment of interest voluntarily entered into between the parties; (ii) if the rate is penal, the court must award at such rate as it deems reasonable; (iii) even if the rate is not penal the court may reduce it if the interest is excessive and the transaction was substantially unfair.

(emphasis supplied)

(7 of 31) [CW-5253/2021]

In a similar vein, in interpreting Section 74 of the Indian Contract Act, 1872, this Court has held that a contractually-stipulated interest rate, if found to be penal, excessive or in terrorem can be reduced to a reasonable rate of compensation.11 In upholding the reasoning of the Kerala High Court in full, a two judge Bench of this Court in K.P. Subbarama Sastri v. K.S. Raghavan held:

5. ...The question whether a particular stipulation in a contractual agreement is in the nature of a penalty has to be determined by the court against the background of various relevant factors, such as the character of the transaction and its special nature, if any, the relative situation of the parties, the rights and obligations accruing from such a transaction under the general law and the intention of the parties in incorporating in the contract the particular stipulation which is contended to be penal in nature. If on such a comprehensive consideration, the court finds that the real purpose for which the stipulation was incorporated in the contract was that by reason of its burdensome or oppressive character it may operate in terrorem over the promiser so as to drive him to fulfil the contract, then the provision will be held to be one by way of penalty.

Therefore, considering the position of Unitech-which knowingly entered into the Development Agreement with full knowledge of the pending litigation and with an intention to continue with the project after a delay of over seven years, up until adecision by this Court, we find that the interest rate is payable to Unitech, without compounding. E.3 Apportionment of the liabilities between the instrumentalities of the state of Andhra Pradesh and Telangana.

39. This leaves the court with the last facet which pertains to the dispute inter se between TSIIC and APIIC. The Single Judge has imposed the liability to refund on TSIIC clarifying however, that it is "entitled to recover it from the State of Andhra Pradesh

(8 of 31) [CW-5253/2021]

and the APIIC, if under law they are entitled to do so". The Division Bench has not interfered with the above direction.

40. Section 68 of the Re-organization Act is comprised in Part VII which enunciates "Provisions as to Certain Corporations". Section 68 of the Re-organization Act provides as follows:

68. (1) The companies and corporations specified in the Ninth Schedule constituted for the existing State of Andhra Pradesh shall, on and from the appointed day, continue to function in those areas in respect of which they were functioning immediately before that day, subject to the provision of this section.

(2) The assets, rights and liabilities of the companies and corporations referred to in Sub-section (1) shall be apportioned between the successor States in the manner provided in Section 53.

The corporations which are listed out in the IXth Schedule include APIIC which appears at Serial No. 17. Section 68(2) states that the assets, rights and liabilities of the companies and corporations referred to in Sub-section (1) shall be re-apportioned between the successor states in the manner provided in Section 53. Section 53 is in the following terms:

53. (1) The assets and liabilities relating to any commercial or industrial undertaking of the existing State of Andhra Pradesh, where such undertaking or part thereof is exclusively located in, or its operations are confined to, a local area, shall pass to the State in which that area is included on the appointed day, irrespective of the location of its headquarters:

Provided that where the operation of such undertaking becomes inter-State by virtue of the provisions of Part II, the assets and liabilities of--

(a) the operational units of the undertaking shall be apportioned

(9 of 31) [CW-5253/2021]

between the two successor States on location basis; and

(b) the headquarters of such undertaking shall be apportioned between the two successor States on the basis of population ratio.

(2) Upon apportionment of the assets and liabilities, such assets and liabilities shall be transferred in physical form on mutual agreement or by making payment or adjustment through any other mode as may be agreed to by the successor States.

41. Section 65 allows for the successor states of Telangana and Andhra Pradesh to agree on the manner in which the benefit or burden of any particular asset or liability can be apportioned. Section 66 empowers the Central Government on a reference made, within three years from the appointed date, by either of the successor states to order an adjustment or allocation of the liability. Finally, to complete the narration of the statutory scheme, Section 71 is in the following terms:

71 . Notwithstanding anything in this Part, the Central Government may, for each of the companies specified in the Ninth Schedule to this Act, issue directions-

(a) Regarding the division of the interests and shares of the existing State of Andhra Pradesh in the Company between the successor states;

(b) Requiring the reconstitution of the Board of Directors of the Company so as to give adequate representations is the successor States.

Section 71(a) speaks of the interests and shares of the existing State of Andhra Pradesh in the companies specified in the IXth Schedule between the successor States. APIIC has brought on record the certificate issued by the Managing Directors of TSIIC and APIIC recording the auditing of assets and liabilities as on 1 June 2014. The certificate is in the following terms:

CERTIFICATE This is to certify that Andhra Pradesh Industrial Infrastructure Corporation

(10 of 31) [CW-5253/2021]

Limited (APIIC LTD.,), Hyderabad have got its Books of Accounts audited upto 1st June, 2014 by M/s. Jawahar and Associates, Hyderabad (Statutory Auditors) and accordingly a) All the Assets and Liabilities as appearing in the Balance Sheet as on 01.06.2014 have been brought on record and have been audited and included in the Demerger Scheme and Demerger Balance Sheet and b) the instructions of the Special Chief Secretary (Industries and Commerce), Government of Andhra Pradesh vide Circular No. 3685/INF (SRC)/2014 dated 29.05.2014 have been followed. All the Assets and Liabilities were duly apportioned between Andhra Pradesh and Telangana States as per the provisions of Andhra Pradesh Reorganisation Act, 2014.

Further to certify that all the suggestions and advices given by Expert Committee with respect to Demerger of Assets and Liabilities have been complied with in formulating the final Demerger Scheme.

          E.V. Narasimha Reddy    K.V. Satyanarayana, IAS
          Vice Chairman &         Vice Chairman &

Managing Director (FAC) Managing Director TSIIC Ltd., APIIC Ltd."

8. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Uttar Pradesh Power

Transmission Corporation Ltd. & Anr. Vs. CG Power and

Industrial Solution Limited & Another reported in (2021) 6

SCC 15 wherein paras 66 to 68 has held as under:-

"66. Even though there is an arbitration clause, the Petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration Clause does not debar the court from entertaining a writ petition.

(11 of 31) [CW-5253/2021]

67. It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (i) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or

(iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge. Reference may be made to Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. and Pimpri Chinchwad Municipal Corporation v. Gayatri Construction Co., cited on behalf of Respondent No. 1.

68 . In Harbanslal Sahnia and Ors. v. Indian Oil Corporation Ltd. , this Court allowed the appeal from an order of the High Court dismissing a writ petition and set aside the impugned judgment of the High Court as also the impugned order of the Indian Oil Corporation terminating the dealership of the Appellants, notwithstanding the fact that the dealership agreement contained an arbitration clause."

9. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Harbanslal Sahnia & Another

Vs. Indian Oil Corporation Ltd. & Ors. reported in (2003) 2

SCC 107 wherein para 7 has held as under:-

"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies:

                                         (12 of 31)             [CW-5253/2021]


           (i)    where    the  writ   petition    seeks

enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act and is challenged [See Whirlpool Corporation v. Registrar of Trade Marks.) The present case attracts applicability of first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."

10. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Whirlpool Corporation Vs.

Registrar of Trade Marks, Mumbai & Ors. reported in (1998)

8 SCC 1 wherein para 20 has held as under:-

"20. Much water has since flown beneath the bridge, but there has been no corrosive effect on these decisions which though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a Writ Petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the Writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation."

11. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Booz Allen And Hamilton Inc.

Vs. SBI Home Finance Limited & Ors. reported in (2011) 5

SCC 532 where in paras 19, 33, 34, 35 & 38 it has been held as

under:-

"19.Where a suit is filed by one of the parties to an arbitration agreement against the other parties to the arbitration agreement, and if the defendants file an application under section 8 stating that the

(13 of 31) [CW-5253/2021]

parties should be referred to arbitration, the court (judicial authority) will have to decide:

(i) whether there is an arbitration agreement among the parties;

(ii) whether all the parties to the suit are parties to the arbitration agreement;

(iii) whether the disputes which are the subject matter of the suit fall within the scope of arbitration agreement;

(iv) whether the defendant had applied under section 8 of the Act before submitting his first statement on the substance of the dispute; and

(v) whether the reliefs sought in the suit are those that can be adjudicated and granted in an arbitration.

33. But where the issue of "arbitrability" arises in the context of an application under section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the court seized of the suit, and cannot be left to the decision of the Arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal.

34. The term "arbitrability" has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under :

(i) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts).

(14 of 31) [CW-5253/2021]

(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters' excluded from the purview of the arbitration agreement.

(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be "arbitrable" if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal.

35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non- contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the Legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and Tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will

(15 of 31) [CW-5253/2021]

refuse to refer the parties to arbitration, under section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable."

12. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Vidya Drolia & Ors. Vs. Durga

Trading Corporation (along with connected matters)

reported in (2021) 2 SCC 1 where in paras-40, 48 & 76 it has

been held as under:-

"40. D.Y. Chandrachud, J. in A. Ayyasamy v. A. Paramasivam, referring to the dictum in Booz Allen & Hamilton Inc., has made two important comments: ( A. Ayyasamy case, SCC pp.410-11, paras 35 & 38) "35...This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in personam which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals...

xx xx xx

38. Hence, in addition to various classes of disputes which are generally considered by the courts as appropriate for decision by public fora, there are classes of disputes which fall within the exclusive domain of special fora under legislation which confers exclusive

(16 of 31) [CW-5253/2021]

jurisdiction to the exclusion of an ordinarily civil court. That such disputes are not arbitrable dovetails with the general principle that a dispute which is capable of adjudication by an ordinary civil court is also capable of being resolved by arbitration. However, if the jurisdiction of an ordinary civil court is excluded by the conferment of exclusive jurisdiction on a specified court or tribunal as a matter of public policy such a dispute would not then be capable of resolution by arbitration.

xxx

48. A judgment in rem determines the status of a person or thing as distinct from the particular interest in it of a party to the litigation; and such a judgment is conclusive evidence for and against all persons whether parties, privies or strangers of the matter actually decided. Such a judgment "settles the destiny of the res itself" and binds all persons claiming an interest in the property inconsistent with the judgment even though pronounced in their absence. By contrast, a judgment in personam, "although it may concern a res, merely determines the rights of the litigants inter se to the res". Distinction between judgments in rem and judgments in personam turns on their power as res judicata, i.e. judgment in rem would operate as res judicata against the world, and judgment in personam would operate as res judicata only against the parties in dispute. Use of expressions "rights in rem" and "rights in personam" may not be correct for determining non-arbitrability because of the interplay between rights in rem and rights in personam. Many a times, a right in rem results in an enforceable right in personam. Booz Allen & Hamilton Inc. refers to the statement by Mustill and Boyd that the subordinate rights in personam derived from rights in rem can be ruled upon by the arbitrators, which is apposite. Therefore, a claim for infringement of copyright against a particular person is arbitrable, though in some manner the arbitrator would examine the right to copyright, a right in rem. Arbitration by necessary implication excludes actions in rem.

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                         xxx

76. In view of the above discussion, we would like to propound a fourfold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:

76.1 (1) When cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

76.2 (2) When cause of action and subject- matter of the dispute affects third-party rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;

76.3 (3) When cause of action and subject- matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable;

76.4 When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

76.5 These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is non- arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non-arbitrable.

76.6 However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. : (SCC p-669, para 35) "35...Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration. It has, however, been held that if in respect of facts

(18 of 31) [CW-5253/2021]

relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman).

Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill)."

13. He further relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Motilal Padampat Vs. State of

U.P. reported in (1979) 2 SCC 409 where in para 33 it has been

held as under:-

"33. The State, however, contended that the doctrine of promissory estoppel had no application in the present case because the appellant did not suffer any detriment by acting on the representation made by the Government : the vanaspati factory set up by the appellant was quite a profitable concern and there was no prejudice caused to the appellant. This contention of the State is clearly unsustainable and must be rejected. We do not think it is necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee acting in reliance of the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promise. This position was implied accepted by Denning J., in the High Trees case when the learned Judge pointed out that the promise must be one "which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact acted on" , (emphasis supplied). If a promise is "acted on", "such action, in law as in physics, must necessarily result in an alteration of position." This was again reiterated by Lord Denning in W.J. Alan & Co. Ltd. v. El.

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Nasr Export and Import Co. where the learned Law Lord made it clear that alteration of position "only means that he (the promise) must have been led to act differently from what he would otherwise have done. And if you study the cases in which the doctrine has been applied, you will see that all that is required is that the one should have acted on the belief induced by the other party." Viscount Simonds also observed in Tool Metal Manufacturing Co. Ltd v. Tungsten Electric Co. Ltd. that ".....the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position". The judgment of Lord Tucker in the same case would be found to depend likewise on a fundamental finding of alteration of position, and the same may be said of that of Lord Cohen. Then again in Emmanuel Avodeji v. Briscoe (supra) Lord Hodson said: "This equity, is however, subject to the qualification (1) that the other party has altered his position". The same requirement was also emphasised by Lord Diplock in Kaminins Ballrooms Ltd.

v. Zenith Investments (Torquay) Ltd. What is necessary, therefore, is no more than that there should be alteration of position on the part of the promisee. The alteration of position need not involve any detriment to the promises. If detriment were a necessary element, there would be no need for the doctrine of promissory estoppel because in that event, in quite a few cases, the detriment would form the consideration and the promise could be binding as a contract. There is in fact not a single case in England where detriment is insisted upon as a necessary ingredient of promissory estoppel. In fact, in W. J. Alan & Co. Ltd. v. El Nasar Export and Import Co. (supra), Lord Denning expressly rejected detriment as an essential ingredient of promissory estoppel, saying:

"A seller may accept a less sum for his goods than the contracted price, thus inducing (his buyer) to believe that he will not enforce payment of the balance; see Central London Property Trust Ltd. v. High Trees House Ltd. and D. & C. Builders Ltd.

v. Rees. In none of these cases does

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the party who acts on the belief suffer any detriment. It is not a detriment, but a benefit to him to have an extension of time or to pay less, or as the case may be. Nevertheless, he has conducted his affairs on the basis that he has had that benefit and it would not be equitable now to deprive him of it."

We do not think that in order to invoke the doctrine of promissory estoppel it is necessary for the promise to show that he suffered detriment as a result of acting in reliance on the promise. But we may make it clear that if by detriment we mean injustice to the promisee which could result if the promisor were to recede from his promise then detriment would certainly come in as a necessary ingredient. The detriment in such a case is not some prejudice suffered by the promisee by acting on the promise, but the prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise. The classic exposition of detriment in this sense is to be found in the following passage from the judgment of Dixon, J in the Australian case of Grundt v. The Great Boulder Pty. Gold Mines Ltd. :

"-It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the

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other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act or source of prejudice."

If this is the kind of detriment contemplated, it would necessarily be present in every case of promissory estoppel because it is on account of such detriment which the promisee would suffer if the promisor were to act differently from his promise, that the Court would consider it inequitable to allow the promisor to go back upon his promise. It would, therefore, be correct to say that in order to invoke the doctrine of promissory estoppel it is enough to show that the promisee has, acting in reliance of the promise, altered his position and it is not necessary for him to further show that he has acted to his detriment. Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Smet (India) Pvt. Ltd., Bombay and setting up a vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore, bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U.P. Sales Tax Act, 1948 did not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the

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Government because the Government cannot be compelled to act contrary to the statute, but since section 4 of the U.P. Sales Tax Act, 1948 confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant."

14. He also relied upon the judgment passed by the Hon'ble

Supreme Court in the matter of Secretary, State of Karnataka

& Ors. Vs. Umadevi (3) & Ors. reported in (2006) 4 SCC 1

where in para 46 it has been held as under:-

"46. Learned Senior Counsel for some of the respondents argued that on the basis of the doctrine of legitimate expectation, the employees, especially of the Commercial Taxes Department, should be directed to be regularized since the

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decisions in Dharwad, Piara Singh, Jacob and Gujarat Agricultural University and the like, have given rise to an expectation in them that their services would also be regularized. The doctrine can be invoked if the decisions of the administrative authority affect the person by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there have been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or

(ii) he has received assurance from the decision-maker that they will not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn . {See Lord Diplock in Council for Civil Services Union v. Minister for the Civil Service, National Buildings Construction Corpn. v. S. Raghunathan and (Dr. Chanchal Goyal v. State of Rajasthan).

There is no case that any assurance was given by the Government or the department concerned while making the appointment on daily wages that the status conferred on him will not be withdrawn until some rational reason comes into existence for withdrawing it. The very engagement was against the constitutional scheme. Though, the Commissioner of the Commercial Taxes Department sought to get the appointments made permanent, there is no case that at the time of appointment any promise was held out. No such promise could also have been held out in view of the circulars and directives issued by the Government after the Dharwad decision. Though, there is a case that the State had made regularizations in the past of similarly situated employees, the fact remains that such regularizations were done only pursuant to judicial directions, either of the Administrative Tribunal or of the High Court and in some case by this Court. Moreover, the invocation of the doctrine of legitimate expectation cannot enable the employees to claim that they must be made permanent or they must be regularized in the service though they had not been selected in terms of the rules for

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appointment. The fact that in certain cases the court had directed regularization of the employees involved in those cases cannot be made use of to found a claim based on legitimate expectation. The argument if accepted would also run counter to the constitutional mandate. The argument in that behalf has therefore to be rejected.

15. In support of the contentions, learned Senior Counsel relied

upon the judgment passed by the Hon'ble Supreme Court in the

matter of Food Corporation of India Vs. M/s Kamdhenu

Cattle Feed Industries reported in (1993) 1 SCC 71 where in

para 7 it has been held as under:-

"7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non- arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This impose the duty to act fairly and to adopt a procedure which is`fairplay in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision making process in all State actions. To satisfy this requirement of non- arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but providers for control of its exercise by judicial review."

                                           (25 of 31)                  [CW-5253/2021]



16.   Mr.   Anil   Mehta,    learned        Additional           Advocate   General,

appearing on behalf of the respondents raised a preliminary

objection with regard to maintainability of the writ petition and

submitted that the petitioner-company during pendency of the

present writ petition has invoked the arbitration clause and filed

application for appointment of Arbitrator and in support of the

contention he made a reference of the Arbitration Application

No.110/2021, copy of which is placed on record, para-33, 35, 36

& 39 as well as the prayer made therein reads as under:-

"33. That thereafter, a letter dated 18.1.2021 written by the Director and Special Secretary, Local Self Government to the Commission, Nagar Nigam, Jaipur Greater/Heritage directing the after demarcation of the area of the Nagar Nigam into two Nagar Nigams an amended agreement in connection to door-to-door work done by the applicant has to be executed after amending in the earlier workorder with certain condition as mentioned in the aforesaid letter dated 18.1.2021. A copy of the letter dated 18.1.2021 is annexed herewith and marked as ANNEXURE-31.

35. That the applicant vide its letter dated 26.2.2021 informed the Commissioner, Nagar Nigam Jaipur Heritage, Jaipur regarding consent for a supplementary agreement for door to door collection, segregation at source, secondary storage and transportation of waste (C & T) for Nagar Nigam Jaipur, Heritage consisting of 4 zones and 100 wards in reply to DLB letter dated 18.1.2021 and accorded the official consent to proceed with the supplementary agreement, effective from 1.3.2021 for door-to-door collection, segregation at source, secondary storage and transportation of waste (C&T) for Nagar Nigam Jaipur, Heritage which consists of new 4 Zones and new 100 wards and requested to submit the draft of the supplementary agreement. A copy of

(26 of 31) [CW-5253/2021]

the letter dated 26.2.2021 is annexed herewith and marked as ANNEXURE-33.

36. That thereafter a supplementary agreement on 20.4.2021 was executed between the Nagar Nigam Jaipur Heritage and the applicant as desired. A copy of the supplementary agreement dated 20.4.2021 is annexed herewith and marked as ANNEXURE-34.

39. That the applicant company on 12.4.2021 sent a letter requesting compliance with Instructions of Director cum Special Secretary, Local Self Government Department dated 18.1.2021, by which a direction was issued to issue separate work orders and execution of supplementary ageements with the applicant company. It is submitted that the request of the applicant was not considered in violation of the order of the State Government, which in resulting uncertainty, coupled with mischievous rumors being propagted by vested interest and causing disturbances in the operations and confusions in the workers and public at large. A copy of the order dated 12.4.2021 is annexed herewith and marked as ANNEXURE-37

It is, therefore, humbly prayed before this Hon'ble Court that the Hon'ble Court may be pleased to allow and accept this application and further be pleased to direct as under:

(i) The Hon'ble Court may kindly be pleased to appoint a Sole Arbitrator to decide and adjudicate upon all the disputes between the applicant and the respondents including arising out of Contract dated 24.3.2017 for Package-I, Package-II and Package-III in accordance to Clause No. 73.2.

(ii) The Hon'ble Court may kindly be further pleased to direct that the Sole Aarbitrator so appointed shall be entitled to receive the fee and other expenses in terms of statutory provisions of Arbitration Act in this regard.

(iii) Any other relief which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case, may also kindly be passed in favour of the applicant."

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17. Mr. Anil Mehta, AAG submitted that once the petitioner has

invoked the Arbitration Clause in terms of the contract agreement,

therefore the petitioner is estopped to file the present writ

petition. He further submitted that the Nagar Nigam is taking all

the actions as per terms & conditions of the original agreement

wherein arbitration clause-73 exists which provides for referring

the disputes to arbitration.

18. In support of contentions, he relied upon the judgment

passed by the Hon'ble Supreme Court in the matter of M/s

Radhakrishna Agarwal & Ors. Vs. State of Bihar & Ors.

reported in (1977) 3 SCC 457 where in paras 11, 19, 24 & 25 it

has been held as under:-

"11. In the cases before us the contracts do not contain any statutory terms or obligations and no statutory power of obligation which could attract the application of Article 14 of the Constitution is involved here. Even in cases where the question is of choice or consideration of competing claims before an entry into the field of contract facts have to be investigated and found before the question of a violation of Article 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can, only be tested satisfactorily by taking detailed evidence, involving examination and cross-examina- tion of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. Such proceedings are summary proceedings reserved for extraordinary cases where the exceptional and what are described as, perhaps not quite accurately, "prerogative" powers of the Court are invoked. We are certain that the cases before us are not such in which powers under Article 226 of the Constitution could be invoked.

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19. We do not think that any of these cases could assist the appellants or is at all relevant. None of these cases lays down that, when the State or its officers purport to operate within the contractual field and the only grievance of the citizen could be that the contract between the parties is broken by the action complained of, the appropriate remedy is by way of a petition under Article 226 of the Constitution and not an ordinary suit. There is a formidable array of authority against any such a proposition. In Lekhraj Sathramdas Lalwani v. N.M.

Shah, Deputy Custodian-cum- Managing Officer, Bombay , (supra) this Court said (at p. 337):

In our opinion, any duty or obligation falling upon a public servant out of a con- tract entered into by him as such public servant cannot be enforced by the machinery of a writ under Article 226 of the Constitution.

In Banchhanidhi Rath v. The State of Orissa, this Court declared (at p. 845)(SCC p.783, para 8):

If a right is claimed in terms of a contract such a right cannot be enforced in a writ petition.

In Har Shankar v. The Deputy Excise & Taxation Commissioner, a Constitution Bench of this Court observed (at p. 265) ( SCC p.747, para 21):

The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching con- tractual obligations".

24. In Additional District Magistrate, Jabalpur, v. Shivakant Shukla, it was pointed out (at p. 1288): (SCC p.604 para 186 ) :

The principles of natural justice which are so implied must always hang, if one may so put it, on pegs of statutory provisions or necessarily follow from them. They can also be said sometimes to be implied as necessary parts of the protection of equality and equal protection

(29 of 31) [CW-5253/2021]

of laws conferred by Article 14 of the Constitution where one of the pillars of Dicey's principles of the Rule of Law is found embodied. Sometimes, they may be implied and read the legislation dealing with rights protected by Article 19 of the Constitution. They could at times, be so implied because restrictions on rights conferred by Article 19 of the Constitution have to be reasonable.

25. The limitations imposed by rules of natural justice cannot operate upon powers which are governed by the terms of an agreement exclusively. The only question which normally arises in such cases is whether the action complained of is or is not in consonence with the terms of the agreement. As already pointed out by us, even if by some stretch of imagination some case of unequal or discriminatory treatment by the officers of the State of persons governed by similar contracts is sought to be made out, a satisfactory adjudication upon the unusual facts of such a case would necessitate proper pleadings supported by acceptable evidence. In that case, the interim stay order or injunction could not be justified at all because so long as a Presidential Order, under Article 359 of the Constitution, is operative, the enforcement of fundamental rights falling under Article 14 is suspended. In such cases even if a petition or suit is entertained and kept pending no stay order could be passed because that would amount to indirectly enforcing the fundamental rights conferred by Article 14 of the Constitution. It is only where a prima facie case for an injunction or stay can be made out, quite apart from a right covered by Article 14 of the Constitution or by any other fundamental right whose enforcement may have been suspended, that an injunction or stay could be granted at all on suitable terms. As we have already said it was on such an assumption that this Court had, apparently, granted the interim stay which must now be discharged."

19. Mr. Anil Mehta, AAG further submitted that they will act in

accordance with the terms and conditions of the original

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agreement and also submitted that as per the directions issued by

the Department of Local Self Government dated 18.01.2021, the

State Government has directed that terms and conditions of the

original agreement will continue even in the supplementary

agreement.

20. Mr. Vimal Choudhary, learned counsel appearing on behalf of

the intervenors while assisting this court submitted that the

petitioner is not doing its work properly in cleaning the city of

Jaipur. He further submitted that the petitioner has also filed

Public Interest Litigation in this matter before the Division Bench

of this court in which the Division Bench has observed to file the

application for impleadment as intervenor in this matter therefore

he on behalf of the intervenors is assisting this court and lastly

prayed for dismissal of the writ petition.

21. Heard counsel for the parties and perused the record.

22. Admittedly, the terms and conditions of the contract entered

into between the parties, reveals that there is an arbitration clause

which provides that in case of any dispute, the matter can be

referred to the Sole Arbitrator.

23. A bare reading of the arbitration application filed by the

petitioner under Section 11(6) of the Arbitration and Conciliation

Act, 1996 before this court for appointment of Arbitrator including

its prayer, shows that all the disputes including the

implementation of the letter/order dated 18.01.2021 is subject

matter of arbitration application.

24. In view of the above discussion, this writ petition filed by the

petitioner-company deserves to be dismissed for the reasons;

firstly, admittedly the petitioner-company has invoked the

arbitration clause by filing arbitration application and a perusal of

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its contents including the prayer, shows that the dispute involved

in this writ petition has also been raised in the arbitration

application; secondly, as stated by Mr. Anil Mehta, AAG that they

will act in accordance with the terms and conditions of the original

agreement while taking any action against the petitioner, the

apprehension of the petitioner-company has no foundation and

lastly in the facts and circumstances of the present case, since the

matter relates to contract between the parties, hence I am not

inclined to exercise the extraordinary jurisdiction of this court

under Article 226 of the Constitution of India.

25. Hence, this writ petition stands dismissed. The interim order

passed by this court dated 06.05.2021 is hereby vacated.

(INDERJEET SINGH),J

Jyoti/24

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