Vgrassp Services A ... vs State Of Uttarakhand & Another
2021 Latest Caselaw 3977 UK

          HIGH COURT OF UTTARAKHAND
                  AT NAINITAL
              Writ Petition (M/S) No. 2095 of 2021
VGRASSP Services a Proprietorship Firm                     ...      Petitioner

                                      Vs.
State of Uttarakhand & Another                             ... Respondents
                                      With

              Writ Petition (M/S) No. 2096 of 2021
VGRASSP Services a Proprietorship Firm                     ...      Petitioner

                                      Vs.
 State of Uttarakhand & Another                             ... Respondents
Advocates :   Mr. D.S. Patni, Senior Advocate, assisted by Mr. Dharmendra Barthwal
              and Mr. Siddhant Manral, Advocates, for the petitioner
              Mr. T.S. Phartiyal, Addl. CSC, for the State of Uttarakhand


Hon'ble Sharad Kumar Sharma, J.

Expressing an urgency, a mention was made in the morning by the learned counsel for the petitioner requesting to summon the writ petition from the Registry and to hear the matter today itself because according to him it was an extremely urgent. Hence, the registry was requested to place the matter before the Court today itself as fresh case, consequently it has been listed today in the supplementary cause list to be heard in the post lunch session of the Court proceedings.

2. In these two writ petitions, though there may be a slight difference in the factual matrix, but, otherwise the principle proposition of law, which has to be made applicable are similar and hence they are being decided together by this common judgment.

3. Precise facts of writ petition, being Writ Petition (M/S) No. 2095 of 2021, are that the petitioner has come up with the case, that the respondent i.e. Directorate of Panchayati Raj, vide its letter number 1296 dated 10.10.2020, had invited tenders for

the work of providing support for ongoing projects of implementation of Smart Office and for setting up Helpdesk Services, for the Directorate of Panchayati Raj, Uttarakhand at its various centres.

4. The technical bids were opened on 2nd November 2020, in which, it was shown that five prospective bidders, are shown to have participated in the bidding process. Out of the above total five bidders, bidder No. 3, i.e. Cyfuture India Prvt. Ltd. was held to be ineligible and its technical bid was rejected. However, the other four bidders, qualified the technical bid, based on the parameters of assignment of marks by the Tender Committee. On account of the fact, that the petitioner contends, that he has secured 95 marks in the bidding process, which was conducted by the Tender Committee hence his financial bid was also directed to be opened, and consequently, on 7th November 2020, the financial bid of the petitioner was opened and he was ultimately determined as to be an L-1 bidder.

5. The petitioner contends that having qualified both the technical and financial bids, the work-order was also issued to him vide letter No. 1533/P-2/Actt./H.Desk/2020-21 dated 9th November 2020. The petitioner has come up with the case, that in pursuance to the issuance of the said work-order on 9th November 2020, the petitioner was to furnish a consent letter within 21 days of the issuance of the letter of acceptance, after the opening of the financial bid extending his consent to perform the work, lest failing which the bid was to be offered to the L2 bidder.

6. The learned Senior Counsel for the petitioner submits, that while responding to the letter dated 9th November 2020, the petitioner vide his letter dated 11th July 2020, had expressed his

consent and willingness to enter into a contract for providing the Service Level Agreement, which was proposed to be entered into on culmination of the said tendering process.

7. Certain clauses of bidding documents, to which the reference has been made by the learned Senior Counsel, for the petitioner in the writ petition, particularly i.e. Clause 4.3, pertaining to the submission of the correct invoices, on every third subsequent month of delivery of work against which the payment was scheduled to be made. Clause 10 of the agreement i.e. a condition which provided for furnishing 10% of the annual contract value; as a performance guarantee, which was to be held to be valid for a period of one year on successful completion of the contract and thereafter the same was made refundable.

8. Clause 14 provided with all the terms and conditions, under which the contract could be terminated. The agreement contained several schedules including the obligations under the contract between the employer and the contractor, for the purposes of installation of the aforesaid work of Helpdesk at 20 workstations in 13 Districts of the Panchayati Raj Department.

9. As per the term of Clause 20 of the agreement, the life of the contract and for the services, which was required to be rendered, therein for the aforesaid work was to extend from 1st December 2020 to 30th November 2023, which was further made to be extendable for two terms of two years each, under a mutual terms of agreement of extension.

10. The learned Senior Counsel for the petitioner submits that the project thus assigned to the petitioner under the terms of the contract dated 30th November 2020; he had till January 2021, successfully completed the work and 20 work stations, were fully

made operational. He submits, that the controversy, which has been raised in the present writ petition which was emanating from the impugned order dated 29th September 2021, in fact, was because of the reason that the petitioner has raised his invoices in January, 2021, June, 2021, August 2021 and September 2021, as per the term of Clause 4.3 of the contract, for the payment of the amount due to be paid towards the 20 workstations, which were said to have been already made operational by the petitioner. The said claim, the learned Senior Counsel for the petitioner contends that it remained un-redressed and it was not settled hence the petitioner has to reiterate his request for payment of the bills by representing on 13th September 2021 and 23rd September 2021.

11. To the dismay of the petitioner, he contends that the respondents had issued an order dated 29th September 2021, which according to him was a unilateral decision, which attempted to sought novation of the term of the agreement as per Section 62 of the Indian Contract Act, 1872, which is extracted hereunder:-

"62. Effect of novation, rescission, and alteration of contract. - If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

12. What he intended to contend by his argument is that because of the issuance of the impugned order dated 29th September 2021, since there was a complete discontinuance of work, as it was agreed to be performed by the petitioner in pursuance to the Service Level Agreement dated 30th November 2020, for which the petitioner has met with all the infrastructural and manpower facilities, to cater the said required terms and condition of the contract dated 30th November 2020, the action taken by way of an order dated 29th September 2021, is said to be a "novation", of the terms of contract, it was that means

almost a cessation of earlier settled terms of contract dated 30th November 2020, thereby the inference drawn by the petitioner is, that it completely jeopardises and impeded the necessity of the petitioner to perform further work under the terms of the agreement, which has resulted into a complete business loss and hence the unilateral decision was attempted to be brought within the ambit of Section 62 of the Indian Contract Act, the petitioners' case was that it ought to have been desisted by the respondents, as it ostensibly runs contrary to the very basic foundation of the principal contract dated 30th November 2020.

13. Apart from that, the prime argument which has been extended by the learned Senior Counsel Mr. D.S Patni is that since it was a unilateral decision having a bearing on his civil rights, which was created by the contract dated 30th November 2020, it ought not to have been resorted to except, without resorting to the procedure of providing an opportunity of hearing to the petitioner; hence he contends, that the order dated 29th September 2021, deserves to be set aside and the petitioner may not be called upon to and coerced to enter into and sign the new agreement in terms of the order, which was issued on 29th September 2021, particularly, in the light of yet another letter which too was issued on the like date, at the behest of the directions of the Hon'ble Minister and the Secretary of the Panchayati Raj, thereby calling the Technical Director, to carry out the evaluation of the items already procured by the petitioner under the terms of the contract, pertaining to the Helpdesk and other work done under the contract, which was given to the petitioner on 30.11.2020.

14. In order to show an exigency in the matter, the learned Senior Counsel for the petitioner has contended, that the

communication which had been made by the Secretary, Panchayati Raj on 29th September 2021, could be brought to the knowledge of the petitioner, at a much belated stage and it was nothing but rather a revengeful act motivated by malice, when the petitioner has sought for the release of the three month dues against the services to which the petitioner contends, to have been already rendered by him. Thus under the aforesaid backdrop, the petitioner has preferred this writ petition for the following reliefs:-

"PRAYER It is therefore prayed that this Hon'ble Court may graciously be pleased to:

a) issue writ, order or direction in the nature of certiorari quashing/ setting aside the impugned communication dated 29.9.2021 {(Annexure No. 1} issued by the respondent No. 2, directing the respondent to henceforth continue the operation of the agreement dated 30.11.2020 and allow the petitioner to continue with the services for the terms as has been agreed between the parties until November 2023 and further restrain the respondent from taking any action in this regard.

b) issue writ, order or direction in the nature of certiorari quashing /setting aside the impugned communication 29.9.2021 {Annexure No. 12} written by the respondent no. 2 to the Technical Director NIC, Secretariat premises Dehradun.

c) issue writ, or direction in the nature of mandamus directing the respondent to adhere to the terms of the agreement dated 30.11.2020 which was entered pursuant to the completion of the tender process where the petitioner being declared successful bidder and has continuously been discharging his obligation in terms of the aforesaid agreement and further to continue discharging the same until expiry of the terms of the said agreement.

d) issue, recorder writ or direction in the nature of mandamus directing and commanding the respondent to henceforth release the payment in respect of the invoices raised by for the month of July, 2021 and August, 2021 to the petitioner towards the service provided by the petitioner to the respondent as per letter dated 29.09.2021 sent by respondent to the Secretary, Panchayati Raj.

e) issue any other order, direction which this Hon'ble Court may deem fit and proper in the facts of the case.

f) Award cost of the present writ petition to the petitioner"

15. Though, there were several other factual narrations and

facts which are made in the writ petition, but primarily the argument which has been extended by the learned Senior Counsel for the petitioner, was based upon the principles that the impugned order dated 29th September 2021, since being a 'novation', of a pre-existing and a concluded contract, as it was resulting into its substitution by a new contract and since both the contracts; being in contradiction and inconsistent to one another, the old contract dated 30th November 2020, could not have been substituted by an executive direction dated 29th September 2021 thereby calling upon the petitioner to enter into a new contract and hence he has made reference to a judgment as reported in 2000 (1) SCC 586, Lata Construction and others Vs. Dr. Rameshchandra Ramniklal Shah and another, particularly, he has drawn the attention of this Court and relied upon para 9 and 10 of the said judgement, which are extracted hereunder:-

"9. We may, at this stage, refer to the provisions of Section 62 of the Indian Contract Act which provides as under :

"If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed." This provision contains the principle of "Novation" of contract.

10. One of the essential requirements of `Novation'; as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract.

16. Before answering the two prospects, which have been argued by the learned Senior Counsel for the petitioner pertaining to the impact and the implications of Section 62 of the Indian

Contract Act, and its impact as to whether a novation under Section 62 of the Contract Act, could at all be made by the employer by executing or substituting the earlier contract by an inconsistent subsequent contract would be permissible or not, this Court feels it to be necessary and inevitable too, to refer to the terms of the contract, which was principally executed between the parties on 30th November 2020, which in itself contained an inbuilt mechanism; that in an eventuality of any dispute of facts which were emanating from the terms of the contract or breach of the term of the contract, in that eventuality, under clause 13 of the contract dated 30th November 2020, it had provided its own mechanism, which is extracted hereunder:-

"13. DISPUTE RESOLUTION The parties must attempt in good faith to resolve any dispute between them in connection with this Agreement by negotiation.

If any dispute cannot be resolved by negotiation between the parties within 10 days or such further period as the parties agree is appropriate, then within the following 10 days the parties must seek to agree on the procedural rules and a timetable for resolving the dispute through mediation by a mediator agreed upon by the parties. Each party will bear their own costs of mediation and pay one half of the mediator's costs.

A party a note commence court proceedings for arbitration (other than an urgent interlocutory application) relating to any dispute arising from this Agreement unless that party has complied with the preceding two sub- clauses.

In case of any dispute between the Agency and Client, Client shall have the right to decide. However, all matters of jurisdiction shall be at the local courts located at Dehradun."

17. In the connected writ petition, being Writ Petition (M/S) No. 2096 of 2021, in fact, the petitioner has prayed for almost an identical relief based on the impugned communication dated 29th September 2021, and the consequential effect of it, on the previous agreement/contract, which is in the instant case, happens to be that of 24th October 2020 (hence, for the second writ petition i.e. Writ Petition (M/S) No. 2096 of 2021, the earlier Service Level Contract, which was executed and entered into under the strength of letter dated 6th October 2020, has to be read

as 30th October 2020 instead of 30th November 2020, as it was in the earlier writ petition).

18. This is the only exception, which entails consideration in the present writ petition; apart from the fact, that after the invitation of bids on 11th September 2020, the petitioner was held to be technically and financially qualified in a financial bid, which was opened on 6th October 2020, resulting into the issuance of impugned order vide letter No. 1196/i&2/dekha/473/2020-21 Dehradun dated 29.09.2021, which was based on the letter of Directorate No. 1242 dated 06.10.2021, based on the office memo of the State being Letter No. 1192/XII(I)21-86(26)/2019 dated 19.09.2021.

19. After having heard the learned counsel for the parties at length, and having considered the impact of the impugned order dated 29th September 2021, which has been sought to be brought within the ambit of Section 62 of the Indian Contract Act, by alleging it to be novation resulting into substituting a pre-existing contract, which is inconsistent to one another. This Court is of the view that at this stage, the apprehension expressed by the petitioner, that in pursuance to the impugned order, the petitioner may be called upon to enter into a new agreement, contrary to the already a pre-existing agreement or the work contract: will not fall to be within the ambit of Section 62 of the Indian Contract Act, the argument in this context is premature, for the reason being that if at all the impugned order dated 29th September 2021, was having any adverse bearing on the pre existing contract, it would amount to, that there had arisen a dispute inter se between the employer and the contracting party, in terms of the agreement, which has been respectively executed between them in the two cases on 30th November 2020 and 24th October

2020 respectively, and as such under either of the circumstances on an occasion of occurrence of dispute it ought to have been reported in pursuance to the binding terms of the contract, contained in its clause (13) of the terms of the contract; by resorting to the mechanism which has been amicably provided settled between the parties for redressal of the dispute, if at all it has any civil bearing on the terms and conditions of the pre existing contract in either of the cases.

20. In order to answer the arguments which has been extended by the learned counsel for the petitioner, that Section 62 of the Indian Contract Act, where it affects and has a bearing of being a novation, and it will not fall under clause (13) wherein under the terms of the contract, all the disputes redressal mechanism, provided under the contract in the two respective writ petitions, is not acceptable by this Court, for the reason being that recently the Hon'ble Apex Court, in a judgment reported in 2021 SCC Online 738, Uflex Ltd Vs. Government of Tamil Nadu and others, it had laid down that the parties are required to be governed by the principles of commercial prudence i.e. by the term of the contract itself. The principles of equity, as it has been sought to be pressed by the petitioner, that it would be resulting into a financial loss and that there would be inconsistency of the contract or a violation of a natural justice, may not have any stay over the proceedings governed by the contractual obligations.

21. The Hon'ble Apex Court, in the said judgement had laid down that the wider parameters while extending the principles laid down by the judgement of the Hon'ble Apex Court rendered in Michigan Rubber Vs. State of Karnataka, reported in 2012 (8) SCC 216, whereby the principles have been laid down in the said judgement.

22. Hence, based on the aforesaid principles, this Court is of the view, that if the said ratio laid town in paras 4, 5 and 6 of the Hon'ble Apex Court's judgment are taken into consideration, in fact, the principles of equity and natural justice will not have a foreplay over the terms of the contract, which is governed by the commercial prudence. Relevant paragraph of the Hon'ble Apex Court's judgement is extracted hereunder:-

2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance.

4. In a sense the Wednesbury principle is imported to the concept, i.e., the decision is so arbitrary and irrational that it can never be that any responsible authority acting reasonably and in accordance with law would have reached such a decision. One other aspect which would always be kept in mind is that the public interest is not affected. In the conspectus of the aforesaid principles, it was observed in Michigan Rubber v. State of Karnataka 8 SCC 216 as under:

23. From the above decisions, the following principles emerge:

(a) the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;

(b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting

tenders, in those circumstances, the interference by Courts is very limited;

(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;

(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and

(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very restrictive since no person can claim fundamental right to carry on business with the Government.

5. One other aspect examined by this Court is whether the terms and conditions of the tender have been tailor-made to suit a person/entity. In fact, this is what is sought to be contended in the facts of the present case by the Respondents who were the original Petitioners before the Court. In order to award a contract to a particular party, a reverse engineering process is evolved to achieve that objective by making the tender conditions such that only one party may fit the bill. Such an endeavour has been categorized as "Decision Oriented Systematic Analysis" (for short 'DOSA').

6. The burgeoning litigation in this field and the same being carried to this Court in most matters was the cause we set forth an epilogue in Caretel Infotech Ltd. v. Hindustan Petroleum Corporation Limited and Ors. Even if it amounts to repetition, we believe that it needs to be emphasized in view of the controversy arising in the present case to appreciate the contours within which the factual matrix of the present case has to be analysed and tested.

"37. We consider it appropriate to make certain observations in the context of the nature of dispute which is before us. Normally parties would be governed by their contracts and the tender terms, and really no writ would be maintainable Under Article 226 of the Constitution of India. In view of Government and public sector enterprises venturing into economic activities, this Court found it appropriate to build in certain checks and balances of fairness in procedure. It is this approach which has given rise to scrutiny of tenders in writ proceedings Under Article 226 of the Constitution of India. It, however, appears that the window has been opened too wide as almost every small or big tender is now sought to be challenged in writ proceedings almost as

a matter of routine. This in turn, affects the efficacy of commercial activities of the public sectors, which may be in competition with the private sector. This could hardly have been the objective in mind. An unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government and Public Sectors a cumbersome exercise, with long drawn out litigation at the threshold. The private sector is competing often in the same field. Promptness and efficiency levels in private contracts, thus, often tend to make the tenders of the public sector a non-competitive exercise. This works to a great disadvantage to the Government and the public sector.

38. In Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and Anr. (2016) 16 SCC 818, this Court has expounded further on this aspect, while observing that the decision-making process in accepting or rejecting the bid should not be interfered with. Interference is permissible only if the decision-making process is arbitrary or irrational to an extent that no responsible authority, acting reasonably and in accordance with law, could have reached such a decision. It has been cautioned that Constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute their view for that of the administrative authority. Mere disagreement with the decision-making process would not suffice.

39. Another aspect emphasised is that the author of the document is the best person to understand and appreciate its requirements. In the facts of the present case, the view, on interpreting the tender documents, of Respondent No. 1 must prevail. Respondent No. 1 itself, appreciative of the wording of Clause 20 and the format, has taken a considered view. Respondent No. 3 cannot compel its own interpretation of the contract to be thrust on Respondent No. 1, or ask the Court to compel Respondent No. 1 to accept that interpretation. In fact, the Court went on to observe in the aforesaid judgment that it is possible that the author of the tender may give an interpretation that is not acceptable to the constitutional Court, but that itself would not be a reason for interfering with the interpretation given. We reproduce the observations in this behalf as under:

"15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender

conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given."

40. We may also refer to the judgment of this Court in Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and Anr. (2018) 11 SCC 508, authored by one of us (Sanjay Kishan Kaul, J.). The legal principles for interpretation of commercial contracts have been discussed. In the said judgment, a reference was made to the observations of the Privy Council in Attorney General of Belize v. Belize Telecom Ltd.: (2009) 1 WLR 1988 as under:

"45.......16. Before discussing in greater detail the reasoning of the Court of Appeal, the Board will make some general observations about the process of implication. The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended...."

19......In Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board (1973) 1 WLR 601 (HL) Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:

...the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves.

41. Nabha Power Limited (NPL)4 also took note of the earlier judgment of this Court in Satya Jain v. Anis Ahmed Rushdie (2013) 8 SCC 131, which discussed the principle of business

efficacy as proposed by Bowen, L.J. in the Moorcock (1889) LR 14 PD 64 (CA). It has been elucidated that this test requires that terms can be implied only if it is necessary to give business efficacy to the contract to avoid failure of the contract and only the bare minimum of implication is to be there to achieve this goal. Thus, if the contract makes business sense without the implication of terms, the courts will not imply the same.

42. The judgment in Nabha Power Limited concluded with the following observations in para 72:

72. We may, however, in the end, extend a word of caution. It should certainly not be an endeavour of commercial courts to look to implied terms of contract. In the current day and age, making of contracts is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express terms. The implied terms is a concept, which is necessitated only when the Penta-test referred to aforesaid comes into play. There has to be a strict necessity for it. In the present case, we have really only read the contract in the manner it reads. We have not really read into it any 'implied term' but from the collection of clauses, come to a conclusion as to what the contract says. The formula for energy charges, to our mind, was quite clear. We have only expounded it in accordance to its natural grammatical contour, keeping in mind the nature of the contract.

43. We have considered it appropriate to, once again, emphasise the aforesaid aspects, especially in the context of endeavours of courts to give their own interpretation to contracts, more specifically tender terms, at the behest of a third party competing for the tender, rather than what is propounded by the party framing the tender. The object cannot be that in every contract, where some parties would lose out, they should get the opportunity to somehow pick holes, to disqualify the successful parties, on grounds on which even the party floating the tender finds no merit.

23. Thus, the writ petitions lack merit and the same are accordingly dismissed.

(Sharad Kumar Sharma, J.) 01.10.2021 Mahinder/