The Single Bench of the Delhi High Court in the case of M/S TPF Engineering Pvt. Ltd & Anr. vs Union of India, Ministry of Road Transport and Highways & Ors. consisting of Justice Jyoti Singh, while interpreting Clause 2.9.6 of the General Conditions of Contract (“GCC”), observed that issuance of a termination notice does not ipso facto lead to termination of the contractual relationship and if within 45 days of receipt of the notice, contractor refers the matter to arbitration, the contract shall not be terminated except in accordance with resulting in arbitral award and the parties have thus crafted a protocol for termination of the contract.
Facts
This petition u/s 9 of the Arbitration and Conciliation Act, 1996 (‘1996 Act’) was filed by the Petitioners praying for an interim order staying the operation of the impugned notice dated 30.04.2022 issued by Respondents No.1 & 2 (‘Respondents’) seeking to terminate the Consultancy Agreement with the Petitioners. The disputes between the parties emanated from the Contract Agreement executed between the Petitioners as ‘Authority’s Engineer’ and the Respondents for the Work of Replacement of Superstructure of Existing Four-Lane Mahatma Gandhi Setu over Ganga River in NH-19, Patna.
Contentions Made
Appellant: Respondents have issued stagewise completion certificate to the Petitioners on being satisfied with the services rendered by them. The action is malafide being initiated when the 60 months long contract was to be concluded in the next 17 days. Conjoint reading of Clauses 2.8 and 2.9 of the Agreement establishes beyond certitude that the Petitioners were to be afforded an opportunity of remedying any defects/defaults, if any, prior to notice of suspension and only on failure to remedy, a notice of termination of 60 days could be issued which has not happened in the present case. The report rendered by the Petitioners was duly accepted by the Respondents. Completion Certificates were issued in favour of the Petitioners expressing satisfaction qua their work. Clause 2.9.6 of the Consultancy Agreement provides that if either party disputes whether an event specified in paragraphs (a) to (e) of Clause GC 2.9.1 or 2.9.2 has occurred, such party may within 45 days after receipt of termination notice refer the matter to arbitration and this contract shall not be terminated on account of such event except in accordance with the terms of any resulting arbitral award. Reliance was placed on Egis India Consulting Engineers Private Limited v. Pawan Hans Ltd. and M/S Eptisa Servicios De Ingeniera S.L. v. National Highways and Infrastructure Development Corporation Ltd.
Respondent: Agreement in question is a determinable contract. The effect of breach of a contract by a party seeking to specifically enforce the contract under the Indian Law is enshrined in Section 16(c) read with Section 41(e) of the Specific Relief Act, 1963 and the latter provision clearly provides that injunction cannot be granted to prevent the breach of a contract, performance of which cannot be specifically enforced. Reliance was placed on Rajasthan Breweries Ltd. v. The Stroh Brewery Company. Impugned notice terminated the contract of the Petitioners. They are no longer working on the site so no interim order can be granted in their favour at this stage.
Observations of the Court
The Bench observed that:
“Interpreting Clause 2.9.6 GCC and relying on the order in M/S Eptisa Servicios De Ingeniera S.L. (supra), the Court observed that if one reads Clause 2.9.6 carefully, it appears prima facie that issuance of a termination notice does not ipso facto result in termination of the contractual relationship and if within 45 days of receipt of the notice, contractor refers the matter to arbitration, the contract shall not be terminated except in accordance with resulting in arbitral award and the parties have thus crafted a protocol for termination of the contract. After so observing, the Court stayed the operation of the termination notice.”
Judgment
In the present case, the Petitioners disputed the validity of the said notice on several grounds and invoked the arbitration agreement within 45 days as envisaged in Clause 2.9.6. Hence, it was directed that till the next date of hearing, there shall be a stay on the operation of the impugned notice.
Case: M/S TPF Engineering Pvt. Ltd & Anr. vs Union of India, Ministry of Road Transport and Highways & Ors.
Citation: O.M.P.(I) (COMM.) 198/2022 & I.A. 9728-29/2022
Bench: Justice Jyoti Singh
Decided on: 17th June 2022
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