Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4912 OF 2008
(Arising out of S.L.P. (C) No. 1129 of 2007)
Pimpri Chinchwad Municipal Corporation
And Ors. …..Appellants
Versus
M/s Gayatri Construction Company and Anr. ….Respondents
J U D G M E N T
Dr. ARIJIT PASAYAT.
1. Leave granted.
2. Challenge in this appeal is to the judgment of a Division
Bench of the Bombay High Court allowing the Writ Petition
filed by the respondents.
3. Background facts in a nutshell are as follows:
Writ Petition was filed by respondents 1 and 2 taking the
stand that respondent No.1 was awarded a contract for the
work of improvement and widening of part of the Thermax-
Telco-Bhosari road which was divided in three phases and
contract for Phase-III (Approx. 3.7 Kms.) was given to the
them, whereas the tender of Phase-II with its cost at
Rs.8,61,63,048/- was awarded to another party (Approx. 3.3
Kms.) Though the tender amount was Rs.9 crores with a
discount at 9.01%, the contract price was fixed at
Rs.8,18,91,000/- and the letter by the Corporation to the
respondents was given on 7/4/2005 and the work was to be
completed within 12 months from that date. There is no
dispute that the work was not completed and the corporation
released an advertisement published in some of the local
newspapers on 30/6/2006 inviting tenders for the
improvement and widening of four roads, including the road
which was the subject matter of the contract awarded to the
respondents i.e. Item No. 3-A - Telco road. The approximate
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costs of this road in the advertisement has been shown to be
Rs.30 crores as against the original tender cost of Rs.17.6
crores. After the advertisement was released, the respondents
were issued a letter dated 19/7/2006 informing the
Corporation’s decision to take action under clause 3(a) of the
contract and the respondents were called upon to remain
present for final measurement on 27/6/2006. The
respondents submitted a representation on 25/7/2006 and by
its letter dated 1/8/2006 the corporation reiterated its action
as per the letter dated 19/7/2006. The respondents
approached the High Court on 22/8/2006 after they had
submitted another representation on 4/8/20006 to the
Corporation and the Corporation confirmed the decision to
stop work. The respondents filed writ petition challenging
action of appellants in releasing the advertisement and
inviting fresh tenders on 30/6/2006 for the very same work
which is part of the contract awarded to the respondents i.e.
Item No.3-A Improvement and Widening of remaining stretch
of Telco Road and consequently the attempt to terminate the
contract post facto by invoking clause 3(a) of the contract.
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The present appellants filed an affidavit in reply and
raised a preliminary objection as to the maintainability of the
writ petition. It was contended that the writ petitioners had an
alternative remedy for enforcement of the contract. In matters
flowing from the contract, a petition under Article 226 of the
Constitution of India, 1950 (in short the ‘Constitution’) cannot
be maintained. Further, disputed questions are involved. On
merits it was also contended that it was the contractor firm
which was responsible for not maintaining the contractual
terms and in spite of the contractual period having been over,
the work could not be completed and the contractors went on
insisting that the entire stretch of the road be handed over to
them so as to start and complete the work. In short the
contractors failed to complete the work in 12 months’ time
and therefore the contract was terminated.
The High Court found that though Clause 58 of the
agreement provided for inhouse remedy of representation for
settlement of disputes that cannot stand in the way of the
writ petition being entertained. It was submitted by writ
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petitioners that the cost of completing the work would be
much higher than what would have been payable to the writ
petitioners. The High Court referred to the Minutes of the
Corporation and held that the writ petitioners were justified in
challenging the Corporation’s action to invite fresh tenders for
the work allotted to it. It also referred to the undertaking given
by the writ petitioners to the effect that they were ready and
willing to execute the work but were unable to do so for
several reasons. The High Court, therefore, directed the
Corporation not to complete the work and to maintain status
quo in respect of Phase-III of Telco Road as well as the tenders
received for the said work in response to the advertisement
which was impugned before the High Court.
4. In support of the appeal, learned counsel for the
Corporation and its functionaries submitted that the High
Court lost sight of the objections raised as regards to the
maintainability of the writ petition. It was submitted that there
was cancellation of tender and fresh advertisement was
issued. The agreement provided inhouse mechanism in
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relation to dispute arising out of the contract. The High Court
did not consider this aspect. The High Court also did not take
note of the difference between the statutory contracts and
non-statutory contracts. Before the High Court the writ
petition was questioned on three grounds; (i) disputed
questions relates to facts were involved; (ii) to enforce the
terms of contractual rights remedy under the Civil Law is
available, and in any event, the writ petition was not
maintainable in respect of contractual matters. It was pointed
out that the writ petitioners were seeking relief of enforcement
of their contractual rights, and that several relevant and
material facts have been suppressed. In essence, it was
submitted that the above aspects have not been considered by
the High Court.
5. In response, learned counsel for the respondents-writ
petitioners submitted that the Corporation itself was guilty of
not providing the requisite infrastructure for carrying out the
contractual obligations. The difficulties have been highlighted
in various representations to the Corporation. But without any
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plausible reason and without following the principles of
natural justice the fresh advertisement was issued. It is also
pointed out that subsequently there appears to be the
settlement of the work at a huge cost.
6. So far as existence of the alternative remedy is concerned
Clause 58 of the agreement is relevant. The same reads as
under:
“Clause 58- All disputes & differences of any kind
whatever arising out of or in connection with the
contractor the carrying out of the work (whether
during the progress of the work or after their
complete & whether before or after the
determination, abandonment or breach of the
contract) shall be referred to & settled by the City
Engineer. But, if the contractor be dissatisfied with
the decision of the City Engineer or as to
withholding by the City Engineer of any certificate
to which the contractor may within 60 days after
receiving notice of such decision give a written
notice to the other party requiring that may claim to
entitled then & in any such case the contractor
such matter in dispute be referred to in open before
a Committee as mentioned below. Such written
notice shall specify the manner which are in
disputes & such disputes or difference of which
such notice has been given & no other shall be & is
hereby referred committee consisting of the
Commissioner, Pimpri Chinchwad Municipal
Corporation, the city engineer and project
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management consultant, the decision taken by the
parties will be final and binding on both the parties.
Such reference except as to the withholding of any
certificate to which the contractor to be entitled
shall not be opened or entered upon until after the
completion or alleged completion of the works or
until after the practical cessation of the City
Engineer. Provided always that the Corporation
shall not withhold the payment of an Interim
Certificate not the Contractor in any way delay the
carrying out of the works by reason of any such
matters, question or dispute being referred to the
Committee but shall proceed with the work with all
the diligence & shall, until the decision of the
Committee abide by the decision of the City
Engineer & no award of the Committee shall relive
the contractor of his obligations to adhere strictly to
the City Engineer's instructions with regard to the
actual carrying out of the works. The Owner & the
Contractor hereby also agree that the said reference
to the Committee under this clause shall be a
condition precedent to any right of action under the
Contract.”
7. In matters relating to maintainability of writ petitions in
contractual matters there are catena of decisions dealing with
the issue.
8. In National Highways Authority of India v. Ganga
Enterprises (2003 (7) SCC 410), it was inter alia held as
follows:
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“6. The respondent then filed a writ petition in
the High Court for refund of the amount. On
the pleadings before it, the High Court raised
two questions viz.: ( a ) whether the forfeiture of
security deposit is without authority of law
and without any binding contract between the
parties and also contrary to Section 5 of the
Contract Act; and ( b ) whether the writ petition
is maintainable in a claim arising out of a
breach of contract. Question ( b ) should have
been first answered as it would go to the root
of the matter. The High Court instead
considered Question ( a ) and then chose not to
answer Question ( b ). In our view, the answer
to Question ( b ) is clear. It is settled law that
disputes relating to contracts cannot be
agitated under Article 226 of the Constitution
of India. It has been so held in the cases of
Kerala SEB v. Kurien E. Kalathil (2000 (6) SCC
293) , State of U.P. v. Bridge & Roof Co. (India)
Ltd. (1996 (6) SCC 22) and Bareilly
Development Authority v. Ajai Pal Singh 1989
(2) SCC 116 . This is settled law. The dispute in
this case was regarding the terms of offer.
They were thus contractual disputes in respect
of which a writ court was not the proper
forum. Mr Dave, however, relied upon the
cases of Verigamto Naveen v. Govt. of A.P.
(2001 (8 SCC 344)) and Harminder Singh
Arora v. Union of India (1986 (3) SCC 247) .
These, however, are cases where the writ court
was enforcing a statutory right or duty. These
cases do not lay down that a writ court can
interfere in a matter of contract only. Thus on
the ground of maintainability the petition
should have been dismissed.”
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9. In Kerala State Electricity Board and Anr. v. Kurien E.
Kalathil and Ors. (2000 (6) SCC 293), this Court dealt with the
question of maintainability of petition under Article 226 of the
Constitution and the desirability of exhaustion of remedies
and availability of alternative remedies, as also difference
between statutory contracts and non-statutory contracts. In
paras 10 and 11 of the judgment it was noted as follows:
“10. We find that there is a merit in the first
contention of Mr Raval. Learned counsel has
rightly questioned the maintainability of the
writ petition. The interpretation and
implementation of a clause in a contract
cannot be the subject-matter of a writ petition.
Whether the contract envisages actual
payment or not is a question of construction of
contract. If a term of a contract is violated,
ordinarily the remedy is not the writ petition
under Article 226. We are also unable to agree
with the observations of the High Court that
the contractor was seeking enforcement of a
statutory contract. A contract would not
become statutory simply because it is for
construction of a public utility and it has been
awarded by a statutory body. We are also
unable to agree with the observation of the
High Court that since the obligations imposed
by the contract on the contracting parties
come within the purview of the Contract Act,
that would not make the contract statutory.
10
Clearly, the High Court fell into an error in
coming to the conclusion that the contract in
question was statutory in nature.
11. A statute may expressly or impliedly
confer power on a statutory body to enter into
contracts in order to enable it to discharge its
functions. Dispute arising out of the terms of
such contracts or alleged breaches have to be
settled by the ordinary principles of law of
contract. The fact that one of the parties to the
agreement is a statutory or public body will
not by itself affect the principles to be applied.
The disputes about the meaning of a covenant
in a contract or its enforceability have to be
determined according to the usual principles
of the Contract Act. Every act of a statutory
body need not necessarily involve an exercise
of statutory power. Statutory bodies, like
private parties, have power to contract or deal
with property. Such activities may not raise
any issue of public law. In the present case, it
has not been shown how the contract is
statutory. The contract between the parties is
in the realm of private law. It is not a statutory
contract. The disputes relating to
interpretation of the terms and conditions of
such a contract could not have been agitated
in a petition under Article 226 of the
Constitution of India. That is a matter for
adjudication by a civil court or in arbitration if
provided for in the contract. Whether any
amount is due and if so, how much and
refusal of the appellant to pay it is justified or
not, are not the matters which could have
been agitated and decided in a writ petition.
The contractor should have relegated to other
remedies.”
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10. Reference can also be made to State of Gujarat and Ors.
v. Meghji Pethraj Shah Charitable Trust and Ors. (1994 (3)
SCC 552). In para 22 it was observed as follows:
“22. We are unable to see any substance in
the argument that the termination of
arrangement without observing the principle of
natural justice ( audi alteram partem ) is void.
The termination is not a quasi-judicial act by
any stretch of imagination; hence it was not
necessary to observe the principles of natural
justice. It is not also an executive or
administrative act to attract the duty to act
fairly. It was — as has been repeatedly urged
by Shri Ramaswamy — a matter governed by a
contract/agreement between the parties. If the
matter is governed by a contract, the writ
petition is not maintainable since it is a public
law remedy and is not available in private law
field, e.g., where the matter is governed by a
non-statutory contract. Be that as it may, in
view of our opinion on the main question, it is
not necessary to pursue this reasoning
further.”
11. Again in State of U.P. and Ors. v. Bridge & Roof Company
(India) Ltd. (1996 (6) SCC 22), this Court dealt with the issue
in paras 15 and 16 in the following manner:
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“15. In our opinion, the very remedy adopted
by the respondent is misconceived. It is not
entitled to any relief in these proceedings, i.e.,
in the writ petition filed by it. The High Court
appears to be right in not pronouncing upon
any of the several contentions raised in the
writ petition by both the parties and in merely
reiterating the effect of the order of the Deputy
Commissioner made under the proviso to
Section 8-D(1).
16. Firstly, the contract between the parties is
a contract in the realm of private law. It is not
a statutory contract. It is governed by the
provisions of the Contract Act or, maybe, also
by certain provisions of the Sale of Goods Act.
Any dispute relating to interpretation of the
terms and conditions of such a contract
cannot be agitated, and could not have been
agitated, in a writ petition. That is a matter
either for arbitration as provided by the
contract or for the civil court, as the case may
be. Whether any amount is due to the
respondent from the appellant-Government
under the contract and, if so, how much and
the further question whether retention or
refusal to pay any amount by the Government
is justified, or not, are all matters which
cannot be agitated in or adjudicated upon in a
writ petition. The prayer in the writ petition,
viz., to restrain the Government from
deducting a particular amount from the writ
petitioner’s bill(s) was not a prayer which
could be granted by the High Court under
Article 226. Indeed, the High Court has not
granted the said prayer.”
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12. At para 11 of India Thermal Power Ltd. v. State of M.P.
and Ors. (2000 (3) SCC 379), it was observed as follows:
“11 . It was contended by Mr. Cooper, learned
Senior Counsel appearing for appellant GBL
and also by some counsel appearing for other
appellants that the appellant/IPPs had
entered into PPAs under Sections 43 and 43-A
of the Electricity Supply Act and as such they
are statutory contracts and, therefore, MPEB
had no power or authority to alter their terms
and conditions. This contention has been
upheld by the High Court. In our opinion the
said contention is not correct and the High
Court was wrong in accepting the same.
Section 43 empowers the Electricity Board to
enter into an arrangement for purchase of
electricity on such terms as may be agreed.
Section 43-A(1) provides that a generating
company may enter into a contract for the sale
of electricity generated by it with the Electricity
Board. As regards the determination of tariff
for the sale of electricity by a generating
company to the Board, Section 43(1)(2)
provides that the tariff shall be determined in
accordance with the norms regarding
operation and plant-load factor as may be laid
down by the authority and in accordance with
the rates of depreciation and reasonable
return and such other factors as may be
determined from time to time by the Central
Government by a notification in the Official
Gazette. These provisions clearly indicate that
the agreement can be on such terms as may
be agreed by the parties except that the tariff
is to be determined in accordance with the
provision contained in Section 43-A(2) and
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notifications issued thereunder. Merely
because a contract is entered into in exercise
of an enabling power conferred by a statute
that by itself cannot render the contract a
statutory contract. If entering into a contract
containing the prescribed terms and
conditions is a must under the statute then
that contract becomes a statutory contract. If
a contract incorporates certain terms and
conditions in it which are statutory then the
said contract to that extent is statutory. A
contract may contain certain other terms and
conditions which may not be of a statutory
character and which have been incorporated
therein as a result of mutual agreement
between the parties. Therefore, the PPAs can
be regarded as statutory only to the extent
that they contain provisions regarding
determination of tariff and other statutory
requirements of Section 43-A(2). Opening and
maintaining of an escrow account or an escrow
agreement are not the statutory requirements
and, therefore, merely because PPAs
contemplate maintaining escrow accounts that
obligation cannot be regarded as statutory”.
13. Therefore, the High Court ought not to have entertained
the writ petition. Additionally, it appears that by order dated
17.1.2007 interim stay of the impugned order was granted
and was continued by order dated 12.2.2007. It is pointed
out by learned counsel for the appellants that since the order
of the High Court was stayed and there was urgency in the
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matter fresh tenders were called for. Three persons submitted
the bids and the work has already been allotted and a
considerable portion of the work has already been completed.
In view of aforesaid, we set aside the impugned order of the
High Court and direct dismissal of the writ petition. It is
however open to the respondents-writ petitioners to seek such
remedy, if so advised, as is available in law. We do not express
any opinion in that regard.
14. The appeal is allowed. There shall be no order as to
costs.
………………………….……….J.
(Dr. ARIJIT PASAYAT)
……………………………………J.
(Dr. MUKUNDAKAM SHARMA)
New Delhi,
August 6, 2008
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