Dismissed

Competent Service v. Lala Ram Sarup Institute of Tb and Respiratory Diseases

Delhi HC6 Sept 2011W.P.(C)/6519/2011

Case brief

AI extract

What is this about?

This writ petition challenged the termination of an manpower services agreement by the respondent institute without stated reasons. The Court held that the contract allowed termination without notice of cause, and there was no public law element requiring judicial interference regarding the absence of reasons for dismissal.

What did the court decide?

The writ petition was dismissed; no order as to costs.

Competent Service Vs Lala Ram Sarup Institute… — Contract and Commercial Disputes | Delhi HC (2011)

¶1

*IN THE HIGH COURT OF DELHI AT NEW DELHI

¶2

Date of decision: 6^th September, 2011 + W.P.(C) 6519/2011

¶3

COMPETENT SERVICE ..... Petitioner Through: Mr. M.I. Chaudhary & Mr. Bharat Sharma, Advs.

¶4

Versus

¶5

LALA RAM SARUP INSTITUTE OF TB AND RESPIRATORY DISEASES ..... Respondent Through: None. CORAM : - HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW 1. Whether reporters of Local papers may Not necessary be allowed to see the judgment? 2. To be referred to the reporter or not? Not necessary 3. Whether the judgment should be reported Not necessary in the Digest? RAJIV SAHAI ENDLAW, J. 1. The petitioner, in December, 2010 had entered into an Agreement with the respondent, stated to be an autonomous institute under the Ministry of Health & Family Welfare of the Government of India, for providing manpower services. The term of the said Agreement was for one

¶6

W.P.(C)6519/2011

¶7

Page 1 of 6

¶8

year from 27.12.2010 to 26.12.2011. This writ petition has been filed impugning the letter dated 18.08.2011 of the respondent terminating the Agreement with the petitioner in exercise of powers under Clause 17 of the Contract.

¶9

It is not in dispute that Clause 17 of the Agreement / Contract authorizes the respondent to terminate the Contract with one month’s notice in writing and the petitioner upon receipt of such notice is obliged to discontinue the work accordingly.

¶10

The counsel for the petitioner has contended that the respondent has not given any reason whatsoever for termination. Reliance in this regard is placed on Clause 7 of the letter dated 27.11.2010 of the respondent to the petitioner offering the Contract to the petitioner upon the bid of the petitioner being found L1 in the tender process and as per which Clause, the Contract is terminable if the services were not found satisfactory. It is contended that there is no allegations of unsatisfactory services against the petitioner and thus the termination without reason is interferable by this Court in writ jurisdiction.

¶11

Though Clause 7 aforesaid entitles the respondent to terminate the W.P.(C)6519/2011 Page 2 of 6

¶12

Contract upon services rendered being unsatisfactory but without assigning any reason. Moreover, the letter dated 27.11.2010 containing the said Clause stood superseded by the Agreement aforesaid of a subsequent date and as per Clause 17 of which the respondent is entitled to terminate the Contract in its sole discretion and even without assigning any reason. Moreover, the nature of the Contract is not such which can be specifically enforceable. If the petitioner has any grievance, the remedy of the petitioner is to claim damages from the respondent.

¶13

The interference in writ jurisdiction in contractual matters is even otherwise very limited and can only be when a public law element is entailed as reiterated by the Apex Court in Kisan Sahkari Chini Mills Ltd. Vs. Vardan Linkers AIR 2008 SC 2160.

¶14

The counsel for the petitioner has sought to argue that an element of public law is entailed since no reason for termination has been given. However, the obligation to give reasons has to be seen contextually and without their being any requirement in the Contract to give reasons, merely because the respondent has in the letter of termination not given any reason would not entitle this Court to interfere. The Supreme Court in W.P.(C)6519/2011 Page 3 of 6

¶15

Maharashtra State Board of Secondary & Higher Secondary Education

¶16

v. K.S. Gandhi (1991) 2 SCC 716 held that omission to record reasons is

¶17

not necessarily illegal or violative of natural justice and depends upon the nature of enquiry and the effect of the decision on the rights of the person and attendant circumstances. As has often been said, the principles of natural justice cannot be applied in a vacuum without reference to the relevant facts and circumstances. In fact doubts have been expressed

¶18

whether duty to give reasons is a part of the principles of natural justice.

¶19

The counsel for the petitioner has lastly argued that only two months

¶20

of the Contract remain and notice of the writ petition be issued to find out the reasons which prevailed with the respondent to terminate the Contract. It is further stated that in another tender floated by the respondent, though the petitioner was again L1, the Contract was not awarded and a writ petition in that regard has been entertained by this Court.

¶21

However, the occasion for issuing notice of the petition would arise only when the petitioner makes out a prima facie case. The petitioner has also not pleaded mala fides of any officer of the respondent in the matter of termination. The only case is of principles of natural justice having not W.P.(C)6519/2011 Page 4 of 6

¶22

been complied with but as aforesaid, there was no such requirement in the Agreement. In the present case, the petitioner having failed to make out a prima facie case and the other factors aforesaid being irrelevant, no case of entertaining the petition is made out.

¶23

The counsel for the petitioner at this stage relies upon paras 5&6 in

¶24

Tulsipur Sugar Co. Ltd. Vs. The Notified Area Committee, Tulsipur (1980) 2 SCC 295. However, the observation therein were in the context of Section 3 of the U.P. Town Areas Act, 1914 whereunder the decision was of a judicial / quasi judicial nature and the Court recorded that there was, under the said provision, an express obligation to give reasons. There is no obligation in the present case which is of a Contract and when the Clause in the Contract under which the respondent has acted expressly stated that no reasons needs to be given. A power to deal with a contractual matter and a power of the statutory authority to exercise its statutory power in determining the rights and liabilities of the parties are distinct and different. Whereas reasons are required to be assigned in a case where civil or evil consequences may ensue, the same may not be necessary where it is contractual in nature (see Ramchandra Murarilal Bhattad v. State of W.P.(C)6519/2011 Page 5 of 6

¶25

Page 5 of 6

¶26

Maharashtra (2007) 2 SCC 588). The Courts in contractual matters have insisted on giving of reasons only where the action impugned is apparently contrary to logic i.e. say where the highest bid is not accepted.

¶27