Dismissed

Il and Fs Engineering and Construction Company Limited through Satyanarayana Vishnupanth v. Jharkhand Bijli Vitran Nigam Limited through Its Managing Director

Jharkhand HC3 Jul 2019WPC/1761/2019

Case brief

AI extract

What is this about?

Several writ petitions challenging the cancellation of Letter of Award and termination of contract agreements by Jharkhand Bijli Vitran Nigam Limited. The Court held that disputes regarding breach of contract, interpretation of terms, and termination for public interest are commercial matters beyond the scope of Article 226 jurisdiction, especially where work has been allotted to others.

What did the court decide?

The writ petitions were dismissed; the cancellation of the Letter of Award and termination of the contract were upheld.

Il and Fs Engineering and Construction… — Contract and Commercial Disputes | Jharkhand HC (2019)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(C) No.1761 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Satyanarayana Vishnupanth, aged about 40 years, son of V Srinivas, resident of Safilguda, P.O. R K Puram, P.S. Neredmet, District Hyderabad, Telangana.

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…… Petitioner

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Versus

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Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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General Manager (R-APDRP), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Sri Gopikrishna Infrastructure Private Limited, having its office at H.No.30/B (8-3-191/162), Vengalrao Nagar, P.O. S.R. Nagar, P.S. S.R. Nagar, District Hyderabad, Telangana.

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Gupta Transformer & Products Ltd., having its office at 5^th KM Stone, Meerut road, Opposite Gagan Dham Kanta, Muzaffarnagar, P.O. Muzaffarnagar, P.S. Phugana Muzaffarnagar, District Muzaffarnagar, Uttar Pradesh.

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Suncity Private Ltd., having its office at 83, Devi Nagar, New Sanganer Road, Sodala, Jaipur, P.O. Shyam Nagar, P.S. Sodala, District Jaipur, Rajasthan.

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…… Respondents

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WITH

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W.P.(C) No.1837 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Gourahari Swain, aged about 41 years, son of Nityananda Swain, resident of Hanspal, P.O. Balianta, P.S. Balianta, District Khurdha, Odisha.

…… Petitioner

Versus

Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Executive Director (Project)-cum-General Manager (RP), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Chief Engineer (R.E.), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Sri Gopikrishna Infrastructure Private Limited, having its office at H.No.30/B (8-3-191/162), Vengalrao Nagar, P.O. S.R. Nagar, P.S. S.R. Nagar, District Hyderabad, Telangana.

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Jakson Ltd., having its office at A-43, Phase II (Extension), P.O. Chhaprauli Bengar, P.S. Sector 49, Noida, District Gautam Buddh Nagar, Uttar Pradesh.

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…… Respondents

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WITH

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W.P.(C) No.1838 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Gourahari Swain, aged about 41 years, son of Nityananda Swain, resident of Hanspal, P.O. Balianta, P.S. Balianta, District Khurdha, Odisha.

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…… Petitioner

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Versus

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Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Executive Director (Project)-cum-General Manager (RP), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Chief Engineer (R.E.), Jharkhand Bijli Vitran Nigam Limited, having

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his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Suncity Private Ltd., having its office at 83, Devi Nagar, New Sanganer Road, Sodala, Jaipur, P.O. Shyam Nagar, P.S. Sodala, District Jaipur, Rajasthan.

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Anvil Cables Private Limited, having its office at 102, Krishna 224, AJC Bose Road, P.O. Shakespeare Sarani, P.S. Circus Avenue, District Kolkata, West Bengal.

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…… Respondents

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WITH

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W.P.(C) No.1851 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Gourahari Swain, aged about 41 years, son of Nityananda Swain, resident of Hanspal, P.O. Balianta, P.S. Balianta, District Khurdha, Odisha.

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…… Petitioner

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Versus

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Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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General Manager (R-APDRP), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Sri Gopikrishna Infrastructure Private Limited, having its office at H.No.30/B (8-3-191/162), Vengalrao Nagar, P.O. S.R. Nagar, P.S. S.R. Nagar, District Hyderabad, Telangana.

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Jakson Ltd., having its office at A-43, Phase II (Extension), P.O. Chhaprauli Bengar, P.S. Sector 49, Noida, District Gautam Buddh Nagar, Uttar Pradesh.

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…… Respondents

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WITH

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W.P.(C) No.1853 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered

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office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Gourahari Swain, aged about 41 years, son of Nityananda Swain, resident of Hanspal, P.O. Balianta, P.S. Balianta, District Khurdha, Odisha.

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…… Petitioner

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Versus

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Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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General Manager (R-APDRP), Jharkhand Bijli Vitran Nigam Limited, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Sri Gopikrishna Infrastructure Private Limited, having its office at H.No.30/B (8-3-191/162), Vengalrao Nagar, P.O. S.R. Nagar, P.S. S.R. Nagar, District Hyderabad, Telangana.

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WITH

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W.P.(C) No.1854 of 2019

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IL & FS Engineering & Construction Company Limited, having its registered office at 4^th Floor, Sanali Info Park Cyber Towers, Road No.2, Banjara Hills, P.O. and P.S. Banjara Hills, District Hyderabad, Telangana, through its Authorised Signatory Gourahari Swain, aged about 41 years, son of Nityananda Swain, resident of Hanspal, P.O. Balianta, P.S. Balianta, District Khurdha, Odisha.

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…… Petitioner

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Versus

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Jharkhand Bijli Vitran Nigam Limited, through its Managing Director, having its office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Executive Director (Project)-cum-General Manager (RP), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi.

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Chief Engineer (R.E.), Jharkhand Bijli Vitran Nigam Limited, having his office at Engineering Building, HEC, Dhurwa, P.O. Dhurwa, P.S.

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Jagannathpur, District Ranchi.

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Sri Gopikrishna Infrastructure Private Limited, having its office at H.No.30/B (8-3-191/162), Vengalrao Nagar, P.O. S.R. Nagar, P.S. S.R. Nagar, District Hyderabad, Telangana.

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Anvil Cables Private Limited, having its office at 102, Krishna 224, AJC Bose Road, P.O. Shakespeare Sarani, P.S. Circus Avenue, District Kolkata, West Bengal.

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Eka Chakra Electrical Works, D-40, Phase I, Jeedimetia, P.O. Gajularamaram, P.S. Jeedimetia Tirumalagiri, District Hyderabad, Telangana.

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…… Respondents

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CORAM: HON’BLE MR. JUSTICE SUJIT NARAYAN PRASAD

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For the Petitioner : Mr. R. S. Majumdar, Advocate For the Resp-JBVNL : Mr. Ajit Kumar, Sr. Advocate Mr. Navin Kumar, Sr. SC Mr. Dheeraj Kumar, SC ----------------------------

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07 / Dated 03rd July, 2019

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These writ petitions have been heard together and are being disposed of by this common order.

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These writ petitions are under Article 226 of the Constitution of India whereby and whereunder the decision of the respondent-authority by which the work awarded to the petitioner has been cancelled as also for quashing the work order issued in favour of the private respondent.

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The brief facts of the case of the petitioner is that the respondent Jharkhand Bijli Vitaran Nigam Limited, in short J.B.V.N.L. has come out with a tender notice on 31.08.2016 inviting applications for the work of Urban Electrification Works of Jamshedpur Electric Supply Area of Jharkhand Under Integrated Power Development Scheme.

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The petitioner having been declared to be successful bidder was issued two Letter of Intents (LoI) and the work in terms of the condition of the Letter of Intents was of 24 months from the date of

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its issuance.

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The petitioner has started the execution of the work but due to the reason beyond the control i.e., the petitioner has been dragged to the proceeding of Insolvency and Bankruptcy Code, 2016, there was hindrance in the work and hence, the work in question could not have been completed within the period specified, in consequence thereof, the LoA has been cancelled and as such the contract agreement has also been terminated.

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It is the case of the petitioner that since the reason for noncompletion of the work as per the terms of the contract was not within the domain of the petitioner, therefore, the work could not have been completed and hence, the consideration ought to have been made by the authority concerned before cancelling the LoA and terminating the contract agreement but having not done so, the authority at the moment also is to consider the grievance by reissuing the Letter of Intent or Letter of Award so that the petitioner may be able to execute the work in its entirety.

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Mr. Ajit Kumar, learned senior counsel appearing for the J.B.V.N.L. has submitted that the petitioner has been issued with LoI and in terms thereof, the contract has been entered by virtue of which the work was to be completed, considering the public urgency, within time, but having not done so, a show cause notice was issued for submission of his reply but the authority after its consideration has found that the petitioner has committed serious breach of contract, therefore, has cancelled the LoA and terminated the contract agreement.

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His further submission is that after cancellation of the LoA vide impugned order, the competent authority considering the public interest at large, has allotted the work in favour of others in whose favour LoI has been issued and they have commenced the work, although, no agreement having been entered into, therefore, at this moment no relief can be granted to the petitioner for the reason that once the contract has been terminated and the other contractor has come in picture, who has started the work, the same needs no

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consideration.

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Further submission has been made that it is the question of breach of contract on the ground that the serious irregularity has been found to be committed by flouting the terms and conditions of the contract which is not a statutory one, therefore, the jurisdiction conferred to this Court under Article 226 of the Constitution of India may not be interfered with.

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Having heard the learned counsel for the parties and on appreciation of their rival submissions, the fact which is not in dispute in this case is that in terms of the notice inviting tender the petitioners have been found to be successful and accordingly, LoI has been issued and in consequence thereupon, the contract agreement has been signed.

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The petitioners have commenced with the work but in the meanwhile, show cause notice has been issued alleging therein that the petitioner has failed to adhere to its obligation by not achieving the required progress of the project as per PERT schedule with regard to Material mobilization, Manpower mobilization & Erection work at site.

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The said show cause notice has been responded by the petitioner stating therein that they are discussing details to subcontract balance portion of the work to an agency, therefore, the said reply has been found to be vague and showing non-confirmation and in view thereof, the authority having not found the reply satisfactory, has proceeded by cancelling the LoA as also by terminating the contract agreement.

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The petitioner has taken stand that the reason for breach of contract is that the petitioner-establishment has been dragged to the proceeding of Insolvency and Bankruptcy Code, 2016 in which the moratorium initially had been granted under Section 14 of the I.B.C. Code, 2016 but subsequently it has been granted and now the petitioner-establishment is ready to execute the work, therefore, appropriate order may be passed.

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The question herein is that when a contract has been entered in

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between the parties containing certain conditions, the same binds the parties, if there would be any interference by the court of law overriding the terms of the contract, it will amount to dictating the terms of the contract by the court of law which is not permissible by the High Court sitting under Article 226 of the Constitution of India, reference in this regard may be made to the judgement rendered in the case of Union Territory of Pondicherry and Ors Vs. P.V. Suresh and Ors., reported in (1994) 2 SCC 70 wherein at paragraph 11 & 12 it has been held that the Court has no jurisdiction to alter the terms or re-write the contract between the parties.

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In the case of Polymat India (P) Ltd. and Anr. Vs. National Insurance Co. Ltd. and Ors., reported in (2005) 9 SCC 174 wherein the Hon’ble Apex Court by taking aid of the judgment rendered in the case of United India Insurance Co. Ltd. Vs. M.K.J. Corp., reported in (1996) 6 SCC 428 has been pleased to observe that “after the completion of the contract, no material alteration can be made in its terms except by mutual consent”.

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It is further settled that if the contract between the parties is in the realm of the private law, not being 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 of agitation by a Civil Court or in arbitration if provided for in the contract. Reference in this regard may be made to the judgment rendered by the Hon’ble Supreme Court in the case of Kerala State Electricity Board and Anr. Vrs. Kurien E. Kalathil and Ors., reported in (2000) 6 SCC 293.

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In the light of the aforesaid position of law, it transpires to this Court that there is a clause i.e., sub-clause 36.2 in the general clause which reads hereunder as :

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“a) if the Contractor becomes bankrupt or insolvent, has a receiving order issued against it, compounds with its creditors, or, if the Contractor is a corporation, a resolution is passed or order is made for its winding

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up (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), a receiver is appointed over any part of its undertaking or assets, or if the Contractor takes or suffers any other analogous action in consequence of debt.

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b) If the Contractor assigns or transfers the cContract or any right or interest therein in violation of the provision of GCC Clause 37.

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c) If the Contractor, in the judgment of the Employer has engaged in corrupt or fraudulent practices in competing for or in executing the Contract.

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d) If the contractor fails to achieve mutually agreed deadline (as set in mutually agreed Project Execution Plan/PERT chart) for consecutive 3 months, Employer shall issue contract termination notice giving suitable time to contractors which may be up to time agreed between employer and contractor. In case, contractor does not improve its performance as per contract termination notice, which shall be within overall plan under mutually agreed project execution plan, employer will terminate the contract and encash performance securities.”

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It is evident from the aforesaid contract that if the contractor becomes bankrupt or insolvent, has a receiving order issued against it, compounds with its creditors, or, if the contractor is a corporation, a resolution is passed or order is made for its winding up (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), a receiver is appointed over any part of its undertaking or assets, or if the contractor takes or suffers any other analogous action in consequence of debt.

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Further, if the contractor assigns or transfers the contract or any right or interest therein in violation of the provision of GCC Clause 37.

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Further, if the contractor, in the judgment of the Employer has engaged in corrupt or fraudulent practices in competing for or in executing the contract.

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As would be evident from the reasoning recorded in the impugned order wherein response submitted by the petitioner in terms of the

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show cause notice wherein it has been admitted that they are discussing details to subcontract balance portion of the work to an agency, meaning thereby, they have resorted to an amount which is contrary to the provision of GCC Clause 37.

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Further it is evident that the work progress was very slow which has been considered to be detrimental to the public interest, therefore, the authorities have come to the conclusion that there is serious breach of contract and therefore, the LoA has been cancelled and the contract agreement has been terminated.

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Now the question herein is that when the petitioner has been given the show cause notice which has been responded to wherein no reference of a proceeding pending before the competent authority or forum under the provision of IBC Code, 2016 has been referred, can it be considered by this Court sitting over upon the reply already filed by the petitioner in terms of the show cause.

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The answer of this would be in negative, since when the show cause notice has been issued hence it is incumbent upon the concerned upon whom the show cause notice has been issued to give proper reply for its proper consideration, and if it has been considered by taking a final decision, the court of law cannot sit over upon the said decision.

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The question of sitting over upon a decision by the court of law would arise only when there is no proper consideration of the reply submitted by the concerned but that is not the case herein.

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The question of interference by the High Court in the matter of contract fell for consideration before the Hon'ble Apex Court, reference may be made to the judgment rendered in the case of Tata Cellular vs. Union of India, reported in (1994) 6 SCC 651 wherein the Hon'ble Apex Court has been pleased to hold, which reads hereunder as :

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“Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making

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process itself. It is thus different from an appeal. When hearing an appeal, the Court is concerned with the merits of the decision under appeal. Since the power of judicial review is not an appeal from the decision, the Court cannot substitute its own decision. Apart from the fact that the Court is hardly equipped to do so, it would not be desirable either. Where the selection or rejection is arbitrary, certainly the Court would interfere. It is not the function of a judge to act as a superboard, or with the zeal of a pedantic schoolmaster substituting its judgment for that of the administrator.”

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Reference may also be made to the judgment rendered in the case of Siemens Public Communication Networks Private Limited and Anr. vs. Union of India and Ors., reported in (2008) 16 SCC 215 wherein at paragraph 40 the Hon'ble Apex Court has been pleased to hold as under :

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“ 40. ….... When the power of judicial review is invoked in

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the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna.”

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In view of the proposition laid down therein, the High Court is not supposed to interfere in a matter of breach of contract by exercising the power conferred to this Court under Article 226 of the Constitution of India.

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Furthermore, herein, since the LoI has been issued in favour of the other contractors who are continuing with work, therefore, it would not be proper for this Court to review the decision taken by the concerned authority unless the said LoI and the issuance of work order are not being questioned by the petitioner.

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