Allowed

The Kerala State Road Transport Corporation Ksrtc v. Centre for Development of Advanced Computing (Cdac)

Kerala HC20 Oct 2021WP(C)/20412/2021

Case brief

AI extract

What is this about?

This judgment disposed of two linked writ petitions filed by CDAC against KSRTC. The Court held that while disputes were subject to arbitration, the High Court could intervene when the public authority acted unfairly. The Court directed KSRTC to return the proceeds of bank guarantees invoked for an impermissible purpose and contrary to an interim stay order, directing parties to the rest of the di

What did the court decide?

Directed the Corporation to return forthwith the proceeds of the bank guarantees to the petitioner and directed the parties to resolve the rest of the disputes via arbitration as per the work order.

The Kerala State Road Transport Corporation… — Contract and Commercial Disputes | Kerala HC (2021)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR WEDNESDAY, THE 20^TH DAY OF OCTOBER 2021 / 28TH ASWINA, 1943 WP(C) NO. 13145 OF 2021

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PETITIONER:

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CENTRE FOR DEVELOPMENT OF ADVANCED COMPUTING (C-DAC) (R & D ORGANIZATION OF THE MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY, GOVERNMENT OF INDIA), P.B.NO.6520, VELLAYAMBALAM, THIRUVANANTHAPURAM695033, REPRESENTED BY ITS EXECUTIVE DIRECTOR, MAGESH ETHIRAJAN.

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BY ADVS. R.T.PRADEEP D.S.JAYACHANDRAN (KOLLEMCODE) M.BINDUDAS K.C.HARISH

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RESPONDENTS:

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1 KERALA STATE ROAD TRANSPORT CORPORATION (KSRTC) TRANSPORT BHAVAN, FORT, THIRUVANANTHAPURAM-695023. REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR.

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2 CHAIRMAN AND MANAGING DIRECTOR, KERALA STATE ROAD TRANSPORT CORPORATION(KSRTC) TRANSPORT BHAVAN, FORT, THIRUVANANTHAPURAM-695023.

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3 CANARA BANK, CDAC CAMPUS, VELLAYAMBALAM, REPRESENTED BY ITS BRANCH MANAGER-695010.

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BY ADVS. DEEPU THANKAN SC M.GOPIKRISHNAN NAMBIAR SC KURYAN THOMAS K.JOHN MATHAI JOSON MANAVALAN PAULOSE C. ABRAHAM RAJA KANNAN

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W.P.(c) Nos.13145 & 20412 of 2021

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R.T.PRADEEP D.S.JAYACHANDRAN BINDU DAS M

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K.C.HARISH

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 20.10.2021, ALONG WITH WP(C).20412/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(c) Nos.13145 & 20412 of 2021

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR WEDNESDAY, THE 20^TH DAY OF OCTOBER 2021 / 28TH ASWINA, 1943 WP(C) NO. 20412 OF 2021

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PETITIONER:

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THE KERALA STATE ROAD TRANSPORT CORPORATION (KSRTC) TRANSPORT BHAVAN, EAST FORT, THIRUVANANTHAPURAM - 695023, REPRESENTED BY THE AUTHORISED SIGNATORY, SMT. HENA P.N., DEPUTY LAW OFFICER,

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BY ADV DEEPU THANKAN

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RESPONDENT:

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CENTRE FOR DEVELOPMENT OF ADVANCED COMPUTING (CDAC) (R & D ORGANIZATION OF THE MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY, GOVERNMENT OF INDIA), P.B. NO. 6520, VELLAYAMBALAM, THIRUVANANTHAPURAM, KERALA - 695033. REPRESENTED BY ITS EXECUTIVE DIRECTOR.

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BY ADVS. SAIJO HASSAN NAGARAJ NARAYANAN SC RAFEEK. V.K. BENOJ C AUGUSTIN P.PARVATHY U.M.HASSAN

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 20.10.2021, ALONG WITH WP(C).13145/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(c) Nos.13145 & 20412 of 2021

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P.B.SURESH KUMAR, J.

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W.P.(C) Nos.13145 & 20412 of 2021

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Dated this the 20^th day of October, 2021

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J U D G M E N T

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The questions arising for consideration in these matters are closely interlinked and they are, therefore, disposed of by this common judgement. Parties and documents are referred to in this judgement, as they appear in WP(C) No.13145 of 2021.

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The petitioner is an organisation under the Ministry of Electronics and Information Technology, Government of India. They submitted a proposal to the first respondent, the Kerala State Road Transport Corporation (the Corporation) for development of a software for the Corporation. The Corporation accepted the proposal and issued Ext.P2 Letter of Intent subject to various conditions. The petitioner accepted Ext.P2 Letter of Intent in terms of Ext.P3

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W.P.(c) Nos.13145 & 20412 of 2021

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communication. On receipt of Ext.P3 communication, the Corporation issued Ext.P4 work order to the petitioner. Though a formal agreement was not executed between the parties in connection with the work, on receipt of the work order, the petitioner commenced the work of development of the software. In terms of the work order, the petitioner is entitled to 30% of the project cost by way of mobilisation advance against bank guarantee and in order to receive the mobilisation advance, the petitioner raised an invoice and furnished two bank guarantees, covering 30% of the project cost. Exts.P7 and P8 are the bank guarantees furnished by the petitioner to the Corporation. It is stated by the petitioner that though bank guarantees have been furnished by the petitioner in terms of the work order, the Corporation did not release the mobilisation advance. Later, on 12.1.2021, the Corporation issued Ext.P11 communication to the petitioner stating that as the Corporation is not confident that the petitioner will be able to complete the work to their satisfaction, they have decided not to release the mobilisation advance. Thereafter, on 12.2.2021, the

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W.P.(c) Nos.13145 & 20412 of 2021

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Corporation issued Ext.P12 communication to the petitioner informing them that since the work has not progressed in the expected pace and quality, the Corporation has decided to cancel the work order, and called upon the petitioner why they shall not resort to such action. It is stated by the petitioner that by then, the petitioner had incurred a sum of Rs.21.88 lakhs by way of expenditure for the project. Though the petitioner has pointed out to the Corporation in response to Ext.P12 communication that they have not committed breach of any of the terms of the work order, the Corporation issued Ext.P16 communication to the petitioner affirming their decision to cancel the work order.

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The petitioner thereupon issued Ext.P18 communication to the Corporation requesting the Corporation to release the bank guarantees furnished by them for mobilisation advance and also to reimburse the expenditure incurred by them in connection with the project. While so, on 29.6.2021, the Corporation invoked the bank guarantees furnished by the petitioner on the ground that the petitioner has not returned the data provided to

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W.P.(c) Nos.13145 & 20412 of 2021

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them by the Corporation in connection with the project. Ext.P20 is the communication addressed by the Corporation to the bank which has issued the bank guarantees in this regard. The writ petition was filed on coming to know of the said communication, on 1.7.2021 seeking directions to the Corporation to refrain from invoking the bank guarantees.

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Although this Court passed an interim order in the writ petition on 1.7.2021 itself directing the parties to maintain status quo as regards the bank guarantees after hearing the learned Standing Counsel for the Corporation, the Corporation collected the proceeds of the bank guarantees on the same day itself.

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A counter affidavit has been filed by the Corporation stating, among others, that the work order issued by the Corporation provides that disputes and differences between the parties shall be resolved by way of arbitration and the writ petition seeking reliefs in respect of matters covered by the work order is therefore not maintainable. It is also stated in the counter affidavit that the Corporation had to cancel the work order since the progress of the

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W.P.(c) Nos.13145 & 20412 of 2021

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work was not satisfactory; that the petitioner ought to have returned the data provided to them by the Corporation in connection with the project on cancellation of the work order and the bank guarantees have been invoked since the petitioner has demanded the expenditure incurred by them in connection with the project and that the Corporation would not have invoked the bank guarantees, had the petitioner returned the data.

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When WP(C) No.13145 of 2021 was heard, it was felt

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that the dispute being one between a Central Government organisation and a State Government undertaking, the same has to be resolved otherwise than by a judicial process and consequently adjourned the matter for exploring the possibility of an amicable settlement.

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Later, when the matter was taken up, it was reported that there was no amicable settlement of the dispute. Though the parties blamed each other for not arriving at an amicable settlement, since it was felt that it is unnecessary to go into the correctness of the reasons put forth by the parties for not arriving at

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W.P.(c) Nos.13145 & 20412 of 2021

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the settlement, the learned counsel were heard on the merits of the matter.

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After the conclusion of the hearing, the learned counsel for the Corporation submitted that the Corporation is also intending to institute a writ petition against the petitioner seeking reliefs in connection with the project. In the light of the said submission, W.P.(C) No.13145 was adjourned with a view to take up the matter along with the writ petition proposed by the Corporation.

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Thereupon, on 24.9.2021, W.P.(C) No.20412 of 2021 was instituted by the Corporation seeking directions to the petitioner to return to them the data provided by them to the petitioner in connection with the project. As already stated in the counter affidavit filed in W.P.(C)No.13145 of 2021, the case set out by the Corporation W.P.(C) No. 20412 of 2021 is that the conduct on the part of the petitioner in withholding the data of the Corporation even after the cancellation of the work order is arbitrary.

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W.P.(c) Nos.13145 & 20412 of 2021

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Heard the learned counsel for the petitioner as also the learned learned Standing Counsel for the Corporation.

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The fact that the work order issued by the Corporation to the petitioner enables the petitioner to claim 30% of the project cost by way of mobilisation advance against bank guarantee is not disputed by the Corporation. Similarly, the fact that the bank guarantees referred to in the writ petition are the bank guarantees furnished by the petitioner for the said purpose is also not disputed by the Corporation. Again, the fact that mobilisation advance has not been provided by the Corporation to the petitioner against the bank guarantees is not disputed by the Corporation. When a bank guarantee is furnished by a party to a contract for a purpose mentioned in the contract, it is trite that the same can be invoked only for the purpose provided for in the contract, for invocation of the bank guarantee for a purpose other than one provided for in the contract would be against the contemplation of the contract which has to be respected by the parties concerned. Reverting to the facts, the specific case of the Corporation in the

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W.P.(c) Nos.13145 & 20412 of 2021

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writ petition is that the bank guarantees have been invoked by the Corporation as the petitioner demanded reimbursement of the expenses alleged to have been incurred by them in connection with the work already executed by them for returning the data entrusted to them by the Corporation. In other words, even according to the Corporation, the bank guarantees have not been invoked for the purpose for which the same were furnished. The aforesaid conduct of the Corporation being against the terms of the work order, it is illegal and arbitrary. That apart, the Corporation being a public undertaking, its decisions shall not only satisfy the test of reasonableness, but shall also be fair. A public body is not expected to behave like a private party and resort to illegitimate acts, even for legitimate purposes.

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There is no doubt to the fact that when parties to a contract agree that disputes and differences between them would be resolved by way of arbitration, invocation of remedies other than arbitration for resolution of the disputes and differences in connection with the contract may not be appropriate. But, it is by

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W.P.(c) Nos.13145 & 20412 of 2021

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now settled that the said principle does not preclude the constitutional courts from entertaining the writ petition if public authorities act unfairly and unjustly [See Central Bank of India v. Devi Ispat Ltd. , (2010)11 SCC 186 and Union of India v. Tantia Construction (P) Ltd. , (2011)5 SCC 697]. The facts of the present case, according to me, justify interference by this court in exercise of the powers under Article 226 of the Constitution to the aforesaid limited extent. I take this view also for the reason that the Corporation has received the proceeds of the bank guarantees despite the interim order passed by this court in this writ petition that the parties shall maintain status quo as regards the bank guarantees. In so far as the Corporation has no case that the proceeds of the bank guarantees have been received before the interim order was passed after hearing their learned Standing Counsel, they ought to have returned in fairness, the proceeds of the bank guarantees to the bank and waited for a decision in the matter. In the result, the writ petitions are disposed of directing the Corporation to return to the petitioner forthwith the proceeds of

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W.P.(c) Nos.13145 & 20412 of 2021

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the bank guarantees referred to in the writ petition, and directing the parties to resolve the rest of the disputes as provided for in the work

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order.

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Sd/-

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P.B.SURESH KUMAR, JUDGE.

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YKB

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W.P.(c) Nos.13145 & 20412 of 2021

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APPENDIX OF WP(C) 13145/2021

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PETITIONER EXHIBITS

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Exhibit P1	TRUE COPY OF THE SUBMITTED BY THE RESPONDENT ON 24.	PROJECT PROPOSAL PETITIONER TO THE 1ST 09.2020.
Exhibit P2	TRUE COPY OF THE DATED 14.10.2020 RESPONDENT.	LETTER OF INTENT (LOI) ISSUED BY THE 1ST
Exhibit P3	TRUE COPY OF THE 19.10.2020 SUBMIT THE 1ST RESPONDEN	ACCEPTANCE LETTER DATED TED BY THE PETITIONER TO T.
Exhibit P4	TRUE COPY OF THE 21.10.2020 ISSUED THE PETITIONER ON	WORK ORDER DATED BY THE 1ST RESPONDENT TO 28/10/2020.
Exhibit P5	TRUE COPY OF THE DATED 03.11.2020 RESPONDENT TO THE	CLARIFICATION LETTER ISSUED BY THE 1ST PETITIONER.
Exhibit P6	TRUE COPY OF THE SUBMITTED BY THE RESPONDENT.	LETTER DATED 23.11.2020 PETITIONER TO THE 1ST
Exhibit P7	TRUE COPY OF THE EXECUTED BY THE 3 RS.27.07 LAKHS UP	BANK GUARANTEE FORMS RD RESPONDENT FOR TO 09.02.2022.
Exhibit P8	TRUE COPY OF THE EXECUTED BY THE 3 RS.20.70 LAKHS UP	BANK GUARANTEE FORMS RD RESPONDENT FOR TO 09.05.2024.
Exhibit P9	TRUE COPY OF THE 23.11.2020 ISSUED FAVOUR OF THE 1ST	PROFORMA INVOICE DATED BY THE PETITIONER IN RESPONDENT.
Exhibit P10	TRUE COPY OF LETT ISSUED ON BEHALF	ER DATED 22.12.2020 OF THE PETITIONER TO THE

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W.P.(c) Nos.13145 & 20412 of 2021

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	1ST RESPONDEN	T.
Exhibit P11	TRUE COPY OF ISSUED BY THE PETITIONER.	LETTER DATED 12.01.2021 1ST RESPONDENT TO THE
Exhibit P12	TRUE COPY OF ISSUED BY THE PETITIONER.	LETTER DATED 12.02.2021 1ST RESPONDENT TO THE
Exhibit P13	TRUE COPY OF 19.02.2021 OF RESPONDENT.	THE REPLY LETTER DATED THE PETITIONER TO THE 1ST
Exhibit P14	TRUE COPY OF ISSUED BY THE PETITIONER.	THE LETTER DATED 23.02.2021 1ST RESPONDENT TO THE
Exhibit P15	TRUE COPY OF OF THE PETITI	THE LETTER DATED 01.03.2021 ONER TO THE 1ST RESPONDENT.
Exhibit P16	TRUE COPY OF ISSUED BY THE PETITIONER IN THE WORK ORDE	THE LETTER DATED 13.05.2021 1ST RESPONDENT TO THE FORMING THE CANCELLATION OF R.
Exhibit P17	TRUE COPY OF ISSUED BY THE RESPONDENT.	THE LETTER DATED 14.05.2021 PETITIONER TO THE 1ST
Exhibit P18	TRUE COPY OF DATED 15.06.2 DIRECTOR OF T OF THE 1ST RE	THE E-MAIL CORRESPONDENCES 021 BETWEEN THE SENIOR HE PETITIONER AND EDP CENTRE SPONDENT.
Exhibit P19	TRUE COPY OF ISSUED BY THE RESPONDENT.	THE LETTER DATED 08.06.2021 PETITIONER TO THE 1ST
Exhibit P20	TRUE COPY OF ISSUED BY THE	THE LETTER DATED 29.06.2021 1ST RESPONDENT.
Exhibit P21	TRUE COPY OF SENT BY THE P	REPLY LETTER DATED 29.06.2021 ETITIONER TO THE 1ST

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W.P.(c) Nos.13145 & 20412 of 2021

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RESPONDENT.

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Exhibit P22 TRUE COPY OF THE LETTER DATED 30.06.2021 ISSUED BY THE 3RD RESPONDENT BANK TO THE PETITIONER. Exhibit P23 TRUE COPY OF THE E-MAIL WITH A LETTER ATTACHED SEND BY THE PETITIONER TO THE 3RD RESPONDENT. Exhibit P24 TRUE COPY OF THE LETTER DATED 01.07.2021 ATTACHED IN EXHIBIT P23 E-MAIL. Exhibit P25 TRUE COPY OF THE E-MAIL WITH A LETTER ATTACHED SEND BY THE 3RD RESPONDENT TO THE PETITIONER Exhibit P26 TRUE COPY OF THE LETTER DATED 01.07.2021 ATTACHED IN EXHIBIT P25 E-MAIL. Exhibit P27 TRUE COPY OF THE bANK STATEMENT SHOWING THE TIME OF THE ABOVE TRANSACTIONS VIOLATING THE STATUS QUO ORDER

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W.P.(c) Nos.13145 & 20412 of 2021

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PETITIONER EXHIBITS

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Exhibit P1	TRUE COPY OF THE RESPONDENT.	PROPOSAL SUBMITTED BY THE
Exhibit P2	TRUE COPY OF THE 14.10.2020 ISSUED RESPONDENT.	LETTER OF INTENT DATED BY THE PETITIONER TO THE
Exhibit P3	TRUE COPY OF THE THE WORK DATED 19 RESPONDENT.	ACCEPTANCE OF AWARD OF .10.2020 ISSUED BY THE
Exhibit P4	TRUE COPY OF THE 21.10.2020 ISSUED	WORK ORDER DATED BY THE PETITIONER.
Exhibit P5	TRUE COPY OF THE ISSUED BY THE PET	CLARIFICATION LETTER ITIONER DATED 03.11.2020.
Exhibit P6	TRUE COPY OF THE DATED 12.01.2021.	LETTER OF THE CORPORATION
Exhibit P7	TRUE COPY OF THE DATED 12.02.2021.	LETTER OF THE CORPORATION
Exhibit P8	TRUE COPY OF THE DATED 23.02.2021.	LETTER OF THE CORPORATION
Exhibit P9	TRUE COPY OF THE	LETTER DATED 01.03.21
Exhibit P10	TRUE COPY OF THE DATED 13.05.2021.	LETTER OF THE CORPORATION
Exhibit P11	TRUE COPY OF THE THE PETITIONER TO 29.06.2021.	COMMUNICATION ISSUED BY THE BANK DATED
Exhibit P12	TRUE COPY OF THE	COVERING LETTER DATED
	13.09.2021 ALONG	WITH THE CHEQUE.

The Kerala State Road Transport Corporation Ksrtc v. Centre for Development of Advanced Computing (Cdac)

Case brief

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The Kerala State Road Transport Corporation Ksrtc v. Centre for Development of Advanced Computing (Cdac)

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