Union of India &
Ors. Vs. Tantia Construction Pvt. Ltd.
J U D G M E N T
ALTAMAS KABIR, J.
1.
The
sole Respondent, M/s. Tantia Construction Pvt. Ltd., filed writ petition, being
CWJC No.14055 of 2008, against the Petitioners herein, inter alia, for the issuance
of a writ in the nature of Certiorari for quashing the order dated 18th August,
2008, passed by the Deputy Chief Engineer (Construction), Ganga Rail Bridge, East
Central Railway, Dighaghat, Patna, calling upon the Respondent Company to
execute the enlarged/extended quantity of the contract work pursuant to Tender No.76
of 06-07. Further relief has been prayed for by the Respondent Company for a
writ in the nature of Mandamus directing the Petitioners herein to let it complete
the reduced quantity of work relating to the construction of the Rail Over-Bridge
at Bailey Road, which did not include the additional work in respect of the extended
portion of the Viaduct and to close the contract and, thereafter, to make
payment for the contract work which it had executed pursuant to the aforesaid
Tender.
2.
During
the hearing of the writ petition several issues were identified regarding the Petitioners'
right to force the Company to execute the 3additional work of constructing the Viaduct
which was neither within the scope of the work nor within the schedule of work comprised
in Tender No.76 of 06-07. A connected issue was also identified as to whether in
a Risk and Cost Tender, the nature of work provided for in the Tender could be altered
and whether such action would be in violation of Articles 14 and 19(1)(g) of the
Constitution of India, besides being against the principles of natural justice and
contrary to the clauses in the General Conditions of Contract included in the Tender
document.
3.
It
appears that on 12th December, 2006, the East Central Railways (ECR) invited Risk
and Cost Tender No.76 of 06-07 for the work of construction of a Rail Over-Bridge
at Bailey Road over the proposed Railway Alignment over the Ganga Bridge at Patna
for an approximate cost of 15.42 crores. The Tender documents provided that the
contract 4work was to be completed within 15 months from the date of issuance
of the letter of acceptance. Upon the tenders being opened on 27th December,
2006, the contract was awarded to the Respondent Company and a letter of
acceptance was issued to the Respondent Company on 12th/13th February, 2007. The
contract work was accepted at a cost of 19,11,02,221.84p. and an agreement was thereafter
entered into between the East Central Railways and the Respondent Company in
respect of the contract work, whereby a Rail Over-Bridge was to be constructed with
two abutments on both sides and three piers in between. The work also included 500
meters of approach road with Reinforced Earth Retaining Walls to a maximum height
of 15 meters on both sides of the Rail Over-Bridge.
4.
On
account of some of the procedural work, including the change of the span of the
bridge, change in the design of the pier cap, the 5requirement of shifting obstacles
like a temple, police station, electrical pole, etc. and also due to heavy rains,
the construction of the wall was delayed. The delay in preparation of the designs
and drawings which involved the work of a specialized agency also contributed to
the delay. On account of changes in the design whereby the Viaduct had to be extended
involving an additional cost of 36.11 crores, the Petitioner No.6 requested the
Respondent Company to convey its consent for execution of the complete work, including
the revised work. By its letter dated 13th February, 2008, the Respondent Company
wrote back to the Petitioner No.6 that they did not want to take up the
construction of the extended Viaduct which was not covered in the Agreement dated
30th April, 2007. The Respondent Company refused to give their consent for the execution
of the complete work at the revised cost of 36.11 crores. On such refusal the Railways
floated a separate 6Tender No.189 of 2008 for the additional work of the extended
portion of the Viaduct for the Road Over-Bridge at Bailey Road. The approximate
cost earmarked for the said work was 24.50 crores. As there was not much
response to the said Tender, the date for submission of the Tender was extended
from 9.4.2008 till 23.5.2008 and the assessed cost of work was revised and re-assessed
at 26,35,96,878.63p. Corrigendums were issued from time to time in connection
with the said Tender for the additional work and ultimately two firms, namely, Allied
Infrastructures and Projects Pvt. Ltd. and Arvind Techno Engineers Pvt. Ltd. quoted
the rate for execution of the works as 34,11,16,279.39p. and 35,89,93,215.66p. respectively,
for the additional work only.
5.
While
the Tender process for the extended contract on the Viaduct was going on, keeping
in view their long relationship, the Respondent Company wrote to the Petitioner
No.6 on 12th April, 2008, agreeing to execute the varied contract at the same
rate, terms and conditions of the contract agreement, but on condition that the
price increase, due to the Price Variation Clause, would be payable to the company.
It was also indicated that the Company would have no claim for reduction in
quantity by more than 25% in the agreement.
6.
In
the meantime, the Respondent Company, vide its letter dated 27th April, 2008, submitted
the revised work programme for the left-over work. The same was accepted and
the time for the execution of the left-over work was extended till 31st December,
2008.
7.
In
response to the letter written on behalf of the Respondent Company on 12th April,
2008, the Petitioners called upon the Respondent Company by its letter dated 15th
June, 2008, to execute the varied quantity of work.
8.
In
response to the said letter dated 15th June, 2008, the Respondent Company wrote
back to the Railways on 1st July, 2008, stating that they had given their consent
to execute only the reduced quantity of work, the cost of which worked out to 12,37,49,888/-.
However, the Railways once again asked the Respondent Company by its letter dated
18th August, 2008, to carry out the complete work, including the additional
work of the Viaduct, at an approximate cost of 36.11 crores.
9.
Aggrieved
by the stand taken by the Railways, the Respondent Company filed a Writ
Petition, being CWJC No.14055 of 2008, before the Patna High Court, challenging
the directions given by the Railway Authorities for completion of the entire work,
including the extended work. It was the contention of the Respondent Company
that having failed to get any suitable response to the fresh Tender floated in
respect of the additional work, it was not open 9to the Petitioners to compel it
to complete the same at an arbitrarily low price, particularly when the additional
work was not part of the original Tender.
10.
The
learned Single Judge accepted the case made out by the Respondent Company, holding
that there was no breach of the agreement entered into between the Petitioners and
the Respondent Company, since it was the Petitioners themselves who had altered
the agreement by separately tendering the extended work. The learned Single Judge
observed that consequently the entire work could not be thrust upon the Respondent
Company and the Railways was free to get the Viaduct constructed separately by any
other contractor, as it had contemplated earlier. The learned Single Judge further
observed that since the Respondent Company was ready to do the balance work from
the left-over tender, the rescinding of the entire work by the Railways and 10to
re-tender the entire block could not certainly be at the risk and cost of the
Respondent Company. The learned Single Judge also observed that the Respondent Company
could not be saddled with the cost of work which it had never undertaken to execute.
11.
On
such findings, the Writ Petition was allowed and the Railways was advised to
expeditiously clear the payments of the Respondent Company in respect of the
work already completed by it.
12.
The
matter was taken in appeal to the Division Bench by the Petitioners herein in LPA
No.603 of 2009. The Division Bench by its judgment and order dated 29th July, 2009,
upheld the judgment of the learned Single Judge and dismissed the Appeal. It is
against the said order of the Division Bench dismissing the appeal filed by the
Petitioners that the present Special Leave Petition has been filed.
13.
The
same submissions, as had been advanced before the High Court, were also
advanced before us by the learned Additional Solicitor General, Ms. Indira
Jaising. She urged that the contract of the Respondent Company had been rightly
terminated in accordance with clause 62 of the General Conditions of Contract
upon the Respondent's refusal to comply with the forty eight hours' notice served
on it. The learned ASG submitted that since under the terms of the Agreement entered
into between the parties, the Petitioners were entitled to vary or alter the nature
of the work for which the contract was given, the Respondent Company was under a
contractual obligation to complete the work, including the varied work under
the contract.
14.
The
learned ASG submitted that the Petitioners had no intention of compelling the Respondent
Company from completing the work. On the other hand, it was the Respondent
Company's obligation to complete the work under the contract. It was the Respondent
Company which had, by its letter dated 12th April, 2008, agreed to do the varied
work at the same rate, terms and conditions, subject to the applicability of
the Price Variation Clause. It was only thereafter that by his letter dated
15th June, 2008, the Petitioner No.6 asked the Respondent Company to execute
the varied quantities of work on the Rail Over-Bridge at the same rate and on the
same terms and conditions. It was upon the Respondent Company's failure to do so
that notice was given to it under clause 62 of the General Conditions of Contract
on 10th October, 2008, indicating that after the expiry of the notice, the contract
would stand rescinded and the work under the contract would be carried out at the
risk and cost and consequences of the Respondent Company. The said notice was
followed by a letter dated 17th October, 2008 sent to the Respondent Company by
the Petitioners rescinding the contract and informing the company that the work
under the contract would be carried out at the company's risk and cost.
15.
It
was also submitted that the agreement between the parties provided for arbitration
in respect of all disputes and differences of any kind arising out of or in connection
with the contract whether during the progress of work or after its completion and
whether before or after the termination of the contract. It was urged that in view
of the said arbitration clause, the Writ Court was not competent to decide the issue
involved in the dispute which had been raised by the Respondent Company.
16.
It
was lastly contended that the scope of the work did not change, despite the variation
of the design and planning. It was submitted that it was only a case where the quantity
of the work was decreased in one sense, but increased in another, and the costs
involved on account of such variation 14was worked out and a fresh figure was computed
which the Respondent Company was bound to accept under the terms of the
contract. It was submitted that the same would be evident from Clause 23.2 relating
to the quotation of rates whereby the Railway Administration reserved the right
to modify any or all the schedules, either to increase or to decrease the scope
of the work. It was submitted that the termination of the contract on account of
violation of the terms thereof could not be quashed by the Writ Court to resurrect
the contract which had already been terminated and the only recourse available
to the Respondent Company was to have the matter decided in arbitration.
17.
Appearing
for the Respondent-Company, Mr. Soumya Chakraborty, learned Advocate, submitted
that from the facts as revealed during the hearing of the Writ Petition and the
Letters Patent Appeal, it would be apparent that the initial contract signed between
the parties on 27.12.2006 was ultimately abandoned. Mr. Chakraborty submitted that
on account of an alteration in the design of the Rail Over-Bridge, which included
a completely new work project, a fresh Tender had to be floated since the new
work could not be treated to be part of the initial contract. Having regard to the
estimated cost of the variation involved, the Petitioners did not receive adequate
response to the said Tender. On the other hand, two Tenderers submitted their offers
at a much higher rate than was fixed as the estimated cost of the work which had
been added to the existing work on account of the alteration in the design of the
Rail Over-Bridge. Noting the problem that the Petitioners were faced with, with
regard to the completion of the Rail Over-Bridge, the Respondent Company, keeping
in mind its long association with the Railways, offered to complete the varied work
at the same rates and conditions of contract, subject to the applicability of
the Price Variation Clause. Mr. Chakraborty submitted that by its letter dated 12th
April, 2008, the Respondent Company had referred to the variation of the work by
the agreement entered into between the Railways and the Respondent Company on account
of the alteration of the original design. Mr. Chakraborty submitted that it had
never been the Respondent Company's intention to execute the entire work,
including the variation on account of the alteration of the design, at the same
rates and the terms and conditions and that such offer was confined only in respect
of the balance work left over from the contract executed on 27th December, 2006.
Mr. Chakraborty submitted that the same would be evident from the fact that in the
letter of 12th April, 2008, it had also been indicated that the Respondent Company
would have no claim for reduction in quantity by more than 25% in the agreement.
Mr. Chakraborty submitted that the 17Petitioners had clearly misunderstood the
scope and intent of the letter dated 12th April, 2008, written on behalf of the
Respondent Company and had interpreted the same to mean that its offer also covered
the extended work on account of the change in the design of the Rail
Over-Bridge.
18.
It
was also contended that since the Petitioners had illegally terminated the contract
with the Respondent Company, the Writ Court had stepped in to correct such injustice.
In fact, Mr. Chakraborty also submitted that the objection taken on behalf of
the Petitioners that the relief of the Respondent Company lay in arbitration proceedings
and not by way of a Writ Petition was devoid of substance on account of the various
decisions of this Court holding that an alternate remedy did not place any fetters
on the powers of the High Court under Article 226 of the Constitution.
19.
In
support of his aforesaid submissions Mr. Chakraborty firstly relied and referred
to the decision of this Court in Harbanslal Sahnia vs. Indian Oil Corporation Ltd.
[(2003) 2 SCC 107], wherein this Court observed that the Rule of exclusion of writ
jurisdiction by availability of an alternative remedy, was a rule of discretion
and not one of compulsion and there could be contingencies in which the High
Court exercised its jurisdiction inspite of availability of an alternative remedy.
Mr. Chakraborty also referred to and relied on the decision of this Court in Modern
Steel Industries vs. State of U.P. and others [(2001) 10 SCC 491], wherein on the
same point this Court had held that the High Court ought not to have dismissed the
writ petition requiring the Appellant therein to take recourse to arbitration proceedings,
particularly when the vires of a statutory provision was not in issue.
20.
Reference
was also made to the decision of this Court in Whirlpool Corporation vs. Registrar
of Trade Marks [(1998) 8 SCC 1]; National Sample Survey Organisation and Another
vs. Champa Properties Limited and Another [(2009) 14 SCC 451] and Hindustan Petroleum
Corporation Limited and Others vs. Super Highway Services and Another [(2010)3 SCC
321], where similar views had been expressed.
21.
Mr.
Chakraborty submitted that while enacting the Arbitration and Conciliation Act,
1996, the Legislature had intended that arbitration being the choice of a private
Judge agreed upon by the parties themselves to settle their disputes, there should
be minimum interference by the regular Courts in such proceedings. In this regard,
Mr. Chakraborty referred to Section 5 of the aforesaid Act which indicates that
notwithstanding anything contained in any other law for the time being in force,
in matters governed by Part I, no judicial authority shall intervene except where
so provided in the said Part. Mr. Chakraborty urged that upon revival a
contract can at best be modulated to any change in circumstances but the termination
of the contract with the Respondent Company was not warranted, since the decision
to terminate the contract was based on an erroneous interpretation of the contents
of the letter dated 12th April, 2008, written on behalf of the Respondent Company
and the termination had, therefore, been rightly quashed by the High Court.
22.
The
facts disclosed reveal that on the basis of the Tender floated by the Petitioners
for construction of a Rail Over-Bridge at Bailey Road over the proposed Railway
Alignment over the Ganga Bridge, Patna, the Respondent Company had been awarded
the contract at an approximate cost of 15.42 crores and it was stipulated that the
contract was to be completed within 15 months from the date of issuance of the letter
of acceptance. Admittedly, on the contract being awarded to the Respondent Company,
the letter of acceptance was issued on 12th/13th February, 2007, and an
agreement was thereafter entered into between the East Central Railways and the
Respondent Company in respect of the contract work. Admittedly, on account of the
procedural delays, the work could not be completed within the stipulated period
of 15 months from the date of issuance of the letter of acceptance. The procedural
delay was mainly on account of the fact that the work on the approach road could
commence only after the design, which was to be initially prepared by the Respondent
Company, was approved by the Railways. The Respondent Company appointed the Central
Road Research Institute, Delhi, as its consultant for designing the plan for
execution. During the above process, it was found that each earth filled approach
road could not be raised above 7 meters and, as a result, the remaining 8
meters was to be made of complete cement casting known as a Viaduct. The Railways
got the matter examined by its own associate, RITES, and, thereafter, approved the
plan. The consequence of the said change was that the Tender which was of 19
crores stood increased to 36 crores on account of the additional work which was
to be undertaken as a result of the modified design. In fact, the Railways themselves
decided to float a fresh Tender for the additional work at an estimated cost of
24.50 crores separately. As a result, the work relating to construction of the Rail
Over-Bridge now consisted of two parts, one of which the Respondent Company was
executing and the other to be executed by a different contractor. However, as mentioned
hereinbefore, there was hardly any response to the Tender floated. Seeing that the
quantum of work under Tender No.76 of 06-07 stood reduced, the 23Respondent Company
wrote to the Petitioners on 12th April, 2008, agreeing to undertake the varied work
at the same rate and on the same terms and conditions, subject to the Price Variation
Clause. The problem appears to have begun at this stage when, on the basis of the
said letter dated 12th April, 2008, the Petitioners directed the Respondent Company
to continue with the unfinished portion of the plan.
23.
Admittedly,
the work which had to be completed within 15 months from the date of issuance of
the letter of acceptance, could not be completed within the said period and, on
the other hand, a new element was introduced into the design of the Rail Over-Bridge.
It is the case of the Respondent Company that any item of work directed to be performed
could not be covered by the original contract dated 12th/13th February, 2007, and
realizing the same, the Railways themselves floated a fresh Tender No.189 of 2008
for the additional work of the extended portion of the Viaduct.
24.
We
are of the view that the letter dated 12th April, 2008, did not cover the extended
work on account of the alteration of the design and was confined to the work
originally contracted for. We cannot lose sight of the fact that while the initial
cost of the Tender was accepted for 19,11,01,221.84p., the costs for the extended
work only was assessed at 24.50 crores and that two offers were received, which
were for 34,11,16,279.39p. and 35,89,93,215.66p. respectively. This was only with
regard to the extended portion of the work on account of change in design. The Respondent
Company was expected to complete the entire work which comprised both the work covered
under the initial Tender and the extended work covered by the second Tender. The
Respondent had all along expressed its unwillingness to take up the extended work
and for whatever reason, it agreed to complete the balance work of the initial contract
at the same rates as quoted earlier, despite the fact that a long time had elapsed
between the awarding of the contract and the actual execution thereof.
25.
In
our view, the Respondent Company has satisfactorily explained their position regarding
their offer being confined only to the balance work of the original Tender and not
to the extended work. The delay occasioned in starting the work was not on account
of any fault or lapses on the part of the Respondent Company, but on account of
the fact that the project design of the work to be undertaken could not be completed
and ultimately involved change in the design itself. The Respondent Company appears
to have agreed to complete the varied work of Tender No.76 of 06-07 which variation
had been occasioned on account of the change in the design as against the
entire work covering both the first and second Tenders. To proceed on the basis
that the Respondent Company was willing to undertake the entire work at the old
rates was an error of judgment and the termination of the contract in relation
to Tender No.76 of 06-07 on the basis of said supposition was unjustified and was
rightly set aside by the learned Single Judge of the High Court, which order was
affirmed by the Division Bench.
26.
The
submissions made on behalf of the Petitioners that in terms of Clause 23(2) of the
Agreement, the Petitioners were entitled to alter and increase/decrease the scope
of the work is not attracted to the facts of this case where the entire design of
the Rail Over-Bridge was altered, converting the same into a completely new project.
It was not merely a case of increase or decrease in the scope of the work of
the original work schedule covered under Tender No.76 of 06-07, but a case of substantial
alteration of the plan itself.
27.
Apart
from the above, even on the question of maintainability of the writ petition on
account of the Arbitration Clause included in the agreement between the parties,
it is now well-established that an alternative remedy is not an absolute bar to
the invocation of the writ jurisdiction of the High Court or the Supreme Court and
that without exhausting such alternative remedy, a writ petition would not be maintainable.
The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional
powers vested in the High Court or the Supreme Court cannot be fettered by any alternative
remedy available to the authorities. Injustice, whenever and wherever it takes place,
has to be struck down as an anathema to the rule of law and the provisions of the
Constitution. We endorse the view of the High Court that notwithstanding the provisions
relating to the Arbitration Clause contained in the agreement, the High Court was
fully within its competence to entertain and dispose of the Writ Petition filed
on behalf of the Respondent Company.
28.
We,
therefore, see no reason to interfere with the views expressed by the High Court
on the maintainability of the Writ Petition and also on its merits. The Special
Leave Petition is, accordingly, dismissed, but without any order as to costs.
................................................J.
(ALTAMAS KABIR)
................................................J.
(CYRIAC JOSEPH)
New
Delhi
Dated:
18.04.2011
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