High Court · 2009

ARBITRATION 14.0 14.1 (cid:28)Any dispute/s or difference/s whatsoever arising between the parties vi z., the Seller, the Tenderer/ Buyer and MSTC out of or relating to the construct ion, meaning, scope, operation or effect of this Tender/Contract or the validity or the breach thereof shall be settled by arbitration of a Sole Arbitrator to b e appointed by the Head of Office, by whatever name called of the Seller. The A rbitrator so appointed shall not be a person who had dealt with the matter/s in dispute. The provisions of the Arbitration & Conciliation Act, 1996 and the Rule s framed thereunder or any amendment thereto shall apply to such arbitral procee dings. The award passed by such Sole Arbitrator shall be final and binding on th e parties. The venue of the arbitration shall be Kolkata. The costs and expenses of such arbitration shall be borne equally by the parties. Subject to the above, legal proceeding, if any, arising out of this Tender/Contr act shall be triable only by appropriate Civil Court in Kolkata only, to the exc lusion of all other courts (cid:29). The appellant in the writ appeal who is also the writ petitioner in WP(C 4. ) No.2631/2008 submitted it’s tender pursuant to the aforesaid tender notice. By a communication dated 7.10.2006 the appellant/writ petitioner was informed that the tender submitted by it has been accepted at the offered amount of Rs.31,51, 555.00. The amount quoted by the appellant/writ petitioner was, thereafter, pai d in two installments i.e. on 19.1.2007 and 20.7.2007. On receipt of the said am ounts sale orders were issued in favour of the appellant/writ petitioner by the Chief Materials Manager of the Indian Oil Corporation Ltd. (Assam Oil Division). The appellant/writ petitioner thereafter started lifting the scrap material in question. However, in the first week of August 2007 the respondent Corporation o bstructed the appellant/writ petitioner from lifting any further quantity of scr ap material. In the above situation, the appellant/writ petitioner addressed a l etter dated 6.8.2007 to the MSTC seeking its intervention in the matter. On rece ipt of the said communication dated 6.8.2007 the Senior Manager of the MSTC by a communication dated 7.8.2007 informed the Materials Manager of the respondent C orporation that as the sale to the appellant was of all the materials included i n Lot No.01 and the sale had been made on lot basis further delivery should be g iven to the petitioner. This was reiterated by the MSTC in another letter dated 16.10.2007. At this stage, the respondent Corporation issued a notice of e-aucti on of scrap material including 207.0 MT and 12.0 MT of scrap material of the KTU plant which materials, according to the appellant/writ petitioner, was already sold to them pursuant to the earlier tender process. The aforesaid two quantiti es of scrap material were shown as Lot Nos.74(a) and 74(b) in the fresh notice o f e-auction. In these circumstances, the appellant/writ petitioner instituted a writ proceeding before this Court registered and numbered as WP(C) No.6307/2007. In the said writ petition interim protection was granted to the appellant/writ petitioner by this Court by order dated 13.12.2007. When the writ petition was l isted before the Bench on 9.1.2008, the respondent Corporation informed the Cour t that the impugned notice of e-auction stood withdrawn. Accordingly, the writ p etition was closed by the Court as infructuous. Notwithstanding the aforesaid developments, the appellant/writ petitione 5. r was not allowed to remove any further quantity of scrap material. Instead, by a letter dated 16.1.2008 issued by the Chief Materials Manager of the respondent Corporation, the appellant/writ petitioner was informed that it had, till date, lifted a total quantity of 301.870 MT of scrap material against the stipulated quantity of 233.926 MT thereby lifting a quantity of 67.944 MT in excess. Conseq uently, the appellant/writ petitioner was asked to make payment for the aforesai d excess quantity by the letter dated 16.1.2008. The aforesaid letter dated 16.1 .2008 was followed by another letter dated 17.1.2008. The appellant/writ petitio ner was further informed that the tender in which the appellant/writ petitioner had participated was for disposal of (cid:28)scrap KTU and electrical items etc. 233.92 6 MT approx. (cid:29) in one lot. As the appellant/writ petitioner had already lifted 30 1.870 MT against the stipulated quantity of 233.926 MT the sale against the tend er is complete. In these circumstances, the appellant/writ petitioner was inform ed that the respondent/Corporation had advised MSTC to dispose of the balance qu antity of scrap KTU Plant by a fresh process pursuant whereto the said balance q uantity was included as Lot Nos.74(a) and 74(b) in the e-auction notice. The app ellant/writ petitioner was further informed that as the writ petition filed by i t has been disposed of as infructuous the question of issuing any balance quanti ty does not arise. Against the decision contained in the aforesaid communication s dated 16.1.2008 and 17.1.2008 WP(c) No.335 of 2008 was instituted by the prese nt appellant/writ petitioner. While the aforesaid writ petition i.e. WP(C) No.33 5/2008 was pending the respondent Corporation issued another e-auction notice wi th closing and opening date on 28.3.2008, once again, including the balance quan tity of the scrap material of the KTU plant as Lot Nos.74(a) and 74(b). Against the aforesaid e-auction notice another writ petition i.e. WP(C) No.1058/2008 was filed by the appellant/writ petitioner.

6. Both the writ petitions i.e. WP(C) 335/08 and 1058/08 were disposed of by a learned Single Judge of this Court on 21.5.2008 by leaving it open to the a ppellant/writ petitioner to take recourse to arbitration as contemplated by clau se 14 of the terms and conditions of the contract. In view of the aforesaid orde r passed the learned Single Judge hearing the two writ petitions had no occasion to deal with the merits of the rival contentions in the two writ petitions in q uestion. It is against the aforesaid order dated 21.5.2008 that Writ Appeal No.1 81/2008 has been filed by the appellant/writ petitioner.

7. While the aforesaid writ appeal was pending another e-auction notice fix ing closing and opening date on 25.6.2008 has been issued wherein the same scrap material has been included, once again, against Lot Nos.74(a) and 74(b). Aggrie ved, WP(C No.2631/2008 has been filed wherein by interim order dated 25.6.2008 t his Court had directed the respondents not to give effect to the decision, if an y, with regard to the auction of the aforesaid two Lots. It will be required to be noticed, at this stage, that the opening and closing date in terms of the afo resaid e-auction notice has expired while WP(C) No.2631/2008 has continued to re main pending.

8. We have heard Sri N. Dutta, learned Senior Counsel for the appellant/wri t petitioner and Sri G. N. Sahewalla, learned counsel appearing for the responde nt Corporation. None has appeared on behalf of the other respondents in the writ appeal as well as in the writ petition under consideration.

9. Sri Dutta, learned senior counsel for the appellant/writ petitioner has submitted by referring to clauses 3.1 to 3.5 of the terms and conditions of tend er (on acceptance whereof terms and conditions of the contract) that where the g oods are sold on lot basis and not by units the entire material lying in the lot is required to be lifted by the buyer. Referring to the relevant part of the sc hedule of items/rates (Annexure-1 to the original tender notice) Sri Dutta has s ubmitted that the entire scrap material of the KTU plant had been offered in one Lot and the appellant/writ petitioner’s offer being for the Lot the consequenti al sale to the appellant/writ petitioner was in respect of all the materials inc luded in the said Lot. In this regard, Sri Dutta has pointed out that the quanti ty mentioned in the details contained in the Schedule to the tender notice i.e. 233.926 MT is approximate. Under the different sub-clauses of clause 3 of the te rms and conditions of contract not only there is an obligation on the part of th e appellant/writ petitioner to lift the entire quantity available in the Lot sol d to it; there is an enforceable right to lift all such materials which in the p resent case has been sought to be curtailed by the respondent Corporation. In th is regard, Sri Dutta has also drawn the attention of the Court to the letters da ted 7.8.2007 and 16.10.2007 of the MSTC to the respondent Corporation wherein th e aforesaid position has been clearly indicated by the MSTC. Sri Dutta has submi tted that the offer of the appellant/writ petitioner pursuant to the tender noti ce being for the entire Lot, the acceptance thereof and payment of the entire am ount resulting in the sale orders dated 19.1.2007 and 20.7.2007 has the effect o f vesting all the materials of the KTU plant in the appellant/writ petitioner. I n such circumstances, according to the learned counsel, the demand raised by the respondent Corporation for the alleged excess quantity of 67.944 MT; the refusa l of the respondent Corporation to allow the appellant/petitioner to lift the ba lance quantity and the subsequent e-auction notices including the said balance q uantity as Lot Nos.74(a) and 74(b) are wholly illegal and unauthorized.

10. Sri Dutta, learned counsel for the appellant/writ petitioner, has furthe r submitted that in the present case though there is an arbitration clause (clau se 14) requiring the parties to settle their disputes or differences by a proces s of arbitration, the only point at dispute between the parties is with regard t o the interpretation of the various sub-clauses of clause 3 of the terms and con ditions of the contract. Sri Dutta has further submitted that there is no disput e between the parties on any of the facts relevant to the case. In such a situat ion, according to Sri Dutta, notwithstanding clause 14 of the terms and conditio ns of contrct, it will be open for the Court to finally adjudicate the controver sy between the parties by an appropriate interpretation of the different sub-cla uses of clause 3 of the terms of the contract. Sri Dutta has referred to a judgm ent of the Apex Court in the case of ABL International Ltd. & another vs. Export Credit Guarantee Corporation of India Limited and others, reported in (2004) 3 SCC 553, to contend that a construction/ interpretation of the terms of a contra ct in an appropriate case can be made by the writ Court. Sri Dutta has also refe rred to another judgment of the Apex Court in Harbanslal Sahnia & another vs. In dian Oil Corporation Ltd. and others, reported in (2003) 2 SCC 107, wherein the Apex Court has laid down that the High Court under Article 226 can finally resol ve a dispute arising out of a contract notwithstanding the existence of an arbit ration clause in the contract between the parties.

11. In reply, Sri Sahewalla, learned counsel for the respondent Corporation has urged that the present writ petition being for enforcement of contractual ri ghts of the appellant/writ petitioner arising out of a non-statutory contract th e same will not be maintainable. Sri Sahewalla has further urged that in view of the arbitration clause contained in the contract between the parties the resort to the writ remedy by the appellant/writ petitioner is not appropriate. In this regard Sri Sahewalla has referred to a judgment of the Apex Court in State of G ujrat & others vs. Maghji Pethraj Shah Charitable Trust and others, reported in (1994) 3 SCC 552 and another decision of the Apex Court in State of U.P. & other s vs. Bridge & Roof Company (India) Ltd., reported in (1996) 6 SCC 22. Sri Sahe walla has also referred to a decision of the Apex Court in Kerala State Electri city Board and another vs. Kurien E. Kalathil and others, reported in (2000) 6 S CC 293, to contend that interpretation of a clause in a contract cannot be made the subject matter of a writ petition. Lastly, Sri Sahewalla has submitted that the decision of the Apex Court in ABL International Ltd. and another (supra) rel ied upon by the appellant/writ petitioner had been rendered in a situation where the contract between the parties did not have an arbitration clause as in the p resent case. In this regard Sri Sahewalla has specifically drawn the specific at tention of the Court to paragraph 14 of the judgment in ABL International Ltd. a nd another (supra).

12. On merits Sri Sahewalla, learned counsel for the respondent Corporation, has submitted that in the present case goods of different classifications havin g been included in the lot in question, it is the provisions contained in clause 3.5 which will apply thereby authorizing the respondent Corporation to effect d elivery of materials to the extent of the tendered quantity only. In this regard , Sri Sahewalla has pointed out that under the head (cid:28)description of materials (cid:29) m entioned in the Schedule of items/rates an approximate quantity of 233.926 MTs w as contemplated for sale in the Lot in question which quantity has already been lifted by the appellant/writ petitioner. Therefore, according to Sri Sahewalla, the appellant/writ petitioner is liable to pay for the excess quantity removed b y it and the Respondent Corporation is authorized to put the balance quantity of the scrap materials of the KTU plant to further auction.

13. The rival submissions advanced on behalf of the contesting parties would require the Court to determine two principal questions that have arisen in the cases under consideration. The first is with regard to the maintainability of th e writ petition. Closely connected is the further question - whether in view of the arbitration clause contained in the contract agreement between the parties t he aggrieved party should be left with the option of availing the remedy of arbi tration in accordance with the provision of Arbitration and Conciliation Act, 19 96. The second issue that confronts the Court is whether the appellant/writ peti tioner having submitted its tender for the scrap KTU plant which was offered for sale in one lot is entitled to remove the entire quantity of scrap which appear s to be far in excess of the approximate quantity mentioned in the tender notice as 233.926 MTs. Naturally, the first issue has to be first answered by the Cou rt and depending on the conclusion that the Court may reach the necessity of det ermination of the second issue will arise.

14. The maintainability of the writ petition has been challenged on behalf o f the respondent Corporation on the ground that disputes arising out of a commer cial contract and interpretation of clauses thereof cannot be adjudicated in a w rit petition. In this regard reliance has been placed on the decisions of the Ap ex Court in State of Gujrat & others vs. Meghji Pethraj Shah Charitable Trust an d others(supra) and State of U.P. & others vs. Bridge & Roof Company (India) Ltd . (supra).

15. The question of maintainability of a writ petition on the ground that th e dispute arises under a private commercial contract defies a ready answer. In f act the very precedents cited at the Bar makes it clear that for violation of a contract ordinarily (emphasis is ours) a writ petition is not the normal remedy . The position has been elaborately explained in the subsequent decision of the Apex Court in ABL International Ltd. and another (supra) in the following manner : (cid:28)23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligatio n in law to act fairly, justly and reasonably which is the requirement of Articl e 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the St ate has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent. (cid:29) (cid:28)27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition : In an appropriate case, a writ petition as against a State or an instrum (a) entality or a State arising out a contractual obligation is maintainable. Merely because some disputed questions of fact arise for consideration, (b) same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. (c) so maintainable. (cid:29) A writ petition involving a consequential relief of monetary claim is al However, while entertaining an objection as to the maintainability of a (cid:28)28. writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 22 6 of the Constitution is plenary in nature and is not limited by any other provi sions of the Constitution. The High Court having regard to the facts of the case , has a discretion to entertain or not to entertain a writ petition. The Court h as imposed upon itself certain restrictions in the exercise of this power. And t his plenary right of the High Court to issue a prerogative writ will not normall y be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and l egitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction. (cid:29) It is, therefore, our considered view that it is not an absolute proposi 16. tion of law that a writ petition raising a dispute under a contract or seeking t o enforce a right under a contract would not be per se maintainable. The questio n of maintainability of such a writ petition must be decided in the context of t he facts of each case by taking into account the extent of demonstrated arbitrar iness on the part of the State and the efficaciousness and effectiveness of the available alternative remedy.

17. However, the maintainability of a writ petition in the face of an arbitr ation clause in the contract agreement between the parties would stand on a diff erent footing. An arbitration clause between the parties is an expression of the intention of the parties to resolve their differences by a process of arbitrati on in the event such differences arise. When the parties themselves have agreed to a means of resolution of their differences it would be wholly incorrect for o ne of the parties to such agreement to act in breach of it and to take recourse to the writ remedy under Article 226. The above is the foundation of the decisio n in State of U.P. & others vs. Bridge & Roof Company (India) Ltd. (supra). In f act, in ABL International Ltd. and another (supra) on which reliance has been pl aced on behalf of the appellant/ petitioner, the view expressed in State of U.P. & others vs. Bridge & Roof Company (India) Ltd. (supra) was approved and in par agraph 14 of the judgment it was made clear that the departure made by the Apex Court to interpret the terms of contract was on the ground that there was no arb itration clause in the contract in question. Harbanslal Sahnia & another vs. Ind ian Oil Corporation Ltd. and others (supra) is certainly not an authority for th e proposition that an arbitration clause ought to be ignored in the event a chal lenge is made against an order of cancellation of a contract. The view expressed by the Supreme Court in that case that the dispute raised by means of a writ pe tition should have been entertained by the High Court, notwithstanding the arbit ration clause, was in the special facts of the case i.e. that the cancellation o f the contract was made on a non-existent ground. In the said case the dealershi p of the appellant before the Apex Court in petroleum products was initially sus pended and subsequently cancelled. Both the aforesaid actions were based on a te st report of a sample of kerosene oil taken from the premises of the appellant. The initial suspension order was challenged before the appellate authority which took the view that the test report of the sample was not acceptable as the same was prepared in violation of Government instructions with regard to analysis of a sample. As the test report was found to be unacceptable by the appellate auth ority while dealing with the order of suspension of the contract/licence, the Ap ex Court took the view that the said test report was not in existence so as to e nable the State Government to rely on it to cancel the appellant’s contract/lice nce. It is in these facts that the Apex Court took the view that the High Court was not justified in requiring the appellant to take recourse to the process of arbitration as visualized by the arbitration clause in the contract between the parties.

18. In the present case, clause 14 of the contract between the parties clear ly visualizes a resolution of the disputes/ differences that may arise between t he parties by a process of arbitration under the Arbitration and Conciliation Ac t, 1996. A valiant attempt has been made on behalf of the appellant/ writ petiti oner to show that the present is the case where no dispute on the core facts is discernible and the only question to be determined is one of interpretation of c lause 3 of the contract between the parties. We do not agree with the aforesaid contention advanced as our acceptance of the same would require us to speculate on the nature of objections and counter objections that the parties may be raise d if the matter is to be referred to arbitration. Though it is possible for us t o visualize some of such objections and counter objections, propriety and judici al discipline would require us to refrain from placing the same on record. Howev er, our aforesaid perception in the matter would be sufficient to disincline us to resolve the dispute between the parties in exercise of our jurisdiction under Article 226.

19. A contention has been raised by the learned senior counsel for the appel lant/writ petitioner that if this court is inclined to send the matter to arbitr ation and we are now inclined to do so, the arbitrator should be appointed by th e Court. We are afraid we cannot do so. The process of appointment of arbitrator /arbitrators is laid down in the arbitration clause between the parties and the provisions of the Arbitration and Conciliation Act, 1996 which must be allowed t o govern the matter.

20. Learned counsel for the appellant/ writ petitioner had further submitted that in the event the matter is to be sent for arbitration orders should be pas sed by the Court to maintain status quo of the property i.e. balance quantity of scrap materials in Lot No.1. Section 9 of the Arbitration and Conciliation Act, 1996 empowers the Court defined in Section 2(e) to pass appropriate interim ord ers at any time before or during the arbitral proceedings or even after the maki ng of the award. We are, therefore, of the view that it would not be appropriate for us to go into the said aspect of the matter and instead leave the same for determination by the competent court if an approach is made to it. However, havi ng regard to the facts and circumstances of the case we direct the respondent Co rporation not to auction or sell the aforesaid balance quantity of scrap materia ls from the KTU plant for a period of three months from today within which time the appellant/writ petitioner may approach the competent court by means of an ap propriate application.

21. Consequently and in the light of the foregoing discussions the writ appe al as well as the writ petition i.e. WP(c) No.2631/2008 shall stand disposed of.