PRESENT THE HON'BLE MR N v. ANJARIA, CHIEF JUSTICE AND THE HON'BLE MR JUSTICE M.I.ARUN WRIT APPEAL NO
Case Details
- 1 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF FEBRUARY, 2025 PRESENT THE HON'BLE MR N. V. ANJARIA, CHIEF JUSTICE AND THE HON'BLE MR JUSTICE M.I.ARUN WRIT APPEAL NO. 1877 OF 2024 (GM-RES) BETWEEN: 1. M/S. SEUNDO ENERGY PVT. LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE AT # 733, 2ND FLOOR, LEO ARCADE 19TH MAIN, 9TH CROSS, MEI LAYOUT BAGALUGUNTE, BENGALURU-560 073. REP. BY ITS MANAGING DIRECTOR. (BY SRI. S. SRIRANGA, SR. ADVOCATE A/W SMT. ASHWINI N.RAVINDRA, ADVOCATE) AND: 1. MANGALORE REFINERY AND PETROCHEMICALS LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 SCHEDULE A GOVERNMENT OF INDIA ENTERPRISE HAVING ITS REGISTERED OFFICE AT KUTHETHOOR P.O. VIA KATIPALLA MANGALURU-575 030. REP. BY ITS MANAGING DIRECTOR.
Legal Reasoning
Digitally signed by H K HEMA Location: High Court of Karnataka …APPELLANT
Legal Reasoning
(BY SRI. K.ARVIND KAMATH, ASGI A/W SRI. V.G.PRASHANTH, ADVOCATE) …RESPONDENT - 2 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT, 1961 PRAYING TO SET ASIDE THE ORDER DATED 18.12.2024 PASSED BY THE LEARNED SINGLE JUDGE AND IN WRIT CONSEQUENTLY GRANT THE ORDER SOUGHT AS ORDERS IN THE WRIT PETITION, IN THE INTEREST OF JUSTICE. PETITION No.26754/2024 (GM-RES) THIS APPEAL, COMING ON FOR ADMISSION HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N. V. ANJARIA and HON'BLE MR JUSTICE M.I.ARUN ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE M.I.ARUN) This intra court appeal is preferred against the order passed in Writ Petition No.26754 of 2024 by the petitioner therein. 2. The appellant is a company incorporated under the Companies Act and is involved in the business of Engineering Procurement And Construction. 3. The respondent is a Government of India undertaking and operates an Aromatic Complex, a petrochemical unit, capable of producing 0.905 MMTPA of Para Xylena and 0.273 MMTPA of Benzene. In relation to its business, it floated a tender for the following purpose, - 3 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 "'Construction of completely new 110/33 Kv substation, named SS- 10 shall be engineered, procured (engineered items) and construction adjacent to the existing MSEZ substation, GSS-03 besides other activities within the existing substation, SS-01A and other areas within MRPL aromatic complex premises along with installation of a single 110/34.5 Kv, 36/45 MVA free issued transformer in SS-10 and laying of 33Kv free issued cables inside the newly constructed (by others) RCC cable trench of approximately 1.8 km length between the substation SS-10 and SS-01A". 3. The appellant was the successful bidder and was entrusted with the work. The said work was to be completed within nine months from the date of letter of acceptance which was dated 04.08.2023. However, the appellant was not in a position to complete the agreed work within the stipulated time and on several occasions time was extended at the behest of the appellant and finally it was extended up to 23.09.2024. However, the appellant was not in a position to complete the said work and again requested for extension of time (vide Annexure-Q to the writ petition). However, the respondent terminated the contract (vide - 4 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 Annexure-S to the writ petition). Aggrieved by same, the petitioner preferred Writ Petition No.26754 of 2024. Learned Single Judge on the ground that the case on hand involves complex question of facts necessitating appreciation of evidence and examination of witnesses refused to exercise the writ jurisdiction and has dismissed the writ petition. Aggrieved by the same, the present writ appeal is field. 4. The case of the appellant is that there was no breach of contract on part of the appellant and that respondent has terminated the contract based on ulterior motives and irrelevant considerations and the decision of the respondent is arbitrary and unreasonable. It is also contended that the respondent has not followed the principles of natural justice and an opportunity of hearing has not been granted to the appellant before termination of the contract. It is also submitted that the appellant has completed 77.4% of the work and the balance work could not be completed within the time due to the fault of the respondent. It is further submitted that learned Single Judge failed to appreciate these facts
Decision
and has erroneously dismissed the writ petition. - 5 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 5. Per contra, the respondent justifies the order passed by learned Single Judge and prays for dismissal of the writ appeal. 6. Normally, the courts in exercise of its powers under Article 226 of the Constitution of India, do not entertain the dispute pertaining to contractual matters unless the petitioner is in a position to show arbitrariness, ulterior motives or irrelevant considerations by the State in terminating the contract. The Hon'ble Apex Court in Subodh Kumar Singh Rathour Vs The Chief Executive Officer and Others [2024 SCC OnLine SC 1682) in paragraphs 68, 69, 70 and 71 has held as under, "68. The dictum as laid in Tata Cellular v. UOI reported in (1994) 6 SCC 651 is that the judicial power of review is exercised to rein in any unbridled executive functioning. It was observed that the restraint has two contemporary manifestations viz. one is the ambit of judicial intervention and the other covers the scope of the court's ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action. It was held that the principle of 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 process itself. It was held that the principle of judicial review would apply to the exercise of contractual powers by the Government bodies in order to prevent arbitrariness or favouritism. It was held that the duty of the court is to confine itself to the question of legality and its concern should be whether a decision-making authority exceeded its powers; whether it committed an error of law or committed a breach of the rules of natural justice or reached a decision which no reasonable tribunal would have reached or, abused its - 6 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 its own decision, without powers. The grounds upon which an administrative action can be subjected to judicial review are classified as illegality, irrationality and procedural impropriety. In that very decision, while deducing the principles from various cases referred, it was held that the modern trend points to judicial restraint in administrative action; that the Court does not sit as a court of appeal but merely reviews the manner in which the decision was made; that the court does not have the expertise to correct the administrative decision and if a review of the administrative decision is permitted, it will be substituting the necessary expertise which itself may be fallible; that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract; and, that the government must have freedom of contract, i.e. a free-play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness, but must be free from arbitrariness not affected by bias or actuated by mala fides. Moreover, quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 69. To ascertain whether an act is arbitrary or not, the court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard the supporting an order with a circumstances is found to be reasonable will go a long way to repel a challenge to State action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non-application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action. rationale which in 70. One another way, to assess whether an action complained of could be termed as arbitrary is by way of - 7 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 scrutinizing the reasons that have been assigned to such an action. It involves overseeing whether the reasons which have been cited if at all genuinely formed part of the decision-making process or whether they are merely a ruse. All decisions that are taken must earnestly be in lieu of the reasons and considerations that have been assigned to it. The Court must be mindful of the fact that it is not supposed to delve into every minute details of the reasoning assigned, it need not to go into a detailed exercise of assessing the pros and cons of the reasons itself, but should only see whether the reasons were earnest, genuine and had a rationale with the ultimate decision. What is under scrutiny in judicial review of an action is the decision-making process and whether there is any element of arbitrariness or mala fide. 71. Thus, the question to be answered in such situations is whether the decision was based on valid considerations. This is undertaken to ensure that the reasons assigned were the true motivations behind the action and it involves checking for the presence of any ulterior motives or irrelevant considerations that might have influenced the decision. The approach of the court must be to respect the expertise and discretion of administrative authorities while still protecting against arbitrary and capricious actions. Thus, now the only question that remains to be considered is whether the action of the respondent to cancel the tender could be termed as arbitrary?" 7. Thus, the question that arises for consideration in the instant case is whether the appellant is able to show on the face of it that the order of termination of contract passed by the respondent is arbitrary or unreasonable or based on malafide or irrelevant considerations. - 8 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 8. Admittedly, the contract pertains to execution of certain work relating to expansion of the manufacturing process of the respondent entity. While examining as to who is responsible for delay in execution of the work by the appellant, the court is required to examine the question of facts. As already stated above, this court normally in exercise of its powers under Article 226 of the Constitution of India cannot examine the same. This court does not sit as an appellate authority over the decision taken by the respondent while exercising its powers under Article 226 of the Constitution of India. It examines only, whether, on the face of it the decision of the respondent is arbitrary, unreasonable or malafide. The appellant in the instant case has prayed for setting aside the termination order passed by the respondent and direct the respondent to consider the representation of the appellant for further extension of time. A perusal of the request of the appellant to the respondent for further extension of time (Annexure-Q to the writ petition) reveals that the delay was entirely due to the problems that the appellant had with its bankers and its sub contractors or suppliers. The said representation do not place any blame on the respondent for any delay. It is more in the nature of requesting the respondent to consider that the appellant has faced certain - 9 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 difficulties in its business, because of which, there is a delay and that the appellant has now resolved those problems and is in a position to complete the work. The said request has been rejected by the respondent. Further, none of the documents produced by the appellant shows prima facie that the respondent has acted arbitrarily or unreasonably or its decision has been motivated by ulterior motives or malafides. It is only in the pleadings of the writ petition and writ appeal, the appellant has blamed the respondent. 9. The appellant having failed to show arbitrariness or unreasonableness or malafides on part of the respondent, we are of the opinion that learned Single Judge committed no error in coming to the conclusion that the case on hand is a contractual matter and a decision can be given only after examining the disputed question of facts and it is not possible to decide the same by this Court by exercising its powers under Article 226 of the Constitution of India. We do not see any reason to interfere in the well reasoned order of learned Single Judge. For the aforementioned reasons, the writ appeal is dismissed. 10. It is needless to state that the dismissal of the writ appeal will not come in the way of the appellant approaching Civil Court or - 10 - NC: 2025:KHC:5908-DB WA No. 1877 of 2024 Arbitration as the case may be if it so advised and that the Civil Court or Arbitration shall decide the dispute independently without being influenced by any of the observations made hereinabove. Sd/- (N. V. ANJARIA) CHIEF JUSTICE Sd/- (M.I.ARUN) JUDGE PGG List No.: 1 Sl No.: 87