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ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.13281 OF 2022
Louis Beger SAS having its Asia Operation Office at 5th
Floor, Tower B, Surinder Jakhar Bhavan (IFFCO)
Plot No.3, Sector 32, Gurugram, Haryana – 122 001. ....Petitioner
Development Corporation Limited having its registered office at Nepean Sea Road, Priyadarshini Park, Mumbai – 400 036. ....Respondent
…
IN
WRIT PETITION NO.13281 OF 2022
Louis Beger SAS ....Applicant
IN THE MATTER BETWEEN
Louis Beger SAS ....Petitioner
Development Corporation Ltd. ....Respondent
Mr. Venkatesh Dhond, Senior Advocate a/w Mr. Jayaprakash Sen, Senior
Advocate, Mr. Vadlomani Seshgiri, Mr. Jay Sanklecha and Ms. B.
Ramakrishnan i/b Mr. Akash Menon for the Petitioner/Applicant.
Mr. Diniyar Madan, Senior Advocate a/w Mr. Mutahhar Khan, Mr. Joshua
D’souza & Mr. Chirag Sancheti i/b M/s. Bulwark Solicitors for Respondent-
MSRDCL.
… katkam 1/19
JUDGMENT
1 Rule. Rule made returnable forthwith. By consent of parties, Petition is heard finally.
2 Petitioner, an appointee of Respondent-Maharashtra State Road Development Corporation Limited (MSRDC) as Project Management Consultant (PMC) for the project of Varsova-Bandra Sea Link (VBSL), has challenged Tender Notice No. CE-I/AE/VBSL/2021-22 dated January 25,
2022. It also challenges letter dated April 27, 2022 by which it has been directed to demobilize all its staff from the site on account of expiration of the term of contract. In short, Petitioner is aggrieved by the action of MSRDC in treating the contract as expired and in adopting fresh Tender process for appointment of a new contractor as PMC for construction of VBSL.
3 Briefly stated, facts of the case are that, Petitioner is a Company incorporated in France with its Asia office in Haryana and is engaged in the business of infrastructure consulting services. Respondent-MSRDC has undertaken the project of construction of VBSL It desired to appoint an katkam 2/19 agency for consultancy services as MSRDC’s Engineer for Project Management Services on Engineering, Procurement and Construction (‘EPC’) basis.
MSRDC accordingly floated tender notice in for appointment of PMC. Petitioner emerged as successful bidder in the tender process and came to be appointed as PMC on EPC basis. The contract of appointment came to be executed between the parties on September 4, 2018. Under the contract, the work was to be executed in three phases: (i) Phase I: Peer Review of Techno Economic Feasibility Study Reports and Detailed Project Report; (ii) Phase II: Bid Process Management for appointment of construction contractor; and (iii) Phase III: Project Management/Supervision during actual implementation of work and defect liability period.
4 The work under Phase I and Phase II of the contract was successfully completed by the Petitioner and after implementation of tender process, construction contractor came to be appointed by MSRDC for carrying out the construction work. This is how Phase III of the contract commenced, under which Petitioner was supposed to supervise the work and manage the project. The last leg of third phase was to commence after completion of work during the defect liability period.
5 It appears that the contractor appointed by MSRDC could not complete the work within the stipulated period, on account of which period katkam 3/19 for completion of construction work was required to be extended up to December 26, 2026. On January 25, 2022, MSRDC issued tender notice inviting bids for appointment of PMC in respect of the balance construction work. Petitioner is aggrieved by the action of MSRDC in seeking to replace it with a new PMC. Some correspondence took place between the parties and by letter dated March 10 & 11, 2022 MSRDC called upon Petitioner to submit an undertaking to continue its services till October 2026 within the unutilized balance amount of Rs.64.23 crores. Instead of submitting an undertaking as desired by the MSRDC, Petitioner undertook to be abide by the terms and conditions of the contract which provided for escalation during extended period of contract by its letter dated April 7, 2022. Since disputes could not be resolved, present Petition was filed on April 22, 2022. This Court by its ad-interim order dated April 25, 2022 restrained MSRDC from issuing any work order to the new PMC.
MSRDC thereafter issued letter dated April 27, 2022 directing Petitioner to demobilize all its staff from the site by May 4, 2022. Petitioner therefore, sought further interim orders and by order dated May 4, 2022, this Court not only continued the earlier interim order dated April 25, 2022 but further stayed letter dated April 27,
2022. The interim orders so passed continue to operate till date.
6 Appearing for Petitioner Mr. Dhond, the learned Senior Advocate would submit that Petitioner’s contract has not been terminated in any katkam 4/19 manner by MSRDC and that it continues to subsist. That without issuing any communication to Petitioner, MSRDC arbitrarily and unilaterally proceeded to implement tender process for appointment of new PMC. He would submit that Petitioner’s contract to act as PMC is co-terminus with the construction contract and that therefore there is no question of expiration of Petitioner’s contract. Mr. Dhond would take us through various clauses of contract in support of his contention that Petitioner is entitled to render its services not only till completion of the construction work but also till expiry of the defect liability period. He would submit that there is no complaint or breaches on the part of Petitioner during currency of the contract nor there is any communication on the part of MSRDC alleging deficiency in services or breaches on the part of Petitioner. As Petitioner has been awarded contract to act as PMC till completion of work and till completion of defect liability period, any delay on the part of construction contractor in completing the work would result in automatic extension of contract of Petitioner as well. He would submit that Petitioner’s contract couched in such a manner that the same would continue to subsist right till expiration of the defect liability period.
7 Mr. Dhond would further submit that the Respondent-MSRDC being an instrumentality of State cannot be permitted to act arbitrarily by katkam 5/19 undertaking tender process for appointment of new PMC without even issuing a single written communication to Petitioner. Relying on MSRDC’s letter dated March 31, 2022, Mr. Dhond would submit that new contractor is sought to be appointed with a view to deny payments under escalation clauses to the Petitioner. In the process, he would submit that, MSRDC would incur higher costs than the one payable to Petitioner. Petitioner’s additional costs (with escalation) is likely to be Rs.42 crores as against the lowest price bid of Rs.166 crores received in pursuance of the impugned tender process.
8 Mr. Madan, the learned Senior Advocate appearing for the Respondent-MSRDC would oppose the Petition. He would raise a preliminary objection about maintainability of the present Petition inviting our attention to arbitration clause in the contract. He would submit that the only plausible claim Petitioner can have against MSRDC is towards damages, which cannot be determined in a Writ Petition filed under Article 226 of the Constitution of India. He would invite our attention to prayer clause (c) in the Petition in which Petitioner has sought direction to release payments due and payable under the terms of contract, which prayer, according to Mr. Madan, would clearly take the Petition out of purview of Article 226 of the Constitution of India. He would submit that by placing katkam 6/19 erroneous interpretation on terms and conditions of contract, Petitioner cannot be permitted to give flavor of arbitrariness with a view to attract jurisdiction of this Court under Article 226 of the Constitution of India, to a pure money claim capable of being decided in a civil suit or arbitration.
9 Mr. Madan would also oppose the Petition on merits submitting that true and correct interpretation of various clauses of the contract would indicate that Petitioner’s contract is not co-terminus with the construction contract. That various clauses of the contract contemplate extension thereof (for escalation etc.) which itself would indicate that Petitioner’s contract had life of its own, upon expiry whereof, Petitioner was expected to seek extension of the contract. He would submit that while the construction contractor sought extension, Petitioner never submitted any application for extension of his contract. The contract accordingly expired by efflux of time.
10 Mr. Madan would place his own interpretation with regard to the letter dated March 31, 2022 to mean that without seeking extension of contract by submission of undertaking, Petitioner’s contract could not have been extended. That Petitioner did submit an undertaking, albeit not as desired by MSRDC, indicating thereby acquiescence on its part as regards expiration of term of contract. katkam 7/19
11 In rejoinder Mr. Dhond would counter the objection of maintainability/ entertainability of the Petition by submitting that once the action of MSRDC, which is a public authority, is demonstrated as arbitrary, mere existence of arbitration clause in the contract would not be a reason not to entertain the Writ Petition under Article 226 of the Constitution of India. In support of his contention Mr. Dhond would rely upon the judgments of the Apex Court in ABL International Ltd. vs. Export Credit Guarantee Corporation of India, (2004) 3 SCC 553 and Unitech Limited & Ors. vs. Telangana State Industrial Infrastructure Corporation (TSIIC) & Ors., 2021 SCC OnLine SC 99. He would also rely upon the judgment of single Judge of this Court in Board of Control for Cricket in India vs. Deccan Chronicle Holdings Ltd., (2021) 4 Bom CR 481.
12. It may be apt to note here that during the course of hearing of Petition on January 30, 2023 it was disclosed by Mr. Madan that the lowest offer after negotiations in pursuance of the fresh tender process is Rs.142 crores. Mr. Dhond, after taking instructions from his clients, gave a counter offer to perform the balance work at Rs.129 crores. However, when the Petition was further heard on February 6, 2023, Mr. Madan expressed inability on the part of MSRDC to accept the Petitioner’s offer citing that a new PMC has already been selected after implementation of valid tender process. katkam 8/19
14 Before adverting to the merits of the Petition, it would be necessary to first deal with preliminary objection raised by Mr. Madan about maintainability of the Petition. We must at the very outset observe that it would be erroneous to state that any writ petition filed under the provisions of Article 226 of the Constitution of India would be not ‘maintainable’. It would be another matter whether this court would ‘entertain’ a given petition for various reasons like availability of alternate remedy, etc. Here we may make a profitable reference to very recent judgment of the Apex Court delivered on February 1, 2023 in M/s Godrej Sara Lee Ltd. Vs. The Excise & Taxation Officer-cum-Assessing Authority & Ors (Civil Appeal No. 5393 of 2010) expounding law on ‘maintainability’ and ‘entertainability’ of writ petition. The Apex Court has held:
4. Before answering the questions, we feel the urge to say a few words on the exercise of writ powers conferred by Article 226 of the Constitution having come across certain orders passed by the high courts holding writ petitions as “not maintainable” merely because the alternative remedy provided by the relevant statutes has not been pursued by the parties desirous of invocation of the writ jurisdiction. The power to issue prerogative writs under Article 226 is plenary in nature. Any limitation on the exercise of such power must be traceable in the Constitution itself. Profitable reference in this regard may be made to Article 329 and ordainments of other similarly worded articles in the Constitution. Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. While it is true that exercise of writ powers despite availability of a remedy under the very statute which has been invoked and has given rise to the action impugned in the writ petition ought not to be made in a routine manner, yet, the mere fact that the petitioner before the high court, in a given case, has not purkatkam 9/19 sued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. It is axiomatic that the high courts (bearing in mind the facts of each particular case) have a discretion whether to entertain a writ petition or not. One of the self-imposed restrictions on the exercise of power under Article 226 that has evolved through judicial precedents is that the high courts should normally not entertain a writ petition, where an effective and efficacious alternative remedy is available. At the same time, it must be remembered that mere availability of an alternative remedy of appeal or revision, which the party invoking the jurisdiction of the high court under Article 226 has not pursued, would not oust the jurisdiction of the high court and render a writ petition “not maintainable”. In a long line of decisions, this Court has made it clear that availability of an alternative remedy does not operate as an absolute bar to the “maintainability” of a writ petition and that the rule, which requires a party to pursue the alternative remedy provided by a statute, is a rule of policy, convenience and discretion rather than a rule of law. Though elementary, it needs to be restated that “entertainability” and “maintainability” of a writ petition are distinct concepts. The fine but real distinction between the two ought not to be lost sight of. The objection as to “maintainability” goes to the root of the matter and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of “entertainability” is entirely within the realm of discretion of the high courts, writ remedy being discretionary. A writ petition despite being maintainable may not be entertained by a high court for very many reasons or relief could even be refused to the petitioner, despite setting up a sound legal point, if grant of the claimed relief would not further public interest. Hence, dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, examining whether an exceptional case has been made out for such entertainment would not be proper.
15. The present petition is thus ‘maintainable’. What needs to be examined is whether we can ‘entertain’ it. The preliminary objection of Mr. Madan is referable to arbitration clause in the contract which reads thus: “44 Arbitration The Parties shall seek to resolve in good faith, any dispute or difference arising between them in respect of any matter connected with this Agreement. If the parties cannot resolve any such dispute or difference within 14 days, or such a period as the parties may katkam 10/19 subsequently agree to the following Disputes shall be settled by arbitration in accordance with the following provisions. In case of dispute, the Employer shall nominate any person, who shall be a retired Principal Secretary of Government of Maharashtra. Such a person to be nominated by Vice Chairman & Managing Director, M.S.R.D.C. (Ltd.), as a sole arbitrator within 28 days of receipts of the Consultant notice for non-acceptance of Employer’s decision. The arbitrator so nominated shall carry out arbitration proceeding in accordance with Arbitration and Conciliation Act, 2015 or any modification thereof and give his decision in reasonable time or as specified in the act from date of reference of dispute to him. The decision of the above said arbitrator shall be final and binding on the Client and the Consultant. The venue of the Arbitration shall be Mumbai. The language of the arbitration shall be English.” 16 Existence of arbitration clause is not disputed by Petitioner. However, the action of MSRDC, an instrumentality of State, is branded by it as so arbitrary and unfair, that this Court would be justified in entertaining the present petition. No doubt, jurisdiction of this Court under Article 226 of the Constitution of India cannot be altogether ousted in every contractual matter. However, the issue is whether jurisdiction of this Court under Article 226 can be invoked in every contractual matter, involving State or its instrumentality, which is capable of being tried and decided in a civil suit or arbitration? To find an answer, we refer to the judgment in ABL International (supra) relied upon by Mr. Dhond, wherein the Apex Court has held as under: “28. However, while entertaining an objection as to the maintainability of a 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 226 of the Constitution is plenary in katkam 11/19 nature and is not limited by any other provisions 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 has imposed upon itself certain restrictions in the exercise of this power [See: Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. [1998 (8) SCC 1]. And this plenary right of the High Court to issue a prerogative writ will not normally 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 legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction.” (emphasis supplied)
17 The judgment in ABL Inernational (supra) has been followed by the Apex Court in Unitech Limited (supra) in which it is held in paragraphs 39, 40 and 41 as under: “39. A two judge Bench of this Court in ABL International Ltd. vs. Export Credit Guarantee Corporation of India (2004) 3 SCC 553 [ABL International] analyzed a long line of precedent of this Court in K.N. Guruswamy vs. State of Mysore, AIR 1954 SC 592; Gujarat State Financial Corporation vs. Lotus Hotels (P) Ltd., (1983) 3 SCC 379; Gunwant Kaur vs. Municipal Committee, Bhatinda, (1969) 3 SCC 769 to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
40. This exposition has been followed by this Court, and has been adopted by three- judge Bench decisions of this Court in State of U.P. vs. Sudhir Kumar, 2020 SCC OnLine SC 847 and Popatrao Vynkatrao Patil vs. State of Maharashtra, Civil Appeal 1600 of 2000 (Supreme Court of India). The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.[1] of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226 (2016) 2 SCC 82. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. The principle was recognized in ABL International: *******
41. Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. The jurisdiction under Article 226 katkam 13/19 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed. TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest on the consideration that was paid by Unitech over a decade ago. It does not dispute the entitlement of Unitech to the refund of its principal.
18 We now proceed to examine whether present case would fall in the exception carved out in ABL International and Unitech Limited. The test is to first determine whether action of instrumentality of State is arbitrary or unfair and in consequence, in violation of Article 14. We first proceed to examine facts in Unitech Limited. In that case, the tender was for development of integrated township and the Appellant therein, being successful bidder, paid various amounts in pursuance of the development agreement executed between the parties. In a separate litigation, Andhra Pradesh High Court held that the Government of Andhra Pradesh did not have title to the project land and that judgment came to be upheld by the Supreme Court. The Appellant therein sought refund of all the amounts paid towards development of land, in which the Respondent therein did not have title. The Writ Petition was filed seeking refund of amount before the High Court under Article 226 of the Constitution of India. It is in the light of these facts that the Supreme Court held Writ Petition seeking refund of amount by Appellant therein from a state instrumentality, as maintainable. katkam 14/19
MSRDC has taken a defence that Petitioner’s contract has expired by efflux of time. On the contrary, Petitioner contents that the term of contract is coterminous with the construction contract, tenure of which has been extended by MSRDC till December 26, 2026. While both the learned Counsels appearing for the parties made detailed submissions on interpretation of terms of contract on the issue of tenure thereof, we do not propose to record any final opinion on the same. Suffice it to say at this juncture that triable issues do exist with regard to interpretation of terms of contract. Apart from the stipulations in the contract, some correspondence has taken place between the parties, on the basis of which, each of them seek to draw an inference in support of their respective contentions. Petitioner also demands release of various unpaid amounts for works allegedly performed by it. If Petitioner’s case that the life of its contract is coterminous with that of construction contract is ultimately upheld, the same would result in breach of the part of MSRDC, for which Petitioner has remedy of either seeking specific performance of contract or damages or both. When MSRDC called upon Petitioner to submit undertaking for continuance to perform services till October 2026 within balance unutilized amount of Rs.64.23 crores, prima facie it does appear that MSRDC was willing to continue services of Petitioner during katkam 15/19 extended tenure of construction contract. However, the parties could not agree on financial terms for offering services during the extended tenure of construction contract. Prima facie, therefore, it is difficult to hold that the approach of MSRDC has been so arbitrary or unfair so as to entertain the present Petition filed under Article 226 of the Constitution. It is not that MSRDC has flatly refused to continue services of Petitioner during extended tenure of construction contract. However, whether the financial offer made by MSRDC to Petitioner was reasonable considering the facts and circumstances of the case is something needs to be decided, possibly by adducing evidence. It must be observed here that Petitioner has pleaded in paragraph 4.15 of the Petition that Petitioner’s additional costs calculated in accordance with terms and conditions of the contract is Rs.31 crores (without escalation) and Rs.42 crores (with escalation). Petitioner sought to compare this amount with the lowest price bid of Rs.166 crores received in pursuance of fresh tender process. However, during the course of hearing of the present Petition, Petitioner agreed to provide services during extended tenure of construction contract at Rs.129 crores. After negotiations, MSRDC has been able to reduce the lowest offer to Rs.142 crores. Since the gap between the two figures of Rs.129 crores offered by Petitioner and Rs.142 crores received by MSRDC does not appear to be too large and that offer of Petitioner comes after the lowest offer pursuant to katkam 16/19 tender process, prima facie it cannot be stated that the actions of MSRDC are wholly arbitrary, irrational or unfair. Considering the nature of dispute raised in the present Petition, prima facie it cannot be held that the actions of MSRDC are so arbitrary that the present Petition needs to be entertained, rather than relegating the parties to the remedy of arbitration. Therefore, after considering the law expounded by the Apex Court in ABL International (supra) and Unitech Limited (supra), we are unable to entertain the present Petition in the light of existence of arbitration clause in the agreement.
20 The decision of the Single Judge of this Court in Board of Control for Cricket in India (supra) would have no application to the facts and circumstances of the present case. This Court was essentially determining challenge to the arbitration award under section 34 of the Arbitration & Conciliation Act, 1996 and in that context, it has discussed public law principles in arbitration decision-making. The judgment in our view would have no application for deciding preliminary objection raised by MSRDC.
21 Resultantly, we are of the view that the present Petition need not be entertained in the light of existence of arbitration agreement between the parties. Petitioner shall be free to adopt necessary proceedings for appointment of Arbitrator and have its claims adjudicated before Arbitrator in arbitration proceedings. All observations made in the present judgment katkam 17/19 which seek to touch upon merits of contentions raised before us are prima facie and the Arbitrator shall not be influenced by the same. Since interim protection is continuing in favour of Petitioner since April 25, 2022 and May 4, 2022, we deem it appropriate to extend the same for a period of one week from today, so as to enable Petitioner to take further course of action even with regard to interim measures before commencement and/or during pendency of arbitration proceedings.
22. We accordingly proceed to pass the following order: O R D E R i) We hold the present Petition as not entertainable in the light of existence of arbitration agreement between Petitioner and MSRDC. Petitioner shall be at liberty to take appropriate steps for appointment of Arbitrator, so also to apply for interim measures before commencement and/or during pendency of arbitration proceedings. All contentions on merits of the dispute are left open. ii) Interim protection granted by this Court vide orders dated April 25, 2022 and May 4, 2022 shall continue to operate till February 15,
2023. iii) With above observations, Writ Petition is disposed of. Rule discharged. There shall be no orders as to costs. katkam 18/19 iv) In view of the disposal of the Writ Petition, the Interim Application does not survive and the same is also disposed of. (SANDEEP V. MARNE, J.) (ACTING CHIEF JUSTICE) katkam 19/19