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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
DHIRAJ SINGH THAKUR, C.J., R. RAGHUNANDAN RAO, J.
M/s Braithwaite & Co. Ltd. - Appellant
Versus
Union of India, Rep. by its Chairman & CEO, Railway Board and Others - Respondents
Writ Appeal No. 168 of 2024
Decided On : 29-08-2024
Arbitration - Termination of Contract - Article 226, Article 14 - The court upheld the dismissal of a writ petition challenging contract termination, emphasizing the existence of an arbitration clause and the need for fair state action under Article 14.
Fact of the Case:
The appellant, a government undertaking, challenged the termination of a contract for railway station upgradation, claiming delays were due to the respondents' failures. The contract was terminated after multiple notices citing defaults by the appellant.
Finding of the Court:
The court found that the termination was not arbitrary, as the respondents provided explanations for the alleged defaults. The existence of an arbitration clause was a significant factor in declining to exercise writ jurisdiction.
Issues: Whether the termination of the contract was arbitrary and if the writ petition was maintainable given the existence of an arbitration clause.
Ratio Decidendi: The court held that even in non-statutory contracts involving the state, writ jurisdiction can be exercised in cases of arbitrary action, but the presence of an arbitration clause typically precludes such intervention.
Result: The writ appeal was dismissed, affirming the lower court's decision.
JUDGMENT :
Dhiraj Singh Thakur, C.J.
The present writ appeal has been preferred against the judgment and order impugned, dated 14.02.2024, passed in W.P. No.1300 of 2024, whereby the petition filed by the appellant challenging the order of termination of the Contract awarded to the petitioner, was dismissed on the ground that disputed questions of fact were involved not warranting the exercise of extraordinary writ jurisdiction under Article 226 of the Constitution of India, and that there was an alternate remedy of arbitration as per the arbitration clause in the agreement between the parties.
2. Briefly stated, the material facts in the background of which the present controversy has arisen are as under:
The appellant M/s Braithwaite & Co. Ltd is a Government of India undertaking. M/s Cognition Projects Pvt. Ltd is a company registered under the Companies Act. Both these companies formed a consortium called M/s. Braithwaite & Co. Ltd., & M/s. Cognition Projects Pvt. Ltd. (Consortium) in which M/s. Braithwaite & Co. Ltd is the lead member of the said consortium.
The consortium responded to a notice, dated 14.06.2022, inviting proposals under two bid system from interested eligible bidders for upgradation of Visakhapatnam Railway Station on Engineering, Procurement and Construction (EPC) mode. The bid submitted by the petitioner was selected and accordingly a Letter of Acceptance (LoA) was issued on 14.09.2022, according to which, the construction was to be completed within 36 months from the 'appointed date'. The agreement was valued at Rs.388,91,00.790/-. The petitioner in terms of the LoA furnished a performance security of Rs.11,66,73,024/- on 07.10.2022. An agreement was formally executed between the parties on 15.11.2022.
3. As per the agreed terms of LoA and the agreement, dated 15.11.2022, the petitioner was supposed to complete the construction within 36 months from the 'appointed date'.
4. Article 21.1.2 of the Agreement envisaged the termination of the Agreement and consequently the contract by issuing a termination notice provided that before issuance of termination notice, the Authority informs the contractor about its intention and grants 15 days time to the contractor to make a representation, and may after the expiry of such 15 days time, issue the termination notice.
A termination notice, dated 24.03.2023, came to be issued by the Chief Project Manager, East Coast Railway, Waltair, invoking Article 21.1.2 of the Agreement based upon the alleged defaults committed by the petitioner in the execution of the contract. Reply was submitted by the petitioner, dated 05.04.2023, to the notice, dated 24.03.2023, which after being considered by the authorities resulted in issuance of communication, dated 22.04.2023, whereby the petitioner was given another chance to complete the project within the stipulated time i.e., by 29.11.2025 after proper planning and compliance and removal of the deficiencies crystallized in the said communication.
5. Subsequently, another notice, dated 06.11.2023, came to be issued. In this notice, it was alleged that whereas the contract was supposed to have been completed within 36 months starting from 30.11.2022 to 29.11.2025, the petitioner had failed to achieve the project milestones and also failed to comply with certain important provisions of the Contract Agreement, which constituted a default on the part of the contractor. As many as 43 items of default were enumerated in the aforementioned notice, which was issued in terms of Article 21.1.2.
It was specifically stated that despite the fact that the competent authority had provided an opportunity vide its communication, dated 22.04.2023, to the petitioner to complete the project within the scheduled time with proper planning and in spite of various commitments made during progressive review meetings, the petitioner had failed to achieve any substantial progress even after lapse of more than eleven months out of a total period of 36 months envisag
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