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Karnataka High Court
SHETTY s CONSTRUCTION COMPANY PRIVATE limited, HUBLI - Appellant
Versus
KRISHNA BHAGYA JALA NIGAM LIMITED, bangalore - Respondent
Decided On : 09-20-05
Writ Appeal : 2612 of 2005
GOVERNMENT CONTRACTS
Awarding or termination - Are bound by postulates of Article 14 of the Constitution.
[S. R. Nayak and C. R. Kumaraswamy, JJ]: The State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedure laid down by them and cannot depart from them arbitrarily. Though the decision taken-by them is not amenable to judicial review on merit, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness and due to violation of the terms and conditions imposed by the authority itself It is trite law that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. The judgments of the Apex Court referred to above would show that the writ petitions against the State and its instrumentalities arising out the contractual obligations are maintainable and judicial review is permissible both at the pre-contract stage and post-contract stage and the action of the State and its instrumentalities should be fair, just, reasonable and free from arbitrariness. In other words, the State and instrumentalities of the State, in the matter of awarding contract or terminating the contracts, are bound by the postulates of Article 14 of the Constitution of India, viz., reasonableness, fairness and non-arbitrariness.
Cases Referred: AIR 1979 SC 1638: (1979) 3 SCC 489: 1979-II-LLJ-217 (SC); AIR 1981 SC 344: (1981) 1 SCC 568: 1981-I-LLJ-193 (SC); AIR 1985 SC 330: (1985) 1 SCC 260: (1985) 154 ITR 172 (SC); (1994) 6 SCC 651; AIR 1997 SC 1236: (1997) 1 SCC 134; AIR 1999 SC 393: (1999) 1 SCC 491; AIR 2000 SC 2272: (2000) 5 SCC 287: 2000 (4) Supreme 34; AIR 2000 SC 801: (2000) 2 SCC 617: 2000 (1) Scale 346.
Followed: AIR 1990 SC 1208: (1990) 2 SCC 331.
Awarding or termiantion of contracts
KARNATAKA TRANSPARENCY IN PUBLIC PROCUREMENT ACT, 1999 - Awarding or termiantion of contracts -Are bound by Article 14 postulates. See, Government Contracts.
Sub-letting of contract
GOVERNMENT CONTRACTS
Sub-letting of contract - What amounts to - Legality of rescission of contract on the ground of.
[S. R. Nayak and C. R. Kumaraswamy, JJ]: It is the specific case of the appellant that under the agreement entered with the third parties, it has only employed them to do some piece works under the appellant s direct control an supervision for remuneration and it had retained full responsibility to carry out the work to the standard stipulated in the main contract and the work was carried out to the full satisfaction of the respondents. It is also stated by the appellant that the respondents were aware of the appellant entering into such agreements with the third parties to do piece works and knowing fully well of that arrangement, the respondents cleared the bills submitted by the appellant for Rs. 526 lakhs in respect of the contract work fully approving the works carried out by the appellant which included the works done through the third parties under the agreements. No convincing reasons are forthcoming from the side of the respondents to reject the explanation offered by the appellant with regard to the allegation of violation of Clause 26(a) of the contract. If what is stated in Annexure-B reply is correct and the piece works were done by third parties under the agreements under the nose of the officers and the Engineer of the respondent-NIGAM, it cannot be said that the appellant violated Clause 26(a) of the contract.
KARNATAKA TRANSPARENCY PUBLIC PROCUREMENT ACT, 1999 ; No.2187 ; Synopsis ; Awarding or termiantion of contracts ; Awarding or termiantion of contracts -Are bound by Article 14 postulates. See, Government Contracts.
GOVERNMENT CONTRACTS ; Awarding or termination ; Awarding or termination -Are bound by postulates of Article 14 of the Constitution. [S. R. Nayak and C. R. Kumaraswamy, JJ]: The State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedure laid down by them and cannot depart from them arbitrarily. Though the decision taken-by them is not amenable to judicial review on merit, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness and due to violation of the terms and conditions imposed by the authority itself. It is trite law that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. The judgments of the Apex Court referred to above would show that the writ petitions against the State and its instrumentalities arising out the contractual obligations are maintainable and judicial review is permissible both at the pre-contract stage and post-contract stage and the action of the State and its instrumentalities should be fair, just, reasonable and free from arbitrariness. In other words, the State and instrumentalities of the State, in the matter of awarding contract or terminating the contracts, are bound by the postulates of Article 14 of the Constitution of India, viz., reasonableness, fairness and non-arbitrariness.
Cases Referred: AIR 1979 SC 1638: (1979) 3 SCC 489: 1979-II-LLJ-217 (SC); AIR 1981 SC 344: (1981) 1 SCC 568: 1981-I-LLJ-193 (SC); AIR 1985 SC 330: (1985) 1 SCC 260: (1985) 154 ITR 172 (SC); (1994) 6 SCC 651; AIR 1997 SC 1236: (1997) 1 SCC 134; AIR 1999 SC 393: (1999) 1 SCC 491; AIR 2000 SC 2272: (2000) 5 SCC 287: 2000 (4) Supreme 34; AIR 2000 SC 801: (2000) 2 SCC 617: 2000 (1) Scale 346. Followed: AIR 1990 SC 1208: (1990) 2 SCC 331.
WORDS AND PHRASES ; No.3322 ; Synopsis ; Sub-letting ; Sub-letting - What amounts to - Legality of rescission of contract -The word "subletting" means transfer of an exclusive right to enjoy the property in favour of the third party. The mere occupation by a party is not. Sufficient to infer either subletting or parting with possession.
( 2 ) THE second respondent issued a notice dated 22-12-2003 to the appellant alleging that the appellant has sublet the contract work to one sri Gururaja Sharanappa Patil and Sri Prahlada Bellary and others and the said act amounts to violation of terms of agreement dated 29-9-2000 and calling upon the appellant to give reply in writing within 15 days as to why appropriate action should not be taken against the appellant for rescinding the contract, for forfeiting the security deposit and removal of the appellant's name from the selected list of contractors maintained in the Nigam etc. The appellant submitted a detailed written reply dated 3-1-2004 to the said show-cause notice.
( 3 ) WHEN the matter stood thus, since the second respondent had threatened action against the appellant as mentioned in the show-cause notice, the appellant filed a suit in O. S. No. 268 of 2004 before the Civil judge (Senior Division), Yadgir to declare that the notice dated 22-12-2003 is illegal, null and void and is not binding on the plaintiff and that the plaintiff is entitled to the money claimed in the pending bills and to direct payment and for permanent injunction against the defendant from terminating/rescinding the contract except in due process of law. In the said suit, the appellant filed an application for temporary injunction for restraining the second respondent from rescinding/terminating the contract. By order dated 17-2-2004 the Civil judge rejected the application for temporary injunction. The appellant preferred an appeal M. A. No. 5 of 2004 to the Court of the Principal district Judge, Gulbarga against the order dated 17-2-2004. The learned district Judge by order dated 23-3-2004 extended the interim order of status quo until further orders. The learned District Judge heard the appeal and by order dated 9-11-2004 dismissed the said appeal. The appellant filed LA. No. 4 on 9-11-2004 in the said appeal, M. A. No. 5 of 2004, praying to continue the status quo order for one more month. The second respondent filed its objections. After hearing, the learned District judge by order dated 16-11-2004, directed the parties to maintain status quo for a period of 15 days. The appellant filed W. P. No. 45353 of 2004 for quashing the order dated 9-11-2004 passed by the Principal District judge, Gulbarga in M. A. No. 5 of 2004 and the order dated 17-2-2004 passed by the Civil Judge (Senior Division) on I. A. No. 2 in O. S. No. 3 of 2004. In the said writ petition, this Court by order dated 18-11-2004 granted an interim order of status quo for 8 weeks. When the matter stood thus, the
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