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2023 Supreme(Cal) 1019
IN THE HIGH COURT AT CALCUTTA
I.P. MUKERJI, BISWAROOP CHOWDHURY, JJ.
Union of India & Ors. – Appellants
Versus
M/s. IMECO Ltd. & Anr. – Respondents
APO 79 of 2014 WPO 162 of 2012
Decided on : 25-07-2023
Advocate Appeared:
For the Appellant : Mr. Ajit Kumar Chaubey, Adv.
For the Respondents: Mr. Biswaroop Bhattacharya, Mr. Tirthankar Nandi, Adv, Mr. Abhrajit Mitra, Sr. Adv, Mr. Saykya Sen, Ms. Nilanjana Adhya, Mr. Nikunja Berlia, Ms. Sonali Pal, Advs.
A sub-contractor has sufficient locus standi to maintain a writ application if he enjoys a right against the state, the first contracting party, to compel him to discharge his duty to make payment to the other contracting party so that as a result, the sub-contractor has the prospect of receiving payment as well.
Headnote:
CONTRACT - WRIT JURISDICTION - PRIVITY OF CONTRACT - SUB-CONTRACTOR - TERRITORIAL JURISDICTION - PAYMENT - ARBITRATION - ARTICLE 12 - ARTICLE 226 - CONSTITUTION OF INDIA, 1950 - A writ of mandamus can be issued to compel a contracting party to make payment to the other contracting party, at the instance of the sub-contractor, if the sub-contractor has sufficient locus standi. The sub-contractor has sufficient locus standi to maintain a writ application if he enjoys a right against the state, the first contracting party, to compel him to discharge his duty to make payment to the other contracting party so that as a result, the sub-contractor has the prospect of receiving payment as well. The court has territorial jurisdiction to entertain the writ application if a part of the cause of action is located within its jurisdiction.
Fact of the Case:
IMECO, a sub-contractor, filed a writ petition seeking a direction upon the appellant (Southern Railway) to release the dues of BEML Ltd (the other contracting party) for the purpose of payment to IMECO. The contract between the appellant and BEML was executed outside the jurisdiction of the court, but the sub-contract between BEML and IMECO was executed within the jurisdiction of the court.
Finding of the Court:
The court held that the sub-contractor has sufficient locus standi to maintain a writ application and that the court has territorial jurisdiction to entertain the writ application. The court also held that the appellant should immediately act in terms of the circular of the Railway Board dated 30th March, 2009 and to make payment to BEML considering the note of the Senior Divisional Mechanical Engineer at Pgs.103-104 of the paper book and upon verification of the records regarding the quality and quantity of supply by IMECO to take care of the averments in paragraph 13 of the affidavit-in-opposition quoted above.
Issues: 1. Whether the sub-contractor has sufficient locus standi to maintain a writ application? 2. Whether the court has territorial jurisdiction to entertain the writ application? 3. Whether the appellant is liable to make payment to BEML?
Ratio Decidendi: 1. A sub-contractor has sufficient locus standi to maintain a writ application if he enjoys a right against the state, the first contracting party, to compel him to discharge his duty to make payment to the other contracting party so that as a result, the sub-contractor has the prospect of receiving payment as well. 2. The court has territorial jurisdiction to entertain the writ application if a part of the cause of action is located within its jurisdiction. 3. The appellant is liable to make payment to BEML in terms of the circular of the Railway Board dated 30th March, 2009 and upon verification of the records regarding the quality and quantity of supply by IMECO.
Final Decision: The appeal is dismissed affirming the judgment and order of the learned trial judge with the additional orders made above.
JUDGMENT :
I.P. Mukerji, J.
1. This is an appeal from the judgment and order dated 18th October, 2012 made by a learned single judge of this court in exercise of its writ jurisdiction. The writ application was allowed.
2. Two points of great importance are raised in this matter.
3. The first and foremost relates to the territorial jurisdiction of this court to entertain the application.
4. The second relates to the power of the writ court in an undisputed contractual claim to compel a contracting party to make payment to the other contracting party, at the instance of the sub-contractor. In this process, the sub-contractor could expect payment from its principal, the other contracting party. The point regarding the territorial jurisdiction of this court could be well answered after discussion and adjudication of the second point.
5. The second point is this: The general law of contract is quite plain. A contract can only be enforced by one party to it against the other. Barring some exceptional circumstances, it cannot be enforced by a third party. This is known as the law of privity of contract.
6. The general law of contract would not have allowed IMECO’s claim for their dues arising out of this sub-contract against the appellant. In this writ application IMECO has claimed its dues by asking for a writ of mandamus to be issued commanding the appellant to release the amount due to BEML Ltd. So that by that process it would receive payment.
7. A writ of mandamus is issued by the writ court to compel the government or a body akin to a state under Article 12 of the Constitution of India (collectively the state) to do its duty. The person applying before the court, in other words, the writ petitioner, should have sufficient locus standi. This means that he should enjoy the right of entitlement to performance of that duty by the state. If in a contract a claim is undisputed, unquestionably a party to the contract with the state has the right of obtaining amongst other things, payment under it and the state a duty to make such payment. It is now well settled that the court will enforce such duty in its writ jurisdiction only if some public law element is involved, say for example, arbitrariness, unfairness, discrimination, malice and so on.
8. Now, suppose the state (first contracting party) contracts with another party (second contracting party), which in this case is a government company, an instrumentality under Article 12 of the Constitution of India. Also suppose that the second contracting party whether private or a state instrumentality has lawfully made a sub-contract with another party to perform the contract. Let us also assume that the contract between the first contracting party and the second contracting party has been fully performed through the sub-contractor. Further, a sum is due and payable by the first contracting party to the second contracting party under the contract. Similarly, under the sub-contract a sum is payable by the second contracting party to the sub-contractor.
9. The question which arises is whether the sub-contractor has got sufficient locus to move the writ court to compel the first contracting party to make payment to the second contracting party. Upon such payment there is every likelihood of the sub-contractor also being paid.
10. In general law relating to contract since there is no privity of contract between the sub-contractor and the first contracting party, the subcontractor has no claim against him.
11. If there is a sum due and owing by the state, a contracting party to the other party to the contract, it has the obligation to discharge that liability. A contracting party which is a state under Article 12 has an obligation to act honestly and fairly towards its contractors by releasing any admitted amount arising out of a contract to the other contracting party and not to hold on to payment unnecessarily. If the other contracting party has lawfully entered into a sub-contract, the first contracting
