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2024 Supreme(Ker) 516

IN THE HIGH COURT OF KERALA AT ERNAKULAM
M.A. ABDUL HAKHIM, J.
Marymatha Infrastructure Pvt. Ltd. (Formerly Mary Matha Construction Company), Represented By Its Managing Director – Petitioner
Versus
M/s. Roads & Bridges Development Corporation Of Kerala Ltd., Represented By Its Managing Director and Anr. – Respondents
WP(C) No. 12353 Of 2021
Decided On : 21-06-2024

Advocates Appeared:
For the Petitioner: Marymatha Infrastructure Pvt. Ltd. (Party), Santhosh Mathew, Arun Thomas, Mathew Nevin Thomas, Karthika Maria, Anil Sebastian Pulickel, Shinto Mathew Abraham, Abi Benny Areeckal, Kurian Antony Mathew, Karthik Rajagopal.
For the Respondents: Resmitha R. Chandran, Nithin George, Vizzy George Kokkat, B. Deepak.

IMPORTANT POINT
The main legal point established in the judgment is that in contractual matters, the court may not entertain a writ petition if there is a public law element, and the parties should resort to the contractual dispute resolution mechanism provided in the agreement.

Headnote:

Termination - Contractual Dispute - FIDIC Conditions of Contract - Clause 60.10, 69.1, 67.1 - The court discussed the termination of a contract based on the FIDIC Conditions of Contract, specifically focusing on the payment obligations under Clause 60.10 and the termination rights under Clause 69.1. The court also highlighted the dispute resolution mechanism provided in the agreement under Clause 67.1.

Fact of the Case:

The petitioner, a private limited company, challenged a show cause notice and termination of a contract by the 1st respondent, citing delay in payment and demanding a declaration that the contract had been terminated by the petitioner. The 1st respondent contended that the termination proceedings were legal and valid due to the petitioner's continuous default in completing the works.

Finding of the Court:

The court found that the writ petition challenging the termination was not maintainable in contractual matters and dismissed the petition. The court emphasized that the dispute should be resolved through the contractual dispute resolution mechanism provided in the agreement.

Issues: The main issue was the maintainability of the writ petition in contractual matters, specifically regarding the termination of the contract and the competing claims from both parties.

Ratio Decidendi: The court held that the dispute should be resolved through the contractual dispute resolution mechanism provided in the agreement, and that the writ petition challenging the termination was not maintainable in contractual matters.

Final Decision: The writ petition was dismissed, and the court emphasized the need for the parties to resort to the remedies provided in the contract for adjudication of their rights.

JUDGMENT :

1. The Petitioner is a private limited company engaged in undertaking contracts. The Petitioner was awarded a contract work by the name – “Civil and Electrical Works for Developing CUSAT into International Centre of Excellence in Academic and Research-Package I, Main Campus” by the 1st respondent for an amount of Rs.62,58,31,218/-. Ext.P5 is the Contract dt 05.09.2019 executed between the petitioner and the 1st respondent. The 2nd respondent is the Consultant/Engineer in respect of the work. The petitioner is referred to as 'the contractor' and the 1st respondent is referred to as 'the employer' in the Ext.P5 contract. It is clear from Ext.P5 that KIIFB is the Funding Agency for the work. As per Clause 4(iii) of Ext.P5 FIDIC (Federation Internationale Des Ingenieurs Conseils) Conditions of Contract for Works of Civil Engineering Construction are the General Conditions of the Contract.

2. The petitioner has filed this writ petition challenging Ext.P37 Show Cause Notice dt 11.06.2021 issued by the 1st respondent invoking Clause 63.1 of the FIDIC Conditions of Contract and Ext.P36 Recommendation of the 2nd respondent to the 1st respondent to terminate the contract. According to the petitioner, he had already terminated the contract on valid reasons by issuing Ext.P23 notice dt 08.01.2021 invoking Clause 69.1 of the FIDIC Conditions of Contract, which the 1st respondent received on 11.01.2021. According to the petitioner when the contract is already terminated by the petitioner as per Ext.P23, the 1st respondent has no right or authority to initiate proceedings to terminate the very same contract. Even the legality of the Ext. P 23 termination notice cannot be decided by the 1st respondent because it is a party to the contract. In addition to the challenge against Ext.P36 and P37 the petitioner has challenged Ext.P25 dt 22.01.2021 by which the 1st respondent communicated to the petitioner that the reasons stated by the petitioner in Ext.P23 Termination Notice mainly the delay in payment of Running Account Bill (RAB) No.1 is not correct and demanding the petitioner to resume the work. The petitioner has also sought a declaration that the contract between the parties having been terminated vide Ext.P23, the 1st respondent is devoid of any jurisdiction in issuing Ext.P37 Show-Cause Notice. The other directions sought are against the invocation of the Bank Guarantees, forfeiture of Security Deposit, liquidated damages, etc., for the release of the amounts covered by RAB Nos.2 and 3 within a time frame and to direct the respondents to consider and take a final decision on Ext.P34 Representation of the petitioner relating incidental claims.

3. The 1strespondent has not filed any Counter Affidavit in this writ petition.

4. The 2nd respondent has filed a Counter Affidavit dt 09.08.2021 mainly objecting the maintainability of the writ petition under Article 226 of the Constitution of India as the subject matter comes under purview of contractual obligation and contending that the petitioner has not availed itself of the Dispute Resolution Mechanism provided in the Agreement; that the writ petition is premature as the petitioner approached this Court on mere receipt of Ext.P37 Show-Cause notice; that RAB No.1 was processed and paid within the time frame stipulated in Clause 60.10 of the FIDIC Conditions of Contract and as such Ext.P23Termination Notice issued by the petitioner invoking clause 69.1of the FIDIC Conditions of Contract is unsustainable; that the respondents were compelled to initiate termination proceedings to terminate Ext.P5 Agreement on account of the willful and continuous default on the part of the petitioner to resume and complete the works inspite of repeated requests and demand on the part of the respondents and that the termination proceedings initiated as per Ext.P37 Show Cause Notice is perfectly legal and valid in view of the willful violation of the terms of Ext.P5 Agreement .

5. I heard learned Senior C

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