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2010 Supreme(Mad) 994
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE T.S. SIVAGNANAM
E. Mohan
Versus
Madras Fertilizers Limited, Rep. by its Dy. General Manager (Acting), Chennai & Others
W.P. No. 26848 of 2009 & M.P. Nos. 1,2,3 & 4 of 2009
Decided on: 12-03-2010
For the Petitioner:R. Muthukumarasamy, Senior counsel for M/s. Satish Parasaran, Rahul Balaji, Advocates.
For the Respondents:R. Viduthalai, Senior counsel for M/s. L.N. Praghasam, Advocate.
Headnote:
Writ Petition - Termination of Road Transport Contract - Arbitrariness and Unreasonableness - Violation of Article 14 and 19(1)(g) of the Constitution of India - Maintainability of Writ Petition - Availability of Alternate Remedy of Arbitration - Invocation of Bank Guarantee - Legality and Propriety.
Fact of the Case:
The petitioner, a transport contractor, challenged the termination of a road transport contract awarded to him by the respondent, a public sector undertaking, on the grounds of arbitrariness, unreasonableness, and violation of Articles 14 and 19(1)(g) of the Constitution of India. The petitioner also contended that the termination was illegal as it was done without affording him an opportunity of being heard and without following the principles of natural justice.
Finding of the Court:
The court held that the termination of the contract was arbitrary, unreasonable, and violative of Articles 14 and 19(1)(g) of the Constitution of India. The court found that the respondent had withheld substantial payments due to the petitioner, which had made it impossible for the petitioner to perform his obligations under the contract. The court also found that the respondent had failed to provide the petitioner with an opportunity of being heard before terminating the contract. The court further held that the invocation of the bank guarantee by the respondent was illegal and unjustified.
Issues: 1. Whether the writ petition was maintainable against the respondent, a public sector undertaking? 2. Whether the petitioner was entitled to challenge the termination of the contract awarded in his favor by the respondent by filing a writ petition and without resorting to arbitration? 3. Whether the reasons assigned for termination were justifiable and whether the same could be gone into in the present writ petition? 4. To what other relief the parties were entitled?
Ratio Decidendi: 1. A writ petition is maintainable against a public sector undertaking when the impugned action is arbitrary, unreasonable, and violative of fundamental rights. 2. A party to a contract can challenge the termination of the contract by filing a writ petition if the termination is arbitrary, unreasonable, and violative of fundamental rights, even if an arbitration clause is included in the contract. 3. The reasons assigned for termination of a contract can be examined by the court in a writ petition if the termination is challenged on the grounds of arbitrariness, unreasonableness, and violation of fundamental rights. 4. The court can grant appropriate relief to the parties, including directing the reinstatement of the contract, payment of damages, and injunctions.
Final Decision: The court allowed the writ petition, set aside the impugned termination notice, and directed the respondent to continue to avail the services of the petitioner in terms of the road transport contract awarded to him. The court also directed the respondent to forthwith recredit the forfeited bank guarantee amount in the petitioner's account.
1. By consent, the main writ petition itself is taken up for disposal.
2. The prayer in the writ petition is to quash the termination notice dated 112. 2009 issued by the first respondent terminating the road transport contract 2009-2011 awarded to the petitioner and to direct the first respondent to avail the services of the petitioner as transport Contractor by strictly adhering to the terms of such contract including complying with the payment obligations contained under the contract.
3. The case of the petitioner is that the petitioner is the Proprietor of M/s.Krishna Lorry Service, a service provider, engaged in the business of transportation of products and goods on contract basis covering the State of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka and Pondicherry. The proprietorship concern was initially owned and managed by the petitioners father Mr.Easwaran and after his demise it is managed by the legal heirs, which includes the petitioner, his mother and two sisters and the petitioners mother and two sisters are stated to have granted Power of Attorney in favour of the petitioner herein.
.4. The first respondent herein is a public sector undertaking of the Central Government engaged in the production of Ammonia, Urea and NPK complex. The petitioner herein was engaged as a transport Corporation of the first respondent since 1997 for transporting its bagged fertilizer and consignments. The contract for the period 2007-2009 was awarded to the petitioner as they qualified as the lowest tenderer. The first respondent by tender notice dated 6. 2009 called for tender to submit bids for transportation of its products for a period of two years, viz., 2009-2011. The tender was two-cover bid system consisting of "Form A – Qualification Bid" and "Form B – Rate Bid". The petitioner as one of the participants in the said tender, submitted its bids on 7. 2009. According to
.the petitioner, on the date of submission of its bids, the petitioner was intimidated by the presence of certain criminal elements within the premises of the office of the first respondent, who attempted to snatch the tender papers from the petitioner and his sister. However, no action was taken inspite of the fact being brought to the notice of the second respondent, the Chairman and Managing Director of the first respondent Company who has been impleaded in his personal capacity in this writ petition. It is stated that the petitioner managed to submit his bid on the said date. Having been qualified in the Qualification bid, the financial bid of the petitioner was opened on 37. 2009 as scheduled and since the petitioner was the lowest bidder, the contract for the period 2009-2011 was awarded in favour of the petitioner. The earlier contract for the period 2007-2009 was to expire on 8. 2009 and the new contract for the subsequent period ought to have been entered well before the expiry of the previous contract, but stated to have been delayed by the first respondent for the reasons best known to them. It is stated that the second respondent called the petitioner for a meeting on 8. 2009 and asked them to back out from the said tender and informed that the rates quoted by the petitioner was unworkable and they were inclined to award the contract to the second lowest bidder whose offer was Rs.11 Crores over and above the offer made by the petitioner. According to the petitioner, these facts were brought to the notice of the Department of Fertilizers, Government of India by their letter dated 8. 2009. Subsequently, by communication dated 8. 2009 the first respondent called upon the petitioner to extend the earlier contract for the year 2007-09 for a further period of one month i.e., from 8. 2009 to 9. 2009 at the prevailing rates. This request made by the first respondent was agreed to by the petitioner. Subsequently, the contract for the period 2009-2011 was given in favour of the petitioner by letter dated 9. 2009 and an agreement was also enter
