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2021 Supreme(Online)(KER) 9674
HIGH COURT OF KERALA
N. NAGARESH, J
COASTAL ENGINEERING – Appellant
Versus
THE UNION OF INDIA – Respondent
WP(C)/5952/2021
K.L.VARGHESE (SR.), SMT.SANTHA VARGHESE, SRI.RAHUL VARGHESE, SRI.RANJITH VARGHESE, SRI.N.K.SUBRAMANIAN, SC, RAILWAYS
Litigants cannot seek court intervention on contractual disputes pending arbitration; arbitration clauses must be respected in contract execution.
Headnote:
Contract - Termination - Arbitration Act Section List - The court examined the contract terms, consistent with the Arbitration and Conciliation Act, to determine that the petitioner’s claims regarding withheld deposits were not maintainable due to existing arbitration proceedings and contractual obligations.
Fact of the Case:
The petitioner, a contractor, sought the release of Security Deposit and Earnest Money Deposit after the foreclosure of a contract with the respondents, citing lack of progress and subsequent termination as the issues affecting the release of funds.
Issues: Whether the petitioner was entitled to the release of Security Deposit and Earnest Money Deposit despite ongoing arbitration related to the contract.
Ratio Decidendi: The court concluded that the existence of an arbitration process barred the current writ petition concerning the release of deposits, as the arbitration would address related claims comprehensively.
Final Decision: The writ petition was dismissed.
J U D G M E N T
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The petitioner, a registered contractor of Southern Railway, is aggrieved by the non-release of Security Deposit and Earnest Money Deposit despite the foreclosure of contract.
2. The petitioner entered into Ext.P1 agreement dated 30.01.2016 with the respondents for the work “Doubling of Track between Kuruppanthara & Chingavanam - Proposesd soil stabilisation of weak formation between Kuruppanthara & Chingavanam Stations, under Agt. No.02/DCE/ERS/2016 dated 30.01.2016” . Due to want of facilities, the work spilled over the original stipulated period of
10.02.2016. The period was extended up to 31.01.2019.
3. The petitioner states that a meeting was held on
12.10.2018 wherein it was decided that stone columns would be used instead of Prefabricated Vertical Drain (PVD) which was sanctioned in Ext.P1 agreement. It was resolved to treat the petitioner's work of PVD as closed on completion of the work wherever it was ongoing. The petitioner thereafter submitted a new design for vibratory stone column. There was no further intimation from the respondents. The Deputy Chief Engineer, however, issued Ext.P4 notice dated 19.01.2019 alleging the progress in work is slow. In fact, Ext.P4 was a prelude to termination of the contract. The Deputy Chief Engineer was feigning ignorance of the stalemate due to change in methodology, contends the petitioner.
4. The petitioner submitted Ext.P5 letter. The 1st respondent, however, issued Ext.P6 communication dated 28.01.2019 which was a 48 hours notice to terminate the contract. The petitioner filed W.P.(C) No.3201/2019. This Court directed the 2nd respondent to consider the petitioner's representation and take a decision regarding foreclosure of the contract. The 2nd respondent thereupon required the petitioner to issue a letter that no claims would be raised, to enable foreclosure of contract. The petitioner submitted Ext.P10 letter stating that the petitioner will be entitled to the payments for the work done. The 2nd respondent thereafter issued Ext.P11 letter dated 20.03.2019 recommending foreclosure of the contract.
5. The petitioner states that in spite of Ext.P11, no steps were taken for foreclosure of contract nor for release of Performance Bank Guarantee furnished by the petitioner. The petitioner hence approached this Court filing W.P.(C) No.22961/2019. This Court disposed of the writ petition recording the undertaking of the counsel for the respondents that Bank Guarantee would be released after recording the measurements of the work carried out by the petitioner. In Ext.P15 judgment, this Court safeguarded the rights of the petitioner to raise all claims with respect to the subject work through arbitration.
6. The petitioner thereafter issued several letters to the Railways requiring to release the Security Deposit and EMD since the contract is foreclosed. The 2nd respondent issued Ext.P18 letter stating that No–dues Certificate was a mandatory precondition for the release of Security Deposit and EMD. In this writ petition, The petitioner challenges Exts.P11 and P18 and seeks to direct the respondents to release the Security Deposit and Earnest Money Deposit illegally withheld from the petitioner. The petitioner also seeks payment of 18% interest on the amount illegally withheld from the petitioner.
7. Respondents 2, 3 and 4 filed a counter affidavit and contested the writ petition. The respondents stated that the petitioner failed to show substantial progress in the works during the contract period. The process and procedure for termination of contract were in accordance with the general conditions of contract. Periodic inspections were made by the concerned authority and it was noted that the work was not progressing at the desired pace. Accordingly, Ext.R1(c)
termination notice dated 31.01.2019 was issued.
8. The respondents pointed out that the petitioner has already invoked the arbitration clause under General Conditions of Contract and AR No.22/2021 is pe
