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2025 Supreme(Online)(Ker) 26808
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Adithya Rajeev, J
M/S NATH INFRASTRUCTURES – Appellant
Versus
UNION OF INDIA – Respondent
W.P.(C)No.11720 of 2023 | W.P(C) No. 8260 of 2023
For the Appellants/Petitioners: Sri Adithya Rajeev
For the Respondents: Sri T.C.Krishna, Sri.K.V.Manoj Kumar
The court reaffirmed that a contractor may terminate a contract if the authority defaults, and it emphasized the importance of procedural due process in contract termination by the state.
Headnote:(A) Indian Contract Act, 1872 - Breach of Contract - Evidence of Authority Default - The court emphasized that the respondents failed to issue a proper order for an extension of time after the contractor's request and unlawfully terminated the contract without compliance with procedural due process and principles of natural justice. (Paras 27, 32)
(B) Judicial Review - The court highlighted that issues of arbitrary state action can be scrutinized within the writ jurisdiction despite the existence of an alternative remedy, especially when there is a failure to act reasonably. (Paras 21, 20)
Facts of the case:
The petitioner, a partnership firm, entered into a contract for road construction, citing causes for delays including adverse weather and COVID-19, and sought an extension of time which was ignored, leading to their termination of the contract.
Findings of Court:
The court found that the respondents had acted arbitrarily and unreasonably in terminating the contract without considering the contractor's request for an extension and prior representations made.
Issues: Whether the termination of the contract by the state was justified given the circumstances and whether the petitioner's termination notice had validity.
Ratio Decidendi: The court reasoned that the continued work by the petitioner and the failure to grant a timely extension constituted authority default, permitting the contractor to terminate the contract, and that the state failed to comply with procedural requirements in their termination.
Result: The notices issued by the respondents were quashed, and directions were given for payment due to the contractor for work completed.
| Table of Content |
|---|
| 1. background of petitioner and contract details. (Para 1 , 2 , 3) |
| 2. extension requests and pandemic impact. (Para 4 , 5 , 6) |
| 3. work executed post-deadline and billing issues. (Para 7 , 8) |
| 4. termination notices and disputes over defaults. (Para 9 , 10 , 11) |
| 5. respondents’ counterclaims and petitioner’s notices. (Para 12 , 13 , 15) |
| 6. legal considerations on writ jurisdiction. (Para 18 , 19) |
| 7. circumstances under which writ petitions are maintainable. (Para 20 , 21) |
| 8. contract termination clauses and authority responsibilities. (Para 22 , 23) |
| 9. analysis of authority's actions regarding time extension. (Para 24 , 25 , 26) |
| 10. defense arguments regarding termination rights. (Para 27 , 29 , 30) |
| 11. arbitrariness in the state's termination process. (Para 31 , 32) |
| 12. court's order and directions. (Para 33) |
JUDGMENT
The petitioner in both these writ petitions is a partnership firm engaged in road construction. The firm undertakes projects for the Kerala Infrastructure Investment Fund Board (KIIFB), the National Highway Authority, and the Public Works Department. The Petitioner has satisfactorily completed several work contracts, including the Kuttipuram-Puthuponnani National Highway and National Highway 15/000 to 57/000 in Wayanad. The prayers in these writ petitions are intrinsically connected, and the writ petitions are being heard and disposed of together. The references to the exhibits and the status of the parties are -6- as per W.P.(C)No.11720 of 2023, which is treated as the main case.
2. The 5th respondent, who had been entrusted with the development, maintenance, and management of National Highway 766 including the section from km 25/1000 to km 45/1000, by the 1st respondent, invited proposals from eligible bidders for "strengthening and geometric improvements from km 25/1000 to km 45/1000 of NH 766 (old NH 212) in Kozhikode District in the State of Kerala on Engineering, Procurement, Construction ("EPC") mode." The petitioner was the successful bidder. An Engineering, Procurement, and Construction Agreement was executed on 07.08.2020. The site was handed over on 18.09.2020, on which day the work was to commence. The time for completion of the work was twelve months from the date of commencing the work and was to end on 17.9.2021. The petitioner had also executed a Bank guarantee as per the terms of the contract.
3. According to the petitioner, at the time of handing over the site, there were thirty trees, eighty electric posts, ten telephone poles, and one bus shelter at the site. The heavy rains during the years 2020 and 2021, and the statewide lockdown from 08.05.2021 to 30.06.2021 due to the outbreak of the COVID-19 pandemic, affected the procurement of materials and skilled labourers. The site was also earmarked as a Containment Zone on various occasions, and several labourers had also tested positive for the COVID-19 virus during that period. Even after the lockdown period, the work was carried out strictly adhering to the COVID-19 protocols, and all the above factors, according to the petitioner, resulted in slow progress of the project. The petitioner also submits that the structural works in different stretches were delayed due to the non-shifting of utilities and the failure to remove trees from the site. On 24.08.2021, the petitioner applied for an extension of time to complete the work. The request was forwarded by the 5th respondent to the Ministry of Road Transport & Highways (MoRTH), recommending the grant of time extension, by imposing a penalty on the petitioner. On 25.10.2021, the Executive Engineer wrote to the petitioner, directing them to submit a proposal for extension of time. This was followed by a letter from the Superintending Engineer asking them to submit a proposal for extension of time, without delay. The petitioner applied on 24.12.2021, seeking extension of time till 30.06.2022. On 4.2.2022, the Executive Engineer wrote to the Superintending Engineer, requesting that the time for comp
