The High Court held that issuing a new tender while arbitration proceedings were active violated a prior court order, nullifying the contract with a new contractor and reinforcing adherence to undertakings.

JUDGMENT

(Judgment of the Court was made by Dr.G.Jayachandran,J.)

M/s.Ourland Engineering Works Private Limited, the successful bidder, in the tender floated by Thiruverkadu Municipality, has executed the work of solid waste management from June 2023 to June 2024. Thereafter, the contract was extended for a further period of one year. As per the terms of the contract, it is renewable for up to three years.

2. While so, the Municipality issued a notice to the Contractor alleging improper execution of the work. Consequently, the Contractor had issued notice under Section 21 of the Arbitration and Conciliation Act, 1996 (in short “the Act”) for amicable resolution and the Contractor filed an application in Arb.O.P.No.21 of 2025 for appointment of an Arbitrator as per the tender conditions. On 19.02.2025, an Arbitrator was appointed and requested the Municipality to commence the arbitration proceedings. However, the Municipality issued a termination notice on 17.12.2024, despite the fact the Contractor initiated arbitration proceedings. On the next day, a fresh tender was floated for choosing a new contractor for the work of solid waste management.

3. The Contractor invoking Section 9 of the Arbitration and Conciliation Act, 1996 has filed O.A.No.11 of 2025 seeking an interim injunction restraining the Municipality from calling for any new tender and permitting the contractor to continue the work, as per the work order issued in his favour on 14.06.2023.

4. The Learned Single Judge of this Court on 22.01.2025, in O.A.No.11 of 2025 passed the following order:-

“The learned counsel for the respondent/Commissioner of Municipality undertakes to file counter affidavit. He further undertakes that no coercive steps shall be initiated against the applicant, till the hearing of the application.

2.Post the matter after two weeks for filing counter affidavit.”

5. This order was passed, based on the undertaking given by the Municipality that they will not take coercive steps against the Contractor till the hearing of the application and the same was extended for further period of three weeks from 05.03.2025 permitting the Contractor to seek interim relief to protect their interest under Section 17 of the Arbitration and Conciliation Act, 1996 before the Arbitrator appointed by the Court, vide order dated 19.02.2025 in Arb.O.P.(Com.Div.)No.21 of 2025. Alleging that the Commissioner of Thiruverkadu Municipality had committed breach of the order passed by the learned Single Judge in O.A.No.11 of 2025, dated 05.03.2025, the Contractor has filed an application in A.No.2128 of 2025 under Order 39, Rule 2A of C.P.C., to punish the respondents for wilful disobedience of the final order passed by this Court in O.A.No.11 of 2025, dated 05.03.2025.

6. For the sake of convenience, the said order dated 05.03.2025 in O.A.No.11 of 2025 which alleged to have been breached is extracted as below:-

“Since the Court has already appointed an Arbitrator in Arb.O.P.(Com.Div.)No.21 of 2025 by this Court's order dated 19.02.2025, the undertaking given by the respondents that they shall not take coercive steps against the applicant, which was recorded in O.A.No.11 of 2025, shall stand extended for a further period of three weeks from today to enable the