IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE TWENTY EIGHTH DAY OF FEBRUARY TWO THOUSAND AND FIVE PRESENT THE HON'BLE MR JUSTICE C.Y.SOMAYAJULU WRIT PETITION NO : 19454 of 2004 Between: Sinclaire Infra Tech Limited rep., by its authorized Signatory Sri B.V.Rama Rao, s/o late Sri B.Venkateshwar Rao, r/o Narayanguda, Hyderabad. ..... PETITIONER AND 1. Union of India, rep., by its Secretary to the Government, Department of telecommunications, Ministry of Telecommunications, New Delhi-110 001. 2. Bharat Sanchar Nigam Limited, Government of India Enterprise, 148B, Statesman House, Barakhamba Road, New Delhi 110 001, rep., by The Chairman & Managing Director. 3. Bharat Sanchar Nigam Limited, The Dy. Director General (MM), 12th Floor, 148B, Statesman House, Barakhamba Road, New Delhi-110 001. 4. Bharat Sanchar Nigam Limited, Assistant Director General (C.T.), BSNL Corporate Office, 12th Floor, 148B, Statesman House, Barakhamba Road, New Delhi-110 001. 5. Bharat Sanchar Nigam Limited, Assistant Director (C.T.-I), BSNL Corporate Office, 12th Floor, 148B, Statesman House, Barakhamba Road, New Delhi 110 001. .....RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ order or direction, more particularly one in the nature of writ of mandamus: (a) declare the decision contained and communicated by the BSNL through its communication dated 15-10-2004 as arbitrary and unjust; (b) further declare that the decision of the BSNL, to revise the unit prices as intimated by it through its letter dated 25-08-2004 as illegal and unconstitutional; (c) consequently, direct the respondents to refrain from resiling from the terms contained in the purchase order vide No.MT/PO/06/2003-2004 dated 09-09-2003; and (d) direct the respondents to order for supply and delivery of 75% balance quantity along with add on quantity of STM-1 SDH equipment from the petitioner company in conformity with the terms contained in purchase order No.MT/PO/06/2003-2004 dated 09-09-2003 read with the order contained in file No.33-01/2003-MMC/Vol.II/431 dated 29-06-2004 and accordingly, pray for the same and pass. Counsel for the Petitioner: MR.NUTY RAM MOHAN RAO Counsel for the Respondents: MR.R.S.MURTHY and MR.SUKUMARA PATTA JOSHI (SC FOR BSNL) The Court made the following: THE HON’BLE SRI JUSTICE C.Y.SOMAYAJULU WRIT PETITION No.19454 of 2004 ORDER: This writ petition is filed questioning the letter dated 15.10.2004, proposing to cancel the Purchase Order No.MT/PO/06/2004-04 dated 09.09.2003. 2. The facts, which are not in dispute, are, petitioner, is a Company incorporated under the provisions of the Indian Companies Act, 1956. Bharat Sanchar Nigam Limited (for short ‘BSNL’) issued a global tender bearing No. MM/OF/072002/ 000247 for supply of STM-1 SDH Equipment. On a representation made by the indigenous manufacturers of the said equipment that the said notification is giving scope for its being construed that multinational companies only can participate in the bid, BSNL issued a clarification on 18.09.2002, introducing clause 15(B) in Section IV of the bid document, which enabled indigenous manufacturers also to submit their tenders. In that bid, under Clause 15(B), petitioner became the second lowest bidder (L2) while Semi Conductors Complex Limited, Chandigarh, a Government of India Public Sector undertaking was the Lowest bidder (L1) and accordingly both L1 and L2 were awarded the contract for supply of the equipment required by BSNL. As per the terms of the bid document, BSNL would place an order for 25% quantity, which would be subjected to observation and testing for a period of three months after installation and commissioning in the field. Only on its (BSNL) being satisfied with the performance of the equipment, would it place an order for the remaining 75% of the quantity. Accordingly, BSNL placed an Advance Purchase Order (APO) for 25% of the quantity with petitioner through its letter No.MT/APO/07/2003-04 tentatively valuing the order at Rs.1,28,74,410-54ps. As required in the APO petitioner furnished bank guarantee for Rs.6,43,721/-, and started manufacturing and supplying of the equipment, after securing the Type Approval Certificate (TAC). At the request of the petitioner time for supply was extended with certain conditions, and petitioner completed the supply of 25% of the equipment. BSNL finalized the price for the said 25% of the equipment supplied by the petitioner to it vide letter No.33-01/2003—MMC/Vol.II/431 dated 29.06.2004. Since one of the multi-national companies, which also was awarded a contract under clause 15A of Section IV of the bid document, could not supply the equipment ordered, Semi Conductors Complex Limited (L1) and petitioner (L2) became entitled to that order as add on quantity. So, by its letter dated 28.07.2004, BSNL placed an APO for the remaining 75% quantity (as per the contract) + add on quantity, tentatively fixing the price at Rs.4,78,80,271/- and directed the petitioner to furnish performance bank guarantee of Rs.22,65,000/-. By its letter dated 04.08.2004/05.08.2004, enclosing performance bank guarantee for Rs.22,65,000/- valid for a period of three years, petitioner submitted its acceptance, and having found that the clause in its APO dated 28.07.2004 of the BSNL, reading, “The prices shall be finalized with the budgetary impact of regular budget announced for the year 2004-05 or the approved prices of new tender to be opened during 2004- 05, on whichever is on lower side” is not in accordance with the bid document, addressed the following letter dated 16.08.2004 to the BSNL. “However, on scrutiny of the APO terms and conditions, it is found that in the 2nd part of clause-3 (i), the contract prices are restricted to those obtained in the new tender of 2004-05. This is not applicable in our case as they are totally governed by conditions of Tender Enquiry under reference-1 (T.E.No.MM/ OF/ 072002/000247 dated 31.07.2002) above. Such condition of restricting price of a contract under a previous Tender based on un-established prices to be obtained in future tenders is neither in the scope of the Tender documents nor in the procurement policy.” for which, BSNL, by its letter dated 25.08.2004 informed the petitioner as follows: “Kindly refer to the above mentioned captioned Advance Purchase Order and your acceptance of APO under reference. The New tender for the procurement of STM-1 SDH equipment in BSNL has been opened on 18.08.2004. Due to the decreases in unit prices (all exclusive) of all the items, the provisional unit prices of each item of the said APO is hereby revised as shown in the enclosed annexure. These provisional prices are the 90% of the L-1 quoted price against the New Tender Enquiry No.MM/OF/062004/000270 opened on 18.08.2004. During the original delivery period, the final prices of STM-1 SDH equipment shall be the approved prices of the last tender opened on 03.10.2002 with budgetary impact as on date or the approved prices of New tender opened on 18.08.2004, whichever is on lower basis. You are requested to convey your unconditional/ unequivocal acceptance of the revised provisional unit prices (all inclusive) in respect of the above said APO within Seven days i.e. up to 31.08.2004, failing which the said APO shall be withdrawn. All other terms and conditions of the said APO shall remain unaltered.” For the said letter of BSNL, petitioner sent a reply dated 27.08.2004 informing that the tender document did not contemplate the prices being finalized as per the tenders to be opened in future, and that introduction of a new clause in the APO is not fair, and sent a reminder dated 16.09.2004, for which BSNL sent a reply dated 15.10.2004 reading: “Kindly refer to your letter under reference and captioned Advance Purchase Order. Your request for not linking the new tender process against the subjected APO has not been agreed to. It is informed that “during the original delivery period, the final prices of STM-1 SDH equipment shall be the approved prices of the tender opened on 03.10.2002 with budgetary impact, if any as on date of the approved prices of New tender to be opened in this year, whichever is lower”. You are requested to convey your unconditional/ unequivocal acceptance of the revised provisional unit process (all inclusive) intimated on 25.08.2004 vide letter under reference (ii) in respect of the above said APO. Your reply must reach up to 25.10.2004, failing which the said APO shall be withdrawn at your risks and responsibilities. All other terms and conditions of the said APO shall remain unaltered.” Apprehending that BSNL would give effect to the above letter, petitioner approached this Court for a declaration that the above communication revising the prices, as mentioned therein, is arbitrary, illegal and consequently to direct BSNL to place an order for supply of 75% balance quantity and the add on quantity to it, in accordance with the terms in the bid document. 3. The case in brief of the respondents, as disclosed in the affidavit of the 4th respondent filed on behalf of the respondents, is that this Court has no territorial jurisdiction to entertain the writ petition and in any event the writ petition filed without resorting to the remedy of arbitration, available as per the bid document, is not maintainable more so because this Court’s jurisdiction cannot be invoked by resorting to Art.226 of the Constitution of India for enforcement of contracts. On merits, since petitioner could not supply 25% of the quantity within the stipulated delivery schedule, its performance cannot be said to be satisfactory. When there is delay in supply clause 6(xii) of the purchase order dated 09.09.2003 placed on the petitioner would come into play. Petitioner, who did not comply with the initial purchase order for 25% quantity, does not have a vested right to the balance 75% of the quantity. The conditions stipulated in the APO for 75% balance quantity only would govern the price for that quantity. Prices for the quantity mentioned in the purchase order would firm up only during the delivery period. Since prices communicated to the petitioner in the letter dated 29.06.2004 are only for the supplies made up to 28.02.2004, in response to the earlier purchase order and since fixation of price is strictly as per the Contract, and since the same was accepted by the petitioner, petitioner is not entitled to any relief, more so because it (petitioner) would not be visited withy any penal consequence for its non compliance with the APO. 4. Heard Mr. Nuty Ramamohana Rao, learned counsel for the petitioner, and Mr. Sukumara Patta Joshi, learned standing counsel for BSNL. 5. The points for consideration are: 1. Whether this Court has no territorial jurisdiction to entertain this petition? 2. Whether the writ petition for the relief sought is not maintainable? 3. To what relief, if any, is the petitioner entitled to? Point No.1: 6. The main contention of the learned standing counsel for BSNL is that since no part of the cause of action has arisen within the jurisdiction of this Court, this Court has no jurisdiction to entertain this petition, by relying on the decision of a learned single Judge of this Court in MIC ELECTRONICS LTD. v. UNION OF INDIA, which was confirmed by a Division Bench in MIC ELECTRONICS LTD. v. UNION OF INDIA. He also relied on OIL & NATURAL GAS COMMISSION v. UTPAL KUMAR BASU & OTHERS, M/S.KUSUM INGOTS & ALLOYS LTD. v. UNION OF INDIA and B.R. ELECTRICALS v. THE CHAIRMAN AND OTHERS in support of his contention. 7. The contention of the learned counsel for petitioner is that since MIC ELECTRONICS LTD. cases (1 and 2 supra) relate to a tender which did not fructify into a contract, and since this case relates to supply of goods in pursuance of a concluded contract and since the contract between the parties has to be performed at Hyderabad, a place within the jurisdiction of this Court and since as per Art.226(2) of the Constitution the Court in whose jurisdiction a part of cause of action has arisen would have jurisdiction to entertain the writ petition, this Court does have jurisdiction to entertain this petition. He also relied on M/S.KUSUM INGOTS & ALLOYS LTD. case (4 supra) and NAVINCHANDRA N. MAJITHA v. STATE OF MAHARASTRA in support of his contention. 8. The facts in MIC Electronics Ltd. cases (1 and 2 supra), strongly relied on by the learned counsel for the respondents, show that MIC Electronics Limited, which is a small scale industry, manufacturing Electronics and Telecommunications Network Systems, in response to a tender floated by BSNL submitted its tender claiming benefit of exemption from payment of bid security up to the amount equal to the monetary limit as certified by the National Small Industries Corporation Limited, as per the bid document. After opening the bids, BSNL returned the bid documents of MIC Electronics Ltd. on the ground that it is not accompanied with the bid security amount as per Cl.2.1 of Section IV of the Tender Notice. Questioning the said rejection MIC Electronics Ltd. filed a writ petition in this Court. BSNL opposed the petition inter alia on the ground that this Court has no territorial jurisdiction to entertain the writ petition. Counsel for both sides, as in this also, relied on M/S.KUSUM INGOTS & ALLOYS LTD. case (4 supra) in support of their contention that this Court has no territorial jurisdiction to entertain the writ petition. The finding of the learned single Judge that the facts pleaded in the writ petition, which have to disclose that at least a part of the cause of action had arisen within the territorial jurisdiction of the Court in which the writ petition is filed, are not found in the petition filed by the MIC Electronics Ltd., dismissed the petition, and that finding was confirmed by a Division Bench. 9. OIL & NATURAL GAS COMMISSION case (3 supra) relied on by the learned counsel for the respondent also has no application to the facts of this case because that case also relates to an unconcluded contract. The writ petitioner in that case invoked the jurisdiction of Calcutta High Court on the ground that his reading the advertisement, making a representation and receiving a reply thereto at Calcutta would give raise to a cause of action at Calcutta. Repelling that contention and holding that mere reading of the advertisement at, submitting an offer from, and receiving a reply at, Calcutta would not give jurisdiction to the Court at Calcutta, the writ petition was dismissed. Since this is not a case of submitting an offer, but is a case of petitioner complaining of a breach of the contract, the said decision has no application to the facts of this case. 10. B.R. ELECTRICALS case (5 supra) relied on by the learned counsel for the petitioner also has no application to the facts of this case. The writ petitioner in that case invoked the jurisdiction of Delhi High Court on the ground that payment due to it was stopped only due to the instructions given by the first respondent’s office located at Delhi. Except the first respondent’s office at Delhi issuing instructions to stop payment to B.R. Electricals no other part of the cause of action arose in the jurisdiction of Delhi High Court. Holding that mere issuance of instructions stopping payment due to the goods supplied, by an office which had no role to play either at the time of entering into the contract or during its performance, would not give rise to a cause of action for invoking its jurisdiction, Delhi High Court dismissed the writ petition of B.R. Electricals. The facts of that case are entirely different to the facts of this case and so the said decision has no application to the facts of this case. 11. In M/S. KUSUM INGOTS & ALLOYS LTD. case (4 supra), relied on by the learned counsel for both sides, the apex Court held that the High Court in whose jurisdiction a part of the cause of action arises would have jurisdiction to entertain the writ petition. In NAVINCHANDRA N. MAJITHA case (6 supra), a writ petition was filed in Bombay High Court for quashing a Criminal complaint filed at Shillong, on the ground that a false complaint was filed with a mala fide intention to put pressure on him to reverse the transaction relating to transfer of shares which took place at Mumbai. Bombay High Court dismissed the petition on the ground that it has no territorial jurisdiction. The Supreme Court while setting aside the order of Bombay High Court, and holding that major part of the cause of action did arise in Bombay and so Bombay High Court does have territorial jurisdiction to entertain the writ petition, had while ordering transfer of the case from Shillong, directed Mumbai Police to take up further investigation. 12. Clause (2) of Art.226 of Constitution lays down that the High Court in whose jurisdiction the whole or a part of the cause of action arises can entertain a writ petition. In this case there is a concluded contract between the petitioner and BSNL, and petitioner, admittedly, has to supply the goods manufactured by it in a place within the jurisdiction of this Court, to the BSNL, at places to be named by it. It is well known that in cases of breach of contract, the place where the goods are manufactured, or where the goods have to be delivered, or the place where payment has to be received for the goods supplied or the place where breach is committed, also will have jurisdiction to entertain the proceedings, because those acts give raise to a cause of action. Since petitioner received the letter impugned in this writ petition at Hyderabad, a place within the jurisdiction of this Court, and since petitioner has to receive payment from the BSNL for the goods manufactured by it at a place within the jurisdiction of this Court, a part of cause of action did arise within the jurisdiction of this Court, and so it cannot be said that this Court has no territorial jurisdiction to entertain the writ petition. The point is answered accordingly. POINT NO.2: 13. The contention of the learned counsel for the BSNL on this point is two fold. His first contention is that since the bid document contains an arbitration clause, petitioner, if aggrieved, has to refer the matter to arbitration but cannot file a writ petition. His next contention is that in any event since petitioner is alleging breach of contract, question of this Court granting relief under Article 226 of the Constitution in cases relating to breach of contract does not arise. He relied on HYTHRO POWER CORPORATION LTD. v. DELHI TRANSCO LTD., STATE OF JAMMU AND KASHMIR v. GHULAM MOHD. DAR and STATE OF BIHAR AND OTHERS v. JAIN PLASTICS AND CHEMICALS LIMITED in support of his contention. The contention of the learned counsel for the petitioner is that since BSNL is but an instrumentality of the State, it has a duty to act fairly, even in contracts with third parties, and any arbitrary or unfair act on its behalf, which violates Art.14 of the Constitution, gives raise to the effected party to invoke the jurisdiction of this Court under Art.226 of Constitution, and for invoking public law remedy, clause relating to arbitration cannot be a bar and so this writ petition is maintainable. He relied on MAHAMMAD GAZI v. STATE OF M.P. in support of his contention that even in cases relating to contracts with private parties by a state writ petition is maintainable. 14. Before considering the merits of the contentions raised by the learned counsel for the parties it is relevant to refer to the decisions relied on by them. In HYTHRO POWER CORPORATION LTD. case (7 supra), Delhi Transco issued a notice inviting tenders for balance of the work relating to erection, testing and commissioning of 220 KV DC Tower Line from Samaypur to Mehrauli, which contained an arbitration clause. The Delhi Transco issued a letter of intent to Hythro Power Corporation. For resolution of a dispute between it and Delhi Transco, Hythro Power Corporation Limited filed a petition for arbitration under Section 11 of the Arbitration and Conciliation Act, 1996, in the High Court. A learned single Judge of the Delhi High Court, acting as the designate or nominee of the Chief Justice, holding that since no agreement in writing with an arbitration clause was executed by the parties, rejected the petition. Aggrieved thereby Hythro Power Corporation Limited filed a writ petition in a Delhi High Court which was also dismissed on the ground that there is no written agreement. On appeal to it, the Apex Court set aside to order of the Delhi High Court and remitted the case to the Delhi High Court with a request to the Chief Justice, or his nominee, to hear the case in accordance with the arbitration clause in the notice inviting tenders. This decision is not much of help in deciding this petition because question as to maintainability of a writ petition in case of violation of terms of contract by an instrumentality of the State was not considered therein. 15. In GULAM MOHD. DAR case (8 supra) a writ petition was filed seeking a direction to the State for payment of 42% escalated rates, as approved under a supplementary agreement and confirmed by the Chief Engineer, which was allowed by a learned single Judge and was confirmed by a Division Bench. In further appeal to it, the Apex Court holding that High Court should not entertain a writ petition involving disputed questions of fact, at the request of the counsel appearing for the parties before it, appointed an arbitrator. I n JAIN PLASTICS AND CHEMICALS LIMITED case (9 supra) the writ petitioner company, in pursuance of a tender notification for supply of PVC Pipes and Fittings at Patna and Hazipur, issued by the State Government, submitted a tender, which was accepted and an agreement was executed for an estimated value for supplies amounting to Rs.5,81,92,584.84ps. There was a delay in making supplies by the writ petitioner company and so the State Government with held some payments due and payable to the writ petitioner company. Contending that the authorities of the State Government returning the requisite road permits and other relevant papers was the only cause for the delay in supplying the material, writ petitioner company filed a writ petition seeking a direction to the State Government to release the amount due to it, which was allowed by a learned single judge holding that failure or refusal of the Government to supply the road permits was the cause for the delay and gave a direction to the State Government to pay the amount claimed by the writ petitioner company and that order was confirmed by a Division Bench. On further appeal by the State Government, the Supreme Court, while setting aside the order of the High Court, held that since question whether the alleged non-supply of road permits by the authorities of the Government would justify breach of contract by the writ petitioner company or not is a question of fact which has to be decided on evidence to be adduced and since such seriously disputed questions of fact and rival claims of the parties with regard to breach of contract are not to be decided in a writ petition, dismissed the writ petition. In my considered opinion, both the above decisions have no application to the facts of this case and for deciding this point, because this writ petition does not relate to a claim by the writ petitioner seeking escalated price or payment of money with held by the Government. The case of the petitioner is that BSNL had unilaterally and arbitrarily incorporated an additional clause in the APO, contrary to the terms in the bid document. 16. In MOHAMMED GAZI case (10 supra), a highest bidder in a tender auction of tendu leaves was prevented from having the benefit of the contract, due to a stay order obtained by the previous bidder and so the tendu leaves perished. When the highest bidder sought return of the security amount government imposed a cut on that amount as