*THE HON’BLE SRI JUSTICE P.S.NARAYANA + WRIT PETITION Nos. 25617 and 25600 of 2006 %Dated 27.12.2007 # Imperial Tubes Private Limited. ..... PETITIONER AND $ Rashtriya Ispat Nigam Limited and others. .....RESPONDENTS Counsel for the Petitioner: Sri Vilas V Afzul Purkar Counsel for the Respondents 1 to 3: Sri V.Ravindeer Rao Counsel for the Respondent 4: Assistant Solicitor General < GIST: > HEAD NOTE: ? Cases referred: 1. 2004(3) SUPREME COURT CASES 553 2. AIR 1974 SUPREME COURT 1265 3. AIR 1984 SUPREME COURT 29 4. AIR 1997 SUPREME COURT 2557 THE HON'BLE MR JUSTICE P.S.NARAYANA WRIT PETITION Nos.25617 & 25600 of 2006 Dated: 27.12.2007 Between: Imperial Tubes Private Ltd. ..... PETITIONER And: Rashtriya Ispat Nigam Limited and others. .....RESPONDENTS THE HON'BLE MR JUSTICE P.S.NARAYANA WRIT PETITION Nos.25617 and 25600 of 2006 COMMON ORDER: 1. Heard Sri Vilas V Afzul Purkar, the learned Senior Counsel representing the petitioner, Sri V. Ravinder Rao, the learned counsel representing respondents 1 to 3 and the learned Assistant Solicitor General representing respondent No.4. 2. W.P.No.25617 of 2006 is filed praying for a writ or order or direction in the nature of Mandamus, to declare the action of the respondents in appropriating the payment receivable by the petitioner towards other contracts against the risk purchase of the petitioner’s contract, as communicated and evidenced by the letter of respondent No.1 bearing No.Pur/2.63.058/059/8883 dated 01.11.2006 impugned herein as illegal, arbitrary and non-est in the eye of law and consequently direct the respondents to forthwith refund the said appropriated amount together with costs of the writ petition. 3. W.P.No.25600 of 2006 is filed praying for a writ or order or direction in the nature of Mandamus, to declare the action of the respondents in appropriating the payment receivable by the petitioner towards other contracts against the risk purchase of the petitioner’s contract, as communicated and evidenced by the letter of respondent No.1 bearing No.Pur/2.63.058/059/8883 dated 01.11.2006 impugned herein, as illegal arbitrary and non-est in the eye of law and consequently direct the respondents to forthwith refund the said appropriated amount together with costs of the writ petition. 4. Sri Vilas V Afzul Purkar, the learned Senior Counsel representing the petitioner had taken this Court through the contents of the affidavits filed in support of the writ petitions and would maintain that in the facts and circumstances, the action of the respondents in appropriating the payment receivable by the petitioner towards other contracts against the risk purchase of petitioner’s contract cannot be sustained. Learned Senior Counsel also would maintain that the stand taken by the respondents to the effect that the writ petitions are not maintainable cannot be sustainable, especially in the light of the view expressed by the Apex Court in ABL INTERNATIONAL LTD v. EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD[1]. The learned Senior Counsel further would maintain that in the light of the similarity of clauses in the present writ petitions and also that specified in UNION OF INDIA v. RAMAN IRON FOUNDRY[2], the view expressed by the Apex Court in the said decision is to be made applicable. The learned Senior Counsel also had drawn the attention of this Court to the decisions of the Apex Court in H.M.K.ANSARI & CO. v. UNION OF INDIA[3] and M/S. SANT RAM & CO. v. STATE OF RAJASTHAN[4] and would maintain that the clauses, which had been discussed in the said decisions being cited different, the decision of the Apex Court in UNION OF INDIA’s case (2 supra) is to be preferred to that of the other decisions in H.M.K.ANSARI & CO.’s case (3 supra) and M/S. SANT RAM’s case (4 supra). 5. Per contra, Sri V. Ravinder Rao, the learned counsel representing respondents 1 to 3 had taken this Court through the contents of the common counter affidavit and would maintain that in the light of the facts and circumstances, the writ petitions are not maintainable. The learned counsel also would maintain that even if it is to be taken as a subsequent cause of action, the petitioner is at liberty to invoke arbitration clause. Viewed from any angle, the writ petitions are liable to be dismissed. 6. This Court issued Rule Nisi on 20.12.2006. The reliefs prayed for had already been specified supra. 7. It is averred that the 1st respondent is a Government Company within the meaning of Section 617 of the Companies Act, 1956 and is an instrumentality of the State being Union of India, 4t h respondent herein. The 1st respondent and officers of the 1st respondent which is a State and/or other authority within the meaning of Article 12 of the Constitution of India and as such are amenable to the writ jurisdiction of this Court. It is also stated that the 1st respondent owns and operates Visakhapatnam Steel Plant, which is claimed to be the largest shore based steel plant in the country. For its aforesaid steel plant the 1st respondent requires continuous annual supply of ERW pipes. Having regard to its aforesaid requirement the 1st respondent from time to time invites tenders for purchase of ERW pipes. 8. Further, it is averred that on or about October 10, 2002 the 1st respondent invited a tender for entering into a rate contract for supply of ERW pipes for a period of 12 months. A copy of the said invitation to tender had been placed before this Court. Pursuant to negotiations, a rate contract was entered into by and between the petitioner and the 1st respondent in respect of supply of 17 items of ERW pipes. A copy of the said rate contract also had been placed before this Court. It is further specified that the said rate contract, inter alia, provided as follows:- “11. Delivery Schedule: Order shall be confirmed by the PURCHASER based on the requirement and materials shall be supplied within 60 days”. “12. Period of the Contract: The rate contract shall be valid upto 28.02.2004. The prices shall be confirmed and valid for the orders placed upto 28.02.2004”. 9. Pursuant to the said Rate contract, the 1st respondent from time to time issued purchase orders upon the petitioner for supply of the required quantity of ERW pipes. The said purchase orders were referred to as “Acceptance to Tender”. Such acceptance to tender (purchase orders) are 4 in number and were issued on March 24, 2003, May 24, 2003, July 26, 2003 and September 22, 2003. Pursuant to the purchase orders, the petitioner from time to time supplied to the 1st respondent E.R.W. pipes of various descriptions. On account of reasons beyond the control of the petitioner, supply of certain quantity of E.R.W. pipes could not be executed by it. It appears that on account of failure of supply by the petitioner, the 1st respondent resorted to make risk purchase on account of the petitioner from alternative sources. Such risk purchase appears to have been made by the 1st respondent on January 9 2004, by order No.Pur.3.63.008/0613 and on May 13, 2004 by Purchase Order No.Pur.4.63.0016/2737 from one M/s Jindal India Limited totaling to Rs.24,81,882.60ps. 10. It is further stated that for items which are on account of risk purchase made by the 1st respondent on January 9, 2004 within the validity period of the Rate Contract which expired on 28.02.2004, the petitioner duly compensated the respondent No.1 by making deposit of Rs.1,.36,344/- by a Demand Draft NO.112607 dated 16.01.2005 reimbursing the additional cost incurred by the 1st respondent in respect of the bill raised by it in this behalf. 11. It is also averred that the purported risk purchase made by the 1st respondent to the petitioner’s account on May 13, 2004 for Rs.24,81,881.60 ps. for the balance quantity of materials not supplied by the petitioner as per the Rate Contract is bad, wrongful, arbitrary and illegal, inasmuch as the said purported risk purchase was made by respondent No.1 beyond the validity period of the said rate contract, which expired on 28.02.2004. It is significant that even after having resorted to the purported risk purchase, the respondents continued to demand deliver of the quantity of E.R.W. pipes, despite the expiry of the period of the Rate Contract, as is seen from letters dated March 29, 2004, April 30, 2004, July 3, 2004 and September 6, 2004. The said letters had been placed before this Court. 12. It is also averred that the demand made by the respondents dated January 29, 2005 from the petitioner for a sum of Rs.24,81,882.60 ps. being the difference of the price in respect of the purported risk purchase made by the respondent No.1 is bad and illegal, inasmuch as the purchase was made beyond the validity period of the rate contract. The petitioner by letter dated 21.02.2005 replied to the letters dated 29.01.2005 and 08.02.2005 disputing the claim of the respondents. Copies of the same had been placed before this Court. In fact, the purported dispute by and between the parties, the 1st respondent had invoked the arbitration clause provided in the “General Conditions of Contract for Supply” by referring the matter to the India council of Arbitration, New Delhi, knowing the same to be disputed amounts between the parties. 13. It is further averred that in or about July, 2006, the 1st respondent filed its Statement of Claim against the petitioner before the Indian Council of Arbitration, New Delhi. A copy thereof had been placed before this court. Pursuant to the direction given by Indian Council of Arbitration, New Delhi, the petitioner has duly filed its Statement of Defence denying and disputing the purported claims raised by the respondents. The petitioner further made payment of Rs.48,750/- towards the tentative cost of the arbitration proceedings, as directed by the said Indian Council of Arbitration, New Delhi. 14. It is also stated that on or about September 30, 2006 and October 17, 2006, the respondent requested the Indian Council of Arbitration, New Delhi, for extension of time to deposit the cost of arbitration. The 1st respondent further requested an extension till October 31, 2006. Copies of the said two letters of request made by respondent No.1 dated September 30, 2006 and October 17, 2006 had been placed before this court. On or about November 1, 2006 the respondents informed the Indian Council of Arbitration, New Delhi, that 1st respondent was withdrawing its request for initiation of arbitration in the matter as it had recovered its dues. A letter, dated November 1, 2006 written by the Assistant Manager of 1st respondent to the Registrar, Indian Council of Arbitration, New Delhi, a copy whereof was endorsed to the petitioner, had been placed before this Court. In terms of the said letter, it is evident that respondent No.1 having initiated the arbitration proceedings as per the contract suddenly backtracked and wrongfully recovered the disputed amount from the petitioner’s other ongoing contracts. 15. On or about November 2, 2006 the petitioner received a fax message being letter dated November 02,2006 sent on behalf of 1st respondent, a copy whereof had been placed before this Court. From the said message, it appears that the respondent No.1 has purportedly invoked Article 9 of the General Conditions for Supply and has deducted and recovered the purported claim amount from out of the amount payable to the petitioner by it from other contracts between the parties. 16. It is further states that the purported deduction and/or recovery made by the 1st respondent is wrong, arbitrary and illegal inasmuch as such recovery and /or deduction was made during the pendency of the arbitration proceedings between the parties without any adjudication as to whether any sum is due and payable by the petitioner to 1st respondent. In any event after invocation of the arbitration clause and initiation of arbitration proceedings it was and is not open to the respondents to take unilateral and convenient stand and appropriate the petitioner’s receivables under the garb of Article 9 of the General Conditions of Contact for Supply. It is reiterated that the 1st respondent knowing fully that the amount was disputed between the parties ought not to have taken recourse to Article 9 of the General Conditions of Contract for the supply, which has no application to disputed claims. 17. It is also averred that having regard to the provision of the said Article 9 of the General Conditions of Contract for supply and on a true, proper and correct interpretation thereof, the purported amount claimed by the 1st respondent is not and cannot be said to be “recoverable from and payable by the Contractor”, having regard to the pendency of the arbitration proceedings between the parties. The 1st respondent and its officers are bound, liable and obliged to act fairly, reasonably in all its dealings with third parties including the petitioner, which the respondents have failed and neglected to do. It is also stated that the purported acts and conduct of the respondents is null and void, wrongful, arbitrary and illegal and the respondents ought to be compelled to act in accordance with law 18. It is further averred that the petitioner has already demanded justice from the 1st respondent by its letter dated November 10, 2006 and a copy thereof had been placed before this court. However, the respondent, having received the same, had not responded. In the light of the said facts, the petitioner is left with no other option, except to approach this Court by invoking Article 226 of the Constitution of India. 19. In the common counter-affidavit, it is stated that the relief sought in the Writ Petitions is in the realm of a non-statutory contract. The grievance of the petitioner relates to an action taken by the respondent in terms of a non-statutory contract. Hence a public law remedy under Article 226 of Constitution of India cannot be invoked. On this ground, the writ petitions are liable to be dismissed without going into the merits of the dispute. It is stated that the pleadings in paras 3 to 7 relate to contracts between the parties for supply of ERW pipes and terms thereof, which are evident from the agreements and need not be traversed. 20. It is also stated that in the contract dated 27.01.2003 the respondent issued 6 purchase orders and not five as mentioned by the petitioner. The 6th purchase order is dated 28.04.2003. It is not correct to allege that the petitioner supplied ERW pipes against all the purchase orders. It is also incorrect to contend that non-supply of certain quantity of pipes was on account of reasons beyond the control of the petitioner. On account of petitioner’s default in making the supplies, the respondent had no alternative but to resort to risk purchase. 21. It is further submitted that as per the rate contract the prices are firm and orders are to be placed within the validity of the contract i.e., before 31.01.2004 and 28.02.2004 respectively, and need to be executed as per the terms and conditions of the purchase order. It is not in dispute that the non-executed orders were placed on the petitioner within the validity period of the contract as per the agreed terms and conditions. Hence the petitioner was contractually under an obligation to make the supplies, failure to supply attracted the risk purchase action. The petitioner has compensated the respondent for part of risk purchase that was undertaken within the validity period of the rate contract. Some of the risk purchases were made beyond the validity period of the contract, though the orders for supply were made and defaulted within the validity period of the contract. Such risk purchases were made by the respondent on 13.05.2004 and 17.05.2004 respectively. These purchases also represent the orders placed within the validity period of rate contract. Having committed default in supplies, the petitioner is under a contractual obligation to compensate the respondent for the additional cost incurred in exercising the risk purchase option. 22. It is also stated that in terms of the contract, orders for supply can be placed any time during its validity period and the contract provides for supplies to be made within 60 days from the date of the order. Therefore, the dates of supply would extend beyond the validity period of the contract for orders placed during the 2 months of contract. As a routine notices were sent to the petitioner for pending orders beyond the contractual period. Such notices do not by themselves operate against the action of risk purchase invoked earlier. The claim of the respondent in both the cases relating to the difference in price between the contractual rate and risk purchase rate is just and permissible in law. 22. It is further stated that in view of the default and the consequential loss incurred by the respondent on invocation of risk purchase, the arbitration clause for proper adjudication of the claim and for recovery of the amount was invoked. At the time of invocation of Arbitration Clause the respondent was not holding any amount payable to the petitioner. Contention of the petitioner that it has submitted the statement of defence is not correct. No such statement was served to the respondent after invocation of Arbitration Clause and reference of the matter to the Arbitrator. After invocation of the arbitration clause, the respondent found in its possession certain amounts payable to the petitioner. To ensure that the loss suffered by the respondent on account of risk purchase is mitigated, Clause 9 of General Conditions of contract was invoked and adjusted the amount payable to the petitioner against other contracts. Even after invocation of Arbitration Clause the provisions of General Conditions of Contract can still be invoked. The contract provides for different options to be exercised by 1st respondent to recover the amounts due to it. Hence the 1st respondent having invoked Clause 9 of General Conditions of Contract, has withdrawn the Arbitration proceedings. Such an action is well within the terms of the contract. The 1st respondent being the “Dominus Litus” in the Arbitration proceedings, it is open to withdraw the Arbitral proceedings, since its claim is satisfied through other valid means available under the contract. The 1st respondent has already sent a reply dated 13.12.2006 to the petitioner’s letter dated 10.11.2006 and hence, the dismissal of these writ petitions had been prayed for. 23. The relevant material papers, which had been placed before this Court, the correspondence and letters would reflect certain factual controversies between the parties. Be that as it may, the learned Senor Counsel representing the petitioner in both the writ petitions had placed strong reliance on ABL INTERNATIONAL LTD’s case (1 supra), wherein the Apex Court observed as under: 16. In the present case, in our judgment, the High Court was not justified in dismissing the petition on the ground that it will not determine disputed question of fact. The High Court has jurisdiction to determine questions of fact, even if they are in dispute and the present, in our judgment, is a case in which in the interests of both the parties the High Court should have entertained the petition and called for an affidavit-in-reply from the respondents, and should have proceeded to try the petition instead of relegating the appellants to a separate suit”. 19. Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the Court entertaining such petition under Article 226 of the Constitution is not always bound to relegate the parties to a suit. In the above case of Gunwant Kaur this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be taken. This clearly shows that in an appropriate case, the writ Court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact. 27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition: a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. c) A writ petition involving a consequential relief of monetary claim is also maintainable. 51. From the terms of the contract, we have noticed in clause 6, as amended by the addendum, consideration by way of barter of goods is not the sole mode of payment of consideration. The said clause contemplates alternate modes of payment of consideration, one of them being by barter of goods and the other by cash payment in US $. The terms of the insurance contract which were agreed between the parties were after the terms of the contract between the exporter and the importer were executed which included the addendum, therefore, without hesitation we must proceed on the basis that the first respondent issued the insurance policy knowing very well that there was more than one mode of payment of consideration and it had insured failure of all the modes of payment of consideration. From the correspondence as well as from the terms of the policy, it is noticed that existence of only two conditions has been made as a condition precedent for making the first respondent Corporation liable to pay for the insured risk, that is : (i) there should be a default on the part of the Kazak Corporation to pay for the goods received; and (ii) there should be a failure on the part of the Kazakhstan Government to fulfil their guarantee. This is clear from the terms of the insurance contact read with the letter of the first respondent dated 8-9-1993 wherein at clause 3-A, it is stated: “Our liability will arise only after default has been established on the guarantee of the Ministry”. From the above, it is clear that both the grounds as put forth by the learned counsel for the respondent before us as well as in the two letters of repudiation issued by the first respondent are unsustainable. In our opinion, the first respondent insured the export risk of the appellants in regard to the non-payment of the consideration for the tea exported, whether it arose from the non-fulfilment of the barter clause or from the non-fulfilment of the cash payment clause. The argument advanced on behalf of the respondent that the appellants refused to accept the barter by goods offered by the Kazak Corporation which amounted to a default under the contract on the part of the appellants has no legs to stand in view of the clear language of the amended clause 6 of the agreement which as noted above, states that the obligation of the buyer, namely, the Kazak Corporation to pay for the goods received by it in US $ arises when payment by barter fails for “any reason whatever”. The use of the words “any reason whatever” in the said amended clause includes the reasons of refusal by the appellants to accept the goods offered in barter. On the fact of the said language of the amended clause, there could be no room for two opinions at all in regard to the liability of the first respondent to pay for the loss suffered by the appellants even in cases where payment by barter fails at the instance of the appellant. The learned counsel for the respondent contended that for a correct interpretation of this amended clause and the other clauses of the contracts i.e., the contract of export and the contract of insurance, between the parties there is need for oral evidence being led without which a proper interpretation of this clause is not