IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE FIRST DAY OF APRIL TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION NO : 6425 of 2008 Between: Smt. M. Maha Lakshmi W/o Narayana Swamy, R/o 6/1130, Shankara Puram, kadapa. ..... PETITIONER AND 1 Transmission Corporation of Andhra Pradesh Ltd., rep by its Chairman and Managing Director, Viduth Saudha. Hyderabad. 2 Chief Engineer Transmission Corporation, Vidyuth Saudha, Hyderabad. 3 Chief Engineer TL & SS A.P. Transco, Kadapa. 4 Superintendent Engineer, TL & SS A.P. Transco, Kadapa. 5 The Asst Divisional Engineer, C.K. Palli 22oKVSS, Kadapa. 6 S. Jayamuni Rao S/o Not Known Superintending Engineer, TL & SS, kadapa. .....RESPONDENTS Counsel for the Petitioner:MR.DURGA REDDY THIMMAYYAGIRI Counsel for Respondent Nos.1 to 5: MR.O.MANOHAR REDDY The Court made the following : ORDER: This writ petition is filed for a writ of mandamus to declare the action of respondent No.4 in terminating L.S.Agreement bearing Nos.92/07-08 of 220 KV Sub-Station, C.K.Palli and 93/07-08 of 220 KV Sub-Station, Kodur entered by the petitioner with respondent No.1, by proceedings, dated 03.03.2008 as illegal and arbitrary. The petitioner was awarded with the contract of maintenance of the above-mentioned two Sub-Stations for the period from 01.12.2007 to 31.08.2008. A formal agreement was entered into vide agreement No.92/07-08 on 13.02.2008. When complaints were received to the effect that the petitioner issued post-dated cheques towards payment of wages to the labourers employed by her, respondent No.5 issued notice, dated 24.02.2008 wherein the petitioner was called upon to immediately explain why she has given the post-dated cheques for salaries for the months of December, 2007 and January, 2008 contrary to the terms of the agreement and kept the relevant column relating to the date of payment in the acquittance register blank while handing over the same to ADE/M/C.K.Palli. In reply to the same, the petitioner gave her explanation on 25.02.2008, in which, she claimed that it is only after receiving the notice, she realized that she committed a mistake by mentioning the month of March instead of February on the cheques and that she was prepared to correct the date of the cheques, if they are returned to her and that mentioning of March on the cheques is not actuated by any bad motives. Respondent No.5 while responding to the said explanation, addressed to her a letter, dated 26.02.2008 wherein he expressed dissatisfaction over the explanation submitted by her and pointed out that on the date of issue of cheques itself, he informed her that they were post-dated cheques and that was the reason for his not honouring the acquittance and processing the bills and that he requested her to see that effective payment is made immediately. As the petitioner evidently failed to make payments, the Divisional Engineer, TL & SS, Kadapa addressed to her a letter, dated 27.02.2008 wherein he requested her to arrange payment to the contract labourers working in C.K.Palli and Kodur Sub-Stations immediately. Respondent No.4 on 28.02.2008 addressed another letter to the petitioner wherein while bringing to her notice as to the nonpayment of wages to the labourers for the months of December, 2007 and January, 2008, he informed her that issuing of post-dated cheques is as good as not making payment and requested her to make payment to the contract labour immediately, failing which necessary action would be taken as per the terms and conditions of respondent No.1. As no payments were made by the petitioner as required in the above mentioned letters, the impugned proceedings are issued by respondent No.4 wherein the contract of the two agreements has been terminated for nonpayment of wages for the months of December, 2007, January and February, 2008. Assailing the said termination, the petitioner filed the present writ petition. Respondent No.4 filed a counter affidavit wherein he averred that the petitioner was awarded with the contract of operation and maintenance of 220 KV Sub-Stations at C.K.Palli and Kodur earlier for the period from 01.07.2005 to 30.11.2007; that during the period of the said contract, the petitioner failed to pay wages to the contract labour continuously for a period of three months i.e. September, 2007 to November, 2007; that the petitioner participated in the tenders for operation and maintenance work of 220 KV Sub-Stations of C.K.Palli and Kodur in pursuance of later tender notice for the contract period from 01.12.2007 to 31.08.2008 and that she was awarded with the work vide intimation, dated 26.11.2007 of respondent No.2. It is further averred that before the respondents entered into an agreement with the petitioner, the contract labour working under the petitioner informed the respondents the fact that she failed to make payment of wages to them from September, 2007 to November, 2007. On coming to know of the same, the Divisional Engineer wrote a letter on 03.12.2007 requesting the petitioner to pay minimum wages to the contract labourers engaged by her before 05.12.2007 and that in spite of receipt of the said letter, she failed to make payment and, therefore, another notice, dated 12.12.2007 calling upon her to make payments on or before 14.12.2007 was issued. This was followed-up by another letter, dated 13.12.2007 and that in spite of receipt of the said letters, she failed to make payment. In view of the same, respondent No.2 vide his letter, dated 24.12.2007 cancelled the letters of intents issued to the petitioner in respect of earlier agreements. It is further averred that the petitioner made a representation on 28.12.2007 expressing her regrets for the delay in payment of the amounts and requesting for re- allotment. Thereupon, respondent No.2 issued letter, dated 10.01.2008 to respondent No.3, which reads as under: “After careful examination, the Chief Engineer/TL&SS/Kadapa is authorized for the following: (i) To arrange wages to the contract labourers for the period from 01.09.2007 to 01.11.07 (old contract period) by revoking the cancellation orders of Agreements issued to Smt. M.Mahalakshmi, Kadapa by the SE/TL&SS/Kadapa. (ii) To revoke the LOIs issued by the CE/TL&SS/Kadapa for the period from 01-12-2007 to 31-08-2008 to Smt. M.Mahalakshmi, Kadapa to avoid legal implications. The above approval is accorded subject to the following: “(i) written undertaking from the contractor to pay wages to labourers from 1.9.2007 to 31.11.2007 by cheques within one week from the date of signing the undertaking, failing which his new contract with effect from 1.12.2007 will stand terminated. (ii) to ensure that wages in the new contract are paid through cheques promptly. Any single complaint received in future the contract will be terminated and contractor will be blacklisted.” It is stated that respondent No.3 thereafter, issued proceedings, dated 11.01.2008 with the following directions: “1. Written undertaking from the contractor to pay wages to labourers from 1.9.07 to 31.11.07 by cheques within one week from the date of signing the undertaking failing which his new contract effect from 1.12.2007 will stand terminated. 2. to ensure that wages to the construct labourers are paid through cheques promptly. Any single complaint received in future the contractor will be terminated and contractor will be blacklisted. After payment to the contract labour details may be intimated to this office for taking further action at this end.” The deponent to the counter affidavit narrated the events that transpired after entrustment of the fresh contract leading to the termination, the gist of which is already referred to supra. At the hearing, Sri T.Durga Reddy, learned counsel for the petitioner submitted that the impugned termination of contracts is arbitrary and in violation of principles of natural justice. He submitted that the termination is not preceded by a show cause notice and that even in respect of noncommercial contracts, the respondents, who are the instrumentalities of the State are bound to act with fairness and wherever this Court finds that their action is found to be arbitrary and unfair, it could interfere. He relied upon the judgment of this Court in B.R.G.K.S.V.Educational Society v. Government of Andhra Pradesh [1]. Sri O.Manohar Reddy, learned Standing Counsel for the respondents opposing the contentions of the learned counsel for the petitioner submitted that ordinarily this Court does not interfere with the disputes arising out of commercial contracts. He further submitted that repeated opportunities were given to the petitioner before terminating the contracts in question and hence, the petitioner’s contention that the respondents acted arbitrarily in terminating the contracts is wholly without basis. The learned Standing Counsel invited my attention to the correspondence between the petitioner and the respondents and submitted that despite affording sufficient opportunities to the petitioner, she failed to make payments, on account of which, the contracts have been terminated in accordance with the terms of the agreements. He, therefore, contended that the termination of contracts does not suffer from any illegality or arbitrariness warranting interference of this Court under Article 226 of the Constitution of India. I have carefully considered the submissions of the learned counsel for the parties. With regard to the maintainability of the writ petition, there is a virtual dichotomy in the judgments of the Apex Court. While the Supreme Court in Radhakrishna Agarwal v. State of Bihar[2]; State of Jammu and Kashmir v. Ghulam Mohd. Dar [3] ; State of U.P. v. Bridge & Roof Co. (India) Ltd[4] and Binny Ltd. V. V.Sadasivan[5] laid down that in commercial contracts, the public law limitations against the State or its instrumentalities cannot be pleaded and the High Court exercising jurisdiction under Article 226 of the Constitution of India would not entertain disputes arising under commercial contracts, pure and simple, however, in the other line of judgments Srilekha Vidyarthi (Kumari) v. State of Uttar Pradesh[6] and ABL International Ltd. v. Export Credit Guarantee Corporation Ltd. [7] , the Supreme Court held that in commercial contracts ordinarily, the High Courts do not entertain writ petitions, but there is no rule that the High Courts in exercise of their jurisdiction under Article 226 of the Constitution of India would not entertain writ petitions merely because the disputes fall in the realm of commercial contracts when the action of the respondents is per se arbitrary. The judgment in B.R.G.K.S.V.Educational Society, Vijayawada (1 supra) relied on by the learned counsel for the petitioner reiterated the view expressed in the latter line of judgments. In view of these conflicting views, I am not inclined to throw away the writ petition merely on the ground of the dispute arising under a commercial contract. I, therefore, proceed to decide the case on the premise that the action of the respondents in terminating the contract can be judged on the touchstone under Article 14 of the Constitution of India. From the facts narrated hereinabove, it cannot be disputed that the petitioner has the history of committing defaults in making payments. After awarding the present work in favour of the petitioner, when serious complaints were sent against her in respect of arrears of wages payable to the labourers in connection with previous contracts, the work orders relating to previous contract were terminated and on the representation made by the petitioner, respondent No.2 revoked the termination order subject to the conditions contained in his letter, dated 10.01.2008, which are extracted supra. Thus, ex facie, the petitioner has a very poor record of payment of wages to her labourers. If we analyse the correspondence commencing from 24.02.2008 emanating from respondent No.5, the petitioner was given repeated opportunities to make payment of wages to the labourers for the months of December, 2007 and January, 2008. Having admitted the fact that the petitioner issued post-dated cheques, she tried to term it as a mistake though the Assistant Divisional Engineer called her bluff in his letter, dated 26.02.2008, in which, he categorically stated that even on the day of issue of cheques itself, he informed the petitioner that she gave post-dated cheques. This contemporaneous correspondence clearly establishes that the petitioner committed deliberate default in making payment of wages to the labourers by issuing post-dated cheques and she did not make amends even when she was given repeated opportunities to pay wages. As regards the contention of the learned counsel for the petitioner that termination proceedings are not preceded by any show cause notice, it is relevant to extract clause 4(d) of the agreement, which reads as under: “d) The successful tenderer shall give an undertaking that they will pay the wages of previous month to the labour engaged within a week of succeeding month. If any complaints received on the contractor from the contract labour engaged by him for nonpayment of wages for more than one month, the concerned contract will be automatically be terminated duly forfeiting the security deposit paid by him besides blacklisting the contractor.” From the above-reproduced clause, it is clear that nonpayment of wages for more than one month results in an automatic termination of contract and forfeiture of security deposit apart from exposing the petitioner to blacklisting. Despite such an omnibus power being given to the respondents, they have not straight away invoked the said clause. Instead, they wrote series of letters to impress upon the petitioner to make payments to the labourers. In the light of these facts, it cannot be said that letter, dated 28.02.2008 issued by respondent No.4 does not constitute a proper notice before terminating the contracts. It is clearly mentioned in the said letter as under: “Issuing of post dated cheques is as well as not making payment. You are therefore requested to make payment to the contract labour immediately failing which necessary action will be taken as per the terms and conditions of AP TRANSCO.” In the absence of any statutory requirement of a show cause notice, notice dated 28.02.2008 is a sufficient compliance of principles of natural justice and by applying any standard, it cannot be said that termination of contracts in the instant case suffers from either arbitrariness or violation of principles of natural justice. In this view of the matter, the petitioner failed to make out any case for interference of this Court under Article 226 of the Constitution of India and hence, the writ petition is dismissed. Learned counsel for the petitioner, however, invited my attention to the impugned proceedings, wherein it is mentioned that the contract is terminated with effect from 01.12.2007 i.e. from inception. I find this action as illegal and arbitrary. On the facts of the case, the respondents are not justified in terminating the contract with retrospective effect. The impugned proceedings are set aside to that extent with the direction that the termination would take effect from the date, on which it was made, namely, 03.03.2008. As a sequel to dismissal of main petition, WPMP.No.8388 of 2008 filed by the petitioner for interim relief is disposed of as infructuous. C.V. NAGARJUNA REDDY, J 1st APRIL, 2008 kvni [1] 2008(2) ALD 417 [2] AIR 1977 SC 1496 [3] (2004) 12 SCC 327 [4] (1996) 6 SCC 22 [5] (2005) 6 SCC 657 [6] (1991) 1 SCC 212 [7] (2004) 3 SCC 553