. 5 HIGH COURT OF CHHATTISGARH AT BILASPUR " @L Writ Petition (C) No.6811 of 2008 PETITIONER: M/s Lark Constructions Pvt. Ltd. Versus Union of India RESPONDENT: HON’BLE MR. V) WW A? ORDER FOR CONSIDERATION 5 , Sd/- Dhirendra Mishra Judge R.N. CHANDRAKAR, J Sd/— R.N. CHANDRAKAR. i Judge 1% POST FOR ORDER ON-Q? JANUARY, 2010 i, Sdl- Juége Dhirendra Mishra" i W) x HIGH COURT OF CHHATTISGARH AT BILASPUR Writ Petition (C) No.6811 of 2008 6i PETITIONER: M/s Lark Constructions Pvt.JLtd., a limited company duly registered under the relevant provisions of Company Act, 1923, having its principal office at Ground ‘Floor, “Runanubandh” Road No.1, Sector-19, New Panvel district Raigad (Mah.) 410206, represented by the Managing Director ‘Shri A.D. Patrikar, aged about 59 years, son of late Shri Diwakar Patrikar, R/o “Runanubandh”, 8-2, Road No.1, Sector No.19, New Panvel district Raig'ad (Mah) 410206 Versus RESPONDENT: Union of lndia, through ‘The Chief Engineer (Const) ll, South East Central Railway, Construction Office, Bilaspur, CG Present: Shri Hemant counsel for thé’petitioner. Shri S.P. Bhandarkar with Shri Solapurkar, Ms. Naushina Afrin Ali, counsel for the respondent. Division Bench: Hon’ble Shri Dhirendra Mishra & Hon’ble Shri R.N. Chandrakar, JJ. L O R D E R Q?%January, 2010) (Passed on 2010) The following order of the Court was passed by Dhirendra Mishra, J. made the order of rescinding the contract and 1. This petition has been against forfeiture of earnest money dated 8-5-2008 (Annexure-P/1) issued by the respondent. 2. In response to the notice inviting tender of Annexure—R/3 for execution of earthwork in formation on detour alignment between ch.11900 (in section Kachhpura — Gwarighat) to Jamtara and construction of balance minor Ugg bridges and other allied works between Kachhpura to Sukri sectionpn detour alignment in connection with Gondia-Jabaipur guage conversion project, the petitioner submitted hisoffer dated 14‘“ August, 2007 with earnest money deposit of Rs.14‘50,240/— vide Annexure-P/2. § . 3i The petitioner was requested to attend negotiations to be held on 11th January, 2008, as his original offer was considered on higher side vide Annexure—P/3. The petitioner participated in the negotiations and communicated the respondent (Annexure-P/4) that they wereunot in a position to reduce their rates further, as they had already quoted a very competitive rate in response to the NIT. It was specifically mentioned that their negotiated offer shall remain valid for a period of 60 days from the date 6 i of negotiation i.e. from 17-1—2008. 4. The respondent vide their memo dated 29-2-2008 (Annexure-P/5) informed the petitioner that his negotiated offer was under consideration and requested the petitioner'to extend the validity up to 30'“ April, 2008, as the-offer was valid only up to 16-1-2008. The petitioner, in response to the memo of Annexure-P/5 vide their letter dated 17th March, 2008 (Annexure-P/6) expressed their inability to extend the validity up to 30th April, 2008 and i requested for refund of earnest money deposit by them. However, the petitioner received letter of acceptance dated 10m March, 2008 (Annexure- P/7) of the r'espondent on 19th March, 2008. The petitioner informed the respondent that the letter of acceptance reached to them after the expiry of the validity period of their offer (Annexure—P/8). The petitioner was served 7 days notice under clause-62 of the General Conditions of the Contract on 11— 4- 008 (vide Annexure-P/Q) and was directed to commence the work and \{t t‘: \‘ i ; @ finally 48 hours notice was issued for the same purpose on 32-4-2008 (Annexure-P/10). 5. The petitioner replied the aforesaid notices and reiterated his stand that letter of acceptance was received by him on 19‘“ March, 2008 when the.validity of his offer had aiready expired on 16th March, 2008 and thus there is no concluded contract and requested for refund of earnest money. However, the respondent Vide impugned communication of Annexure-P/1 dated 8‘“ May, 2008 rescinded the contract in terms of clause-62 of the General Conditions of the Contract and forfeited the earnest money deposit. 6. Shri S.P. Bhandarkar with Shri Hemant Solapurkar, learned counsel appearing on behalf of the petitioner submitted that the letter of acceptance § could not he served upon the petitioner within the validity period of their tender offer up to 16th March, 2008, as the respondent had refused to extend the validity beyond 16m March, 2008 and, therefore, the letter of acceptance (Annexure-P/7) served upon the petitioner after the period of validity is void. The letter of acceptance (Annexure-P/7) is also invalid, as the same has not been issued on behalf ofthe President of lndia, which is mandatory in view of ’ Article 299 of the Constitution of India. .From bare perusal of the letter of acceptance, it would be evident that the same is suspicious document, as the same has not been endorsed to any other authorities, which is unusual, as normally copies of the acceptance letter are issued to other officers of the Railways. it s 7. lt was further argued that there is no provision in the General Conditions of terms of contract that the communication of acceptance would be deemed to be the date on which they were so delivered or left. The petitioner has communication of acceptance was'within the knowledge of the petitioner and in View of Section 4 of the indian Contract Act it is complete is Without any substance and forfeiture of earnest money depOSIt under Rule 9 3 4 of the tender notice could not be invoked. " i On the other hand, Ms. Naushina Afrin Ali, learned. counsel appearing on behalf of the respondent submitted that the instant writ petition relating to contract matter is not maintainable The petitioner has alternative remedy of taking recourse to clause 64 (1) of the general conditions of the contract which prOVides for resolution of the dispute through arbitration. The petitioner’s application dated 27‘“ August, 2008 submitted to the General Manager (Constructions) of the respondent (Anneuxre-R/1) is pending consideration. After approval of the competent authority, tender was awarded to the petitioner vide acceptance letter dated 10m march, 2008 (Annexure R/6) copy of which was faxed to the petitioner on 1 1 3-2008 and copy of fax receipt is Annexure R/7 and the same was again sent by the registered post With acknowledgement due on 11—3-2008 vide Annexure-W8. The communication was sent to the official fax number of the petitioner i.e. 022-27454929 on 11-3-2008, as the petitioner was called upon toiattend the omce within 7 days for signing the contract document. it was specifically mentioned that acceptance shall constitute a binding contract between the parties and no separate work order will be issued except for the items A . \kioyered under SER~SOR-1992. g/ ‘@> A v 9. We have heard learned counsel for the parties. We have perused the pleadings of the respective parties and the documents annexed with their pleading. d 10. Before entering into the controversy between the parties‘ we propose to examine the scope of interference by the High Court in contractual matters in exercise of powers under Article 226 of the Constitution of India. 11. In the matter of Mahabir Auto Stores and others Vs. Indian Oil Corporation and others1, the petitioner was lubricant distributor of the respondent-Indian Oil Corporation. He was recognized as authorized dealer, distributor and agent of the Corporation. However, the Corporation stopped supply of lubricants to the petitioner and when his representations were also ' not considered, the petition was filed. The Hon’ble Supreme Court, while dealing with maintainability of the above petition, held that in appropriate cases, action of the State or its instrumentalities, uninformed by re’ason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial if review strikes such an action down. Every action of the State execution authority must be subject to rule of law and must be informed by reason. So, whatever be the activity or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. lf a Government action even in thebmatters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. ‘AIR199U so .w. \r r‘x 12. In the matter of Kumari Shrilekha Vidyarthi Vs. State of U.P. and others2 also, the Hon’ble Supreme Court, referring Vade’s Administrative Law, 6th Ed., observed that the whoie conception of unfettered discretion is inappropriate to a pubiic authority, which possesses powers soleiy in order that it may use them for the pubiic good. in the latter part of this judgment, it has been further observed that for the same reasons, there should, in principle, be no such thing as un-reviewable administrative discretion, which n6 i should be just as much a contradiction in terms as unfettered discretion. The question which has to be asked is what is the scope of judicial review, and in a few special cases, the scope for the review of discretionary decisions may be minimal. It remains axiomatic that all discretion is capable of abuse, and that legal limits to every power are to be found somewhere. 13. in the matter of National Highways Authority of lndia.Vs. Ganga Enterprises and another3, the respondent participated in a tender process and submitted his bid. Along with his bid, he also furnished a bank guarantee in the sum of Rs.50 lacs as bid security. The bank guarantee furnished was “on demand bank guarantee”, which specifically provided that the bank guarantee could be enforced on demand, if the bidder withdravvs his bid during the period of bid validity. On opening of the tender, the respondent was the highest bidder. The respondent withdrew his bid during validity of the offer. In these circumstances, the petitioner encashed the bank L guarantee for Rs.50 lacs. The respondent filed writ petition in the High Court for refund of the bank guarantee amount. The High Court raised two questions viz.: (a) whether the forfeiture of security deposit was without authority of law and without any binding contract between the parties and 2A1R 1991 sc 537 3 (2003) 7 scc 41o v \ also contrary to Section 5 of the Contract Act; and (b) whether the writ petition was maintainabie in a ciaim arising out of a breach of contract. The High Court without considering the question (b), allowed the writ petition by holding that the offer was withdrawn before it was accepted. Thus no completed contract had come into existence and it is always open to the parties to withdraw its offer before its acceptance. Allowing the appeal of the petitioner-authority‘ the Hon’ble Supreme Court observed that the High Court ought to have first answered the question (b) i.e. whether the writ petitionwas maintainable in a claim arising out of a breach of contract as it would go to the root of the matter. It has been further observed that it is settled law that a dispute relating to contract cannot be agitated under Article 226 of the Constitution. Principles of law laid down in the matters of Kerala SEB Vs. Kurien E. Kalathil {AIR 2000 SC 2573}, State of U.P. Vs. Bridge and Roof Co. (India) Ltd. {(1996) 6 SCC 22} and Bareilly Development Authority Vs. Ajai Pal Singh {(1 989) 2 SCC 116} have also been referred with approval. 14. However, in the matter of ABL International Ltd. and another Vs. Export Credit Guarantee Corporation of India Ltd. and others‘ , while dealing 3 . with maintainability of a petition for enforcement of contractual obligation of State or its instrumentalities under Article 226 of the Constitution of India, it has been held that on a given set of facts if the State acts in arbitrary manner even in a matter of contract, an aggrieved party can approach the‘Court in a writ under Article 226 of the Constitution and the Court depending on facts of the said case is empowered to grant the relief. When an instrumentality of the State acts contrary to public good and public interest, unfairly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations, it 4 (2004) 3 Supreme Court Cases 553 really acts contrary to the constitutional guarantee found in Article 14 of the Constitution. Therefore, once the State or an inst’rumentality of the State is a party, it has an obligation in law to act fairly, justly and reasonably to a contract which is the requirement of Article 14 of the Constitution. 15. In the matter of Food Corporation of India and others Vs. Jagannath Dutta and others5, while considering the scope of interference with contractual obligations under Article 226 of the Constitution, it has been held in paragraph-5 of the judgment that:- “We are of the View that the High Court was not justified in quashing the impugned notice especially when the terms and ‘conditions of the contract permitted the termination of the agreement by either of the parties. The High Court shouid not have gone into the question ’of contractual obligation in its writ jurisdiction under Art. 226 of the Constitution. Even otherwise, the High Court misread the documents on the record .and grossly erred in reaching the conclusion that no policy decision was taken by the FCI to terminate the storage agencies in the State of West Bengal. We may refer to some of the documents on the record.” At y Ab? 16. ln the matter of Kerala State Electricity-Board and another Vs. Kurien E. \ Kalathil and otherss, it has been held that a contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. The dispute arising out of the terms of such contracts or alleged breaches has to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not of itself affect the principles to be applied. ' \‘ 9 1% Statutory bodies tike private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. 17cm the matter of State of Bihar and others Vs. Jain Plastics and Chemicals Ltd.,7, in para-3, it has been held thus:— a “Settled law — Writ is not the remedy for enforcing contractual obligations. It is to be reiterated that the writ petition under Article 226 is not the proper proceeding for adjudicating such disputes. Under the law, it was open to the respondent to approach the Court of competent jurisdiction for appropriate relief for breach of contract. it is settled law that when an alternative and equally efficacious remedy is open to the litigant, he , should be required to pursue that remedy and not invoke the writ jurisdiction of the High Court. Equally, the existence of alternative remedy does not affect the jurisdiction of the Court to issue writ, but ordinarily that would be a good ground in refusing to exercise the discretion under Article 226.” 18. From the principles of law laid down in the aforesaid judgments, it may be said that normally writ is not the remedy for enforcing contractual obligations and petition under Article 226 of the Constitution is not the proper proceeding hen equally efficacious remedy is available, ' for adjudicating such disputes. W he should‘pursue that remedy. However, while entertaining the objection as on under Article 226 of the censtitution of lndia, the fact to be borne in .mind is that whether the State ‘or its instrumentality acts in arbitrary manner. When the State or its instrumentality acts contrary to public good and public interest, unfairly, unjustly and in its contractual obligation, then Article 14 of the Constitution to the maintainability of the writ petiti unreasonably, M LQrm) 1 scc 216 ?"7u7” ' w 10 comes into play and the High Court having regard to the facts ofthe case has a discretion to entertain or not to entertain a writ petition. é ; 19. in the instant case, the petitioner has impugned forfeiture of earnest money deposit in contract in question on the following grounds:- (i) There was no conciuded contract between the parties as letter of acceptance of Annexure-P/7 purportediy dispatched on 13‘“ March, 2008 was received by the petitioner on 19th March, 2008, whereas the petitioner’s offer was admittedly valid only up to 16th March, 2008. intimation of acceptance through fax dated 11—3-2008 in the official telephone number of the petitioner company is of no avail, as there is no provision in the general conditions of the contract that communication of acceptance through fax is permissible and communication of acceptance through electronic mode may be tinkered with. (ii) Froin bare perusal of letter of acceptance dated 10m March, 2008, it is evident that the same has not been issued in the name of the President of india which is mandatory as per Article 299 of the Constitution of lndia. (iii) There is no provision in clause-62 of the general conditions of the contract for forfeiture of earnest money deposit and‘-condition No.9.3.4 ofthe NIT could not be invoked. 2.0. indisputably, letter of acceptance was dispatched through fax as well as registered post on 11th March, 2008 on the official address of the petitioner. 5, The Hon’ble Supreme Court in the case of Bhagwandas Goverdhandas Kedia Vs. Girdharilal Parshottamdas and Co., and othersg, while dealing with communication, acceptance and revocation of proposals under the Contract Act, held thus:— \ “. The Contract Act does not expressly deal with the place where a contract is made. Sections 3 and 4 of the Contract Act deal with the communication, acceptance and revocation of proposals. By Section 3 the communication of a proposal, acceptance of a proposal, and revocation of a proposal and acceptance, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it. Section 4 provides: “The communication of a proposal is complete when it comes to the knowledge of the person to Whom itnis made. The communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the ,power of the acceptor; as against the acceptor, when it comes to the know/edge of the proposer. The communication of a revocation is complete as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge." ln terms Section 4 deals not with the place where a contract takes place, but with the completion of communication of a proposal, acceptance and A revocation. In determining the place where a contract takes place, the interpretation clauses in Section 2 which largely incorporate the substantive Iaw of contract must be taken into account. A person signifying to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence is said to make a proposal: clause (a) When the person to whom the 7 \ 12 ‘. §r proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted, becomes a promise: clause (b), and evefy promise and every set of promises, forming the consideration for each other is an agreement: clause (e). An agreement enforceable at law is a contract: clause (k). By the second clause of Section 4 the communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor. This implies that where communication of an acceptance is made and it is put in a course of transmission to the proposer, the acceptance «is complete as against the proposer: as against the acceptor, it becomes complete when it comes to the knowledge of the proposer. ln the matter of communication of revocation it is provided that as against the person who makes the revocation *it becomes complete when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it, and as against the person to whom it is made when it comes to his knowledge. But Section 4 does not imply that the contract is made qua the proposer at one place and give the acceptor at another place. The contract becomes complete as soon as the acceptance is made 'by the acceptor and unless othenNise agreed expressly or by necessary Implication by the adoption of a speCIal method of intimation, when the acceptance of offer is intimated to the offeror.” 21. ln the present case, the respondent has dispatched its acceptance through fax as well as registered post on 11m March, 2008 which is within time when the offer of the petitioner was valid. Section 4 also provides that intention of in .V" 13 19v proposal is complete when it comes to the knowledge of the person t0'whom it is made. In View of the fact that communication was made through fax in the official number of the petitioner company, knowledge of acceptance to the petitioner cannot be ruled out. In any case, the question whether the respondent communicated its acceptance during validity of offer of the petitioner is a disputed question of fact and the same cannot be gone into in a writ proceeding and the same may be considered by an appropriate. forum on the basis of evidence adduced before him by the respective parties. :x . 22. So far as objection that letter of acceptance has not been issued in the name of the President of lndia as required under Article 299 of the Constitution is concerned, Article 299 (1) reads thus:— § “All contracts made in the exercise of the executive ’ power of the Union or of a State shall be expressed to be made by the President, or by the Governor....of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power, shall be executed on behalf of the President or the Governor ..... by such person and in such manner as h. he may direct or authorize.” 23. ln the instant case, the respondent vide their memo dated 10th March, 2008 communicated the petitioner their acceptance to the negotiated offer of the petitioner and the petitioner was called upon to attend the office and execute formal agreement and, therefore, objection of the petitioner that letter of acceptance is void, as the same was not issued in the name of the President of India is baseless. a . £ 24. So far as third objection that there is no provision in clause-62 of the general conditions of the contract for forfeiture of earnest money deposit is ; @ concerned, the petitioner was unequivocally communicated that his offer is accepted and the letter of acceptance would constitute a binding contract between the parties and he was further called upon to attend the office and commence the work and execute agreement. Since the petitioner failed to respond to the notices subsequently issued to him in this regard, the order of Annexure-P/1 has been passed. Clause 62 (6) provides that rwhere the contractor abandons the contract, then the Engineer on behalf of the Railway may resort to forfeiture and rescind earnest money deposit apart from other action after issuance of notice as provided in the said clause. 5x . 25‘ For the aforesaid reasons, in the facts and circumstances of the present case, we do not deem it