Case: Union of India Vs. Hetovi Kappo & Others

1. Leave granted. 2. A public interest litigation, was filed in the Gauhati High Court, invoking the jurisdiction of the High Court under Article 226 of the Constitution of India. The petitioner had invoked the writ jurisdiction of the High Court, in an effort to expedite the laying of a 329 kilometers road, the construction whereof had been stalled. It is for the aforesaid objectives, that the petitioner before the High Court, had prayed as under :"1. To issue a writ in the nature of Mandamus and/or any other appropriate writ, order or directions directing the respondent authorities to complete the two-laning work of the approach road from Hebolimi Village to the National Highway in particular and also all the other parts of the 329 kms of roads under the present project, as early as possible even by applying alternate means, if necessary; 2. To issue a writ in the nature of Mandamus and/or any other appropriate writ directing the respondent authorities to reject the Revised Cost Estimate submitted by M/s. Maytas-Gayatri (Joint Venture) through the Chief Engineer (National Highway) Nagaland, PWD, vide official correspondence dated 20.02.2012; 3. To issue a writ in the nature of Mandamus and/or any other appropriate writ directing the respondent authorities to blacklist M/s. Maytas-Gayatri (Joint Venture) from further tender works in the Public Works Department, Government of Nagaland. 4. To issue a writ in the nature of mandamus and/or any other appropriate writ directing and enquiry by the Central Bureau of Investigation (CBI) in the Mega Project in the State of Nagaland initiated by the Public Works Department converting a total length of 329 kilometers road for two laning from i. Mon-Tamlu-Merangkong, ii. Longleng-Changtongya, iii. Phek-Pfutsero and iv. Chakabama-Zunheboto and this Honble Court may be further pleased to supervise such enquiry by the Central Bureau of Investigation (CBI). And/or pass such further order/orders as Your Lordship may deem fit and proper in the facts and circumstances of the case."3. It seems that the High Court, in its desire to ensure completion of the above road project expeditiously, had issued directions to Respondent No.7 to complete the project without any delay. In order to achieve the aforesaid objective, the High Court had even required the progress thereof, to be supervised by Honble Mr. Justice R.B. Mishra, a former Judge of the Gauhati High Court. The High Court had even required payments to be released to Respondent No.7-M/s. Maytas-Gayatri, for the work already executed. In this behalf, it would be necessary to record, that in the estimation of the High Court, an approximate amount of Rs.540.31 crores, was payable to Respondent No.7, for the work already executed. 4. On 7th October, 2016, this Court passed the following directions, and sought a report from the appellant herein, and from the State of Nagaland :"We do not for the present intend to express any final opinion on the contentions urged on behalf of the petitioner and those strenuously put forth by Dr. Abhishek Manu Singhvi appearing for the contractor lest we prejudice the case of anyone of the two parties. All that we are inclined to do for the present is to secure the following information from the parties:- (i) Who all are parties to the agreement with the contractor in relation to works in dispute? A copy of the contract/document shall be placed on record by the Union of India and/or Government of Nagaland as the case may be. (ii) At what stage was it first noticed by the Government of India and/or Government of Nagaland that the contractor was committing the defaults in the execution of the contracted works? Material to support the version regarding the earliest occurrence and noticing of defaults committed by the contractor shall be placed on record. (iii) What action, if any, was proposed by the Government of India and/or the Government of Nagaland on account of the defaults reported against the contractor either in terms of giving any notice and/or cancellation of the contract? (iv) If a decision regarding cancellation of the contract at any stage prior to 11.01.2015 taken then why was no formal order of cancellation of the contract issued? Copies of notices and/or letters if any exchanged between the parties regarding default by the contractor and remedial measures shall be placed on record. (v) If the Government of India considers the contractor to be responsible for the stalemate then what is the road map which the Government proposes to adopt in regard to the works in question? Has the government taken any decision as to the agency that would be employed for executing the contracted works? (vi) Is the Government of India ready to financially support the project in question? Copies of the decision on the subject shall be placed on record by the Government of India. (vii) In the opinion of Government of India is there any dereliction by any officer at any level in the matter of implementing the contract. If so, what action, if any, is the Government proposing to take against those responsible for dereliction? (viii) If no inquiry has been conducted to fasten responsibility so far, is the Government of India ready to have the matter inquired into by the Central Vigilance Commissioner to identify those responsible for acts of omission and or commission? (ix) What is the time-frame within which the works are now expected to be completed? In case the Government of Nagaland was expected to work the contract, has the Government of Nagaland explained the reasons why no termination was ordered at the appropriate stage and taken action against officers responsible for dereliction in that regard.?"5. In response to the directions/queries extracted herein above, a report dated 26th October, 2016, has indeed been filed before this Court, by the Superintending Engineer (MORTH). The same has been placed on the record of this case by way of an additional affidavit. It is essential for us to extract herein paragraph 23 of the aforesaid additional affidavit :"23. Insofar as direction no. (v) is concerned, I respectfully state and submit that vide minutes dated 11.08.2015, the petitioner has already concluded that Contractor and PWD Nagaland has not observed due diligence in carrying out the work in accordance with the sanction granted by the petitioner and subsequent instructions dated 9.12.2010 and has accordingly decided to foreclose the contract and may consider taking up construction of the subject roads in phased manner as per NH standards subject to the condition that State Government makes available encumbrance free land required for improvement of two land highways."A perusal of paragraph 23 extracted above reveals, that the appellant herein had already decided to foreclose the contract. It is also apparent, that the appellant herein, has already decided to execute the above-mentioned project, by inviting fresh tenders. 6. It is essential for us, also to extract paragraph 27 of the above additional affidavit, which is reproduced herein below :"27. Insofar as direction no. (ix) is concerned, I respectfully state and submit that as per the estimates arrived by the experts of the petitioner a time period of 3 year 6 months may be required for completion of work, provided that the work is permitted to continue without any hindrances and the land is made available to the petitioner without any encumbrances. I state and submit that till date the respondent no.2 has not tendered any explanation to the petitioner intimating the reasons why no termination was ordered at the appropriate stage nor it has intimated the petitioner about against officers responsible for dereliction in that though it had referred the matter to the State vigilance early as on 7.09.2012."A perusal of the assertions expressed in paragraph 27 reveals, that in the estimation of the appellant, the completion of the road project, is likely to take about 3 years and 6 months. 7. Having heard learned counsel for the rival parties, we are satisfied, that the public interest litigation initiated by Respondent No.1, was with the sole object of having the road project completed at the earliest. Pendency of the present proceedings before this Court, keeping in view the stance adopted by the appellant, shows that the afore-stated objective cannot be achieved, through Respondent No.7. We are, therefore, satisfied in allowing the appellant to retender the project, by initiating a fresh process, by following the contemplated procedure. In view of the assurance given to this Court, we direct the appellant as also the State of Nagaland, to ensure completion of the project, within a period of three years and six months from today. 8. It is also essential for us to record, some observations in respect of the claim of Respondent No.7 with reference to the work already executed. It is also necessary to keep in mind the effect of the cancellation of the contract and also the loss (if any) suffered by Respondent No.7-M/s. Maytas-Gayatri. Insofar as all these aspects, and similar allied aspects are concerned, we are of the view, that the consequences emanating out of the agreement dated 3rd February, 2011, executed between the State of Nagaland and Respondent No.7, can only be settled in terms of the arbitration clause incorporated in their agreement. The same is reproduced herein below :"ARBITRATION (GCC CLAUSE 25.3) The procedure for arbitration will be as follows: 25.3 (a) In case of Dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The parties shall make efforts to agree on a sole arbitrator and only if such an attempt does not succeed and the Arbitral Tribunal consisting of 3 arbitrators one each to be appointed by the Employer and the Contractor and the third Arbitrator to be chosen by the two Arbitrators so appointed by the parties to act as Presiding Arbitrator shall be considered. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Council, Indian Roads Congress. (b) The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties, and shall act as Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the Council, Indian Road Congress. (c) If one of the parties fails to appoint its arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Council, Indian Roads Congress shall appoint the Arbitrator. A certified copy of the order of the Council, Indian Roads Congress, making such an appointment shall be furnished to each of the parties. (d) Arbitration proceedings shall be held in India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (e) The decision of the majority of Arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the Arbitral Tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself. (f) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings."

Decision reasoning: 1[ds]A perusal of paragraph 23 extracted above reveals, that the appellant herein had already decided to foreclose the contract. It is also apparent, that the appellant herein, has already decided to execute theproject, by inviting freshperusal of the assertions expressed in paragraph 27 reveals, that in the estimation of the appellant, the completion of the road project, is likely to take about 3 years and 6 months.Having heard learned counsel for the rival parties, we are satisfied, that the public interest litigation initiated by Respondent No.1, was with the sole object of having the road project completed at the earliest. Pendency of the present proceedings before this Court, keeping in view the stance adopted by the appellant, shows that theobjective cannot be achieved, through Respondent No.7. We are, therefore, satisfied in allowing the appellant to retender the project, by initiating a fresh process, by following the contemplated procedure. In view of the assurance given to this Court, we direct the appellant as also the State of Nagaland, to ensure completion of the project, within a period of three years and six months from today.It is also essential for us to record, some observations in respect of the claim of Respondent No.7 with reference to the work already executed. It is also necessary to keep in mind the effect of the cancellation of the contract and also the loss (if any) suffered by Respondent No.. Insofar as all these aspects, and similar allied aspects are concerned, we are of the view, that the consequences emanating out of the agreement dated 3rd February, 2011, executed between the State of Nagaland and Respondent No.7, can only be settled in terms of the arbitration clause incorporated in their