Parmod Kumar Versus The State of Haryana and others

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

Civil Writ Petition No.7992 of 2010
Date of decision: 20.05.2010

Parmod Kumar ….Petitioner
versus
The State of Haryana and others …Respondents

CORAM: HON’BLE MR. JUSTICE K. KANNAN
——
Present: Mr. O.P.Goyal, Senior Advocate with Mr. S.S.Dalal,
Advocate, for the petitioner.
Mr. Ravi Dutt Sharma, Deputy Advocate General, Haryana,
for respondents 1 and 4.
Mr. D.R.Bansal, Advocate, for respondents 2 and 3.
—–

K.Kannan, J (Oral)
C.M. No.7298 of 2010
1. Application is allowed, as prayed for. Replication filed by
the petitioner, is taken on record.
Civil Writ Petition No.7992 of 2010
2. The writ petition challenges the decision of the 3rd
respondent terminating a contract for collecting toll on a highway which
was granted to the petitioner through an agreement dated 30th June, 2009.
The tenure of the contract was one year and the premature termination
done without issuing any notice or affording an opportunity to the
Civil Writ Petition No.7992 of 2010 – 2 –
petitioner to show cause against termination was the fulcrum issue for
consideration. After notice to respondents, Shri D.R. Bansal, Advocate,
appeared on behalf of respondents 2 and 3 and Shri Ravi Dutt Sharma,
DAG, Haryana on behalf of respondents 1 and 4. They stated the
preliminary objection that the contract which is alleged by the petitioner
as having been breached provides for an arbitral agreement and the resort
to a writ petition, under such a circumstance, is not maintainable.
3. It is not in dispute that the petitioner’s right flows through
the written agreement executed on 30.06.2009. Since the reliefs sought
in the writ petition are resisted on a jurisdictional issue, I take it as a
preliminary point and I sought the assistance of the counsel to address
the arguments on the issue relating to the arbitral agreement and the
feasibility of continuity of the proceedings before the Court.
4. The learned senior counsel Shri Goyal contends that the
decision to terminate the contract was taken by the Executive Director,
who was not the Executive Engineer referred to under the contract as a
person who is competent to empower the collection of charges and as a
person who is aggrieved by a decision of the Executive Director is not
necessitated under any terms of the contract to resort to arbitration. For a
fuller understanding of the contentious issue, the relevant clauses under
the agreement shall be required to be reproduced:
“39. Except where otherwise provided or specified in this
agreement and subject also to such powers as may be
delegated by the Managing Director, HSRDC to the
Executive Engineer (PWD B&R) concerned or any one else
for the time being in charge of the said fee collection, on all
questions and matter whatsoever arising out of or in
Civil Writ Petition No.7992 of 2010 – 3 –
relation to or in connection with this Agreement or as to the
interpretation of any of its conditions whether during the
currency of this Agreement or at any time thereafter, shall
be final and binding on the Entrepreneur/Agent.”
“40. In the even the Entrepreneur/Agent disagreeing with
the decision mentioned in the provision of above, he may
request the Managing Director, HSRDC, for appointment of
an Arbitrator for adjudication of the dispute. On receipt of
request from the Entrepreneur/Agent for appointment of
Arbitrator, Managing Director, HSRDC will appoint an
Arbitrator for adjudication of the dispute. The arbitrator so
appointed shall conduct the arbitration proceedings in
accordance with the provision of the contract agreement.
Fee of the Arbitrator shall be paid by the party who will
seek the arbitration.”
The first portion of Clause 39 excepts such of those actions which are
specifically provided elsewhere under the agreement and stated to be
subject also to such powers that may be delegated by the Managing
Director to the Executive Engineer or to any other person in the charge
of fee collection. All questions arising out of and in relation to the
agreement shall be binding on the entrepreneur/agent. In other words,
any decision pertaining to a contract shall be binding if a decision is
taken by any authority except when through a specific clause in the
agreement itself, it is provided otherwise. The decision could be taken
by the Executive Engineer or any other person delegated by the
Managing Director which could be binding ought to include the decision
of the Managing Director. After all, if a person who is a delegatee from
the Managing Director, a fortiorari, the decision of the Managing
Director, shall also be binding. Therefore, if presently the
Civil Writ Petition No.7992 of 2010 – 4 –
termination of a contract has arisen by a decision of the Executive
Director, it cannot be seen, in my view, as one passed by a person, who is
incompetent to take such a decision. Clause 40 states that a person, who
disagrees with the decision could request the Managing Director for an
appointment of an Arbitrator. The construction put on these two clauses
by Shri Goyal, the learned senior counsel appearing on behalf of the
petitioner that only the Executive Engineer could take a decision and any
other person is not so authorized by the Managing Director cannot take
such a decision, in my view, is not correct. For the same reason, if a
decision has been taken by the Executive Director and if a contracting
party such as the petitioner is aggrieved by such decision, his remedy
shall be only to apply for an appointment of an Arbitrator.
5. The learned counsel states that the clause 40 does not set out
the arbitral process that will be required to be adopted not does it make a
reference about the applicability of Arbitration and Conciliation Act of
1996. This objection also, in my view, is not sound for if there is a
provision for a reference to arbitration between contracting parties,
unless it is arbitration through a statute that independently provides for a
particular method of arbitration, all references to arbitration must be
understood as reference under the Arbitration and Conciliation Act of
1996. The preamble to the Act sets out that it is an act to consolidate and
amend the law relating to domestic arbitration and Section 1(2) of the
Act extends it to the whole of India and brought into force on the day
when the Central Government by notification appoints. Ever since the
Act was brought in force on 26.08.1996, whenever there is any reference
Civil Writ Petition No.7992 of 2010 – 5 –
to arbitration, it should always be understood that the arbitration shall go
through the process as delineated under the Act without any exception.
We have already seen the only possible exception is statutory arbitration
which prescribes a mode of appointment of an Arbitrator and in what
circumstances, the resort to arbitration could be made. Clause 40 of the
contract is sufficient indication about how the process must be started by
a request which an entrepreneur/agent should make to the Managing
Director, HSRDC for appointment and that the Managing Director shall
appoint an Arbitrator for adjudication of the dispute. The clause also
states that the Arbitrator shall conduct the arbitration proceeding in
accordance with the provisions of the contract agreement and that the fee
shall be paid by the party, who seeks arbitration. The 1996 Act contains
adequate provisions when the person who is bound to appoint an
Arbitrator fails to do so. The party will have a remedy for taking action
under Section 11 for the appointment of an Arbitrator.
6. The learned counsel states that the arbitration itself will not
be appropriate in a case where there is a fundamental breach of a contract
by violating the principles of natural justice where by an illegal process,
the respondents have encashed a bank guarantee to the tune of 1.29
crores. The petitioner claims that he has suffered gross prejudice by
being debarred from entering into any other contract that has grave civil
consequences. The learned counsel refers to the decisions of the Hon’ble
Supreme Court in Sahara India (Firm), Lucknow Versus
Commissioner of Income Tax, Central-I and another-(2008) 14
Supreme Court Cases 151; Harbanslal Sahnia and another Versus
Civil Writ Petition No.7992 of 2010 – 6 –
Indian Oil Corporation Limited and others-(2003) 2 Supreme Court
Cases 107; Sidheshwar Sahakari Sakhar Karkhana Limited Versus
Union of India and others-(2005) 3 Supreme Court Cases 369; and
ABL International Limited and another Versus Export Credit
Guarantee Corporation of India Limited and others-(2004) 3 Supreme
Court Cases 553. All these decisions have a single underlying theme
that even a pure administrative act that entails civil consequences shall
be addressed with reasonableness and rules of natural justice would
require a right of hearing by application of the principle of audi alteram
partem. This fundamental breach partakes the character of violation of
fundamental right for which the affected party certainly has the most
efficacious remedy through an intervention of prerogative writs under
Article 226.
7. While the Court’s power under Article 226 is wide enough
to admit redressals of every grievance that violates fundamental rights,
by the only fact that the powers are wide, there is a greater need for
circumspection for exercise of such power. And that would include the
consideration of whether there is an effective remedy that is possible
through an alternative adjudicatary process. ADRs are the byword for
speedier and quicker reliefs and arbitral process is the most sought after
emerging forum for adjudication and more especially when commercial
interests are involved and where the quicker adjudication is the most
desirable result. The apprehension of the learned counsel again that the
petitioner shall not be able to secure any interim relief which could
protect him is allayed in the Arbitration and Conciliation Act itself, when
Civil Writ Petition No.7992 of 2010 – 7 –
it provides under Section 17 the power to pass interim orders to an
Arbitrator which will be in the nature of issuing measures of protection
in relation to the subject matter of dispute. In other words, when there is
a clause for arbitration to which the petitioner has been a willing party
when he enters into the contract, he shall have the remedy only through
an arbitral process which is efficacious enough.
8. The writ petition is disposed of with liberty to the petitioner
to resort to arbitration in the manner contemplated under the contract and
provided through the statute.
(K.KANNAN)
JUDGE
20.05.2010

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