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Delhi High Court Rejects Frivolous Petition in Construction Dispute, Pointing to Availability of alternative Remedies

Case Name:  UP State Bridge Corporation ltd. & Anr v. National Highways and Infrastructure 

Case No.: W.P.(C) 3256/2024 & CM APPL. 13420/2024 

Dated: May 08, 2024 

Quorum: Justice Subramonium Prasad 

 

FACTS OF THE CASE: 

The Petitioner has come before this court to contest the Respondent’s communication from February 9, 2024, which declared the Petitioner to be a “Non-Performer” and stated that the Petitioner would not be permitted to bid on any project with the Ministry of Road, Transport, and Highways or any of its executing agencies until their name was taken off the list of Non-Performers.  

Furthermore, the aforementioned communication makes it clear that the Petitioner will also include its joint venture partners and promoters whose qualifications were taken into account when they were approved for the project of “Building of Two Lanes with Paved Shoulders of New Greenfield Alignment from Chochenpheri at Km. 52.000 to Helipad Near Menla at Km. 82.000 of Rhenoc-Menla spur (NH-717 B) Package-III on EPC basis under SARDPNE Phase ‘A’ in the State of Sikkim.” 

The Respondent put out a bid for the project of “Construction of 2 laning with paved shoulder of new Greenfield alignment from Chochenpheri at Km. 52.000 to Helipad near Menla at Km. 82.000 of Rhenoc-Menla spur (NH-717 B) Package-III on EPC basis under SARDP-NE Phase ‘A’ in the State of Sikkim”. 

Having placed the highest bid, the petitioner was given the opportunity to complete the job. Petitioner submitted a bid of Rs. 532,52,00,000/-for the contract, which was accepted by Respondent on October 28, 2020, via letter. The petitioner provided the performance security of Rs. 26,62,60,000 and an extra performance security of Rs. 3,16,82,000 in accordance with clause 2.21 of the RFP, in accordance with the conditions of the bid document. The project was set to end on December 10, 2020, and work had to be finished within 36 months of that date. 

First to work was the petitioner. Whether or not the Petitioner was granted the Right of Way (ROW) to complete the construction has been the subject of several disagreements between the Petitioner and the Respondent. The Respondent is not happy with the Petitioner’s performance in numerous other areas as well. Records reveal that the Petitioner was given the opportunity to have personal hearings in order to provide an explanation for the reasons behind the contract’s delay in performance. Documentation in the file also reveals that the Petitioner received two cure notices, dated 24.11.2022 and 11.10. 2023. 

Since the petitioner was designated as a “Non-Performer,” their name has been added to a list of non-performers, and they are not allowed to participate in any bids with the Ministry of Road, Transport, and Highways or any of its executing agencies until they are taken off the list. 

  

LEGAL PROVISION: 

  • Section 5 of the Arbitration and Conciliation Act- Extent of judicial intervention. Regardless of the provisions of any other currently enacted legislation, no judicial authority may get involved in topics covered by this Part unless specifically authorised by this Part. 
  • Section 34 of the Arbitration Act- The sole way to challenge an arbitral award in court is to file an application to have the award set aside in line with subsections (2) and (3). (ii) There is a disagreement between the arbitral ruling and Indian public policy. (iii) It goes against even rudimentary moral or just conceptions. 

 

CONTENTIONS OF THE PETITIONER: 

The learned counsel representing the petitioner argues that the contested communication, dated 09.02.2024, was approved based on a circular dated 06.10.2021, even though the letter of award was sent on October 28, 2020. As a result, the respondent was unable to punish the petitioner because the contract agreement was signed before the date the circular, dated 06.10.2021, was issued, and the petitioner is not covered by it.  

Furthermore, it is stated that the natural justice standards were not followed in the passing of the contested communication. The petitioner claims that in addition to being ordered to stick with the current contract, they have also been forbidden from placing any bids with the Ministry of Road, Transport, and Highways.  

It is also argued the respondent cannot be allowed to hold opposing views at the same time. It further states that the Petitioner cannot be required to fulfil its portion of the contract within a set amount of time as the Respondent has not fulfilled its share of the obligations and has failed to fulfil its share of the reciprocal obligations. 

 

CONTENTIONS OF THE RESPONDENTS: 

The respondent’s attorney brings up the maintainability of the writ petition, pointing out that the contract has an arbitration clause. Furthermore, under paragraph 7 of the Circular dated 06.10.2021, it is specified that the Impugned Communication may be appealed before the Appellate Authority, which is the Secretary, Road Transport and Highway Development. 

It is claimsed that this Court should not hear the current writ petition since the Petitioner has access to an other effective remedy. In addition to addressing the question of the writ petition’s sustainability, the learned attorney representing the respondent also called attention to a number of shortcomings on the part of the petitioner, including the fact that the design and drawings for 3.340 km of the 4.470 km of viaducts have not been provided.  

Furthermore, it is mentioned that project milestone II is not yet completed and that as of November 19, 2023, there has been just 24.04% financial development, although 30% should have been the result. The Petitioner is said to have had multiple opportunities, a personal hearing, and cure notices issued to them, but they have not taken any action. As a result, this Court should not use its discretion under Article 226 of the Indian Constitution because it has been declared that the decision-making process has been equitable. 

 

COURT’S ANALYSIS AND JUDGMENT: 

The court determined that extracting the arbitration clause was pertinent. The dispute resolution procedure is covered in Article 26 of the contract agreement.  

Article 26 states that, in the first instance, any disagreement, argument, or dispute between the Parties regarding any aspect of this Agreement (including its interpretation) shall be tried to be settled amicably through the conciliation process; if that fails, the matter will be referred to arbitration. 

The court, after a reading of the aforementioned paragraph reveals that the High Court may hear a writ petition even in cases where there is a viable alternative remedy, where the writ petition aims to enforce a fundamental right, where natural justice principles are violated, where the contested orders or proceedings are completely without jurisdiction, or where the validity of an Act is being contested. It is well established that when there is a different, effective remedy available and when the parties have mutually agreed to arbitrate their dispute, courts acting under Article 226 of the Indian Constitution generally do not intervene. 

The Court believed that there were contested factual issues in the current case. The only way to establish the contested facts is for both parties to present oral and written evidence; an affidavit cannot be used as the sole means of establishing the facts. 

It was of the view of this Court that the Petitioner has failed to establish a prima facie case supporting its position. In any case, it is improper for this Court to grant a stay on the operation of the contested communication when it is not inclined to entertain the writ petition based on the facts of the case. Section 9 of the Arbitration and Conciliation Act gives the Court of Competent Jurisdiction the authority to decide the matter based on the merits of the case.  

Due to the aforementioned, the Court was hesitant to grant the writ petition, citing the petitioner’s access to an alternative effective remedy. 

 

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Judgment reviewed by Riddhi S Bhora. 

Click to view judgment.