2022 (9) TMI 1659 - HC - Indian Laws

Dishonour of final bills despite certification of completion of the tender work - petitioner argues that there is absolutely no reason for not honouring the bills - fictional disputes - HELD THAT - The respondents having already taken possession of the property on 05.04.2017 having certified satisfactory completion of the work having obtained a certificate to that effect from their designated architect having gloriously inaugurated the building which has been put to use on day to day basis now cannot turn around to complain that the work has not been done satisfactorily. What bewilders this Court is the enormous delay culpably brooked by the respondents in sending negative response to the petitioner. More than one year after the building was handed over such an apparently unsustainable stand could not have been taken by the respondent-Corporation which is an instrumentality of the 1st Respondent-Government in the light of R D SHETTY vs. INTERNATIONAL AIRPORT AUTHORITY OF INDIA 1979 (5) TMI 144 - SUPREME COURT . It hardly needs to be stated that the State and its instrumentalities should conduct themselves as model litigants than to tread on lose soil of technical objections. It is a well settled position of law that only a genuine dispute merits reference for arbitration and not fictional disputes of the kind. This view gains support from a decision of Madhya Pradesh High Court in INDIAN OIL CORPORATION LTD. AND OTHERS VERSUS M/S TATPAR PETROLEUM CENTRE 2022 (1) TMI 1483 - MADHYA PRADESH HIGH COURT wherein it is observed Whether the assertion made by one and the denial made by the other leaves to passing of any particular order by one of the party is not necessary for arising of a dispute. An assertion by one and denial/said assertion by another is enough for germination of the concept of a dispute. A dispute which otherwise can be fairly adjudged on the basis of pleadings of the parties accompanied by the evidentiary material on record cannot be relegated to adjudication elsewhere more particularly when the respondents happen to be the governmental bodies answering the definition of State under Article 12. It is not that the so called dispute squarely falls within the realm of private law either; there is Karnataka Transparency in Public Procurements Act 1999 and Rules promulgated thereunder. There are sufficient elements of public law. A contract to which State is a party does not create an island completely immune from judicial review under Article 226 227. This is a fit case for levy of exemplary costs for the ill-treatment meted out to the scrupulous citizen who had done the work for the State entities. A message should loudly go to the quarters that be that the courts would not tolerate indolence on the part of public bodies when interest of the citizen is put to peril. Both the sides having been heard even on this aspect of the matter this court is of the considered opinion that the second respondent-Corporation should be saddled with a cost of Rs. 2 00 000/-payable to the petitioner in addition to interest at a reasonable rate for the delay in making payment in terms of undisputed bills that are already authenticated by the concerned. Conclusion - i) Public bodies must act with fairness and transparency and they cannot rely on technicalities to evade their obligations. ii) The respondents actions were arbitrary and unjust and it was appropriate for the writ court to intervene to ensure justice for the petitioner. Petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the writ court can intervene in a contractual dispute involving non-payment of a contractor's bills when an arbitration clause exists.

2. Whether the respondents' actions in delaying payment to the petitioner were arbitrary and unjust, warranting judicial intervention.

3. Whether the petitioner should be relegated to arbitration or civil remedies given the presence of disputed facts.

4. Whether exemplary costs should be levied against the respondents for their conduct in handling the petitioner's claims.

ISSUE-WISE DETAILED ANALYSIS

1. Intervention of Writ Court in Contractual Dispute:

The legal framework typically discourages writ court intervention in contractual disputes, especially when an arbitration clause is present. However, the court noted that the arbitrariness and unjustness in the actions of public functionaries could not be ignored. The court emphasized that constitutional mandates for fairness in public functions override the traditional reluctance to intervene in contractual matters. The court cited the principle that constitutions are meant to preserve practical and substantial rights, not just maintain theoretical constructs.

The court found that the petitioner's work was completed and certified, and the respondents had acknowledged the satisfactory completion and use of the structure. The court reasoned that the respondents' later claims of unsatisfactory work were not credible, given the significant delay in raising such issues.

2. Arbitrary and Unjust Actions by Respondents:

The court observed that the respondents' failure to honor the petitioner's bills despite certification and acknowledgment of completion was arbitrary and unjust. The court highlighted the respondents' contradictory actions, such as inaugurating the completed structure and then later claiming defects. The court found these actions to be a calculated attempt to delay or deny payment without justification.

The court emphasized the need for public bodies to act as model litigants and not rely on technical objections to evade their responsibilities. The court referenced the principle that the state and its instrumentalities should conduct themselves with fairness and transparency.

3. Relegation to Arbitration or Civil Remedies:

The respondents argued that the presence of an arbitration clause necessitated relegating the petitioner to arbitration. However, the court rejected this contention, noting that arbitration is appropriate only when a genuine dispute exists. The court found no true dispute regarding the completion and certification of the work, as the respondents had acknowledged the petitioner's claims through their conduct and documentation.

The court further noted that the respondents' delayed complaints about the work were time-barred and lacked credibility. The court emphasized that fictional disputes should not be used to compel arbitration.

4. Exemplary Costs:

The court considered the imposition of exemplary costs due to the respondents' conduct. The court found that the respondents' actions caused undue hardship to the petitioner, who had completed the work satisfactorily. The court determined that exemplary costs were warranted to send a message that courts would not tolerate indolence and arbitrary actions by public bodies.

The court ordered the second respondent to pay costs to the petitioner and allowed for the recovery of these costs from the responsible officials.

SIGNIFICANT HOLDINGS

The court held that the writ petition succeeded, and a writ of mandamus was issued to the second respondent to pay the petitioner the outstanding bill amount plus interest and costs. The court emphasized the principle that public bodies must act with fairness and transparency, and they cannot rely on technicalities to evade their obligations. The court's decision reinforced the notion that constitutional mandates for fairness in public functions take precedence over traditional contractual remedies.

The court concluded that the respondents' actions were arbitrary and unjust, and it was appropriate for the writ court to intervene to ensure justice for the petitioner. The court's decision underscored the importance of public bodies acting as model litigants and the judiciary's role in upholding constitutional principles of fairness and justice.