TMI Blog2011 (2) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... the 9 sites. (iii) restrain the respondent MCD from taking any steps for recovery of the impugned demand in terms of the letter dated 25/11/2010, pending the disposal of arbitration proceedings. (iv) injunct the Respondent MCD from calling any tender for remaining 41 sites till the conclusion of the arbitration proceeding. (v) pass ex-parte orders in respect of prays at serial Nos. (i) to (iv). (vi) pass such other or further order(s) as it may deem fit and proper keeping in view the fact and circumstances of the case. 3. The facts as are necessary for the adjudication of the present appeal are that: (a) A contract was entered into between the Appellant and the Respondent for display of advertisement through 50 LED screens at selected market areas of Delhi under the jurisdiction of Municipal Corporation of Delhi (MCD), Respondent herein, for a period of five years at the monthly licence fee of ₹ 1,01,750/- per screen per month totaling up to ₹ 50,87,500/- for all the screens. In this behalf it is stated that the tender notice dated 19th March, 2009 with details of sites to be provided for setting up of the LED screens was issued by the Respondent. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes 25 sites did not fall either within the jurisdiction of the MCD or were not permitted by traffic police as violating the Supreme Court guidelines in this behalf. (h) The Appellant also states that it paid licence fee to the Respondent from 10th October, 2009 to 13th July, 2010 amounting to ₹ 2,95,07,747/-(first seven months). Since payment were not made for all the 50 sites and the cheques furnished to the Respondent were dishonoured when presented for encashment, show cause notice dated 27th October, 2010 was issued to the Appellant as to why the contract be not cancelled and the security amount not forfeited for violation of the terms and conditions of the contract. The Respondent also demanded a balance outstanding payment of ₹ 3,05,25,000/- towards arrears of licence fee. (i) A reply was filed on behalf of the Appellant through letters dated 27th October, 2010 and 28th October, 2010 wherein the Appellant stated that they were liable to pay for only the 20 operational sites. (j) The subject contract was cancelled by the Respondent vide letter dated 25th November, 2010 and the said cancellation order provided for recovery of dues within a period of three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Specific Relief Act specifically provided that a contract which is in its very nature determinable could not be specifically enforced, which is what the Appellant were seeking by way of the present Appeal. 6. It was then urged on behalf of the Respondent that Section 41(e) of the Specific Relief Act categorically provided that an injunction could not be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. In this behalf the Respondent relied upon the decisions of this Court in Rajasthan Breweries Ltd.-vs.-The Stroh Brewery Company, reported as 2000(3)Arb. LR 509(Delhi) and Raj Electricals (Regd.)-vs.-BSES Rajdhani Power Ltd. reported as 142(2007) Delhi Law Times 687. It was further urged on behalf of the Respondent that the 50 sites which were the subject matter of the contract had been identified by the Appellant themselves and were all within the jurisdiction of the Respondent. It was also urged that although the agreement was entered into in the month of June, 2009 the first objection with regard to the purported non-viability of the sites were raised only in the month of December, 2009. It was lastly urged on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of its conduct in all spheres by requirement of Article14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirement of Article 14 and contractual obligations are alien concepts, which cannot co-exist. The Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. Therefore, total exclusion of Article 14 - non-arbitrariness which is basic to rule of law - from State actions in contractual field is not justified. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals. Unlike the private parties the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. It is really the nature of its personality as State which is significant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as justified in coming to the conclusion that the appellant had sought for an injunction seeking to specifically enforce the agreement. Such an injunction is statuorily prohibited with respect of a contract, which is determinable in nature. The application being under the provisions of Section 9(ii)(e) of the Arbitration and Conciliation Act, relief was not granted in view of Section 14(i)(c) read with Section 41 of the Specific Relief Act. It was rightly held that other clauses of Section 9 of the Act shall not apply to the contract, which is otherwise determinable in respect of which the prayer is made specifically to enforce the same. Consequently, therein no merit in the appeal, the same is dismissed. In Raj Electrical (Supra) a Single Judge of this Court held as follows: 11. Like any other contract this contract is also to be governed by the commercial interest of the parties. If the respondent considers that the arrangement which was made by DVB of Single Point Distribution seeking services of the contractor has outlived its utility and the respondent was in a better position to serve the people of the area, the respondent can terminate the contract and suffer the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. However, it is observed that the decision of the Supreme Court in ABL International Ltd.(supra) is not an authority for the proposition that the mutual rights and liabilities of the parties where the contracts are freely entered into with the State are exclusively governed by public law principles and not by the terms and conditions of the contracts and the laws relating to contracts. 10. Further, in Assistant Excise Commissioner -vs.-Issac Peter reported as (1994) 4 SCC 104, the Supreme Court held:- 26. Learned Counsel for Respondents then submitted that doctrine of fairness and reasonableness must be read into contracts to which State is a party. It is submitted that the State cannot act unreasonably or unfairly even while acting under a contract involving State power. Now, let us see, what is the purpose for which this argument is addressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that where a public authority is exempted from the operation of a Statute like Rent Control Act, it must be presumed that such exemption from the statute is coupled with the duty to act fairly and reasonably. The decision does not say that the terms and conditions of contract can be varied, added or altered by importing the said doctrine. It may be noted that though the said principle was affirmed, no relief was given to the appellant in that case. Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212, was a case of mass termination of District Government Counsel in the State of U.P. It was a case of termination from a post involving public element. It was a case of non-government servant holding a public office, on account of which it was held to be a matter within the public law field. This decision too does not affirm the principle now canvassed by the learned Counsel. We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms conditions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant that only public law principles would exclusively apply to the relationship between the parties and that private law principles flowing from the terms of the contract would have no application to the subject contract. Even otherwise it is noted that the cancellation of the licence had taken place after issuance of a show cause notice and calling for the reply of the Appellant. 12. The next question that needs to be considered is the contention of the Respondent that the contract between the parties was in its very nature determinable and consequently could not be specifically enforced by way of the present proceedings. In this behalf, it is observed that the Appellant did not pay the agreed licence fee in terms of the licence agreement. Consequently, after issuance of the show cause notice and calling for a reply from the Appellant the Respondent cancelled the licence under the terms of the agreement between the parties. Therefore, the licence stood terminated, as correctly observed by the learned Single Judge, in the impugned order, and the legality or illegality of termination would be a matter to be determined in arbitration. Further, the justification given by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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