REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  4912   OF 2008 (Arising out of S.L.P. (C) No. 1129 of 2007)

Pimpri Chinchwad Municipal Corporation And Ors.  …..Appellants

Versus

M/s Gayatri Construction Company and Anr. ….Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT.

1. Leave granted.  

2. Challenge in this appeal is to the judgment of a Division

Bench of  the Bombay High Court  allowing the Writ Petition

filed by the respondents.

3. Background facts in a nutshell are as follows:

Writ Petition was filed by respondents 1 and 2 taking the

stand that respondent No.1 was awarded a contract  for the

work of improvement and widening of  part of the Thermax-

Telco-Bhosari  road  which  was  divided  in  three  phases  and

contract  for  Phase-III  (Approx.  3.7  Kms.)  was  given  to  the

them,  whereas  the  tender  of  Phase-II  with  its  cost  at

Rs.8,61,63,048/- was awarded to another party (Approx. 3.3

Kms.)  Though  the  tender  amount  was  Rs.9  crores  with  a

discount  at  9.01%,  the  contract  price  was  fixed  at

Rs.8,18,91,000/-  and  the  letter  by  the  Corporation  to  the

respondents was given on 7/4/2005 and the work was to be

completed  within  12  months  from  that  date.  There  is  no

dispute that the work was not completed and the corporation

released  an  advertisement  published  in  some  of  the  local

newspapers  on  30/6/2006  inviting  tenders  for  the

improvement and widening of four roads, including the road

which was the subject matter of the contract awarded to the

respondents i.e. Item No. 3-A - Telco road. The approximate

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costs of this road in the advertisement has been shown to be

Rs.30  crores  as  against  the  original  tender  cost  of  Rs.17.6

crores. After the advertisement was released, the respondents

were  issued  a  letter  dated  19/7/2006  informing  the

Corporation’s decision to take action under clause 3(a) of the

contract  and  the  respondents  were  called  upon  to  remain

present  for  final  measurement  on  27/6/2006.  The

respondents submitted a representation on 25/7/2006 and by

its letter dated 1/8/2006 the corporation reiterated its action

as  per  the  letter  dated  19/7/2006.  The  respondents

approached  the  High  Court  on  22/8/2006  after  they  had

submitted  another  representation  on  4/8/20006  to  the

Corporation  and  the  Corporation  confirmed  the  decision  to

stop  work.  The  respondents  filed  writ  petition  challenging

action  of  appellants  in  releasing  the  advertisement  and

inviting fresh tenders on 30/6/2006 for the very same work

which is part of the contract awarded to the respondents i.e.

Item No.3-A Improvement and Widening of remaining stretch

of Telco Road and consequently the attempt to terminate the

contract post facto by invoking clause 3(a) of the contract.

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The  present  appellants  filed  an  affidavit  in  reply  and

raised a preliminary objection as to the maintainability of the

writ petition. It was contended that the writ petitioners had an

alternative remedy for enforcement of the contract. In matters

flowing from the contract, a petition under Article 226 of the

Constitution of India, 1950 (in short the ‘Constitution’) cannot

be maintained.  Further, disputed questions are involved. On

merits it was also contended that it was the contractor firm

which  was  responsible  for  not  maintaining  the  contractual

terms and in spite of the contractual period having been over,

the work could not be completed and the contractors went on

insisting that the entire stretch of the road be handed over to

them  so  as  to  start  and  complete  the  work.  In  short  the

contractors  failed  to complete  the work in 12 months’  time

and therefore the contract was terminated.  

The  High  Court  found  that  though  Clause  58  of  the

agreement provided for inhouse remedy of representation for

settlement of disputes  that cannot stand in the way of the

writ  petition  being  entertained.  It  was  submitted  by  writ

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petitioners  that  the  cost  of  completing  the  work  would  be

much higher than what would have been payable to the writ

petitioners.   The  High Court  referred  to the  Minutes  of  the

Corporation and held that the writ petitioners were justified in

challenging the Corporation’s action to invite fresh tenders for

the work allotted to it. It also referred to the undertaking given

by the writ petitioners  to the effect that they were ready and

willing  to  execute  the  work  but  were  unable  to  do  so  for

several  reasons.   The  High  Court,  therefore,  directed  the

Corporation not to complete the work and to maintain status

quo in respect of Phase-III of Telco Road as well as the tenders

received for the said work in response  to the advertisement

which was impugned before the High Court.  

4. In  support  of  the  appeal,  learned  counsel  for  the

Corporation  and  its  functionaries  submitted  that  the  High

Court  lost  sight  of  the  objections  raised  as  regards  to  the

maintainability of the writ petition. It was submitted that there

was  cancellation  of  tender  and  fresh  advertisement  was

issued.  The  agreement  provided  inhouse  mechanism  in

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relation to dispute arising out of the contract. The High Court

did not consider this aspect. The High Court also did not take

note  of  the  difference  between  the  statutory  contracts  and

non-statutory  contracts.  Before  the  High  Court  the  writ

petition  was  questioned  on  three  grounds;  (i)  disputed

questions  relates  to  facts  were  involved;  (ii)  to  enforce  the

terms  of  contractual  rights  remedy  under  the  Civil  Law  is

available,  and  in  any  event,  the  writ  petition  was  not

maintainable in respect of contractual matters. It was pointed

out that the writ petitioners were seeking relief of enforcement

of  their  contractual  rights,  and  that  several  relevant  and

material  facts  have  been  suppressed.  In  essence,  it  was

submitted that the above aspects have not been considered by

the High Court.  

5. In  response,  learned  counsel  for  the  respondents-writ

petitioners submitted that the Corporation itself was guilty of

not providing the requisite infrastructure for carrying out the

contractual obligations. The difficulties have been highlighted

in various representations to the Corporation. But without any

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plausible  reason  and  without  following  the  principles  of

natural justice the fresh advertisement was issued. It is also

pointed  out  that  subsequently  there  appears  to  be  the

settlement of the work at a huge cost.  

6. So far as existence of the alternative remedy is concerned

Clause 58 of the agreement  is relevant.  The  same reads as

under:

“Clause 58- All disputes & differences of any kind whatever arising out of or in connection with the contractor the carrying out of the work (whether during the progress of the work or after their complete & whether before or after the determination, abandonment or breach of the contract) shall be referred to & settled by the City Engineer. But, if the contractor be dissatisfied with the  decision  of  the  City  Engineer  or  as  to withholding by the City Engineer of any certificate to which the contractor may within 60 days after receiving  notice  of  such  decision  give  a  written notice to the other party requiring that may claim to entitled  then  &  in  any  such  case  the  contractor such matter in dispute be referred to in open before a  Committee  as  mentioned  below.  Such  written notice  shall  specify  the  manner  which  are  in disputes  &  such  disputes  or  difference  of  which such notice has been given & no other shall be & is hereby  referred  committee  consisting  of  the Commissioner,  Pimpri  Chinchwad  Municipal Corporation,  the  city  engineer  and  project

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management consultant, the decision taken by the parties will be final and binding on both the parties. Such reference except as to the withholding of any certificate  to  which  the  contractor  to  be  entitled shall not be opened or entered upon until after the completion  or  alleged  completion  of  the  works  or until  after  the  practical  cessation  of  the  City Engineer.  Provided  always  that  the  Corporation shall  not  withhold  the  payment  of  an  Interim Certificate not the Contractor in any way delay the carrying  out  of  the  works  by reason of  any  such matters,  question or dispute being referred to the Committee but shall proceed with the work with all the  diligence  &  shall,  until  the  decision  of  the Committee  abide  by  the  decision  of  the  City Engineer & no award of the Committee shall relive the contractor of his obligations to adhere strictly to the City Engineer's instructions with regard to the actual carrying out of the works. The Owner & the Contractor hereby also agree that the said reference to  the  Committee  under  this  clause  shall  be  a condition precedent to any right of action under the Contract.”  

7. In matters relating to maintainability of writ petitions in

contractual matters there are catena of decisions dealing with

the issue.  

8. In  National  Highways  Authority  of  India v.  Ganga

Enterprises (2003  (7)  SCC  410),  it  was  inter  alia  held  as

follows:

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“6. The respondent then filed a writ petition in the High Court for refund of the amount. On the pleadings before it, the High Court raised two questions viz.: (a) whether the forfeiture of security  deposit  is  without  authority  of  law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act; and (b) whether the writ petition is  maintainable  in  a  claim  arising  out  of  a breach of  contract.  Question (b)  should  have been first answered as it would go to the root of  the  matter.  The  High  Court  instead considered Question (a) and then chose not to answer Question (b). In our view, the answer to Question (b)  is clear. It  is settled law that disputes  relating  to  contracts  cannot  be agitated under Article 226 of the Constitution of India.  It  has been so held in the cases of Kerala SEB v. Kurien E. Kalathil (2000 (6) SCC 293),  State of U.P. v.  Bridge & Roof Co. (India) Ltd.  (1996  (6)  SCC  22) and  Bareilly Development Authority v.  Ajai  Pal Singh 1989 (2) SCC 116. This is settled law. The dispute in this  case  was  regarding  the  terms  of  offer. They were thus contractual disputes in respect of  which  a  writ  court  was  not  the  proper forum.  Mr  Dave,  however,  relied  upon  the cases  of  Verigamto  Naveen v.  Govt.  of  A.P. (2001  (8  SCC  344))   and  Harminder  Singh Arora v.  Union  of  India  (1986  (3)  SCC  247). These, however, are cases where the writ court was enforcing a statutory right or duty. These cases do not lay down that a writ court can interfere in a matter of contract only. Thus on the  ground  of  maintainability  the  petition should have been dismissed.”

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9. In  Kerala State Electricity Board and Anr. v.  Kurien E.

Kalathil and Ors. (2000 (6) SCC 293), this Court dealt with the

question of maintainability of petition under Article 226 of the

Constitution  and  the  desirability  of  exhaustion  of  remedies

and  availability  of  alternative  remedies,  as  also  difference

between statutory contracts and non-statutory contracts.   In

paras 10 and 11 of the judgment it was noted as follows:  

“10. We find that there is a merit in the first contention of Mr Raval.  Learned counsel  has rightly  questioned  the  maintainability  of  the writ  petition.  The  interpretation  and implementation  of  a  clause  in  a  contract cannot be the subject-matter of a writ petition. Whether  the  contract  envisages  actual payment or not is a question of construction of contract.  If  a  term of  a  contract  is  violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of  the High Court that the  contractor  was seeking  enforcement  of  a statutory  contract.  A  contract  would  not become  statutory  simply  because  it  is  for construction of a public utility and it has been awarded  by  a  statutory  body.  We  are  also unable  to  agree  with  the  observation  of  the High Court that since the obligations imposed by  the  contract  on  the  contracting  parties come within the purview of the Contract Act, that  would  not  make  the  contract  statutory.

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Clearly,  the  High  Court  fell  into  an  error  in coming to the conclusion that the contract in question was statutory in nature.   11. A  statute  may  expressly  or  impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled  by  the  ordinary  principles  of  law  of contract. The fact that one of the parties to the agreement  is  a  statutory  or  public  body  will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or  its  enforceability  have  to be determined according to the usual  principles of  the Contract  Act.  Every act of  a statutory body need not necessarily involve an exercise of  statutory  power.  Statutory  bodies,  like private parties, have power to contract or deal with  property.  Such  activities  may  not  raise any issue of public law. In the present case, it has  not  been  shown  how  the  contract  is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract.  The  disputes  relating  to interpretation of  the terms and conditions of such a contract could not have been agitated in  a  petition  under  Article  226  of  the Constitution  of  India.  That  is  a  matter  for adjudication by a civil court or in arbitration if provided  for  in  the  contract.  Whether  any amount  is  due  and  if  so,  how  much  and refusal of the appellant to pay it is justified or not,  are  not  the  matters  which  could  have been agitated and decided in a writ  petition. The contractor should have relegated to other remedies.”

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10. Reference can also be made to State of Gujarat and Ors.

v.  Meghji  Pethraj  Shah Charitable  Trust  and Ors. (1994 (3)

SCC 552). In para 22 it was observed as follows:

“22.  We are unable  to see any substance in the  argument  that  the  termination  of arrangement without observing the principle of natural  justice  (audi  alteram partem)  is  void. The termination is not a quasi-judicial act by any stretch of  imagination;  hence  it  was not necessary to observe the principles of natural justice.  It  is  not  also  an  executive  or administrative  act  to  attract  the  duty  to  act fairly. It was — as has been repeatedly urged by Shri Ramaswamy — a matter governed by a contract/agreement between the parties. If the matter  is  governed  by  a  contract,  the  writ petition is not maintainable since it is a public law remedy and is not available in private law field, e.g.,  where the matter is governed by a non-statutory contract.  Be that as it may, in view of our opinion on the main question, it is not  necessary  to  pursue  this  reasoning further.”

11. Again in State of U.P. and Ors. v. Bridge & Roof Company

(India) Ltd. (1996  (6) SCC 22),  this Court dealt with the issue

in paras 15 and 16 in the following manner:  

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“15.  In our opinion, the very remedy adopted by  the  respondent  is  misconceived.  It  is  not entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any  of  the  several  contentions  raised  in  the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner  made  under  the  proviso  to Section 8-D(1).

16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a  statutory  contract.  It  is  governed  by  the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any  dispute  relating  to  interpretation  of  the terms  and  conditions  of  such  a  contract cannot be agitated, and could not have been agitated,  in  a writ  petition.  That  is  a  matter either  for  arbitration  as  provided  by  the contract or for the civil court, as the case may be.  Whether  any  amount  is  due  to  the respondent  from  the  appellant-Government under the contract and, if so, how much and the  further  question  whether  retention  or refusal to pay any amount by the Government is  justified,  or  not,  are  all  matters  which cannot be agitated in or adjudicated upon in a writ petition.  The prayer in the writ petition, viz.,  to  restrain  the  Government  from deducting  a particular  amount from the writ petitioner’s  bill(s)  was  not  a  prayer  which could  be  granted  by  the  High  Court  under Article  226.  Indeed,  the  High  Court  has  not granted the said prayer.”

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12. At para 11 of  India Thermal Power Ltd. v.  State of M.P.

and Ors. (2000 (3) SCC 379), it was observed as follows:

“11. It was contended by Mr. Cooper, learned Senior  Counsel  appearing  for  appellant  GBL and also by some counsel appearing for other appellants  that  the  appellant/IPPs  had entered into PPAs under Sections 43 and 43-A of the Electricity Supply Act and as such they are statutory contracts and, therefore,  MPEB had no power or authority to alter their terms and  conditions.  This  contention  has  been upheld by the High Court. In our opinion the said  contention  is  not  correct  and  the  High Court  was  wrong  in  accepting  the  same. Section 43 empowers the Electricity Board to enter  into  an  arrangement  for  purchase  of electricity  on  such  terms  as  may  be  agreed. Section  43-A(1)  provides  that  a  generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board.  As regards  the determination of  tariff for  the  sale  of  electricity  by  a  generating company  to  the  Board,  Section  43(1)(2) provides that the tariff shall be determined in accordance  with  the  norms  regarding operation and plant-load factor as may be laid down by the authority and in accordance with the  rates  of  depreciation  and  reasonable return  and  such  other  factors  as  may  be determined from time to time by the Central Government  by  a  notification  in  the  Official Gazette. These provisions clearly indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is  to  be  determined  in  accordance  with  the provision  contained  in  Section  43-A(2)  and

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notifications  issued  thereunder.  Merely because a contract is entered into in exercise of  an enabling  power  conferred  by  a  statute that  by  itself  cannot  render  the  contract  a statutory contract. If  entering into a contract containing  the  prescribed  terms  and conditions  is  a  must  under  the  statute  then that contract becomes a statutory contract. If a  contract  incorporates  certain  terms  and conditions in it which are statutory then the said  contract  to  that  extent  is  statutory.  A contract may contain certain other terms and conditions  which  may  not  be  of  a  statutory character  and which have  been  incorporated therein  as  a  result  of  mutual  agreement between the parties.  Therefore,  the PPAs can be  regarded  as  statutory  only  to  the  extent that  they  contain  provisions  regarding determination  of  tariff  and  other  statutory requirements of Section 43-A(2). Opening and maintaining of an escrow account or an escrow agreement are not the statutory requirements and,  therefore,  merely  because  PPAs contemplate maintaining escrow accounts that obligation cannot be regarded as statutory”.

13. Therefore, the High Court ought not to have entertained

the writ petition. Additionally, it appears that  by order dated

17.1.2007  interim stay  of  the  impugned  order  was  granted

and was  continued by order dated 12.2.2007. It  is pointed

out by learned counsel for the appellants that since the order

of the High Court was stayed and there was urgency in the

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matter fresh tenders were called for. Three persons submitted

the  bids  and  the  work  has  already  been  allotted  and  a

considerable portion of the work has already been completed.

In view of aforesaid, we set aside the impugned order of the

High  Court  and  direct  dismissal  of  the  writ  petition.  It  is

however open to the respondents-writ petitioners to seek such

remedy, if so advised, as is available in law. We do not express

any opinion in that regard.   

14. The  appeal  is  allowed.  There  shall  be  no  order  as  to

costs.  

………………………….……….J. (Dr. ARIJIT PASAYAT)

……………………………………J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, August 6, 2008  

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