Court In Writ Jurisdiction Cannot Enter Arena Of Interpretation Of Contractual Terms: Karnataka High Court
The Karnataka High Court has set aside an order passed by the Single judge bench by which it directed the State government to release balance payments due to M/s BBP Studio Virtual Bharat Pvt Ltd, which was appointed to produce a 3D film during the Global Investors Meet, in November 2022, but the contract was cancelled last minute as the film did not meet required parameters.A division bench...
The Karnataka High Court has set aside an order passed by the Single judge bench by which it directed the State government to release balance payments due to M/s BBP Studio Virtual Bharat Pvt Ltd, which was appointed to produce a 3D film during the Global Investors Meet, in November 2022, but the contract was cancelled last minute as the film did not meet required parameters.
A division bench of Chief Justice N V Anjaria and Justice Krishna S Dixit allowed the appeal filed by Invest Karnataka Forum and the State of Karnataka and said “It is difficult to agree with the view of the learned Single Judge.”
The bench added, “The agreement between the respondent No.2 and the petitioner contained an arbitration clause, that any dispute or difference or claim arising out of, or in connection with, or relating to the contract in question or the breach or termination thereof, shall be referred and settled under the Arbitration Centre - Karnataka (Domestic & International) Rules 2012. It is well settled that in such circumstances the proper course for the learned Single Judge to relegate the parties to arbitral proceedings instead of entertaining the writ petition.”
Case Background:
The global investor's meet titled “Invest Karnataka 2022' was slated to be held between 2nd and 4th November 2022, with the object of projecting the State and reflecting the role of the State for a play in the global supply chain, the petitioner was sought to be hired for production of a film.
On 16-06-2022 the 3rd respondent/Marketing Communication and Advertising Limited which is a subsidiary unit of Mysore Sales International Limited issued an invitation for expression of interest for appointment of business associates for the event.
On 14-07-2022 the 3rd respondent issued a communication to the petitioner notifying its pre-qualification and successful acceptance of the application of the petitioner. A work order was issued to the petitioner to execute the work.
Once the work order was issued, the petitioner began to work on the creation of the 3D film. On 16-09-2022, the 3rd respondent again communicated to the Forum requesting the release of an advance amount of `Rs 1,50,00,000 towards the creation of the film, which was also released. On 25-10-2022 the petitioner claimed to be ready to deliver its work to the 3rd respondent in completion of the work order dated 11-08- 2022.
However, the petitioner was informed about the cancellation/withdrawal of the contract/work by a cryptic communication indicating no reason as to why it was being withdrawn. After emails sent to the respondent failed to elicit a positive response, the petitioner approached the court.
The single judge bench had quashed communication dated 25-10-2022 cancelling the work order issued for producing the film to the company.
In its order, the court had said “After its approval the contract was awarded in favour of the petitioner, agreement was executed for execution of the work and the petitioner executed the work and took the execution of such work to its logical conclusion. Just before delivery of the final product the contract is cancelled, not on any merit/quality of the film, but on political interference i.e., a communication of the Minister (Industries Minister Dr Murugesh Nirani). Therefore, this becomes a classic case where arbitrariness is writ large.”
The appellants argued that the learned Single Judge could not have entered into the arena of dispute which was a contractual matter between the parties.
The respondents supported the order contending that the facts clearly showed that there was a breach on the part of the respondents who were 'State' authorities or agencies of the 'State', of the established contractual obligations in not accepting for exhibiting the film produced by the petitioner.
Findings:
The division bench on perusing the impugned order said “There is no gainsaying that, the dispute between the parties wherein the petitioner produced the film pursuant to work order and later the same was not accepted by exhibition, was a pure contractual dispute.”
Noting that the internal Committee which was constituted examined the worthiness as also the quality content of the 3D film created by the petitioner intended to be exhibited at the Invest Karnataka – 2022 and the Committee found that the film was raw, generic, incomplete and sub-standard which did not meet the scope of work, the court observed, “The dispute was, therefore, a pure dispute of breach of contract.”
Further, it said, “The entire challenge before learned Single Judge, in other words, was about alleged illegal termination of the contract and that the respondents did not perform their part of obligations under the contract, as per the case of the petitioner. The issues raised and the relief sought for pertained to contractual rights and obligation arising from the work order given by the respondents and its performance by the petitioner.”
Following this, the court opined, “The scope of judicial review in contractual matters is extremely limited and it is in the rare category of cases that the writ of mandamus could be issued. The facts of the present case is not a case where learned Single Judge would have issued writ of mandamus directing the respondents to release the payment straight away without the trial of the issues.”
It added that the High Court in the exercise of writ jurisdiction would not enter into the arena of interpretation of the contractual terms, its enforcement and the questions regarding breach or otherwise thereof since they are questions to be subjected to evidence.
Accordingly, it allowed the appeals.
Appearance: Additional Advocate General Ruben Jacob a/w AGA Niloufer Akbar for Appellants.
Senior Advocate Jayakumar S Patil assisted by Advocate Swaroop S for Respondents.
Citation No: 2024 LiveLaw (Kar) 267
Case Title: Invest Karnataka Forum & ANR and M/s BBP Studio Virtual Bharath Pvt. Ltd & Anr
Case No: C.C.C NO.495 OF 2023 (CIVIL) C/W WRIT APPEAL NO.1095 OF 2023 (GM-RES) AND WRIT APPEAL NO.1266 OF 2023