India-Myanmar-Thailand Trilateral Highway: Manipur HC Dismisses Challenge To Centre's Termination Of Contract [Read Order]

In a major decision, the Manipur High Court last week dismissed an appeal against its Single Judge's decision to not exercise jurisdiction in a contractual dispute pertaining to the India-Myanmar-Thailand Trilateral HighwayProject.

The dispute has its origin in the construction of 69 bridges on the approach road to the India-Myanmar-Thailand Trilateral Road. The Ministry of External Affairs had terminated the contract, imputing defaults to the contractor. The contractor contended that the Centre, without taking note of the work done, has arbitrarily exercised power to victimise the contractor for no fault of his, and that the mandatory provision in the contract relating to termination, requiring notice to be served informing the contractor of the intention to issue termination notice by granting 15 days time to make a representation, was not complied with. The Single Judge of the High Court, noting that per the ouster clause in the agreement, Courts at Delhi shall have exclusive jurisdiction over the matters arising out of or relating to the Agreement, had dismissed the writ petition on the plea that there was no cause of action within the jurisdiction of this Court. Thereafter, an intra-court appeal was filed, which could not come to be heard on account of the Pandemic Situation, until the Attorney General raised the issue in the Supreme Court and the top court directed that the matter be decided expediently.

At the outset, Chief Justice Ramalingam Sudhakar and Justice Lanusungkam Jamir reiterated that 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 and that such is a matter for adjudication by a civil court or in arbitration, if provided for in the contract. "The appellant / writ petitioner has invited himself to its interpretation in a petition of Article 226 of the Constitution leaving us no choice but to render a ruling on it", said the division bench.

Noting that ideally, the Court would not have ventured into the interpretation of an Article of the agreement, the bench remarked that it is forced to rule as the Appellant invoked the plea of Fundamental Rights and arbitrariness vehemently on the basis of an Article of the Agreement on 'Termination for Contractor Default'. "We are conscious of the fact that writ Courts normally do not enter into the arena of interpretation of the terms of contract", repeated the bench, before proceeding to adjudicate the matter.

'Termination notice not issued in haste or arbitrary manner'

"In the earlier show cause notice, details of the inaction, delay, lethargy in execution of the contract have been highlighted extensively", appreciated the bench. The court also noted that in fact, the appellant/writ petitioner had also replied to the earlier show cause notice.

"It is, therefore, clear that the final decision of issuing the termination notice dated 24.11.2018 was not taken in haste or in an arbitrary manner", concluded the bench.

The bench was of the view that the number of notices, review meetings, clarifications given by the respondents makes it amply clear that they have cautioned the appellant time and again to take steps to complete the project. "However, the appellant has been taking a stand that the Detailed Project Report/Feasibility Report itself is inherently at fault and several other data are erroneous and incorrect", the bench further pointed out.

The bench opined that since the authority has proceeded in the terms of the articles of the agreement, the appellant's plea for interference by invoking Article 226 "appears to be misplaced".

'Party relying on one part of the Agreement (Termination Clause) is also equally bound by the other parts (Ouster Clause)'

Noting that the appellant had primarily pitched the writ petition on the interpretation of Article 23.1.2 of the Agreement ('Termination for Contractor Default'), the bench took the view that the party cannot resile from the other parts of the agreement, particularly the article relating to ouster of jurisdiction of the courts in case of dispute and article relating to arbitration.

"It is trite that a contract or an agreement should be read as a whole. If a party relies upon one part of the agreement, such party is equally bound by the other parts of the agreement unless there is an intention to the contrary", reiterated the bench.

Commenting that it is clear that the appellant falls back on some Articles of the agreement to plead arbitrariness in the issue of the termination order, the bench expressed the opinion that if that be so, the entire Agreement and other clauses namely, Articles of the agreement will have to be equally applied to consider whether a case has been made out by the petitioner to invoke writ jurisdiction of this Court.

The bench took note that in terms of the agreement, both the appellant and respondents had consciously agreed to confer jurisdiction on the Courts at Delhi. The bench pulled up the appellant for incorrectly pleading that the Delhi High Court was on vacation, calling it a deliberate attempt to avoid the Courts at Delhi and seek indulgence of the Manipur High Court.

Naming it a "clear case of forum shopping", the bench fumed at the factually incorrect pleading "only to take interim protection from this Court", knowing fully well that as per the Agreement (Article 27), the Courts at Delhi alone have jurisdiction.

'Suppression of Arbitration Clause of the Agreement is a deliberate attempt to override the same'

Besides, in the course of argument, it was contended by the respondents that the Article relating to Arbitration has to be mandatorily followed. "On the perusal of the scope of the contract and the various Articles to which the parties have signed, it is clear that in case of dispute arising out of the terms of the contract, the remedy is only by way of arbitration...It is admitted that the appellant/ writ petitioner has concealed this Article 26.3, but the respondents have raised it as a preliminary objection", noted the bench.

"In this case, the appellant/writ petitioner does not deny the arbitration clause. He has, however, suppressed it... He has filed this writ petition only on the plea of violation of fundamental rights and arbitrariness on the part of the respondents by issuing the impugned termination notice", reflected the bench.

Upon this, the bench had no hesitation to hold that suppression of arbitration clause in the agreement was a "deliberate attempt to override the same", and hence, on this ground, the writ petition / appeal was liable to be rejected on this ground as well.

Upholding the order of the Single Judge, the division bench dismissed the writ appeal.

Senior Advocate H. S. Paonam and Advocate A. Arunkumar appeared for the appellant, ASGs Madhavi Divan and S. Suresh represented the Centre, and Advocates Abir Phukan and I. Denning were the counsel for the other respondents.

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