R K Associates and Hotelier Private Ltd Vs the Union of India - Citation 110565 - Court Judgment

Excerpt:
in the high court at calcutta constitutional writ jurisdiction original side g.a.no.1214 of 2017 w.p.no.218 of 2017 r.k.associates and hotelier private ltd.versus the union of india. for the petitioner : mr.mr.mr.mr.pratap chatterjee, sr.advocate joy saha, sr.advocate rishad medora, advocate meghajit mukherjee, advocate for the respondent : mr.koushik chanda, addl. solicitor general mr.swapan banerjee, advocate hearing concluded on : july 19, 2017 judgment on : july 28, 2017 debangsu basak, j.:- the writ petition as well as an interim application made therein are taken up for final hearing. learned senior advocate for the petitioner submits that, the petitioner was granted a contract for catering services at the sealdah new delhi rajdhani express by virtue of a master license agreement dated june 23, 2014. the petitioner was discharging its obligations under such agreement. over a period of time, there were several complaints against the petitioner with regard to the quality of the food served at such train. at every complain, the petitioner had accepted the allegation. the authorities had imposed fines upon the petitioner. the petitioner has paid such fines. the petitioner had done so in order to avoid controversies to the extent possible. he submits that, consequently, breach if any of the contract stood remedied by the payment of such penalty. he refers to an incident occurring on march 27, 2017 and submits that, a section of the passengers in coaches b-8 and b-9 of sealdah bound rajdhani express are took exception to the dinner served. the pantry manager and the train manager upon receipt of complaints from such passengers had looked into the issue and did not find any wrong doings on the part of the petitioner. in support of such contention, he refers to the contemporaneous writings of such officials. the petitioner was served with a show-cause notice dated march 17, 2017 with regard to such incident. the petitioner had replied thereto. he submits that, the railway authorities are acting with a closed mind with regard to the show-cause notice. the railway authorities are determined to cancel the contract without any basis. such decision, according to him, will appear from the statement made by the hon’ble minister of railway in parliament on march 29, 2017. in support of such contention he refers to a video clip of the statement of the minister for railway made in parliament. he submits that, when the hon’ble railway minister has taken a decision on termination of the contract, the decision on the show-cause notice and the reply thereto are foregone conclusions. in fact, during the pendency of the writ petition on april 6, 2017, the petitioner was served with a purported letter of termination at 9p.m.the petitioner has challenged the same in the interim application. referring to 2006 volume 12 supreme court cases page 33 (siemens limited v. state of maharashtra & ors.).2010 volume 13 supreme court cases page 427 (oryx fisheries private limited v. union of india & ors.).learned senior advocate for the petitioner submits that, when the authorities are acting with a closed mind, then the entire show-cause notice as also the subsequent proceedings stand vitiated. a direction for a decision on the show-cause notice in the facts of the present case would be an idle formality as the hon’ble railway minister has already made up his mind. he relies upon 1914 india law reports 41 cal page 436 (israil v. shamser rahman) and submits that, the court can direct restoration of status quo ante, if need be. referring to 2012 volume 10 supreme court cases page 1 (natural resources allocation, in re, special reference no.1 of 2012) he submits that, article 14 of the constitution applies to contractual matters.and if the action of the article 12 authority fails the test of reasonableness, the same should be struck down. referring to the master license agreement dated june 23, 2014 learned senior advocate for the petitioner submits that, the existence of an arbitration clause in such agreement ipso facto does not oust the jurisdiction of a writ court. moreover, referring to articles 18.4 and 19.5 of the master license agreement, he submits that, the railway authorities, not having issued a notice for six months is not entitled to terminate the contract. in such circumstances he submits that, the impugned show-cause notice as also the letter of termination dated april 6, 2017 should be quashed. learned additional solicitor general appearing for the railway authorities submits that, the railway authorities had terminated the contract by the writing dated april 6, 2017. such termination of contract is not under challenge in the present writ petition. without such challenge being levelled, the petitioner is not entitled to a relief with regard to the termination. relying upon 2003 volume 4 company law journal page 333 (cal) (bharat bhari udyog nigam ltd.v.jessop & co.ltd.staff association & ors.) learned advocate solicitor general submits that, supplementary affidavit will not extend the scope and ambit of the writ petition. he refers to the prayers made in the writ petition in support of the contention that the letter of termination is not under challenge. moreover, the petitioner is seeking relief with regard to a contract existing between the parties. he refers to the contract itself and submits that, a material breach contemplated under article 16 of such contract happening, the railway authorities are entitled to act in terms of the provisions of article 18 and terminate the contract. the railway authorities have done so. the termination of such contract, therefore, would be a dispute covered by the arbitration clause existing in the agreement between the parties. the petitioner having agreed to refer the dispute to an alternative dispute redressal forum, it should be asked to avail of the same. so far as no opportunity of hearing being given to the petitioner prior to the decision of termination being taken, learned additional solicitor general submits that, firstly, the petitioner is not entitled to a hearing in the facts of the present case, and secondly, the petitioner was actually heard. he refers to the sequence of events and submits that, the show-cause notice was issued on march 28, 2017, the speech of the hon’ble minister in parliament was on march 29, 2017. the petitioner had replied to the show-cause notice on march 31, 2017 and the letter of termination was issued on april 6, 2017. learned additional solicitor general appearing for the railway authorities submits that, there were numerous complaints against the petitioner, over a period of time. in fact, there were 138 complaints prior to the fateful one. the petitioner had accepted the same and had paid the fines imposed thereon. the number of complaints and the frequency of the same required the railway authorities to take a decision on the same. the railway authorities, therefore, considering the totality of the complaints against the petitioner and the situation preventing, had decided to terminate the contract. such cours.of action was taken on the subjective satisfaction of the materials on record by the railway authorities. the petitioner cannot claim negative equality. in support of such contention, learned additional solicitor general relies upon 2003 volume 5 supreme court cases page 437 (union of india & anr.v.international trading co.& anr.).he submits that, past conduct of the petitioner does not inspire confidence and that in respect of all the 138 numbers of complaints against the petitioner, it had accepted the same and had paid fines on a number of occasions thereof. the railway authorities had given number of opportunities to the petitioner to correct itself. however, the petitioner had chosen not to do the same. this conduct of the railway authorities in providing opportunities to the petitioner to correct itself, demonstrates and establishes that, the railway authorities were not unfair to the petitioner. on the proposition that, the parties are bound by the terms of the contract and the court need not rewrite the contract, learned additional solicitor general relies upon 1994 volume 4 supreme court cases page 104 (assistant excise commissioner & ors.v.issac peter & ors.).2009 volume 4 supreme court cases page 357 (s.k.jain v. state of haryana & ors.).2010 volume 10 supreme court cases page 174 (bharti cellular limited v. union of india & ors.) and 2015 volume 7 supreme court cases page 728 (joshi technologies international inc.v.union of india & ors.).he relies upon 1995 volume 5 supreme court cases page 545 (gujarat bottling co.ltd.& ors.v.coca cola co.& ors.) on the conduct of the parties. on april 29, 2014, the railway authorities had awarded a contract for catering services to the petitioner in respect of sealdah-new delhi rajdhani express departing from sealdah and new delhi. the petitioner had started operation thereon from may 3, 2014. the parties had entered into a master license agreement on june 23, 2014. the master license agreement contemplates a period of five years of operation. it stipulates a licence fee. the petitioner has paid the licence fee till may 2, 2018. over a period of time, the railway authorities had received 138 complaints against the petitioner. in respect of every such complaints, the petitioner had accepted its wrongdoings and had agreed to pay the fines imposed. in fact, it had paid the same. the railway authorities had received a complaint with regard to an incident on the sealdah bound rajdhani express dated march 27, 2017. it had issued a show-cause notice to the petitioner with regard thereto on march 28, 2017. the petitioner had replied thereto on march 31, 2017. the railway authorities had, thereafter, proceeded to terminate the contract on april 6, 2017. however, between the date of the reply to the show-cause notice and letter of termination dated april 6, 2017, the petitioner had filed the writ petition and the same was being heard. in re natural resources allocation (supra) is rendered on a presidential reference. eight questions were referred for opinion of the hon’ble supreme court. opinion was sought on the permissible method for disposal of natural resources. in such context, it is of the view that:“170. the legal propositions laid down in the instant judgment in shrilekha vidyarthi case may be summarized as follows: 171.1. firstly, state actions in the contractual field are meant for public good in public interest and are meant for public good and in public interest and are expected to be fair and just. 171.2. secondly, it would be alien to the constitutional scheme to accept the argument of exclusion of article 14 of the constitution of india in contractual matters.171.3. thirdly, the fact that a dispute falls in the domain of contractual obligation, would make no difference to a challenge raised under article 14 of the constitution of india on the ground that the impugned act is arbitrary, unfair and unreasonable. 171.4. fourthly, every state action must be informed of reason and it follows that an act uninformed by reason is arbitrary. 171.5. fifthly, where no plausible reason or principle is indicated (or is discernible).and where the impugned action ex facie appears to be arbitrary, the onus shifts on the state to justify its action as fair and reasonable. 171.6. sixthly, every holder of public office is accountable to the people in whom the sovereignty vests. all powers vested in a public office, even in the field of contract, are meant to be exercised for public good and for promoting public interest. 171.7. and seventhly, article 14 of the constitution of india applies also to matters of governmental policy even in contractual matters.and if the policy or any action of the government fails to satisfy the test of reasonableness, the same would be unconstitutional.” issac peter & ors.(supra) is of the view that, in cases of contracts freely entered into with the state, there is no room for invoking the doctrine of fairness and reasonableness against one party of the contract, for the purpose of altering or adding to the terms and conditions of the contract, merely because one of the party happens to be a state. similar view is expressed in s.k.jain (supra).bharti cellular limited (supra) and joshi technologies international inc. (supra).doctrine of reasonableness and fairness are not applicable to matters which require adjudication on the basis of law of contract or private law as distinguished from administrative law and public law. joshi technologies international inc. (supra) is of the following view:- the presidential reference related to disposal of natural resources by state authorities. “70. further, legal position which emerges from various judgments of this court dealing with different situations/aspects relating to the contracts entered into by the state/public authority with private parties, can be summarized as under: 70.1. at the stage of entering into a contract, the state acts purely in its executive capacity and is bound by the obligations of fairness. 70.2. state in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations. 70.3. even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of article 14 of the constitution could arise. if those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross- examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under article 226 of the constitution. in such cases court can direct the aggrieved party to resort to alternate remedy of civil suit, etc.70.4. writ jurisdiction of high court under article 226 of the constitution was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5. writ petition was not maintainable to avoid contractual obligation. occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. it cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business. 70.6. ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. otherwise, the party may sue for damages. 70.7. writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice. 70.8. if the contract between private party and the state/instrumentality and/or agency of state is under the realm of a private law and there is no element of public law, the normal cours.for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the high court under article 226 of the constitution of india and invoking its extraordinary jurisdiction. 70.9. the distinction between public law and private law element in the contract with state is getting blurred. however, it has not been totally obliterated and where the matter falls purely in private field of contract. this court has maintained the position that writ petition is not maintainable. dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision. in fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. once on the facts of a particular case it is found that nature of the activity or controvers.involves public law element, then the matter can be examined by the high court in writ petitions under article 226 of the constitution of india to see whether action of the state and/or instrumentality or agency of the state is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary. 70.10. mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness. 70.11. the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.” as noted in joshi technologies international inc. (supra).there is no absolute bar to the maintainability of a writ petition in a contractual field. however, courts ordinarily do not exercise the discretion of granting relief when it finds no public law element to be involved in the contract, or where there are complex disputed questions of facts involved requiring oral evidence. there are differences and distinctions between statutory contracts and non-statutory ones. the rigours of article 14 are not so onerous in its applicability, in the case of a non-statutory contract not involving any public law element. there is a contract between the parties. the parties have entered into it freely and voluntarily. the actions of the parties ought to be adjudged on the terms and conditions of the contract between them. the master license agreement dated june 23, 2014, therefore, assumes a large significance. few clauses of such agreement as referred to by the parties are set out hereafter:“article16evnts of default/material breach161 the following event(s) shall be deemed to be the events(s) of default or material breach on the part of the licensee: (a) if the licensee fails to start catering service within one (1) month from the commencement date as defined in article 1.1 of the master license agreement. (b) if the licensee fails to provide satisfactory services as under the license; or (c) if the licensee fails to adhere to the desired performance levels as determined by railway at any time during the term of this agreement; or (d) if the railway receives persistent complaints against the licensee from the passengers or otherwise; or (e) if the licensee fails to pay license fee along with interest, if any, to the railway on or before due dates; or (f) if the licensee engages in corrupt or fraudulent practices in execution of catering services under the agreement; or (g) if the licensee fails to provide any information/record within the prescribed time as may be demanded by the railway from time to time; or (h) if there is any failure or default at any time on the part of the licensee to carry out the terms and provisions of this agreement to the satisfaction of the railway.” “article18termination181 if either party to the agreement is subject to liquidation or insolvency under the applicable law, then the other party may forthwith terminate this agreement by issuing a notice for termination upon such confirmed events having taken place. 18.2 the parties agree that ‘material breach’ for the licensee shall also mean (other than those instances set forth in this agreement).the failure to maintain the desired performance levels’ and/or any misrepresentation or violation of the commitment set forth in this entire agreement or in response to the bid or the breach or noncompliance by licensee of its fundamental obligations under this agreement, such that the breach or nonachievement defeats the object and purpose of this agreement. 18.3 railway shall also have, without prejudice to other rights and remedies, the right, in the event of ‘material breach’ by the licensee of any of the terms and conditions of the contract, or due to the licensee’s inability to perform as agreed for any reason whatsoever, to terminate the contract forthwith and get the work done for the unexpired period of the license at the ‘risk and cost’ of the licensee or the manner railway deems fit to recover losses, damages, expenses, or costs that may be suffered or incurred by the railway. the decision of the railway about the breach /failure on the part of the licensee shall be final and binding on the licensee and shall not be called into question. 18.4 railway or the licensee may terminate this agreement without assigning any reason to the licensee/railway by giving 6(six) months prior notice in writing to the licensee/railway. 18.5 in the event that the agreement is terminated by either party pursuant to article 18.1 or by the railway under article 18.4, then the effective date of termination shall be decided by railway. however, the effect5ive date of termination shall not be more than 6(six) months from the date of notice, as given in article 18.1 or article 18.4. 18.6 in the event the agreement is terminated by the licensee under article 18.4, the railway shall forfeit the license fee, as per article 18.8, paid by the licensee, and invoke the security deposit. 18.7 in the event that the agreement is terminated by either party prior to the achievement of the commencement date, then the parties to the agreement agree to stop working on the plan for commencement of operations. 18.8 in the event the agreement is terminated after commencement date, then the licensee acknowledges and undertakes to continue performance of the services under the agreement until the effective date of termination as confirmed by railway, irrespective of whichever party has terminated the agreement. further, during the intervening period, the licensee agrees to provide services on the same terms as it were being provided during the tenure of the agreement. the forfeiture of licensee fee shall, however, only be for the period for which the catering service has not been rendered by the licensee in a year.” article 16 deals with events of default. it defines material breach and events of default. under article 16.1(d) receipt of persistent complains against the petitioner from the passengers.otherwise would be considered as an event of default or a material breach. article 18 allows the termination of the contract. it allows the railways to terminate the contract, if there is any material breach or if there is a failure on the part of the petitioner to maintain the desired performance level, amongst others.article 18.3 allows the railways to terminate the contract forthwith and to get the work done for the unexpired period of the stipulated licence period, at risk of the petitioner. article 18.4 allows the railways to terminate the contract by giving six months prior notice. the terms and conditions of the contract between the parties, therefore, contemplate eventualities requiring the termination of the contract. the parties have agreed that the railways would be entitled to terminate the contract. the parties have also agreed to a dispute redressal mechanism in the master license agreement. the legality, validity and sufficiency of the termination of the contract can be referred to the agreed forum for dispute resolution. in the present case, the railway authorities have terminated the contract on april 6, 2017 during the pendency of the writ petition. the railway authorities did not obtain leave of the court to terminate the contract. however, on april 16, 2017 there did not subsist any order of the court restraining the railway authorities from terminating the contract. israil (supra) is of the view that, if the court finds that, there are good reasons to hold that, the status obtaining prior to the filing of the suit should be maintained, it can do so. the court, therefore, has the power to direct the parties to maintain status quo ante. however, the exercise of such power will depend upon the fact scenario of each case presented to the court. the question, therefore, in the present case is whether in the fact scenario as obtaining in the present case, a direction for maintaining status quo ante is required to be passed or not. in other words, whether the show-cause letter dated march 28, 2017 and the letter of termination dated april 6, 2017 are required to be set aside or not. the petitioner had suffered 138 complaints against it in respect of the catering services rendered by it. the railway authorities had permitted the petitioner to continue functioning, albeit imposing fines for the 138 infractions. therefore, the railway authorities have given sufficient opportunities to the petitioner to correct itself. the contract is for providing catering services to the passengers on board the train. a passenger travelling on board the rajdhani has paid for the catering services. such a passenger is entitled to be served with the correct quantity of food, in a hygienic manner, with appropriate and palatable disposition of the food served. apparently, the petitioner had failed on 138 occasions to do so. it cannot claim that, it will be immune from a termination of a contract in spite of a number of complaints against it. the railway authorities also cannot overlook the number of complaints. a case is sought to be made out, that given the number of passengers travelling on board the train and comparing the same with the length of the period and the number of complaints, then the percentage of complaint is negligible. viewed from such perspective also, the court cannot ignore a situation where all complaints are not lodged with the authorities and even if so done, the authorities do not take steps in respect all of them. in the present case, the railway authorities have taken steps in respect of 138 complaints. the 139th complaint apparently was too much for the railway authorities. the number of complaints made against the petitioner does not augur well for it. the court should not come to the assistance of a person who has failed in the discharge of its obligations under a contract. the petitioner has not substantiated that, the failure was due to circumstances or events beyond its control. the railway authorities cannot be faulted if they are insisting on quality to be maintained as in the instant case. the decision of termination taken, therefore, cannot be said to be against public good or public interest. rather it can be said to be for public good and in public interest. the letter of termination was issued during the pendency of the writ petition and without obtaining leave of the court. as noted above, on the date of issuance of the letter of termination, there was no subsisting order preventing the railway authorities from doing so. however, as an article 12 authority, the railway authorities could have informed the court as to its decision to terminate the contract. not having done so, an allegation of arbitrariness and overreach of the court does stick to the railway authorities. by itself, however, in the facts of the present case, i am not minded to say that, the letter of termination can be faulted. article 18.3 of the master license agreement allows the railway authorities to terminate the contract without assigning any reasons. there is an agreed dispute redressal mechanism provided in the master license agreement. the petitioner may or may not have suffered damages in respect of the unilateral termination of the contract. that has to be looked into through the mechanism of dispute resolution agreed between the parties. as a writ court i need not interfere in such process, in the facts of the present case. bharat bhari udyog nigam ltd.(supra) considers the question whether disinvestment of equity shares of the government of india in a government company in favour of a private company was justified or not. the writ petition was filed by the staff association of the government company. it notices the number of supplementary affidavits filed in the writ petition and the initial prayers in the writ petition. it finds that, an entirely new case was sought to be built up which was never put up in the pleadings. it goes on to say that, subsequent events did take place after filing of the writ petition and that, if the parties to the writ petition wanted to bring such developments on record, then the courts in its liberal approach would take into consideration such subsequent events. however, that should be done by amending the writ petition and not by filing successive affidavits. in the facts of the present case, the subsequent event developing after filing of the writ petition is the letter of termination. the petitioner has brought it on record through the way of an interim application, not requiring an amendment to the writ petition. such a procedure on the strength of the ratio of bharat bhari udyog nigam ltd.(supra) is suspected. siemens ltd.(supra) concerns a writ petition questioning a showcause notice demanding payment of cess. in the facts of such case, it is found that, the show-cause notice was issued with a pre-meditation and that, a direction by the writ court to the statutory authority to hear the matter afresh, would not yield any fruitful purpose. in the present case, after the show-cause and the petitioner having replied thereto, the railway authorities have decided to terminate the contract. the railway authorities are entitled to terminate the contract in terms of article 18.3. such exercise of power is independent to the show-cause notice. moreover, the petitioner has an agreed dispute redressal forum to ventilate its grievances, if any. there are serious disputes between the parties. the mechanism of a writ petition may not be appropriate to resolve such disputes. the disputes between the parties are such that oral evidence would be required. therefore, although the writ petition was found to be maintainable at the stage of consideration of the grant of interim order, it would not be prudent to entertain the writ petition any further, in the facts of the present case. w.p.no.218 of 2017 is disposed of accordingly. in view of the discussions had in respect of the writ petition, no further order need be passed in the interim application. g.a.no.1214 of 2017 is disposed of accordingly. no order as to costs. [debangsu basak, j.].

Judgment:

IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction Original Side G.A.No.1214 of 2017 W.P.No.218 of 2017 R.K.Associates and Hotelier Private LTD.versus The Union of India.

For the Petitioner : Mr.Mr.Mr.Mr.Pratap Chatterjee, Sr.Advocate Joy Saha, Sr.Advocate Rishad Medora, Advocate Meghajit Mukherjee, Advocate For the Respondent : Mr.Koushik Chanda, Addl.

Solicitor General Mr.Swapan Banerjee, Advocate Hearing concluded on : July 19, 2017 Judgment on : July 28, 2017 DEBANGSU BASAK, J.:- The writ petition as well as an interim application made therein are taken up for final hearing.

Learned Senior Advocate for the petitioner submits that, the petitioner was granted a contract for catering services at the Sealdah New Delhi Rajdhani Express by virtue of a master license agreement dated June 23, 2014.

The petitioner was discharging its obligations under such agreement.

Over a period of time, there were several complaints against the petitioner with regard to the quality of the food served at such train.

At every complain, the petitioner had accepted the allegation.

The authorities had imposed fines upon the petitioner.

The petitioner has paid such fines.

The petitioner had done so in order to avoid controversies to the extent possible.

He submits that, consequently, breach if any of the contract stood remedied by the payment of such penalty.

He refers to an incident occurring on March 27, 2017 and submits that, a section of the passengers in Coaches B-8 and B-9 of Sealdah bound Rajdhani Express are took exception to the dinner served.

The Pantry Manager and the Train Manager upon receipt of complaints from such passengers had looked into the issue and did not find any wrong doings on the part of the petitioner.

In support of such contention, he refers to the contemporaneous writings of such officials.

The petitioner was served with a show-cause notice dated March 17, 2017 with regard to such incident.

The petitioner had replied thereto.

He submits that, the Railway authorities are acting with a closed mind with regard to the show-cause notice.

The Railway authorities are determined to cancel the contract without any basis.

Such decision, according to him, will appear from the statement made by the Hon’ble Minister of Railway in Parliament on March 29, 2017.

In support of such contention he refers to a video clip of the statement of the Minister for Railway made in Parliament.

He submits that, when the Hon’ble Railway Minister has taken a decision on termination of the contract, the decision on the show-cause notice and the reply thereto are foregone conclusions.

In fact, during the pendency of the writ petition on April 6, 2017, the petitioner was served with a purported letter of termination at 9P.M.The petitioner has challenged the same in the interim application.

Referring to 2006 Volume 12 Supreme Court Cases page 33 (Siemens Limited v.

State of Maharashtra & Ors.).2010 Volume 13 Supreme Court Cases page 427 (Oryx Fisheries Private Limited v.

Union of India & Ors.).learned Senior Advocate for the petitioner submits that, when the authorities are acting with a closed mind, then the entire show-cause notice as also the subsequent proceedings stand vitiated.

A direction for a decision on the show-cause notice in the facts of the present case would be an idle formality as the Hon’ble Railway Minister has already made up his mind.

He relies upon 1914 India Law Reports 41 Cal page 436 (Israil v.

Shamser Rahman) and submits that, the Court can direct restoration of status quo ante, if need be.

Referring to 2012 Volume 10 Supreme Court Cases page 1 (Natural Resources Allocation, In Re, Special Reference No.1 of 2012) he submits that, Article 14 of the Constitution applies to contractual matteRs.and if the action of the Article 12 authority fails the test of reasonableness, the same should be struck down.

Referring to the master license agreement dated June 23, 2014 learned Senior Advocate for the petitioner submits that, the existence of an arbitration clause in such agreement ipso facto does not oust the jurisdiction of a Writ Court.

Moreover, referring to Articles 18.4 and 19.5 of the master license agreement, he submits that, the Railway authorities, not having issued a notice for six months is not entitled to terminate the contract.

In such circumstances he submits that, the impugned show-cause notice as also the letter of termination dated April 6, 2017 should be quashed.

Learned Additional Solicitor General appearing for the Railway authorities submits that, the Railway authorities had terminated the contract by the writing dated April 6, 2017.

Such termination of contract is not under challenge in the present writ petition.

Without such challenge being levelled, the petitioner is not entitled to a relief with regard to the termination.

Relying upon 2003 Volume 4 Company Law Journal page 333 (Cal) (Bharat Bhari Udyog Nigam Ltd.V.Jessop & Co.LTD.Staff Association & Ors.) learned Advocate Solicitor General submits that, supplementary affidavit will not extend the scope and ambit of the writ petition.

He refers to the prayers made in the writ petition in support of the contention that the letter of termination is not under challenge.

Moreover, the petitioner is seeking relief with regard to a contract existing between the parties.

He refers to the contract itself and submits that, a material breach contemplated under Article 16 of such contract happening, the Railway authorities are entitled to act in terms of the provisions of Article 18 and terminate the contract.

The Railway authorities have done so.

The termination of such contract, therefore, would be a dispute covered by the arbitration clause existing in the agreement between the parties.

The petitioner having agreed to refer the dispute to an alternative dispute redressal forum, it should be asked to avail of the same.

So far as no opportunity of hearing being given to the petitioner prior to the decision of termination being taken, learned Additional Solicitor General submits that, firstly, the petitioner is not entitled to a hearing in the facts of the present case, and secondly, the petitioner was actually heard.

He refers to the sequence of events and submits that, the show-cause notice was issued on March 28, 2017, the speech of the Hon’ble Minister in Parliament was on March 29, 2017.

The petitioner had replied to the show-cause notice on March 31, 2017 and the letter of termination was issued on April 6, 2017.

Learned Additional Solicitor General appearing for the Railway authorities submits that, there were numerous complaints against the petitioner, over a period of time.

In fact, there were 138 complaints prior to the fateful one.

The petitioner had accepted the same and had paid the fines imposed thereon.

The number of complaints and the frequency of the same required the Railway authorities to take a decision on the same.

The Railway authorities, therefore, considering the totality of the complaints against the petitioner and the situation preventing, had decided to terminate the contract.

Such couRs.of action was taken on the subjective satisfaction of the materials on record by the railway authorities.

The petitioner cannot claim negative equality.

In support of such contention, learned Additional Solicitor General relies upon 2003 Volume 5 Supreme Court Cases page 437 (Union of India & Anr.v.International Trading Co.& Anr.).He submits that, past conduct of the petitioner does not inspire confidence and that in respect of all the 138 numbers of complaints against the petitioner, it had accepted the same and had paid fines on a number of occasions thereof.

The Railway authorities had given number of opportunities to the petitioner to correct itself.

However, the petitioner had chosen not to do the same.

This conduct of the Railway authorities in providing opportunities to the petitioner to correct itself, demonstrates and establishes that, the Railway authorities were not unfair to the petitioner.

On the proposition that, the parties are bound by the terms of the contract and the Court need not rewrite the contract, learned Additional Solicitor General relies upon 1994 Volume 4 Supreme Court Cases page 104 (Assistant Excise Commissioner & Ors.v.Issac Peter & Ors.).2009 Volume 4 Supreme Court Cases page 357 (S.K.Jain v.

State of Haryana & Ors.).2010 Volume 10 Supreme Court Cases page 174 (Bharti Cellular Limited v.

Union of India & Ors.) and 2015 Volume 7 Supreme Court Cases page 728 (Joshi Technologies International Inc.v.Union of India & Ors.).He relies upon 1995 Volume 5 Supreme Court Cases page 545 (Gujarat Bottling Co.LTD.& Ors.v.Coca Cola Co.& Ors.) on the conduct of the parties.

On April 29, 2014, the Railway authorities had awarded a contract for catering services to the petitioner in respect of Sealdah-New Delhi Rajdhani Express departing from Sealdah and New Delhi.

The petitioner had started operation thereon from May 3, 2014.

The parties had entered into a master license agreement on June 23, 2014.

The master license agreement contemplates a period of five years of operation.

It stipulates a licence fee.

The petitioner has paid the licence fee till May 2, 2018.

Over a period of time, the Railway authorities had received 138 complaints against the petitioner.

In respect of every such complaints, the petitioner had accepted its wrongdoings and had agreed to pay the fines imposed.

In fact, it had paid the same.

The Railway authorities had received a complaint with regard to an incident on the Sealdah bound Rajdhani Express dated March 27, 2017.

It had issued a show-cause notice to the petitioner with regard thereto on March 28, 2017.

The petitioner had replied thereto on March 31, 2017.

The Railway authorities had, thereafter, proceeded to terminate the contract on April 6, 2017.

However, between the date of the reply to the show-cause notice and letter of termination dated April 6, 2017, the petitioner had filed the writ petition and the same was being heard.

In re Natural Resources Allocation (supra) is rendered on a presidential reference.

Eight questions were referred for opinion of the Hon’ble Supreme Court.

Opinion was sought on the permissible method for disposal of natural resources.

In such context, it is of the view that:“170.

The legal propositions laid down in the instant judgment in Shrilekha Vidyarthi case may be summarized as follows: 171.1.

Firstly, State actions in the contractual field are meant for public good in public interest and are meant for public good and in public interest and are expected to be fair and just.

171.2.

Secondly, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 of the Constitution of India in contractual matteRs.171.3.

Thirdly, the fact that a dispute falls in the domain of contractual obligation, would make no difference to a challenge raised under Article 14 of the Constitution of India on the ground that the impugned act is arbitrary, unfair and unreasonable.

171.4.

Fourthly, every State action must be informed of reason and it follows that an act uninformed by reason is arbitrary.

171.5.

Fifthly, where no plausible reason or principle is indicated (or is discernible).and where the impugned action ex facie appears to be arbitrary, the onus shifts on the State to justify its action as fair and reasonable.

171.6.

Sixthly, every holder of public office is accountable to the people in whom the sovereignty vests.

All powers vested in a public office, even in the field of contract, are meant to be exercised for public good and for promoting public interest.

171.7.

And seventhly, Article 14 of the Constitution of India applies also to matters of governmental policy even in contractual matteRs.and if the policy or any action of the Government fails to satisfy the test of reasonableness, the same would be unconstitutional.” Issac Peter & ORS.(supra) is of the view that, in cases of contracts freely entered into with the State, there is no room for invoking the doctrine of fairness and reasonableness against one party of the contract, for the purpose of altering or adding to the terms and conditions of the contract, merely because one of the party happens to be a State.

Similar view is expressed in S.K.Jain (supra).Bharti Cellular Limited (supra) and Joshi Technologies International Inc.

(supra).Doctrine of reasonableness and fairness are not applicable to matters which require adjudication on the basis of law of contract or private law as distinguished from administrative law and public law.

Joshi Technologies International Inc.

(supra) is of the following view:- The presidential reference related to disposal of natural resources by State authorities.

“70.

Further, legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under: 70.1.

At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

70.2.

State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations.

70.3.

Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise.

If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, Involving examination and cross- examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution.

In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit, etc.70.4.

Writ jurisdiction of High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.

70.5.

Writ petition was not maintainable to avoid contractual obligation.

Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes.

It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business.

70.6.

Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed.

Otherwise, the party may sue for damages.

70.7.

Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.

70.8.

If the contract between private party and the State/instrumentality and/or agency of State is under the realm of a private law and there is no element of public law, the normal couRs.for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.

70.9.

The distinction between public law and private law element in the contract with State is getting blurred.

However, it has not been totally obliterated and where the matter falls purely in private field of contract.

This Court has maintained the position that writ petition is not maintainable.

Dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision.

In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element.

Once on the facts of a particular case it is found that nature of the activity or controveRs.involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.

70.10.

Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.

70.11.

The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.” As noted in Joshi Technologies International Inc.

(supra).there is no absolute bar to the maintainability of a writ petition in a contractual field.

However, Courts ordinarily do not exercise the discretion of granting relief when it finds no public law element to be involved in the contract, or where there are complex disputed questions of facts involved requiring oral evidence.

There are differences and distinctions between statutory contracts and non-statutory ones.

The rigours of Article 14 are not so onerous in its applicability, in the case of a non-statutory contract not involving any public law element.

There is a contract between the parties.

The parties have entered into it freely and voluntarily.

The actions of the parties ought to be adjudged on the terms and conditions of the contract between them.

The master license agreement dated June 23, 2014, therefore, assumes a large significance.

Few clauses of such agreement as referred to by the parties are set out hereafter:“ARTICLE16EVNTS OF DEFAULT/MATERIAL BREACH161 The following event(s) shall be deemed to be the events(s) of default or material breach on the part of the licensee: (a) If the licensee fails to start catering service within one (1) month from the Commencement Date as defined in Article 1.1 of the Master License Agreement.

(b) If the Licensee fails to provide satisfactory services as under the License; or (c) If the Licensee fails to adhere to the desired Performance Levels as determined by Railway at any time during the term of this Agreement; or (d) If the Railway receives persistent complaints against the Licensee from the passengers or otherwise; or (e) If the Licensee fails to pay license fee along with interest, if any, to the Railway on or before due dates; or (f) If the Licensee engages in corrupt or fraudulent practices in execution of catering services under the Agreement; or (g) If the Licensee fails to provide any information/record within the prescribed time as may be demanded by the Railway from time to time; or (h) If there is any failure or default at any time on the part of the Licensee to carry out the terms and provisions of this Agreement to the satisfaction of the Railway.” “ARTICLE18TERMINATION181 If either party to the Agreement is subject to liquidation or insolvency under the applicable law, then the other party may forthwith terminate this Agreement by issuing a notice for termination upon such confirmed events having taken place.

18.2 The parties agree that ‘Material Breach’ for the Licensee shall also mean (other than those instances set forth in this Agreement).the failure to maintain the desired Performance Levels’ and/or any misrepresentation or violation of the commitment set forth in this entire Agreement or in response to the Bid or the breach or noncompliance by Licensee of its fundamental obligations under this Agreement, such that the breach or nonachievement defeats the object and purpose of this Agreement.

18.3 Railway shall also have, without prejudice to other rights and remedies, the right, in the event of ‘Material Breach’ by the Licensee of any of the terms and conditions of the contract, or due to the Licensee’s inability to perform as agreed for any reason whatsoever, to terminate the contract forthwith and get the work done for the unexpired period of the License at the ‘risk and cost’ of the Licensee or the manner Railway deems fit to recover losses, damages, expenses, or costs that may be suffered or incurred by the Railway.

The decision of the Railway about the Breach /failure on the part of the licensee shall be final and binding on the Licensee and shall not be called into question.

18.4 Railway or the Licensee may terminate this Agreement without assigning any reason to the Licensee/Railway by giving 6(six) months prior notice in writing to the Licensee/Railway.

18.5 In the event that the Agreement is terminated by either party pursuant to Article 18.1 or by the Railway under Article 18.4, then the effective date of termination shall be decided by railway.

However, the effect5ive date of termination shall not be more than 6(six) months from the date of notice, as given in article 18.1 or Article 18.4.

18.6 In the event the Agreement is terminated by the Licensee under Article 18.4, the Railway shall forfeit the License Fee, as per Article 18.8, paid by the Licensee, and invoke the Security Deposit.

18.7 In the event that the Agreement is terminated by either party prior to the achievement of the Commencement Date, then the parties to the Agreement agree to stop working on the plan for commencement of operations.

18.8 In the event the Agreement is terminated after Commencement Date, then the Licensee acknowledges and undertakes to continue performance of the services under the Agreement until the effective date of termination as confirmed by Railway, irrespective of whichever party has terminated the Agreement.

Further, during the intervening period, the Licensee agrees to provide services on the same terms as it were being provided during the tenure of the Agreement.

The forfeiture of Licensee Fee shall, however, only be for the period for which the catering service has not been rendered by the Licensee in a year.” Article 16 deals with events of default.

It defines material breach and events of default.

Under Article 16.1(d) receipt of persistent complains against the petitioner from the passengeRs.otherwise would be considered as an event of default or a material breach.

Article 18 allows the termination of the contract.

It allows the Railways to terminate the contract, if there is any material breach or if there is a failure on the part of the petitioner to maintain the desired performance level, amongst otheRs.Article 18.3 allows the Railways to terminate the contract forthwith and to get the work done for the unexpired period of the stipulated licence period, at risk of the petitioner.

Article 18.4 allows the Railways to terminate the contract by giving six months prior notice.

The terms and conditions of the contract between the parties, therefore, contemplate eventualities requiring the termination of the contract.

The parties have agreed that the Railways would be entitled to terminate the contract.

The parties have also agreed to a dispute redressal mechanism in the master license agreement.

The legality, validity and sufficiency of the termination of the contract can be referred to the agreed forum for dispute resolution.

In the present case, the Railway authorities have terminated the contract on April 6, 2017 during the pendency of the writ petition.

The Railway authorities did not obtain leave of the Court to terminate the contract.

However, on April 16, 2017 there did not subsist any order of the Court restraining the Railway authorities from terminating the contract.

Israil (supra) is of the view that, if the Court finds that, there are good reasons to hold that, the status obtaining prior to the filing of the suit should be maintained, it can do so.

The Court, therefore, has the power to direct the parties to maintain status quo ante.

However, the exercise of such power will depend upon the fact scenario of each case presented to the Court.

The question, therefore, in the present case is whether in the fact scenario as obtaining in the present case, a direction for maintaining status quo ante is required to be passed or not.

In other words, whether the show-cause letter dated March 28, 2017 and the letter of termination dated April 6, 2017 are required to be set aside or not.

The petitioner had suffered 138 complaints against it in respect of the catering services rendered by it.

The Railway authorities had permitted the petitioner to continue functioning, albeit imposing fines for the 138 infractions.

Therefore, the Railway authorities have given sufficient opportunities to the petitioner to correct itself.

The contract is for providing catering services to the passengers on board the train.

A passenger travelling on board the Rajdhani has paid for the catering services.

Such a passenger is entitled to be served with the correct quantity of food, in a hygienic manner, with appropriate and palatable disposition of the food served.

Apparently, the petitioner had failed on 138 occasions to do so.

It cannot claim that, it will be immune from a termination of a contract in spite of a number of complaints against it.

The Railway authorities also cannot overlook the number of complaints.

A case is sought to be made out, that given the number of passengers travelling on board the train and comparing the same with the length of the period and the number of complaints, then the percentage of complaint is negligible.

Viewed from such perspective also, the Court cannot ignore a situation where all complaints are not lodged with the authorities and even if so done, the authorities do not take steps in respect all of them.

In the present case, the Railway authorities have taken steps in respect of 138 complaints.

The 139th complaint apparently was too much for the Railway authorities.

The number of complaints made against the petitioner does not augur well for it.

The Court should not come to the assistance of a person who has failed in the discharge of its obligations under a contract.

The petitioner has not substantiated that, the failure was due to circumstances or events beyond its control.

The Railway authorities cannot be faulted if they are insisting on quality to be maintained as in the instant case.

The decision of termination taken, therefore, cannot be said to be against public good or public interest.

Rather it can be said to be for public good and in public interest.

The letter of termination was issued during the pendency of the writ petition and without obtaining leave of the Court.

As noted above, on the date of issuance of the letter of termination, there was no subsisting order preventing the Railway authorities from doing so.

However, as an Article 12 authority, the Railway authorities could have informed the Court as to its decision to terminate the contract.

Not having done so, an allegation of arbitrariness and overreach of the Court does stick to the Railway authorities.

By itself, however, in the facts of the present case, I am not minded to say that, the letter of termination can be faulted.

Article 18.3 of the master license agreement allows the Railway authorities to terminate the contract without assigning any reasons.

There is an agreed dispute redressal mechanism provided in the master license agreement.

The petitioner may or may not have suffered damages in respect of the unilateral termination of the contract.

That has to be looked into through the mechanism of dispute resolution agreed between the parties.

As a Writ Court I need not interfere in such process, in the facts of the present case.

Bharat Bhari Udyog Nigam LTD.(supra) considers the question whether disinvestment of equity shares of the Government of India in a Government company in favour of a private company was justified or not.

The writ petition was filed by the staff association of the Government Company.

It notices the number of supplementary affidavits filed in the writ petition and the initial prayers in the writ petition.

It finds that, an entirely new case was sought to be built up which was never put up in the pleadings.

It goes on to say that, subsequent events did take place after filing of the writ petition and that, if the parties to the writ petition wanted to bring such developments on record, then the Courts in its liberal approach would take into consideration such subsequent events.

However, that should be done by amending the writ petition and not by filing successive affidavits.

In the facts of the present case, the subsequent event developing after filing of the writ petition is the letter of termination.

The petitioner has brought it on record through the way of an interim application, not requiring an amendment to the writ petition.

Such a procedure on the strength of the ratio of Bharat Bhari Udyog Nigam LTD.(supra) is suspected.

Siemens LTD.(supra) concerns a writ petition questioning a showcause notice demanding payment of cess.

In the facts of such case, it is found that, the show-cause notice was issued with a pre-meditation and that, a direction by the Writ Court to the statutory authority to hear the matter afresh, would not yield any fruitful purpose.

In the present case, after the show-cause and the petitioner having replied thereto, the Railway authorities have decided to terminate the contract.

The Railway authorities are entitled to terminate the contract in terms of Article 18.3.

Such exercise of power is independent to the show-cause notice.

Moreover, the petitioner has an agreed dispute Redressal forum to ventilate its grievances, if any.

There are serious disputes between the parties.

The mechanism of a writ petition may not be appropriate to resolve such disputes.

The disputes between the parties are such that oral evidence would be required.

Therefore, although the writ petition was found to be maintainable at the stage of consideration of the grant of interim order, it would not be prudent to entertain the writ petition any further, in the facts of the present case.

W.P.No.218 of 2017 is disposed of accordingly.

In view of the discussions had in respect of the writ petition, no further order need be passed in the interim application.

G.A.No.1214 of 2017 is disposed of accordingly.

No order as to costs.

[DEBANGSU BASAK, J.].

Court	Kolkata High Court
Decided On	Jul-28-2017
Judge	Debangsu Basak
Appellant	R.K. Associates and Hotelier Private Ltd.
Respondent	The Union of India.

R.K. Associates and Hotelier Private Ltd. Vs. The Union of India. - Court Judgment