In Union of India v M/s Puna Hinda,(1) the Supreme Court examined the question of whether a writ court can exercise its extraordinary jurisdiction and adjudicate disputes arising out of purely contractual disputes. There were major disputes arising from the contract and the work done by the contractor, which were referred to the high court, instead of the arbitration proceedings provided for in the contract.
The Border Roads Organisation, a road construction entity in India (the appellant) issued a work order in favour of M/s Puna Hinda (the respondent) for the construction and improvement of a road between Lumla and Tashigong, under the Special Accelerated Rural Development Programme. The work order was enhanced, increasing the work cost. The enhanced part of said work was completed and invoices were raised. In order to verify the work done, a joint survey was conducted by a team that consisted of officers from the authorities and from the respondent, and a joint survey report was made. This was sent to the competent authority at the respondent's headquarters. However, it was noted that some of the work done was outside the scope of the work order. Different invoices were raised for this portion of the work done. In a letter dated 29 October 2013, the authorities declined to make the additional payments, citing various shortfalls by the respondent in completing the work.
The respondent approached the Guwahati High Court under article 226 of the Constitution and applied for a writ of mandamus for payment of the unpaid amounts. The Court accepted, issuing a writ of mandamus that ordered the appellant to pay the outstanding amount to the respondent. Upon appeal to the division bench, the writ of mandamus was rejected on the grounds that a considerable amount of time had passed and any further surveys would not be fair; the single judge's order was upheld. Aggrieved with this order, the appellant filed an appeal before Supreme Court. The main issue before the Court was whether the writ of the high court's jurisdiction could be invoked to adjudicate contractual disputes.
Appellant
The appellant contended that there were several disputes on the accuracy of the final joint survey report, hence, a writ court could not adjudicate on disputes of facts. To support their argument, the appellant relied on the judgment in Kerala State Electricity Board v Kurien E Kalathil,(2) wherein the court held the following:
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.
The appellant also cited the judgment in Technologies International v Union of India,(3) where the Court had determined that the:
[l]aw in this aspect has developed through catena of judgments of this Court and from the reading of these judgments it would follow that in pure contractual matters the extraordinary remedy of writ Under Article 226 or Article 32 of the Constitution cannot be invoked. However, in a limited sphere such remedies are available only when the non-Government contracting party is able to demonstrate that it is a public law remedy which such party seeks to invoke, in contradistinction to the private law remedy simpliciter under the contract.
It was further argued that as the contract contained an arbitration clause that called for any dispute arising out of the impugned contract to be referred to and resolved by arbitration, meaning that the high court order was unwarranted and untenable.
Respondent
The respondent submitted that the officer that issued the letter dated 29 October 2013 was not the competent authority under the contract. Thus, the rejection was invalid.
The Court rejected the respondent's argument, observing that the letter was issued by the officer on behalf of the competent authority and that the letter explicitly mentioned that the documents had been thoroughly examined by the competent authority. The Court noted that the order of the division bench of the high court was based on the assumption that a resurvey of the project could not be undertaken since a long time had elapsed after the first survey. However, the Court did not accept said assumption of the division bench, opining that a resurvey could be undertaken on the basis of the documents on record. The Court also observed that the respondent had acted in a questionable manner by cancelling a meeting with the board of officers that was meant to resolve the dispute, without citing express reasons.
The Court further observed that the whole dispute consisted of only technical issues and no question of law was involved. Accepting the appellant's argument, the Court held that although the high court's jurisdiction is wide, purely contractual matters in the field of private law that have no statutory substances are better adjudicated upon by a specialised forum agreed to by the parties. The Court held that since the dispute consisted of highly technical issues such as resurveys and the examination of contract documents, such processes could be adjudicated by only arbitration and not by the writ court as it did not have the expertise to adjudicate the complex technical issues of this case.
The Court eventually allowed the appeal and dismissed the writ petition filed by the respondents before the high court.
For further information on this topic please contact Nihal Shaikh or Nikhil Shirsekar at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.
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