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Delhi High Court Holds That Contractual Rights Cannot Be Tested On Anvil of Article 14 of the Constitution

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Case: Mep Infrastructure Developers Ltd. v. South Delhi Municipal Corporation And Ors.

Excerpt

The Respondent rejected the petitioner’s representation demanding the weekly remittances along with a penalty of 0.1% per day. The Petitioner files a writ petition in the nature of mandamus under Article 226 of the Constitution of India. 

Facts of the Case

The Respondent floats a tender inviting offers/bids and selects the Petitioner to collect Toll tax & ECC at the 124 toll plaza/post/barriers in Delhi. The Petitioner proposes weekly remittance of Rs.23.13 crores, totalling Rs. 1,206 crores per annum for two years and 5% enhancement after two years. 

Due to the opening of Eastern peripheral Expressway and Western peripheral Expressway and the commercial vehicles using free lanes to escape payment of toll tax, there is a decrease in the collection. SDMC directs the Petitioner to deposit the arrears i.e. Rs. 115.04 Crores in three equal monthly instalments and also continue to pay Rs. 20 Crores per week. The Respondent issues a demand notice upon the Petitioner asking them to deposit a sum of rupees for 450.69 crores and also pay the penalty amount of 0.1% per day. 

The Court maintained the payment of arrears but suspended the order for payment of Rs. 20 Crores per week in view of the Force Majeure Clause. SDMC filed a Letters Patent Appeal challenging order and the Court held that the SDMC must get weekly payments of Rs.20.00 crores till 25.03.2020.

Arguments

Appellant

The counsel for the Appellant submits that due to the opening of the Eastern and Western Peripheral Expressways, evasion of tax by commercials vehicles using free lanes and the Force Majeure event there has been a gross reduction of traffic volume and collection. Thus, it was not possible for the Petitioner to make the deposits.

The counsel further adds, SDMC has issued the letter of Termination. It further issued a fresh Notice Inviting Tender (NIT). The Petitioner further claimed that the Respondent is forcing to deposit an amount that is much higher than collected. The traffic volume has not resumed to 90% of the pre-lockdown volume. Also, the Respondent did not take any steps to stop the leakage of revenue from such vehicles. Thus, the Respondent is liable to make good the loss suffered by the Petitioner. 

Respondent

The counsel for the Respondent submits that the disputes raised are contractual in nature and governed by the terms of the agreement between the parties. The petition cannot invoke Article 226 of the Constitution of India. The Petitioner should seek relief before appropriate forums by the terms of the contract and law. Adding further, he says that the Petitioner is not new to the scene and is aware of all the ground realities. The terms and conditions of the contract are set out in a language that admits no ambiguity.

As per the Contract Agreement, Petitioner is not entitled to any compensation rebate or reduction in Toll Collection Contract Fee on account of change or variation in the traffic pattern, volume, or intensity for any reason. It is further submitted that the conduct of the Petitioner does not merit any relief under Article 226 of the Constitution of India as the Petitioner is guilty of several contractual breaches.

Observation of the Court

The Court observed that the Toll-Tax & ECC Collection Agreement dated 28.09.2017 governs the relationship between the parties. The court further took account of “Air India Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617” and observed that “The award of a contract is a commercial transaction. It can fix its own terms of the invitation to tender and that is not open to judicial scrutiny. If there is malafide, unreasonableness, and arbitrariness in the decision-making process the court can interfere. 

The Petitioner cannot invoke Article 226 of the Constitution of India to wriggle out of the contractual obligations. Contractual rights cannot be tested on the anvil of Article 14 of the Constitution of India. Clause 16 of the said agreement has become unworkable or not, is a disputed question of fact and the same cannot be gone into in a Writ Petition under Article 226 of the Constitution of India.

Court’s Decision

The Court dismissed the Writ Petition and vacated all interim orders. The Court directed the parties to resolve their disputes and enforce their respective rights under the Contract Act, appropriate civil proceedings before the appropriate Court.

Click here to view the Judgement.


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