2023 (5) TMI 1248 - HC - Indian Laws

Invocation of bank guarantees furnished by the petitioner - direction to the respondents to return the bank guarantees furnished by the petitioner - HELD THAT - In State of Bihar Ors. v. Jain Plastics and Chemicals Ltd. 2001 (11) TMI 1032 - SUPREME COURT , the Hon'ble Supreme Court was to adjudicate upon the issue-whether the High Court ought not to have exercised its jurisdiction under Article 226 of the Constitution of India for granting relief in case of alleged breach of contract. The Apex Court held that a writ petition under Article 226 of the Constitution of India is not the proper proceeding for adjudicating such disputes. Under the law, it was open to the respondent therein, to approach the court of competent jurisdiction for appropriate relief for breach of contract. It is settled law that when an alternative and equally efficacious remedy is available to a litigant, he should be required to pursue that remedy and not invoke the writ jurisdiction of the High Court. Equally, the existence of an alternative remedy does not affect the jurisdiction of the court to issue a writ, but ordinarily, that would be a good ground in refusing to exercise the discretion under Article 226 of the Constitution of India. This court cannot countenance the argument that, whereas, otherwise, a dispute owing to its private law origins ought to have been agitated before a civil court, merely because the entity so breaching the contract is a State or its functionary, the case is to be considered under Article 226 of the Constitution of India. Arbitrariness, under Article 14 of the Constitution of India needs to be pleaded in exclusion to claims of pure breach of contract. In the present petition, the petitioner has not been able to persuade this court that the breach so alleged on the part of respondents is of such a nature that it may be considered arbitrary and deserves to be entertained under the writ jurisdiction of this court alone. This court is of the considered opinion, that the present petition, involves disputed questions of facts; has a purely contractual origin without any aspect of public law; and that the petitioner has an alternative remedy to pursue. The mere fact that the petition is pending since long, it cannot be made a ground to entertain a petition which is incapable of being decided in writ jurisdiction. The maintainability of the writ petition must be entertained or not, is a matter that can be determined by this court either at the threshold or at the stage of final disposal. The mere passage of time is not a ground to entertain a writ petition, which is either not found to be maintainable or the court, while considering the overall facts and circumstances, comes to the conclusion that the same ought not to be entertained and the parties may be relegated to more appropriate civil remedies. In Unitech Ltd. Ors. v. Telangana State Industrial Infrastructure Corporation (TSIIC) Ors. 2021 (2) TMI 1181 - SUPREME COURT , the Hon'ble Supreme Court held that the jurisdiction under Article 226 of the Constitution of India was rightly invoked by the single judge and the Division Bench of the Andhra Pradesh in this case when the foundational representation of the contract had failed. This court, on the ground that the present petition has contractual roots and basis, requires to make factual findings on disputed questions, has no element of public law and does not involve arbitrariness in the context of Article 14 of the Constitution of India, finds that the present petition should not be entertained - this court is not inclined to entertain the present petition - Petition dismissed.

Summary

Issues Involved:
1. Maintainability of the writ petition under Article 226 for contractual disputes.
2. Whether the invocation of bank guarantees (BGs) by the respondent was valid.
3. Allegations of fraud and irretrievable harm.

Summary:

1. Maintainability of the Writ Petition:
The primary issue was whether the High Court should entertain the writ petition under Article 226 for a dispute rooted in private law and contractual obligations. The court emphasized that the petition falls exclusively in the domain of private law and is fundamentally contractual in nature. It was noted that the mere fact that the parties engaging in the contract are State or its instrumentalities does not make the issue relevant to public law. The court cited precedents, including *Joshi Technologies International INC v. Union of India* and *State of Bihar & Ors. v. Jain Plastics and Chemicals Ltd.*, to highlight that disputes arising from contracts should ordinarily be adjudicated outside the scope of Article 226, unless there is a significant public law element involved.

2. Validity of the Invocation of BGs:
The petitioner argued that the BGs were issued for a specific purpose related to retention monies under the Definitive Agreements, and since the project was allegedly completed, the petitioner was discharged from its obligations. The respondent countered that the invocation was within the terms of the BGs, specifically Clause 3, which required only a demand for invocation. The court found that determining whether the project was completed and if the invocation was valid required a factual determination and interpretation of the contract, which is not suitable for writ jurisdiction.

3. Allegations of Fraud and Irretrievable Harm:
The petitioner claimed that a fraud had been perpetrated by the respondents, who allegedly had a fraudulent motive for procuring the BGs with the intent of assigning them later. The court noted that fraud must be the "only realistic inference" and that clear evidence is needed. It was observed that the petitioner was aware of the possibility of the BGs being assigned to the long-term lender, as evidenced by Clause 11 of the BGs and various letters acknowledging the assignment. The court found no prima facie evidence of fraud and stated that such issues should be adjudicated in appropriate civil proceedings. Regarding irretrievable harm, the court held that financial inconvenience does not constitute irretrievable harm or injustice in legal terms.

Conclusion:
The court concluded that the petition involved disputed questions of fact, had a purely contractual origin without any aspect of public law, and that the petitioner had an alternative remedy to pursue. The writ petition was dismissed, with the court directing the petitioner to take recourse to appropriate remedies in accordance with the law. The status quo order regarding the retention of BGs was extended for four weeks to enable the petitioner to seek alternative remedies.