2020 (12) TMI 877 - HC - Insolvency and Bankruptcy

Maintainability of petition - Works Contract - contract for the construction of certain portion of the Kochi Metro Project - privity of contract between DMRC and the petitioners - statement filed on behalf of the DMRC, contending that there is no privity of contract between DMRC and the petitioners and that the prayer in the writ petition being in the nature of a monetary claim, cannot be agitated in a writ petition filed under Article 226 of the Constitution of India - HELD THAT - The contention of there being no privity of contract between DMRC and the petitioners to be well-founded. The mere fact that on the request of EIEL, some amounts were directly paid to the petitioners is not sufficient to hold the DMRC liable for the balance payments. As per the terms of the agreements entered into between the petitioner and EIEL, the amounts due to the petitioners is to be paid by EIEL. For the default committed by the said Company, the DMRC cannot be made liable, unless the bills are cleared and a request for direct payment made by EIEL and accepted by the DMRC. The Apex Court has reiterated the settled position that the remedy for violation of a term of contract is not under Article 226 of the Constitution of India. In Kurien E. Kalathil's case 2000 (7) TMI 920 - SUPREME COURT , the Apex Court observed that a contract would not become statutory simply because it is for construction of a public utility and was awarded by a statutory body and that like private parties, the statutory bodies also have power to contract or deal with property. The prayer for payment of the amounts due to the petitioners by the DMRC is liable to be rejected - Petition dismissed.

Summary

Issues:
1. Privity of contract between DMRC and petitioners for payment disputes.
2. Maintainability of writ petitions under Article 226 for monetary claims.
3. Liability of DMRC for payments due to petitioners despite insolvency proceedings.

Analysis:
1. The petitioners argued that DMRC is obligated to ensure payments for work done and materials supplied for the Kochi Metro Rail Project, despite agreements being with EIEL. They relied on past direct payments by DMRC to Era-Ranken JV. DMRC contended no privity of contract with petitioners and that monetary claims cannot be addressed under Article 226. The court found DMRC not liable as per agreements, stating that payments should be made by EIEL unless direct payment requests are accepted by DMRC.

2. DMRC reiterated the lack of privity of contract and the inadmissibility of monetary claims under Article 226. Citing previous judgments, DMRC argued that contractual disputes cannot be resolved through writ petitions. Petitioners contended that the bills are undisputed, making the writ petitions maintainable. The court agreed with DMRC, emphasizing that contractual disputes fall outside the purview of Article 226, dismissing the prayer for payment.

3. Despite the insolvency of EIEL, petitioners sought payment based on the limited role of EIEL in the joint venture agreement and past direct payments by DMRC. The court upheld the legal position that DMRC is not liable for payments to petitioners due to EIEL's default. It highlighted that statutory and common law remedies must be pursued for recovery, dismissing the writ petitions and denying the payment claim.

In conclusion, the court found no privity of contract between DMRC and the petitioners, leading to the dismissal of the writ petitions seeking payment. The judgment emphasized the legal principle that contractual disputes, even in public utility projects, must be resolved through statutory and common law remedies rather than under Article 226 of the Constitution of India.