Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE V.G.ARUN TUESDAY, THE 24TH DAY OF JANUARY 2023 / 4TH MAGHA, 1944 WP(C) NO. 16730 OF 2022 PETITIONERS:
1 LOTS SHIPPING AND TRADING PVT. LTD.
85 CASHEW ROAD, NO. 04-01, SINGAPORE - 679656, REP. BY ITS DIRECTOR, MR. PHILIP MATHEWS, AGED 64 YEARS, S/O.
MATHEWS POTHEN.
2 LOTS SHIPPING LTD.
NO. 34, 4TH FLOOR, GCDA COMPLEX, MARINE DRIVE, COCHIN, KERALA - 682016, REP. BY ITS DIRECTOR MRS. SUSAN PHILIP, AGED 60 YEARS, W/O. PHILIP MATHEW.
BY ADVS.
V.B.HARI NARAYANAN KAVYA VARMA M. M.
RESPONDENTS:
1 UNITED INDIA INSURANCE COMPANY LTD.
24 WHITES ROAD, CHENNAI - 600014, REP. BY ITS GENERAL MANAGER.
2 ARYA SHIP CHARTERERS PVT LTD.
123A, MITTAL COURT, NARIMAN POINT, MUMBAI - 400021, REP BY ITS MANAGING DIRECTOR.
OTHER PRESENT:
SC FOR R1 ADV.P.K.MANOJKUMAR THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.01.2023, THE COURT ON 29.01.2023 DELIVERED THE FOLLOWING:
W.P.(C).16730/2022 2 JUDGMENT Dated this the 24th day of January, 2023 The first petitioner is a Company incorporated under the laws of Singapore and engaged in the business of rendering salvage services. The second petitioner is a company incorporated under the provisions of the Indian Companies Act, engaged in shipping and other allied activities. The 2nd respondent was the registered owner of 'MT Nu Shi Nalini', an Indian Flag Vessel engaged in sea trade. The first respondent had provided hull and machinery insurance for the vessel.
2. On 13.06.2018 while the vessel was at anchor off Cochin, an explosion on-board called for emergent salvage operations. As the company entrusted with that task failed to complete the salvage operation, the second respondent entered into Ext.P1 salvage contract with the first petitioner on 20.09.2018. Accordingly, the first petitioner commenced the work and raised invoices at different stages. After effecting
W.P.(C).16730/2022 3 certain payments, the second respondent informed the petitioners that further payments under Ext.P1 salvage contract would be made by the first respondent insurer.
Thereupon, Exts. P5 and P6 side agreements were executed between the petitioners and the first respondent. As the first respondent was obligated to pay the charges as per Clause 9 of Ext. P1, the second petitioner raised three invoices totalling Rs.8,15,66,320/-, including GST plus taxes for the services rendered. Thereafter, based on mutual discussions, the petitioners and the first respondent entered into Ext.P7 side agreement on 02.05.2019, as per which the first respondent was required to pay a sum of USD 855,978 plus taxes in terms of Clause 9 of Ext. P1 contract. Thereupon, the earlier invoices were cancelled and Exts. P14 to P16 invoices raised for an amount of Rs.8,15,66,320/- including GST. As against the invoices, the first respondent made a part payment of Rs.5,98,05,899/-, excluding GST and with other reductions.
3. Meanwhile, there arose disputes between the petitioners and the second respondent, mainly with respect to
W.P.(C).16730/2022 4 the alleged failure of the second respondent to provide reception facility for the goods cargo segregated on-board the vessel as part of salvage operations. The failure of the respondents to pay the balance amount due under the invoices, as also the GST components, also gave rise to a dispute which resulted in the petitioners approaching the High Court of Bombay with an Admiralty Suit. In the suit, an interim order was passed directing to arrest the Vessel 'MT Nu Shi Nalini'. Subsequently, the vessel was sold in public auction. By the time the arrest was effected, the second respondent had become insolvent. Consequently, the petitioners were not able to recover the amounts due and payable by the second respondent from the sale proceeds of the vessel. Later the petitioners withdrew the suit and Exts.
P23 order was passed disposing the suit as withdrawn, reserving the liberty to file regular commercial suit or such other proceedings available in law against the defendants.
This writ petition is filed in purported exercise of the liberty granted under Ext. P23 order.
W.P.(C).16730/2022 5 4. Adv. V.B. Harinarayan appearing for the petitioners submitted that the first respondent is an instrumentality of State and is therefore bound to honour its commitments. The first respondent having acted in an arbitrary and capricious manner by refusing to honour the invoices submitted by the petitioners and pay the GST component, this Court should direct the first respondent to act in terms of Ext. P1 contract and Ext.P7 side agreement. Relying on the decisions in ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors. [(2004) 3 SCC 553] and Unitech Limited and Ors. v. Telangana State Industrial Infrastructure Corporation (TSIIC) and Ors. (2021 SCC Online SC 99) it is contended that writ petitions under Article 226 are maintainable even in matters pertaining to contract, when no factual dispute is involved.
5. Adv. P.K. Manoj Kumar appearing for the first respondent insurer contended that the monetary dispute involved, that too, arising from a contract, cannot be decided in a writ petition under Article 226. The petitioners' remedy, if
W.P.(C).16730/2022 6 any, is to approach the competent civil court, particularly in view of Ext. P23 order of the High Court of Bombay. It is submitted that the second respondent having been declared insolvent and the company itself not being in existence, Ext.
P1 contract has ceased to exist. Being so, the petitioners cannot seek to invoke the terms of a side agreement that is entirely based on Ext.P1 contract.
6. Indisputably, the petitioner had moved the High Court of Bombay seeking similar relief against the respondents. A perusal of Ext. P23 order shows that the Commercial Admiralty Suit was disposed as withdrawn reserving liberty to the petitioners to file regular commercial suit or such other proceedings available in law against the respondents. The liberty granted being to institute a commercial suit or such other proceedings, I find substantial merit in the objection as to maintainability of this writ petition. It is settled law that the principle of res judicata are applicable to writ proceedings also.
7. As regards the contention that writ petitions are maintainable even in contractual matters when exceptional
W.P.(C).16730/2022 7 circumstances are made out, it has to be borne in mind that for invoking the power under Article 226, a public law element should also be present. In this regard it will be profitable to refer the well considered decision of the Apex Court in Joshi Technologies International Inc. v. Union of India and Ors. [(2015) 7 SCC 728], wherein the legal position is summarized as under;
“69. The position thus summarized in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, can refuse to exercise. It also follows that under the following circumstances, 'normally', the Court would not exercise such a discretion:
69.1. the Court may not examine the issue unless the action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said made of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
W.P.(C).16730/2022 8 69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.
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 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.
W.P.(C).16730/2022 9 70.4. Writ jurisdiction of High Court under Article 226 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 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 course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the
W.P.(C).16730/2022 10 High Court under Article 226 of the Constitutional 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 controversy 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
W.P.(C).16730/2022 11 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."
8. As has been categorically laid down by the Apex Court, money claims arising out of contractual obligations are normally not to be entertained and if the contract between a private party and the State/instrumentality/agency of the State is under the realm of private law and there is no element of public law, the aggrieved party has to invoke the remedies provided under ordinary civil law, rather than seeking to invoke the extraordinary jurisdiction of the High Court under Article 226. There being no public law element in the dispute between the parties herein, the above dictum is squarely applicable.
For the aforementioned reasons, the writ petition is found to be not maintainable and consequently dismissed.
Sd/- V.G.ARUN JUDGE sb
W.P.(C).16730/2022 12 APPENDIX OF WP(C) 16730/2022 PETITIONER EXHIBITS Exhibit P1 A COPY OF THE BIMCO WRECKSTAGE 2010 SALVAGE CONTRACT DATED 20.09.2018 EXECUTED BETWEEN 1ST PETITIONER AND 2ND RESPONDENT.
Exhibit P2 A COPY OF THE MOU DATED 22.09.2018 ENTERED INTO BETWEEN THE PETITIONERS.
Exhibit P3 A COPY OF THE INVOICE NO. LOTS/012/2018-19 DATED 21.09.2018 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P4 A COPY OF THE INVOICE NO. LOTS/013/2018-19 DATED 27.09.2018 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P5 A COPY OF THE SIDE AGREEMENT DATED 23.11.2018 EXECUTED BETWEEN PETITIONERS AND 1ST RESPONDENT.
Exhibit P6 A COPY OF THE SIDE AGREEMENT DATED 27.02.2019 EXECUTED BETWEEN PETITIONERS AND 1ST RESPONDENT.
Exhibit P7 A COPY OF THE SIDE AGREEMENT DATED 02.05.2019 EXECUTED BETWEEN PETITIONERS AND 1ST RESPONDENT.
Exhibit P8 A COPY OF THE INVOICE LOTS/015/2018-19 DATED 08.10.2018 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P9 A COPY OF THE EMAIL COMMUNICATION DATED 31.12.2018 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P10 A COPY OF THE INVOICE NO. LOTS/016/2018-19 DATED 05.02.2019 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P11 A COPY OF THE EMAIL DATED 25.02.2019
W.P.(C).16730/2022 13 ADDRESSED BY THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P12 A COPY OF THE EMAIL DATED 31.03.2019 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P13 A COPY OF THE EMAIL DATED 24.04.2019 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P14 A COPY OF THE INVOICE NO. LOTS/002/2019-20 DATED 16.05.2019 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT .
Exhibit P15 A COPY OF THE INVOICE NO. LOTS/003/2019-20 DATED 16.05.2019 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P16 A COPY OF THE INVOICE NO. LOTS/004/2019-20 DATED 16.05.2019 ISSUED BY THE 2ND PETITIONER TO 2ND RESPONDENT .
Exhibit P17 A COPY OF THE RECEIPT ISSUED BY 2ND PETITIONER ACKNOWLEDGING RECEIPT OF PAYMENTS FROM 1ST RESPONDENT.
Exhibit P18 A COPY OF THE LAWYER NOTICE DATED 31/5/2019 ISSUED TO THE 2ND RESPONDENT.
Exhibit P19 A COPY OF THE EMAIL DATED 01/06.2019 ISSUED BY 2ND RESPONDENT TO PETITIONER.
Exhibit P20 A COPY OF THE NOTICE OF TERMINATION DATED 12/6/2019 ISSUED BY PETITIONER'S LAWYER TO 2ND RESPONDENT.
Exhibit P21 A COPY OF THE LETTER DATED 5/7/2019 ISSUED BY 2ND PETITIONER TO 2ND RESPONDENT.
Exhibit P22 A COPY OF TABULATED STATEMENT OF THE INVOICES RAISED, PAYMENTS RECEIVED AND BALANCE OUTSTANDING FROM THE RESPONDENTS.
Exhibit P23 A COPY OF THE ORDER DATED 11.01.2022 IN ADMIRALTY SUIT NO. 52/2019 OF THE BOMBAY HIGH
W.P.(C).16730/2022 14 COURT.
Exhibit P24 A COPY OF THE GST RETURNS SUBMITTED BY THE 2ND PETITIONER FOR THE PERIOD 2019-20 DATED 29.11.2019.
Exhibit P25 A COPY OF THE LETTER DATED 13.04.2022 ISSUED BY THE PETITIONERS TO THE 1ST RESPONDENT.