M/S Patliputra Entertainment Private Limited vs. The Bihar State Tourism Development Corporation LTD.

Facts

M/s. Patliputra Entertainment Private Limited (Petitioner) and its Director filed a writ petition challenging orders dated 01.04.2022 and 23.05.2022 by the Bihar State Tourism Development Corporation Limited (Corporation). These orders rejected the petitioner's request for reconsideration of the cancellation of their agreement dated 01.04.2022, imposed blacklisting, and sought continuation of the agreement for ten years. The petitioner also disputed the calculation of rental dues, requesting it from the agreement date (27.08.2019) rather than the possession date (20.06.2018), and sought condonation of rent for the COVID-19 lockdown periods. The Corporation had issued a Notice Inviting Tender (NIT) on 09.03.2018 for running Hotel Vishnu Vihar, Gaya. After a tender process, a Letter of Award was issued to the petitioner. The agreement was eventually signed on 27.08.2019, but the petitioner defaulted on payments, leading to the cancellation of the contract and blacklisting.

Held

The Court held that the writ petition is maintainable despite the arbitration clause, as the petitioner raised grounds of violation of natural justice and challenged the validity of orders leading to blacklisting. Regarding the petitioner's conduct, the Court found that delays in payment existed from the inception of the contract, with repeated reminders being ignored and no course correction even after the first cancellation order. The Court noted that the Corporation had repeatedly excused delays and granted time. Even after the writ petition was filed, a cheque for Rs.32,00,000/- was dishonoured, and payment was delayed. From an equity standpoint, saddling the Corporation with such a lessee again would be against justice and the Corporation's commercial interests. Concerning respondent no.6, the Court found that MKS Enterprises acted according to the NIT dated 15.06.2022 and was declared the successful bidder on 27.07.2022. As no stay was granted, this action could not be questioned. The Court held that issuing a Letter of Award to respondent no.6, who complied with all conditions, could not be questioned to the detriment of an interested party. The Court concluded that the orders passed by the Corporation did not meet the threshold of arbitrariness and were not violative of Article 14. The decision to waive only interest on delayed payment was within the Corporation's purview. The questions raised were answered, and it was left open for either party to agitate the arbitration clause for grievances. The petition was dismissed.

Key Issues

1. Whether the writ petition is maintainable given the arbitration clause (Clause 54) in the agreement dated 27.08.2019 between the petitioner and the Corporation? The petitioner argued for maintainability, emphasizing violations of natural justice and the invalidity of the cancellation and blacklisting orders, suggesting arbitration as a recourse but not a bar to writ jurisdiction in such circumstances. The respondents likely contended that the arbitration clause provides an adequate alternative remedy, making the writ petition not maintainable. 2. Contingent on the first issue, whether the petitioner's conduct post-filing the writ petition entitles them to restoration of possession of the Hotel? The petitioner sought restoration of possession. The respondents likely argued that the petitioner's conduct, including defaults and dishonoured cheques, disentitles them to any equitable relief. 3. As a result of the second NIT, what right, if any, vests with respondent no.6 (MKS Enterprises)? The petitioner likely argued that respondent no.6 has no vested right as the contract with the petitioner was subsisting. Respondent no.6 and the Corporation likely argued that respondent no.6 is a successful bidder in a subsequent NIT and has acquired rights. 4. Whether the petitioner's claim that the agreement commenced from the signing date (27.08.2019) is legally sustainable? The petitioner argued for commencement from the signing date, citing Clause 37 of the agreement and Clause 6 of the NIT. The respondents likely argued that the rental period should commence from the date of possession (20.06.2018) or LOI date (15.06.2018), as per the tender terms and practice.