M/S C Gopal Reddy And Company vs. National Highways And Infrastructure Development Corporation LTD & Anr.

Facts

The petitioner, M/s C Gopal Reddy and Company, a construction firm, entered into a contract with the respondent, National Highways and Infrastructure Development Corporation Ltd. (NHIDCL), for road construction. The contract price was Rs. 117,50,00,001/- excluding GST, with an 18-month completion period starting August 25, 2021. The petitioner alleged that NHIDCL's failure to provide land and Right of Way (ROW), coupled with delayed payments and unusual rain, hindered project progress. Despite achieving early milestones, the petitioner sought an extension of time. NHIDCL issued a Notice of Intention to Terminate on January 12, 2023, to which the petitioner responded. NHIDCL terminated the contract on March 7, 2023, without considering the petitioner's extension request or response. The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a stay on the termination order and a notice inviting bids for the balance work.

Held

The Court held that it could not grant an injunction against the termination of the contract. The primary reason was that the contract, being determinable in nature, could not be specifically enforced under Section 14(d) read with Section 41 of the Specific Relief Act, 1963. The Court cited several precedents establishing that seeking an injunction on the termination of a determinable contract is impermissible. Furthermore, Section 41(ha) of the Specific Relief Act prohibits injunctions that would impede or delay the progress of infrastructure projects. The Court noted that granting a stay would require it to form a prima facie opinion that the termination was misconceived, which would amount to enforcing the contract, a relief not permissible at this stage. The Court also observed that a fresh tender had already been issued for the balance work, and staying the termination would upset this process. The Court concluded that the petitioner could be compensated by damages, negating the need for specific performance. Therefore, the petition was dismissed.

Key Issues

1. Whether the Court can grant an ad interim stay on the termination order and the subsequent notice inviting bids, considering the provisions of the Specific Relief Act, 1963, particularly Section 41(ha) and Section 14(d)? Petitioner's arguments: The petitioner contended that the termination was arbitrary, illegal, and mala fide, caused by the respondent's defaults. They argued that they had achieved significant progress (71% in milestone-3) and could complete the work with an extension. They sought interim protection to prevent grave prejudice. They also submitted that completing the balance works would be in the public interest. Respondent's arguments: The respondent argued that the petition was a "mischievous attempt to derail and delay the project." They asserted that the termination followed the due procedure under the contract, including issuing a prior notice and considering the petitioner's response. They maintained that the Authority Engineer recommended termination due to the petitioner's "non-exhaustive fundamental breaches" and failure to fulfill contractual obligations. They also pointed out that a fresh tender had already been issued for the balance work.