Ncc Limited vs. The Singareni Collieries Company Limited

Facts

NCC Limited (Petitioner) entered into a contract with The Singareni Collieries Company Limited (Respondent) for excavation and related works. The contract stipulated that the Respondent would supply diesel, and for excess consumption, the cost would be withheld from the Petitioner's bills. The Petitioner drew additional diesel quantities between March 2022 and June 2022. The Respondent recovered the cost of this excess diesel at invoice/purchase rates, amounting to Rs. 17,33,70,126.97. The Petitioner contended that the recovery should be at the basic rate of Rs. 84.16 per litre as per Clause 1.2(e) of the order, and the difference of Rs. 6,24,72,082.82 was illegally recovered. The Petitioner sought a writ of mandamus to direct recovery at the basic rate and refund of the excess amount.

Held

The Court held that the dispute involves complex questions of fact and requires detailed interpretation of the contract terms, which falls outside the purview of writ jurisdiction under Article 226 of the Constitution. The Court noted that the Petitioner had availed the dispute resolution mechanism provided under the contract. It was observed that the contract is private in nature, with no public law element involved. The Court cited precedents like Kerala State Electricity Board and Joshi Technokologies International INC to support the view that such disputes are best resolved by civil courts where oral and documentary evidence can be adduced. The Court found no merits in the writ petition and dismissed it. The interim order directing the release of bills with deductions at the specified rate for August and September 2022 was to continue, and the Petitioner was granted liberty to institute a suit before September 30, 2022, seeking interim relief from the civil court.

Key Issues

1. Whether the action of the Respondents in recovering the cost of excess diesel consumed by the Petitioner at the purchased rate/invoice rate, instead of the equivalent basic rate specified in Clause 1.2(e) of the order dated 05.07.2021, is illegal and arbitrary, violating principles of natural justice? (This issue turns on the interpretation of the contract terms and the nature of the dispute). Petitioner's arguments: The recovery at invoice/purchase rate is contrary to the contract terms. The contract excludes the cost of diesel from the excavation rate, and the Respondent is obligated to provide a notified quantity of diesel at a specific rate. The basic rate of Rs. 84.16 per litre should be applied for excess consumption. Reliance was placed on the contra proferentem rule. Respondent's arguments: The basic rate of Rs. 84.16 per litre was only for arriving at the total contract value. Due to the Russia-Ukraine war, diesel prices increased significantly. The Petitioner was aware of this and did not raise objections. The invoice rate is charged only for excess consumption, and if the Petitioner meets targets with optimum consumption, the basic rate will apply. The Petitioner had invoked the dispute resolution mechanism under the contract and should have approached the civil court due to complex factual disputes and the need for contract interpretation.