Indian Oil Corporation LTD. vs. Hlk Infrastructure PVT. LTD.

Held

The Court modified the interim order dated August 3, 2020, to a limited extent. It allowed IOCL to proceed with the balance/uncompleted works by engaging third-party contractors, as fresh tenders were already in process and the work was considered to be in public interest. The stay on the termination notice dated May 29, 2020, was vacated. However, the Court clarified that the bank guarantee, if any, pledged by the writ petitioner shall not be invoked without leave of the Court. The question of the validity and correctness of the termination notice, as well as the locus of the petitioner to challenge it via writ proceedings in the face of arbitration clauses, were left open to be decided at the hearing of the main writ petition. The Court also held that HLK Infrastructure was prima facie not entitled to the benefit of the Office Memorandum dated May 13, 2020, as their contractual obligations were admittedly defaulted well prior to February 19, 2020, and they had not invoked the Force Majeure Clause. The obligations of IOCL vis-à-vis the writ petitioner will continue to be governed by the original agreement.

Facts

HLK Infrastructure Pvt. Ltd. (petitioner) was awarded a work order by Indian Oil Corporation Ltd. (IOCL) on August 21, 2018, for interior, electrical, and HVAC works at the IOCL Digboi Refinery Township, with an estimated contract value of Rs. 1,25,13,403/- (exclusive of GST). The contract duration was six months from the award date. The petitioner visited the site on November 14, 2018, but work commencement was significantly delayed. Despite assurances and appointment of sub-contractors, the sub-contractor stopped work. IOCL issued a show cause notice on December 15, 2011 (likely a typo and should be 2018 or 2019, based on context), followed by another on January 29, 2020. A meeting on February 6, 2020, led to an agreement for the petitioner to proceed with balance works within two days. However, the petitioner failed to do so, leading IOCL to issue a termination notice on May 29, 2020. The petitioner challenged this notice in WP(C) No. 2981/2020, and an interim order dated August 3, 2020, stayed the termination notice and prevented invocation of the bank guarantee. IOCL filed an interlocutory application (IA) seeking vacation or modification of this interim order.

Key Issues

1. Whether the interim order dated August 3, 2020, which stayed the termination notice and bank guarantee, should be recalled, modified, or vacated to allow IOCL to proceed with the balance work through fresh tenders? (Question of law and fact, concerning the Court's interim powers and contractual disputes). Petitioner's Arguments (IOCL): The interim order was passed ex-parte and hinders IOCL's ability to proceed with the balance work by issuing fresh tenders. The urgent nature of the works necessitates recalling the order to enable IOCL to engage third-party contractors for the incomplete job. The contract is non-statutory, and the Court should not interfere in commercial contracts, especially when arbitration is an available remedy. Respondent's Arguments (HLK Infrastructure): The judgment does not explicitly record arguments from HLK Infrastructure regarding the modification of the interim order in this specific IA, but it notes that no objection was filed by the writ petitioner against the IA. However, the judgment later discusses HLK's claim for benefits under an Office Memorandum dated May 13, 2020, related to COVID-19, which IOCL contested.