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India-Myanmar-Thailand Trilateral Road: Manipur HC dismisses contractor's challenge to Centre's termination of contract

The judgment resolves a complex commercial dispute arising from the construction of 69 bridges with the approach road to the India-Myanmar-Thailand Trilateral Road.

Lydia Suzanne Thomas

In a significant ruling, the Manipur High Court last week dismissed an appeal against the decision of a Single Judge Bench of the Court declining to assume jurisdiction over a contractual dispute arising out of the India-Myanmar-Thailand Trilateral Road Project (Niraj Cement Structurals Ltd. v. Union of India and Ors).

The judgment resolves a complex commercial dispute arising out of the construction of 69 bridges on the approach road to the India-Myanmar-Thailand Trilateral Road. The Union of India and the project management consultants terminated the contract citing defaults on the contractor's side.

The contractor, alleging arbitrariness and lack of notice per the terms of the contract, approached the Manipur High Court. This was resorted to despite an ouster clause in favour of jurisdiction by Delhi courts.

A Single Judge of the High Court had ruled that the Court did not have jurisdiction to entertain the issue. An intra-court appeal was moved challenging the Single Judge verdict. Hearings before the Division Bench were, however, delayed owing to the pandemic. After a Supreme Court direction that the dispute be resolved expeditously, hearings resumed and the judgment was pronounced.

Clearing a key impediment to the High Court's adjudication of a contractual dispute prior to recording findings, the Bench of Chief Justice Ramalingam Sudhakar and Justice Lanusungkam Jamir asserted:

"This Court would not have ventured into the interpretation of Article of the agreement as above but we were forced to rule on the above as Appellant invoked the plea of Fundamental Rights and arbitrariness vehemently on the basis of Article 23.1.2 of the Agreement. The respondents also denied such allegations with equal proportion..."We are conscious of the fact that writ Courts normally does not enter into the arena of interpretation of the terms of contract."

Citing pronouncements of the Supreme Court, the Bench reiterated the proposition that contracts, even those involving the government, could be resolved only in civil courts or through arbitration. As the jurisdiction of the High Court had been invoked by alleging violation of fundamental rights and arbitrariness, the Bench was compelled to pronounce a judgment, it was stated.

On the lack of a proper notice of termination

The Court found that the documents produced did not reflect the appellants' contention that there was a lack of proper notice or opportunity to respond to the allegations made.

"The number of notices, review meetings, clarifications given by the respondents makes it amply clear that they have cautioned the appellant time and again to take steps to complete the project,", the Court said.

On arbitrariness

It was declared that the decision to terminate the contract was not taken hastily or arbitrarily, given the show cause notices issued and replies sought.

"Needless to state that in the earlier show cause notice details of the inaction, delay, lethargy in execution of the contract has been highlighted extensively. In fact, the appellant/writ petitioner has also replied to the earlier show cause notice. It is, therefore, clear that the final decision of issuing the termination notice .. was not taken in haste or in an arbitrary manner."

On the existence of an ouster clause and an arbitration clause

Since the appellant had approached the Court contending that a mandatory term requiring a notice of termination was not complied with (though the Court found that it had), the other terms in the contract were equally binding upon the appellant, the Court opined.

The Court observed,

"... the appellant who primarily pitched the writ petition on the interpretation of Article 23.1.2 of the Agreement cannot resile from the other parts of the agreement particularly the article relating to ouster of jurisdiction of the courts in case of dispute and article relating to arbitration. Before we proceed further in the matter on the applicability of the various articles of the agreement, it is trite that a contract or an agreement should be read as a whole. If a party relies upon one part of the agreement, such party is equally bound by the other parts of the agreement unless there is an intention to the contrary..."

The judgment notes that the resort to the jurisdiction of the High Court under Article 226 of the Constitution was misconceived since the agreement between the parties prescribed arbitration to resolve disputes between the contracting parties.

Justifying its invocation of the Manipur High Court's jurisdiction in light of the ouster clause, the appellant submitted that the Courts in Delhi were closed for vacation when the plea was moved, and also because some parts of the project were to be carried out in Manipur. The appellant also argued that since the grievance of arbitrariness was raised, the High Court could adjudicate, in light of the Supreme Court's ruling in Maharashtra Chess Association v. Union of India.

This argument was rejected, however, since the judgment relied upon allowed the High Court to decline jurisdiction applying the forum non conveniens doctrine if the facts so required.

Finding that the appellant appeared to have 'forum shopped', the Court critically pointed out that even during vacations, the courts were open.

On the appellant's suppression of documents

Before parting with the judgment, the Court reprimanded the appellant for approaching it with 'unclean hands', by suppressing key documents that evidenced communications between the parties such as notices and replies.

On these, among other grounds, the appeal was dismissed.

Senior Advocate HS Paonam and Advocate A Arunkumar represented the appellant. Additional Solicitors General Madhavi Divan and S Suresh and Advocates Abir Phukan and I Denning appeared for the respondents.

Read the Order here:

Niraj Cement Structurals Ltd. v. Union of India and Ors. - Final Order dated August 20.pdf
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