Rajesh S. Patil, J
1. This Petition is filed under Article 226 of the Constitution of India, challenging an action of Respondent No.2 / Municipal Corporation of Greater Mumbai (for short “MCGM”) inter-alia imposing recoveries on the Petitioner to the tune of Rs.1,82,31,076.24 ps., vide its letter dated 29 March, 2023, from the sums due and payable to the Petitioner.
2. By an order dated 14 June, 2023 passed in this Writ Petition, notice for final disposal of the Petition at the admission stage was issued and the matter was fixed for final hearing. Accordingly by consent the matter was taken for final disposal at the admission stage.
THE FACTUAL BACKGROUND :
3. The Petitioner claims to be engaged in providing infrastructure and construction services and carries out civil engineering works in all sectors of infrastructure industries such as tunnels, micro tunnels, bridges etc.
4. Pursuant to the bids invited by Respondent No.2 / MCGM, for rehabilitation of the sewer lines by GRP liners using trenchless technology in Greater Mumbai, the Petitioner’s bid was accepted and Contract No.SO4-07-T-1 (for short “First Contract”) was executed on 17 April, 2008 between the Petitioner and MCGM.
5. In November 2010, MCGM invited bids for rehabilitation of sewerlines by GRP Liners using trenchless technology. The Petitioner was the successful bidder and was awarded on 11 January, 2011 work order. Accordingly Contract No.SO4-09-T3 (for short “Second Contract”) was entered between the Petitioner and MCGM.
6. On 22 February, 2012 final bill for the First contract was processed and paid to the Petitioner by MCGM. Thereafter on 31 October, 2013, final bill for the second contract was processed and paid by MCGM to the Petitioner.
7. Pursuant to the demand made by MCGM on 20 May, 2015, the Petitioner provided Octroi challans and bills, for octroi paid against GRP Piles to MCGM.
8. Thereafter Controller and Auditor General of India by its report on local bodies in the year ended 31 December, 2016 being Report No.5 of 2017 submitted that due to inclusion of inflated rates of GRP lines in the contract, S.O. has made excess payment of Rs.17.73 crore to the contractor / Petitioner.
9. On 28 June 2019, 62nd Report of Public Accounts Committee was approved, which stated that MCGM has furnished detailed rate analysis considering other incidental charges which were earlier not made available to audit. Hence, as per calculation made by the Department, excess payment was reduced to Rs.1,82,31,076.24 P.
10. Shortly thereafter, MCGM by its letter dated 17 January, 2022 and 5 August, 2022 addressed to the Petitioner demanded that as per the recommendations of the audit reports, the Petitioner was called upon to refund a sum of Rs.1,82,31,076.24 P., failing which action would be initiated against the Petitioner.
11. The Petitioners submitted their objections on the said demand by its letter dated 4 February, 2022, 12 August, 2022 and 15 March, 2023. By a letter dated 24 March, 2023, MCGM addressed a letter to the Petitioner stating that the Additional Municipal Commissioner had approved the recovery of Rs.1,82,31,076.24 P. as the payments were not made by the Petitioners as per the demand, the said amount was recovered from ongoing contract No.SO4-18-
10 (for short “Third Contract”).
12. The Petitioner thereafter preferred Writ Petition (Lodging) No.8499 of 2023 in this Court challenging the demand made by MCGM and sought to stay the proposed recovery.
13. On 28 March, 2023, MCGM issued payment certificate for the Third Contract and a sum of Rs.1,82,31,076.24 P. was earmarked towards other deposit. Thereafter this Court passed an order on 30 March, 2023 in Writ Petition (Lodging) No.8499 of 2023 thereby recording the submission of MCGM that Rs.1,82,31,076.24 P. is deducted from ongoing contract.
14. The Petitioner on 30 March, 2023 received communication from MCGM dated 29 March, 2023, thereby informing that MCGM has already recovered the amount from ongoing contract.
15. On 26 April 2023, Writ Petition (Lodging) No.8499 of 2023 came to be disposed of by this Court, however liberty was granted to the Petitioners to file appropriate Petition.
16. Pursuant to the liberty, the present Writ Petition is filed by the Petitioners wherein following reliefs are claimed :-
“(a) Quash and set aside communication dated 29th March, 2023 issued by the Respondent No. 2 at Exhibit R and issue Writ in the nature of Mandamus or any other appropriate Writ directing the Respondent No. 2 to release all the sums of monies due and payable to the Petitioner under Contract No. SO4-18-010 including a sum of Rs. 1,82,31,076.24/- which has been illegally deducted by the Respondent No. 2 from Payment Certificate No. 1001580630 ;
(b) Issue a writ of Mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, calling for records pertaining to the impugned actions of the Respondent Nos. 2, inter alia, illegally deducting a sum of Rs. 1,82,31,076.24/- from sums due and payable under Contract No. S04-18-010 and under Payment Certificate No. 1001580630 and after going into the validity and legality thereof to quash and set aside the same;
(c) Issue a writ of Mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, restraining the Respondents Nos. 1 and 2 from acting upon the impugned portions of the Performance Audit Report No. 5 of 2017 (Clause 4.3.8.1 of the Report of the Comptroller and Auditor General of India on local bodies for the year ended 31 March 2016) and 62nd Report dated 2nd July 2019 of the Public Accounts Committee (Suggestions and recommendations of PAC on Clause 4.3.8.1 of the Report of the Comptroller and Auditor General of India on local bodies for the year ended 31 March 2016) which are detrimental to the interest of the Petitioner and not binding on the Respondent No. 2;
(d) Issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, directing the Respondent No. 2 not to retrospectively seek, to recover, to ask refund or deduct sanctioned and authorized payments to be made to the Petitioner on the basis of the Performance Audit Report No. 5 of 2017 of the Comptroller and Auditor General of India and 62nd Report dated 2nd July 2019 of the Public Accounts Committee and quash and set aside communication dated 29th March, 2023 issued by the Respondent No. 2 at Exhibit R as the same being arbitrary, illegal, void and de hors the law as the same being violative of Article 14 of the Constitution of India, 1950;
(e) Issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, declaring the impugned actions of the Respondent No. 2 of illegally deducting a sum Rs. 1,82,31,076.24/- from sums due and payable to the Petitioner under Contract No. $04-18-010 and under Payment Certificate No. 1001580630 as the same being arbitrary, illegal, void and de hors the law as the same being violative of Article 14 of the Constitution of India, 1950.”
SUBMISSIONS OF THE PARTIES :
17. Mr.Vineet Naik, learned Senior Counsel on behalf of the Petitioner made his submissions. Mr.Naik submitted that the alleged recoveries made by MCGM from the ongoing Third Contract, are without any authority and is against the contractual provisions. Mr.Naik further submitted that clause 87 of the General Conditions of Contract clearly provides for the situation “over payment and underpayment” and also provides the remedy for it. The provision is detailed, given the complexity and the detailed technicalities involved in the contract. He further submitted that CAG has altered the terms of the contract without giving an opportunity to the Petitioner to make out its case under the provisions of Clause 87. He further submitted that CAG is not competent to conduct a technical examination of the contract nor is it empowered to amend or substitute the terms and conditions of the contract. He further submitted that Clause 87 of GCC states that “if as a result of the audit and technical examination any over payment is discovered in respect of any work done by the contractor alleged to have been done under the contract, it shall be recovered by the Municipal Corporation from the contractor by any or all of the methods prescribed above or if under payment is discovered the amount shall be duly paid to the contractor by the Municipal Corporation”. He further submitted that MCGM has not conducted any audit of its own and even otherwise the period of two years as envisaged in the proviso of the said clause has lapsed.
18. Mr.Naik further contended that the alleged recovery made by MCGM is without following due process of law and therefore, it clearly violates the principles of natural justice. He further submitted that MCGM has arbitrarily and de-hors contractual provisions recovered the amount of Rs.1,82,31,076.24 P. against ongoing Third Contract, merely on the basis of the report of CAG and the recommendations as made by PAC. He further submitted that MCGM has unilaterally provided the calculations and cost analysis to PAC without granting any opportunity whatsoever to the Petitioner and as such for defaults of MCGM, the Petitioner cannot be made liable. He submitted that the Petitioner cannot invoke a dispute redressal mechanism in the earlier contract for the recovery made from the present contract and even otherwise the dispute as provided in the contracts in question cannot be termed as “alternative” or “equally efficacious”. He further submitted that MCGM could have not made any recovery from the present ongoing contract admittedly for an amount purportedly due, of the previous contracts after a passage of more than ten years. He further submitted that MCGM could have filed civil proceedings for recovery of any alleged amount of the earlier contracts. He submitted that the present Writ Petition is maintainable and the same should be allowed. To buttress his submissions, he relied upon following four judgments :-
1). Unitech Limited and Ors. vs. Telengana State Industrial Infrastructure Corporation (TISIIC) & Ors., reported in 2021 SCC OnLine SC 99 .
2). ABL International Ltd. & Anr. vs. Export Credit Guarantee Corporation of India Ltd. & Ors., reported in (2004) SCC 553,
3). Maha Active Engineers India Pvt. Ltd. vs. Maharashtra State Electricity Transmission Co. Ltd. & Ors. , reported in (2022) 2 Bom. 72 : 2022 SCC OnLine Bom 59, and
4). Uttar Pradesh Power Transmission Corporation Limited & Anr. vs. CG Power & Industrial Solutions Limited & Anr., reported in (2021) 6 SCC 15.
19. He submitted that proposition of law as envisaged in the above Judgments, is squarely applicable to the present proceedings.
20. On the other hand Mr.Karan Bhosale made his submissions on behalf of MCGM. Mr.Bhosale submitted that the Writ Petition in the present form is not maintainable since the Petitioner has alternate remedy to raise its dispute arising in respect of the contract, as per clause 96 of the General Conditions of Contract. As per the provisions of the said clause “if any dispute, differences or claim raised by either party relating to the matter arising out of the contract, the aggrieved party may refer such dispute within a period of seven days to the concerned Additional Municipal Commissioner, who shall constitute a Committee comprising of three officers i.e. concerned D.M.C. or Director (E.S. & P.), Chief Engineer other than the Engineer of the contract and concerned Chief Accountant. The Committee shall give its decision within sixty days. He further stated that if dissatisfied, any party can appeal against the said order of the Committee to the Municipal Commissioner. Mr.Bhosale submitted that the Petitioner without availing this remedy, has filed the present Writ Petition, hence the same is not maintainable. Mr.Bhosale stated that the Petitioner is aggrieved by enforcement of the legitimate action on the part of MCGM in relation to the contract, which is taken up by MCGM pursuant to the audit report conducted by CAG and recommended by Public Accounts Committee, Maharashtra State, which had found over payment to the tune of Rs. 1,82,31,076.24 P. made to the Petitioner. Hence the same was required to be recovered from the Petitioner. Mr.Bhosale submitted that Clause 87 of GCC clearly stipulates the right of MCGM to carry out post audit and technical examination of the final bill including all supporting vouchers, abstracts etc. Mr.Bhosale further submitted that the fact about excess payment being made to the Petitioner came to the light only during CAG audit conducted after three years of completion of work and after recommendation of the Public Accounts Committee, Maharashtra State which was received in the year 2022. Hence the Petitioner immediately to set right the audited accounts, it being the exchequer’s money, recovered the excess payment from the Petitioner. Mr.Bhosale further submitted that there is no merit in the present Writ Petition and the same should be dismissed.
ANALYSIS AND CONCLUSION :
21. We have heard counsel for both sides and have gone through the documents on record.
22. The Petitioner has filed the present Writ Petition seeking relief of mandamus for the directions to the MCGM to release the sum of moneys due and payable to it in the third contract, including a sum of Rs.1,82,31,076.24 P. which according to the Petitioner has been illegally deducted by MCGM from payment certificate of ongoing third contract for alleged excess payment made for First Contract and Second Contract. Basically, two points arise for determination in this Petition: (I) Maintainability of the Writ Petition, (ii) Whether the impugned communication dated 29 March, 2023 is arbitrary, unreasonable and therefore ought to be set aside?
Maintainability of the Writ Petition :
23. Mr. Bhosale, Counsel for the MCGM have taken a preliminary objection about the maintainability of the Writ Petition. He has submitted that there is alternate remedy to the Petitioner as per clause 96 of GCC which states that in case of any dispute, aggrieved party may refer the dispute within seven days to the concerned Additional Municipal Commissioner, who shall constitute a Committee comprising of three officers and the said Committee shall give its decision within sixty days.
24. The MCGM has deducted a sum of Rs. 1,82,31,076.24P. from the ongoing Third Contract on the ground that excess payment was made in the First and Second Contracts. The Petitioner has relied upon four judgments. The judgment in the case of Unitech Limited and Ors. (supra) of the Supreme Court held that if State instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. The Paragraph Nos. 38 and 40 of the judgment reads as under:
38. Much of the ground which was sought to be canvassed in the course of the pleadings is now subsumed in the submissions which have been urged before this Court on behalf of the State of Telangana and TSIIC. As we have noted earlier, during the course of the hearing, learned Senior Counsel appearing on behalf of the State of Telangana and TSIIC informed the Court that the entitlement of Unitech to seek a refund is not questioned nor is the availability of the land for carrying out the project being placed in issue. Learned Senior Counsel also did not agitate the ground that a remedy for the recovery of moneys arising out a contractual matter cannot be availed of under Article 226 of the Constitution. However, to clear the ground, it is necessary to postulate that recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.
40. This exposition has been followed by this Court, and has been adopted by three-judge Bench decisions of this Court in State of UP v. Sudhir Kumar and Popatrao Vynkatrao Patil v. State of Maharashtra. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.1 of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International:
“28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction.”
[Emphasis supplied]
25. Mr. Naik has also referred to the judgment of Supreme Court in the case of ABL International Ltd. & Anr. (supra) which has held that in appropriate case, Writ Court has jurisdiction to entertain the Writ Petition involving the disputed question of fact and there is no absolute bar to entertain the Petition under Article 226 of the Constitution of India.
26. The facts in the present Writ Petition are identical to the facts of the judgment in the case of Maha Active Engineers India Pvt. Ltd. (supra). We therefore are of the view that the objection of MCGM about the maintainability of the present Writ Petition does not hold much water and the same is therefore rejected. The Writ Petition is therefore, maintainable and entertainable in view of law laid down by the Supreme Court.
27. It is now well settled by a plethora of decisions of this Court that relief under Article 226 of the Constitution of India may be granted in a case arising out of contract. An alternate remedy by itself does not divest the High Court of its Powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law. We are of the view that the presence of an arbitration clause in a contract between a state instrumentality and a private party is not an absolute bar to availing remedies under Article 226.
28. We are of the view that in the present proceedings, there is a violation of principles of Natural Justice as without giving any hearing by the impugned letter, the MCGM has ordered that they are recovering a sum of Rs. 1,82,31,076.24P. for over-payment in First and Second Contracts, from the monies due to be paid to the Petitioner in the ongoing Third Contract. For the aforestated reasons, we find that this petition is maintainable as well as entertainable as it is covered by one of the exceptions to the general rule against the entertainability of the petition under Article 226 of the Constitution, as held in the cases discussed hereinabove. The preliminary objection taken, is therefore, rejected.
Whether the impugned communication dated 29 March, 2023 is arbitrary, illegal , and therefore ought to be set aside?
29. There is no dispute that the recovery is made by communication dated 29 March, 2023 from the ongoing contract for alleged dues of First Contract and Second Contract. A bare reading of the MCGM’s affidavit in reply indicates that the amount is deducted from the ongoing contract’s monies payable.
30. We find that Mr. Naik’s reliance on the Judgment of the Supreme Court in UP Power (Supra) is well founded. In the said judgement, the Petitioner impugned a letter of the Respondents therein, which directed adjustment of labour cess that was due in respect of an older contract against money it owed the Petitioner therein in respect of subsequent contracts. This was done on the basis of an alleged report of the Comptroller and Auditor General of India. In the said proceeding, the Supreme Court held in Paragraph No.70 as under:
“70. In this case, the action of UPPTCL in forcibly extracting building cess from Respondent No.1 in respect of the first contract, solely on the basis of the CAG Report, is in excess of power conferred on UPPTCL by law or in terms of the contract. In other words, UPPTCL has no power and authority and or jurisdiction to realise labour cess under the Cess Act in respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee. There is no legal infirmity in the finding of the High Court that UPPTCL acted in excess of power by its acts impugned, when there was admittedly no assessment or levy of cess under the Cess Act.”
[Emphasis Supplied]
After considering the legal proposition, we hereby hold that the alleged claims under the old contracts cannot be recovered from ongoing contract.
31. In the judgment of Maha Active Engineers India Pvt. Ltd. (supra), referred by Mr. Naik, the Division Bench of this Court has held that the Writ Petition challenging a letter addressed by the Respondent refusing to release the payments of the Petitioners for the erection of transmission lines by the Petitioner for Respondent No.1 under a contract awarded pursuant to a public tender process, is maintainable. The said judgment of the Division Bench of this Court was challenged before the Supreme Court. However, the same was summarily dismissed by the Supreme Court. Paragraph 53 of the Division Bench judgment of this Court reads as under :-
“53. Whether or not the Respondents are correct in their submission that the Petitioner owes them money under the Old Contracts is not within the purview of the Present Petition. We do not intend to enter upon that dispute except to note that even if the Respondents case is taken at its highest the claim under the Old Contracts goes back to the year 2017 or thereabouts. After the bank guarantees under the Old Contracts were not renewed, as contended by the Respondents, no attempt or endeavour has been made by the Respondents to initiate any legal proceedings or taken any action known to law for recovering the amounts claimed by it under the Old Contracts.
[Emphasis Supplied]
32. As far as the issue about the recovery of the alleged over payment made to the contractor / Petitioner by MCGM pursuant to the audit report, according to us the payment made by MCGM in First and Second Contracts cannot be recovered from the Third Contract.
33. Whether or not the Respondents are correct in their submission that the Petitioner owes them money under the Old Contracts is not within the purview of the Present Petition. We do not intend to enter upon that dispute except to note that even if the Respondents case is taken at its highest, the claim under the earlier contracts goes back to the year 2013 or thereabouts. The MCGM was not able to show any clause in the ongoing contract which permits MCGM to withhold legitimate payments due to the petitioner in lieu of alleged dues of earlier contracts.
34. However, if the MCGM wants to recover any money from the Petitioner which according to them is the excess payment of Rs.1.82,31,076.23 P. is made by them; it will be open for MCGM to adopt any such proceedings for recovery of the said amount. However, we have not dealt with the merits of such claim of MCGM and all questions are kept open to be decided in the said proceedings.
35. Hence the present Writ Petition is partly allowed on the following terms:
(a) Communication dated 29 March 2023, issued by the Respondent No. 2 which is enclosed as attachment to Exhibit R is quashed and set aside. MCGM to return back the amount of Rs.1,82,31,076.24 P. deducted by them as mentioned in communication dated 29 March 2023 to Petitioner within a period of 4 weeks from today.
(b) MCGM, is prohibited from recovering any amount which according to them is due from Petitioner pertaining to the first contract and second contract, from the on going contract.
(c) MCGM is granted liberty to adopt such proceedings for recovery of any dues which according to them are pertaining to the first contract and the second contract. If any such recovery proceedings are preferred by the MCGM, the same shall be decided on its own merits.
