Case Note & Summary
The Petitioner, a Private Limited Company, challenged the termination notice dated 13.06.2024 issued by the Respondent No.2 – Aurangabad Smart City Development Corporation Limited (ASCDCL) terminating a contract for an E-ticketing system for city buses in Aurangabad. The Petitioner was awarded the contract on 18.02.2020 and implemented it, receiving a 'Go Live Certificate' on 01.11.2021. In February 2024, ASCDCL issued a new tender for Electronic Ticket Issuing Machines (ETIM), which the Petitioner objected to as overlapping with its scope. On 23.02.2024, ASCDCL issued a show cause notice citing penalties for software downtime and the printing of 'Zero Value Tickets' causing revenue loss. The Petitioner responded, denying breaches and stating that the zero-value ticket functionality was per the tender specifications. ASCDCL terminated the contract without further reasons. The Petitioner argued that the termination was arbitrary, mala fide, and violated the contractual termination procedure under Clause 15.4.1, which requires a preliminary notice to rectify defects. The Petitioner also contended that despite an arbitration clause, the writ petition was maintainable. The Court examined the communications between the parties, which revealed disputed questions of fact regarding delays, penalties, and the zero-value ticket issue. The Court held that while writ jurisdiction under Article 226 can be invoked against arbitrary actions of State instrumentalities in contractual matters, it is discretionary and not ordinarily exercised when there are disputed questions of fact requiring evidence. The contract contained an arbitration clause (Clause 16.2 of the RFP), and the arbitration agreement survives termination. The Court dismissed the writ petition, leaving it open to the Petitioner to pursue arbitration or other remedies as per law.
Headnote
A) Constitutional Law - Writ Jurisdiction - Contractual Disputes - Article 226 of the Constitution of India - The High Court held that while writ jurisdiction is available against arbitrary actions of State instrumentalities in contractual matters, it will not entertain petitions involving disputed questions of fact which require evidence, especially when an arbitration clause exists. (Paras 9-11) B) Arbitration Law - Survival of Arbitration Clause - Section 16(1) of the Arbitration and Conciliation Act, 1996 - The arbitration agreement survives the termination of the principal contract by virtue of the doctrine of separability. (Para 12) C) Contract Law - Termination of Contract - Procedure - Clause 15.4.1 of Request for Proposal - The court noted that the termination procedure under the contract was followed, including issuance of a preliminary termination notice, and the dispute is arbitrable. (Paras 10-11)
Issue of Consideration
Whether the termination of a contract by a State instrumentality can be challenged under Article 226 of the Constitution of India when the contract contains an arbitration clause and the dispute involves disputed questions of fact.
Final Decision
The writ petition is dismissed. The Petitioner is at liberty to take recourse to arbitration or any other remedy available in law.
Law Points
- Writ jurisdiction under Article 226 is discretionary and not ordinarily exercised in contractual disputes involving disputed questions of fact
- Availability of alternative remedy (arbitration) does not bar writ jurisdiction but court may decline to entertain
- Arbitration clause survives termination of contract
- Doctrine of malice in law requires unlawful act without excuse
