2011 (2) TMI 1585 - HC - Indian Laws

Contract termination upheld as per terms, public law inapplicable. Specific performance denied, damages remedy available. No interim relief.

The court affirmed the Respondent's termination of the contract with the Appellant, noting its terminable nature as per the contract terms. It held that ... - Issues Involved:1. Validity of contract termination by the Respondent.2. Applicability of public law principles versus private law principles.3. Entitlement to specific performance or damages.4. Grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.Issue-wise Detailed Analysis:1. Validity of Contract Termination by the Respondent:The Appellant entered into a contract with the Respondent for displaying advertisements through 50 LED screens. The contract included specific terms and conditions, such as payment schedules and site inspections. The Appellant claimed that 25 of the 50 sites were either not under the Respondent's control or faced objections from various authorities. Despite these issues, the Appellant paid the license fee for the first seven months but defaulted on subsequent payments, leading to the issuance of a show cause notice by the Respondent. The contract was eventually canceled by the Respondent due to non-payment, and the security amount was forfeited. The court observed that the legality of the termination would be determined in arbitration, noting that the contract was inherently terminable as per its terms.2. Applicability of Public Law Principles versus Private Law Principles:The Appellant argued that the Respondent, being a public authority, should be governed by public law principles under Article 14 of the Constitution, which mandates fairness, justice, and reasonableness. The court referred to the Supreme Court's decision in ABL International Ltd., which held that Article 14 applies even in contractual matters involving the State. However, the court also cited Issac Peter, reaffirming that mutual rights and liabilities in contracts freely entered into with the State are governed by the terms of the contract and contract law, not exclusively by public law principles. Thus, the court concluded that the contract in question, entered through a tender process, was subject to private law principles.3. Entitlement to Specific Performance or Damages:The Respondent contended that the contract was determinable and could not be specifically enforced under Section 14(1)(c) of the Specific Relief Act. The court agreed, citing precedents like Rajasthan Breweries Ltd., which held that in cases of wrongful termination, the remedy lies in seeking damages rather than specific performance. The court noted that the Appellant's remedy, if the termination was found wrongful, would be to claim damages in arbitration. The court emphasized that the contract's determinable nature precluded the grant of specific performance.4. Grant of Interim Relief under Section 9 of the Arbitration and Conciliation Act, 1996:The Appellant sought interim relief under Section 9 of the Arbitration and Conciliation Act to stay the contract's termination and maintain the status quo. The Single Judge dismissed the application, concluding that the Appellant failed to establish a prima facie case for interim relief. The court upheld this decision, noting that the contract was determinable and that the Appellant's primary remedy lay in seeking damages. The court also referenced Section 41(e) of the Specific Relief Act, which prohibits injunctions to prevent the breach of a contract that cannot be specifically enforced.Conclusion:The court dismissed the appeal, affirming that the contract was terminable and that the Appellant's remedy for any wrongful termination would be to seek damages through arbitration. The court upheld the rejection of interim relief, emphasizing that the contract's determinable nature precluded specific performance or an injunction to maintain the status quo. The appeal was dismissed with no order as to costs.