16 Aug 2010

Exemplary Costs justified for misconceived petitions: High Court

While we had earlier written on the principles for grant of exemplary costs, we find that in a recent decision [VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd. v. Union of India] a Division Bench of the Delhi High Court invoked a Chinese proverb to describe the matter at hand: “A mans greed is like a snake that wants to swallow an elephant” to hold similarly. With various legal luminaries at the bar appearing in the matter and the Government being defended by no less than the Attorney General of India, in the decision running into 121 pages on various issues relating to construction and operation of projects, the High Court imposed heavy costs  (of Rupees Six Lakhs) against the petitioner for raising stale claims before the High Court.

The Bench in this regard took inspiration from the decisions of the Supreme Court cautioning against interference in public projects by the Courts to inter alia observe as under;
210. The Supreme Court has reiterated the undesirability of intervention in contractual transactions by the Government bodies in matters relating to public projects. In Raunaq International vs. IVR Construction Ltd.(supra), it was emphasized that a high cost project for which loans from international bodies have been obtained should not be inteferred with, being detrimental to public interest. So far as interim orders are concerned, reliance was placed on earlier pronouncements and in para 24, the court held that in granting an injunction or stay against the award of a contract by the Government or a Government agency, the court has to  satisfy itself that the public interest in holding up the project far outweighs the public interest in carrying it out within a reasonable time. The Supreme Court clearly stated that the court must also take into account the cost involved in staying the project and whether the public would stand the benefit of incurring such a cost.
211. In para 25 of Raunaq International Ltd. (supra), the Supreme Court laid down the principle that any interim order which stops a public project from proceeding further must provide for reimbursement of cost to the public in case the litigation ultimately fails. It was clearly laid down that the public must be compensated by them for the delay in implementation of the project and the cost escalation resulting from such delay. It was held that unless an adequate provision is made for this in the interim order, the interim order may prove counter productive.
212. In (2000) 2 SCC 617 Air India Ltd. vs. Cochin Int. Airport Ltd. & Ors., the above principles were restated and it was further observed in para 15 that : 
“Even when some defect is found in the decision making process, the Court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should interfere.”
These principles were reiterated in a later judgment of the Supreme Court reported at (2005) 6 SCC 138 Master Marine Services (P) Ltd. vs. Metcalfe & Hodgkinson (P) Ltd. & Anr.
213. It is not possible to arrive at an actual figurative computation of the damages which which would have resulted on account of delay in the execution of the project in hand taken in public interest. The petitioner has sat by and waited for the entire tendering process to be over and the contract awarded before it has mouthed its objections or approached this court. Delay in the completion of the project would have an inevitable and obvious impact on the interest of the users of this stretch of the NH-6 for whose benefit the project is being undertaken.
215. The backlog and existence of arrears is the single and largest criticism which is levelled against severely overburdened courts. The issue of costs for misconceived and unwarranted litigation is, therefore, extremely important. This very issue had arisen for consideration in the judgment reported at 138 (2007) DLT 62 in CCPO No. 130/2005 in OMP No. 361/2004 decided on 19 th October, 2006 entitled Goyal MG Gases Pvt. Ltd. vs. Air Liquide Deutschland Gmbh and Ors. wherein on the issue of the impact of insufficient costs, it was observed as follows :-
“60. Vexatious and frivolous litigation poses a number of threats to the efficient operation of any civil justice system. Those threats stem from the manner in which the vexatious and frivolous litigant conducts litigation before the courts. Such proceedings, apart, from the oppression and the harassment inflicted on the adversary, are extremely damaging to public interest. Judicial resources are valuable and scarce. The resources of the court are not infinite, especially in terms of judicial time. Therefore, administration of justice and interests of equity and fair play mandate that a party which succeeds is compensated by award of costs in respect of false or vexatious claims or defences. A faulting party may be required to pay to the other party such costs as would, in the opinion of the court, be reasonably sufficient to reimburse the other party in respect of the expenses incurred by him in attending the court on that date and payment of such costs on the next date following the date of such order if unreasonable adjournments are taken by the parties. However, many unscrupulous parties take advantage of the fact that either costs are not awarded or nominal costs alone are awarded against the unsuccessful party.”
220. Valuable court time has been expended on a wholly misconceived claim raised by the petitioner. The project of 2004 is stated to be valued at around 14 to 15 crores of rupees whereas the 2009 project is valued at over rupees 567 crores. The petitioner and respondent no. 3 are both located in Maharashtra as per the memo of parties. The record and several order sheets are testimony to the seriousness and weight of the contest. We have had the valuable assistance of the learned Attorney General of India as well as the learned Additional Solicitor General of India, Standing counsels for the Government of India, learned senior counsels for all the parties and several learned counsels who have assisted them and appeared before us during the protracted hearings. Judicial notice can, therefore, be taken of the fact that every hearing in the matter may have caused parties to incur prohibitive costs. The respondent nos. 1 and 2 have been compelled to utilise public money for defending this misconceived petition. The loss to public interest could not be assessed or computed.
221. We are, therefore, of the view that the petitioner deserves to be burdened with exemplary costs in the matter. 
The Bench also quoted the words of Rabindra Nath Tagore in this regard;

208. Not so long ago, Rabindra Nath Tagore has stated as follows :-
“The greed of gain has no time or limit to its capaciousness. Its one object is to produce and consume. It has pity neither for beautiful nature nor for living human beings. It is ruthlessly ready without a moment's hesitation to crush beauty and life out of them, molding them into money.”
Such aspirations of men as well as corporations created by them and their tendency to live and prosper at the expense of, and to the exclusions of all others, though unfortunate, but remain a hard reality. Such culture of uncontained selfpromotion has often led to throttling of legitimate competition and creation of monopolies in commerce as is attempted in this case. This court cannot countenance or allow effectuation of such aspirations, more so when they deviate from the larger element of public interest.

The decision of the High Court also notes substantially on the rules of interpretation of a contract. Relying upon the decisions of the Supreme Court, the High Court entailed the law in this regard inter alia as under;
118. In (2009) 5 SCC 313 Bank of India vs. K. Mohan Das, also relied upon by the petitioner, the court was concerned upon the construction of a Voluntary Retirement Scheme, 2000 made available to employees of the public sector banks. The scheme was held to be contractual. The court was concerned with issues relating to construction of the contract. The observations of the court relevant for the present consideration, read as follows :- 
“28. The true construction of a contract must depend upon the import of the words used and not upon what the parties choose to say afterwards. Nor does subsequent conduct of the parties in the performance of the contract affect the true effect of the clear and unambiguous words used in the contract. The intention of the parties must be ascertained from the language they have used, considered in the light of the surrounding circumstances and the object of the contract. The nature and purpose of the contract is an important guide in ascertaining the intention of the parties
Xxx xxx
31. It is also a well-recognized principle of construction of a contract that it must be read as a whole in order to ascertain the true meaning of its several clauses and the words of each clause should be interpreted so as to bring them into harmony with the other provisions if that interpretation does no violence to the meaning of which they are naturally susceptible. [(The North Eastern Railway Company v. L. Hastings) 1900 AC 260]. 
32. The fundamental position is that it is the banks who were responsible for formulation of the terms in the contractual Scheme that the optees of voluntary retirement under that Scheme will be eligible to pension under Pension Regulations, 1995, and, therefore, they bear the risk of lack of clarity, if any. It is a well-known principle of construction of contract that if the terms applied by one party are unclear, an interpretation against that party is preferred. [Verba Chartarum Fortius Accipiuntur Contra Proferentum].” 
This judgment also does not lay down the absolute proposition suggested on behalf of the petitioner and it was observed that discretion is conferred on the court to construe the contract based on words used therein. 
119. The pronouncement of the Apex Court reported at AIR 1962 SC 1810 Khardah Co. Ltd. vs. Raymon & Co. (India) Pvt. Ltd. has made similar observations and laid down the following principles in para 18 :-
“18. But it is argued for the respondents that unless there is in the contract itself a specific clause prohibiting transfer, the plea that it is not transferable is not open to the appellants and that evidence allunde is not admissible to establish it and the decisions in (1951) 1 MLJ 147 Boddu Seetharamswami vs. Bhagwathi Oil Company, AIR 1954 Mad 87 Illuru Hanumanthiah vs. Umnabad Thimmaiah and Hussain Kasam Dada vs. Vijayanagaram Comm. Asson. are relied on it support of this position. We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances. Therefore on the question whether there was an agreement between the parties that the contract was to be nontransferable, the absence of a specific clause forbidding transfer is not conclusive. What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such considerations as can legitimately be taken into account that the agreement of the parties was that it was not to be transferred. When once a conclusion is reached that such was the understanding of the parties, there is nothing in law which prevents effect from being given to it. That was the view taken in AIR 1956 Mad 110 Virjee Daya & Co. vs. Ramakrishna Rice & Oil Mills, and that in our opinion is correct.”
120. In para 5 of AIR 1965 SC 1288 Central Bank of India Ltd. vs. Hartford Fire Insurance Co. Ltd., the Supreme Court has reiterated the well settled principle that, “it is the court's duty to give effect to the bargain of the parties according to their intention and when that bargain is in writing, the intention is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly”. The Supreme Court had further stated that “if those words are clear, there is very little that the court has to do. The court must give effect to the plain meaning of the words however it may dislike the result”. In para 6 of the judgment, the court held that plain and categorical language cannot be radically changed by relying upon the sorrounding circumstances. In para 7, referring to Halsbury's Laws of England (3rd Edn.) Volume II, paragraph 640, page 391, it was observed that the rule laid down therein did not permit a court to speculate and that the court must be able to say with certainty what the intention was, in order that it may add something to the language used by the parties. 

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