Roshan Lal Vohra & Sons & Anr vs East Municipal Corporation Of ...
2016 Latest Caselaw 2409 Del

            *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                        Date of decision: 29th March, 2016

+                              W.P.(C) 3412/2013

       ROSHAN LAL VOHRA & SONS & ANR.            ..... Petitioners
                   Through: Mr. Shyam Moorjani, Adv.

                                   Versus

    EAST MUNICIPAL CORPORATION OF DELHI .... Respondent

Through: Mr. Balendu Shekhar & Ms. Somya Rathore, Advs. with Mr. Zavvar Kazim, Asst. Engineer, EDMC.

CORAM :-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1. The petition (i) impugns the Circular dated 6th February, 2013 of the

respondent East Delhi Municipal Corporation (EDMC) notifying all

concerned of Rs.6.63 lacs being due from the petitioner and calling upon all

concerned to recover the said amount from the payments if any due to the

petitioner; and, (ii) seeks a mandamus to the respondent EDMC to make

payment of Rs.6.63 lacs which had been illegally deducted from the amounts

due to the petitioner under the other running contracts/agreements, along with

interest at 18% per annum.

2. The petition was entertained and pleadings have been completed On 9th

July, 2015, when the matter came up for hearing, attention of the counsel for

the petitioners was invited to Godavari Sugar Mills Ltd. Vs. State of

Maharashtra (2011) 2 SCC 439 holding that money recovery in writ

jurisdiction can be done only when accompanied with a challenge to vires of a

tax or statute under which recovery has been effected and which was not the

position here. On the request of the counsel for the petitioners hearing was

adjourned. During the course of further hearing on 14th July, 2015 the counsel

for the respondent EDMC also handed over copy of the General Conditions of

Contract of MCD and drew attention to Clause 29A thereof. It was the

contention of the counsel for the petitioners that the respondent EDMC having

not referred thereto in the counter affidavit, could not during the hearing rely

thereon. Keeping open the said objection, judgment was reserved.

3. It is the case of the petitioners (i) that petitioner no.1 of which petitioner

no.2 Sh. Anil Vohra is sole proprietor is enlisted as a Class-I contractor with

the Municipal Corporation of Delhi (MCD) for the last many years; (ii) upon

bifurcation of the MCD, the relevant project in respect whereof the disputes

subject matter of petition had arisen fell within the jurisdiction of EDMC; (iii)

that MCD/EDMC invited tender bids in respect to certain works pertaining to

construction of 120 bedded ward block at Swami Dayanand Hospital,

Shahdara (North) vide Work Order dated 17th April, 2006; (iv) vide another

Work Order also dated 17th April, 2006 bids were invited in respect of

construction of additional floors of OPD Block at the same hospital; (v) that

the petitioners were chosen for carrying out both Work Orders and the terms

and conditions of engagement were reduced into writing; (vi) that the

petitioners carried out the work subject matter of both Work Orders to the

satisfaction of the respondent EDMC and certificates in that regard were

issued; (vii) that even after completion of the works, no complaints were made

or deficiencies reported; (viii) that after three years of the completion of the

works, vide letter dated 26th September, 2012 a sum of Rs.6,63,267/- was

demanded from the petitioners on the ground of the petitioners having used

less cement than the quantity specified for execution of the aforesaid work and

the said fact having come to light during the course of an audit; (ix) the

petitioners immediately responded contending that the demand after more

than three years of execution of the work was arbitrary and without

jurisdiction; (x) however the respondent EDMC issued the impugned Circular

dated 6th February, 2013 and in pursuance whereto the said amount was

deducted out of the payments due to the petitioners in respect of another Work

Order; and, (xi) that no opportunity of hearing was given to the petitioners

before making the said recovery and that the said recovery had been made

without following the procedure prescribed by law.

4. The respondent EDMC has contested the petition pleading (i) that writ

remedy is not maintainable; (ii) that as per the contract between the parties the

petitioners were bound to accept the decision of the audit party and the Audit

Department has found that the design mix was designed at a lesser quantity of

cement than stipulated; (iii) that recoveries on the basis of audit reports is a

settled principle - instances of such recoveries are given in the Annexure R-1

to the counter affidavit; (iv) that the deduction was made after demanding the

amount from the petitioners and upon the failure of the petitioners to pay the

same and in accordance with clause 29(ii) of the Agreement; and, (v) that the

Audit Department of the respondent EDMC carries out assessment to re-check

and re-asses the entire transaction based on available records and the

petitioners are duty bound to accept their finding.

5. The petitioners have filed a rejoinder wherein with respect to the

contract referred to in the counter affidavit it is stated that the contents thereof

are matter of record but there is no provision in the contract which entitles the

respondents to recover any amount from the petitioners without following the

due process of law.

6. The counsel for the petitioners in response to the query made from him

with reference to Godavari Sugar Mills Ltd. supra contended that the

petitioners are not seeking enforcement of a money claim under a Contract

but are seeking declaration of the monies recovered by the respondent EDMC

without following the due process of law as illegal. Reliance in this regard

was placed on Piramal Healthcare Limited Vs. Union of India 202 (2013)

DLT 15. It was further argued that (a) no show cause notice was issued to the

petitioners with respect to the alleged audit; (b) that the claim of the monies

recovered illegally was barred by time; (c) that without any legal

determination of any liability owed by the petitioners to the respondent

EDMC, no recoveries could have been made; (d) that the respondent EDMC

is not entitled to make any such deductions. Attention was invited to the

certificates dated 10th July, 2009 with respect to the Work Order dated 17 th

April, 2006 certifying that the work had been completed without levy of

compensation and was of good quality. It was argued that the respondent

EDMC cannot become a Judge in its own cause and reliance in this regard

was placed on M/s. Macadum Makers Vs. State of Chhattisgarh AIR 2012

Chh 123 and on State of Karnataka Vs. Shree Rameshwara Rice Mills,

Thirthahalli AIR 1987 SC 1359.

7. Per contra the counsel for the respondent EDMC referred to my

judgment speaking for the Division Bench of this Court in Chakradar Auto

Udyog Pvt. Ltd. Vs. Engineering Export Promotion Council

MANU/DE/4248/2012 and to Cicily Kallarackal Vs. Vehicle Factory (2012)

8 SCC 524.

8. The counsel for the petitioners with reference to Clause 29A invoked by

the counsel for the respondent EDMC argued that the same cannot be invoked

after conclusion of the contract and that the same also does not authorize self

adjudication.

9. I have considered the rival contentions.

10. I will first deal with the objection of the counsel for the petitioners to

the reliance by the counsel for the respondent EDMC during the hearing on a

clause of the contract. In this regard I may state that the petitioners, along with

the petition, did not choose to place the terms of the tender in response to

which the petitioners had submitted the bids resulting in the Work Orders or

the Work Orders or the Agreements which the petitioners in the petition itself

admitted was executed. The respondent EDMC in its counter affidavit

specifically referred to the contract and claimed its action to be in accordance

with the contract and relied at least on Clause 29(ii) of the contract. In my

opinion in a lis emanating from a contract and when the petitioner who

approaches the Court fails to place the contract before the Court,

notwithstanding the failure of the respondent EDMC also to place the contract

along with its counter affidavit, this Court is not precluded from looking into

the contract at the stage of final hearing, especially when there is no dispute as

to the contents thereof.

11. Clause 29(ii) as quoted by the respondent EDMC in the counter

affidavit and Clause 29A invoked during the hearing are as under:-

".... Government shall have the right to cause an audit and technical examination of the works and the final bills of the contractor including all supporting vouchers, abstract, etc., to be made after payment of the final bill and if as a result of such audit and technical examination any sum is found to have been overpaid in respect of any work done by the contractor under the contract or any work claimed to have been done by him under the contract and found not to have been executed, the contractor shall be liable to refund the amount of over- payment and it shall be lawful for Government to recover the same from him in the manner prescribed in sub-clause

(i) of this clause or in any other manner legally permissible; and if it is found that the contractor was paid less than what was due to him under the contract in respect of any work executed by him under it, the amount of such under payment shall be duly paid by Government to the contractor, without any interest thereon whatsoever...."

" CLAUSE 29 A

Lien in respect of claims in other contracts Any sum of money due and payable to the contractor (including the security deposit returnable to him) under the contract may be withheld or retained by way of lien by the Engineer-in-Charge or the M.C.D. or any other contracting person or person through Engineer-in-Charge against any claim of the Engineer-in- Charge or M.C.D. or such other person or persons in respect of payment of a sum of money arising out of or under any other contract by made the contractor with the Engineer-in-Charge or the M.C.D. or with such other person or persons.

It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Engineer- in-Charge or the M.C.D. will be kept withheld or retained as such by the Engineer-in-Charge or the M.C.D. or till his claim arising out of the same contract or any other contract is either mutually settled or determined by the arbitration clause or by the competent court, as the case may be and that the contract shall have not claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the contractor."

12. The question in controversy is twofold. Firstly, the entitlement of the

EDMC as State to determine the amount claimed by it to have been received

by the petitioners in excess than due under the contract and secondly, the

maintainability of a writ petition challenging such an action of the EDMC as

State and seeking recovery of the amounts so deducted.

13. Supreme Court in Shree Rameshwara Rice Mills, Thirthahalli supra

relied upon by the counsel for the petitioners was concerned with the

correctness of the opinion rendered by a Full Bench of the High Court of

Karnataka in a reference made in a Regular Second Appeal arising from a suit

and in accordance with which opinion certain writ petitions had also been

allowed. The Full Bench had held that where an Agreement between the State

and a private person provides that for any breach of the conditions such

persons shall be liable to pay damages as may be assessed by the State and

such damages shall be recovered as arrears of land revenue, the State is not

competent to adjudicate upon the question whether such a person committed

breach of contract and that the State is not competent to assess damages for

any breach of the contract which is not admitted by the other side and the

damages so assessed cannot be recovered as arrears of land revenue. Before

the Supreme Court, the contention of the State was that the terms of the

Agreement were wide and comprehensive enough to hold that the officer

named, representing the State, had competence and sanction to decide whether

any breach of conditions of contract had been committed and also to

determine the quantum of damages payable for the breach. The said

contention was rejected on an interpretation of the clause subject matter of

Agreement in that case as meaning that the right of the State to assess

damages would arise only if the breach of conditions is admitted or if no issue

is made of it. It was further held that if it was the intention of the parties that

the officer acting on behalf of the State was also entitled to adjudicate upon a

dispute regarding the breach of conditions, the wordings would have been

entirely different. It was yet further held that a right to adjudicate upon an

issue relating to breach of conditions of the contract does not flow from and is

not inhered in the right conferred to assess damages arising from a breach of

conditions; the power to assess damages is a subsidiary and consequential

power and not the primary power. It was yet further reasoned that a party to

the Agreement cannot be an arbiter in his own cause. The Supreme Court

however held that damages becoming payable on account of breach of

conditions of the Agreement constitute amounts payable under the contract.

14. It would thus be seen that the ratio of the judgment supra relied upon by

the counsel for the petitioners, on an interpretation of the contract subject

matter of that case, is that though State as a party to the Agreement was not

competent to determine whether the party with which it had contracted has

committed a breach of the Agreement or not but once the breach is admitted /

established, State is entitled to assess the damages and recovery of such

damages would be recovery of an amount due under the Contract.

15. The Division Bench of the High Court of Chhattisgarh in M/s.

Macadum Makers supra was concerned with a writ petition impugning an

order of the Executive Engineer informing all the Executive Engineers not to

make any payment or refund any amount due to the contractor therein because

of a recovery due from the contractor therein under a contract qua which a

certificate of completion had been issued to the contractor. High Court,

relying on ABL International Ltd. Vs. Export Credit Guarantee Corporation

of India Ltd. (2004) 3 SCC 553, Karnataka State Forest Industries

Corporation Vs. Indian Rocks (2009) 1 SCC 150 and Kisan Sahkari Chini

Mills Ltd. Vs. Vardan Linkers (2008) 12 SCC 500, held the writ petition to be

maintainable and further reasoning that since security deposit had already

been refunded to the contractor and the claim of the State which was sought to

be recovered in the manner impugned was disputed and since Supreme Court

in Shree Rameshwara Rice Mills, Thirthahalli supra has held that the State

cannot be the judge in its own cause, allowed the writ petition with liberty to

the State to invoke arbitration agreed upon for recovery of its dues.

16. In Piramal Healthcare Limited supra, a Single Judge of this Court was

concerned with the challenge in a writ petition to the rejection of a claim for

refund of advance license fee paid and for a direction for refund thereof. The

learned Single Judge has prefaced the judgment observing that "there is

admittedly no clause in the advertisement issued by the respondents, inviting

Expression of Interest (in short EOI) or, in the tender conditions, empowering

the respondents to retain and / or forfeit the license fee." The objection to the

maintainability of the writ petition was negatived relying on ABL

International Ltd. supra and after noticing Godavari Sugar Mills Ltd. supra

and holding "that the Supreme Court has undoubtedly veered from a

conservative position that a writ petition would not lie for entertaining

disputes which emanate from a breach of contract to now conclude or let me

say explain that this is not an absolute rule and much would depend on the

facts and circumstances of each case" allowed the writ petition by directing

refund of advance licence fee to the petitioner.

17. As far as the judgments relied upon by the counsel for the respondent

EDMC are concerned, in Chakradar Auto Udyog Pvt. Ltd. supra, the Division

Bench of this Court relying on Godavari Sugar Mills Ltd. supra held that a

writ petition for enforcing a monetary claim is not maintainable and Cicily

Kallarackal supra is not found to be relevant to the issue.

18. Supreme Court since ABL International Ltd. supra and Godavari

Sugar Mills Ltd. supra has again dealt with the issue of maintainability of a

writ petition in contractual matters in Joshi Technologies International Inc.

Vs. Union of India (2015) 7 SCC 728 and in order dated 18th March, 20015 in

Civil Appeal No.3053/2015 arising out of SLP (C) No.15689/20011 titled

National Highways Authority of India Vs. MEIL- EDB LLC (JV) and both

of which have been extensively dealt by me in CCPL Developers Pvt. Ltd. Vs.

Gail (India) Ltd. MANU/DE/4361/2015 by extracting the relevant portions

thereof and I thus do not feel the need to burden this judgment with the

lengthy discussion as contained therein. It is also worth mentioning that

MEIL- EDB LLC (JV) supra was against the judgment dated 10th March,

2011 of a Division Bench of this Court in W.P.(C) No.8418/2010 titled M/s.

Madhucon Projects Ltd. Vs. National Highways Authority of India. Relying

on the said two judgments, I held that a final decision with respect to

contractual rights of the parties is not permissible in writ jurisdiction.

19. I may in this regard mention that the claim of the petitioners in the

present petition, shorn of its challenges, is a monetary claim under a contract.

What the petitioners claim is that the monies due to them under the contract

entered into with the respondent EDMC are being not paid. To the said

monetary claim is added the challenge to the reason given by the respondent

EDMC for not making the payment. I have wondered if a writ petition under

Article 226 of the Constitution of India would have been maintainable on the

respondent EDMC simply withholding the monies without disclosing any

reason which according to the petitioners were due under the contract. In my

opinion, for the detailed reasons given by me in CCPL Developers Pvt. Ltd.

supra, it would not have been. If it would not have been, merely because the

respondent EDMC has given reasons for withholding the money, the writ

petition would not become maintainable.

20. Otherwise also, each of the judgments aforesaid relied upon by the

counsel for the petitioners has turned on its own facts and on an interpretation

of contract subject matter thereof. As already noticed above, in Piramal

Healthcare Limited supra, there was no clause entitling the Union of India

(UOI) in that case to forfeit or retain the advance license fee. However in the

contract in the present case, the action of the respondent EDMC is in

accordance with Clause 29(ii) quoted in the counter affidavit of the

respondent EDMC. Though the counsel for the petitioners has not argued but

I may mention that the respondent EDMC in its counter affidavit appears to

have set out the clause in the government contracts and not the clause in its

own contracts and in which the words „Engineer Incharge‟ or the „MCD‟

appear instead of the word „government‟. In accordance with the said Clause,

the respondent EDMC has/had a right to cause an audit and technical

examination of the works after the payment of a final bill and if in such audit

any amount was found to have been overpaid to the contractor, to recover the

same from the contractor by withholding the payments from other accounts.

Such a Clause is materially different from the Clause which was subject

matter of Shree Rameshwara Rice Mills, Thirthahalli supra and M/s.

Macadum Makers supra. Here, the respondent EDMC is not seeking to be a

judge in its own cause as was the case therein but is seeking to recover monies

if any found to have been overpaid as a result of audit. Generally such audit is

by external agencies. Moreover, spending of all public monies as the monies

of EDMC, are subject to such audit. State and State instrumentalities, as the

respondent EDMC work through officers and actions of such officers

especially entailing monetary consequences have been made subject to audit

as they otherwise also would be. Such arrangement, by no stretch of

imagination, can be said to be bad under the law. Moreover, in the petition,

there is no challenge thereto.

21. Though the petitioners, in this petition, besides seeking recovery of

money are also impugning the Circular dated 6 th February, 2013 aforesaid of

EDMC directing recovery of claimed amounts from monies payable to

petitioners under other contracts and on first blush it may appear that this

Court in writ jurisdiction can certainly grant the said relief on the principles

enshrined in Shree Rameshwara Rice Mills, Thirthahalli supra and M/s.

Macadum Makers supra but on deeper consideration it is found that the relief

of striking down the said circular i.e. prohibiting EDMC from acting

thereunder is also in substance and reality a direction to pay what has been

directed to be withheld thereunder.

22. Supreme court in H.M. Kamaluddin Ansari and Co. vs. Union of India

(1983) 4 SCC 417 after noticing the trend of the judgements of this court

emanating from Mohan Meakin Breweries Limited vs. Union of India AIR

1975 Delhi 248 and which in turn relied on Union of India vs. Raman Iron

Foundry (1974) 2 SCC 231 of injuncting the state and state agencies from

withholding the amounts due to the contractors under pending bills in other

contracts held that such an order necessarily means that the amount must be

paid. It was held that such an order in substance amounts to a direction to pay

the amounts due under other contracts. The Supreme Court also noticed that

Directorate General of Supplies and Disposals (DGS&D), General Conditions

of Contract whereof were subject matter of interpretation in Raman Iron

Foundry supra had since amended its contract and under the amended

contract it was entitled to withhold not only the monies which were due to it

from the contractors, but also the monies for which it merely had a claim

against the contractors. The Supreme Court held that once the contract

conferred power to withhold the amount for which there was only a claim, no

injunction restraining the state or its agencies from withholding the amount

could be issued.

23. Again in M/s Sant Ram & Company Vs. State of Rajasthan (1997) 1

SCC 147 it was held that no injunction restraining withholding the amount

due under other pending bills of the contractor and which injunction virtually

amounted to a direction to pay the amount, could be granted.

24. The fallacy of the argument of the counsel for the petitioners is that,

citing judgments ratio whereof is that the government / governmental agency

cannot be a judge in its own cause for claim for breach of contract and which

judgments may be of assistance to him in a claim in a suit or in an arbitration

proceedings for recovery of monies withheld, he is seeking to restrain the

respondent EDMC from withholding the monies due to the petitioners under

other contracts and which injunction cannot be granted as per the judgments

of the Supreme Court in H.M. Kamaluddin Ansari and Co. supra and M/s

Sant Ram & Company supra.

25. The writ petition is not maintainable not only because it is in

enforcement of a money claim under a contract but also because the direction

for recovery of money claims from dues under other contracts being in

accordance with contract, cannot be found fault with. The petition is thus

dismissed. However the petitioners shall be entitled to take appropriate

proceedings in law i.e. of a suit or of an arbitration for recovery of the monies

if any due to them and since this Court had entertained the petition and the

same remained pending in this Court, in computation of period of limitation

for instituting such proceedings the time between the date on which this writ

petition was filed and till today shall stand excluded.

No costs.

RAJIV SAHAI ENDLAW, J.

MARCH 29, 2016 „pp/gsr‟