Madhu vs The State Of Kerala
2021 Latest Caselaw 12264 Ker

         IN THE HIGH COURT OF KERALA AT ERNAKULAM

                            PRESENT

              THE HONOURABLE MR.JUSTICE N.NAGARESH

  MONDAY, THE 26TH DAY OF APRIL 2021/6TH VAISAKHA, 1943

                    WP(C).No.7472 OF 2020(H)



PETITIONER:

              MADHU, S/O.KITTUNNY, AGED 58 YEARS,
              CHALAKKALAM, THATHAMANGALAM,
              PALAKKADU DISTRICT.

              BY ADVS.
              SRI.C.S.MANILAL
              SRI.S.NIDHEESH

RESPONDENTS:

     1        THE STATE OF KERALA, REPRESENTED BY
              THE SECRETARY TO GOVERNMENT,
              WATER RESOURCE DEPARTMENT,
              THIRUVANANTHAPURAM - 605 036.

     2        THE CHIEF ENGINEER, PROJECT I,
              IRRIGATION DEPARTMENT,
              KOZHIKODE - 673 001.

     3        SUPERINTENDING ENGINEER,
              SIRUVANI PROJECT CIRCLE,
              PALAKKADU - 678 002.

     4        THE EXECUTIVE ENGINEER,
              IRRIGATION DIVISION, CHITTOOR,
              PALAKKADU - 678 002.

     5        THE DEPUTY TAHASILDAR,
              CHITTOOR TALUK,
              PALAKKAD DISTRICT - 678 002.

              BY SR.GOVERNMENT PLEADER SMT.DEEPA NARAYANAN

     THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 08.02.2021 AND THE COURT ON 26-04-2021 DELIVERED THE
FOLLOWING:
 WP(C) No.7472/2020
                                    :2 :




                            JUDGMENT

~~~~~~~~~

Dated this the 26th day of April, 2021

The petitioner, who is a Government Contractor,

has approached this Court seeking to quash Exts.P1 and P2

to P6 and to declare that revenue recovery proceedings

cannot be invoked in respect of tentative liability and inabilities

which are not quantified or adjudicated by the Civil Court or

other Adjudicating Authority and hence the recovery

proceedings are illegal and non-est.

2. The petitioner was selected for award of the work

"Widening the existing Veliavallampathy Canal from Ch:

8930m to 9210m". The probable amount of contract was

₹13,31,163/-. An agreement was executed on 18.05.2004.

The site was handed over to the petitioner on 31.12.2004.

The work had to be completed before 30.06.2005. The WP(C) No.7472/2020

respondents later extended the period up to 31.12.2005.

3. The petitioner states that the estimate was revised

at the instance of the Department to ₹18,89,475/- on

22.04.2005. According to the petitioner, the work could not be

completed due to non-supply of Departmental materials and

on account of denial of part bills. The petitioner completed

substantial work and raised a part bill for ₹12,50,075/-.

However, only ₹8,41,837/- was paid. An amount of

₹3,55,947/- is yet to be paid.

4. While so, one Mayilswami filed a complaint before

the Enquiry Commissioner and Special Judge, Thrissur. The

Enquiry Commissioner ordered a quick verification. In the

quick verification, the Vigilance found that the total volume of

the work done by the petitioner is ₹11,97,784/- and after

deducting the first part bill of ₹8,41,837.60, the balance

amount due is ₹3,55,947.20. The Vigilance recommended

termination of the contract at the risk and cost of the

petitioner. Thereupon, without issuing any notice, the contract

was cancelled as per Ext.P1 proceedings. WP(C) No.7472/2020

5. The petitioner states that the security amount of

₹1,00,000/- which was directed to be adjusted against another

work of the petitioner was later released on 28.04.2007.

Retention amount due to the petitioner was also released on

31.03.2006. The petitioner also remitted ₹26,665/- being the

amount quantified as the cost of cement.

6. The petitioner states that though the Department

attempted to re-tender the balance work twice, the work was

not carried out. As the work could not be carried out, the

actual risk and cost cannot be quantified in order to fix any

liability on the petitioner. Without quantifying the liability, the

Department issued a requisition to the revenue authority for

recovery and amount of ₹2,99,999/- from the petitioner.

Accordingly, Ext.P6 demand notice was issued under Section

7 of the Revenue Recovery Act. The petitioner challenges

Exts.P1 and P6.

7. The learned counsel for the petitioner, relying on

the judgment of the Apex Court in Union of India v. Raman

Iron Foundry [AIR 1974 SC 1265], argued that a claim for WP(C) No.7472/2020

liquidated damages does not give rise to a debt until the

liability is adjudicated and damages assessed by a decree or

order of a court or other Adjudicating Authority. Relying on

the judgment of this Court in Abraham Sebastian v. State of

Kerala [2002 (3) KLT839], the learned counsel argued that

actual loss which the Government had to suffer in a

terminated contract can be assessed only after the completion

of the work and till then, no revenue recovery proceedings can

be initiated against the appellant.

8. As regards realisation of 30% of the cost provided

under the PWD Manual, the learned counsel for the petitioner

argued that the said 30% amount can be realised only from

EMD/security, bill amount/retention amount, any dues from

the Department to the contractor or bank guarantee/

performance guarantee or by filing a civil suit. Revenue

recovery proceedings cannot be resorted to for recovering the

said 30% of the cost.

9. The 4th respondent-Executive Engineer contested

the case filing counter affidavit. According to the 4 th WP(C) No.7472/2020

respondent, the Government is entitled to recover 30% of the

cost through revenue recovery proceedings. In the additional

counter affidavit filed by the respondents, it has been stated

that as per the PWD Manual, an amount equal to 30% of the

cost of the remaining works at the agreed rates of terminated

contract has to be paid by the petitioner. In the petitioner's

case, 30% of the cost of remaining works was calculated by

the Department as per law based on original agreement and

the work schedule. In view of the provisions contained in the

PWD Manual, there is no need to wait till the work is arranged

alternatively through another contractor, for realising the said

30% amount.

10. Heard learned counsel for the petitioner and

learned Government Pleader representing the respondents.

11. The petitioner is challenging revenue recovery

proceedings initiated by the respondents for recovery of 30%

of the cost of the remaining work at agreed rates, on two

grounds. Firstly, the amount towards liquidated damages can

be recovered from the petitioner only after adjudication of the WP(C) No.7472/2020

amount by a civil court or any other competent authority.

12. Secondly, even under the PWD Manual, recovery

of 30% of the cost of the remaining work can be realised only

from EMD/security, bill amount/retention money, any dues

from Department to the contractor, bank guarantee/

performance guarantee or by filing civil suit against the

contractor. Revenue recovery proceedings for recovery of the

30% of the cost of the remaining work is not contemplated

under the PWD Manual.

13. It is true that a claim for liquidated damages does

not give rise to a debt until the liability is adjudicated and

damages assessed by a decree or order of a civil court or any

other Adjudicating Authority. When there is a breach of

contract, the party who commits the breach does not co

instanti incur any pecuniary obligation, nor does the party

complaining of the breach become entitled to a debt due from

the other party. However, when there is an agreement or

contract enabling one of the parties to recover a pre-decided

sum, such party would be entitled to realise the amount in WP(C) No.7472/2020

accordance with the law without resorting to any proceedings

for adjudication of the said amount.

14. In the case of the petitioner, the petitioner has

executed contract accepting the provisions contained in the

PWD Manual. Clause 2116.2.1 of the PWD Manual reads as

follows:

"2116.2.1 Realisation of loss on account termination An amount equal to 30% of the cost of the remaining works at agreed rates of the terminated contract shall be recovered from the defaulted contractor towards the risk and cost. The contractor shall be directed to remit the risk and cost amount within three months. There is no need to wait till the work is arranged alternatively through another contractor and the total loss sustainable due to the default of the original contractor is assessed. Such loss, if any, shall be realised after completion of the work. If he falls to remit the amount within this periods following steps can be adopted for realisation of loss. The amount can be realised from the following:

2. EMD/Security

3. Bill amount/retention if any due to the contract.

4. Any dues from department to the contract.

5. Bank Guarantee/Performance Guarantee or By filing civil suit against the contractor."

15. As there is a specific agreement between the

petitioner and the respondents in this regard, the respondents

will be entitled to recover 30% of the cost of the remaining WP(C) No.7472/2020

works at the agreed rates from the petitioner. The judgment

of the Apex Court in Raman Iron Foundry (supra) or the

judgment of this Court in Abraham Sebastian (supra) did not

deal with Clause 2116.2.1 of the PWD Manual and therefore

those judgments would not be of any help to the petitioner.

16. The further argument of the petitioner is that the

said 30% of the cost of the remaining works can be realised

by the respondents only from EMD/security, Bill amount/

retention amount, any dues from the department to the

petitioner, bank guarantee/performance guarantee or by filing

civil suit. The argument is that as the said Clause of the PWD

Manual does not specify revenue recovery under the Revenue

Recovery Act as one of the mode of realising the amount, the

respondents cannot resort to revenue recovery.

17. Clause 2116.2.1 of the PWD Manual states that "an

amount equal to 30% of the cost of the remaining works at

agreed rates of the terminated contract shall be recovered

from the defaulted contractor towards the risk and cost".

Therefore, as per the PWD Manual and the contract entered WP(C) No.7472/2020

into by the petitioner with the respondents, the respondents

can legally claim 30% amount on termination of petitioner's

contract. The provisions for realising the amount from

EMD/security etc. mentioned in Clause 2116.2.1 of the PWD

Manual can be treated only as explanatory, and not

exhaustive. The Government can very well resort to revenue

recovery as the 30% of the cost of the remaining works at

agreed rates of a terminated contract, is a sum due to the

Government.

For the above said reasons, this Court finds no

merit in the claim made by the petitioner in the writ petition.

The writ petition lacks merit and it is accordingly dismissed.

Sd/-

N. NAGARESH, JUDGE

aks/16.04.2021 WP(C) No.7472/2020

APPENDIX PETITIONER'S EXHIBITS:

EXHIBIT P1 TRUE COPY OF THE PROCEEDINGS OF THE 4TH RESPONDENT DATED 30/5/2014.

EXHIBIT P2 TRUE COPY OF THE LETTER DATED 20/12/2016 SENT BY THE 4TH RESPONDENT TO THE ADDITIONAL GOVERNMENT PLEADER PALAKKADU.

EXHIBIT P3 TRUE COPY OF THE RE-TENDER DATED 23/11/2017 ISSUED BY 3RD RESPONDENT.

EXHIBIT P4 TRUE COPY OF THE RE-TENDER DATED 12/12/2017 ISSUED BY 3RD RESPONDENT.

EXHIBIT P5 TRUE COPY OF THE SELECTION NOTICE DATED 16/5/2017 ISSUED TO M.M.JOHN.

EXHIBIT P6 TRUE COPY OF THE REVENUE RECOVERY NOTICE DATED 10/1/2020 ISSUED BY 5TH RESPONDENT.

RESPONDENTS' EXHIBITS:

ANNEXURE R1(a) TRUE COPY OF THE LETTER DATED 04.12.2015 ISSUED BY THE EECUTIVE ENGINEER, IRRIGATION DIVISION, CHITTOOR TO THE PETITIONER ANNEXURE R1(b) TRUE COPY REPORT OF THE ASSISTANT EXECUTIVE ENGINEER, KOZHINJAMPARA RBC SUB DIVISION DATED 05.12.2015 ASSESSING THE LIABILITY OF THE BALANCE WORK.

ANNEXURE R1(c) TRUE COPY OF THE RELEVANT PORTION OF PWD MANUAL.

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