Kerala High Court
M/S. Nath Infrastructures vs State Of Kerala on 29 March, 2023
W.P.(C) No. 16643/2022 & batch
:1:
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
WEDNESDAY, THE 29TH DAY OF MARCH 2023 / 8TH CHAITHRA, 1945
WP(C) NO. 16643 OF 2022
PETITIONER/S:
M/S. NATH INFRASTRUCTURES
28/309 A1, THONDAYAD, KOTTOOLY ROAD, CHERVARAMBALAM P.O
KOZHIKODE-673 017, REPRESENTED BY ITS MANAGING PARTNER,
V RAJEENDRANATH.
BY ADVS.
SANTHOSH MATHEW
ARUN THOMAS
KARTHIKA MARIA
ANIL SEBASTIAN PULICKEL
ABI BENNY AREECKAL
MATHEW NEVIN THOMAS
RESPONDENT/S:
1 STATE OF KERALA
REPRESENTED BY THE SECRETARY TO THE GOVERNMENT, PUBLIC
WORKS DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM, KERALA - 695 001.
2 PROJECT DIRECTOR,
KERALA ROAD FUND BOARD-PROJECT MANAGEMENT UNIT,
GROUND FLOOR, BSNL OFFICE BUILDING, CGM(O) DOORSANCHAR
BHAVAN, PMG JUNCTION, THIRUVANANTHAPURAM,
KERALA - 695 033.
3 THE CHIEF EXECUTIVE OFFICER,
KERALA INFRASTRUCTURE INVESTMENT FUND BOARD 2ND FLOOR,
FELICITY SQUARE, MG ROAD, STATUE, THIRUVANANTHAPURAM,
KERALA - 695 001.
4 THE TEAM LEADER,
PMU-KRFB, GROUND FLOOR, BSNL OFFICE BUILDING, CGM(O)
DOORSANCHAR BHAVAN, PMG JUNCTION, THIRUVANANTHAPURAM,
KERALA - 695 033.
5 EXECUTIVE ENGINEER,
KERALA ROAD FUND BOARD-PROJECT MANAGEMENT UNIT,
KOZHIKODE / WAYANAD, A-16, VRINDAVAN COLONY, CHEVAYUR,
KERALA - 673 017.
6 ADDL. R6 IMPLEADED:
THE AUTHORIZED OFFICER.
W.P.(C) No. 16643/2022 & batch
:2:
THE FEDERAL BANK LTD., L.C.R.D KOZHIKODE DIVISION, IST
FLOOR, FEDERAL TOWERS, ARAIYIDATHUPALAM, KOZHIKODE,
KERALA - 673 016.
(ADDL. R6 IS IMPLEADED AS PER ORDER DATED 21.12.2022 IN IA-
4/2022 IN WP(C) NO. 16643/2022.)
BY ADVS.
Mohan Jacob George
P.V.PARVATHY (P-41)(K/000036/1991)
REENA THOMAS(R-364)
NIGI GEORGE(K/1169/2012)
R3 BY SRI. CHANDRASEKHARAN NAIR
R1 BY SRI. K.V. MANOJ KUMAR, SPL. GOVERNMENT PLEADER
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16.03.2023,
ALONG WITH WP(C).16798/2022, THE COURT ON 29.03.2023 DELIVERED THE
FOLLOWING:
W.P.(C) No. 16643/2022 & batch
:3:
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
WEDNESDAY, THE 29TH DAY OF MARCH 2023 / 8TH CHAITHRA, 1945
WP(C) NO. 16798 OF 2022
PETITIONER/S:
M/S. NATH INFRASTRUCTURES,
28/309 A1, THONDAYAD, KOTTOOLY ROAD, CHERVARAMBALAM
(PO), KOZHIKODE - 673 017 REPRESENTED BY ITS MANAGING
PARTNER.
BY ADVS.
SANTHOSH MATHEW
ARUN THOMAS
KARTHIKA MARIA
ANIL SEBASTIAN PULICKEL
ABI BENNY AREECKAL
MATHEW NEVIN THOMAS
KARTHIK RAJAGOPAL
RESPONDENT/S:
1 STATE OF KERALA,
REPRESENTED BY THE SECRETARY TO THE GOVERNMENT, PUBLIC
WORKS DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM, KERALA - 695 001.
2 PROJECT DIRECTOR,
KERALA ROAD FUND BOARD-PROJECT MANAGEMENT UNIT,
GROUND FLOOR, BSNL OFFICE BUILDING, CGM(O) DOORSANCHAR
BHAVAN, PMG JUNCTION, THIRUVANANTHAPURAM,
KERALA - 695 033.
3 THE CHIEF EXECUTIVE OFFICER,
KERALA INFRASTRUCTURE INVESTMENT FUND BOARD , 2ND
FLOOR, FELICITY SQUARE, MG ROAD, STATUE,
THIRUVANANTHAPURAM, KERALA - 695 001.
4 THE TEAM LEADER, PMU-KRFB,
GROUND FLOOR, BSNL OFFICE BUILDING, CGM(O) DOORSANCHAR
BHAVAN, PMG JUNCTION, THIRUVANANTHAPURAM,
KERALA - 695 033.
5 EXECUTIVE ENGINEER,
KERALA ROAD FUND BOARD-PROJECT MANAGEMENT UNIT,
KOZHIKODE / WAYANAD, A-16, VRINDAVAN COLONY, CHEVAYUR,
KERALA - 673 017.
6 ADDL.R6 IMPLEADED:
W.P.(C) No. 16643/2022 & batch
:4:
THE AUTHORIZED OFFICER
THE FEDERAL BANK LTD., LCRD KOZHIKODE DIVISION, 1ST
FLOOR, FEDERAL TOWERS, ARAIYIDATHUPALAM, KOZHIKODE,
KERALA 673 016
[ADDL. R6 IMPLEADED AS PER ORDER DATED 21.12.2022 IN
I.A.4/2022 IN WP(C)16798/2022.]
BY ADVS.
MOHAN JACOB GEORGE
P.V.PARVATHY (P-41)
REENA THOMAS
NIGI GEORGE
SRI. K.V. MANOJ KUMAR
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16.03.2023,
ALONG WITH WP(C).16643/2022, THE COURT ON 29.03.2023 DELIVERED THE
FOLLOWING:
W.P.(C) No. 16643/2022 & batch
:5:
SHAJI P. CHALY, J.
---------------------------------------------------------
W.P.(C). Nos.16643 & 16798 of 2022
---------------------------------------------------------
Dated this the 29th day of March, 2023.
JUDGMENT
The captioned writ petitions are filed by one and the same
petitioner, who is a contractor engaged by the Kerala Road Fund
Board, respondent No.2, to carry out the works "KIIFB-
Improvements to Thamarassery-Varattiakkal road in Kozhikode
District", and "KIIFB-2016-17 Improvement of Kaithapoyil-
Kodenchery-Agastianmuzhi Road Km 0/000 to 21/200 in Kozhikode
District" respectively. Accordingly, Exhibit P3 agreements were
executed on 03.02.2018 and 13.09.2018 respectively, and the work
was to be completed within 18 months from the date of execution of
the agreement.
2. In W.P.(C) No. 16643 of 2022, the petitioner challenges
Exhibit P18 order dated 08.04.2022 issued by the Project Director,
Kerala Road Fund Board-- respondent No.2, terminating the work at
the risk and cost of the petitioner. It is stated therein that the site
was handed over to the contractor on 12.02.2018 with a period of
completion of 18 months. It is also stated that the fourth extension
of time of completion of the work was granted upto 31.12.2021.
W.P.(C) No. 16643/2022 & batch
But, supplementary agreement was not executed as the validity of
the bank guarantee was not extended. It is further stated that the
extension of time of completion was requested upto 31.03.2022.
However, the Team Leader, as per letter dated 01.02.2022,
reported that there are many concrete works still pending and BC
works in the first reach of 14.10 Km and second stretch of 2.75 km.
are also not arranged by the petitioner contractor.
3. That apart, it is stated that as per a letter dated
05.03.2022, the Executive Engineer reported that repeated
instructions were given to the contractor to carry out the BC works
and balance side protection work; but the contractor did not start
the balance work at the site to date. It is further stated that two
notices were issued from the office of the second respondent dated
01.12.2021 and 10.01.2022 on the slow progress of the work and
directed to complete the work at an early date benefiting the
climatic condition; but the contractor did not show the proportionate
progress during the extended period of time of completion and
therefore, the undue delay in executing the work could not be
accepted further.
4. Insofar as W.P.(C) No. 16798 of 2022 is concerned, the
petitioner challenges Exhibit P19 order dated 08.04.2022 issued by
the Project Director, Kerala Road Fund Board, respondent No.2
W.P.(C) No. 16643/2022 & batch
terminating the work at the risk and cost of the petitioner
contractor. Therein also, it is stated that the site was handed over
to the contractor on 22.09.2018 with a period of completion of 18
months. It is further stated that the third extension of time of
completion for the work granted upto 31.03.2022; that the
Executive Engineer, as per letter dated 10.03.2022 reported that
even after the repeated meetings and instructions given to the
contractor, the work was progressing slowly; that the contractor has
not effectively utilized dry season from December, 2021 to March,
2022 by stating false promises and other reasons; and that the
progress achieved during the said time is not satisfactory.
5. That apart, it is specified that notices dated 20.10.2021
and 30.11.2021 were issued from the office of the Project Director
on the slow progress of the work, and final notices prior to the
termination was issued on 14.03.2022; however, no measures are
seen taken by the contractor to complete the work within the
scheduled time benefiting climatic conditions.
6. When the writ petitions came up for admission, invocation
of bank guarantee was restrained as per order dated 24.05.2022
which was being periodically extended and the same is in force now.
The paramount contention advanced by the petitioner is that there
were severe hindrances, such as electric posts, water pipeline, trees
W.P.(C) No. 16643/2022 & batch
etc. along the sites, which were not shifted. That apart, it is
contended that there was delay in obtaining consent for widening
from the respective land owners.
7. The sum and substance of the contention advanced by the
petitioner is that the work was delayed not due to the laches on the
part of the petitioner, but, due to default on the part of the
respondents in timely removing the hindrances along the site. It is
further pointed out that even though several letters were issued by
the petitioner to the second respondent wherein the issue was
updated, no action was taken. Therefore it is the contention of the
petitioner that the work was delayed due to the Covid-19 pandemic,
and since the hindrances were removed by the respondents only
during July, 2021.
8. It is also the contention of the petitioner that he was
compelled to execute supplementary agreements to extend the time
of completion of the work on various occasions. It is further
submitted that subsequently also, the petitioner applied for
extensions after the expiry of the time of completion, and the work
was being carried on. It is also the case of the petitioner that the
request of the petitioner was endorsed and recommended by all
concerned engineers. However, none of them were approved by
the second respondent. It is the further case of the petitioner that
W.P.(C) No. 16643/2022 & batch
he has completed 93% and 76% respectively of the works awarded
to him.
9. It is further contended that it is a well settled position in
law that when there is a contractual dispute, the party alleging
breach cannot also be the arbiter as to whether or not the breach
has been committed. It is further contended that when there is a
dispute as to whether or not there has been a breach in the
conditions of a contract, the party alleging breach cannot determine
whether or not a breach has actually occurred and cannot take any
penal action against the other party. However, in the instant case,
the second respondent, being a party to the agreement, cannot
unilaterally determine whether the petitioner has committed any
default or take any penal action including assigning the risk and
cost of re-tendering to the petitioner and invoking the performance
securities provided by the petitioner. It is also contended that as
per clause 24 of the agreement, all disputes arising during the
implementation have to be settled through civil courts of applicable
jurisdiction.
10. In sum and substance, the contention advanced by the
petitioner is that it must be proved before a civil court of applicable
jurisdiction that there are sufficient grounds to assign the risk and
cost to the petitioner before the same can be done. It is also
W.P.(C) No. 16643/2022 & batch
contended that the second respondent has failed to meet its
obligations under the agreements and the site was not handed over
free of hindrances which contributed heavily to the delay in the
work. Other contentions are also raised.
11. KIIFB, respondent No.3, has contended that it is only a
funding agency and it is the prerogative of the special purpose
vehicle, respondent No.2, to regulate the work in terms of the
agreement. Additional documents are also produced along with I.A.
No. 3 of 2022.
12. I have heard Sri. Santhosh Mathew for the petitioners,
Sri. K. V. Manoj Kumar, learned Special Government Pleader, and
Sri. S. Chandrasekharan Nair for KIIFB, and perused the pleadings
and material on record.
13. The sum and substance of the contention advanced by the
petitioner is that the Project Director, being a party to the contract,
is not vested with any powers to terminate the contract at the risk
and cost of the contractor. The Project Director is shown as the
employer in the agreement and the engineer is the team leader;
Executive Engineer, PWD Roads Division, Kozhikode is the
authorised representative. The General Conditions of Contract
shows that the employer is the party who will employ the contractor
to carry out the works. The Engineer is the person named in the
W.P.(C) No. 16643/2022 & batch
Contract Data (Or any other competent person appointed and
notified to the contractor to act in replacement of the Engineer) who
is responsible for supervising the contractor, administering the
contract, certifying payments due to the contractor, issuing and
valuing variations to the contract, awarding extensions of time and
valuing the compensation events.
14. Clause 17 of the General Conditions of Contract deals with
'the works to be completed by the Intended Completion date' and
sub-clause 17.1 makes it clear that the contractor may commence
execution of the works on the start date and shall carry out the
works in accordance with the programmes submitted by the
contractor, as updated with the approval of the Engineer, and
complete them by the Intended Completion Date.
15. As per clause 36, the contractor is bound to carry out the
items in the Bill of Quantities item wise variation upto 25 percent
excess provided that the change does not exceed 1% of initial
contract price.
16. Clause 41 deals with payments and sub-clause 41.2
enumerates that payments shall be adjusted for deductions for
advance payments retention, other recoveries in terms of the
contract and taxes at source, as applicable under the law; and that
W.P.(C) No. 16643/2022 & batch
the employer shall pay the contractor the amounts certified by the
engineer within 28 days of the date of each certificate.
17. Clause 42 deals with 'compensation events' and sub-
clause 42.1 enumerates 'the compensation events unless they are
caused by the contractor', which reads as follows:
42. Compensation Bvents
42.1. The following are compensation events unless they are caused by the
Contractor.
(a) The Employer does not give access to a part of the sìte by the site possession
date stated in the Contract Data.
(b) The Employer modified the schedule of other contractor in a way which
affects the work of the contractor under the contract.
(c) The engineer orders a delay or does not issue drawings specifications or
instructions required for execution of works on time.
(d) The Engineer instructs the Contractor to uncover or to carry out additional
tests upon work which is then found to have no defects.
(e) The Engineer does not approve of a subcontract to be let, within 15 days.
(f) Ground conditions are substantially more adverse than could reasonably have
been assumed before issuance of Letter of Acceptance from the information
issued to Bidders (including the Site Investigation Reports), from information
available publicly and from a visual îinspection of the site.
(g) The Engineer gives an instruction for dealing with an unforeseen condition
caused by the Employer, or additional work required for safety or other
reasons.
(h) Other contractors, public authorities, utilities or the Employer does not work
within the dates and other constraints stated in the Contract, and they cause
delay or extra cost to the Contractor.
(i) The advance payment is delayed, beyond 28 days after receipt of application
and bank guarantee.
(j) The effect on the Contractor or any of the Employer's Risks.
(k) The Engineer unreasonably delays issuing a Certificate of completion.
(l) Other compensation events listed in the Contract Data or mentioned in the
Contract.
18. Sub-clause 42.2 specifies that if a compensation event would
cause additional cost or would prevent the work being completed
W.P.(C) No. 16643/2022 & batch
before the Intended Completion Date, the contract price shall be
increased and/or the Intended completion Date is extended, and the
engineer shall decide whether and by how much the Contract price
shall be increased and whether and by how much the Intended
completion Date shall be extended.
19. Clause 46 deals with 'liquidated damages' and clause 46.1
stipulates that the contractor shall pay liquidated damages to the
employer at the rate per day stated in the Contract Data for each
day that the Completion Date is later than the Intended Completion
Data (for the whole of the works or the milestone as stated in the
contract data); that the total amount of liquidated damages shall
not exceed the amount defined in the Contract Data; that the
employer may deduct liquidated damages from payments due to
the contractor; and that payment of liquidated damages does not
affect the contractor's other liabilities.
20. Clause 46.2 specifies that if the Intended Completion Date
is extended after liquidated damages have been paid, the Engineer
shall correct any overpayment of liquidated damages by the
Contractor by adjusting the next payment certificate, and the
contractor shall be paid interest on the over payment calculated
from the date of payment to the date of repayment at the rates
W.P.(C) No. 16643/2022 & batch
specified in sub-clause 43.1
21. Sub-clause 43.3 states that if the contractor fails to
comply with the time for completion as stipulated in the tender,
then the contractor shall pay to the employer the relevant sum
stated in the Contract Data as Liquidated damages for such default
and not as penalty for every day or part of day which shall elapse
between relevant time for completion and the date stated in the
taking over certificate of the whole of the works on the relevant
section, subject to the limit stated in the Contract Data.
22. Clause 54 deals with 'termination' and sub-clause 54.1
specifically states that the employer or the contractor may
terminate the contract, if the other party causes a fundamental
breach of the contract. Clauses 54.2 deals with the fundamental
breaches of contract which shall include, but shall not be limited to,
and it reads as follows:
a) The contractor stops work for 28 days when no stoppage of
work is shown on the current programme and the stoppage
has not been authorized by the engineer;
b) the Engineer instructs the contractor to delay the progress of
the works and the instruction is not withdrawn within 28
days;
c) the employer or the contractor is made bankrupt or goes into
W.P.(C) No. 16643/2022 & batch
liquidation other than for a reconstruction or amalgamation;
d) a payment certified by the engineer is not paid by the
employer to the contractor within 56 days of the date of the
engineer's certificate;
e) the engineer gives notice that failure to correct a particular
defect is a fundamental breach of contract and the contractor
fails to correct it within a reasonable period of time
determined by the engineer.
f) The contractor does not maintain a security which is
required.
g) The contractor has dealyed the completion of works by the
number of days for which the maximum amount of liquidated
damages can be paid as defined in the contract data; and
h) if the contractor in the judgment of the employer has
engaged in corrupt or fraudulent practices in completing for
or in executing the contract.
23. Sub-clause 54.4 is a covenant empowering the employer to
terminate the contract for convenience notwithstanding the specific
instances pointed out in sub-clause 54.2. Sub-clause 54.5 makes it
clear that if the contract is terminated, the contractor shall stop
work immediately, make the site safe and secure and leave the site
as soon as reasonably possible.
24. Clause 55 deals with 'payment upon termination', and
sub-clause 55.1 specifies that if the contract is terminated because
W.P.(C) No. 16643/2022 & batch
of a fundamental breach of contract by the contractor, the engineer
shall issue a certificate for the value of the work done less advance
payments received upto the date of issue of the certificate, less
other recoveries due in terms of the contract, less taxes due
deducted at source as per applicable law, and less the percentage to
apply to the work not completed as indicated in the Contract Data;
that additional liquidated damages shall not apply; and that if the
total amount due to the employer exceeds any payment due to the
contractor, the difference shall be a debt payable to the employer.
25. Sub-clause 55.2 makes it clear that if the contract is
terminated at the employer's convenience or because of a
fundamental breach of contract by the employer, the engineer shall
issue a certificate for the value of the work done, the cost of
balance material brought by the contractor and available at site, the
reasonable cost of removal of equipment, repatriation of the
contractor's personnel employed solely on the works, and the
contractor's costs of protecting and securing the works and less
advance payments received up to the date of the certificate, less
other recoveries due in terms of the contract and less taxes due to
be deducted at source as per applicable law.
26. Clause 57 deals with 'release from Performance' and sub-
W.P.(C) No. 16643/2022 & batch
clause 57.1 states that if the contract is frustrated by the outbreak
of war or by any other event entirely outside the control of either
the employer or the contractor, the engineer shall certify that the
contract has been frustrated; that the contractor shall make the site
safe and stop work as quickly as possible after receiving the
certificate and shall be paid for all work carried out before receiving
it and for any work carried out afterwards to which the commitment
was made.
27. From the above , it is clear that the terms and conditions
of the agreement executed by and between the employer and the
contractor are definite. The petitioner did not have any complaint
with respect to the terms and conditions of the agreement executed
by and between the parties till the work was terminated by the
employer. Moreover, it is an admitted case that the period of
contract was extended by executing supplementary agreements on
various dates and even at that point of time, the petitioner did not
have a case that the terms and conditions of the contract are
unconscionable, illegal or void.
28. It is also clear that the agreement speaks about the
compensation events, if the employer commits default and also the
compensation events in the event the contractor makes default in
W.P.(C) No. 16643/2022 & batch
execution of the work. The termination could be made by the
employer for his own fault and also due to the fault on the part of
the contractor. Therefore, the terms and conditions of the contract
are entered by and between the parties taking into account the
nature of the contract that had to be executed by the contractor.
29. Now, the fundamental and basic question remains to be
considered is whether as pointed out by the petitioner, the
employer has to resort to a civil remedy for the purpose of
terminating a contract. In that regard, the learned counsel for the
petitioner has advanced arguments that conditions in the PWD
Manual relied upon by the employer to terminate the contract are
merely administrative instructions and therefore, the said provisions
cannot overlook the law in respect of the termination of contract.
30. In support of the said contention, the learned counsel has
placed reliance on a Division Bench judgment of this Court in State
of Kerala v. Aboobacker Kutty [1992 (2) KLT 939], wherein
following the judgment of the Apex Court in Fernandez v. State of
Mysore (AIR 1967 SC 1753), it is held that the instructions
contained in the PWD Manual are merely administrative instructions
and not statutory rules.
31. In my considered opinion, the issue to be decided in this
W.P.(C) No. 16643/2022 & batch
writ petition is entirely different. This is a case where the parties
have entered into an agreement which are having specific terms
and conditions with respect to each and every aspect, including the
termination of contract. Therefore, the provisions of the PWD
Manual would have to be read along with the terms and conditions
agreed by and between the parties.
32. Clause 2116.1 deals with 'termination due to default by
contractor', which states that as per General Conditions of Contract,
the agreement authority has the power to cancel the contract and
arrange the work otherwise in the event of default by the
contractor; that the agreement authority, in exercising the power
vested with him, shall follow the procedure outlined in the General
Conditions of the Contract; and that the damages and penalties
provided therein and applicable to the particular contract shall also
be realised in accordance with the General Conditions of Contract.
33. Clause 2116.2 dealing with 'termination of contract',
enumerates the circumstances under which the Department can
terminate the contract at the risk and cost of the contractor that: --
(i) if the contractor does not turn up for starting the work within the
specified period to take charge of the site after executing the
agreement; (ii) if the contractor does not show the proportionate
W.P.(C) No. 16643/2022 & batch
progress during the extended period of time of completion; (iii) if
the contractor abandons the work after executing a portion without
genuine reason and does not resume or complete it even after
specific direction from the Department; (iv) fails to make
application for extension of time of completion in time; (v) the
licence of the contractor whose work has been terminated shall be
cancelled with immediate effect and shall be barred from quoting for
another work for a minimum period of five years. Contract licence
shall not be renewed in his name or different name of a binamy;
and (vi) a company or person or firm once terminated shall be
disqualified from participating in any tender in his name or by using
a different name or binamy. There shall also be a fine and forfeiture
of deposits.
34. Clause 2116.2.1 of the PWD Manual Revised Edition, 2012
deal with 'realisation of loss on account of termination', which
clearly specifies 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;
that the contractor shall be directed to remit the risk and cost
amount within three months; that 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
W.P.(C) No. 16643/2022 & batch
assessed; that such loss, if any, shall be realised after completion of
the work; and that if he fails to remit the amount within the period,
the steps enumerated thereunder can be adopted for realisation of
loss. It also specified that the amount can be realised from the
EMD/security; Bill amount/ retention if any due to the contract;
any dues from department to the contract; and Bank Guarantee/
Performance Guarantee or by filling civil suit against the contractor.
35. That apart, clause 2116.2.2 deals with 'revoking of
termination', which specifies that the contract for a work on
terminated by the agreement authority can be revoked by the
immediate superior officer, if the contractor expresses his
willingness at later date to complete the balance work; but
performance guarantee of 30% of the balance work to be completed
shall be deposited; and the said performance guarantee shall be
released only on completion of the work. In such a case, the
contractor is bound to do the work at the originally agreed rates for
which agreement authority shall execute a supplemental agreement
with balance schedule and fresh time of completion.
36. Therefore, on a conjoint reading of the agreement and the
provisions of the PWD Manual specified above, it is clear that power
is vested with the employer to terminate the contract. It is not by
W.P.(C) No. 16643/2022 & batch
invocation of the provisions of the PWD Manual alone, the
termination was effected by the employer. But, it was also taking
into account the terms and conditions of the agreement mutually
agreed upon by and between the parties.
37. Therefore, it is not a case where the petitioner is not
without a remedy, if an action of termination is employed by the
employer. It is also clear from clause 2118 of the PWD Manual
dealing with the 'settlement of disputes and differences' that the
agreement authority as well as the contractor shall follow the
procedure contained in the relevant clauses in the General
Conditions of Contract for settling the disputes arising out of the
execution of the contract.
38. The issue of the legal effect of the Public Works
Department Code was considered by the Apex Court in Fernandez
(supra), wherein the question considered was whether the
instructions in the Code have any statutory force, and if they have
no statutory force, whether they confer any right on anybody; and if
so, whether a tenderer can claim any rights on the basis of the
administrative instructions; and finally it was held that the State
Government can take executive action in all matters in which the
Legislature of the State can pass laws; but Article 162 by itself does
W.P.(C) No. 16643/2022 & batch
not confer any rule making power on the State Government in that
behalf; and therefore, it was held that the instructions contained in
the Code are mere administrative instructions and are not statutory
rules.
39. But, this is a case where the action was initiated on the
basis of the terms and conditions of contract entered into by and
between the parties. Therefore, that can only be treated as a
contract executed by and between the parties in terms of the
provisions of the Indian Contract Act, 1872. Viewed so, once an
offer was made by the employer and accepted by the contractor
and an agreement was executed by and between the parties, one of
the parties cannot turn around and attack some of the terms and
conditions of the agreement, but for the agreement vitiated by
undue influence, fraud, misrepresentation, without free consent,
mistake of fact or it is void consequent to any terms and conditions
forbidden by law.
40. Further, the petitioner does not have a case that any of
the agreement conditions executed by and between the parties is
void in nature. The issue with respect to the binding nature of the
terms and conditions of an agreement executed by and between the
State or other authority with private persons was considered by the
W.P.(C) No. 16643/2022 & batch
Apex Court in Bareilly Development Authority and Ors. v. Ajay
Pal Singh and Ors. [(1989) 2 SCC 116], Radhakrishna Agarwal
and Ors. Vs. State of Bihar and Ors. [(1977) 3 SCC 457],
Premji Bhai Parmar and Ors. Vs. Delhi Development
Authority and Ors. [1980(2) SCC 129] and Divisional Forest
Officer v. Biswanath Tea Co. Ltd. [(1981) 3 SCC 238] and it is
held that the contract entered into by and between the State and
the persons aggrieved is non statutory and purely contractual and
the rights are governed only by the terms of the contract and no
writ or order can be issued under Article 226 of the Constitution of
India, so as to compel the authorities to permit a breach of
contract, pure and simple.
41. However, conducting an elaborate survey of the earlier
Supreme Court judgments on the issue relating to a non statutory
contract, the Apex Court had rendered a judgment in M.P. Power
Management Company Limited, Jabalpur v. Sky Power
Southeast Solar India Private Limited and others [2023) 2
SCC 703] holding that the principle laid down in Bareilly
Development Authority (supra) that in the case of a non-
statutory contract, the rights are governed only by the terms of the
contract and the decisions, which are purported to be followed, may
not continue to hold good, in the light of what has been laid down in
W.P.(C) No. 16643/2022 & batch
ABL International Limited and another v. Export Credit
Guarantee Corporation of India [(2004) 3 SCC 553] (supra),
and as followed in the recent judgment in State of U.P. v. Sudhir
Kumar Singh and Ors.[2020 SCC Online SC 847]. After finding
so, it was held thus:
82.1. It is, undoubtedly, true that the writ jurisdiction
is a public law remedy. A matter, which lies entirely
within a private realm of affairs of public body, may not
lend itself for being dealt with under the writ
jurisdiction of the Court.
...
82.12. In a case the State is a party to the contract and a breach
of a contract is alleged against the State, a civil action in the
appropriate forum is, undoubtedly, maintainable. But this is not
the end of the matter. Having regard to the position of the
State and its duty to act fairly and to eschew arbitrariness in all
its actions, resort to the constitutional remedy on the cause of
action, that the action is arbitrary, is permissible (see in this
regard Shrilekha Vidyarthi v. State of U.P. [Shrilekha Vidyarthi v.
State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742] ). However,
it must be made clear that every case involving breach of
contract by the State, cannot be dressed up and disguised as a
case of arbitrary State action. While the concept of an arbitrary
action or inaction cannot be cribbed or confined to any
immutable mantra, and must be laid bare, with reference to the
facts of each case, it cannot be a mere allegation of breach of
contract that would suffice. What must be involved in the case
W.P.(C) No. 16643/2022 & batch
must be action/inaction, which must be palpably unreasonable
or absolutely irrational and bereft of any principle. An action,
which is completely mala fide, can hardly be described as a fair
action and may, depending on the facts, amount to arbitrary
action. The question must be posed and answered by the Court
and all we intend to lay down is that there is a discretion
available to the Court to grant relief in appropriate cases.
82.13. A lodestar, which may illumine the path of the Court,
would be the dimension of public interest subserved by the
Court interfering in the matter, rather than relegating the
matter to the alternate forum."
42. Taking into account the above principles of law and
bearing in mind the terms and conditions of the agreement
executed by and between the parties, it cannot be said that the
termination of the contracts by the agreement authority is bad or
illegal. This I say because, the authority has granted sufficient
time to the petitioner, even by extending the agreement period
by executing supplementary agreements. The rest of the aspects
put forth by the petitioner in this writ petition is premature in
nature. Moreover, admittedly, consequent to the execution of the
agreement, the parties have entered into specific terms and
conditions by which the employer as well as the contractor are
given the liberty to terminate the contract in the circumstances
specified in the agreement executed by and between the parties.
W.P.(C) No. 16643/2022 & batch
43. Considering the facts and figures so, I do not think, the
petitioner is entitled to get any reliefs as are sought for in the writ
petitions against Exhibits P18 and P19 termination orders made by
the Project Director--the agreement authority.
Needless to say, writ petitions fail and accordingly, they are
dismissed. However, I make it clear that all the issues with respect
to the payment due to the petitioner; the contentions raised by the
petitioner apprehending further action, and the contentions with
respect to the power of quantification of the damages by the
employer, are all left open.
sd/- SHAJI P. CHALY, JUDGE.
Rv
W.P.(C) No. 16643/2022 & batch
APPENDIX OF WP(C) 16643/2022
PETITIONER'S EXHIBITS:
Exhibit P1 TRUE COPY OF NOTICE INVITING TENDER NO. PMU-
KRFB/T-07/2017-18 DATED 04.10.2017 ISSUED BY
THE 2ND RESPONDENT FOR THE WORK "KIIFB
IMPROVEMENTS TO THAMARASSERY-VARATTIAKKAL
ROAD IN KOZHIKODE DISTRICT".
Exhibit P2 TRUE COPY OF THE LETTER OF ACCEPTANCE DATED
13.12.2017 ISSUED BY THE 2ND RESPONDENT IN
FAVOUR OF THE PETITIONER.
Exhibit P3 TRUE COPY OF THE RELEVANT EXTRACTS OF THE
AGREEMENT DATED 03.02.2018 ENTERED INTO
BETWEEN THE PETITIONER AND RESPONDENT.
Exhibit P4 TRUE EXTRACT COPY OF THE PETITIONER FIRM'S
DETAILS FROM THE REGISTRAR OF PARTNERSHIPS.
Exhibit P5 TRUE COPY OF THE ORDER NO. A2/824/2018 OF THE
SUPERINTENDING ENGINEER, PWD DATED
30.04.2018.
Exhibit P6 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 20.02.2018.
Exhibit P7 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 19.06.2019.
Exhibit P8 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 12.03.2021.
Exhibit P9 TRUE COPY OF SUPPLEMENTAL AGREEMENT NO. 1
DATED 24.09.2019 EXECUTED BETWEEN THE
PETITIONER AND 2ND RESPONDENT.
Exhibit P10 TRUE COPY OF SUPPLEMENTAL AGREEMENT NO. 2
DATED 01.01.2020 EXECUTED BETWEEN THE
PETITIONER AND 2ND RESPONDENT.
Exhibit P11 TRUE COPY OF SUPPLEMENTAL AGREEMENT NO. 4
DATED 16.09.2020 EXECUTED BETWEEN THE
PETITIONER AND 2ND RESPONDENT.
Exhibit P12 TRUE COPY OF THE MOST RECENT EXTENSION
REQUEST DATED 20.12.2021 SENT BY THE
PETITIONER TO THE RESPONDENTS.
Exhibit P13 TRUE COPY OF THE FIRST NOTICE PRIOR TO
TERMINATION ISSUED BY THE 2ND RESPONDENT
DATED 01.12.2021.
Exhibit P14 TRUE COPY OF THE PETITIONER'S REPLY DATED
28.12.2021.
Exhibit P15 TRUE COPY OF THE SUPPLEMENTAL AGREEMENT NO. 3
DATED 13.03.2020 EXECUTED BETWEEN THE
PETITIONER AND 2ND RESPONDENT.
Exhibit P16 TRUE COPY OF THE RELEVANT EXTRACTS OF THE
W.P.(C) No. 16643/2022 & batch
ESTIMATE REPORT SUBMITTED ON REVISED
20.12.2021 BY THE 5TH RESPONDENT.
Exhibit P17 TRUE COPY OF THE FINAL NOTICE PRIOR TO
TERMINATION DATED 10.01.2022 ISSUED BY THE 2ND
RESPONDENT.
Exhibit P18 TRUE COPY OF THE ORDER
NO.06/PWD004-18/PD/PMU-KRFB/137R/KKD/2017
DATED 08.04.2022 ISSUED BY THE 2ND
RESPONDENT.
Exhibit P19 TRUE COPY OF THE REPRESENTATION DATED
21.04.2022 SUBMITTED BY THE PETITIONER BEFORE
THE 1 RESPONDENT'S MINISTER FOR PUBLIC WORKS.
Exhibit P20 TRUE COPY OF THE LETTER SENT BY THE 5TH
RESPONDENT TO THE 4TH RESPONDENT.
Exhibit P21 TRUE COPY OF THE PETITIONER'S LETTER
SUBMITTING THE 8TH AND PART BILL TO THE 5TH
RESPONDENT DATED 12.05.2022.
Exhibit P22 TRUE COPY OF THE LETTER OF THE 4TH RESPONDENT
ALONG WITH RELEVANT EXTRACTS OF THE CERTIFIED
BILL ACCOMPANYING.
Exhibit P23 TRUE COPY OF THE NOTICE DATED 24.11.2022
ISSUED TO THE PETITIONER BY THE AUTHORIZED
OFFICER, THE FEDERAL BANK LTD, LCRD,
KOZHIKODE.
Exhibit P24 TRUE COPY OF THE REPLY DATED 5.12.2022 TO EXT.
P23 ISSUED BY THE PETITIONER.
Exhibit P25 TRUE COPY OF THE EMAIL REPLY OF THE BANK TO
EXT.P24 DATED 06.12.2022.
RESPONDENTS' EXHIBITS: NIL
True Copy
PS To Judge.
rv
W.P.(C) No. 16643/2022 & batch
APPENDIX OF WP(C) 16798/2022
PETITIONER'S EXHIBITS:
Exhibit P1 TRUE COPY OF NOTICE INVITING TENDER NO. PMU-
KRFB/T07/2017-18 FOR THE WORK "KIIFB-2016-17
IMPROVEMENT OF KAITHAPOYILKODANCHERY-
AGUSTHIAMUZHI ROAD KM 0/000 TO 21/200 IN
KOZHIKODE DISTRICT DATED 07.05.2018 ISSUED BY
THE. 2ND RESPONDENT.
Exhibit P2 TRUE COPY OF THE LETTER OF ACCEPTANCE DATED
23.08.2018 ISSUED BY THE 2ND RESPONDENT IN
FAVOUR OF THE PETITIONER.
Exhibit P3 TRUE COPY OF THE RELEVANT EXTRACTS OF THE
AGREEMENT DATED 13.09.2018 ENTERED INTO
BETWEEN THE PETITIONER AND RESPONDENT.
Exhibit P4 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 29.08.2019.
Exhibit P5 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 18.09.2019.
Exhibit P6 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 18.09.2019.
Exhibit P7 TRUE COPY OF THE PETITIONER'S LETTER TO THE 2ND
RESPONDENT DATED 11.02.2021.
Exhibit P8 TRUE COPY OF THE SUPPLEMENTAL AGREEMENT NO. 1
DATED 08.06.2020 EXECUTED BETWEEN THE
PETITIONER AND THE 2ND RESPONDENT.
Exhibit P9 TRUE COPY OF THE SUPPLEMENTAL AGREEMENT NO. 2
DATED 11.08.2021 EXECUTED BETWEEN THE
PETITIONER AND THE 2ND RESPONDENT.
Exhibit P10 TRUE COPY OF THE SUPPLEMENTAL AGREEMENT NO. 3
DATED 11.10.2021 EXECUTED BETWEEN THE
PETITIONER AND THE 2ND RESPONDENT.
Exhibit P11 TRUE COPY OF THE FIRST NOTICE PRIOR TO
TERMINATION ISSUED BY THE 2ND RESPONDENT
DATED 20.10.2021.
Exhibit P12 TRUE COPY OF THE REPLY DATED 26.10.2021 SENT BY
THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P13 TRUE COPY OF THE NOTICE DATED 30.11.2021
ISSUED BY THE 2ND RESPONDENT.
Exhibit P14 TRUE COPY OF THE REPLY DATED 21.12.2021 SENT BY
THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P15 TRUE COPY OF THE EMAIL OF THE 2ND RESPONDENT
TO THE PETITIONER.
Exhibit P16 TRUE COPY OF THE 2ND RESPONDENT'S NOTICE
DATED 14.03.2022.
EXHIBIT P17 TRUE COPY OF THE REPRESENTATION DATED
W.P.(C) No. 16643/2022 & batch
15.03.2022 SUBMITTED BY THE PETITIONER BEFORE
THE 2ND RESPONDENT.
EXHIBIT P18 TRUE COPY OF THE LETTER DATED 23.03.2022 SENT
BY THE PETITIONER TO THE 2ND RESPONDENT.
EXHIBIT P19 TRUE COPY OF THE 2ND RESPONDENT'S ORDER NO.
38/PWD004-100/PD/PMU-KRFB/137R/KKD/2018
DATED 08.04.2022.
EXHIBIT P20 TRUE COPY OF THE REPRESENTATION DATED
21.04.2022 SUBMITTED BY THE PETITIONER BEFORE
THE FIRST RESPONDENT'S MINISTER FOR PUBLIC
WORKS.
EXHIBIT P21 TRUE COPY OF THE RELEVANT EXTRACTS LETTER OF
THE 5TH RESPONDENT TO THE 4TH RESPONDENT
DATED 17.03.2022.
EXHIBIT P22 TRUE COPY OF THE PETITIONER'S LETTER
SUBMITTING THE 8TH PART BILL DATED 28.04.2022.
EXHIBIT P23 TRUE COPY OF THE LETTER OF THE CONSULTANT ON
THE PROJECT FORWARDING THE BILL TO THE 5TH
RESPONDENT.
EXHIBIT P24 TRUE COPY OF THE PETITIONER'S LETTER DATED
19.05.2022 REQUESTING MEASUREMENT AND
CERTIFICATION OF THE UNBILLED WORK.
Exhibit P25 TRUE COPY OF THE RELEVANT EXTRACTS OF THE
CERTIFIED BILL FORWARDED ON 17.03.2022 ALONG
WITH EXT. P21.
Exhibit P26 TRUE COPY OF THE LETTER OF THE 5TH RESPONDENT
DATED 29.06.2022 ALONG WITH RELEVANT EXTRACTS
OF THE CERTIFIED BILL INCLUDED THEREWITH.
Exhibit P27 TRUE COPY OF THE COMMUNICATION DATED
21.11.2022 OF THE 5TH RESPONDENT TO THE 4TH
RESPONDENT ALONG WITH RELEVANT EXTRACTS OF
THE CERTIFIED BILL INCLUDED THEREWITH.
Exhibit P28 TRUE COPY OF THE NOTICE DATED 24.11.2022
ISSUED TO THE PETITIONER BY THE AUTHORIZED
OFFICER, THE FEDERAL BANK LTD, LCRD,
KOZHIKODE.
Exhibit P29 TRUE COPY OF THE REPLY DATED 05.12.2022 TO EXT.
P 28 ISSUED BY THE PETITIONER.
Exhibit P30 TRUE COPY OF THE EMAIL REPLY OF THE BANK TO
EXT.P29.
RESPONDENTS' EXHIBITS: NIL
True Copy
PS To Judge.
rv
