Kerala High Court

M/S. Rds Projects Ltd vs State Of Kerala on 23 February, 2024

Author: V.G.Arun

Bench: V.G.Arun

            IN THE HIGH COURT OF KERALA AT ERNAKULAM
                             PRESENT
         THE HONOURABLE THE CHIEF JUSTICE MR. A.J.DESAI
                                &
               THE HONOURABLE MR.JUSTICE V.G.ARUN
    FRIDAY, THE 23RD DAY OF FEBRUARY 2024 / 4TH PHALGUNA, 1945
                       WA NO. 1688 OF 2023
     AGAINST THE JUDGMENT WP(C) 17363/2023 OF HIGH COURT OF
                             KERALA
APPELLANT/S:

            M/S. RDS PROJECTS LTD.,
            HAVING ITS REGISTERED OFFICE AT HO: 427, SOMDUTT
            CHAMBERS-II 9, BIKAJI KAMA PLACE, NEW DELHI 110066
            AND ITS REGIONAL OFFICE AT SHIHAB THANGAL ROAD
            PANAMPILLY NAGAR, KOCHI - 682019 REPRESENTED BY
            ITS DIRECTOR, MR. AMIT VARGHESE JOSEPH, PIN -
            682019

            BY ADVS.
            E.K.NANDAKUMAR (SR.)
            M.GOPIKRISHNAN NAMBIAR;
            K.JOHN MATHAI
            JAI MOHAN
            JOSON MANAVALAN
            KURYAN THOMAS
            PAULOSE C. ABRAHAM
            RAJA KANNAN
            RAJIVE R. RAJ



RESPONDENT/S:
1         STATE OF KERALA
          REPRESENTED BY CHIEF SECRETARY GOVERNMENT
          SECRETARIAT THIRUVANANTHAPURAM, PIN - 695001

2           PRINCIPAL SECRETARY PWD ROADS DIVISION
            GOVERNMENT SECRETARIAT THIRUVANANTHAPURAM, PIN -
            695001.
 W.A. 1688/2023                       -:2:-



3            SUPERINTENDENT ENGINEER PUBLIC WORKS DEPARTMENT
             OFFICE OF THE SUPERINTENDENT ENGINEER NH (CENTRAL)
             CIRCLE, VYTILLA COCHIN, PIN - 682019

             BY ADVS.
             K.GOPALAKRISHNA KURUP, ADVOCATE GENERAL
             SHRI.K.V.MANOJ KUMAR, SENIOR G.P.



OTHER PRESENT:

             ADV. DUSHYANT DAVE (SR.)



      THIS    WRIT     APPEAL   HAVING       COME   UP    FOR    ADMISSION   ON
23.02.2024,      THE    COURT   ON    THE      SAME      DAY    DELIVERED    THE
FOLLOWING:
 W.A. 1688/2023                -:3:-




                       JUDGMENT

A.J. Desai, CJ

The challenge in this appeal filed under Section 5 of the

Kerala High Court Act, 1958 is against the judgment dated

23.08.2023 delivered by a learned Single Judge of this Court

dismissing W.P.(C) No.17363/2023 filed by the present

appellant, by upholding Ext. P49 order dated 27.06.2023

passed by the Superintending Engineer, NH (Central) Circle,

Vytila, Kochi, 3rd respondent, blacklisting the appellant and

barring it from quoting for other works for a period of five

years and simultaneously cancelling the appellant's 'A' Class

contractor's licence, on account of poor workmanship, and

further disqualifying the appellant from participating in any

tender in its own name or by using a different name or

benami and also withholding the security deposit of Rs.

2,00,000/- until further orders, is purported exercise of the

power under clause 2116.2 of PWD Manual.

2. The short facts arising from the records are as under:

2.1 The appellant/petitioner is a company incorporated

under the Companies Act, 1956, and has been offering

building solutions for a broad range of construction and

engineering projects since 1992. It is the case of the petitioner

that the company has completed over a hundred projects

throughout India, out of which, 45 projects are in Kerala, of

which 23 are construction of bridges.

2.2 The Roads and Bridges Development Corporation of

Kerala Limited (hereinafter referred to as RBDCKL) invited

tenders for the construction of a flyover on National

Highway-66 at Palarivattom, Ernakulam. After due process,

the petitioner was awarded the said work being the lowest

tenderer. Accordingly, the petitioner executed an agreement

dated 4.3.2014 (Exhibit-P3) with the RBDCKL. As per the said

agreement, the site had to be handed over to the petitioner

company on 1.6.2014, and the work was required to be

completed within 24 months from the date of the agreement.

2.3 It is the case of the petitioner that the structural

work, except for the wearing coat, was completed by June

2016 and that, as the inauguration of the flyover was

scheduled to be held on 12.10.2016, the company was forced

to complete the work of wearing coats in the monsoon period

itself. As per the statement of the petitioner, the work was

thus completed on 20.09.2016.

2.4 According to the petitioner, there was an error in the

approved drawings and due to the formation of potholes,

there occurred stagnation of water and dust collection on the

expansion joints. To remedy the defects, the issue was

reported to the structural consultant viz., M/s. Nagesh

Consultancy, for expert advice.

2.5 It is the further case of the petitioner that the

consultant, along with the representatives of RBDCKL and

another company viz., KITCO Ltd., which offers consultancy

services in architectural, engineering, technical management

and financial sectors, inspected the site and forwarded their

drawings for rectification of the joints. Thereafter, on

16.11.2016, a review meeting was held by RBDCKL, and as

per Exhibit-P5 minutes, it was decided to take corrective

steps to rectify the defects in the expansion joints between

two strip seal expansion joints. As per the decision of the

aforesaid meeting, the balance drain works were started on

18.11.2016.

2.6 The petitioner submits that, based on the views of

the consultant, Exhibits P6 and P7 requests were made for

rehabilitation/rectification of joints, which were never heeded

to, and the traffic continued to ply through the flyover. The

petitioner also availed services from one M/s. Sanfield India

Pvt. Ltd., for testing certain materials.

2.7 It is the case of the petitioner that, as per the request

made, one Dr. Aravindan, a retired professor of IIT Madras

and head of M/s. Sree Giri Consultants, along with a team

inspected the flyover on 07.11.2016 and 29.10.2017, and

thereafter, prepared a detailed structural design check and

submitted Exhibit P11 report before the RBDCKL. It is

submitted that as per clause 20.2 of the agreement dated

4.3.2014, it was the responsibility of the petitioner to rectify

any defects during the defect liability period at its own costs,

to the satisfaction of the Engineer, KITCO. It is stated that

even though the RBDCKL was intimated with regard to the

nature of defects and methodology to rectify the same, no

action/steps were taken to enable the petitioner to execute

such work at its own expense.

2.8 It is the further case of the petitioner that without

considering the various proposals submitted by it for

rehabilitation of the flyover, RBDCKL engaged IIT Madras to

assess the condition of the flyover and suggest rehabilitation

measures. After conducting a scientific study, the IIT Madras

approved the methodology for bearing replacement of span

P18-AP2 submitted by KITCO. By communication dated

19.03.2019 (Exhibit P12), IIT Madras informed the RBDCKL

about the corrected methodology submitted by the Engineer

was approved by IIT Madras.

2.9 It is the case of the petitioner that the methodology

suggested by IIT Madras was, in essence, the same as the

methodology suggested by the petitioner. Finally, by

communication dated 28.03.2019, RBDCKL permitted the

petitioner to conduct repair works as per the methodology

approved by the IIT Madras. It is also the case of the

petitioner that the repair works, as suggested, were

completed under the supervision of IIT Madras and RBDCKL

as well as the expert panel of three Chief Engineers deputed

by the State of Kerala. The company expended a sum of

Rs.2.63 Crores for the repair works and except the expansion

joint of the span P18-AP2, all other repair works, as

suggested, were commenced on 01.05.2019 and completed on

02.06.2019, under the supervision of the engineers and Dr. P.

Alagasundaramoorthy of IIT Madras. By Exhibit P15 letter

dated 29.07.2019, the petitioner informed RBDCKL and

KITCO that the site was ready for replacement of the final

bearing in span P18-AP2 and sought permission for

completion of all the rectification works by 05.08.2019. Again,

by Exhibit P16 communication dated 18.09.2019, the

petitioner informed RBDCKL and KITCO to complete the

balance work; however, there was no reply from RBDCKL.

2.10 Petitioner has further stated that the Government of

Kerala, being dissatisfied with the inspection report and the

remedial measures of IIT Madras, sought clarification from

Dr. E. Sreedharan, the Principal Advisor of Delhi Metro Rail

Corporation (DMRC for short). It is alleged by the petitioner

that Dr. E. Sreedharan, without conducting a scientific study

or even physical verification, submitted reports dated

03.07.2019, 14.09.2019 and 19.09.2019, contrary to the report

of IIT Madras. Pursuant thereto, Dr. E. Sreedharan submitted

a recommendation dated 03.07.2019 before the Government

of Kerala for rehabilitation of the bridge by dismantling 17

RCC spans and replacing them with PSC girders.

2.11 In view of the different reports, the Government of

Kerala constituted a committee to examine both the reports,

i.e., the reports of the IIT Madras and Dr. E. Sreedharan. The

petitioner further alleges that the committee so constituted,

without conducting any scientific study, submitted a report

dated 04.10.2019. The Government of Kerala, by passing an

order dated 25.10.2019 (Exhibit P17), accepted the

recommendation of the technical committee appointed by it

to resolve the dispute, and decided that the DMRC should

take over the bridge for rehabilitation and further directed

the RBDCKL to realise the loss sustained from the petitioner.

2.12 Considering the contents of the reports, an FIR in

Vigilance Case No. 1/2019 was also filed in the Court of

Vigilance and Anti-corruption Bureau, Muvattupuzha,

against the petitioner. The petitioner challenged the order

dated 25.10.2019 (Exhibit P17) by filing W.P.(C)

No.30487/2019 before this Court, and the learned Single

Judge stayed all coercive action, including the attachment of

the bank account of the petitioner.

2.13 The petitioner had also filed W.P.(C) No.26030/2019

seeking a direction to conduct a load test on the bridge. Since

other Public Interest Litigations were preferred with regard

to the flyover in question, all the matters were heard

together, and by an order dated 21.11.2019 (Exhibit-P19), a

Division Bench of this Court directed the State of Kerala to

conduct a load test of the Palarivattom flyover through an

approved qualified agency capable of conducting such a test,

with notice to all the stakeholders.

2.14 The said decision was challenged by the State of

Kerala before the Hon'ble Supreme Court. The Hon'ble Apex

Court, by judgment dated 22nd September 2020 in Civil

Appeal Nos.3239-3246 of 2020, arising out of SLP(C)

Nos.3008-3015 of 2020, set aside the judgment delivered by

the Division Bench of this Court, by which, a fresh load test

was ordered to be conducted.

2.15 Subsequent to the judgment of the Hon'ble Apex

Court, Government of Kerala passed another order, viz.,

Exhibit-P21, granting administrative sanction to DMRC for

rehabilitation of the Palarivattom flyover, with a further

direction to realise the cost of rehabilitation from the

petitioner. The petitioner thereafter filed Civil Suit

No.80/2021 before the Commercial Court, Ernakulam, on the

ground of breach of contract, seeking recovery of the amount

due to the petitioner and for a declaration that the

Government Orders dated 25.10.2019 and 07.10.2020 are

illegal, ab initio void and non est in law. The RBDCKL also

instituted a suit, being C.S. No.240/2022, before the

Commercial Court, Ernakulam, for realisation of a sum of

Rs.24,52,22,498/- being the alleged loss incurred for the

demolition and reconstruction of the flyover in question.

Both these suits are pending before the concerned court.

2.16 When the petitioner was excluded from

participating in the bid process for another project of the

Government of Kerala, a writ petition, being W.P.(C)

No.31556/2019, came to be filed challenging the action of the

Government, since the petitioner was never blacklisted. The

said writ petition was admitted, and by judgment dated

04.05.2020, a learned Single Judge of this Court disposed of

the same with a direction to the State authorities to conclude

the blacklisting process as early as possible.

2.17 Subsequent to the direction issued by this Court,

the 3rd respondent, i.e., the Superintending Engineer, Public

Works Department, NH (Central) Circle, Vyttila, Cochin,

issued a notice dated 8.2.2023 (Exhibit P42), calling upon the

Managing Director of the appellant company why action for

blacklisting the company should not be undertaken and also

requiring the petitioner to remain present on 21.02.2023

before the Superintending Engineer. Exhibit P42 notice was

challenged by the appellant by way of W.P.(C) No. 5722/2023

on the ground that the said notice does not disclose any

reasons for the proposed action of blacklisting the petitioner.

2.18 The above said writ petition came to be disposed of

by judgment dated 20.02.2023, directing the Superintending

Engineer, PWD, to provide the details with respect to the

blacklisting procedure adopted, so as to enable the petitioner

to file a suitable reply when he appears before the said

authority for hearing. In compliance with the said order, by

communication dated 5.5.2023, the Superintending Engineer

supplied the details regarding the allegations raised against

the petitioner. The petitioner submitted its reply dated

26.05.2023, raising various issues regarding the proposed

action of blacklisting initiated by the Superintending

Engineer. After considering the material on record and the

reply submitted by the petitioner, the Superintending

Engineer passed the impugned Exhibit P49 order on

27.06.2023. Being aggrieved by the said order, the captioned

writ petition is filed.

2.19 In response to the notice issued by the learned

Single Judge, the Executive Engineer, Public Works

Department, NH, Central Circle, Vytila, on behalf of the 3 rd

respondent, filed a detailed counter affidavit dated 24.07.2023

along with certain documents. After considering the rival

submissions and the materials on record, the learned Single

Judge dismissed the writ petition by the impugned

judgment. Hence, this appeal.

3. Learned Senior Counsel Sri. Dushyant Dave, ably

assisted by Adv. Sri. Jai Mohan and Adv. Sri. Rajive R. Raj,

for the appellant, challenged the authority on the part of the

State of Kerala to pass Exhibit P49 order dated 27.06.2023,

blacklisting the appellant. It was argued that the appellant

had entered into an agreement with the Roads and Bridges

Development Corporation of Kerala Limited, a company

registered under the Companies Act and thus, an

independent legal entity. Therefore only the RBDCKL can

take action in case of breach of contract entered between the

appellant and RBDCKL.

4. Being a public limited company, RBDCKL is

governed by clause 4 of its Articles of Association. The

Articles of Association empower the Directors of the

company to institute, conduct, defend, compound or

abandon any legal proceedings by or against the company or

its officers. By taking us through clause 34.12 of the Articles

of Association of RBDCKL, he would submit that the

company can be sued or can sue with regard to any claims or

demands by or against the company.

5. Learned Senior Counsel would further submit that as

per clause 34.28 of the Articles of Association, the Directors

can enter into all such negotiations and contracts and rescind

and vary all such contracts. He would also submit that the

control of the Government under clause 35 of the Articles of

Association is only with respect to (a) increasing or reducing

the authorised capital of the company; (b) winding up of the

company; and (c) taking or otherwise acquiring or holding

shares in any other company exceeding Rs.5 Crores. He

would, therefore, submit that issues arising out of the subject

contract can only be dealt with by RBDCKL and not by the

State of Kerala, as has been done in the case on hand.

Learned Senior Counsel would, therefore, submit that the

decision taken by the State of Kerala regarding blacklisting

the appellant is patently illegal for lack of authority,

jurisdiction or power to deal with the alleged breach of

contract between two independent entities.

6. He would further submit that a public limited

company is equal to a natural person and a legal entity. In

support of the said submission, he has relied upon a decision

of the Constitutional Bench of the Hon'ble Supreme Court in

the case of Tata Engineering and Locomotive Co. Ltd. v.

State of Bihar [(1964) 6 SCR 885]. He would submit that,

being an individual legal entity, it can sue or be sued

exclusively for its own purpose. He would further submit

that RBDCKL has already filed a civil suit for recovery of

money before a competent civil court, which is pending for

final disposal.

7. Sri. Dushyant Dave would further submit that the

State of Kerala is only a shareholder of the company and,

therefore, the State of Kerala and its departments cannot take

any action on behalf of RBDCKL, including blacklisting a

contractor on the ground of alleged breach of contract. In

support of his submission, the learned Senior Counsel has

relied upon the decision of the Hon'ble Apex Court in the

case of Heavy Engineering Mazdoor Union v. State of Bihar

& Ors. [(1969) 1 SCC 765]. He would, therefore, submit that

the decision taken by the State authorities with respect to the

blacklisting of the appellant is void ab initio and requires to

be quashed and set aside.

8. The learned Senior Counsel would further submit that

the State of Kerala has undertaken the action of blacklisting

under the PWD Manual, which governs only the contractors

who are registered under the said manual and have entered

into contracts for executing works with the Kerala PWD. In

paragraph 1902 of the PWD Manual, which provides the

rules for registration of contractors executing works in the

Kerala PWD, it has been explicitly stated that only those

persons who have registered themselves as contractors under

these rules would be entitled to submit tenders for the work

in PWD. He would submit that the subject work was

assigned to the present appellant not by the State of Kerala

but by a company, viz., RBDCKL, and therefore, the action

taken with regard to the blacklisting of a registered

contractor under the PWD Manual is misconceived,

inappropriate, and that the authority ought not have passed

such an order when the appellant had never entered into a

contract for execution of works with the Kerala PWD.

9. It was argued that neither at the time of inviting

tenders by the RBDCKL nor at the time of execution of the

contract, it was mentioned that the contract would be

covered by the Kerala PWD Manual. In the absence of

specific conditions, the Government of Kerala cannot initiate

any action against the contracting party for the so-called

breach of the manual and backlist a contractor who had

entered into an agreement with a legal entity, viz., RBDCKL,

of which the Government is the shareholder. No powers are

assigned to the State of Kerala in the Memorandum of

Articles of RBDCKL to take any action for blacklisting a

contractor. He would submit that merely for the reason that

only registered contractors were permitted to participate in

the tender process, the State of Kerala is not empowered to

take action on the ground of alleged breach of contract

between a private entity and a public limited company, i.e.,

RBDCKL. He would also submit that, even though, as per

clause 5.1(b) of the tender agreement, a contract shall be

governed by and be construed in accordance with the

governing law of India and also the laws in force in the State

of Kerala, that does not mean that the government can take

action against the contractor for alleged breach of contract.

The only interpretation that can be arrived at from the above

clause is the applicability of laws rather than the terms and

conditions of the PWD Manual, which would apply only

when a party enters into a contract with any department of

the State of Kerala. He would also submit that RBDCKL is

not a department but a company having its own articles of

association. Therefore, on these grounds also, the action

taken by the State authorities to blacklist the petitioner is

required to be quashed and set aside.

10. The learned Senior Counsel appearing for the

appellant would further submit that the alleged breach of

contract is by a non-Government entity and, therefore, the

PWD Manual would not be applicable to the present

appellant. He would also submit that the powers under

paragraph 1917 of the Manual regarding blacklisting of a

contractor by the registering authority cannot be exercised

against the present contractor/appellant, which has entered

into an agreement with a third party, i.e., RBDCKL.

11. Alternatively, he would submit that the reason for

blacklisting the appellant recorded in Exhibit P49 order dated

27.06.2023 is poor workmanship. He would submit that a

contractor can be blacklisted only on specific grounds, which

are referred to in paragraph 1917 of the PWD Manual. One of

the reasons referred to therein is clause 1917(vii), which is

poor workmanship. Clause (viii) was inserted by G.O.(Rt.)

No.552/2020/PWD dated 23.06.2020. He would further

submit that this clause would also not be applicable to the

appellant since the parties have entered into a contract much

before the insertion of the aforesaid clause. Therefore, on this

ground also, Exhibit P49 order is required to be quashed.

12. By taking us through the order impugned dated

27.06.2023 (Exhibit P49), he would further submit that the

same is a non-reasoned order and is therefore required to be

quashed on that ground also.

13. On the other hand, learned Advocate General Sri. K.

Gopalakrishna Kurup, ably assisted by Sri. K.V.

Manojkumar, learned Senior Government Pleader for the

State, has opposed the writ appeal and supported the order

which was impugned in the writ petition and the judgment

delivered by the learned Single Judge.

14. He would submit that the RBDCKL is a

Government company, and while inviting tenders, a specific

condition was mentioned that only registered contractors are

permitted to take part in the tender and, therefore, it is

implied that the Government is the final authority to deal

with the issues that arise with regard to the contract entered

into between the contractor and tenderer company.

15. By taking us through clause 5.1(b) of the agreement,

he would submit that it has been made clear therein that the

contract shall be governed by and construed in accordance

with the governing law of India as well as the laws in force in

the State of Kerala. He, therefore, would submit that the

petitioner was fully aware that, while entering into a contract

with RBDCKL, the PWD Manual would be applicable with

respect to the agreement entered into between the parties.

16. Learned Advocate General would further submit

that under the PWD Manual, a person can be blacklisted on

various grounds, including poor workmanship. By taking us

through clause 1917 of the Manual, which deals with

blacklisting, he would submit that clause (viii) was inserted

with effect from 26.03.2020. He would argue that the

submissions made by the learned Senior Counsel for the

appellant that an amendment in the Manual subsequent to

the contract is not applicable is misconceived, since the issue

with regard to the poor workmanship subsisted till 2023. He

would submit that action was taken after getting reports from

several authorities regarding the poor workmanship on the

part of the contractor. The State is bound to blacklist the

contractor if there is poor workmanship and the contractor's

registration is also liable to be cancelled.

17. In support of his submissions, the learned Advocate

General has relied on the decision of the Hon'ble Apex Court

in Patel Engineering Limited v. Union of India and Another

reported in (2012) 11 SCC 257. He would submit that in the

said decision, the Hon'ble Apex Court has held that,

empowering the Government to blacklist a person has the

effect of preventing a person from the privilege and

advantage of entering into a lawful relationship with the

Government for purposes of gains, when the Government

has come to the conclusion that there was poor workmanship

on that person's part. He would submit that the decision to

blacklist was taken based on the technical committee's report

and not by relying upon clause 1917 of the Kerala PWD

Manual.

18. By taking us through the order dated 7.6.1999, which

has been produced for the first time before this Court, the

learned Advocate General submitted that the Roads

Development Corporation formed by the Government was

renamed as the Roads and Bridges Development Corporation

of Kerala Limited and, therefore, it is a part and parcel of the

Government of Kerala.

19. By relying upon another decision of the Hon'ble

Apex Court in the case of Kulja Industries Ltd. v. Chief Gen.

Manager W.T. Proj. BSNL [AIR 2014 SC 9], the learned

Advocate General would submit that the scope of judicial

review with regard to the decision of blacklisting a contractor

is narrow and the writ court may be loath to interfere with

such a decision.

20. By taking us through the invitation for bids (IFB)

issued by the RBDCKL, wherein it is explicitly stated that the

Government of Kerala had assigned the project in question to

RBDCKL, it is argued that the petitioner was fully aware of

the control of the State of Kerala with regard to the contract

in question. He would submit that the State of Kerala has

taken the impugned decision after going through various

reports and had to carry out the repair works through

another contractor, sustaining huge loss, for which a suit has

already been filed. The filing of suits by the parties would

not debar the authorities from blacklisting the contractor. As

the decision to blacklist the petitioner was in accordance with

law, the learned Single Judge has committed no error in

dismissing the writ petition. The learned Advocate General,

therefore, prayed that this appeal be dismissed.

21. We have heard the learned Advocates for the

respective parties and perused the documents, including the

impugned judgment.

22. It is an undisputed fact that RBDCKL is a company

registered under the Companies Act, 2013. It is true that by

order dated 7.6.1999, the Road Development Corporation

was renamed as the Roads and Bridges Development

Corporation of Kerala Limited (RBDCKL) by the

Government of Kerala. However, the new entity has been

registered as a company under the provisions of the

Companies Act, 2013 and is therefore, a legal entity that has

to deal with its issues in accordance with the Articles of

Association of the company as well as the other general laws

in force.

23. As per the Articles of Association, the company is a

public limited company, and as per Article 4, the company is

to be governed by the Articles. The Articles of Association

empower the company to increase, reduce and alter its

capital, issue new shares, transfer shares, etc. That apart, the

Government can appoint directors from time to time apart

from the nominee directors. Going through the Articles of

Association, it can also be seen that specific powers are given

to the directors, particularly under clause 34.12, which reads

as under:

"To institute, conduct, defend, compound or

abandon any legal proceedings by or against the

Company or it's officers or otherwise the affairs of

the Company, and also to compound and allow time

for payment or satisfaction of any debt due or of any

claims or demands by or against the Company."

24. It is also evident from the Articles of Association that

the Director has the power to enter into negotiations of a

contract under clause 34.28, which reads as under:

"To enter into all such negotiations and contracts

and rescind and vary all such contracts and execute and

do all such acts, deeds and things in the name and on

behalf of the Company as they may consider expedient

for or in relation to any of the matters aforesaid or

otherwise for the purpose of the Company."

25. As per clause 35 of the Articles of Association, the

Government is the only holder of the company. The said

clause reads as under:

"DIRECTIONS BY THE GOVERNMENT

35. Subject to the Provisions of the Act, the

chairman shall reserve for the approval of the

Government any proposals or decisions of the Board in

respect of the following matters namely :-

a. Increasing or reducing authorized capital of the

Company.

b. Winding up of the Company.

c. Taking or otherwise acquiring or holding shares

in any other Company exceeding Rs.5 Crores.

26. From the above clauses of the Articles of Association,

it is clear that RBDCKL, which had entered into an

agreement, is empowered to take legal action, including the

institution of a suit which has already been filed before a

competent civil court. Therefore, when the company is

inviting tenders and intends to see that specific terms and

conditions are to be impliedly read in the contract, it has the

power to clarify while inviting tenders from registered

contractors that the Kerala PWD Manual would govern the

contract. In the present case, there is no specific reference

with regard to the applicability of the PWD Manual in the

tender notice. Therefore, the submission made by the

learned Advocate General that assigning the project in

question to RBDCKL is sufficient to deal with the issue

regarding breach of contract as per the PWD Manual, cannot

be countenanced. It is the legitimate expectation of the

participants to know the implications and rights regarding

the contract. That apart, it was the duty of the RBDCKL,

while inviting tenders, to specifically state that the Kerala

PWD Manual would be applicable to the party entering into

the agreement for executing the work. That apart, even while

entering into an agreement in the year 2014, nothing was

mentioned about the applicability of the Kerala PWD

Manual. We have gone through the Agreement

No.RBDC/Work/04/2014 entered into between RBDCKL and

the present petitioner. We do not find any such clause

referred to in the agreement. The present appellant is a

Contractor within the meaning of clause 1.1(a) (ii) of the

conditions of the contract, whereas RBDCKL is an Employer

within the meaning of clause 1.1(a)(i). The said clauses read

as under:

"Definitions

1.1 In the Contract (as hereinafter defined) the

following words and expressions shall have

the meanings hereby assigned to them,

except where the context otherwise requires:

(a) (i) "Employer" means the person named as

such in Part II of these Conditions and the

legal successors in title to such person, but

not (except with the consonant of the

Contractor)any assignee of such person.

(ii) "Contractor" means the person whose

tender has been accepted by the Employer

and the legal successors in title to such

person, but not (except with the consent of

the Employer) any assignee of such person."

27. For our consideration, clauses 49.2 and 49.4 of the

conditions of the contract for works of civil engineering

construction, which are relevant, are reproduced hereunder:

"49.2 - Completion of outstanding Work and

Remedying Defects - To the intent that the Works shall,

at or as soon as practicable, after the expiration of the

Defects Liability Period, be delivered to the Employer in

the condition required by the Contract, fair wear and

tear excepted, to the satisfaction of the Engineer, the

Contractor shall:

(a) complete the work, if any, outstanding on the

date stated in the Taking-Over Certificate as

soon as practicable after such date, and

(b)execute all such work of amendment,

reconstruction and remedying defects,

shrinkages or other faults as the Engineer may,

during the Defects Liability Period or within 14

days after the expiration, as a result of an

inspection made by or on behalf of the Engineer

prior to its expiration, instruct the Contractor to

execute.

"49.4 - Contractor's Failure to Carry Out Instructions - In

case of default on the part of the Contractor in carrying out

such instruction within a reasonable time, the employer shall be

entitled to employ and pay other persons to carry out the same

and if such work which, in the opinion of the Engineer, the

Contractor was liable to do at his own cost under the Contract,

then all costs consequent thereon or incidental thereto shall

after due consultation with the Employer and the Contractor,

be determined by the Engineer and shall be recoverable from

the Contractor by the Employer, and may be deducted by the

Employer from any monies due or to become due to the

Contractor and the Engineer shall notify the Contractor

accordingly with a copy to the Employer."

28. The remedies available under clause 63.1 of the

conditions of the contract read as under:

"If the Contractor is deemed by law unable to pay

his debts as they fall due, or enters into voluntary or

involuntary bankruptcy, liquidation or dissolution (other

than a voluntary liquidation for the purposes of

amalgamation or reconstruction), or becomes insolvent,

or makes an arrangement with, or assignment in favour

of, his creditors, or agrees to carry out the Contract under

a committee of inspection of his creditors, or if a receiver,

administrator, trustee or liquidator is appointed over any

substantial part of his assets, or if, under any law or

regulation relating to organisation, arrangement or

readjustment of debts, proceedings are commenced

against the Contractor or resolutions passed in connection

with dissolution or liquidation or if any steps are taken to

enforce any security interest over a substantial part of the

assets of the Contractor, or if any act is done or event

occurs with respect to the Contractor or his assets which,

under any applicable law has a substantially similar effect

to any of the foregoing acts or events, or if the Contractor

has contravened Sub Clause 3.1, or has an execution

levied on his goods, or if the Engineer certifies to the

Employer, with a copy to the Contractor, that, in his

opinion, the Contractor:

(a) has repudiated the Contract:


            (b) without reasonable excuse has failed

                 (i)     to commence the Works in accordance

                        with Sub-Clause 41.1, or

(ii) to proceed with the Works, or any Section

thereof, within 28 days after receiving

notice pursuant to Sub-Clause 46.1.

(c) has failed to comply with a notice issued

pursuant to Sub-Clause 37.4 or an instruction

issued pursuant to Sub-Clause 39.1 within 28

days after having received it,

(d) despite previous warning from the Engineer, in

writing, is otherwise persistently or flagrantly

neglecting to comply with any of his obligations

under the Contract, or

(e) has contravened Sub-Clause 4.1.

then the Employer may, after giving 14 days' notice

to the Contractor, enter upon the Site and the Works

and terminate the employment of the Contractor

without thereby releasing the Contractor from any

of the obligations or liabilities under the Contract,

or affecting the rights and authorities conferred on

the Employer or the Engineer by the Contract, and

may himself complete the Works or may employ

any other contractor to complete the Works. The

Employer or such other contractor may use for such

completion so much of the Contractor's Equipment,

Temporary works and materials as he or they may

think proper."

29. Apart from the six important clauses referred to

above, since the learned Advocate General has made several

references regarding the applicability of the PWD manual,

we would refer to clause 5.1 of the General Conditions of

Contract, which reads as under:

"5.1 (a) Language

xxxxxxxxx

(b) Law

The contract shall be governed by and construed

in accordance with the governing law of India

and also the laws in force in the State of Kerala

and no suit or other proceeding relating to the

Contract shall be filed or taken by the contractor

in any court of law except a court of law having

jurisdiction in Ernakulam district which shall

hear and determine all actions and proceedings

connection with and arising out of the Contract,

and the Contractor shall submit to the

jurisdiction of the aforesaid Court of Law for the

purpose of any such action and proceedings.

(c) The Customs and Security Requirements

The Contractor shall comply with all regulations

for the time being imposed by the Customs and

port Security Authorities in respect of the passage

of plant, vehicles, materials and personnel

through custom barriers.

In case of any ambiguities or discrepancies, the

priority shall be as under:

1. Agreement.

2. Priced Bill of Quantities, Correspondence after

submitting bid and before Letter of

acceptance/modification/amendments.

3. Technical Specifications.

4. Technical specifications (Part C) MOST

5. Special conditions of contract, and Contract

data.

6. General Conditions of Contract- Conditions of

Particular Applications

7. General conditions of contract (FIDIC)"

30. On a plain reading of the above clause, the

submission made by the learned Advocate General that the

Kerala PWD Manual would apply, since the laws of the State

of Kerala govern the contract cannot be accepted because the

PWD Manual is not a law. Therefore, the submission about

the applicability of the manual is liable to be rejected.

31. As stated hereinabove, merely because the State of

Kerala is holding the shares in a public limited company, the

company cannot ordinarily be presumed to be a department

or agent of the State. The Hon'ble Apex Court, in the case of

Heavy Engineering Mazdoor Union (cited supra), held as

under:

"5. It is true that besides the Central Government

having contributed the entire share capital, extensive

powers are conferred on it, including the power to

give directions as to how the company should

function, the power to appoint directors and even the

power to determine the wages and salaries payable by

the company to its employees. But these powers are

derived from the company's memorandum of

association and the articles of association and not by

reason of the company being the agent of the Central

Government. The question whether a corporation is

an agent of the State must depend on the facts of each

case. Where a statute setting up a corporation so

provides such a corporation can easily be identified as

the agent of the State as in Graham v. Public Works

Commissioners, 1901 (2) KB 781 where Phillimore, J.

said that the Crown does in certain cases establish

with the consent of Parliament certain officials or

bodies who are to be treated as agents of the Crown

even though they have the power of contracting as

principals. In the absence of a statutory provision,

however, a commercial corporation acting on its own

behalf, even though it is controlled wholly or partially

by a Government department, will be ordinarily

presumed not to be a servant or agent of the State. The

fact that a minister appoints the members or directors

of a corporation and he is entitled to call for

information, to give directions which are binding on

the directors and to supervise over the conduct of the

business of the corporation does not render the

corporation an agent of the Government. [See State

Trading Corporation of India Ltd. v. Commercial Tax

Officer, Visakhapatnam, 1964 (4) SCR 99 at p. 188 :

AIR 1963 SC 1811 at p. 1849 per Shah, J. and Tamlin v.

Hannaford, 1950 (1) KB 18 at pp. 25, 26] Such an

inference that the corporation is the agent of the

Government may be drawn where it is performing in

substance governmental and not commercial

functions. (Cf: London County Territorial and

Auxiliary Force Association v. Nichols, 1948 (2) All ER