C.Y. Chaluvegowda vs Cauvery Niravari Nigama Niyamitha

B. Manohar, J.—The Petitioner has sought for quashing the Minutes of the Proceedings dated 3-1-2009 (vide Annexure-A) refusing to make payments relating to the execution of the work/additional work done by the Petitioner. Further, the Petitioner also sought for quashing the communications at Annexures-B and C and also for a direction, directing the Respondents to make payment to the Petitioner in respect of other works done by him.

The facts of the case are as under:

The first Respondent - Cauvery Niravari Nigama issued tender notification dated 29-10-2004 for carrying out the work of Cement Concrete Lining of Tumkur Division canal from Ch.38000 meters to 39000 meters in 39th Km. and also from Ch.39000 meters to 40000 meters in 40th Km. The Petitioner being a Class-I contractor submitted his tender. Since the Petitioner was a lowest tenderer he was entrusted with the work of providing Cement Concrete Lining of canals. Accordingly, the Petitioner entered into two separate agreements with the first Respondent on 29-10-2004 in respect of lining work from Ch.38000 meters to 39000 meters in 39th. Km and Ch.39000 meters to 40000 meters in 40th Km in Tumkur division. The tender amount is Rs. 84,12,354/- in respect of the first agreement and in respect of the second agreement the tender amount is for Rs. 78,60,060/-. The work has to be completed within a period of six months including rainy season. The work order was issued and work site was handed over to the Petitioner on 20th January 2005 after taking measurement of the work in presence of both the parties. The Petitioner signed the measurement also. As per the agreements, the Petitioner has to complete the work by 19th July 2005. Though the Petitioner commenced the work in respect of the first agreement, he has completed only the earthwork and removal of the silt for 100 meters and no further progress has been made. In respect of the second agreement he has executed the work of concrete lining to the extent of 750 meters, in other words he had completed the work for an amount of Rs. 49,22,726/- and thereafter he stopped the work on the ground that the work includes additional work of excavation of the Canal bed, which consists of boulders and it is extremely difficult to do the work, by increasing the depth of the canal. Unless boulders are removed, he cannot continue the work and he made a representation to the Respondents. The Respondents visited the spot and gave technical instructions to do the lining work and further directed the Petitioner not to do the excavation of the canal in 40th Km., otherwise, the depth of the canal will be increased and closed the bed with the boulders by cement lining. In spite of the repeated instructions, the Petitioner has not commenced the work. The Assistant Executive Engineer in his letters dated 7-3-2005 & 26-3-2005 issued directions to the Petitioner as to how to complete the work without digging the canal, if the digging is deeper than the stipulated measurement, the Contractor will be held responsible. Thereafter, on 30-4-2005, the Respondents directed the Petitioner to complete the lining work in respect of first agreement i.e. from Ch.38000 to 39000 wherein he has completed only earthwork. The technical assistance was also given to the Petitioner to maintain standard in the work. Thereafter, on 13-6-2005, a letter was issued to the Petitioner informing him that the progress of the work is very slow and the same will be brought to the notice of the higher authorities. Thereafter, on 28-6-2005, the Assistant Executive Engineer issued a notice calling upon the Petitioner to complete the work within the specified time. In spite of the same, the Petitioner has not commenced the work. In view of that another notice came to be issued to the Petitioner on 4-10-2007 to be present in the Work spot for the measurement of the work on 27 10-2007. In spite of the said notice, the Petitioner failed to be present in the work spot on 27-10-2007. In his absence, the measurement of the work was also taken and thereafter, the Respondents rescinded both the contracts entered into between the parties.

The Petitioner being aggrieved by the order of rescinding the contract and also notification dated 25-6-2008 issued by the first Respondent inviting fresh tender for concrete lining of canal work from Ch.38000 to 39000 in 39th Km and pending work of Ch.39000 to 40000 in 40th Km, filed W.P. No. 11738/2008 before this Court. In the said writ petition, the Petitioner has also made a prayer to consider his representation dated 17-6-2008 for payment of the work already executed by him. In the writ petition he has not pressed the prayer insofar as challenging the notification inviting fresh tender, however, confined his prayer with regard to consideration of his representation dated 17-6-2008. This Court by an order dated 15-9-2008 disposed of the writ petition with a direction to the Respondents to consider the representation of the Petitioner dated 17-6-2008. Pursuant to the same, the Respondents considered the representation and passed the impugned order dated 3-1-2009 vide Annexure-A. Further, the Respondents also got completed the work from other contractors by issuing fresh tender notification. Due to which, the Respondents have suffered loss of Rs. 87,52,395/-. In order to recover the said amount, the Respondents issued a letter dated 31.3.2010 and also sought for issuance of directions to the Divisional Offices not to make payments to the Petitioner in respect of other works he has executed. Being aggrieved by the same, the Petitioner filed this writ, petition.

Sri. M.R. Naik, learned Senior Advocate appearing for the Petitioner contended that the cancellation of the tender awarded to the Petitioner is contrary to law and the Petitioner has executed substantial work. While executing the work, he has done some additional work also. Further, the earthwork and removal of the silt from the canal is not a part of the agreement, however, he has done that work also. For the lining work, he has to excavate the canal bed and to remove the boulders, for which he has to incur substantial expenditure. In spite of repeated requests, the Respondents have not taken note of the extra work done by the Petitioner. Further, while executing the work between Ch.33000 to 39000 in 39th Km, the Petitioner noticed that the canal bed is 0.8 meters to 1.12 meters above the design level. Since the canal bed was above the design level, it is difficult to carry out the concrete work, unless the canal bed level is increased. In spite of repeated requests, the Respondents have not given any technical'' assistance or instructions, hence he could not complete the work between Ch. 38000 to 39000 and he has done entire work as per the second agreement. The cancellation of the tender work is contrary to law. He further contended that withholding the amount in respect of other contract works done by the Petitioner is also contrary to law. Unless the damages are ascertained by the Competent Authorities in accordance with law, the Respondents cannot assess the damages on their own and withhold the amount of the Petitioner in respect of other works done by him and sought for quashing the impugned order by allowing the writ petition.

On the other hand, Sri. M.R.C. Ravi, Advocate appearing for the Respondents contended that, the writ petition filed by the Petitioner is not maintainable before this Court as he has got remedy under Clause 29 of the Agreement. The agreements entered into between the Petitioner arid Respondents are not statutory agreements and they are private agreements. Hence, the writ petition filed by the Petitioner is not maintainable. The Respondents further contended that the cement concrete lining work of Tumkur Division canal was entrusted to the Petitioner as per the agreement dated 29-10-2004. As per the terms and conditions of the agreement, he has to complete the work within a period of 6 months. However, the Petitioner has not started the concrete lining work in respect of Ch. 38000 to 39000 in 39th Km., and in respect of the second agreement, he has completed the concrete lining work to the extern of only 750 meters. Thereafter he abruptly stopped the work. In spite of repeated directions, the Petitioner has not completed the work. Several notices have been issued calling upon the Petitioner to complete the work otherwise, the contract work will be cancelled. In spite of the same, the Petitioner failed to complete the tender work. Thereafter, a notice was issued on 4-10-2007 calling upon the Petitioner to be present in the work spot for taking measurement of the work he had executed. In spite of the same, the Petitioner remained absent and in his absence measurement was taken. Thereafter, the contract entered into between the Petitioner and Respondents was rescinded and fresh tender notification was issued on 25-6-2008. After inviting fresh tender, the work was entrusted to the other contractors. Upon inviting fresh tender, the Respondents had incurred extra amount of Rs. 87,52,395/- for completion of the work. In order to recover the said amount from the Petitioner, the notices at Annexures-B and C were issued. Further, a direction was also issued to the other Executive Engineers not to make payment to the Petitioner, in respect of other contract works done by him and also forfeited the EMD amount. Learned Counsel submits that there is no infirmity of irregularity in the action of the Respondents and sought for dismissal of the writ, petition.

I have carefully gone through the impugned order passed by the Respondents and considered the arguments advanced by the learned Counsel for the parties.

It is not in dispute that the Petitioner is a Class-I contractor and the successful bidder and he was entrusted the work of carrying out cement concrete lining of Tumkur Division Canal from Ch. 38000 to 39000 in 39th Km and Ch. 39000 to40000 in 40th Km. Thereafter the agreements were also entered into between the parties on 29-10-2004 and the work order was issued and the site was handed over to the Petitioner on 20-1-2005 after taking measurement of the proposed work. The records clearly disclose that the Petitioner has not commenced the lining work in respect of Ch. 38000 to 39000 of 39th Km, however he has done the canal work of Ch. 39000 to 40000 in 40th Km, to the extent of 750 meters and thereafter, he has stopped the work and started demanding the additional payment for the additional work he has done. In spite of the directions issued by the Respondents, the Petitioner has not completed the concrete lining work: In view of that, the contract awarded to the Petitioner was rescinded and fresh tender notification was issued. The action of the Respondents in canceling the tender and inviting fresh tender was questioned in WP. No. 11738/2008, wherein the Petitioner has not pressed the prayer insofar as rescinding the tender agreement entered between him and the Respondents and also inviting the fresh tender. However, he confined his prayer to consider his representation to make payment in respect of the work already executed by the Petitioner. This Court issued directions to the Respondents to consider the representation of the Petitioner and the same was considered and held that there is no infirmity in canceling the tender and inviting fresh tender. In order to recover the expenditure incurred for completion of the work by the other contractors, a notice has been issued to the Petitioner for payment of Rs. 85,82,395/-. Further, a direction was sought to be issued to the other Executive Engineers not to make payment to the Petitioner in respect of other tender works done by him since the Petitioner is due for more than Rs. 85,00,000/-to the Respondents. The said action has been challenged by the Petitioner.

Sri. M.R. Naik, Senior Advocate appearing for the Petitioner contended that the cancellation of the tender is contrary to law and the Petitioner has completed substantial work and no payment has been made. He further contended that the Respondents have no power or authority to withhold or appropriate the amount towards the damages from other tender works done by the Petitioner. Unless the damages due by the Petitioner is ascertained by the Competent Authority, the Respondents cannot claim damages by appropriating the amount belonged to the Petitioner. He also relied upon the judgment reported in Jayanna and Bros. Vs. State of Karnataka, AIR 1987 SC 1359 State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli Union of India (UOI) Vs. Raman Iron Foundry, .

On the other hand, Sri. M.R.C. Ravi appearing for the Respondents contended that as per Clause 29(A) of the agreement, the writ petition filed by the Petitioner is not maintainable. He has to invoke the remedy available to him under the provisions of the agreement entered into between the parties. Further contended that the private contracts entered into between the parties cannot be enforced under Article 226 of the Constitution of India. The tender awarded to the Petitioner has been rescinded at the risk and cost of the Petitioner since there was no progress of work even after lapse of the stipulated period of six months and even the tender work was not completed. As per Clause 36 of the agreement, any sum of money due and payable to the Contractor can be withheld or appropriated against any claim of the Nigam/Government. Further, he has relied upon the unreported judgment in W.A. No. 398/2007 C/w W.A. No. 399/2007 disposed of on 5-6-2008 in the case of Sri. T.P. Mokashi and Anr. v. Managing Director, Krishna Bhagya Jala Nigama Ltd., and Ors. in W.A. NO. 1607/2008 disposed of on 5-12-2008 B. Devaraj v. Krishna bhagya jala nigama ltd., and Ors. MF.A. 5044/1998 disposed of on 11-2-2004 K.B.J.N. Ltd. v. Sri. P. Balaramaiah and Ors. and Pimpri Chinchwad Municipal Corporation and Others Vs. Gayatri Construction Company and Another, ; State of Gujarat and Others Vs. Meghji Pethraj Shah Charitable Trust and Others, and M.C. Mehta Vs. Union of India (UOI) and Others, and sought for dismissal of the writ petition.

It is not in dispute that pursuant to the agreement entered into between the Petitioner and the Respondents dated 29-12-2004, the work order was issued and the Petitioner has completed some portion of the work. If there is any dispute or differences of any kind whatsoever between the contractor and the Respondents, the same has to be settled invoking clause 29 of the agreement. The clause 29 reads as under:

Clause 29(a): If any dispute or difference of any kind whatsoever were to arise between the Executive Engineer/Superintending Engineer and the Contractor regarding the following matters namely:

The meaning of the specifications, designs, drawings and instructions herein before mentioned, any other question, claim, right, matter, thing whatsoever in any way arising'' out of or relating to this contract designs, drawings, specifications, estimates, instructions, or orders or those conditions or failure to execute the same whether arising during the progress of the work or after the completion, termination or abandonment thereof the dispute shall, in the first place, be referred to the Chief Engineer who has jurisdiction over the work specified in the contract. The Chief Engineer shall within a period of ninety days from the date of being requested by the contractor to do so, give written notice of his decision to the contractor.

Chief Engineer''s Decision Final:

(b) Subject to other form of settlement hereafter provided for Chief Engineer''s decision in respect of every dispute or difference so referred shall be final and binding upon the contractor. The said decision shall forthwith be given effect to and the contractor shall proceed with the execution of the work with all due diligence.

Remedy When Chief Engineers Decision Is Not Applicable To Contractor:

(c) In case the decision of the Chief Engineer is not acceptable to the contractor, lie may approach the Court of law for settlement of dispute after giving due written notice in this regard to the Chief Engineer within a period of ninety days from the date of receipt of the written notice of the decision of the Chief Engineer.

Time Limit For Notice To Approach Law Court By Contractor:

(d) If the Chief Engineer has given written notice of his decision to the contractor notice of his decision to the Contractor and no written notice to approach the law Court has been communicated to him by the contractor within a period of ninety days from receipt of such notice, the said decision shall he final and binding upon the contractor.

Time Limit For Notice To Approach Law Court By Contractor When Decision Is Not Given By Case At (b):

(e) If the Chief Engineer fails to give notice of his decision within a period of ninety days from the receipt of contractor''s request in writing for settlement of any dispute or difference as aforesaid the contractor may within ninety days or the expiry of the first named period of ninety days approach the Court of law (in Sub-clause (b) and (e) specify the place where the Court under whose jurisdiction the work is situated/is located) giving due notice to the Chief Engineer.

Contractor To Execute and Complete Work Pending Settlement of Dispute:

(f) Whether the claim is referred to the Chief Engineer or to the law courts, as the case may be the contractor shall proceed to execute and complete the works with all the due diligence pending settlement of the said dispute or difference.

Reading of Clause 29 makes it clear that if the Petitioner has any grievances/disputes in respect of the contract entered into between him and the Respondents, he has to approach the Competent Authority under the Agreement to settle his dispute. He cannot approach this Court invoking power under Article 226 of the Constitution of India for enforcement of his contractual right. In the judgment reported in Pimpri Chinchwad Municipal Corporation and Others Vs. Gayatri Construction Company and Another, , the Hon''ble Supreme Court has clearly held that:

The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such of contract could not have been agitated in a petition under Article 226 of the Constitution of India.

In the judgment reported in State of Gujarat and Others Vs. Meghji Pethraj Shah Charitable Trust and Others, , the Hon''ble Supreme Court: held that

We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alteram partem) is void. The termination is not a quasi-judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is not also an executive or administrative act to attract the duty to act fairly.

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A matter governed by a contract/agreement between the parties. If the matter is governed by a contract, the writ petition is net maintainable since it is a public law remedy and. is not available m private law field.

Further, the unreported judgments referred to above also support the contention of the Respondents.

In view of the authoritative pronouncement of the law it is clear that the Petitioner cannot invoke writ jurisdiction to redress his grievance. He has to invoke remedy available under the provisions of agreement entered into between the parties. Hence, no relief can be granted to the Petitioner.

The contention of Sri. M.R. Naik with regard to withholding of the amounts in respect of other contracts and appropriating the same towards the recovery of the damages in the present case is contrary to the law laid down by the Hon''ble Supreme Court. The Hon''ble Supreme Court has clearly held that unless the claim for damages was either admitted or determined by the Competent Authority or the Civil Court, the Respondents cannot withhold the amount due to the Contractor. In the instant case, after rescinding the agreement entered into between the parties, the Respondents directed the other Executive Engineers not to make payment with regard to other contract works done by the Petitioner on the ground that the Petitioner is due for more than Rs. 85.00 lacs. There is no determination of the damages. Unless the Competent Authority determines the damages, the amount cannot be withheld in respect of other contracts.

The Hon''ble Supreme Court in a judgment reported in AIR 1987 SC 1359 has clearly held that:

The power of the State Government, under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions of agreement and recovery of damages in confined only to those cases where the breach of conditions is admitted and is not disputed....

A right to adjudicate upon an issue relating to a breach of conditions of the contract cannot, be said to flow from or is inhered in the right conferred to assess the damages arising from, a breach of conditions. The power to assess damages is a subsidiary and consequential power and not the primary power. Even assuming that the terms of the relevant clause afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as quantum of damages, the adjudication by the officer of the State Government regarding the breach of the contract cannot be sustained under law because a party to the agreement cannot be an arbiter in his own cause.

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We are therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of damages will stand confined only to those cases where the breach of condition is admitted and it is not disputed.

Further, the Hon''ble Supreme Court in a judgment reported in Union of India (UOI) Vs. Raman Iron Foundry, clearly held that:

Now [he law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed, by a decree or order of the Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eco instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment to Section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred.

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A claim for damages for breach of contract is therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating the other sums due to the contractor. On a proper construction of Clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a Court or other adjudicating authority. We must therefore, hold that the Appellant had no right or authority under clause 18 to appropriate the amounts of other pending bills of the Respondent in or towards satisfaction of its claim for damages against the Respondent.

In view of the authoritative pronouncement of law by the Hon''ble Supreme Court referred to above, I am of the view that the Respondents are not justified in directing the other Executive Engineers to withhold the amounts in respect of the other contract works in which the amount is due to the Petitioner. Unless the Competent Authority decides the damages, the Respondents are not entitled to recover the said dues by appropriating the amount due to the Petitioner in respect of some other contract works. Accordingly, we pass the following:

ORDER

The writ petition filed by the Petitioner is partly allowed. The order at Annexures ''A'' and ''B'' passed by the Respondents insofar as directing the other Executive Engineers to recover the dues from the pending bills of other contract works executed by the Petitioner is quashed. However, liberty is reserved to the Petitioner to avail the remedy available under Clause 29 of the Agreement to redress his grievances.