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Judgment
B. Manohar, J.—The Petitioner has sought for quashing the letter/order dated 09-10-2009 issued by the second Respondent directing the Executive Engineers of various Districts not to release the amounts due to the Petitioner and send the said amounts to the second Respondent. Further the Petitioner has also sought for a direction to the Respondents not to transfer or remit the amount payable to the Petitioner to any other Authorities until disposal of the O.S. No. 894/2009 on the file of the City Civil Judge, Bangalore.
In the writ petition, the Petitioner has contended that pursuant to the tender notification for maintenance of State Highways dated 5-3-2005 issued by the Karnataka Road Development Corporation Limited, the Petitioner being the Contractor engaged in the business of infrastructure development submitted his tender in respect of the maintenance of road of Mangalore Division. The tender amount is Rs. 16.21 crores. As per the notification, the successful tenderer has to maintain the road, i.e. Resurfacing, Pothole Filling, Shoulder Repairs, repair of Drains, Culvert, Bridges for a period of three years. The contractor has to execute the repair work within a period of 12 months and he has to maintain the road for a period of two years thereafter. The Petitioner being the lowest tenderer his bid was accepted and entered into an agreement for maintenance of stretch of State Highway at Mangalore for a sum of Rs. 17.58 crores. Thereafter, the agreement has been entered into between the Petitioner and Respondents on 16-9-2005 and work order has been issued on the very same day.
As per the terms of agreement entered into between the Petitioner and the Respondents, the Petitioner has to complete the road repair work of State Highways of Mangalore Division within 12 months and thereafter, they shall maintain the same for a period of 2 years. Pursuant to the agreement, the Petitioner commenced the repair work in terms of the agreement. However, he has stopped the work and started making representations to the Respondents contending that there is sudden increase in the prices of bitumen, granite, diesel and low density oil in the global market and the cost of materials has been increased to an unimaginable level. Hence he cannot do the work as per the tender agreement and sought for enhancement of the price by 20%. In pursuance to the said representation, the Respondents issued directions to the Petitioner to proceed with the work and complete the repair work. However, the Petitioner has stopped the work and goes on making representations to the Respondents. Since, the representation of the Petitioner was not considered the Petitioner filed W.P. No. 5420/2007 seeking directions to the Respondents to consider his representation. This Court by its order dated 5-6-2007 directed the Respondents to consider the representations of the Petitioner within a period of four weeks. In the meanwhile, since the Petitioner has completely stopped the work and condition of the road was very bad and deteriorating everyday, there was agitation of the public. In spite of repeated directions, the Petitioner has not completed the work as per the tender agreement. In view of that the Respondents by their order dated 15-5-2007 terminated the contract and issued fresh tender notification for the completion of the unfinished work of the Petitioner. Being aggrieved by the cancellation of the tender and also fresh tender notification issued, the Petitioner filed W.P. No. 14516/2008 before this Court. This Court by an order dated 27-5-2009 dismissed the writ petition reserving liberty to the Petitioner to redress his grievance before the appropriate Competent Authority as provided under the relevant clause of the agreement. In the meanwhile, the third Respondent also filed a suit in O.S. No. 894/2009 against the Petitioner for recovery of Rs. 4,07,22,767/-. Thereafter, the second Respondent issued directions to the Executive Engineers of other Districts not to settle the bills of the Petitioner and send the said amounts which are due to the Petitioner to the second Respondent by its communication dated 9-10-2009.
Being aggrieved by the same, the Petitioner filed this writ petition contending that the amounts due to the Petitioner by other contract works cannot be withheld by the Respondents.
Sri. Sreeranga, Advocate appearing for the Petitioner contended that Respondent No.3 has filed a suit in O.S. No. 894/2007 for recovery of damages which was pending before the Civil Court. Unless the court below decides the quantum of damages, the Respondents cannot withhold the amounts due to the Petitioner from other works. It is also contended that the Respondents cannot appropriate the amount towards the recovery of damages claimed by them. Even though the claim of damages was disputed by the Petitioner, the same is pending adjudication in the suit. Hence, the communication dated 9-10-2009 is contrary to law. Further submits that clause 36 of the Agreement cannot be invoked for unliquidated damages. In the instant case, admittedly the damages has not been ascertained by the Competent Authority or the Civil Court, in the absence of the same, the second Respondent cannot issue directions to stop payment to the Petitioner for the work done to other contractors, which is contrary to law. He also relied upon the decisions reported in Union of India (UOI) Vs. Raman Iron Foundry, and AIR 1987 SC 1359 in the case of State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli.
On the other hand, learned Government Advocate and the learned Counsel appearing for the 3rd Respondent filed their separate statement of objections and contended that even though sufficient opportunity has been given to the Petitioner to complete the work as per the tender notification, in spite of repeated remainders dated 7-2-2006, 15-3-2006, 27-3-2006, 5-5-2006 14-6-2006, 11-7-2006 and 8-12-2006, the Petitioner has not taken any steps to repair the roads. As per the tender agreement, for the first 12 months he has to execute the repair works like resurfacing the roads, pothole filling, road shoulder repairs, repairs of drains, culverts and bridges. Thereafter, for another two years he has to maintain the road, which he has repaired. Though the work order has been issued on 23-9-2005, instead of completing the work within a period of one year, he goes on making representations for fixing the higher rates. Though the tender notification is for Rs. I6.21crores, the tender has been awarded for Rs. 17.58erores contending that there is abnormal increase, in the price of bitumen, granite, diesel, low density oil and other materials in the global market. The writ petitions are filed and his representations have been considered and necessary orders also have been passed calling upon the Petitioner to complete the tender work. In spite of the same, no concrete step has been taken and there is agitation of general public regarding the condition of the road, which is deteriorating day by day due to non-maintenance. In view of that the Respondents have taken action for terminating the contract on 15-5-2007 and fresh tender has been called for. There is no infirmity or irregularity in the said action. The writ petition filed by the Petitioner challenging the termination of the tender dated 15-5-2007 was also dismissed by this Court on 27-5-2009. The Respondents have paid sum of Rs. 7,60,29,963/-. In order to recover the said amount, the suit has been filed in O.S. No. 894/2007 for recovery of Rs. 4,07,22,767/- after deducting EMD amount and Security deposits. Thereafter, the impugned order in the writ petition has been passed on 9-10-2009 calling upon the Executive Engineers of various Districts not to make any payment to the Petitioner since he is due for more than Rs. 4.00 crores. As per the tender agreement, the Respondents can withhold or appropriate the amounts due to the Petitioner from other Contract works. It is further contended that if there is any dispute regarding the tender agreement, the Petitioner has to invoke the remedy available under the tender agreement under clause 29 of the agreement. Hence, the writ petition Died by the Petitioner is not maintainable and sought for dismissal of the same.
I have carefully gone through the arguments addressed by the learned Counsel for the parties and perused the orders impugned in the above writ petition.
The undisputed facts are as per the tender notification dated 5-3-2005 Petitioner is a successful bidder and awarded tender work of maintenance of State Highways in Mangalore Division. The bid was accepted for Rs. 17,57,94,000/-. Thereafter, agreement has been entered into between the Petitioner and the Respondents on 16-9-2005 and the work order has been issued on the very same day. As per the agreement he has to complete the work within 12 months and thereafter, he has to maintain the road for another two years. The records clearly disclose that the Petitioner has done some work of repairing the roads. After accepting the tender, he realized that he has quoted less amount and started making representations inter alia contending that the prices of bitumen, granite, diesel and low density oil has been increased and sought for enhancement of the tender amount. The Respondents called upon the Petitioner to complete the repair work. In spite of repeated directions, the Petitioner has not completed the repair work itself, which has to be completed within 12 months from the date of commencement of the work. The entire settlement for the work will be made after a period of 3 years. Before completing less than 40% of the work, the Petitioner started demanding higher rate. The intention of the Petitioner is very clear that he wanted to pressurize the Respondents to get higher price. In view of that, the Respondents terminated the contract on 15-5-2007. The said order has been questioned in W.P. No. 14516/2008 before this Court and this Court dismissed the writ petition reserving liberty to the Petitioner to avail the remedy available under the agreement.
The only point to be considered in this writ petition is as to whether the Respondents are justified in issuing the impugned letter dated 9-10-2009 calling upon the Executive Engineers of other Districts not to make any payments to the Petitioner with regard to other tender works and send the said amounts to the second Respondent towards the amount due to them.
The Petitioner relying upon two judgments of the Hon''ble Supreme Court contended that unless the claim for damages was admitted or determined by the Competent Authority or the Civil Court, the Respondents cannot withhold the amounts due from other contracts. In the instant case, after terminating the agreement, the Respondents called upon the Petitioner to. pay a sum of Rs. 4,07,22,767/- after deducting the EMD and Security Deposit and also filed a suit, in O.S. No. 894/2009 for recovery of the said amount. The Petitioner filed his objections to the suit and made counter claim of Rs. 5,08,90,307/-. The said suit is pending. There is no adjudication regarding the damages. In the absence of the same, the Respondents are not justified in issuing the impugned letter dated 9-10-2009 calling upon the other Executive Engineers to stop payment with regard to the other works rendered by the Petitioner. The Hon''ble Supreme Court in a judgment reported AIR 1987 SC 1359 cited supra clearly held that:
The powers of the State Government, under an agreement entered into by it with a private person providing for assessment of the damages for breach of conditions of the agreement and recovery of the damages is confined only to those cases where the breach of conditions is admitted or it is not disputed....
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 the quantum of damages, the adjudication by the officer of the State Government regarding the breach of contract cannot e sustained under the law because a party to a agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract.
We are, therefore, in agreement with the view of the Full Bench that the powers of the State wider an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases, where the breach of conditions is admitted or it is not disputed.
Further in a judgment reported in Union of India (UOI) Vs. Raman Iron Foundry, Hon''ble Supreme Court clearly held that:
A claim for damages for breach of contract Is 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 other sums due to the Contractor....
Now the 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 a 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 in Section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred.
In view of the authoritative pronouncement of law by the Hon''ble Supreme Court, I am of the view that the Respondents are not justified in issuing the impugned letter/notice dated 9-10-2009 calling upon the Executive Engineers of other Districts not to make payment to the Petitioner for the other tender works rendered by him. Hence, the Petitioner is entitled to succeed. The order passed by the second Respondent is unsustainable in the eye of law. Accordingly, the writ petition is allowed. The impugned letter/notice vide Annexure-Q dated 9-10-2009 is quashed.