Binu and Company v. District Collector, Kollam and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** **WEDNESDAY, THE 17TH DAY OF MARCH 2021 / 26TH PHALGUNA, 1942** ## **WP(C).No.732 OF 2020(N)** ## **PETITIONER:** **BINU AND COMPANY, PEZHUMTHURUTH, PERUMON P.O., KOLLAM - 691 601, REPRESENTED BY ITS PROPRIETOR S.S.BINU.** **BY ADVS. SRI.S.SREEKUMAR (SR.) SRI.P.MARTIN JOSE SRI.P.PRIJITH SRI.THOMAS P.KURUVILLA SRI.AJAY BEN JOSE SRI.MANJUNATH MENON SHRI.HARIKRISHNAN S.** ## **RESPONDENTS:** **1 THE DISTRICT COLLECTOR, KOLLAM, DISTRICT COLLECTOR OFFICE, CIVIL STATION, KOLLAM - 691 013.** - **2 TAHASILDAR/AUTHORIZED OFFICER (REVENUE RECOVERY), TALUK KACHERY, KOLLAM - 691 001.** - **3 KERALA STATE ROAD TRANSPORT CORPORATION, TRANSPORT BHAVAN, FORT, THIRUVANANTHAPURAM, PIN - 695 023, REP. BY ITS CHAIRMAN AND MANAGING DIRECTOR.** - **4 THE CHAIRMAN AND MANAGING DIRECTOR, KERALA STATE ROAD TRANSPORT CORPORATION, TRANSPORT BHAVAN, FORT, THIRUVANANTHAPURAM, PIN - 695 023.** **R3 & R4 BY ADV. SRI.P.C.CHACKO(PARATHANAM)** **SMT MABLE C KURIAN, GP** - **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON** - **17.03.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.732 OF 2020(N)** **2** ## **JUDGMENT** Instant petition is filed challenging Exts P12 and P13 notices issued under Section 7 and 34 of the Revenue Recovery Act,1968 and also for a further direction to quash Ext.P19 notice issued by the 4th respondent calling upon the petitioner to make payment of a sum of Rs.38,79,447/- towards loss sustained to the 3rd respondent, the Kerala State Road Transport Corporation (KSRTC). 2. The facts which led to the challenge raised as aforesaid can be briefly stated at the outset itself. In the year 2013, the 3rd respondent invited a tender for the supply of ER WCR tubes of different dimensions and sizes. The petitioner submitted his tender which was accepted by the 4th respondent and Ext.P1 supply order was issued. Ext.R3(c) is the agreement entered into between the petitioner and the 3rd respondent on the basis of which, 8520 tubes weighing a total of 55,640 kgs was supplied to the 3rd respondent. Immediately thereafter, Ext.P3 notice was issued informing the petitioner that out of the total number of 4034 pipes supplied by him weighing about 27230 kgs, 225 pipes were found to be damaged. The petitioner was called **WP(C).No.732 OF 2020(N)** **3** upon to replace 225 pipes or to refund the value. On receipt of the said communication, Ext.P4 letter was issued by the petitioner informing of his willingness to refund the value of 225 pipes. However, without responding to the said letter, Ext.P5 letter was issued calling upon the petitioner herein to replace 40,279 Kgs of tubes. In response, the petitioner issued Ext.P6 informing that his liability was limited to the value of 725 pipes weighing about 4865 kgs and worth Rs.2,85,040/-. However, the 4th respondent by Ext.P7 notice called upon the petitioner to pay a sum of Rs.20,64,946/being the value of damaged pipes. He submitted Ext.P8 explanation and offered his willingness to return a sum of Rs.71,046/- being the balance amount after adjusting the loss suffered to respondent Nos.3 and 4 from the security amount deposited by the petitioner. Thereafter, Ext.P10 notice was issued on 31.12.2014 warning the petitioner that he would be blacklisted if he failed to pay the amount detailed in Ext.P7. In response, Ext.P11 notice was issued by the petitioner requesting that he may not be blacklisted and seeking to reconsider the entire disputes. Immediately thereafter, contending that the respondents have failed to consider the petitioner’s explanation before blacklisting the concern, W.P.(C) No.7909 of 2015 was preferred before this Court. While the Writ Petition was pending, proceedings under the Revenue Recovery Act was initiated and the impugned notices were issued. When this matter was brought to the notice of the learned Single **WP(C).No.732 OF 2020(N)** **4** Judge, by Ext.P15 judgment dated 13.12.2019, the matter was disposed of ordering a joint inspection with the hope that the parties would be able to amicably resolve the dispute. Pursuant to the judgment, a joint inspection was conducted and Ext. R3(i) is the report. On the side of the petitioner, an expert Engineer was also present. The expert Engineer prepared Ext.P18, consolidated report, a copy of which was forwarded to the respondents. The expert Engineer had opined that the unilateral act on the part of the respondents in rejecting the quality of pipes supplied by the petitioner was not governed by their quality or usefulness but rather was a result of the selective whims and fancies of certain officials who were swayed by extraneous considerations and instigations. The expert also opined that rejection of pipes was done with the sole aim to harass, discredit and to cause pecuniary loss to the petitioner. The petitioner states that the 4th respondent without considering the consolidated report submitted by the expert Engineer, issued Ext.P19 demand notice demanding a sum of Rs.38,79,447/- being the alleged loss sustained by the Corporation. The initiation of revenue recovery proceedings and also the issuance of Ext.P19 time barred notice pursuant to the joint inspection conducted by the parties are under challenge in this writ petition. 3. In the counter affidavit filed by the respondents 3 and 4, it is **WP(C).No.732 OF 2020(N)** **5** contended that the petitioner had agreed while executing Ext.R3(c) agreement that the goods supplied by him shall be of the best quality and workmanship. However, on inspection, it was found that the goods supplied did not match the assurance given by the petitioner. It is stated that if during the period of 12 months from the date of supply of the goods, it was found that the goods did not conform to the description and quality, the Corporation was entitled to reject the goods. It is further stated that the work managers from various depots had reported that the goods did not conform to the specifications and it was in the said circumstances that the petitioner was asked to take back the goods or to pay the value. The split up details of the damaged pipes were given to the petitioner and he had also agreed to reimburse the value of a certain quantity. According to the respondents 3 and 4, pursuant to the joint inspection ordered by this Court, an inspection was conducted and it was found that the total value of defective materials together with interest after deducting the amounts paid by way of security was Rs.39,79,447/- as on 28.1.2020. It is contended that the petitioner cannot claim that Ext.P19 notice is time barred as it was issued pursuant to the joint inspection ordered by this Court. 4. I have considered the submissions advanced. 5. The dispute between the parties is with regard to the quality of **WP(C).No.732 OF 2020(N)** **6** pipes supplied by the petitioner pursuant to Ext.P1 supply order and Ext.R3(c) agreement entered into between the parties on 10.12.2013. The sole question is whether one of the contracting parties can say that the other party is a defaulter and quantify the damages and recover the same by recourse to proceedings under the Revenue Recovery Act. The petitioner has seriously disputed that he is a defaulter. He disputes the very liability to pay the amount determined by the respondents 3 and 4. It has to be borne in mind that during the earlier round of litigation, this Court after taking note of the nature of dispute, and the initiation of revenue recovery proceedings, had ordered a joint inspection of the materials to make an attempt to resolve the dispute. However, it appears that the rift has widened and the respondents 3 and 4 have come up with Ext.P19 demand notice wherein their demand was for a sum of Rs.38,79,447/- being the loss sustained to the Corporation due to the supply of low quality of materials by the petitioner herein. The petitioner relies on a report of the expert Engineer, whose services were sought by him during the joint inspection. In the report, some scathing remarks are made by the expert Engineer. 6. It is by now settled that it is not within the province of one of the contracting parties to decide as to who is in breach and fix the quantum. This is not one of those cases where the defaulting party admits that he is in **WP(C).No.732 OF 2020(N)** **7** default and agrees to pay a liquidated sum by way of damages to the party who is not in breach. 7. In the case on hand, the 3rd respondent is one of the contracting parties and by issuing Ext.P19, they are seeking to realize a sum of Rs. 38,79,447/- towards the alleged loss sustained to the 3rd respondent. When the petitioner disputes the liability and when he contends that he is being victimized by the officers of the Corporation, the 4th respondent cannot be a Judge on his own cause and cannot be its own arbiter to determine the liability and quantum of damages. 8. The Apex Court in **State of Karnataka v. Rameshwara Rice Mills, Thirthahalli[1]** had occasion to lay down the principles in the following lines: "The terms of Clause.12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in Clause.12 are and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of 1 (AIR 1987 SC 1359) **WP(C).No.732 OF 2020(N)** **8** the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of Clause.12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as painted out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of Clause.12 afford scope for being construed as empowering the officer of the state to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the 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. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause.12 9. As held by the Apex Court, interest of justice and equity require that where a party to a contract disputes his liability, the adjudication should be by an independent person or body and not by the other party to the contract. The only exception is when there is a consensus between the contracting parties with regard to breach of conditions. **WP(C).No.732 OF 2020(N)** **9** 10. In that view of the matter, I quash Exts.P12 and P13 as premature. The petitioner shall reply to Ext.P19 notice. If the dispute is not resolved to the satisfaction of the respondents 3 and 4, the matter is required to be adjudicated in accordance with law in a court of law or by an independent adjudicatory body in full compliance with the principles of natural justice. This writ petition is disposed of. **Sd/-** ## **RAJA VIJAYARAGHAVAN V** **JUDGE** NS **WP(C).No.732 OF 2020(N)** **10** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **EXHIBIT P1 TRUE COPY OF SUPPLY ORDER DATED 11/10/2013 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER.** - **EXHIBIT P2 TRUE COPY OF NOTE DATED 21/01/2014 PREPARED BY ASSISTANT CONTROLLER, CHIEF STORES, PAPPANAMCODE.** - **EXHIBIT P3 TRUE COPY OF LETTER DATED 27/01/2014 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** - **EXHIBIT P4 TRUE COPY OF REPLY DATED 10/02/2014 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** - **EXHIBIT P5 TRUE COPY OF LETTER DATED 04/03/2014 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER.** - **EXHIBIT P6 TRUE COPY OF EXPLANATION DATED 14/03/2014 ISSUED BY THE PETITIONER.** - **EXHIBIT P7 TRUE COPY OF NOTICE DATED 13/05/2014 ISSUED BY THE 4TH RESPONDENT.** - **EXHIBIT P8 TRUE COPY OF EXPLANATION DATED 29/05/2014 TO EXHIBIT P7 SUBMITTED BY THE PETITIONER.** - **EXHIBIT P9 TRUE COPY OF LETTER DATED 20/06/2014 ISSUED BY THE REGIONAL WORKSHOP, EDAPPAL OF RESPONDENTS 3 AND 4 TO THE PETITIONER.** - **EXHIBIT P10 TRUE COPY OF FINAL NOTICE DATED 31/12/2014 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER.** - **EXHIBIT P11 TRUE COPY OF DETAILED EXPLANATION DATED 10/01/15 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT.** **EXHIBIT P12 TRUE COPY OF DEMAND NOTICE DATED 30/11/2019 UNDER SECTION 7 OF THE REVENUE** **WP(C).No.732 OF 2020(N)** **11** ## **RECOVERY ACT.** - **EXHIBIT P13 TRUE COPY OF DEMAND NOTICE DATED 30/11/2019 UNDER 42 SECTION 34 OF THE REVENUE RECOVERY ACT.** - **EXHIBIT P14 TRUE COPY OF REPLY DATED 05/12/2019 TO EXHIBIT P12 AND P13 NOTICES.** - **EXHIBIT P15** - **TRUE COPY OF JUDGMENT DATED 13/12/2019 IN W.P.(C) NO.7909 OF 2015 OF THIS HON'BLE COURT.** - **EXHIBIT P16 TRUE COPY OF LETTER DATED 01/01/2020 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** - **EXHIBIT P17 TRUE COPY OF LETTER DATED 06/01/2020 ISSUED BY THE PETITIONER TO EXHIBIT P16.** - **EXHIBIT P18 TRUE COPY OF THE CONSOLIDATED REPORT DATED 31/01/2020 ALONG WITH COVERING LETTER DATED 3/2/2020 ISSUED BY THE PETITIONER** - **EXHIBIT P19 TRUE COPY OF THE DEMAND NOTICE DATED 28/1/2020 ISSUED BY THE 4TH RESPONDENT** - **RESPONDENTS EXHIBITS:** - **EXHIBIT R3 A TRUE COPY OF THE SHORT TENDER NOTICE DATED 25.7.2013 ISSUED BY THE 3RD RESPONDENT** - **EXHIBIT R3 B TRUE COPY OF THE PURCHASE ORDER DATED 11.10.2013 ISSUED BY THE 3RD RESPONDENT** - **EXHIBIT R3 C TRUE COPY OF THE AGREEMENT EXECUTED DATED 10.12.2013 BETWEEN THE PETITIONER AND 3RD RESPONDENT** - **EXHIBIT R3 D TRUE COPY OF THE COMMUNICATION DATED 17.2.2014 ISSUED BY THE MECHANICAL ENGINEER, KSRTC REGIONAL WORKS SHOP EDAPPAL TO THE CONTROLLER OF PURCHASE AND STORES, KSRTC THRIUVANANTHAPURAM.** - **EXHIBIT R3 E TRUE COPY OF THE REPORT DATED 18.2.2014 ISSUED BY THE WORKS MANAGER, REGIONAL** **WP(C).No.732 OF 2020(N)** **12** **WORKSHOP, MAVELIKKARA TO THE CONTROLLER OF PURCHASE AND STORES THIRUVANANTHAPURAM.** **EXHIBIT R3 F TRUE COPY OF THE REPORT DATED 17.2.2014 ISSUED BY THE WORKS MANAGER, ALUVA TO THE EXECUTIVE DIRECTOR, VIGILANCE CHIEF OFFICE, THIRUVANANTHAPURAM** **EXHIBIT R3 G TRUE COPY OF THE REPORT DATED 15.2.2014 SENT BY THE WORKS MANAGER, REGIONAL WORKSHOP, KOZHIKODE TO THE EXECUTIVE DIRECTOR, VIGILANCE.** **EXHIBIT R3 H TRUE COPY OF THE NOTE DATED 21.2.2014 ISSUED BY THE ASSISTANT CONTROLLER (S AND CI) TO THE CONTROLLER OF PURCHASE AND STORES.** **EXHIBIT R3 I TRUE COPY OF THE JOINT INSPECTION REPORT SIGNED BY THE PETITIONER AS WELL AS THE REPRESENTATIVES OF THE 3RD RESPONDENT**