Broadview Security and Manpower Services Pvt Ltd v. Kerala State Beverages Manufacturing and Marketing Corporation Ltd and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM** ## **WEDNESDAY, THE 2[ND] DAY OF AUGUST 2023 / 11TH SRAVANA, 1945** ## **WP(C) NO. 1818 OF 2022** ## **PETITIONER:** BROADVIEW SECURITY AND MANPOWER SERVICES PVT LTD REP BY THOMAS CHARLEY,AGED 57 YEARS, BROADVIEW SECURITY & MANPOWER SERVICES PVT. LTD. REP. BY MANAGING DIRECTOR,THOMAS CHARLEY, S/O T C THOMAS, AGED 57, EL/CC W NO. 32/1306, D, FIRST FLOOR, NEAR MEDI SCAN, PIPELINE ROAD, PALARIVATTOM, KOCHI- 682025 RESIDING AT, THOTTAKATH HOUSE, CHERANELLORE, COCHIN682034. E-MAIL: BROAD VIEW.7@GMAIL.COM, PIN - 682034 BY ADVS. SUNNY JOSEPH K.T.SEBASTIAN TOM JOSE (PADINJAREKARA) ## **RESPONDENTS:** 1 KERALA STATE BEVERAGES MANUFACTURING AND MARKETING CORPORATION LTD., KERALA STATE BEVERAGES (MANUFACTURING & MARKETING) CORPORATION LTD, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR, BEVCO TOWER, VIKAS BHAVAN, PALAYAM, THIRUVANANTHAPURAM- 695003. E-MAIL: KSBCEDP @ GMAIL.COM, PIN - 695003 2 THE GENERAL MANAGER(ADMINISTRATION), KERALA STATE BEVERAGES (M & M) CORPORATION LTD, BEVCO TOWER, VIKAS BHAVAN, PALAYAM, THIRUVANANTHAPURAM-695 003. 3 THE INTERNAL AUDITOR, KERALA STATE BEVERAGES (M & M) CORPORATION LTD, BEVCO TOWER, VIKAS BHAVAN, PALAYAM, BY ADVS. SRI.NAVEEN.T., SC, KERALA STATE BEV.CO. M. AND M. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.P.(C).No.1818 of 2022 2** ## **VIJU ABRAHAM,J** **-----------------------** **W.P.(C).No.1818 of 2022 -----------------------------Dated this the 2[nd] day of August, 2023** ## **JUDGMENT** The petitioner has approached this Court challenging Exts.P5 and P7 and also seeking other consequential reliefs. 2. The petitioner is a company engaged in providing security guards for various institutions in Kerala. The first respondent a fully owned Government Company, invited e-tender from private security agencies through tender Notice No.6982/AE2/2018/KSBC dated 14.6.2018 and the petitioner's tender dated 9.7.2018 was accepted after evaluating the technical bid as well as the financial bid. Consequently, Ext.P1 agreement dated 27.09.2018 was executed between the petitioner and the 1[st] respondent for providing security guards (Un-armed) on contract basis for security duty at the FL-1 retail outlets of the 1[st] respondent company for a period of two years. **W.P.(C).No.1818 of 2022 3** Petitioner had deposited Rs.6 lakhs as security deposit refundable on termination of the contract. Though the contract was initially for a period of two years the same was subsequently extended on 23.09.2020 for further period upto 31.10.2020 or until the clarifications etc., are received from Government whichever is latter and the said decision was intimated as per Ext.P2 letter. While so, the petitioner received a letter dated 26.8.2021 intimating that on 28.3.2021 at 12.50 a.m, the election flying squad found one Harikumar, the building owner of the respondent's Alangad shop, transporting 240 bottles of 375 ml of Honeybee brandy in a car and on the information from the election flying squad, the Excise Officials arrested Harikumar, who informed them that the bottles were given to him by the shop-incharge of the respondent's FL-1-7032 retail outlet at Alangad and the shop was closed at the instance of the excise officials for stock verification and collection of evidence on 28.3.2021 and a case is registered as Crime No.14/2021 against the shop- ## **W.P.(C).No.1818 of 2022 4** in-charge of Alangad outlet and building owner, Harikumar. While so, as per Ext.P5 communication dated 26.8.2021 the petitioner was asked to remit an amount of Rs.6,19,384/-. The said amount was demanded on the basis of the assessment made by the 1[st] respondent that business loss of Rs.18,58,150/- has occurred as a result of closure of the shop on 28.3.2021 by the Excise Officials for stock verification. The loss is assessed unilaterally and arbitrarily by the 1[st] respondent and issued an order to recover the loss of Rs.18,58,150/- proportionately from the shop-incharge Sri.Santhosh.R, Abkari employee Sri.Shaju P.R and the petitioner on the allegation that the security guard is also involved in the said malpractice. Petitioner submits that the security guard deployed by the petitioner company Rehajith, for day duty from 8.00 am to 8.00 pm and another guard for night duty from 8.00 pm to 800 am are not arrayed as an accused in the above said crime and not even questioned by the excise officials in this regard. The alleged incident took place at ## **W.P.(C).No.1818 of 2022 5** 12.50 am, whereas the duty allotted to Rehajith was from 8.00 am to 8.00 pm which shows that the security guard deployed by the company is not involved in the incident. The assessment of the business loss at Rs.18,58,150/- is absolutely illegal, without following any procedures and beyond the powers or authority under the Articles of Association of the 1[st] respondent, and that the assessment has been done in a unilateral manner, violating the principles of natural justice and the petitioner was not heard or given any notice regarding the assessment of business loss. Further, in Ext.P5 notice, any specific act of any omission or commission by the security guard was also not mentioned. On receipt of Ext.P5 notice, Ext.P6 request was made by the petitioner before the 2[nd] respondent pointing out all the relevant facts and requested to waive the demand for Rs.6,19,384/-. But the said request was rejected by the 2[nd] respondent as per Ext.P7 letter dated 2.12.2021. Petitioner submits that Ext.P8 communication dated 20.11.2021 the contract with ## **W.P.(C).No.1818 of 2022 6** the petitioner was terminated, but the security deposit of Rs.6 lakhs was not refunded to the petitioner. Ultimately, the petitioner made Ext.P9 request before the 1[st] respondent seeking to refund the security deposit of Rs.6 lakhs. Therefore, it is aggrieved by Exts.P5 and P7 notices that the petitioner has approached this Court filing the above writ petition. 3. The learned counsel for the petitioner also relies on the judgment of the Apex Court in _**State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli (AIR 1987 Supreme Court 1359), Hussain M.M v. State of Kerala and Others (2020) 6**_ _**KHC 426)**_ in support of the contention that a party to a contract cannot unilaterally assess the damage and the power to assess damage is confined only to cases were breach is admitted. 4. A detailed counter affidavit has been filed on behalf of respondents 1 and 3 wherein it is submitted that 127.5 litres in bulk quantity of liquor was transported in a car driven by one Harikumar, the son of the building owner in which ## **W.P.(C).No.1818 of 2022 7** FL-1-7032 outlet was functioning at Alangad and a crime was also registered in respect of the same. On verification of CC TV visuals of the shop on 27.3.2021, serious malpractices and dereliction of duty was found from the side of the security staff deployed by the petitioner and the CC TV visuals revealed that the security staff of the petitioner Rehajith was helping Harikumar in loading the sack containing the liquor bottles to his car. The counter affidavit further states that for stock verification and for collecting evidence the shop remained closed on 28.3.2021 and the loss due to the closure of the shop was assessed based on the average sale of three consecutive preceding Sundays and the liability has been apportioned among three persons who are responsible for the same and an amount of Rs.6,19,384/- was demanded from the petitioner. An audit was also conducted and Ext.R1(c)report was submitted. It is further contended that as per Clause 11 of Ext.P1 agreement, in the event of theft or pilferage of the material or properties of the Company or any ## **W.P.(C).No.1818 of 2022 8** incident involving security of the company, the Security Agency shall submit reports and will actively assist the company and if necessary, report such incidents to Police and follow up the same if it is referred to a Court of Law. Going by Clause 19, the security Agency will be liable to make good the loss if any sustained by the company by any act involving the security guards or due to any omission/commission by them and such loss will be recovered from the security agency from the bills payable to them. On the strength of the same it is the contention of the respondents 1 to 3 that whatever action and demand that has been made as per Exts.P5 and P7 are perfectly legal and valid. ## 5. Heard both sides. 6. The only Clause in Ext.P1 agreement which makes certain liability on the petitioner is Clause 19 which mandates that the security agency will be liable to make good the loss if any sustained by the company by any act involving the security guards or due to any omission/commission ## **W.P.(C).No.1818 of 2022 9** by them and such loss will be recovered from the security agency from the bills payable to them. The learned counsel for the petitioner relying on the audit report produced in the counter affidavit filed by the respondents 1 to 3 as Ext.R1(c) contended that in the said audit report after verification of the stock, etc., it is categorically stated that no excess stock of any IMFL item was found except one bottle No.1 MCD brandy having 375 ml. On the basis of the said enquiry report, the learned counsel for the petitioner would submit that there was no occasion for any loss caused to the Corporation due to the alleged acts which culminated in registration of crime, Crime No.14 of 2021 of Varapuzha Excise Range. It is further contended by the petitioner that none of the employees of the security agency were made an accused in the said crime. The only damage now assessed is the loss caused to the respondent Corporation due to the closure of the shop on 28.3.2021 for making a stock verification, etc., and the alleged loss has been quantified ## **W.P.(C).No.1818 of 2022 10** based on the average sale of three consecutive preceding Sundays and thereupon, arrived at the loss to the tune of Rs.18,58,150/- and 1/3[rd] of the amount was fixed as liability on the petitioner. Petitioner submits that the said quantification of liability is absolutely without any basis in as much as none of the employees were made an accused and further that in stock verification it was found that there is no excess stock of any IMFL item. It is further contended by the learned counsel for the petitioner that when breach is not admitted one of the parties cannot unilaterally assess damages and fix liability. The terms of Ext.P1 agreement does not give any power upon the respondent Corporation to adjudicate upon a disputed question of breach as well as to assess the damage arising from the breach. To substantiate his contentions the petitioner relies on the judgment in _**Shree Rameshwara Rice Mills's**_ case cited supra, which held in paragraphs 7 and 8 reads as follows: “7.On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyengar. The terms of ## **W.P.(C).No.1818 of 2022 11** 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 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 the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of Clause 12 would have been entirety 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 pointed 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 competence and sanction to decide ether any 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 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 rights in assessing the damages occasioned by the breach in view of the specific terms of clause 12. 8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by damages 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 **W.P.(C).No.1818 of 2022 12** breach of conditions is admitted or it is not will not be money due under disputed.” In _**Hussain M.M's**_ case cited supra, the court held in paragraphs 11 to 13 as follows: “11. The Rule itself is thus indicative of the legislative wisdom that adjudication and levy can only be through the available forum and not by one of the parties to the dispute - the Government. It is a reflection of the wisdom of applying the principle of 'nemo Judex in causa sua' which means, literally, "no-one shall be a Judge in his own cause." It is a principle of natural justice that no person can Judge a case in which he has an interest. 12. The decision maker's impartiality is one of the most sublime and cherished ideals on which the rule of law thrives. Such impartiality must be experienced by the parties to the dispute also. The decision maker's impartiality is expressed in the maxim ' _nemo judex in causa sua_ ' and is one of the facets of natural justice. Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience to be ranked as fundamental. The purpose of following the principles of natural justice is the prevention of miscarriage of justice. They form the minimum protection of the rights of an individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial, and administrative authority while making an order affecting his rights. The rules of natural justice are intended to prevent such authority from doing injustice, One of the essential requirements of the principles of natural justice is that the authority deciding the issue must be impartial and should not have any personal interest in the controversy. Reference can be made to the decision in _UmaNath Pandey an Others v. State of Uttar Pradesh and Another_ and that of this Court in _Philip Registrar of Co operative Societies²_ . 13. Loss caused to the Government is disputed by the Petitioner. Alleged action of the Petitioner resulting in loss to the government is also disputed. In other words, liability of the Petitioner is disputed. In spite of the above mentioned disputes, loss caused and even the liability, is assessed by the Government without recourse to any independent authority ## **W.P.(C).No.1818 of 2022 13** like an arbitrator or a Court of law. Based on an assessment of liability by one of the parties to the cause the petitioner is being proceeded against. Ext.PB is the order of assessment of liability imposed by the Government itself for recovering the loss sustained to it. No evidence is taken and no adjudication is carried out, despite a dispute raised by the petitioner. Such an order cannot be termed as valid in the eye of law. Ext. P8 is therefore arbitrary and hence vitiated.” This Court in _**Kaikkara Construction Company v.**_ _**State of Kerala (2022 (2) KLT Online 1182)**_ has also considered a similar issue and held that one of the parties to the contract cannot assess the damages arising out of the breach of contract if there is a dispute, even if there is a clause empowering to assess damages and in such cases an adjudication by an independent authority is necessary. This Court after referring to various judgments on the point held in paragraph 16 as follows: “16. Therefore, the principle is that in a contract, one of the parties cannot assess the damages arising out of the breach of contract if there is a dispute, even if there is a clause empowering to assess damages. In such cases an adjudication by an independent authority is necessary.” A Division Bench of this Court in _**M/s.Sriram**_ ## _**Engineering Construction Co. v. Kerala State**_ **W.P.(C).No.1818 of 2022 14** _**Industrial Development Corporation and Another**_ _**(2007 (2) KLT 388)**_ held that when a breach is not admitted, before determining the amount by suit or arbitration by independent authority, revenue recovery cannot be initiated for recovering the disputed damages and the party should be relegated to adjudicate their claims in a properly constituted civil suit. Recently, this Court has also occasion to consider a similar issue in _**Koppara Enterprises Printing and Copy Solutions (India) Pvt. Ltd. v. State of Kerala (2023 (4) KHC**_ _**591)**_ in which also it was held that when a dispute arises as to breach of contract, that dispute cannot be decided and settled by one of the parties to the contract. 7. In the present case also the loss what is demanded as per Exts.P5 and P7 is a loss sustained to the respondent Corporation for closure of the said shop FL-1-7032 on 28.3.2021 for verification and the loss was assessed on the basis of the average sale of the three consecutive preceding Sundays, which admittedly has been done in a **W.P.(C).No.1818 of 2022 15** unilateral way even without a notice to the petitioner. Since the demand is only for the loss due to the closure of the shop for a day, for verification and further as per Ext.R1(c) audit report there is no loss sustained to the respondent Corporation due to the removal of the liquor bottles which ultimately resulted in the registration of the crime, the same is unsustainable. Therefore, after hearing both sides, and after considering the judgments cited supra, I am of the opinion that the unilateral fixation of liability and the consequential demand made on the petitioner as per Exts.P5 and P7 is absolutely arbitrary and unjust. I am of the view that when the liability has been disputed by the petitioner, the same can be adjudicated and assessed only by an independent authority and not by a party to the contract. Therefore, Exts.P5 and P7 are quashed. It is made clear that the respondent Corporation is free to approach the competent Civil Court or any other authority for redress their grievance if ## **W.P.(C).No.1818 of 2022 16** any, and if the respondent Corporation choose to approach the Civil Court to adjudicate the claim, the time during which this writ petition was pending before this Court will be excluded while calculating the period of limitation, taking into consideration, the fact that there was a stay granted through out the proceedings. The writ petition is disposed of as above. sd/- **VIJU ABRAHAM, JUDGE** pm ## **W.P.(C).No.1818 of 2022 17** ## **APPENDIX OF WP(C) 1818/2022** PETITIONER EXHIBITS Exhibit P-1 TRUE COPY OF THE AGREEMENT BETWEEN PETITIONER AND RESPONDENTS DATED 27.09.2018 FOR PROVIDING SECURITY GUARDS - Exhibit P-2 TRUE COPY OF THE LETTER DATED 23.09.2020 EXTENDING THE PERIOD OF P-1 CONTRACT - Exhibit P- 3 TRUE COPY OF THE CRIME AND OCCURANCE REPORT IN CR. 14/2021 OF EXCISE RANGE VARAPUZHA - Exhibit P- 4 TRUE COPY OF THE INTERIM STAY ORDER IN WP ( C ) 390/2022 OF THIS HON'BLE COURT - Exhibit P- 5 TRUE COPY OF THE LETTER OF DEMAND/RECOVERY DATED 26.08.2021 ISSUED BY THE 3RD RESPONDENT - Exhibit P-6 TRUE COPY OF THE LETTER DATED 02.09.2021 BY THE PETITIONER REQUESTING WAIVER OF THE DEMAND - Exhibit P- 7 TRUE COPY OF THE LETTER OF DEMAND /RECOVERY DATED 02.12.2021 ISSUED BY THE 1ST RESPONDENT - Exhibit P- 8 TRUE COPY OF THE LETTER DATED 20.11.2021 ISSUED BY THE 1ST RESPONDENT TERMINATING THE CONTRACT Exhibit P-9 TRUE COPY OF THE LETTER DATED 07.01.2022 ISSUED BY THE PETITIONER REQUESTING REFUND OF THE SECURITY DEPOSIT RESPONDENT EXHIBITS Exhibit R1(a) TRUE COPY OF THE STATEMENT OF THE STAFF, NAMELY SMT.AMBILI FRANCIS, DATED 29/03/201 ## **W.P.(C).No.1818 of 2022 18** Exhibit R1(b) TRUE COPY OF THE STATEMENT OF THE STAFF, NAMELY, SMT.JISMI.E.P., DATED 29/03/2021. Exhibit R1(c) TRUE COPY OF THE REPORT OF THE DISTRICT AUDIT TEAM DATED 30/03/2021 SUBMITTED TO THE REGIONAL MANAGER, CENTRAL ZONE2, KSBC, ERNAKULAM. Exhibit R1(d) TRUE COPY OF THE COMMUNICATION NO.KSBC/01/RMC-11/2020-21 DATED NIL, SENT BY THE REGIONAL MANAGER, C2, THRIPUNITHURA TO THE CHAIRMAN AND MANAGING DIRECTOR OF THE CORPORATION.