C.K. Gopalan v. Corporation of Kochi

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: S. Siri Jagan
Judgment Date: 2012-08-03
Court Decision / Holding: Writ petition disposed of. Exts.P4 and P5 are quashed for lack of due process. The respondent may pursue remedies available under law (civil suit or arbitration) if it has a genuine breach claim. If such remedies are not pursued or stayed, the respondent must pay the amounts per Exts.P4 and P5 within one month from the date three months elapse from today.
Final Disposition: Writ petition disposed of; Exts.P4 and P5 quashed; remedies available under law may be pursued; if not, payment of the disputed amounts to be made within one month after three months from today.

Parties to the Case

Appellants / Petitioners

C.K. Gopalan

Respondents

Corporation of Kochi, represented by its Secretary, Ernakulam

Legal Representation & Advocates

Counsels for Petitioners

• P.K. Suresh Kumar
• T.P. Ramachandran (Thacheth)

Counsels for Respondents

• C.M. Suresh Babu (SC)
• S. Ramesh Babu (SC)

Case Synopsis & Summary

The petitioner, C.K. Gopalan, undertook a contract with the Cochin Corporation to remove garbage from its limits during 1.12.2006 to 28.2.2007. He claims the Corporation did not pay the full bill for the contracted work. Earlier, in W.P. No. 22068 of 2008, the Corporation had disputed most of the claim except Rs. 5,91,145/-, and the court relegated the petitioner to a civil suit, noting the Corp.'s position. Subsequently, the Corporation passed two resolutions, Exts. P4 and P5, alleging breach by the petitioner and directed deductions totaling Rs. 4,68,547/- plus damages of Rs. 3,00,000/-, to be adjusted against the petitioner’s bill. The petitioner challenges Exts. P4 and P5 as unilateral actions taken without hearing, arguing they contravene established law that, even when the state is a party to a contract, breach and damages cannot be adjudicated unilaterally by the other party. He cites State of Karnataka v. Shree Rameshwara Rice Mills, AIR 1987 SC 1359. The court agrees, quashing Exts. P4 and P5 for lack of due process. The court notes that if the respondent has a legitimate claim for damages, it may pursue civil proceedings or arbitration; but failure to initiate such remedies within three months requires payment of the amounts at issue within one additional month. The petition is disposed accordingly.

Provisions of Law Cited

Constitution of India, Article 12Arbitration and Conciliation Act

Legal Doctrines & Maxims

Natural justice; audi alteram partem (opportunity to be heard)
State cannot unilaterally adjudicate breach and damages in a contract involving the State; must rely on independent adjudication

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that Exts.P4 and P5 were issued unilaterally and amount to the corporation adjudicating breach and damages without giving an opportunity of hearing, contrary to the law laid down by the Supreme Court (citing State of Karnataka v. Shree Rameshwara Rice Mills). He seeks quashing of Exts.P4 and P5 and disbursement of the entire amount due under Ext.P2, or a declaration that the corporation is not entitled to retain any amount. He argues for proper judicial determination of any breach and damages, with a remedy under civil suit or arbitration if available under the contract.

Contentions of Respondents

The Corporation submits that where there is a written contract with a provision for recovery of loss, it is open to the Corporation to determine the question by itself. Exts.P4 and P5 are therefore valid where the contract permits the deduction for breach and damages.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli	AIR (1987) SC 1359	Positive	Cited to support the proposition that the State cannot unilaterally adjudicate breach and damages in a contract; hearing and independent adjudication are required.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE S.SIRI JAGAN** **FRIDAY, THE 3RD DAY OF AUGUST 2012/12TH SRAVANA 1934** ## **WP(C).No. 18970 of 2009 (M)** **---------------------------** **PETITIONER(S):** **-------------------------** **C.K.GOPALAN, SOIL HOUSE, PUTHUPANAM P.O., VADAKARA, KOZHIKODE DISTRICT.** **BY ADVS.SRI.P.K.SURESH KUMAR SRI.T.P.RAMACHANDRAN (THACHETH)** **RESPONDENT(S):** **---------------------------** **CORPORATION OF KOCHI, REPRESENTED BY ITS SECRETARY, ERNAKULAM.** **BY ADV. SRI.C.M.SURESH BABU,SC,COCHIN CORPN. BY ADV. SRI.S.RAMESH BABU, SC.COCHIN CORPN.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03-08-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Kss** ## **WPC.NO.18970/2009 M** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1: COPY OF WORK ORDER DATED 1/12/2006 ISSUED BY THE RESPONDENT TO THE PETITIONER.** - **P2: COPY OF BILL SUBMITTED BY THE PETITIONER BEFORE THE RESPONDENT.** - **P3: COPY OF JUDGMENT DATED 12/12/2008 IN WPC.NO.22068/2008 PASSED BY THIS HON'BLE COURT.** - **P4: COPY OF PROCEEDINGS OF THE FINANCE STANDING COMMITTEE OF THE RESPONDENT DATED 20/10/2008.** - **P5: COPY OF PROCEEDINGS OF THE FINANCE STANDING COMMITTEE OF THE RESPONDENT DATED 29/11/2008.** - **P6: COPY OF ORDER DATED 11/03/2009 IN R.P.NO.231 OF 2009 PASSED BY THIS HON'BLE COURT.** ## **RESPONDENT'S EXHIBITS:** ## **N I L** ## **/TRUE COPY/** ## **P.A.TO JUDGE** **Kss** ## **S. SIRI JAGAN, J.** ------------------------------------------- W.P.(C) No.18970 of 2009 ---------------------------------------------Dated this the 3[rd] day of August, 2012 ## **JUDGMENT** The petitioner undertook a contract for removing garbage on behalf of the Cochin Corporation from the limits of the Cochin Corporation to the destination as directed by the respondent Corporation for the period from 1.12.2006 to 28.2.2007. According to the petitioner, the Corporation did not pay the bill amount in full due to the petitioner for execution of that contract. The petitioner filed W.P.(C) No.22068/2008 for a direction to the respondent to pay to the petitioner the balance amount due under the contract. In that writ petition, the respondent took the stand that all amounts other than Rs.5,91,145/- have been pad to the petitioner, in respect of entitlement of the petitioner for which amount the Corporation has a dispute. Since the amount was not admitted, recording the said submission, I relegated the petitioner to the remedy by way of a civil suit, by Ext.P3 judgment. Subsequently, the petitioner came to understand that W.P.(C)No.18970/09 2 the Corporation adopted Exts.P4 and P5 resolutions to the effect that on account of breach of contract by the petitioner, the Corporation had to incur additional liability of Rs.1,68,547/- for which damages of Rs.3,00,000/- is also due from the petitioner which has to be deducted from the bill amount due to the petitioner. Thereupon, the petitioner filed R.P.No.231/2009 seeking review of Ext.P3 judgment appropriately. By Ext.P6 order in that review petition, I made it clear that if the petitioner is entitled to other remedies under law in respect of Exts.P4 and P5, it would be open to the petitioner to resort to such remedies, despite Ext.P3 judgment, by which I had relegated the petitioner to a civil suit. It is pursuant to that order, the petitioner has now filed this writ petition challenging Exts.P4 and P5 resolutions of the respondent Corporation has decided that the petitioner had committed breach of contract for which the amount of Rs.4,68,547/- is to be appropriated towards additional expenditure incurred by the Corporation and damages due to the Corporation for breach of contract from amounts due to the petitioner. The contention of the petitioner is that, by those resolutions, without even affording an opportunity of W.P.(C)No.18970/09 3 being heard to the petitioner, the Corporation has unilaterally decided that the petitioner has committed breach of contract and also quantified alleged damages due to the Corporation for the alleged breach of contract, from the petitioner. The petitioner contends that this is clearly against the law laid down by the Supreme Court on the subject. The petitioner submits that in respect of a contract between two parties, even where one of the parties is a State as defined under Article 12 of the Constitution of India, that party cannot unilaterally decide that the other party has committed breach of contract and also adjudicate on the damages recoverable on account of the said alleged breach of contract, without resorting to an adjudication by an independent authority. The petitioner relies on the decision of the Supreme Court in _**State of Karnataka v.**_ _**Shree Rameshwara Rice Mills,Thirthahalli**_ [ AIR (1987) SC 1359]. The petitioner seeks the following reliefs: > “(i) quash the decision taken by the respondent as per Exts.P4 and P5 resolutions by the issue of a writ of certiorari or other appropriate writ, order or direction. (ii) issue a writ of mandamus or other appropriate writ, order or direction commanding the respondent to forthwith disburse the entire amount due to the petitioner on the basis of Ext.P2 bill. (iii) declare that the Corporation is not entitled to W.P.(C)No.18970/09 4 retain any amount of money due to the petitioner as per Ext.P2 bill.” 2. The learned counsel for the Corporation submits that, when there is a written agreement, wherein there is provision for recovery of loss caused by the petitioner on account of their action in the performance of the contract, it is open to the Corporation to decide that question by themselves. 3. I have considered the rival contentions in detail. 4. The decision relied upon by the petitioner and several other decisions by the Supreme Court and this Court have categorically held that even if the State is a party to a contract, the State cannot unilaterally decide the question of breach of contract by the other party, or compute damages for such alleged breach of contract and recover the same from the other party. That exactly has been done in this case, that too even without an opportunity of being heard to the petitioner. Exts.P4 and P5 resolutions holding that the petitioner committed breach of contract and therefore the petitioner is liable to pay the amounts mentioned in Exts.P4 and P5 are therefore clearly without jurisdiction. Accordingly, they are W.P.(C)No.18970/09 5 quashed. 5. However, if the respondent has got a case that the petitioner had, in fact, committed breach of contract on account of which the respondent has suffered damages, it would be open to the respondent to resort to remedies as available to them by way of filing a civil suit or by resorting to proceedings under the Arbitration and Conciliation Act, if the contract provides for the same, if the respondent can at this point of time validly resort to such remedies. However, if the respondent is not able to resort to those proceedings or obtain interim orders of stay of payment of that amount to the petitioner in any valid proceedings, within three months from today, the respondent shall pay the said amount covered by Exts.P4 and P5 to the petitioner within another one month therefrom. The writ petition is disposed of as above. ## **S. SIRI JAGAN, JUDGE** acd W.P.(C)No.18970/09 6 W.P.(C)No.18970/09 7