Coastal Engineering Konthuruthy v Union of India and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE N.NAGARESH** **WEDNESDAY, THE 22[ND] DAY OF DECEMBER 2021 / 1ST POUSHA, 1943** **WP(C) NO. 5952 OF 2021** ## **PETITIONER:** **COASTAL ENGINEERING KONTHURUTHY, KOCHI-682 013, REPRESENTED BY THE MANAGING PARTNER K.J.JOHN** **BY ADVS. K.L.VARGHESE (SR.) SMT.SANTHA VARGHESE SRI.RAHUL VARGHESE SRI.RANJITH VARGHESE** ## **RESPONDENTS:** - **1 THE UNION OF INDIA REPRESENTED BY THE DEPUTY CHIEF ENGINEER,I, CONSTRUCTION, SOUTHERN RAILWAY, ERNAKULAM, KOCHI-682 016** - **2 THE CHIEF ENGINEER (CONSTRUCTION). SOUTHERN RAILWAY, ERNAKULAM, KOCHI-682 016** - **3 THE CHIEF ADMINISTRATIVE OFFICER, ( CONSTRUCTION), SOUTHERN RAILWAY, ERNAKULAM, KOCHI-682 016** - **4 THE DEPUTY FINANCIAL ADVISOR AND CHIEF ACCOUNTS OFFICER, SOUTHERN RAILWAY, ERNAKULAM, KOCHI-682 016** **BY ADV SRI.N.K.SUBRAMANIAN, SC, RAILWAYS , R1 TO R4** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22.12.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.5952/2021 : 2 : ## **N. NAGARESH, J.** ````````````````````````````````````````````````````````````` ## W.P.(C) No.5952 of 2021 ````````````````````````````````````````````````````````````` _Dated this the 22[nd] day of December, 2021_ ## **J U D G M E N T** ~ ~ ~ ~ ~ ~ ~ ~ ~ The petitioner, a registered contractor of Southern Railway, is aggrieved by the non-release of Security Deposit and Earnest Money Deposit despite the foreclosure of contract. 2. The petitioner entered into Ext.P1 agreement dated 30.01.2016 with the respondents for the work “Doubling of Track between Kuruppanthara & Chingavanam - Proposesd soil stabilisation of weak formation between Kuruppanthara & Chingavanam Stations, under Agt. No.02/DCE/ERS/2016 dated 30.01.2016” . Due to want of facilities, the work spilled over the original stipulated period of 10.02.2016. The period was extended up to 31.01.2019. W.P.(C) No.5952/2021 : 3 : 3. The petitioner states that a meeting was held on 12.10.2018 wherein it was decided that stone columns would be used instead of Prefabricated Vertical Drain (PVD) which was sanctioned in Ext.P1 agreement. It was resolved to treat the petitioner's work of PVD as closed on completion of the work wherever it was ongoing. The petitioner thereafter submitted a new design for vibratory stone column. There was no further intimation from the respondents. The Deputy Chief Engineer, however, issued Ext.P4 notice dated 19.01.2019 alleging the progress in work is slow. In fact, Ext.P4 was a prelude to termination of the contract. The Deputy Chief Engineer was feigning ignorance of the stalemate due to change in methodology, contends the petitioner. 4. The petitioner submitted Ext.P5 letter. The 1[st] respondent, however, issued Ext.P6 communication dated 28.01.2019 which was a 48 hours notice to terminate the contract. The petitioner filed W.P.(C) No.3201/2019. This Court directed the 2[nd] respondent to consider the petitioner's W.P.(C) No.5952/2021 : 4 : representation and take a decision regarding foreclosure of the contract. The 2[nd] respondent thereupon required the petitioner to issue a letter that no claims would be raised, to enable foreclosure of contract. The petitioner submitted Ext.P10 letter stating that the petitioner will be entitled to the payments for the work done. The 2[nd] respondent thereafter issued Ext.P11 letter dated 20.03.2019 recommending foreclosure of the contract. 5. The petitioner states that in spite of Ext.P11, no steps were taken for foreclosure of contract nor for release of Performance Bank Guarantee furnished by the petitioner. The petitioner hence approached this Court filing W.P.(C) No.22961/2019. This Court disposed of the writ petition recording the undertaking of the counsel for the respondents that Bank Guarantee would be released after recording the measurements of the work carried out by the petitioner. In Ext.P15 judgment, this Court safeguarded the rights of the petitioner to raise all claims with respect to the subject work through arbitration. W.P.(C) No.5952/2021 : 5 : 6. The petitioner thereafter issued several letters to the Railways requiring to release the Security Deposit and EMD since the contract is foreclosed. The 2[nd] respondent issued Ext.P18 letter stating that No–dues Certificate was a mandatory precondition for the release of Security Deposit and EMD. In this writ petition, The petitioner challenges Exts.P11 and P18 and seeks to direct the respondents to release the Security Deposit and Earnest Money Deposit illegally withheld from the petitioner. The petitioner also seeks payment of 18% interest on the amount illegally withheld from the petitioner. 7. Respondents 2, 3 and 4 filed a counter affidavit and contested the writ petition. The respondents stated that the petitioner failed to show substantial progress in the works during the contract period. The process and procedure for termination of contract were in accordance with the general conditions of contract. Periodic inspections were made by the concerned authority and it was noted that the work was not progressing at the desired pace. Accordingly, Ext.R1(c) W.P.(C) No.5952/2021 : 6 : termination notice dated 31.01.2019 was issued. 8. The respondents pointed out that the petitioner has already invoked the arbitration clause under General Conditions of Contract and AR No.22/2021 is pending before this Court for adjudication. The petitioner was required to submit an unequivocal and unconditional No Claim Certificate for release of Security Deposit, which is as per the conditions of contract. The petitioner has not so far submitted No Claim Certificate as mandated by the special conditions of contract. Since the petitioner has chosen the course of arbitration, the disputes involved in this writ petition also will have to be resolved through the arbitral proceedings. The writ petition is therefore liable to be dismissed, contended the learned Standing Counsel for the respondents. 9. The learned counsel for the petitioner submitted that the judgments of this Court specifically safeguarded the petitioner's right to raise claims and that the petitioner has not agreed to withdraw all claims. The signing of No Claim does not apply to the present fact situation since the work W.P.(C) No.5952/2021 : 7 : had to be foreclosed due to design failure attributable to the Railways. The Hon'ble Apex Court has condemned in _**National Insurance Company Limited v. Boghara Polyfab Private Limited** [(2009) 1 SCC 267]_ the routine insistence by some government departments, statutory corporations and government companies for issue of undated 'No-dues Certificates' or 'full and final settlement vouchers'. Such a procedure is unfair, irregular and illegal and requires to be deprecated. The learned counsel for the petitioner urged that there is no legal or factual basis for withholding Security Deposit amount of ₹36,41,691/- for a work which was admittedly foreclosed due to design failure of the Railways more than two years ago. 10. I have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondents. 11. The petitioner entered into Ext.P1 agreement with the respondents for the work of doubling of track between Kuruppamthara and Chingavanam and for soil stabilisation. W.P.(C) No.5952/2021 : 8 : The agreement was dated 30.01.2016. The period of contract was extended from time to time up to 31.01.2019. The petitioner states that the Railway Board decided on 12.10.2018 that stone columns would be used instead of PVD which was sanctioned in Ext.P1 agreement. It is the case of the petitioner that the petitioner proposed a new methodology for completing the work. 12. The petitioner states that instead of considering the proposal of the petitioner, the respondents proceeded to terminate the contract. The petitioner filed W.P.(C) No.3201/2019. By Ext.P7 judgment, this Court directed the respondents to consider the request of the petitioner for foreclosure of the agreement. By Ext.P11, the 2[nd] respondent-Chief Engineer issued letter dated 20.03.2019 recommending foreclosure of the contract. It is the case of the petitioner that the respondents have already released the Performance Bank Guarantee furnished by the petitioner. Since the contract is foreclosed, the respondents are duty-bound to release Security Deposit and Earnest Money W.P.(C) No.5952/2021 : 9 : Deposit of the petitioner. These amounts are not released for the reason that the petitioner has not submitted No Claim Certificate. 13. In short, the argument of the petitioner is that the work contemplated under Ext.P1 agreement could not be completed for no fault of the petitioner and hence the contract was foreclosed. As there is no fault on the part of the petitioner, the respondents are liable to pay the amounts due to the petitioner for the work completed by him and also to release Security Deposit and EMD to the petitioner. 14. In this regard, it is to be noted that the petitioner approached this Court filing W.P.(C) No.3201/2019. This Court held that if the petitioner submits a representation for release of Performance Bank Guarantee, a decision should be taken thereon and further coercive steps should be deferred. Taking note of the disputes between the petitioner and the respondents, this Court held that any surviving grievance of the petitioner shall be subject to resolution through arbitration as provided in the contract between the W.P.(C) No.5952/2021 : 10 : parties. It is an admitted position that the petitioner has invoked the provisions of the Arbitration and Conciliation Act and filed A.R. No.22/2021 before this Court. The petitioner again approached this Court subsequently, filing W.P.(C) No.22961/2019. In the said writ petition, the petitioner made a specific prayer to direct the respondents to release the petitioner’s Security Deposit and Earnest Money Deposit. In the said writ petition, this Court noted that the respondents have no intention to invoke the Bank Guarantee. This Court held that questions with respect to the claims of either side, are left open to be adjudicated in any properly constituted arbitration proceedings. 15. Since the petitioner has already made a prayer for release of Security Deposit and EMD in W.P.(C) No.22961/2019 and since this Court by Ext.P15 judgment held that the claims not granted in the writ petition are left open to be adjudicated in any properly constituted arbitration proceedings and further, since the petitioner has already initiated the course of arbitral resolution, the present writ W.P.(C) No.5952/2021 : 11 : petition for release of Security Deposit and EMD is not maintainable. The writ petition therefore fails and it is consequently dismissed. Sd/- **N. NAGARESH, JUDGE** aks/21.12.2021 W.P.(C) No.5952/2021 : 12 : ## **APPENDIX OF WP(C) 5952/2021** ## **PETITIONER EXHIBITS** **EXHIBIT P1 TRUE COPY OF THE FACING SHEET OF THE AGREEMENT DATED 30.01.2016 EXECUTED BY THE PETITIONER AND THE RESPONDENTS EXHIBIT P2 TRUE COPY OF THE RIDER AGREEMENT EXECUTED ON 05.01.2019 EXHIBIT P3 TRUE COPY OF THE LETTER DATED 21.11.2018 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER EXHIBIT P4 TRUE COPY OF THE NOTICE DATED 19.01.2019 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER EXHIBIT P5 TRUE COPY OF THE LETTER DATED 28.01.2019 ISSUED BY THE 1ST RESPONDENT TO THE RESPONDENT EXHIBIT P6 TRUE COPY OF THE NOTICE DATED 28.01.2019 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER EXHIBIT P7 TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT DATED 07.02.2019 IN WPC NO.3201 OF 2019 EXHIBIT P8 TRUE COPY OF THE LETTER DATED 22.02.2019 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER EXHIBIT P9 TRUE COPY OF THE REPRESENTATION DATED 26.02.2019 SUBMITTED UNDER COVER OF LETTER DATED 27.02.2019 TO THE 2ND RESPONDENT EXHIBIT P10 TRUE COPY OF THE LETTER DATED 19.03.2019 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT EXHIBIT P11 TRUE COPY OF THE LETTER DATED 20.03.2019 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER EXHIBIT P12 TRUE COPY OF THE LETTER DATED 25.06.2019 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT** W.P.(C) No.5952/2021 : 13 : - **EXHIBIT P13 TRUE COPY OF THE LETTER DATED 30.07.2019 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT** - **EXHIBIT P14 TRUE COPY OF THE LETTER DATED 06.08.2019 ISSUED BY THE 2ND RESPONDENT TO THE 1ST RESPONDENT** - **EXHIBIT P15 TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT DATED 29.08.2019 IN WPC NO.22961 OF 2019** - **EXHIBIT P16 TRUE COPY OF THE LETTER DATED 23.09.2019 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT** - **EXHIBIT P17 TRUE COPY OF THE LETTER DATED 31.01.2020 ISSUED BY THE PETITIONER TO THE RESPONDENTS** - **EXHIBIT P18 TRUE COPY OF THE LETTER DATED 10.02.2020 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER** - **EXHIBIT P19 TRUE COPY OF THE LETTER DATED 30.07.2020 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT** - **EXHIBIT P20 TRUE COPY OF THE LETTER DATED 25.01.2021 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT** - **EXHIBIT P21 TRUE COPY OF THE GOVERNMENT CIRCULAR DATED 27.11.2020 ISSUED BY THE MINISTRY OF RAILWAYS , RAILWAYS BOARD** ## **RESPONDENT EXHIBITS** **TRUE COPY OF THE LETTER OF ACCEPTANCE Exhibit R1 A BEARING NO.W.496/CN/ERS/OT/08/14/3 DTAED 11.05.2015** **TRUE COPY OF THE ORDER Exhibit R1 B NO.NO.W.148/CN/ERS/786 DATED 05.07.2018 RECOVERING THE DAMAGES.** **TRUE COPY OF THE TERMINATION NOTICE Exhibit R1 C BEARING NO.W.148/CN/ERS/786 DATAED 31.01.2019 TRUE COPY OF THE RELEVANT PAGE OF Exhibit R1 D SPECIAL CONDITIONS OF CONTRACT. Exhibit R1 E TRUE COPY OF THE LETTER BEARING NO W 148/CN/ERS/786 DATED 30.9.2019** ## W.P.(C) No.5952/2021 : 14 : **Exhibit R1 F TRUE COPY OF THE PROCEEDINGS DATED 28.9.2019. PRECEDING EXHIBIT R1 (E) Exhibit R1g TRUE COPY OF THE RELEVANT EXTRACT OF THE CONDITIONS OF AGREEMENT VIZ.CLAUSE 14**