Kalandarsha K.A. v. State of Kerala and others

W.P.(C) No. 22930/2021 : 1 : ## IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT ## THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY, THE 21[ST] DAY OF MARCH 2023 / 30TH PHALGUNA, 1944 ## WP(C) NO. 22930 OF 2021 ## PETITIONER/S: KALANDARSHA K.A PWD CONTRACTOR, KANAYAKULAM HOUSE, CHENGALA P.O, KASARAGOD – 671 541. BY ADVS. JOMY GEORGE R.PADMARAJ M.J.BENNY DEEPAK MOHAN R.AJITH KUMAR [V.K.EDOM] RISHAB S. GEORGE J MOOLAMKUNNAM ## RESPONDENT/S: 1 STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM- 695 001. - 2 CHIEF ENGINEER. PWD ROADS, THIRUVANANTHAPURAM- 695 001. - 3 SUPERINTENDING ENGINEER. PWD ROADS AND BRIDGES CENTRAL CIRCLE, ALUVA, ERNAKULAM – 683 101. - 4 SUPERINTENDING ENGINEER. PWD ROADS AND BRIDGES CENTRAL CIRCLE, KOZHIKODE – 673 647. BY ADV. SRI. K.V. MANOJ KUMAR, SPL. GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 14.03.2023, THE COURT ON 21.03.2023 DELIVERED THE FOLLOWING: ## W.P.(C) No. 22930/2021 ## : 2 : ## **SHAJI P. CHALY, J.** --------------------------------------------------------W.P.(C). No. 22930 of 2021 --------------------------------------------------------Dated this the 21[ST] day of March, 2023. ## The petitioner is an ‘A’ class contractor engaged by the Public Works Department of the State for the work ‘FD works 2018-19Flood Rectification works to Chathan Master Road-Reach II from Ch.2/000 to 3/000 and providing drainage facilities in KodakaraKodungallur road at Kodakara Centre-Reg”. Accordingly, Exhibit P1 agreement dated 25.06.2019 was entered into by the petitioner with the Superintending Engineer, PWD Roads and Bridges Central Circle, Aluva, respondent No.3, to execute the work at a cost of Rs.1,22,94,272/- within a period of 9 months. 2. The case of the petitioner is that even though by records, the site was handed over to the petitioner on 05.07.2019, initial level had not been taken and therefore, the petitioner could not take possession of the entire site. According to the petitioner, he started the work; but, he could not complete the same within the time fixed by the respondents mainly due to the delay in finalising the initial level. Thereafter, the entire works was stopped on account of the lock-down restrictions imposed due to pandemic covid-19; and in the meanwhile, petitioner was also hospitalised due to Covid and his condition became very serious. Later, he W.P.(C) No. 22930/2021 : 3 : approached the third respondent and explained the situation that disabled him to restart the work. However, without considering the same, Exhibit P2 order dated 29.12.2020 was issued terminating the work at the risk and cost of the petitioner. 3. Thereafter, on 13.09.2021, the petitioner was served with Exhibit P3 notice directing him to pay an amount of Rs.34,37,634/as initial liability towards the risk and cost amount. It is, thus, challenging the legality and correctness of Exhibit P3 order, the writ petition is filed. Anyhow, the petitioner has submitted Exhibit P4 reply dated 06.10.2021 before the third respondent and the same is still pending consideration. 4. The contention put forth by the petitioner is that subsequent to the termination of the contract, re-tender was invited, in which 8 bidders participated and an agreement was executed with the lowest bidder on 30.07.2021 at an agreed Probable Amount of Contract of Rs.1,07,35,822.44, which is less than the rate agreed by the petitioner; and therefore, according to the petitioner, there is no loss suffered by the respondents consequent to the termination of contract. It is in the said background, the following reliefs are sought for: - 1) Issue a writ of certiorari or any other appropriate writ, order or direction quashing Exhibit P3 notice of the third respondent; - 2) Issue a writ of mandamus or any other appropriate writ, order or direction directing the respondents to relieve the petitioner from the contract without imposing any penalty; or in the alternative W.P.(C) No. 22930/2021 : 4 : - 3) Issue a writ of mandamus or any other appropriate writ, order or direction directing the respondents to quantify the damages, if any suffered by the respondents before demanding any amount from the petitioner, after affording an opportunity of hearing to the petitioner. 5. A statement is filed for and on behalf of the respondents ## basically contending as follows: “5. Petitioner was always in an attempt to evade from the work. The Assistant Engineer, Kodakara informed that the MLA, Chalakudy is criticizing the non-execution of the work in time. The contractor intimated that due to Covid-19 Pandemic, there is shortage of labourers. He intimated that he had engaged labourers from other states and after the period of their quarrantine, the work will be re-strated. He also agreed to restart the work by November 15[th] 2020 and would get it completed by 31.01.2021. He was given strict direction that the work should be restarted and completed within this time frame failing which risk and cost termination will be initiated against him. He was also directed to submit an application for extension of time of completion of the work up to 31.01.2021, and that it would be sanctioned with fine. The initial level of work was taken by the department and the petitioner was contacted several times for joint inspection to report the level but he did not turn up for the same. Since this is the situation of the case, the petitioner is blaming departmental officers stating flimsy reasons such as non finalisation of initial level, lock down due to Covid -19 etc, which was already over by 6/2020. He had never informed this office of the agreement authority that he was affected by Covid -19. He was always in a stand to lag the work to the maximum extent from the agreement execution stage itself. It may be noted that the original time of completion of the W.P.(C) No. 22930/2021 : 5 : work (4.4.2020) is almost over before the outbreak of Covid19 pandemic. He had every opportunity to complete the work before the crisis. 6. It is submitted that he never submitted any reason for the slow progress of the work during any of this period and now submitted a Medical Certificate. Later vide the office letter NO.DT3/11216/18 dated 2.12.2020, the Executive Engineer (Roads) Division, Thrissur was enquired about the present progress of the work (Exhibit R3-4). The Executive Engineer, Thrissur intimated vide letter No. D1-112116/2018 dated 02.12.2020 that the contractor had not submitted any application for extension of time till date nor he restarted the work. Due to the lack of any attempt from the part of the petitioner, the Executive Engineer recommended the termination of work at the risk and cost of the contractor. True copy of the letter No. D1-112116/2018 dated 02.12.2020 is produced herewith and marked as **Annexure R(g).** Since sufficient intimation was given to the contractor this time and this office is bound to complete the work in time considering the interest of the public in general, action was taken to terminate him at risk and cost and accordingly proceedings as per Exhibit P2 was issued. Also the petition was informed to remit Rs. 34,37,634/- being the initial liability @ 30% of the cost of unexecuted work at agreed rate as per KPWD Manual Clause, 2116. 2. It is the initial penalty for the non completion work. Further loss, if any, will be recovered from the defaulted contractor on completion of the rearranged work, the PWD rules states (KPWD Manual Clause 2116.2). The action in imposing initial liability of 30% of the cost of unexecuted work at agreed rate of the defaulted contractor is fully justified as per PWD rules. It has no concern with the contract amount of rearranged work.The work was rearranged on 12.02.2021 and 8 bidders participated in re W.P.(C) No. 22930/2021 : 6 : tender and agreement was executed with the lowest bidder on 30.07.2021 at an agreed PAC of Rs. 1,07,35,8222.44. Also the response in the rearrangement of balance work clearly indicates the work is a nature of an easier work (about 8 bidders participated) which the petitioner could have performed but for his fault and hesitation. If only any additional amount is remaining to be recovered due to the loss on rearrangement of work, it will be finalised on completion of the rearranged work, initial liability will be realised from the defaulted contractor considering the contract amount in the rearranged work. KPWD manual does not contain provision for the same.” 6. Therefore, according to the respondents, without a challenge to the termination of contract, challenge made to the initial quantification done by the respondents as per Exhibit P3 dated 13.09.2021 cannot be sustained under law. It is further submitted by the learned Special Government Pleader that no interference is required, since the action pertaining to Exhibit P3 is on the basis of clause 2116.2 of the PWD manual dealing with ‘termination of contract’ and clause 2116.2.1 dealing with ‘realisation of loss on account of termination’. The said clauses contained under the PWD Manual Revised Edition 2012 reads as follows: ## “2116.2. **Termination of Contract** The department can terminate the contract and rearrange the work at the risk and cost of contractor in the following cases: i. If the contractor does not turn up for starting the work W.P.(C) No. 22930/2021 : 7 : within the specified period to take charge of the site after executing the agreement. ii. If the contractor does not show the proportionate progress during the extended period of time of completion. iii. If the contractor abandons the work after executing a portion without genuine reason and does not resume or complete it even after specific direction from the Department. iv. Fails to make application for extension of time of completion in time. v. The licence of the contractor whose work has been terminated shall be cancelled with immediate effect and shall be barred from quoting for another work for a minimum period of five years. Contract licence shall not be renewed in his name or different name of a binamy. vi. A company or person or firm once terminated shall be disqualified from participating in any tender in his name or by using a different name or binamy. There shall also be a fine and forfeiture of deposits. ## 2116.2.1 **Realisation of loss on account of termination** An amount equal to 30% of the cost of the remaining works at agreed rates of the terminated contract shall be recovered from the defaulted contractor towards the risk and cost. The contractor shall be directed to remit the risk and cost amount within three months. There is no need to wait till the work is arranged alternatively through another contractor and the total loss sustainable due to the default of the original contractor is assessed. Such loss, if any, shall be realised after completion of the W.P.(C) No. 22930/2021 : 8 : work. If he fails to remit the amount within this period, following steps can be adopted for realisation of loss. The amount can be realised from the following. ## 2. EMD / Security 3. Bill amount / retention if any due to the contract. 4. Any dues from department to the contract. 5. Bank Guarantee / Performance Guarantee or By filing civil suit against the contractor.” 7. Therefore, according to the learned Special Government Pleader, the action initiated by the respondents as per Exhibit P3 is in accordance with the PWD Manual. The learned counsel for the petitioner, on the other hand, submitted that by virtue of Sections 73 and 74 of the Indian Contract Act, 1972, since no loss is suffered by the respondents, the petitioner is entitled to be relieved from the work without risk and costs. 8. I have heard the learned counsel for the petitioner Sri. Jomy Goerge and the learned Special Government Pleader Sri. K.V. Manoj Kumar, and perused the pleadings and material on record. 9. In my considered opinion, before finalizing the proceedings pertaining to Exhibit P3, the petitioner is entitled to contest the proceedings as of right. The petitioner, in that context, has submitted Exhibit P4 before the Superintending Engineer, respondent No.3, and the same is pending consideration. Further, Exhibit P3 can only be treated as an initial notice issued to the W.P.(C) No. 22930/2021 : 9 : petitioner in terms of the provisions of the PWD Manual and therefore, it cannot be termed as a final order passed. 10. Even though the learned counsel for the petitioner has invited my attention to the judgments of this Court in _**State of Kerala v. United Shippers and Dredgers**_ [1982 KHC 179], _**State of Kerala v. Bhaskaran**_ [1984 KHC 380] and _**Kaikkara Construction Company v. State of Kerala and another**_ [2022 (2) KHC 541], I am of the view that the said judgments are rendered under different facts and circumstances. This is a case where the petitioner has not challenged the termination of contract by the respondents and therefore, it cannot be said that the power of the tendering authority to quantify the damages is illegal. But, at the same, the learned counsel has invited my attention to the judgment of the Apex Court in _**G.J.**_ _**Fernandez v. State of Mysore and others**_ [AIR 1967 SC 1753], wherein it is held that the instructions contained in the Code are mere administrative instructions and not statutory rules and the said decision was followed by a Division Bench of this Court in _**State of Kerala v. Aboobacker Kutty**_ [1992 KHC 475]. In that view of the matter, I am of the view that even though the tendering authority is vested with powers to quantify the damages, it will have to be done in accordance with law and the legal principles contained under the Indian Contract Act, 1872. W.P.(C) No. 22930/2021 : 10 : Therefore, the right of the petitioner to contest the proceedings before the authority cannot be brushed aside. 10. Accordingly, this writ petition is disposed of with the following directions: - 1) There will be a direction to the third respondent i.e., the Superintending Engineer, PWD Roads and Bridges Central Circe, Aluva, to treat Exhibit P3 as an initial notice and Exhibit P4 submitted by the petitioner as a reply to the same. - 2) The third respondent is directed adjudicate the issues raised by the petitioner in Exhibit P4 in accordance with the law, and in terms of any proposition of law laid down by the Apex Court or this Court, at the earliest possible, at any rate within two months from the date of receipt of a copy of this judgment, after providing an opportunity of hearing to the petitioner. - 3) The petitioner is granted the liberty to take up all contentions before the authority, including the proposition of law laid down by the Apex Court as well as this Court in regard to the quantification of damages and under the context in which the damages can be fixed. ## **SHAJI P. CHALY, JUDGE.** Rv W.P.(C) No. 22930/2021 : 11 : ## APPENDIX OF WP(C) 22930/2021 ## PETITIONER’S EXHIBITS: Exhibit P1 TRUE COPY OF THE AGREEMENT NO. 33SECCA/201920 DATED 25.06.2019 ENTERED INTO BY THE PETITIONER WITH THE 3RD RESPONDENT. Exhibit P2 TRUE COPY OF THE ORDER DATED 29.12.2020 OF THE 3RD RESPONDENT. Exhibit P3 TRUE COPY OF THE NOTICE DATED 13.09.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P4 TRUE COPY OF THE REPLY DATED 06.10.2021 SENT BY THE PETITIONER TO THE 3RD RESPONDENT. ## RESPONDENTS’ EXHIBITS: ANNEXURE R(a) TRUE COPY OF AGREEMENT NO.33/SECCA/2019-20 DATED 25.06.2019. ANNEXURE R(b) TRUE COPY OF NOTICE DATED 02.08.2019. ANNEXURE R(c) TRUE COPY OF NOTICE NO. S1/RD/11216/2018 DATED 11.10.2019. ANNEXURE R(d) TRUE COPY OF NOTICE NO.S1 RD/11216/2018 DATED 06.01.2020. ANNEXURE R(e) TRUE COPY OF MINUTES. ANNEXURE R(f) TRUE COPY OF THE LETTER NO.DT3 11216/18 DATED 05.03.2020. ANNEXURE R(g) TRUE COPY OF THE LETTER NO.D1-11216/2018 DATED 02.12.2020. True Copy PS To Judge. rv