Madhu v. State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE N.NAGARESH** **MONDAY, THE 26TH DAY OF APRIL 2021/6TH VAISAKHA, 1943** ## **WP(C).No.7472 OF 2020(H)** ## **PETITIONER:** **MADHU, S/O.KITTUNNY, AGED 58 YEARS, CHALAKKALAM, THATHAMANGALAM, PALAKKADU DISTRICT.** **BY ADVS. SRI.C.S.MANILAL SRI.S.NIDHEESH** ## **RESPONDENTS:** |**1**|**THE STATE OF KERALA, REPRESENTED BY**| |---|---| ||**THE SECRETARY TO GOVERNMENT,**| ||**WATER RESOURCE DEPARTMENT,**| ||**THIRUVANANTHAPURAM - 605 036.**| |**2**|**THE CHIEF ENGINEER, PROJECT I,**| ||**IRRIGATION DEPARTMENT,**| ||**KOZHIKODE - 673 001.**| |**3**|**SUPERINTENDING ENGINEER,**| ||**SIRUVANI PROJECT CIRCLE,**| ||**PALAKKADU - 678 002.**| |**4**|**THE EXECUTIVE ENGINEER,**| ||**IRRIGATION DIVISION, CHITTOOR,**| ||**PALAKKADU - 678 002.**| |**5**|**THE DEPUTY TAHASILDAR,**| ||**CHITTOOR TALUK,**| ||**PALAKKAD DISTRICT - 678 002.**| ||**BY SR.GOVERNMENT PLEADER SMT.DEEPA NARAYANAN**| **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08.02.2021 AND THE COURT ON 26-04-2021 DELIVERED THE FOLLOWING:** WP(C) No.7472/2020 : 2 : ## **J U D G M E N T** ~ ~ ~ ~ ~ ~ ~ ~ ~ _**Dated this the 26[th] day of April, 2021**_ The petitioner, who is a Government Contractor, has approached this Court seeking to quash Exts.P1 and P2 to P6 and to declare that revenue recovery proceedings cannot be invoked in respect of tentative liability and inabilities which are not quantified or adjudicated by the Civil Court or other Adjudicating Authority and hence the recovery proceedings are illegal and non-est. 2. The petitioner was selected for award of the work “Widening the existing Veliavallampathy Canal from Ch: 8930m to 9210m”. The probable amount of contract was ₹13,31,163/-. An agreement was executed on 18.05.2004. The site was handed over to the petitioner on 31.12.2004. The work had to be completed before 30.06.2005. The WP(C) No.7472/2020 : 3 : respondents later extended the period up to 31.12.2005. 3. The petitioner states that the estimate was revised at the instance of the Department to ₹18,89,475/- on 22.04.2005. According to the petitioner, the work could not be completed due to non-supply of Departmental materials and on account of denial of part bills. The petitioner completed substantial work and raised a part bill for ₹12,50,075/-. However, only ₹8,41,837/- was paid. An amount of ₹3,55,947/- is yet to be paid. 4. While so, one Mayilswami filed a complaint before the Enquiry Commissioner and Special Judge, Thrissur. The Enquiry Commissioner ordered a quick verification. In the quick verification, the Vigilance found that the total volume of the work done by the petitioner is ₹11,97,784/- and after deducting the first part bill of ₹8,41,837.60, the balance amount due is ₹3,55,947.20. The Vigilance recommended termination of the contract at the risk and cost of the petitioner. Thereupon, without issuing any notice, the contract was cancelled as per Ext.P1 proceedings. WP(C) No.7472/2020 : 4 : 5. The petitioner states that the security amount of ₹1,00,000/- which was directed to be adjusted against another work of the petitioner was later released on 28.04.2007. Retention amount due to the petitioner was also released on 31.03.2006. The petitioner also remitted ₹26,665/- being the amount quantified as the cost of cement. 6. The petitioner states that though the Department attempted to re-tender the balance work twice, the work was not carried out. As the work could not be carried out, the actual risk and cost cannot be quantified in order to fix any liability on the petitioner. Without quantifying the liability, the Department issued a requisition to the revenue authority for recovery and amount of ₹2,99,999/- from the petitioner. Accordingly, Ext.P6 demand notice was issued under Section 7 of the Revenue Recovery Act. The petitioner challenges Exts.P1 and P6. 7. The learned counsel for the petitioner, relying on the judgment of the Apex Court in _**Union of India v. Raman Iron Foundry** [AIR 1974 SC 1265],_ argued that a claim for WP(C) No.7472/2020 : 5 : liquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a court or other Adjudicating Authority. Relying on the judgment of this Court in _**Abraham Sebastian v. State of Kerala** [2002 (3) KLT839]_ , the learned counsel argued that actual loss which the Government had to suffer in a terminated contract can be assessed only after the completion of the work and till then, no revenue recovery proceedings can be initiated against the appellant. 8. As regards realisation of 30% of the cost provided under the PWD Manual, the learned counsel for the petitioner argued that the said 30% amount can be realised only from EMD/security, bill amount/retention amount, any dues from the Department to the contractor or bank guarantee/ performance guarantee or by filing a civil suit. Revenue recovery proceedings cannot be resorted to for recovering the said 30% of the cost. 9. The 4[th] respondent–Executive Engineer contested the case filing counter affidavit. According to the 4[th] WP(C) No.7472/2020 : 6 : respondent, the Government is entitled to recover 30% of the cost through revenue recovery proceedings. In the additional counter affidavit filed by the respondents, it has been stated that as per the PWD Manual, an amount equal to 30% of the cost of the remaining works at the agreed rates of terminated contract has to be paid by the petitioner. In the petitioner's case, 30% of the cost of remaining works was calculated by the Department as per law based on original agreement and the work schedule. In view of the provisions contained in the PWD Manual, there is no need to wait till the work is arranged alternatively through another contractor, for realising the said 30% amount. 10. Heard learned counsel for the petitioner and learned Government Pleader representing the respondents. 11. The petitioner is challenging revenue recovery proceedings initiated by the respondents for recovery of 30% of the cost of the remaining work at agreed rates, on two grounds. Firstly, the amount towards liquidated damages can be recovered from the petitioner only after adjudication of the WP(C) No.7472/2020 : 7 : amount by a civil court or any other competent authority. 12. Secondly, even under the PWD Manual, recovery of 30% of the cost of the remaining work can be realised only from EMD/security, bill amount/retention money, any dues from Department to the contractor, bank guarantee/ performance guarantee or by filing civil suit against the contractor. Revenue recovery proceedings for recovery of the 30% of the cost of the remaining work is not contemplated under the PWD Manual. 13. It is true that a claim for liquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a civil court or any other Adjudicating Authority. When there is a breach of contract, the party who commits the breach does not _co instanti_ incur any pecuniary obligation, nor does the party complaining of the breach become entitled to a debt due from the other party. However, when there is an agreement or contract enabling one of the parties to recover a pre-decided sum, such party would be entitled to realise the amount in WP(C) No.7472/2020 : 8 : accordance with the law without resorting to any proceedings for adjudication of the said amount. 14. In the case of the petitioner, the petitioner has executed contract accepting the provisions contained in the PWD Manual. Clause 2116.2.1 of the PWD Manual reads as follows: ## “ **2116.2.1 Realisation of loss on account 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 work. If he falls to remit the amount within this periods 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.” ## 15. As there is a specific agreement between the petitioner and the respondents in this regard, the respondents will be entitled to recover 30% of the cost of the remaining WP(C) No.7472/2020 : 9 : works at the agreed rates from the petitioner. The judgment of the Apex Court in _**Raman Iron Foundry**_ (supra) or the judgment of this Court in _**Abraham Sebastian**_ (supra) did not deal with Clause 2116.2.1 of the PWD Manual and therefore those judgments would not be of any help to the petitioner. 16. The further argument of the petitioner is that the said 30% of the cost of the remaining works can be realised by the respondents only from EMD/security, Bill amount/ retention amount, any dues from the department to the petitioner, bank guarantee/performance guarantee or by filing civil suit. The argument is that as the said Clause of the PWD Manual does not specify revenue recovery under the Revenue Recovery Act as one of the mode of realising the amount, the respondents cannot resort to revenue recovery. 17. Clause 2116.2.1 of the PWD Manual states that “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“. Therefore, as per the PWD Manual and the contract entered WP(C) No.7472/2020 : 10 : into by the petitioner with the respondents, the respondents can legally claim 30% amount on termination of petitioner’s contract. The provisions for realising the amount from EMD/security etc. mentioned in Clause 2116.2.1 of the PWD Manual can be treated only as explanatory, and not exhaustive. The Government can very well resort to revenue recovery as the 30% of the cost of the remaining works at agreed rates of a terminated contract, is a sum due to the Government. For the above said reasons, this Court finds no merit in the claim made by the petitioner in the writ petition. The writ petition lacks merit and it is accordingly dismissed. Sd/- **N. NAGARESH, JUDGE** aks/16.04.2021 WP(C) No.7472/2020 : 11 : ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE PROCEEDINGS OF THE 4TH RESPONDENT DATED 30/5/2014.** **EXHIBIT P2 TRUE COPY OF THE LETTER DATED 20/12/2016 SENT BY THE 4TH RESPONDENT TO THE ADDITIONAL GOVERNMENT PLEADER PALAKKADU.** **EXHIBIT P3 TRUE COPY OF THE RE-TENDER DATED 23/11/2017 ISSUED BY 3RD RESPONDENT.** **EXHIBIT P4 TRUE COPY OF THE RE-TENDER DATED 12/12/2017 ISSUED BY 3RD RESPONDENT.** **EXHIBIT P5 TRUE COPY OF THE SELECTION NOTICE DATED 16/5/2017 ISSUED TO M.M.JOHN.** **EXHIBIT P6 TRUE COPY OF THE REVENUE RECOVERY NOTICE DATED 10/1/2020 ISSUED BY 5TH RESPONDENT.** ## **RESPONDENTS' EXHIBITS:** **ANNEXURE R1(a) TRUE COPY OF THE LETTER DATED 04.12.2015 ISSUED BY THE EECUTIVE ENGINEER, IRRIGATION DIVISION, CHITTOOR TO THE PETITIONER** **ANNEXURE R1(b) TRUE COPY REPORT OF THE ASSISTANT EXECUTIVE ENGINEER, KOZHINJAMPARA RBC SUB DIVISION DATED 05.12.2015 ASSESSING THE LIABILITY OF THE BALANCE WORK. ANNEXURE R1(c) TRUE COPY OF THE RELEVANT PORTION OF PWD MANUAL.** ## **ncd**