M.P.PHILIP, LIFE ENGINEERS & CONTRACTORS, KULATHUPUZHA, KOLLAM v THE SUPERINTENDING ENGINEER & DEPUTY CHIEF ENGINEER (MECH), WATER RESOURCE DEPARTMENT, THIRUVANANTHAPURAM; THE EXECUTIVE ENGINEER, MECHANICAL DIVISION, CIVIL STATION, ALAPPUZHA; GOVERNMENT OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY, WATER RESOURCES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE SMT. JUSTICE P.V.ASHA** ## **MONDAY, THE 9TH DAY OF JANUARY 2017/19TH POUSHA, 1938** ## **WP(C).No. 25396 of 2009 (T)** **-------------------------------------------** **PETITIONER(S) :** **--------------------------** **M.P.PHILIP, LIFE ENGINEERS & CONTRACTORS, KULATHUPUZHA, KOLLAM.** ## **BY ADV. SRI.ALEX VARGHESE** **RESPONDENT(S) :** - **----------------------------** **1. THE SUPERINTENDING ENGINEER & DEPUTY CHIEF ENGINEER (MECH), WATER RESOURCE DEPARTMENT, THIRUVANANTHAPURAM.** **2. THE EXECUTIVE ENGINEER, MECHANICAL DIVISION, CIVIL STATION, ALAPPUZHA.** **3. GOVERNMENT OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY, WATER RESOURCES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.** ## **BY GOVERNMENT PLEADER SMT. PRINCY XAVIER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14-12-2016, THE COURT ON 09-01-2017 DELIVERED THE FOLLOWING:** Msd. ## **WP(C).No. 25396 of 2009 (T)** ## **-------------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS :** - **EXHIBIT P1: PHOTOCOPY OF AGREEMENT NO. 2/2007-08 DATED 11.07.2007.** - **EXHIBIT P2: PHOTOCOPY OF PETITIONER'S REPRESENTATION TO R1 DATED 27.05.2009.** - **EXHIBIT P3: PHOTOCOPY OF ORDER DATED 01.03.2006 TO R1 TO R2.** - **EXHIBIT P4: PHOTOCOPY OF ORDER DATED 23.03.2006 OF R1 TO R2.** **EXHIBIT P4(A): PHOTOCOPY OF 2ND RES. LETTER DATED 01.08.2006.** - **EXHIBIT P5: PHOTOCOPY OF 1ST RESPONDENT'S ORDER NO. CMU/TECH/475/91-VOL.III DATED 25.01.2007.** **EXHIBIT P6: PHOTOCOPY OF ORDER NO. CMU/TECH/475/91 VOL.IV DATED 28.05.2010.** **EXHIBIT P7: TRUE COPY OF PROCEEDINGS NO. CMU/TECH/475/01 DATED 01.09.2004 OF 1ST RESPONDENT.** ## **RESPONDENT(S)' EXHIBITS & ANNEXURES :** **EXHIBIT R1(A): TRUE COPY OF SUPPLEMENTARY AGREEMENT NO. 4/2008-09 DATED 12.03.2009.** **EXHIBIT R1(B): TRUE COPY OF THE AUDIT REPORT RELEVANT PAGES PERIOD FROM 01.12.2003 TO 30.11.2004.** **EXHIBIT R1(C): TRUE COPY OF THE TENDER NOTICE. EXHIBIT R1(D): A TRUE COPY OF THE AUDIT REPORT PERIOD FROM 01.12.2005 TO 30.11.2006. EXHIBIT R1(E): TRUE COPY OF THE LETTER DATED 04.05.2010. EXHIBIT R1(F): TRUE COPY OF THE LETTER DATED 12.07.2010. ANNEXURE A: TRUE COPY OF THE TREASURY SAVINGS BANK CHEQUE. ANNEXURE B: TRUE COPY OF THE LETTER DATED 19.05.2010.** **//TRUE COPY//** **P.S.TO JUDGE.** Msd. ## **P.V.ASHA, J.** ----------------------------------------------------W.P(C) No.25396 of 2009-T ---------------------------------------------------------------------Dated this the 9[th] day of January, 2017 ## **JUDGMENT** A registered contractor has filed this writ petition challenging Exts.P5 and P6 orders of recovery. By Ext.P5 the Superintending Engineer had issued orders directing to recover a sum of Rs.2,65,197/- and to keep the same under deposit till the audit objections raised by the Accountant General were dropped. By Ext.P6 order dated 28.5.2010 it was ordered to recover the said amount from the amount due to the petitioner in respect of another work carried out by him. In Ext.P2 representation submitted before the Superintending Engineer on 27.5.2009, the petitioner had pointed out that the payments due to him were not being made even though the work was completed by him in each item in time. 2. The petitioner was awarded the work for fabrication, supply, erection, etc. of 30/ Lock Gate at Thrikkunnapuzha as per the agreement executed on 11.07.2007 for an agreed cost of Rs.65,46,928/-. According to the petitioner, the 2[nd] respondent W.P(C) No.25396 of 2009-T 2 had directed him to execute certain extra works for a cost of Rs.10.5 lakhs, which was not covered by Ext.P1 agreement; the work was completed in time but the respondents recovered a sum of Rs.2,65,197/- from the amount due to him towards another work executed by him on the basis of an agreement dated 11.11.2003. 3. The petitioner was awarded the work of fabrication of 9 shutters and repair of 31. Agreement was executed for the same on 11.11.2003. The time for completion of the work was 6 months. According to the petitioner, on account of departmental delay the time for completion of the agreement was extended till 30.09.2004 unconditionally. A sum of Rs.35 lakhs was paid towards the final bill upto March, 2006. Though the amount was withdrawn, the 1[st] respondent, in Ext.P4 letter dated 23.3.2006 addressed to the Executive Engineer, informed that the contractor did not have any liability and directed to release the withdrawn amount of Rs.2,65,197/- and the sum of Rs.15,000/- as penalty. In this letter the Superintending Engineer had stated that the Assistant Executive Engineer and Assistant Engineer had purposefully dragged the accounting of W.P(C) No.25396 of 2009-T 3 the bills, in order to cheat the contractor and it was pointed out that in the event of pending bill the contractor has to be exempted from imposing a penalty. It was also pointed out that the bunds were made during the extended period and the contractor did not have any liability in that regard since the date of agreement was 11.11.2003, the site was handed over on 3.12.2003 and the original time for completion was till 2.6.2004. Thereafter the extra period was granted by way of extension for completing the work. The Superintending Engineer had called for explanation from the Assistant Executive Engineer and the Assistant Engineer, who had worked since 1.11.2003, according to the 1[st] respondent, dragged the bills, to make part payment for the completed work in respect of shutters. 4. According to the petitioner, on the basis of Ext.P4 letter the amount of Rs.2,65,197/- was released to him at a time when 3 years was over after completion of the work. The petitioner has produced Ext.P4(A) pointing out that despite Ext.P4 order issued by the 1[st] respondent, the 2[nd] respondent did not relase the sum of Rs.15,000/- imposed as penalty. While so, there was audit objection with respect to the amount covered by W.P(C) No.25396 of 2009-T 4 Ext.P4 and accordingly Ext.P5 letter was forwarded to the petitioner referring to the audit objection. On the basis of the audit objection, the 2[nd] respondent recovered the sum of Rs.2,65,197/- from the pending bill amount due to the petitioner. and the 1[st] respondent passed Ext.P6 order on 28.5.2010 forfeiting the entire amount of Rs.2,65,197/- illegally. The writ petition was filed at a time when Ext.P5 proceedings were issued. Ext.P6 order was issued during the pendency of the writ petition when the petitioner got the writ petition amended incorporating challenge against Ext.P6. 5. It is the case of the petitioner that the 1[st] respondent had already found that there was no delay at all on the part of the petitioner and he had completed the work in time and no loss was caused at his instance. It is also pointed out that there is no provision for forfeiting the bill amount, as per the agreement entered into between the contractor and the respondents. Pointing out the attitude of the 1[st] respondent as evident from letters Exts.P4 and P5, it is argued that the 1[st] respondent was convinced of the fact that the petitioner had completed the work in time and it was only the Executive Engineer who made the W.P(C) No.25396 of 2009-T 5 petitioner to seek extension of time unnecessarily. It is pointed out that the sand bags were already there and it was not necessary to put the sand bags, in case the 2[nd] respondent had co-operated with the petitioner. It is also pointed out that the shutters were in such a dilapidated condition that the fabrication could not be over within the 6 months period and the work was completed at the earliest. 6. The 1[st] respondent has filed a counter affidavit on 24.02.2010 in which it is stated that the petitioner was awarded with a work of replacement of 9 numbers of shutters and remaining shutters of Thottappally spill way. The work had to be competed by 3.6.1994, i.e within the 6 months period stipulated. The work was completed only on 30.09.2004 on the third time of extension granted to the petitioner after several reminders from the office of the Executive Engineer, Alappuzha. According to the respondent, the inordinate delay in completing the work was only on account of the irresponsible attitude of the petitioner. Since the work was not completed in time, the Department did not have any alternate measure to arrest flow of saline water through the damaged shutters of the spill way, in order to W.P(C) No.25396 of 2009-T 6 prevent huge crop loss in agricultural area. In order to prevent the loss to the agriculture in Kuttanadu, the Department had to provide 13650 sand bags in the base of the shutter incurring an expenditure of Rs.2,65,917/-, and its removal for facilitating the erection of new shutters. It is stated that in the event of completion of the work in the stipulated time, this unnecessary expenditure could not have been incurred. Referring to clause 13 of the tender conditions it is stated that for any loss caused to the Government due to failure of the contractor, recoveries could be made from the sum due to the contractor on the contract under the agreement or any other subsisting contract under the Revenue Recovery Act. Under clause 41 and 47 of special conditions of the notice inviting tenders also, the extra amount incurred and loss occurred due to the delay of work would be the liability of the contractor. The Executive Engineer, Mechanical Division Alappuzha had already informed the petitioner about these facts, as per his letter No.D1-1379/99 dated 1.2.2005. In these circumstances, the recovery was effected from the pending bill amount of the petitioner. But the sum of Rs.2,65,197/- was released to the petitioner on the basis of the orders dated W.P(C) No.25396 of 2009-T 7 1.3.2006 and 23.03.2006 of the 1[st] respondent. However, the release of the said amount was directed to be stopped on the basis of the objections raised by the Accountant General and accordingly the said amount was recovered from the part bill amount due to the petitioner towards another work. In Ext.P5 the Executive Engineer was directed to wait for release of payment until audit objections were dropped. 7. The 1[st] respondent thereafter filed another counter affidavit on 1.10.2010, in answer to the amended writ petition challenging Ext.P6. In the meanwhile, this court had directed the 1[st] respondent to take appropriate action in order to waive the audit objections within a period of 3 weeks observing that the unobjectionable portion of the amount due to the petitioner can be released depending upon the outcome of that. Ext.P6 order was passed thereafter on 28.5.2010. While Ext.P5 letter was issued directing the Executive Engineer to await the finalisation of audit objections, by Ext.P6 it was ordered to effect recovery in tune with the audit objections. In the counter affidavit it is pointed out that the Accountant General has in audit report for the period from 1.12.2003 to 30.11.2004 i.e in W.P(C) No.25396 of 2009-T 8 Ext.R1(b), stated that the loss caused to the Government on account of the delay in execution of the work can be recovered from the bills of the contractor, as per clause 13 of Ext.R1(c) notice inviting tenders and special conditions, which form part of the agreement. It is also stated that the Accountant General had in Ext.R1(d) audit report for the period from 1.12.2005 to 30.11.2006 also found that the department had provided sand bags to arrest intrusion of saline water incurring an expenditure of 2.65 lakhs since the contractor did not complete the work in time. As per Ext.R1(e) letter dated 4.5.2010, the Accountant General directed to take action against the contractor in order to drop the audit objection. Accordingly, Ext.P6 order was passed on 28.05.2010 forfeiting the amount retained from the bill. On that basis, Ext.R1(f) letter dated 12.07.2010 was issued from the office of the Accountant General to drop the objections. 8. An additional reply affidavit has been filed producing Ext.P7 proceedings dated 1.9.2004 of the 1[st] respondent, in which the 1[st] respondent had extended the time for completion of the work till 16.09.2004, with reference to an application stated to be submitted by the petitioner for extension upto 30.09.2004. 9 W.P(C) No.25396 of 2009-T It was stated in that order that 6 shutters fabricated had been already brought to site and it would not be possible to complete the erection before 2.09.2004. It was also provided that fine, if any, applicable may be collected from the contractor. The application was stated to be submitted by the contractor for an extension beyond 2.9.2004. In this additional reply affidavit the petitioner has stated that the site was handed over to him on 3.12.2003 and the time for completion was extended unconditionally by 3 months till 30.09.2004 even though the delay was on the part of the Department. According to him, out of the 9 shutters 3 were got fabricated and were erected by 30.03.2004 and the works of remaining 6 shutters were completed and brought to site on 20.08.2004. Pointing out Ext.P7 letter of the 1[st] respondent, it is contended that the remaining shutters were also made available at the site and therefore, the erection could have been made at any time from 20.08.2004 onwards, for which the petitioner was prepared. But he was prevented from doing the same by the Executive Engineer and the Assistant Executive Engineer. According to the petitioner, it was for the petitioner to remove the sand bag W.P(C) No.25396 of 2009-T 10 from the site in order to facilitate erection. The Department did not provide D shackle and connected equipments to facilitate erection. Therefore, it is stated that he had done his part of work including repair of old shutters well within time and since shutters were readily available at the site from 20.08.2004 onwards, there was no necessity to put the alleged sand bags at all and the site was under the charge of the contractor till 30.09.2004 and he was never informed of the necessity to put sand bags to prevent intrusion of saline water. 9. According to him he was informed of the requirement to put the sand bags and the expenditure incurred for the same only after the recovery was effected from him and enquiry was made by him. According to the petitioner, even in the meeting held by the District Collector on 4.9.2004, no suggestion was made regarding putting of sand bags or threat of intrusion of saline water when shutters were readily available at the site for erection; it was only on account of the manipulation carried out by the Assistant Executive Engineer and Assistant Engineer that there occurred delay in installation and the 1[st] respondent, who was convinced about these factual circumstances, had called for W.P(C) No.25396 of 2009-T 11 explanation from those Engineers in Ext.P4 order. According to the petitioner, the site was under his control till 30.09.2004 and the departmental officers were to do any work in that site only in the event, the contractor refused to do any work. According to the petitioner, the intrusion of saline water arises only in October and there was no scope for saline intrusion at the time when the work was going on. It is also pointed out that the Chief Engineer or the Superintending Engineer had not conducted any inspection of the division for the past 4 years. It is also pointed out that at the time of handing over the site, the sand bund was not removed by the Department, which is evident from Ext.R1(b). The delay in erection of new shutters occurred on account of the sand bund. Referring to Ext.R1(b) it is stated that the contractor is not liable for the removal of the sand bund; obstruction was made by the Department itself. In those circumstances, it was for the 1[st] respondent to see that the audit objections were waived. According to the petitioner, he was awarded the work when the former contractor discontinued the work. It is therefore stated that those sand bags might have been put at that site when the work was entrusted to the said contractor in W.P(C) No.25396 of 2009-T 12 order to prevent intrusion of saline water. On that ground, recovery cannot be effected from the petitioner. 10. According to the petitioner, he came to know about the intrusion of saline water and expenditure incurred for putting the sand bags only from the counter affidavit. None of the respondents had intimated him about this expenditure at any time. In these circumstances, recovery of the said amount, without issuing any notice to him is illegal. 11. Heard the learned counsel for the petitioner as well as the learned Government Pleader. 12. The learned counsel for the petitioner relied on the judgments of this court in **Antony v. Commr., Corpn. of Cochin** [1994 1 KLT 169], **Jadeja v. State of Gujarat** [1995 (2) KLT SN 46], **Cannanore shop v. Regional P.F. Commissioner** [1992 (2) KLT 95], **United India Insurance Co. Ltd. v. Samir Chandra Chaudhary** [2005(3) KLT 80] and **Rambal Co. v. Kerala State Science & Technology Museum** [2000 (2) KLT SN 8] in support of his contention that the statutory authority has to act on its own discretion and not on adjudication by any external authorities, it is also pointed out that the reasons in W.P(C) No.25396 of 2009-T 13 support of an order shall not be supplemented subsequently by way of filing counter affidavit, in case those reasons are not revealed in the order. In view of the fact that the Superintending Engineer had already issued Ext.P4 order, in which he had already found that there was no fault on the part of the petitioner, the 1[st] respondent cannot turn around and direct recovery from the petitioner. 13. The case of the petitioner is that there is no provision for forfeiting any amount towards damages alleging breach of contract when the work is already completed and the bill amount is already paid. The petitioner has made serious allegations regarding the contentions as to the removal of sand bags and intrusion of saline water at the relevant period saying that he was never informed of any necessity for putting sand bags and the expenditure incurred for the same on account of the delay caused by him in installing the shutters. 14. Even though the respondents had produced various documents which provide for effecting recovery from the pending bills of the contractor, in the event of loss caused by the contractor, no material has been produced in order to show that 14 W.P(C) No.25396 of 2009-T the petitioner was ever informed of the incurring of expenditure on account of the delay in execution of the work. On the other hand, it is seen that the extension of time was granted to the petitioner unconditionally. It is also pertinent to note that in Ext.P4 the Superintending Engineer found that the delay in payment of the bills due to the petitioner was discriminatory and it was also found that the contractor was never liable for the same. In none of the orders produced by the petitioner or the respondents it is seen stated that the amount which was withheld from the pending bills of the contractor i.e the sum of Rs.2,65,197/- was towards the expenditure incurred in putting the sand bags. Though the petitioner asserts that the sand bags had to be removed by the petitioner so as to enable him to start the work and that there was no occasion for putting the sand bags and thereafter removing it at the time when the work awarded to him was in progress, the respondents have not produced any material to show that the said work was instituted during the period of work of the petitioner. Apart from the objections raised in the audit to the effect that the sand bags had to be put on account of the delay committed by the contractor, W.P(C) No.25396 of 2009-T 15 there is nothing in the documents produced by the respondents to show that the said work was instituted during the said period. 15. Since these are disputed questions of fact, this Court will not be able to adjudicate on the matter under Article 226 of the Constitution of India. However, in view of the contentions raised by the petitioner, I am of the view that it is proper that the petitioner is afforded an opportunity of hearing by the 1[st] respondent with respect to the factual circumstances regarding the expenditure incurred by him. Therefore, the recovery already effected from the bills of the petitioner shall be subject to the decision to be taken by the 1[st] respondent. 16. In the above circumstances, the order Ext.P6 is set aside for the limited purpose of affording an opportunity to the petitioner in respect of the recovery effected. In order to have an effective hearing, the respondents shall issue a notice to the petitioner explaining the details of the alleged expenditure incurred, leading to the impugned recovery. The writ petition is accordingly disposed of directing the 1[st] respondent to issue a notice as directed above within a period of two months from the date of receipt of a copy of this judgment. W.P(C) No.25396 of 2009-T 16 The petitioner shall thereafter submit his explanation within a further period of one month and the 1[st] respondent shall pass final orders within a further period of two months thereafter. The recovery already effected from the petitioner would be subject to the outcome of the decision to be taken by the 1[st] respondent. **Sd/(P.V.ASHA, JUDGE)** rtr/