M/S ARYACON CONTRACTORS AND ENGINEERS & M/S KIRLOSKAR BROTHERS LTD. vs KERALA STATE ELECTRIC BOARD & OTHERS

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** ## **THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR** **WEDNESDAY, THE 16TH FEBRUARY 2011 / 27TH MAGHA 1932** ## **WP(C).No. 23928 of 2009(I)** **-------------------------------------** ## **PETITIONER(S):** ## **----------------------** **1. M/S. ARYACON CONTRACTORS AND ENGINEERS, A FIRM, REP. BY ITS MANAGING PARTNER S. SHYAM PULLUVAZHY, PERUMBAVOOR, ERNAKULAM.** **2. M/S. KIRLOSKAR BROTHERS LTD., UDYOG BHAVAN, TILAK ROAD, PUNE- 411 002, REP. BY ITS POWER OF ATTORNEY & COCHIN BRANCH MANAGER EASWARAN SREEKUMAR, VEEJAY TOWERS, GANDHI NAGAR, COCHIN.** - **BY ADV. SRI.A.SUDHI VASUDEVAN, SMT.K.PUSHPAVATHI.** ## **RESPONDENT(S):** ## **------------------------** **1. KERALA STATE ELECTRICITY BOARD, REPRESENTED BY ITS SECRETARY VYDHUDHI BHAVAN, THIRUVANANTHAPURAM.** **2. CHIEF ENGINEER (CIVIL CONSTRUCTION) NORTH KERALA STATE ELECTRICITY BOARD, VYDHUDHI BHAVAN, KOZHIKODE- 673 011.** **3. DEPUTY CHIEF ENGINEER IN FULL CHARGE KERALA STATE ELECTRICITY BOARD VYDHUDHI BHAVAN, KOZHIKODE.** **4. PROJECT MANAGER, ADYANPARA SMALL HYDRO ELECTRIC PROJECT, KERALA STATE ELECTRICITY BOARD, CHANDAKKUNNU, NILAMBUR.** **5. THE BRANCH MANAGER, INDIAN OVERSEAS BANK, P.B. NO. 4005, VSV BUILDING, CCNB ROAD, ALAPPUZHA.** **R1 TO R4 BY ADV. SRI.P.P.THAJUDEEN, SC, K.S.E.B, SRI.C.K.KARUNAKARAN, SC. K.S.E.B. R5 BY ADV. SRI.P.B.SURESH KUMAR, SC, I.O. BANK.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/12/2010, THE COURT ON 16/02/2011 DELIVERED THE FOLLOWING:** **rs** **WP(C).No. 23928 of 2009(I)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE PARTNERSHIP DEED DATED 21/11/2002 EXECUTED BETWEEN THE PARTNERS OF THE FIRM.** **EXT.P2: COPY OF THE SPECIAL POWER OF ATTORNEY DATED 18/08/2009 EXECUTED IN FAVOUR OF SRI.EASWARAN SREEKUMAR, THE BRANCH MANAGER, KIRLOSKAR BROTHERS LTD., KOCHI.** **EXT.P3: COPY OF THE BOOK HAVING SERIALLY NUMBERED INNER PAGES FROM 1 TO 63 CONTAINING THE WORK AWARDING LETTER DATED 30/05/2007 ISSUED BY 2ND RESPONDENT TO THE CONSORTIUM, CONSTRUCTION SCHEDULE, PROJECT SCHEDULE, LETTER DATED 19/09/2007 ISSUED BY THE 2ND RESPONDENT TO THE CONSORTIUM, AGREEMENT DATED 19/09/2007 BETWEEN THE BOARD AND THE CONSORTIUM ACCOMPANIED BY SCHEDULE A, SCHEDULE B, SCHEDULE A1, SCHEDULE A2, LETTER DATED 21/04/2007 ISSUED BY THE 2ND RESPONDENT TO THE CONSORTIUM, LETTER DATED 23/04/2007 ISSUED BY THE 2ND RESPONDENT TO THE CONSORTIUM, LETTER DATED 25/06/2007 BEARING NO.KBL-ACE/KSEB/AHEP/2007/01-B ISSUED BY THE CONSORTIUM TO THE CHIEF OF GENERATION KSEB, THIRUVANANTHAPURAM, LETTER DATED 25/06/2007 BEARING NO.KBLACE/KSEB/AHEP/2007-02-B ISSUED BY THE CONSORTIUM TO THE CHIEF OF GENERATION KSEB, THIRUVANANTHAPURAM, BO DATED 04/08/2007 ISSUED BY KSEB, BO DATED 11/09/2007 ISSUED BY KSEB LETTER DATED 17/09/2007 ISSUED BY KSEB TO THE CONSORTIUM, CONSORTIUM AGREEMENT DATED 22/08/2007, BETWEEN THE PETITIONER AND THE 5TH RESPONDENT ACCOMPANIED BY THE PROJECT SCHEDULE.** **EXT.P4: COPY OF THE COMMERCIAL BID DOCUMENT (VOL.II) RELATING TO THE WORK AWARDED TO THE PETITIONER.** **EXT.P5: COPY OF THE BID DOCUMENT CONTAINING SCHEDULE OF PRICE (VOL.V) RELATING TO THE WORK AWARDED TO THE PETITIONERS.** **EXT.P6: COPY OF THE LETTER DATED 15/10/2007 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT.** **EXT.P7: COPY OF THE TABLE CONTAINING THE DETAILS OF THE QUANTITY OF THE WORK AGREED TO BE DONE AND THE QUANTITY OF THE WORK ACTUALLY DONE.** **EXT.P8: COPY OF THE CIRCULAR NO.TC5-44/2000 DATED 03/01/2008 ISSUED BY HE KSEB.** **EXT.P9: COPY OF THE BO NO.(FB) 2192/2008 DATED 02/09/2008 ISSUED BY THE BOARD.** **EXT.P10: COPY OF THE LETTER DATED 06/12/2008 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT ACCOMPANIED BY THE CONSTRUCTION PROGRAM.** **EXT.P11: COPY OF THE REPLY DATED 11/12/2008 SENT BY THE 3RD RESPONDENT TO THE 1ST PETITIONER.** **EXT.P12: COPY OF THE LETTER DATED 20/02/2009 ISSUED BY THE 3RD RESPONDENT TO THE CONSORTIUM.** **EXT.P13: COPY OF THE LETTER DATED 06/03/2009 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXT.P14: COPY OF THE LETTER DATED 05/06/2009 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** **(P.T.O.)** **WP(C).No. 23928 of 2009(I)** **EXT.P15: COPY OF THE KEY PLAN PREPARED BY THE PETITIONER SHOWING, AMONG OTHER, PROPOSED TUNNEL AND SURGE SHAFT, THE POWER CHANNEL, FORE BAY AND SURPLUS CHANNEL, POWER CHANNEL ROAD AND THE DETAILS OF WORK EXECUTED BY THE PETITIONER FOR THE ADYANPARA SMALL HYDRO PROJECT.** **EXT.P16: COPY OF THE LETTER DATED 15/06/2009 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXT.P17: COPY OF THE REPLY DATED 19/06/2009 ISSUED BY THE 3RD RESPONDENT TO THE CONSORTIUM.** **EXT.P18: COPY OF THE LETTER DATED 26/06/2009 ISSUED BY THE 3RD RESPONDENT TO THE CONSORTIUM.** **EXT.P19: COPY OF THE LETTER DATED 27/06/2009 SENT BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXT.P20: COPY OF THE LETTER DATED 02/07/2009 ISSUED BY THE 3RD RESPONDENT TO THE CONSORTIUM.** **EXT.P21: COPY OF THE REPLY DATED 10/07/2009 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXT.P22: COPY OF THE LETTER DATED 10/07/2009 ISSUED BY THE 3RD RESPONDENT TO THE CONSORTIUM.** **EXT.P23: COPY OF THE BILL OF QUANTITIES (REVISED ESTIMATE), BEARING THE SIGNATURE OF THE 3RD RESPONDENT.** ## **EXT.P24: COPY OF THE LETTER DATED 20/07/2009 SENT BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXT.P25: COPY OF THE NEWS ITEM APPEARED IN THE MALAYALA MANORAMA DAILY DATED 21/09/2008.** **EXT.P26: COPY OF THE BO NO.1241/96 (TC3(C) T-7/146/92) DATED 29/05/1996 ISSUED BY THE BOARD GRANTING EXTENSION OF TIME OF CONTRACT AND ALLOWING REVISION OF AGREED RATES IN SIMILARLY CIRCUMSTANCED CASE.** **EXT.P27: COPY OF THE BO (FV) NO.2941/2006 (GPC-2/KHEP/SILK/141/04 DATED 28/11/2006 ISSUED BY THE BOARD GRANTING EXTENSION OF TIME OF CONTRACT AND ALLOWING REVISION OF AGREED RATES IN SIMILARLY CIRCUMSTANCED CASE.** **EXT.P28: COPY OF THE BANK GUARANTEE DATED 20/08/2007 EXECUTED BY THE 1ST PETITIONER.** **EXT.P29: COPY OF THE LETTER DATED 07/08/2009 ISSUED BY THE 3RD RESPONDENT TO THE 5TH RESPONDENT WITH A COPY TO THE FIRST PETITIONER.** **EXT.P30: COPY OF THE EXTENDED BANK GUARANTEE UP TO 19/08/2010 FURNISHED BY THE 1ST PETITIONER.** **EXT.P31: COPY OF THE LETTER DATED 18/08/2009 ISSUED BY THE 3RD RESPONDENT TO THE 5TH RESPONDENT WITH A COPY TO THE FIRST PETITIONER.** **EXT.P32: COPY OF THE BOARD ORDER NO.B.O.(FM) NO.2156/2009 (NO.GPC1/177/2005)/ 300 DATED 18/08/2009 ISSUED BY THE 1ST RESPONDENT.** **(P.T.O.)** **WP(C).No. 23928 of 2009(I)** **EXT.P32 (I.A.10955/2009): COPY OF THE LETTER NO.CECCN/AB1/ASHEP/B G/0708 DATED 19/08/2009 ISSUED BY THE 3RD RESPONDENT TO THE BRANCH MANGER, ICICI BANK LTD., SHANGRILLA GARDEN, BUND GARDEN ROAD, PUNE 4111001 SEEKING INVOCATION OF THE BANK GUARANTEE.** **EXT.P33: COPY OF THE LETTER NO.CECCN/DB/03/ASHEP-WORKS/2007-08 DATED 28/08/2009 ISSUED BY THE 2ND RESPONDENT.** **EXT.P34: COPY OF THE LETTER DATED 23/07/2009 ISSUED BY 2ND PETITIONER ANDRA PRADESH POWER GENERATION CORPORATION.** **EXT.P35: COPY OF THE LETTER DATED 15/10/2009 ACCOMPANIED BY THE TRUE COPY OF THE ASSEMBLY PROCEEDINGS DATED 10/07/2008 CONTAINING THE STATEMENT OF THE HONOURABLE MINISTER FOR ELECTRICITY.** **EXT.P36: COPY OF THE TENDER NOTICE DATED 02/07/2010 ISSUED BY THE KERALA STATE ELECTRICITY BOARD.** **EXT.P37: COPY OF THE COMPARATIVE TABLE PREPARED BY THE PETITIONERS SHOWING THE VITAL CHANGES BROUGHT ABOUT IN THE WORK OF ADYANPARA SMALL HYDRO ELECTRIC PROJECT.** **EXT.P38: COPY OF THE REPORT DATED 27/05/2008 OF THE EXPERT COMMITTEE ON TECHNICAL FEASIBILITY OF A POWER TUNNEL IN THE WATER CONDUCTOR SYSTEM.** ## **RESPONDENT'S EXHIBITS:** **EXT.R1(a): COPY OF THE AMENDED WORK ORDER NO.CECCN/DB/10/ASHEP-GNL/200506/1978 DATED 17/09/2007 ISSUED BY THE 2ND RESPONDENT.** **EXT.R1(b): COPY OF THE LETTER DATED 07/02/2007 OF THE 2ND PETITIONER.** **EXT.R1(c): COPY OF THE LETTER DATED 23/02/2007 OF THE 2ND PETITIONER.** **EXT.R1(d): COPY OF THE LETTER DATED 20/02/2009 OF THE 1ST PETITIONER.** **EXT.R1(e): COPY OF THE ESTIMATE REPORT ISSUED BY THE 2ND RESPONDENT.** **EXT.R1(f): COPY OF THE BOARD ORDER NO.(FM) 2156/2009 (GPCI/177/2005)/300 DATED 18/08/2009 OF THE 1ST RESPONDENT.** **EXT.R1(g): COPY OF THE BOARD ORDER NO.B.O.(FM)NO.2634/2008 (ESTT.III/65/6563/2008) DATED 29/10/2008 OF THE 1ST RESPONDENT.** **EXT.R1(h): COPY OF THE LETTER NO.CE/C/T/KTPP/F.KBL/D.NO.424/09 DATED 30/06/2009 OF THE ANDHARA PRADESH POWER GENERATION CORPN. LTD.** **EXT.R1(i): COPY OF THE LETTER NO.CECCN/DB/03/ASHEP-WORKS/2007-08/1498 DATED 28/08/2009 OF THE 2ND RESPONDENT.** **EXT.R1(j): COPY OF THE MINUTES OF MEETING HELD IN THE CHAMBER OF CHIEF ENGINEER NORTH, KSEB, KOZHIKODE, ON 24/06/2009.** **//TRUE COPY//** **P.S. TO JUDGE** **rs** ## **T.R. Ramachandran Nair, J.** **- - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C) No. 23928 of 2009-I** **- - - - -- - - - - - - - - - - - - - - - - - - - -** ## **Dated this the 16th day of February, 2011.** ## **JUDGMENT** The petitioners are aggrieved by the proceedings leading to Exts.P31, P32 and P33 and accordingly seek to quash the same. There is a further prayer to quash Ext.P14 proceedings also. A direction is also sought to respondents 1 and 4 not to enforce Ext.P28 bank guarantee extended by Ext.P30 and the bank guarantee furnished by the second petitioner. 2. The entire subject matter of the dispute turns on the question of performance of an agreement executed by petitioners 1 and 2 with respondents 1 to 4 herein. Necessary facts for the disposal of the writ petition are the following: 3. The first respondent Board invited tenders for construction of Adayanpara Small Hydro Electric Project. The petitioners, after forming a consortium, submitted a tender which was accepted. Accordingly, the work was awarded to the consortium at the total reduced quoted amount of Rs.21,32,91,479/- which is based on 2004 P.W.D. schedule of rates. The work had to be completed within a period of 24 months which expired on 30.9.2009. Ext.P3 is the agreement and other connected documents. wpc 23928/2009 2 Exts.P4 and P5 are true copies of the commercial bid document Vol. II and bid documents containing schedule of price (Vol. V) relating to the said work. 4. According to the petitioners, the work was started on 16.7.2007, viz. clearing of the site and thereafter the various works relating to excavation, work relating to the proposed road leading to the weir, the construction of power house and the switch yard were also started. In para 6 of the writ petition, the petitioners have stated that due to the physical condition of Muttial – Adayanpara earthern road which provides accessibility to the forebay area, for executing the work the petitioners were experiencing difficulties and by Ext.P6 a request was made to make the road transportable, but there was no response. The same is a panchayat road. 5. It is the further case of the petitioners that when the work of the road leading to the weir reached near the proposed power house, it was found that there had been excess work done by the petitioners than the work contained in the schedule. The excavation work relating to the power house and switch yard also exceeded the agreed quantity. It is also the case of the petitioners that they were not fully made aware of the situation and were misled and misrepresented by the wrong design and data furnished by the wpc 23928/2009 3 Board at the time of the preparation of the bid and the execution of the agreement. Finally, on execution of certain works, on 21.2.2008 the first petitioner raised a part bill before the Board for an amount of Rs.47,23,759/and the Board deferred the payment of an amount of Rs.23,45,623/- out of it. It is stated that the unnecessary delay has disabled the first petitioner from continuing the work. Reliance is placed on Ext.P8 circular of the Board to show that when the quantity of an item of work vis-à-vis the approved design exceeds the scheduled quantity beyond 25% of the originally agreed one, the Project Manager will have to constitute a separate technical committee to look into the necessity of the extra item and to submit a report. According to the petitioners, it is in the light of the above, the first petitioner was not allowed to continue the work, as the estimate was likely to exceed 25% of the originally sanctioned estimate. Since no directions were given to the first petitioner in the matter, the work was stopped on 5.1.2008. 6. Ext.P9 is the proceedings of the Board dated 2.9.2008 which reveals that the Board decided to replace the power channel, forebay and surplus channel and it also shows that the Board decided to invite fresh tenders for the execution of the tunnel and surge shaft of the Hydro Electric Project. It is also ordered that the first petitioner can execute the rest of the wpc 23928/2009 4 civil work. It is thereafter that the Board effected payment of the bills submitted by the first petitioner in respect of the additional works, on 11.12.2008. It is further pointed out that after Ext.P9 was issued, repeated correspondences ensued, but without result and finally by Ext.P10 the first petitioner expressed the willingness to execute the entire work including the excess quantity of work at the rate of 29% above the quoted rate. This was declined by Ext.P11. Then a revised proposal was submitted to the Chairman of the Board. Certain suggestions have been made by the petitioner. Therein the petitioner suggested that scheduled quantity of works and 25% excess of the scheduled quantity can be executed at the originally agreed rates in respect of the works, with regard to the works regarding the roads, power house, penstock and weir subject to the condition that the Board sanctions 48.9% above the schedule of rates for the year 2008 in respect of the remaining portion of the excess quantity of the said works as per the revised estimate to be sanctioned by the Board and the works on tunnel and surge shaft can be executed at 48.9% above the scheduled rate, if awarded. This was declined by the third respondent as per Ext.P12. Again the first petitioner submitted Ext.P13 letter agreeing to restart the work on certain terms. Even though several meetings and conferences were held, nothing materialised. Finally, by Ext.P14 the Board wpc 23928/2009 5 informed the first petitioner that the Board decided to entrust the additional works, viz. tunnel and surge shaft to the first petitioner at the original quoted rate of 49.80% above 2004 PWD schedule of rates and that a supplemental agreement for the execution of tunnel and surge shaft work will also have to be executed by the first petitioner. Further correspondences ensued which is evident from Exts.P16, P17 and P18. These were followed by Ext.P19 communication by the first petitioner which was replied by Ext.P20 by the third respondent. Again, the first petitioner replied by Ext.P21. Ultimately, the petitioners have approached this Court when the third respondent tried to enforce the bank guarantee as per Ext.P31. The writ petition was amended subsequently to challenge Ext.P32 order terminating the contract at the risk and cost of the petitioners and to forfeit the bank guarantee. 7. The Board has filed a counter affidavit in the matter. The allegations raised by the petitioners have been denied therein. The sum and substance of the contentions are the following: 8. It is pointed out that the Board is not responsible for the lapses committed by the petitioners before bidding. It is pointed out that the official date of commencement of the work as per the agreement was on 1.10.2007 and the actual date of commencement was on 10.10.2007. The wpc 23928/2009 6 allegations regarding the violation of conditions, are also disputed by the respondents. It is the case of the respondents in para 11 of the counter affidavit that when the petitioners submitted the part bill, after deducting statutory recovery, an amount of Rs.20,62,652/- was paid as per cheque dated 28.3.2008. The petitioners wilfully avoided resumption of work with a malafide intention to claim rate revision and did not care to honour the various directions issued from time to time by the Board regarding the resumption of the work. It is pointed out that no direction was issued by the Board to the contractors to stop the work. But the contractor slowed down the work and finally stopped it on 11.1.2008. What is completed is only 5% of the civil work by the contractor. The petitioners' representations to sanction for the additional work to be done on the revised rate, was not considered by the Board in the light of the conditions in the agreement itself, as it stipulates that the contractor is not eligible for any escalation or otherwise of the rates other than that of the percentage excess/decrease quoted and accepted. The Board decided to replace the power channel, forebay and surplus channel by tunnel and surge arrangements. As per clause E1.020 the Board has got every right to carry out the work either in conformity with or in a manner entirely different from the terms of the agreement. The petitioners have agreed for the said course wpc 23928/2009 7 in the agreement. Since it was a new work it was decided to invite fresh tender and to allow the petitioners to complete the rest of the work as per the present contract. The Board has also effected payment for the excess quantity of work. Various clauses in the agreement have been relied upon to show that the first petitioner is not entitled for escalation of the rate. It is pointed out that the adamant stand of the first petitioner for rate revision resulted in resumption of work. It is pointed out that the demand raised by the first petitioner for resuming the work at the rate 29% above the quoted rate, is a clear breach of the contract. The Board decided to award the work of tunnel and surge shaft as per the request of the petitioner contained in Ext.R1(d). They had agreed to resume the work on or before 29.6.2009, in the meeting held o 24.6.2009 at Kozhikode. Therefore, it is pleaded that this is a case where the petitioners abandoned the work which compelled the Board to terminate the work and to enforce the bank guarantee. If the statlemate continues, it will cause huge loss to the Board and to the Government and therefore the Board had to take steps to terminate the contract. 9. Therefore, it is finally contended that the petitioners were demanding escalation of the rate even without completing 2% of the total work and they wanted a revision of the rates at 2004 P.W.D. rates which is wpc 23928/2009 8 not admissible. It is further contended that since the issue arises out of a contract executed between the petitioners and the Board, the writ petition is not maintainable. 10. Heard learned counsel for the petitioners Shri Sudhi Vasudevan and learned Standing Counsel for the Board Shri C.K. Karunakaran. 11. Learned counsel for the petitioners mainly submitted the following arguments. It is pointed out that the petitioners are not guilty of any breach of the contract. The actual quantity of civil work exceeded the scheduled quantity which was duly informed the Board. Therefore, at that point of time, the petitioners could not continue the work especially in the light of the provisions of the circular issued by the Board as per Ext.P8. It shows that the power to sanction excess quantity/extra items of work is conferred on the Board in such circumstances. The additional quantity of work to be done is actually an extra item of work. Therefore, the petitioners had to stop the work and the delay is attributable only to the Board and its officials. Reliance is placed on the statement made on 10.7.2008 on the floor of the Assembly by the Hon'ble Minister for Electricity in support of the pleas. 12. It is further submitted that the whole circumstances have been changed in the mid way. The Board decided to replace the power channel, wpc 23928/2009 9 surplus channel and forebay by power tunnel and surge shaft. Therefore, the contract itself has been frustrated because of the fundamental change made.. In that view of the matter, there is no failure on the part of the petitioners to perform their part of the contract leading to termination of contract at their risk and cost. This point was stressed by the learned counsel for the petitioners. It is further pointed out that only if the rate is revised, the petitioners could have continued with the work. It is also pointed out that the decision of the Board as per Ext.P9 to call for a fresh tender for the execution of the work of tunnel and surge shaft clearly shows that they have gone back on the contract executed. With regard to the deliberations which were continued in the meantime, it is pointed out that the talks failed simply because of the attitude of the Board. 13. Therefore, what is stressed by the learned counsel for the petitioners is that the proceedings now issued by way of Ext.P32 to terminate the contract at the risk and cost of the petitioners and to enforce the bank guarantee, cannot at all be sustained. Since the contract itself has been frustrated, there cannot be any question of the said contract being terminated at the risk and cost of the petitioners. 14. Learned counsel for the petitioners relied upon various decisions of the Apex Court and this Court to contend for the position that there is no wpc 23928/2009 10 disputed question of fact to be resolved in this writ petition, as it is only a pure question of law. It is therefore pointed out that the writ petition is maintainable. Reliance is placed on **Jancy Chandy v. Jose Puthenkala** (2006 (4) KLT 116), Shriram Engineering Construction Co. Ltd. v. K.S.I.D.C. (2007 (2) KLT 388), **Corporation of Cochin v. T.J. Augusthy** (2006 (3) KLJ 736) and **Padmavathi Amma v. Special Tahsildar and others** (2010 (4) KHC 648). 15. Learned Standing Counsel for the Board relied upon the decisions of the Apex Court in **Pimpri Chinchwad Municipal Corporation and others v. M/s. Gayatri Construction Company and another** {(2008) 8 SCC 172}, **BSES Ltd. (Now Reliance Energy Ltd.) v. Fenner India Ltd. and another** [(2006) 2 SCC 728} and **Vinitec Electronics Private Ltd. v. HCL Infosystems Ltd** . {(2008) 1 SCC 544} and the judgment in W.P.(C) No.30129/2010 and W.A. No.1976/2010, to contend for the position that the writ petition is not maintainable at all as it involves the interpretation of the various terms of the contract. The dispute is purely in the realm of contract and therefore this Court cannot adjudicate the same in a writ petition under Article 226 of the Constitution of India. It is further submitted that the bank guarantee is enforceable and especially wpc 23928/2009 11 since no fraud has been alleged, the petitioners cannot in this proceedings, seek for a direction not to enforce the bank guarantee. 16. Evidently, this is a case where the parties have raised various disputed questions of fact. The petitioners allege that they had to stop the work, as extra items of work had to be performed. In the light of Ext.P8 they could not have continued the same. It was stopped on 5.1.2008. Regarding this, the contention of the Board is evident from the counter affidavit. It is pointed out that only 5% of the work was done by the petitioners and the work was stopped unilaterally and actually it was abandoned by them later by stating unsustainable reasons. It is also stated that there was no direction by the Board to stop the work. 17. With regard to variation, the Board heavily placed reliance on Clause E1.020 (Right to vary work). It is therefore stated that as the petitioners have agreed to this in the agreement executed, the contentions now raised that there is a frustration of the contract, cannot be sustained. 18. Regarding the claims of the petitioners for increased rates also, there are so many disputes between the parties. The Board contends that the petitioners are not entitled for any revision of rates from the 2004 P.W.D. rates. It is pointed out that the attempt of the petitioners is to vary the terms of the contract in terms of 2008 P.W.D. rate. wpc 23928/2009 12 19. With regard to the further deliberations and correspondence both parties differ on the results of them. The petitioners contend that it is the Board which has gone back on the same, whereas, as evident from the pleadings in the counter affidavit, the stand of the Board is that actually the petitioners have abandoned the work. This led to the issuance of the proceedings to terminate the contract. 20. Therefore, the question arises as to whether, under Article 226 of the Constitution, this Court can go into the disputes which involve interpretation of the terms of the agreement between the parties. 21. First I will deal with the decisions relied upon by the learned counsel for the petitioners. In **Jancy Charley v. Jose Puthenkala** (2006 (4) KLT 116) it was held as follows: “Jurisdiction under Art. 226 of the Constitution of India cannot be cribbed and combined by technical pleas. In order to prevent injustice, the writ court should in appropriate cases pass orders or give directions which the concerned statutory authorities could have and should have passed.” The circumstances stated in the said case are not similar to the facts of this case. Writ petition was filed challenging an order passed by the Election Commission. **Shriram Engineering Construction Co. Ltd.'s case** (2007 wpc 23928/2009 13 (3) KLT 388) was one challenging the revenue recovery proceedings. It was held in para 5 that “if there is patent illegality, irrationality, namely, Wednesbury unreasonableness or procedural impropriety court, the courts have jurisdiction to interfere with the same in a writ petition.” That was a case where there was challenge against the revenue recovery proceedings initiated by a Government company for realising damages for the alleged breach of contract and the question was considered on the basis of the argument that proceedings cannot be initiated without quantifying the damages through an adjudication. A civil suit was also pending at the instance of the petitioners claiming damages from the Company. Therefore, the said principles will not apply to the facts of this case. 22. The decision in **Padmavathy Amma's case** (2010) 4 KHC 648) also is in a land acquisition matter wherein it was held that “as far as possible writ petitions entertained and heard by the High Court should be decided on merits. Before relegating a party to Civil Court, High Court should take into account the long time taken by the Civil Courts in settling the matter, the chances of appeals, revisions, etc., the heavy cost involved in protracted litigation and the ultimate gain the party can expect.”The writ petition was one challenging the reduction of compensation originally fixed by the Land Acquisition Officer. wpc 23928/2009 14 23. **T.J. Augusthy's case** (2006 (3) KLJ 736), considered a case for paying admitted amount. The writ petition was held to be maintainable. In W.P.(C) No.30129/2010 the case considered was one of allegation of breach of contract and the challenge was against the termination of the agreement and awarding of work to another person. It was held that since both sides are accusing each other of having breach of contract, an adjudication on various factual issues is necessary for resolving the controversy which is impermissible in a proceedings under Article 226 of the Constitution. This was upheld in W.A. No.1976/2010. 24. The next decision relied upon by the learned counsel for the Board is **Vinitec Electronics Private Ltd.'s case** {(2008) 1 SCC 544} with regard to the enforcement of bank guarantee. Therein, it was held in paragraphs 11 to 14 as follows: “The law relating to invocation of bank guarantee is by now well settled. The bank guarantees which provided that they are payable by the guarantor on demand is considered to be an unconditional bank guarantee. When in the course of commercial dealings, unconditional guarantees have given or accepted the beneficiary is entitled to realise such a bank guarantee in terms thereof irrespective of any pending disputes. It is equally well settled in law that bank guarantee is an independent contract between bank and the beneficiary thereof. The wpc 23928/2009 15 bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and of no consequence.” 25. In **BSES Ltd.'s case** {(2006) 2 SCC 728} also a similar issue was considered and it was held that the bank is obliged to make payment when the guarantee was called in, irrespective of any contractual dispute between the principal and contractor. The exceptions are two: the first is when there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seems to benefit. Second exception when there are “special equities” in favour of injunction, such as when “irretrievable injury” or “irretrievable injustice” would occur if such an injunction was not granted. Learned counsel for the Board placed heavy reliance upon **Orissa Agro Industries Corpn. Ltd and others' case** {(2005) 12 SCC 725} and **Pimpri Chinchwad Municipal Corporation's case** {(2008) 8 SCC 172} to contend for the position that interference in contractual matters is very limited under Article 226 of the Constitution of India. In the first decision, it was held by the Apex Court thus in para 8: “In a catena of cases this Court has held that where the dispute revolves round questions of fact, the matter ought not to be entertained under Art. 226 of the Constitution. (See _State Bank of_ wpc 23928/2009 16 _India v. State Bank of India Canteen Employees' Union_ (1998 SCC (L & S) 1270) and _Chairma, Grid Corpn. of Orissa Ltd. (GRIDCO) v. Sukumani Das_ (1999 (7) SCC 298)}.” In Pimpri Chinhwad Municipal Corporation's case {(2008) 8 SCC 172}, their Lordships relied upon the earlier decision of the Apex Court in KSEB v. Kurien E. Kalathil {(2000) 6 SCC 293}, wherein the difference between statutory contracts and non statutory contracts was explained. Finally, the Apex Court quoted para 16 of the judgment in **State of U.P. and others v. Bridge & Roof Company (Ltd)** {(1996) 2 SCC 22) which is as follows: “16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act, or may be, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant - Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz. to restrain the wpc 23928/2009 17 Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Art. 226. Indeed, the High Court has not granted the said prayer.” 26. In the light of the various principles stated above, it can be seen that what is involved herein is a dispute regarding performance of the contract. The terms of the contract have been reduced into in writing in the form of written agreement. Contentions are respectively raised by the parties accusing the other of breach of contract. With regard to the specific items of claim raised by the petitioners, the Board contends that all those are covered by the terms of the agreement. The important dispute is one regarding the variation of major part of the work which, according to the Board, is covered by the terms of the agreement. The further questions with regard to the claim for escalation of rate for extra items of work, claim for rate revision under 2008 P.W.D. schedule of rate as well as revision of rates for the civil work which was agreed to be done, etc. are all matters of intense dispute between the parties and both rely upon the terms of the contract and the general principles governing the interpretation of the same. Therefore, it requires an adjudication on the various disputed questions of fact. The same can be done only by taking evidence before an wpc 23928/2009 18 appropriate forum. When there is grave dispute regarding the obligations under the contract and the actions taken allegedly based on the terms of the contract, this Court will not be justified in considering the matter under Article 226 of the Constitution. True that the petitioners have got a case that there is frustration of contract. But that aspect is countered by saying that the petitioners have abandoned the work. Therefore, all these aspects will deter this Court from considering the matter in the writ petition, since interpretation of the terms of the contract and adjudication of facts are required. 27. Apart from that, it is further contended by the learned Standing Counsel for the Board that even though the contract has been terminated, there has not been any assessment on the risk and cost element, since the same will be assessed only in future. For all these reasons, the writ petition fails and the same is dismissed. No costs. ## **(T.R. Ramachandran Nair, Judge.)** ## **17/02/2011** Heard. The matter was posted “to be spoken to” at the request of the learned counsel for the petitioners. It is pointed out that as per the interim wpc 23928/2009 19 order passed by this Court, the respondents were restrained from invoking the bank guarantee. It is prayed that the interim order may be allowed to be continued for a reasonable time in the light of the fact that this Court has dismissed the writ petition on the ground of non maintainability. The learned Standing Counsel for the Board vehemently opposed the prayer. My attention is invited to relief No.6 in the writ petition. 2. Having regard to the fact that the interim order was there throughout, there will be a direction not to enforce bank guarantee for a period of ten days from today. **(T.R. Ramachandran Nair, Judge.)** ## **kav/**