M/S. EXPANSE INDIA BUILDCON PVT. LTD. v. STATE OF KERALA & OTHERS

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** ## **WEDNESDAY, THE 3RD DAY OF SEPTEMBER 2014/12TH BHADRA, 1936** ## **WP(C).No. 28713 of 2013 (L)** **----------------------------** **PETITIONER :** **M/S. EXPANSE INDIA BUILDCON PVT. LTD. KUDROLI, WHITE HOUSE, 5TH MILE CHENGALA P.O., KASARAGOD - 671 541 REPRESENTED BY ITS DIRECTOR, C.M.ABDULKHADER.** **BY ADVS.SRI.K.L.VARGHESE (SR.) SMT.SANTHA VARGHESE SRI.RAHUL VARGHESE SRI.RANJITH VARGHESE** **RESPONDENTS :** ## **1. STATE OF KERALA** **REPRESENTED BY THE PRINCIPAL SECRETARY, RURAL DEVELOPMENT DEPARTMENT , THIRUVANANTHAPURAM-695 001.** ## **2. THE CHIEF ENGINEER** - **LOCAL SELF GOVERNMENT DEPARTMENT, THIRUVANANTHAPURAM - 695001.** **3. THE SUPERINTENDING ENGINEER, KERALA STATE RURAL ROADS DEVELOPMENT AGENCY, THIRUVANANTHAPURAM - 695001** **4. THE EXECUTIVE ENGINEER PROGRAMME IMPLEMENTATION DEPARTMENT DISTRICT PANCHAYATH, KANNUR - 695001** **BY SENIOR GOVERNMENT PLEADER SMT. ANITHA RAVEENDRAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16/06/2014, THE COURT ON 03-09-2014 DELIVERED THE FOLLOWING:** **bp** ## **WP(C).No. 28713 of 2013 (L)** ## **----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS -------------------------------------** **EXHIBIT P1: TRUE COPY OF THE MEMORANDUM OF WRIT PETITON IN WPC NO.28279/2012.H.** **EXHIBIT P2: TRUE COPY OF THE LETTER DATED 12/9/2012 ISSUED BY THE PETITIONER TO THE RESPONDENTS. EXHIBIT P3: TRUE COPY OF THE RELEVANT PAGES CONTAINING CLAUSES 52.3 AND 53.2 OF PART I GENERAL CONDITIONS OF CONTRACT U/S.4 OF STANDARD BIDDING DOCUMENTS FOR PMGSY- KERALA STATE.** **EXHIBIT P4: TRUE COPY OF THE JUDGMENT DATED 28/11/2012 IN WPC NO.28279/2012H.** **EXHIBIT P5: TRUE COPY OF THE ORDER OF THE STANDING EMPOWERED COMMITTEE DATED 18/10/2013.** **EXHIBIT P6: TRUE COPY OF THE REPRESENTATION DATED 31/10/2013 SUBMITTED BY THE PETITIONER TO THE RESPONDENTS. EXHIBIT P7: TRUE COPY OF THE LETTER DATED 24/4/2012 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT. EXHIBIT P8: TRUE COPY OF THE LETTER DATED 9/7/2012 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXHIBIT P9: TRUE COPY OF THE LETTER DATED 12/9/2012 ISSUED BY THE PETITIONER TO THE RESPONDENT.** **EXHIBIT P10: TRUE COPY OF THE LETTER DATED 19/3/2013 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXHIBIT P11: TRUE COPY OF THE LETTER DATED 22/5/2013 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXHIBIT P12: TRUE COPY OF THE ORDER DATED 11/1/2012 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER GRANTING EXTENSION OF TIME TO THE PETITIONER.** **EXHIBIT P13: TRUE COPY OF THE LETTER DATED 1/2/2013 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.** **EXHIBIT P14: TRUE COPY OF GOVERNMENT NOTIFICATION DATED 8/10/2012.** **EXHIBIT P15: TRUE COPY OF THE LETTER DATED 6/11/2013 ISSUED BY THE PETITIONER TO THE 4TH RESPONDENT.** **ADDL. EXT.P16:COPY OF THE SOW CAUSE NOTICE DT 26/11/2013 ISSUED BY THE R3 TO THE PETITIONER.** ## **WP(C).NO. 28713 OF 2013 (L)** ## **ADDL.EXT.P.17:COPY OF THE RELEVANT PORTION OF THE AGREEMENT IN PAGES 64 AND 65 RELATING TO CLAUSE 52 UNDER SECTION 4 OF THE AGREEMENT DEALING WITH 'TERMINATION'** ## **ADDL.EXT.P18:COPY OF THE REPLY NOTICE DT 03/12/2013 ISSUED BY THE PETITIONER TO THE R3 WITH COPY TO OTHERS.** **ADDL.EXT.P19:COPY OF THE DECREE OS. NO. 337/2008 OF HE MUNSIFF COURT, TALIPARAMBA.** **ADDL.EXT.P20:COPY OF THE E.P.NO. 37/2012 IN O.S.NO. 337/2008 IN THE MUNSIFF COURT, TALIPARAMBA.** **ADDL.EXT.P21:COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN WPC NO. 2836/2012-D DT 3/2/2012.** **ADDL.EXT.P22(a):COPY OF PHOTOGRAPH AT CH 1/440 SHOWING CUTTING AREA WITH NO LAND FOR FILLING** **ADDL.EXT.P22(b):COPY OF PHOTOGRAPH AT CH 1/470 SHOWING CUTTING AREA WITH NO LAND FOR FILLING.** **ADDL.EXT.P22(c):COPY OF PHOTOGRAPH AT CH 1/530 SHOWING CUTTING AREA WITH IN HARD ROCK.** **ADDL.EXT.P22(d):COPY OF PHOTOGRAPH AT CH 1/590 SHOWING CUTTING AREA WITH IN HARD ROCK.** **ADDL.EXT.P22(e):COPY OF PHOTOGRAPH AT CH 1/610 SHOWING CUTTING AREA WITH IN HARD ROCK.** **ADDL.EXT.P22(f):COPY OF PHOTOGRAPH AT CH 1/650 SHOWING DISPUTED LAND BELONGING TO PRIVATE PARTY.** **ADDL.EXT.P22(g):COPY OF PHOTOGRAPH AT CH 1/830 SHOWING DISPUTED LAND BELONGING TO PRIVATE PARTY.** **ADDL.EXT.P22(h):COPY OF PHOTOGRAPH AT CH 2/100 SHOWING DISPUTED LAND BELONGING TO PRIVATE PARTY.** **ADDL.EXT.P22(i):COPY OF PHOTOGRAPH AT CH 2/220 SHOWING CUTTING AREA WITHOUT LAND FOR FILLING.** **ADDL.EXT.P22(j):COPY OF PHOTOGRAPH AT CH 3/150 SHOWING CUTTING AREA WITHOUT LAND FOR FILLING.** **ADDL.EXT.P22(k):COPY OF PHOTOGRAPH AT CH 3/300 SHOWING CUTTING AREA IN HEAD ROCK.** **ADDL.EXT.P22(l):COPY OF PHOTOGRAPH AT CH 3/600 SHOWING CUTTING AREA WITHOUT SPACE FOR FILLING EXCEPT PRIVATE LAND.** **ADDL.EXT.P22(m):COPY OF PHOTOGRAPH AT CH 3/690 SHOWING CUTTING AREA IN HARD ROCK.** **WP(C).NO. 28713 OF 2013 (L)** **ADDL.EXT.P22(n):COPY OF PHOTOGRAPH AT CH 4/200 SHOWING CUTTING AREA IN HARD ROCK.** **ADDL.EXT.P22(o):COPY OF PHOTOGRAPH AT CH 5/250 SHOWING CUTTING AREA IN HARD ROCK.** **ADDL.EXT.P22(p):COPY OF PHOTOGRAPH AT CH 6/240 SHOWING THAT THERE IS NO ROAD WIDENING POSSIBLE WITHOUT CUTTING IN HARD ROCK.** **ADDL.EXT.P22(q):COPY OF PHOTOGRAPH AT CH 6/330 SHOWING THAT THERE IS NO ROAD WIDENING POSSIBLE WITHOUT CUTTING IN HARD ROCK.** **RESPONDENT(S)' EXHIBITS** **: NIL.** **//TRUE COPY//** **P.A. TO JUDGE** **bp** ## **A.M.SHAFFIQUE, J** ## *** * * * * * * * * * * * *** W.P.C.No.28713 of 2013 ---------------------------------------Dated this the 3[rd] day of September 2014 ## **J U D G M E N T** The above writ petition is filed by the petitioner seeking for a direction to the 1[st] respondent State of Kerala to review Ext.P5 decision and in the alternative, to reconstitute a proper committee for considering the grounds urged by the petitioner in Ext.P6. The petitioner also seeks for a direction to the respondents to consider termination and closure of the contract without his liability in terms of Clause 53.2 of Part I General Conditions of Contract and for other consequential reliefs. 2. The brief facts of the case would disclose that the petitioner was awarded the work of PMGSY (Pradhan Mantri Gram Sadak Yojana) 2006-2007 (Phase VI) by virtue of agreement dated 18/11/2009 with time of completion of 24 months ending on 17/11/2011. The work related to construction of 11.9 Kms road. The contract was for W.P.C.No.28713/2013 2 developing the rural areas incurring an expenditure of about Rs.15.2 Crores which is to be funded by the Central Government. 3. Petitioner has a case that the site was partially handed over with reference to 6.29 Kms after a considerably long period. Even in respect of the land handed over, there were injunction orders from the Munsiff Court, Thaliparamba. As far as the remaining land was concerned, changes had to be incorporated and the revised estimate sanctioned by the appropriate authority. The revised estimate was sanctioned only in November 2012 and the petitioner was informed about the same only by February 2013. Petitioner has submitted Ext.P2 representation on 12/09/2012 to the respondents to finalise the scope of work, issue revised drawings and make the site hindrance free to settle the dispute between the land owners and to reconsider revision of rates. Since there was no response, petitioner filed W.P.C.No.28279/2012 before this Court seeking for appropriate directions to consider his representation, Ext.P2. W.P.C.No.28713/2013 3 This Court, by judgment dated 28/11/2012 in W.P.C.28279/2012 directed the 1[st] respondent to consider the representation of the petitioner within a period of two months. 4. Pursuant to the aforesaid judgment, the Standing Empowered Committee for the said work had issued Ext.P5 order dated 18/10/2013 inter alia observing that since the site was handed over with the delay of 147 days, the value of work to be completed was reduced from Rs.8,28,56,039/to Rs.6,59,39,597/-. In respect of the said work, the scale of rates of 2008 would be applicable. It was further observed that the actual value of work completed was only Rs.2,76,42,717/-. Therefore, it was found that the value of the work to be completed beyond the contract period would come to Rs.1,69,16,442/- for which scale of rates of 2010 will be applicable. Therefore it was observed that there will be an additional financial commitment of only Rs.80,47,151/-. Time was extended by further one year. The Committee also decided to submit the recommendation to Government W.P.C.No.28713/2013 4 for sanction. Petitioner submitted a further review as Ext.P6 to the respondent which is not considered. It is, narrating the various infirmities in Ext.P5 decision, that Ext.P6 has been submitted. Petitioner has a contention that Ext.P5 decision is arbitrary, perverse and illegal. It is inter alia contended that the 1[st] respondent failed to consider the matter as directed by this Court whereas it has delegated the matter to a Committee of three members. It is further indicated that the entire aspect of the matter has not been considered by the Committee whereas it has proceeded on the basis that the 147 days delay has to be counted in the large span of construction period without even considering the fact that only portion of the site was handed over on 05/04/2010. It is contended that when the delay in handing over the work front had been admitted, the petitioner is entitled for the relief sought for and at any rate, the respondents have no right to terminate the contract at the risk of the Contractor. 5. Counter affidavit is filed by the 3[rd] respondent W.P.C.No.28713/2013 5 inter alia stating that after the award of work, several disputes had arisen between the contractor and the agreement authority. Since the work was in a standstill, the Superintending Engineer, KSRRDA issued show cause notice to the petitioner for which there was no reply. It is contended that the respondents were compelled to terminate the work at the risk and cost of the contractor. When the petitioner approached this Court by filing W.P.(C) No. 28279/2012 and this Court directed the matter to be considered by the Government, Government constituted a Standing Empowered Committee with Principal Secretary, Local Self Government Department as Chairman, Chief Engineer, LSGD as a member and one Technical Member nominated by the Contractor. Petitioner nominated Sri.R.Murukesan, Chief Engineer (Retd.) as his nominee. It is, after examining all the grievances of the contractor, that a decision was taken to terminate the contract at the risk and cost of the contractor. It is stated that there was breach of contract on the part of the contractor as there was failure on W.P.C.No.28713/2013 6 the part of the contractor to reach the requisite milestone agreed to be achieved as per Clause 21 of the General Conditions of Contract. They supported the stand taken in Ext.P5. It is further contended that they have the right to cancel the contract in terms of Clauses 52.1 and 52.2 of the General Conditions of Contract. It is therefore contended that the petitioner is not entitled for the reliefs, as prayed for. 6. Learned senior counsel Sri.K.L.Varghese appearing for the petitioner, having relied upon the factual issues relating to the contract, submitted that the Contractor was entitled for escalation of rates on account of the fact that there was delay on the part of the respondents in handing over the site and on account of the hindrances in executing the work, which is admitted in Ext.P5. But by Ext.P5, a method quite unknown to building contract was adopted which is totally unsustainable. He points out the major infirmities in the decision making process as stated hereunder: W.P.C.No.28713/2013 7 _(i) Inordinate delay in giving hindrance free land in the entire stretch of road from 1/680 to 2/160 and 8/280 to 8/460 which was cleared only on 14/03/2013 which means there was a delay of 1073 days or more than 35 months._ _(ii) The date of completion on account of delay of 147 days is reckoned from 14/03/2012 which again is ignoring the 1073 days delay in respect of sizable reach of land mentioned above._ _(iii) Prevailing SOR is that of 2010 with 47.57% excess whereas with effect from 01/10/2012, 2012 SOR was applicable and the impugned Ext.P5 order was passed in October 2013._ _(iv) For the balance work, no tender excess is recommended._ It is also argued that when there was a provision for cancelling the contract without risk liability, the respondent ought to have relied upon the same. Clauses 52.3 and 53.2 are relied upon which reads as under: “ _52.3 Notwithstanding the above, the Employer may terminate the Contract for convenience._ _53.2 If the Contract is terminated at the Employer's convenience, the Engineer shall issue_ W.P.C.No.28713/2013 8 _a certificate for the value of the work done, the reasonable cost of removal of Equipment, repatriation of the Contractor's personnel employed solely on the Works, and the Contractor's costs of protecting and securing the Works and less advance payments received up to the date of the certificate, less other recoveries due in terms of the Contract, and less taxes due to be deducted at source as per applicable law.”_ It is argued that the scope of work has been reduced from 11.9 kms to 6.29 kms during inspection by the Superintending Engineer and when such drastic changes have been made to the scope of work, it is not open for the respondents to terminate the contract at the risk and cost of the petitioner. Though the petitioner had sent a detailed reply to the show cause notice, the same was not considered. 7. On the other hand, the Learned Government Pleader submitted that the writ petition itself is not maintainable on account of the fact that the petitioner is challenging the decision taken by the authorities with W.P.C.No.28713/2013 9 reference to a contract between the parties. When the contract is terminated at the risk and cost of the contractor, since the disputes involved relates to the terms of contract and when there are factual disputes between the parties, the same cannot be adjudicated by a writ court under Article 226 of the Constitution of India. 8. The learned senior counsel Sri.K.L.Varghese relied upon the judgment of this Court in **Grace Joseph v. State of Kerala** [2006(2) KLJ 577] **, Comptroller and Auditor General of India v. K.S.Jaganathan** [(1986) 2 SCC 679], **Union of India v. Tantia Construction (P) Ltd.** [(2011) 5 SCC 697] and **Kumari Sreelekha Vidyarthi and others v. State of U.P and others** [(1991) 1 SCC 212] to contend that despite the fact that the dispute falls within the domain of contractual obligations, if there is violation of Article 14 on the part of the State or its authorities, or if injustice is done, or if the materials on record are sufficient to arrive at a conclusion on the contractual disputes, this Court can exercise jurisdiction and give appropriate directions in the W.P.C.No.28713/2013 10 matter. In fact, there is no dispute in regard to such settled proposition of law, but the exercise of jurisdiction will depend upon the facts and circumstances of each case. 9. Having regard to the factual situation available in the case, two issues arise for consideration. One is whether this Court should exercise the writ jurisdiction in the matter, taking into account the disputed questions of fact and secondly, whether on admitted facts, directions, as sought for can be granted. 10. In Ext.P5, the Standing Empowered Committee (hereinafter referred as 'the Committee') had come to a finding that there was a delay of 147 days in handing over the site after executing the agreement and there was inordinate delay in giving hindrance free land in the entire stretch of road and the same was cleared only on 14/03/2013. It is observed that the delay in handing over the site is due to unavoidable reasons which was known to the contractor and that he would have considered such a risk while submitting the tender. In regard to shifting of W.P.C.No.28713/2013 11 utilities, there was not much delay. 50% of electric posts were shifted at the site. It is the obligation of the contractor to make arrangements for shifting the utilities and the employer's responsibility is limited to reimbursement of the actual expenditure. The delay in payment was on account of the contractor's fault. Time was extended up to 31/12/2012 without levy of liquidated damages. As per Clause 21, the milestones to be achieved was specifically stated and on that basis, the committee has formed an opinion, as stated above. 11. Perusal of Ext.P5 clearly indicates that the Committee has not considered the issue raised by the petitioner in its proper perspective. By judgment dated 28/11/2012, this Court has directed the Government to consider the representation at Ext.P20 (Ext.P2 herein) and to take an appropriate decision in the matter. The Government delegated the consideration of the matter to the Committee. According to the Government, the decision at Ext.P5 is justified especially when it was considered in the presence W.P.C.No.28713/2013 12 of a nominee of the petitioner. But, perusal of Ext.P5, does not instill confidence in this Court to arrive at a finding that it is a proper consideration after referring to the relevant materials. Two factors are required to be noticed. One is that it is a case where the Government admits that there was delay in providing the work site, that there were hindrances in the work site, that the Contractor was unable to proceed with the construction in the work site on account of various factors including injunction granted by the civil court and secondly the work had been considerably reduced to almost 50%. Still, the Contractor was willing to carry out the work which they were unable to do on account of various circumstances. These circumstances are clearly narrated in Ext.P2 representation dated 12/09/2012, which is the same as Ext.P20 referred to in Ext.P4 judgment. Ext.P6 is the review petition filed by the petitioner on 31/10/2013 calling upon the 1[st] respondent to reconsider the entire matter once again. In an instance where there is delay on the part of the employer, the question is whether the employer can W.P.C.No.28713/2013 13 complain about breach of contract. It is borne out from the averments in the writ petition that there had been substantial hindrances in carrying out the work. In the said circumstances, the employer has two options. One is to grant escalation of rates to complete the work, and the other to terminate the contract without risk and cost of the contractor. However, in a case if it is found that the contractor has committed breach of contract, nothing prevents the employer from terminating the contract in accordance with the contractual stipulations. 12. In a building contract or in a civil contract, the actual state of affairs has to be borne in mind before terminating a contract at the risk and cost of the contractor. Apparently, going by Ext.P5, the calculations made and the conclusions do not justify consideration of relevant matters. There cannot be a situation where an escalation of rates, as claimed, is granted by extending the period of contract by 147 days. It is clear that a detailed consideration of the factual circumstances involved in the matter has not been W.P.C.No.28713/2013 14 made and therefore it is necessary to have a re-look into the matter. The contention and claims of the contractor are to be considered in accordance with law. Though the committee has narrated the respective claims and their conclusions, they have not considered the entire facts and circumstances involved in the matter. None of the grounds urged has been properly met and no reasons are stated to controvert the same. Ext.P5, therefore, can only be considered as an expression of opinion of the Committee and is not a decision as contemplated in Ext.P4 judgment. In the result, this writ petition is disposed of directing the 1[st] respondent to reconsider the entire matter based on Ext.P6 and inform the decision to the petitioner within a period of six months and until such time, no further steps shall be taken against the petitioner. ## **(A.M.SHAFFIQUE, JUDGE)** jsr W.P.C.No.28713/2013 15