Pathanapuram Block Panchayath v. K. Ramachandran & Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN THURSDAY, THE 30[TH] DAY OF MARCH 2023 / 9TH CHAITHRA, 1945** **RFA NO. 221 OF 2019** **AGAINST THE JUDGMENT AND DECREE DATED 13.03.2019 IN** **O.S.NO.78/2016 OF SUB COURT, PUNALUR, KOLLAM.** **APPELLANT/DEFENDANT NO.1:** **PATHANAPURAM BLOCK PANCHAYATH, REPRESENTED BY ITS SECRETARY, BLOCK PANCHAYATH OFFICE, PIDAVOOR.P.O., PATHANAPURAM TALUK, PATHANAMTHITTA DISTRICT-689695. BY ADVS. ANSU VARGHESE SRI.MANU RAMACHANDRAN SRI.NAVEEN THOMAS T.KRISHNANUNNI (SR.)(K/280/1973)** ## **RESPONDENTS/PLAINTIFF & DEFENDANTS NOS. 2 TO 4:** |**1**|**K.RAMACHANDRAN, AGED 60 YEARS, GOVERNMENT CONTRACTOR,**| |---|---| ||**'KAILAS', KALLUMKADAVU, PATHANAPURAM TALUK,**| ||**KOLLAM DISTRICT-689695.**| |**2**|**STATE OF KERALA, REPRESENTED BY THE DISTRICT**| ||**COLLECTOR, KOLLAM-691013.**| |**3**|**DEPUTY TAHASILDAR (REVENUE RECOVERY),**| ||**TALUK OFFICE, PATHANAPURAM TALUK, PATHANAPURAM,**| ||**KOLLAM-689695.**| |**4**|**THE VILLAGE OFFICER, VILLAGE OFFICE,**| ||**PATHANAPURAM, KOLLAM-689695.**| ||**BY ADVS.**| ||**SUBHASH CYRIAC**| ||**BY SENIOR GOVERNMENT PLEADER, SMT.PRINCY ZAVIER**| ||**S.SREEJITH (S-3453)**| ||**T.SETHUMADHAVAN (SR.)**| **THIS APPEAL HAVING BEEN FINALLY HEARD ON 09.03.2023, ALONG WITH CO.13/2020, THE COURT ON 30.3.2023 DELIVERED THE FOLLOWING:** R.F.A.No.221/2019 & CO No.13/2020 2 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN** **THURSDAY, THE 30[TH] DAY OF MARCH 2023 / 9TH CHAITHRA, 1945** **CO NO. 13 OF 2020** **AGAINST THE JUDGMENT AND DECREE DATED 13.3.2019 IN** **O.S.NO.78/2016 OF THE SUB COURT, PUNALUR AGAINST THE ORDER/JUDGMENT IN RFA NO.221/2019 OF HIGH** ## **COURT OF KERALA** ## **CROSS APPELLANT/1ST RESPONDENT/PLAINTIFF:** **K.RAMACHANDRAN, AGED 60 YEARS, GOVERNMENT CONTRACTOR, KAILAS, KALLUMKADAVU, PATHANAPURAM TALUK, KOLLAM DISTRICT. BY ADVS. SUBHASH CYRIAC SRI.S.SREEJITH (S-3453)** ## **RESPONDENTS/APPELLANT AND THE RESPONDENT NOS.2 TO 4/DEFENDANTS:** - **1 PATHANAPURAM BLOCK PANCHAYAT, REPRESENTED BY ITS SECRETARY, BLOCK PANCHAYAT OFFICE, PIDAVOOR P.O., PATHANAPURAM TALUK-689695.** - **2 STATE OF KERALA, REPRESENTED BY DISTRICT COLLECTOR, KOLLAM, PIN-691013.** - **3 THE DEPUTY TAHASILDAR (REVENUE RECOVERY), TALUK OFFICE, PATHANAPURAM TALUK, KOLLAM DISTRICT, PIN-689695.** - **4 THE VILLAGE OFFICER, VILLAGE OFFICE, PATHANAPURAM, KOLLAM DISTRICT, PIN-689695.** **BY SENIOR GOVERNMENT PLEADER, SMT.PRINCY ZAVIER BY ADV.ANSU VARGHESE BY SRI.MANU RAMACHANDRAN** **THIS CROSS OBJECTION/CROSS APPEAL HAVING BEEN FINALLY HEARD ON 09.03.2023, ALONG WITH RFA.NO.221/2019, THE COURT ON 30.03.2023 DELIVERED THE FOLLOWING:** R.F.A.No.221/2019 & CO No.13/2020 3 **A.MUHAMED MUSTAQUE & SHOBA ANNAMMA EAPEN, JJ. -------------------------------------------------RFA No.221/2019 & Cross Objection No.13/2020** **------------------------------------------------Dated this the 30[th] day of March, 2023** ## **JUDGMENT** ## **A.Muhamed Mustaque, J.** This appeal was filed by the first defendant in O.S.No.78/2016 on the file of the Subordinate Judge, Punalur. The appellant is the Pathanapuram Block Panchayath. The first respondent in this appeal is the plaintiff. He is also a contractor. 2. We shall refer to the parties with reference to their status in the trial court. The plaintiff entered into an agreement on 26.6.2003 with the first defendant. This agreement was for undertaking work related to the improvements, metalling and black topping of a road Panayam– Puthuvel Kodiyattu Kuzhy Erappakuzhy Myladumpara in Pattazhi Grama Panchayath. The total cost of the work was fixed at Rs.88.10 lakhs. Though the R.F.A.No.221/2019 & CO No.13/2020 4 plaintiff commenced the work, he could not complete the work within the stipulated time period. The plaintiff submitted part bill for the works done and received an amount of Rs.32,25,652/- on 27.4.2004. It appears that certain additional works needed to be carried out but the revised estimate was not approved. That appears to be the bone of the dispute between the parties. The value of the unpaid work is the subject matter of the plaint claim. The first defendant admitted that additional work would have to be done for the completion of the original work and the revised estimate was forwarded to the sanctioning authority. But the Government declined the sanction for the revised estimate. According to the first defendant, the plaintiff did not carry out the original work and the contract was terminated at the risk and cost of the plaintiff. The first defendant also claims that they sustained a loss to the tune of Rs.26,76,658/- due R.F.A.No.221/2019 & CO No.13/2020 5 to the non-completion of the work by the plaintiff. The first defendant is initiating revenue recovery. 3. The plaintiff, apart from seeking recovery of the amount, also sought prayers to declare that the revenue recovery proceedings initiated were illegal and void. 4. The trial court overruled the objections of maintainability of the suit and noted that no counterclaim has been laid, decreed the suit allowing recovery of the unpaid value of the work. 5. The learned senior counsel appearing for the appellant Panchayath assailed the impugned judgment mainly on three grounds: - I. Related to limitation. - II. Related to the declaratory prayer against revenue recovery proceedings. III. Quantification of the amount. ## 6. **On the point of limitation** : The agreement was executed on 26.6.2003. As seen from Ext.A9, R.F.A.No.221/2019 & CO No.13/2020 6 the time was extended for completing the work upto 31.03.2007. The suit was filed only on 18.02.2012. The learned senior counsel argued that there was no pleading to exclude any grounds of exemption from limitation law as referrable under Order VII Rule 6 of the Civil Procedure Code(CPC). It is further submitted that the challenge made by the plaintiff before this Court against the revenue recovery proceedings cannot revive the time which was barred by limitation. The main cause of action itself has been shown with reference to the judgment of this Court dated 09.12.2011. The learned senior counsel appearing for the plaintiff referred to Exts.A9 and A9(a). Ext.A9 shows that the contract was terminated only on 24.01.2011. It is submitted that the limitation has to be reckoned with reference to the date on which the contract was terminated and the first defendant refused to pay the amount. 7. As seen from the pleadings and the R.F.A.No.221/2019 & CO No.13/2020 7 documents, the original period was extended upto 31.3.2007. It is further seen from Ext.A9(a), the Panchayath also requested, as per its letter dated 29.12.2010, the plaintiff-contractor to complete the work. The contract was terminated only on 24.01.2011. Further, the revenue recovery proceedings were initiated only on 25.10.2011. The right to sue accrues in a contractual matter, if no period for stipulation of payment is made, the period would run from the date of refusal. In such cases, Article 113 of the Limitation Act would apply. No period for payment was fixed. In this case, the suit was filed on 18.2.2012. Therefore, the period of limitation would run only from the date of termination on 24.01.2011. Thus the suit was filed within the time. Therefore, the objection based on limitation is unsustainable. ## 8. **On the point related to declaratory relief** : The revenue recovery proceedings were initiated pursuant to the calculation of loss by the first ## R.F.A.No.221/2019 & CO No.13/2020 8 defendant Panchayath. The total loss was calculated at Rs.26,76,658/-. The learned senior counsel for the appellant submitted that a declaratory relief has been sought as an ancillary relief and such relief sought is not maintainable as it cannot be treated as an ancillary relief in this matter. The learned senior counsel further submitted that the revenue recovery proceedings were initiated based on the calculation of loss and that itself is a claim of the first defendant. Without there being a challenge to such claim by paying proper court fee as the main relief, the court could not have entertained the challenge as an ancillary relief. The learned senior counsel also submitted that the revenue recovery proceedings are in the nature of the counterclaim and no counterclaim is necessary for a suit separately to recover the loss. The learned senior counsel appearing for the plaintiff submits that when main relief related to recovery is sustained, R.F.A.No.221/2019 & CO No.13/2020 9 it encompasses an order that no amount is due to the first defendant Panchayath and therefore, such declaratory relief can be maintained as the ancillary relief. The learned counsel further relied on the full bench judgment of this Court in **Abdul Rahiman v. Divisional Forest Officer [1988** **KHC 436]** wherein this Court held that no party to the contract can fix the quantum of damages based on the loss without the intervention of a third- party adjudicator. 9. The breach of contract and recovery of loss thereon is subject of varying opinion often raised as arguments at the Bar. Placing reliance on the apex court judgment, we recently in RFA No.36/2019 clarified the legal position as follows: _“i) In a contract with the State or its Department, if the contract allows the Department to recover loss, the amount calculated towards the loss cannot be directed to be paid without there being a challenge against the determination of loss._ R.F.A.No.221/2019 & CO No.13/2020 10 - _ii) In a suit for recovery laid down by the plaintiff/contractor, the State or Department need not raise a plea of set-off or counterclaim for any amount retained by them towards loss based on the contract._ - _iii) if the state or department wants to recover any amount over and above the retained amount, they will have to file a separate suit or will have to raise a plea of set-off or counterclaim in a suit against them._ - _iv)In the absence of any contract, the State or Department will have to raise a plea of setoff or counterclaim in a suit filed by the contractor.”_ 10. The law laid down as above, is clear in the direction as to the approach, in regard to the challenge of unilateral calculation of the loss by one party to the contract. If it is authorized under the contract, the aggrieved has to challenge such calculation as a main relief by paying proper court fee thereon. However, the contract does not authorize the calculation of the loss by one party, any unilateral calculation of loss is _ex facie_ illegal. One party to the contract cannot unilaterally determine the loss without any ## R.F.A.No.221/2019 & CO No.13/2020 11 authority based on the contract. Thus, it is open for the party to seek a consequent relief of nonliability as against the revenue recovery demand notice, if such demand has no foundation referrable in the contract. 11.In this case, the appellant-first defendant had no case that they had been authorized to determine the loss. In such situation, they ought to have filed a counterclaim. No claim for loss can be decided without laying the counterclaim. That means, on granting the main relief to the plaintiff, the court can very well grant consequential relief declaring that the recovery proceedings are unsustainable. 12. **On quantification of the amount** **calculated by the plaintiff** : The trial court allowed the claim of Rs.29,75,946/- based on Exts.B1 and B2. Ext.B1 dated 30.3.2011 is the demand notice issued to the plaintiff claiming loss to the tune of Rs.26,76,658/-. In that, it ## R.F.A.No.221/2019 & CO No.13/2020 12 was mentioned that to complete the remaining work as per the 2010 schedule rate, a total sum of Rs.61,17,347/- is required. It is not discernible from the impugned judgment how the trial Judge arrived at the conclusion that the amount of Rs.29,75,946/- is well founded. Ext.B2 is the communication issued by the Assistant Engineer, Local Self Government Institutions, Secretary to the Block Panchayat. In that, the method of calculation of loss has been referred to. It is seen that as per the 2010 schedule rate, the total amount required for completion was Rs.61,17,347/-. It is further mentioned that as per the second part-bill, the following amounts are due to the plaintiff: |1|Unpaid value|Rs.11,67,578/-| |---|---|---| |2|Retention amount|Rs. 3,40,328/-| |3|Security deposit|Rs. 1,00,000/-| ||Total|Rs.16,07,906/-| R.F.A.No.221/2019 & CO No.13/2020 13 13. No steps were taken by the plaintiff to calculate the amount due with reference to the measurement. In the absence of any other materials, the plaintiff was only entitled to Rs.16,07,906/-. 14. The plaintiff filed cross-objection claiming interest at 9%. The trial court awarded only interest at 6%. The plaintiff 's case is that construction being a commercial transaction, he was entitled to 9% interest. We cannot treat it is a commercial transaction. In the absence of agreement, 6% of interest is just and proper. 15. Thus, the appeal is partly allowed with proportionate cost. We hold that the plaintiff is entitled to recover Rs.16,07,906/- only. The plaintiff is also entitled to 6% interest on Rs.11,67,578/- from 31.3.2007, 6% interest on Rs.3,40,328/- (retention amount) and Rs.1,00,000/- (security deposit) only with effect from the termination of the contract, i.e. 24.01.2011. R.F.A.No.221/2019 & CO No.13/2020 14 Cross-objection No.13/2020 is dismissed. **Sd/-** **A.MUHAMED MUSTAQUE, JUDGE Sd/SHOBA ANNAMMA EAPEN, JUDGE** ln