R.F.A. No. 508 of 2018

R.F.A. No. 508 of 2018 : 1 : IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE SATHISH NINAN & THE HONOURABLE MR. JUSTICE JOHNSON JOHN FRIDAY, THE 19[TH] DAY OF JULY 2024 / 28TH ASHADHA, 1946 ## RFA NO. 508 OF 2018 AGAINST JUDGMENT DATED 26.02.2018 IN OS NO.1395 OF 2011 OF FIRST ADDITIONAL SUB COURT,THIRUVANANTHAPURAM ## APPELLANTS/DEFENDANTS: 1 KERALA WATER AUTHORITY REPRESENTED BY MANAGING DIRECTOR, JALA BHAVAN, THIRUVANANTHAPURAM - 695 033. 2 SUPERINTENDING ENGINEER P.H.CIRCLE, KERALA WATER AUTHORITY, KOZHIKKODE - 9. 3 EXECUTIVE ENGINEER OFFICE OF THE EXECUTIVE ENGINEER, PUBLIC HEALTH DIVISION, KERALA WATER AUTHORITY, VATAKARA, KOZHIKODE - 673 001. BY ADV SRI.P.BENJAMIN PAUL, SC, KERALA WATER AUTHORITY SRI. P.M.JOHNY, SC, KWA ## RESPONDENT/PLAINTIFF: M.M. VARGHESE, AGED 63 YEARS, S/O.MATHAI, MUTTAVANCHERRY HOUSE, THAMARACHALPURAM, KIZHKKAMBALAM VILLAGE, KUNNATHUNADU TALUK, ERNAKULAM - 683 562. BY ADVS. SRI.V.RAJENDRAN (PERUMBAVOOR) THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 15.07.2024, THE COURT ON 19.07.2024 DELIVERED THE FOLLOWING: R.F.A. No. 508 of 2018 : 2 : ## **SATISH NINAN & JOHNSON JOHN, JJ.** --------------------------------------------------------RFA No. 508 of 2018 --------------------------------------------------------Dated this the 19[th] day of July, 2024. ## **JUDGMENT** ## JOHNSON JOHN,J This appeal is filed by the defendants in O.S.No. 1395 of 2011 on the file of the first Additional Sub Judge, Thiruvananthapuram challenging the decree allowing the plaintiff to recover the balance contract amount. 2. The plaintiff, a registered contractor, submitted tender for the work “technology mission -ARWSS to Azhiyoor Village in Vadakara Taluk -supply and laying 250 mm CI class LA pumping main from Vellikulangara to Kallamala” in pursuance of the tender notification of the second defendant, Superintending Engineer under the first defendant, Kerala Water Authority. Even though, the original amount of Rs.3,70,75,733/- quoted by the plaintiff was the lowest, after the negotiation conducted by the second defendant, the plaintiff has reduced the quoted amount to Rs.2,72,74,225/- and the same is R.F.A. No. 508 of 2018 : 3 : accepted by the first defendant, as per proceedings dated 24.07.2007. The agreement was executed on 30.07.2007 and the work order was issued on 31.07.2007. 3. As per the break up of payment, 53% of the total amount is to be paid after supply of pipes; 11% after completing the supply of specials, valves, cement and steel; 26% after completing laying testing of pumping main, including construction of valve chamber etc.; 5% after completing trial running and commissioning of pumping main; and 5% after completing of one year of maintenance period commencing from the date of commissioning of pumping main. 4. Subsequently, the plaintiff completed the work before the time fixed for completing the performance and the third defendant, Executive Engineer, also issued a certificate dated 08.07.2008 stating that the plaintiff has completed the work as per specification and his performance in execution of work is “very good”. 5. But, the plaintiff received only part payment of Rs.2,59,20,514/- by way of three part bills and Rs.13,63,711/- is due R.F.A. No. 508 of 2018 : 4 : to the plaintiff as balance contract amount. The plaintiff is also entitled to Rs.18,81,938/- towards the amount retained by the defendants from the former two bills and Rs.3,00,000/-, the amount deposited with the defendants as security deposit and therefore, a total amount of Rs.35,45,649/- is due from the defendants to the plaintiff. 6. In the joint written statement, the defendants contended that even though the work was termed as a lump sum contract, the scope of the work and break up of price bid attached to the Notice Inviting Tender would show that the work is not a lump sum contract and the same is a schedule contract in which payment for the work is to be made on the basis of the quantity of work done and material supplied. It is stated that the plaintiff charged the pipe line before the completion of the work as per the scheme with _mala fide_ intention of making illegal gain and the quantity of special valve supplied by the plaintiff was short of the scheduled quantity and the plaintiff has not completed the supply of specials, valves etc. in full quantity as per the agreement schedule, and in the audit, it was found that there was an excess payment of Rs.32,30,034/- to the plaintiff. It is contended that R.F.A. No. 508 of 2018 : 5 : the defendants have made excess payment by mistake and that even though the plaintiff has agreed to supply 300 mm of 250 mm CL class LA pipe alone with one each of specials, valve TEES etc. for future maintenance work, the same was not done and therefore, there is breach of contract on the part of the plaintiff. 7. In the replication filed, the plaintiff stated that till the filing of the written statement, there is no allegation by the defendants about any non performance or non execution of the work as specified in the agreement and if there was any failure on the part of the plaintiff in this regard, the defendants would not have issued completion certificate and they would not have commissioned the project and settled the final bill. The plaintiff reiterated that the contract is a lump sum contract and denied the contention of the defendants that it is a schedule contract. 8. In the trial court, PW1 was examined and Exhibits A1 to A18 were marked from the side of the plaintiff and from the side of the R.F.A. No. 508 of 2018 : 6 : defendants DWs 1 to 4 were examined and Exhibits B1 to B10 were marked. 9. After considering the evidence on record and hearing both sides, the trial court arrived at the finding that it is a lump sum contract and that the plaintiff had completed the work as per the contract and hence, decreed the suit allowing the plaintiff to recover Rs.35,45,649/- together with interest at the rate of 6% per annum from 31.07.2008 till the date of realization from the first defendant and its assets. 10. Heard Sri. Benjamin Paul, the learned Standing Counsel appearing for the appellants and Sri. V. Rajendran (Perumbavoor), the learned counsel for the respondent. 11. The learned Standing Counsel for the appellants argued that the finding in the impugned judgment that it is a lump sum contract and that the plaintiff had completed the work as per the contract, is without proper appreciation of the evidence and that the trial court R.F.A. No. 508 of 2018 : 7 : also failed to consider the breach of contract on the part of the plaintiff and therefore, the impugned judgment is liable to be set aside. 12. But, the learned counsel for the respondent argued that the plaintiff completed the work as per the agreement and conditions in the notice inviting the tender to the satisfaction of the defendants and the third defendant also issued completion certificate dated 08.07.2008 specifically stating that the plaintiff has completed the work as per specification and that the performance of the plaintiff in execution of the work is very good and therefore, there is no reason to interfere with the findings in the impugned judgment. 13. The points that arise for determination are the following: 1. Whether the contract in question is a lump sum contract or a schedule contract? 2. Whether there is any beach of contract on the part of the plaintiff? 3. Whether the impugned judgment and decree are legally sustainable? R.F.A. No. 508 of 2018 : 8 : ## Points 1 to 3: 14. The proceedings of the Managing Director, Kerala Water Authority dated 24.07.2007 shows that the tenders for the work were invited by the Superintending Engineer, PH Circle, Kozhikode on lump sum basis. In page No. 4 of the said proceedings, it is stated that the tender committee also recommended that the tenderer should complete the subject work in all respects, as per the NIT conditions, within his quoted amount of Rs.2,72,74,225/-, since the subject tender was invited as a lump sum contract. In page No.5 of the said proceedings, it is stated that the meeting of the Kerala Water Authority held on 12.07.2007 resolved to approve the offer of Sri. M. M. Varghese at his reduced quoted amount of Rs. 2,72,74,225/- for the subject tender and also resolved to direct the contractor to complete the subject work in all respects as per the NIT conditions within his reduced quoted amount of Rs.2,72,74,225/-, since the subject tender was invited as a lump sum contract. A perusal of the break up of payment issued by the defendants would also show that the quoted amount of Rs. 2,72,74,225/- was to be paid in 5 stages as follows: R.F.A. No. 508 of 2018 : 9 : ## **BREAK UP OF PAYMENT** |Sl. No.|Item|% of Total<br>Contract<br>Value|Amount| |---|---|---|---| |1|Supply of pipes (250 mm<br>CI Class LA 6230 m, 250<br>M.S pipe – 139 M)|53%|14455340| |2|After<br>completing<br>the<br>supply of specials, valves,<br>cement, steel|11%|3000165| |3|After completing laying,<br>testing of pumping main<br>including construction of<br>valve chamber etc.|26%|7091298| |4|After completing Trial<br>running & commissioning<br>ofpumpingmain|5%|1363711| |5|After completing of one<br>year <br>of <br>maintenance<br>period commence from<br>the date of commissioning<br>of pumping main|5%|1363711| ||Total||27274225| 15. The first condition in the contract between the plaintiff and the second defendant dated 31.07.2007 shows that the consideration is Rs.2,72,74,225/- and there is also specific reference about payment on lump sum basis. The contention of the defendants is that the R.F.A. No. 508 of 2018 : 10 : schedule of rates appended to the contract would show that it is a schedule contract and therefore, the plaintiff is entitled only for payment of the work done. In this connection, the learned counsel for the respondent invited our attention to Chapter XV of the Kerala Public Works Department Manual, wherein clause 15.1 (iii) and (iv) provides the difference between schedule contract and lump sum contract, which reads thus: “(iii) **By Schedule contract.** -In this contract the total approximate quantities of the respective items of work and the time of completion are specified and the contractual obligations cover the rate the approximate quantities involved and the time of completion. (iv) **Lump sum contract** .-Here the total cost of the completed works as per drawings and specifications and the time of completion form the essence of the contract. In adopting this contract the drawings and specifications must he full and complete in order to prevent claims arising for variations due to any ambiguity in these. Cases may, however, arise where some modifications to the designs or specifications are found necessary due to site conditions or other reasons. The contract should make provision for evaluating and adjusting the cost of such modifications.” ## 16. The learned counsel for the respondent pointed out that even in a lump sum contract, there can be situations where some R.F.A. No. 508 of 2018 : 11 : modifications to the designs or specifications will be necessary due to site conditions or other reasons and in order to meet such contingencies, schedule rates can be appended and the fact that a schedule of rate is also appended to the contract by itself will not change the original nature of the contract as a lump sum contract and the schedule of rates attached to a lump sum contract is only for the purpose of evaluating and adjusting the cost of additional works due to modifications to the designs or specifications and in this case, there is nothing in evidence to show that there was any such modifications or additional work. 17. As noticed earlier, the performance and experience certificate dated 08.07.2007 issued by the third defendant to the plaintiff would show that the plaintiff has completed the work as per the specifications and his performance in execution of the work is very good. Since the plaintiff has completed the work as per the agreement and the conditions in the notice inviting the tender, it cannot be held that there is any breach of contract on the part of the plaintiff. The certificate issued by the third defendant on 08.07.2008 clearly shows R.F.A. No. 508 of 2018 : 12 : that the plaintiff completed the work to the satisfaction of the Department as per the terms of the contract and we also find merit in the argument of the learned counsel for the respondent that even if any variation is detected subsequently, the defendants cannot unilaterally recover any amount or adjust any amount towards compensation from the payment due to the plaintiff without initiating legal proceedings against the plaintiff before an adjudicatory forum as per law. ## 18. In **JG Engineers Private Limited v. Union of India and** **Another** [(2011) 5 SCC 758], the Honourable Supreme Court held that the question whether a party committed breach of contract can be decided only by an adjudicatory forum and one of the parties to the contract cannot decide the same. 19. It is in evidence that the defendants allotted the work to the plaintiff as the plaintiff quoted the lowest amount of Rs.2,72,74,225/and in the proceedings of the Managing Director dated 24.07.2007, there is specific direction to the contractor to complete the subject R.F.A. No. 508 of 2018 : 13 : work in all respects as per the conditions in the notice inviting the tender within his reduced quoted amount of Rs.2,72,74,225/-, since the subject tender was invited as a lump sum contract. We find no reason to disagree with the finding of the trial court that only because of the schedule attached to the contract, the defendants cannot succeed in their contention that the contract is not a lump sum contract. In the aforesaid circumstances, we find that this appeal is devoid of merit and is liable to be dismissed. In the result, this appeal is dismissed. sd/- **SATHISH NINAN, JUDGE.** sd/- **JOHNSON JOHN, JUDGE.** Rv