Sabari Enterprises v. State of Kerala & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **THURSDAY ,THE 21ST DAY OF MARCH 2019 / 30TH PHALGUNA, 1940** **WP(C).No. 34548 of 2017** ## **PETITIONER/S:** **SABARI ENTERPRISES, SAYUJYAM, THRIKKODITHANAM P.O., CHANGANACHERRY-686105, (REPRESENTED BY SRI. K. C. VIJAYAKUMAR, PARTNER).** **BY ADVS. SRI.K.N.SREEKUMARAN SMT.V.P.SEENA DEVI SRI.P.J.ANILKUMAR (A-1768)** ## **RESPONDENT/S:** - **1 EXECUTIVE ENGINEER, PWD BUILDINGS DIVISION, BEACH ROAD, KOLLAM-691001.** - **2 EXECUTIVE ENGINEER, PWD KLC SECTION, NO.2, VIKAS BHAVAN, THIRUVANANTHAPURAM-695001.** - **3 SUPERINTENDING ENGINEER, PWD SPECIAL BUILDINGS DIVISION, BUILDING SOUTH CIRCLE, THIRUVANANTHAPURAM-695001.** - **4 SECRETARY TO GOVERNMENT PWD, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001. R1 TO R4 BY SMT. PRINCY XAVIER, GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21.03.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.34548 of 2017 2 ## **JUDGMENT** This writ petition is filed by the petitioner seeking direction to the respondents to effect immediate payment of the amounts due under a contract to the petitioner as requested in Ext.P5 representation along with interest for the delay in payment as provided in the Interest Act, 1978. Brief material facts for the disposal of the writ petition are as follows: 2. Petitioner is a Government contractor engaged in the execution of works for the Public Works Department of the State Government. Petitioner has undertaken the construction of official residence for Chief Secretary to the State Government, the multistoried building of 10 class rooms in the Blind School, Vazhuthacaud, 9 class rooms for SMV High School, Thiruvananthapuram and the new building for Government HSS, Punnala, in terms of Ext.P2 agreement executed by and between the parties. The case of the petitioner is that, even though work was completed and three bills were presented covering Rs.2.18 Crores in part, during September, 2016, December, 2016 and February, 2017, payment has been awarded only during July, 2017. The balance bills are still pending. According to the W.P.(C) No.34548 of 2017 3 petitioner, now the petitioner has completed the work and has submitted the final bill, however, the payment is protracted by saying one reason or other. It is also submitted that, in spite of submission of Ext.P5 representation, no action is initiated to release the amounts to the petitioner. 3. The 3[rd] respondent has filed a detailed counter affidavit, refuting the allegations and claims and demands raised by the petitioner. It is submitted that, there is no delay on the part of the Department in paying the bills and the bills were timely paid to the petitioner. The details of the payment made to the petitioner are also provided in the counter affidavit. That apart, it is submitted that, the bills pending were presented and payments are made strictly on seniority basis. That apart, it is submitted that, as per the terms and conditions of agreement executed by and between the parties, there is a clear stipulation that petitioner will not claim interest even if there is delay on the part of the Government in paying the part bills or final bills. 4. A reply affidavit is filed by the petitioner, reiterating the stand adopted in the writ petition and also submitted that, the covenants entered into by and W.P.(C) No.34548 of 2017 4 between the parties that the petitioner will not claim interest for delayed payment will have to be read down to mean that, if the payment is made within a reasonable period, petitioner will not make any claim for interest. 5. I have considered the rival submissions made across the Bar, and perused the pleadings and the documents on record. 6. Taking into account the contentions put forth by the respective parties, it is clear that, there is no dispute with respect to the amounts due to the petitioner. However, the contention basically advanced by the learned Government Pleader is that, the payment is to be made strictly in accordance with the seniority and the petitioner cannot insist for payment overlooking the seniority list prepared for the purpose of effecting payment to the contractors. Learned Government Pleader has invited my attention to the Full Bench judgment of this Court in ' _**Anirudhan & Others v. State of Kerala & Others**_ ' [1999 (2) K.L.J 252], wherein the issue with respect to the seniority in the matter of payment of bills was considered, and held as follows in paragraph 19: W.P.(C) No.34548 of 2017 5 _“_ _**19** . It is held by decisions of court that an executive agency must be vigorously held to the standards by which it professes its action to be judged. This principle has been accepted by the apex court in many cases. Having regard to the explicit terms of Art.180 of the Kerala Financial Code and 15 of the Kerala PWD Manual, it is clear that Government are duty bound to make payments to the work completed. The aforesaid provision, in our opinion would unambiguously command that no work shall be tendered except with the availability of complete funds, has given rise to a promise or representation and it is on that basis alone the contractors come forward to undertake the work, plan their work programme and arrange for the employment of staff and engagement of machinery and incur large investments. Thus upon the strength of the promise and representation the contractors act or change their position by undertaking various steps as aforesaid and also claim 5% security deposit which, according to the contractors, is also made either by borrowings at high rate of interest or from diversion or from their own funds. Non-payment of the amounts due to the contractors will cause grave injustice to them. It is held that the contractors are engaged by the State on their expectation and therefore, cannot be denied their legal dues. A citizen is entitled in law to insist that the State will go by the procedure which it has laid down. In all these cases the State has entered into a contract undertaking payment upon satisfactory completion of the work. The Government has also undertaken to pay the other amounts for the work done as per the agreement. Therefore, the Government in our opinion cannot be permitted to violate the solemn contracts. Such a position would be contrary to the clear mandate under the Constitution for the State to act free from unfairness. We are also unable to accept the argument of the learned Advocate General that the principles of seniority has to be maintained. We are of the opinion that principles of seniority is totally irrational and opposed to the mandate under the Financial Code, PWD Manual and provisions of the agreement. As already noticed the Financial Code and the PWD Manual provide for complete funding and tendering and only thereafter the work is to be called. The arrears, as pointed out by the contractors_ W.P.(C) No.34548 of 2017 6 _and also by the State, are accumulating only because of violation of the rules by not providing full funds as provided in the rules. The Government has to make payments strictly in time. The figures furnished to us by the State would show that arrears have gone up steeply as is clear from the statement. The Government of Kerala are duty bound to provide funds by bringing in a supplementary budget or from the contingency fund. It is also stated that there are no arrears in respect of contractors dues in the C.P.W.D or the railways or even in the Panchayats etc. It may be true that the contractors are aware that there will some delay of payment in settling some cases. That does not mean that the contractors have to wait indefinitely. Likewise, the head-wise seniority list and payment is clearly in violation of the spirit of the directions of this court in its judgment in W.A.1314/93. In the said judgment, Jagannadha Rao (CJ) and K. Sreedharan, J. have directed that the State of Kerala shall disburse the amounts allotted by the Government under various heads based on the seniority of the contractors, such seniority being based on the date of acceptance of the bills for the work coming under that head as long as different contractors fall under the same head, the State shall follow the seniority of the date of acceptance of bills. The Bench also held that the same principle will be adopted in relation to disbursement of monies to contractors also. With this direction, the Writ Appeal was disposed of by the said Bench. The Government also will not give any room for complaint that payments are made to some contractors out of turn when various other final bills submitted were pending with the Government for payment. It is alleged that a person who did the work much later is paid immediately and the person who did the work earlier is not paid at all. Though total lack of bonafide and absence of earnestness in solving the problems of the contractors was highlighted, we are not inclined to go into the said question and the illustrations cited with reference to some cases, regarding the discrimination and arbitrariness as reported in the newspapers. We are of the view that irrespective of the various heads of the principle of “first done first paid” should be ensured. The other reason given by the State to justify non-payment of the monies on the_ W.P.(C) No.34548 of 2017 7 _ground of pay revision cannot also be accepted. The pay is paid to the Government servant on the ground of pay revision. However, payments made because of pay revision cannot be compared to the payments to be made to the contractors. It is also submitted that there is a practice of departmental execution of works and in such works the payments are made without reference to seniority and immediate payment is made. Even though interest is asked for, for the delay in payment of the amounts due, we are not now awarding interest. In view of the undertaking now given by the State that all the contractors who have filed writ petitions and appeals on or before 23.06.1999 will be paid within four months.”_ 7. So also, the Full Bench judgment of this Court in ' _**State of Kerala v. Anil**_ ' [2002 (1) KLT 371 (F.B.)] is pressed into service to canvass the very same proposition. 8. On the other hand, learned counsel appearing for the petitioner has invited my attention to the judgment of this Court in ' _**State of Kerala and Another v. P.Edward John**_ ' [2015 (3) KHC 867 : 2015 (2) KLT 967] and specifically to paragraphs 16 to 18, which are extracted below, and submitted that petitioner has carried out the work by securing loan from various financial institutions, and therefore, the work which was completed long back and the delay on the part of the respondents to pay the amounts due to the petitioner renders the respondents liable for payment of interest at the rate of 18%. W.P.(C) No.34548 of 2017 8 _“_ _**16** . The provisions in the Kerala Financial Code, PWD Manual and the contract for execution of the work mandate payment of part bill during the progress of work and final bill immediately after the completion of the work. The fact that, after the completion of work final measurements were recorded and a final bill in terms of such measurements was drawn up and passed for payment on 29.9.2003 is not in dispute. But, according to the appellants/defendants, they could not make payment due to paucity of funds and the same was released to the respondent/plaintiff in terms of priority in the department concerned and as per availability of funds and letter of credit. They would also contend that, the respondent/plaintiff is not entitled for any interest for delayed payment, since going by Exts.B4 and B5 judgment/order of this Court any payment to the contractors can be made only in accordance with priority based on the date of registration of the bill and subject to availability of funds._ _**17** . When the provisions in the Kerala Financial Code, PWD Manual and the contract for execution of the work mandate payment of part bill during the progress of work and final bill immediately after the completion of the work, the contractors are legally entitled for such payments without any delay, as they are undertaking the contract work on the legitimate expectation and promise that payment will be made at any rate immediately after the completion of work. Going by the terms of the agreement a contractor has to deposit a sum amounting to 5% of the cost of the work undertaken by him as security for the due performance of the contract and all damages payable by the contractor under the terms of the contract shall be deducted by the Executive Engineer concerned by adjustment of a sufficient part of the security deposit or from any other sum due, or which may become due to the contractor by the Government. In addition to this, a deduction of 10% from all the payments made to the contractor shall be made by the Executive Engineer concerned as guarantee fund, which shall be released to the contractor only after the work is completed to the satisfaction of the department and it is finally taken over by the department. When payment of part bills is_ W.P.(C) No.34548 of 2017 9 _delayed indefinitely, the contractors are constrained to complete the entire work within the time stipulated in the contract by investing the entire funds raised by them, which in most of the cases would be borrowed funds from banks or financial institutions at higher rate of interest._ _**18** . In the case on hand, the respondent/plaintiff had availed over draft facility from his bankers M/s. Federal Bank Ltd., Kunnathukal Branch, for undertaking the work in question, and had executed a power of attorney in this regard in favour of his banker with the prior approval of the second appellant/second defendant. Though the final bill was drawn up and passed for payment as early as on 29.9.2003, part payment was made only on 23.2.2005. The fact that payment for the work undertaken by the respondent/plaintiff was delayed due to paucity of Government funds is not in dispute. Admittedly, the respondent/plaintiff was denied the beneficial use of money for more than one year. The provisions in the Kerala Financial Code and the Kerala PWD Manual, which we have already referred to and the conditions of the contract for execution of the work lead to the irresistible conclusion that, the appellants/ defendants have wrongfully deprived the respondent/plaintiff the beneficial use of the money payable for the work undertaken by him. Exts.B4 and B5 judgment/ order of this Court permitting the appellants/defendants to make payment to the contractors on priority based on the date of registration of the bill would not in any manner absolve the appellants/defendants from their statutory/contractual obligations under the Kerala Financial Code, the Kerala PWD Manual and the contract for execution of the work._ 9. On evaluation of the contentions put forth by the parties, and appreciating the proposition of law laid down by this Court in the afore-quoted judgments, I am of the considered opinion that, this Court has held that the respondents cannot maintain a seniority list of all contracts carried out by various W.P.(C) No.34548 of 2017 10 contractors, however, a seniority list is to be made on the basis of the bills submitted and the works completed in various Departments. It is also held in the said judgments that in accordance with the provisions of the PWD Code and the Kerala Financial Code, and so also the agreement executed by and between the parties, the Government and its Departments are bound to release the payments to the petitioners, irrespective of the seniority of the work, however, taking into account the “first done first paid” basis. Apparently, petitioner has submitted three part bills during the year 2017, and the final bill is also submitted. This writ petition was pending before this Court from the year 2017. Therefore, at this distance of time, it cannot be heard to say that the turn of the petitioner has not arrived so far. 10. Bearing in mind the proposition of law laid down by this Court in the afore-quoted judgments, there will be a direction to the respondents to release the entire balance amounts due to the petitioner within three months from the date of receipt of a copy of this judgment, failing which, respondents will be liable to pay interest at the rate of 9% from the date, the amount has actually fallen due as per the bills W.P.(C) No.34548 of 2017 11 submitted by the petitioner. The writ petition is disposed of accordingly. **Sd/-** **SHAJI P.CHALY JUDGE** St/23.03.2019 W.P.(C) No.34548 of 2017 12 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE STATEMENT DATED 9.8.2017 ISSUED BY M/S. DHANALAXMI BANK LTD, KOCHI-31.** **EXHIBIT P2 TRUE COPY OF AGREEMENT NO.46/SEBSC/2015-16 DATED 23.11.2015 FOR THE CONSTRUCTION OF GOVT. HSS, PUNNALA.** **EXHIBIT P3 TRUE COPY OF THE REPRESENTATION DATED 1.3.2016 ADDRESSED TO THE RESPONDENTS.** **EXHIBIT P4 THE DETAILS AND STATEMENT OF PENDING BILLS AND ANNEXURES REGARDING COMPLETION OF WORK.** **EXHIBIT P5 TRUE COPIES OF THE REPRESENTATIONS DATED 24.7.2017 ADDRESSED TO THE RESPONDENT WITH ACKNOWLEDGEMENT.** **RESPONDENTS'** **EXHIBITS:** **EXHIBIT R3(A) TRUE COPY OF THE RELEVANT PORTION OF ONE OF THE AGREEMENT DATED 03.12.2013.** //TRUE COPY// P.S. TO JUDGE St/-