Even assuming that the learned counsel for the
petitioner is right in saying that one party to a contract is
not empowered to determine that the other party to the
contract has committed a breach, or to assess
damages/compensation which it is entitled to under the
contract, it only means that in such a case, the remedy
lies in approaching either the Arbitration Tribunal or the
Civil Court for appropriate relief. A writ petition, in any
event, is not a remedy available in such a situation.
15. For the above reasons, we are of the view that in
absence of any dispute raised by the petitioner
challenging the decision of recession of contract before
the competent authority, the respondent/State is
empowered to issue the demand for the loss suffered
either due to awarding of contract to other agency and as
per terms of the contract, the petitioner is liable to pay
the said amount. Thus, the action of the State is just and
proper. The writ petition filed by the petitioner has no
merit and is accordingly, dismissed.
Dated;13.02.2015
W. P.No.7505/2014
Shiv construction thru shiv Narayan pathak v public works department
Citation;AIR 2015 MP HC42
By this writ petition under Article 226 of the
Constitution of India, the petitioner is praying for
quashment of order dated 15.09.2014 issued by the
respondent No.2.
2.
Brief facts of the case are that a contract for
construction of high level submersible bridge across river
Angrer near Kheda Village for Kheda approach road on
Pithampur Kheda Road, District Dhar was awarded to
the petitioner @ 1.01% above SOR for road and bridge
works issued by EinC, PWD, M.P and enforce from
.
15.04.2009 amended upto the date of issue of NIT has
been accepted by EinC, PWD, Bhopal on behalf of the
Governor of M. P
.
3.
After signing of agreement, the work order was
issued on 12.11.2012. As per work order, the petitioner
was to complete the work within 12 months excluding
rainy season but the same was not completed and inspite
of various notices to carry out the progress in the work,
there was no progress in the work in proportion to the
time stipulated in the work order and the extent of work,
which was to be carried out by the petitioner.
4.
As per Clause 7.12, the work was to be done by the
contractor according to time schedule so fixed by the
authority and as per Clause 7.13, the time allowed for
carrying out of the work was to be strictly adhered to by
the contractor and in violation to the aforesaid clauses of
the agreement, the department has every right to rescind
the contract as per the provisions of Clause 3 of the
agreement. The Clauses 7.12, 7.13 and 3 of the
agreement are relevant, which reads as under :
7.12 TIME SCHEDULE – The work shall be done by
the contractor according to the time schedule fixed
by the competent authority.
7.13 TIME OF CONTRACT
Time allowed for
carrying out the work as entered in the NIT shall be
strictly observed by the contractor and shall be
reckoned from the date of work order to commence
the work.
5.
CLAUSE 3 of the Agreement
In any case
in which under any clause or clauses of this
contract the contractor shall have rendered himself
liable to pay compensation amounting to the whole
of his security deposit (whether paid in one sum or
deducted by installments) or committed a breach of
any of the rules contained in clause 24 or in the
case of abandonment of the work, except due to
permanent disability or death of the contractor, or
any other clause, the Divisional Officer on behalf of
the Governor of Madhya Pradesh shall give a notice
before 15 days for work costing upto Rs.10.00 lacs
and before 30 days for works costing above
Rs.10.00 lacs and in the event of the contractor
failing to comply with the directions contained in
the said notice shall have power to adopt any of the
following courses, as he may deem best in the
interest of the Government.
(c) To measure up the work of the contractor and
to take such part thereof as shall be unexecuted out
of his hand and to give it to another contractor to
complete in which case any expenses which may be
incurred in excess of the sum which would have
been paid to the original contractor if the whole
work had been executed by him (of the amount of
which excess certificate in writing of the Divisional
Officer shall be final and conclusive) shall be borne
and paid by the original contractor and may be
deducted from any money due to him by
Government under the contract or otherwise or
from his security deposit or the proceeds of sale
thereof or a sufficient part thereof.
5.
In the case in hand, the petitioner had only
completed the work worth Rs.2,98,366/ out of work of
Rs.132.00 lacs. The work of construction of bridge is at
Pithampur, which is a work of specialized nature and is a
time bound work, which is to be completed within the
time frames so provided in the work order.
6.
Inpite of notices and number of promises given by
the petitioner, he failed to complete the work. The
department was not left with any other option but to
rescind the contract of the petitioner looking to the slow
progress in the work and, therefore, his work was
rescind.
7.
As per Clause 3 of the agreement, the left over
work was given to other agency after finalization of the
bill of the petitioner and the rate quoted by other agency
was 17% above SOR and the difference between the
petitioner's rate and the rate quoted by the other agency
was 16.99% of the total amount of the contract, which
came to Rs.21,92,678/.
8.
The department passed the orders dated
15.09.2014 and 23.09.2014. As per provisions of Clause
3 of the agreement, directed the petitioner to deposit the
amount, which was the difference of the amount, which
the State Government was to incur due to giving work to
a different agency in respect of work, which was left over
by the petitioner. It is this action, which has been
impugned in this writ petition.
9.
Learned counsel for the petitioner has submitted
that Clause 29 of the agreement deals with arbitration
and as per the aforesaid clause, if any dispute arise
between between the parties, the matter shall be referred
to the Superintending Engineer for deciding the said
dispute and if any one is dissatisfied then, an appeal is
made before the Chief Engineer. He further submitted
that in the present case, order dated 15.09.2014 was
passed by the Chief Engineer and, therefore, no useful
purpose will be served in raising the dispute before the
Superintending Engineer. He further submitted that in
pursuance to the order passed by the Chief Engineer, the
Executive Engineer on 23.09.2014 passed the order for
demand for recovery of the amount in question. He
further submitted that unless and until the dispute is
decided by the competent authority, the difference
amount cannot be recovered from the petitioner. In
support of the aforesaid arguments, learned counsel for
the petitioner has drawn out attention to the Full Bench
decision in the case of B. B. Verma and another vs.
State of M. P
. and another reported in 2007(III) MPJR
(FB) 251 and the decision of the Apex Court in the
matter of State of Karnataka vs. Shree Rameshwara
Rice Mills, Thirthahalli reported in AIR 1987 SC 1359.
10.
In reply, learned Dy. G.A. submits that as per the
agreement, the petitioner has failed to challenge the
order of recovery either by raising a dispute as per
Clause 29 of the agreement or filing a petition under
Section 7 of the M. P Madhyastham Adhikaran
.
Adhiniyam, 1993 (in short "Adhiniyam"), the demand
issued by the State is final because due to breach
committed by the petitioner, the State has suffered a loss
of Rs.21,92,678/ and as per Clause 3, the petitioner is
liable to pay the aforesaid amount. She further
submitted that if the petitioner is aggrieved by the
aforesaid order of recovery, he may refer the matter to
the Tribunal, which is the proper forum but he has failed
to refer the matter and, therefore, the Full Bench
decision cited by the petitioner will not be applicable in
the present facts and circumstances of the case. She also
submits that where a contractor does not complete the
work entrusted to him under the contract and the un
executed part of the work is entrusted to another
contractor for completion and the Government incurs
additional expenses for having the work done by other
contractor, the additional expenses sought to be
recovered by the Government are nothing but damages
within the meaning of Section 73 of the Indian Contract
Act, 1872 and prays for dismissal of the writ petition.
11.
In the case of B. B. Verma (Supra), the appellants
therein raised the dispute before the Executive Engineer
and, thereafter, challenged the impugned orders of
recovery. In the present case, no such dispute was raised
and, therefore, decision of the Full Bench will not be
applicable and is distinguishable on facts.
12.
In the case of Rameshwara (Supra), it has been
held that the Court was construing Clause 12 of the
contract concerned therein, which ran as follows :
"In token of the first party's willingness to abide
by the above conditions, the first party has
hereby deposited as security a sum of Five
Hundred Rupees only with the second party and
for any breach of conditions set forth
hereinbefore, the first party shall be liable to pay
damages to the second party as may be assessed
by the second party, in addition to the forfeiture
in part or whole of the amount deposited by him.
Any amounts that may become due or payable by
the first party to the second party under any part
of the agreement, shall be deemed to be and may
be recovered from the first party as if they were
arrears of land revenue".
The contract was between the State of Mysore,
and Shree Rameshwara Rice Mills. Alleging that
the Mills had committed a breach of contract by
making short delivery of rice, the State
demanded payment of damages, assessed at Rs.
7,344.16 Ps. by the Deputy Commissioner. Since
the Mills failed to pay the said amount, the State
initiated proceedings under the Revenue
Recovery Act, to recover the amount as if it were
arrears of land revenue. The mills thereupon
instituted a suit for a declaration that the
recovery proceedings are illegal, and for a
permanent injunction restraining the State from
pursuing the recovery proceedings. In two other
similar matters, however, the contractors
approached the High Court of Karnataka by way
of writ petitions under Article 226 of the
Constitution, challenging the validity of the
assessment of damages and recovery
proceedings. The second appeal preferred by the
State was dismissed and the writpetitions filed
by the contactors were allowed by the High
Court, whereupon the matter was taken to
Supreme Court. Construing said Clause 12, the
Supreme Court made the following observations :
".....The terms of Clause 12 do not afford scope
for a liberal construction being made regarding
the powers of the Deputy Commissioner to
adjudicate upon a disputed question of breach as
well as to assess the damages arising from the
breach. The crucial words in Clause 12 are "and
for any breach of conditions set forth
hereinbefore, the first party shall be liable to pay
damages to the second party as may be assessed
by the second party". On a plain reading of the
words it is clear that the right of the second party
to assess damages would arise only if the breach
of conditions is admitted or if no issue is made of
it. If it was the intention of the parties that the
officer acting on behalf of the State was also
entitled to adjudicate upon a dispute regarding
the breach of conditions the wording of Clause
12 would have been entirely different. It cannot
also be argued that a right to adjudicate upon an
issue relating to a breach of conditions of the
contract would flow from or is inhered in the
right conferred to assess the damages arising
from a breach of conditions. The power to assess
damages, as pointed out by the Full Bench, is a
subsidiary and consequential power and not the
primary power. Even assuming for argument's
sake that the terms of Clause 12 afford scope for
being construed as empowering the officer of the
State to decide upon the question of breach as
well as assess the quantum of damages, we do
not think that adjudication by the officer
regarding the breach of the contract can be
sustained under law because a party to the
agreement cannot be an arbiter in his own cause.
Interests of justice and equity require that where
a party to a contract disputes the committing of
any breach of conditions the adjudication should
be by an independent person or body and not by
the other party to the contract. The position will,
however, be different where there is no dispute or
there is consensus between the contracting
parties regarding the breach of conditions. In
such a case the officer of the State, even though a
party to the contract will be well within his rights
in assessing the damages occasioned by the
breach in view of the specific terms of Clause
12.....".
13. It would be evident from a reading of the above
observations that the said Clause, according to the
Supreme Court, did not empower the State to determine
whether there was a breach of contract on the part of the
Mills. It was further held that the power to assess
damages was consequential to breach. If the State had no
power to adjudicate upon the issue relating to breach of
contract by the Mills, it follows logically that it had no
power also to assess the damages, which is merely a
consequential aspect. It is, no doubt, true that the Court
did not stop there, and proceeded to observe further that
even if the said clause is construed as empowering the
State to determine whether a breach has been committed
by the Mills, such a clause would be unsustainable, since
"Interests of justice and equity require that where a party
to a contract disputes the committing of any breach of
conditions the adjudication should be by an independent
person or body and not by the other party to the
contract......". At the same time, the Court observed
further that the position would be different where there
in no dispute, or there is consensus between the
contracting parties regarding the breach of conditions. In
such a case, it was held, the State, even though a party to
the contract, will be well within its rights in assessing the
damages occasioned by the breach, in view of the specific
terms of Clause 12.
14. Even assuming that the learned counsel for the
petitioner is right in saying that one party to a contract is
not empowered to determine that the other party to the
contract has committed a breach, or to assess
damages/compensation which it is entitled to under the
contract, it only means that in such a case, the remedy
lies in approaching either the Arbitration Tribunal or the
Civil Court for appropriate relief. A writ petition, in any
event, is not a remedy available in such a situation.
15. For the above reasons, we are of the view that in
absence of any dispute raised by the petitioner
challenging the decision of recession of contract before
the competent authority, the respondent/State is
empowered to issue the demand for the loss suffered
either due to awarding of contract to other agency and as
per terms of the contract, the petitioner is liable to pay
the said amount. Thus, the action of the State is just and
proper. The writ petition filed by the petitioner has no
merit and is accordingly, dismissed. No order as to costs.
gp
(P
. K. Jaiswal)
Judge
(Alok Verma)
Judge
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