M/S Mycon Constructions Limited Vs the Secretary

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NC: 2025:KHC:46217 WP No. 4108 of 2017

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12^TH DAY OF NOVEMBER, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE E.S.INDIRESH WRIT PETITION NO.4108 OF 2017 (GM-RES)

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BETWEEN:

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M/S. MYCON CONSTRUCTIONS LIMITED HAVING ITS REGISTERED OFFICE AT INDUSTRY HOUSE 45, RACE COURSE ROAD BENGALURU - 560 001. REPRESENTED BY ITS DIRECTOR SHRI. ANIL KUMAR MALPANI.

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…PETITIONER

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(BY SRI. K. ARUN KUMAR, SENIOR COUNSEL FOR SRI. SUNDARA RAMAN M.V., ADVOCATE)

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AND:

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Digitally signed by ARUNKUMAR M S Location: HIGH COURT OF KARNATAKA

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THE SECRETARY DEPARTMENT OF WATER RESOURCES NO.305, WATER RESOURCES DEPARTMENT, 3^RD FLOOR, VIKASA SOUDHA, BENGALURU .

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THE KRISHNA BHAGYA JALA NIGAM LTD A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT 3^RD FLOOR, PWD NEW ANNEXE, K.R. CIRCLE, BENGALURU - 560001. AND HEREIN REPRESENTED BY ITS

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NC: 2025:KHC:46217 WP No. 4108 of 2017

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MANAGING DIRECTOR.

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THE STATE OF KARNATAKA REPRESENTED BY ITS CHIEF SECRETARY VIDHANA SOUDHA VIDHANA VEEDHI BENGALURU - 560 001.

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…RESPONDENTS

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(BY SRI. MANJUNATH B., AGA FOR R1 & R3; SRI. PRASHANTH B. R., ADVOCATE FOR SRI. K. RAMACHANDRAN, ADVOCATE FOR R2)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE RESPONDENT TO QUASH THE IMPUGNED ORDER NAMELY GOVERNMENT ORDER NO.WRD 248 KBN 2014 BENGALURU DATED 07.11.2016 VIDE ANNEXURE-A.

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THIS WRIT PETITION HAVING BEEN RESERVED FOR ORDERS, COMING FOR PRONOUNCEMENT THIS DAY, E.S. INDIRESH J., MADE THE FOLLOWING:

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CORAM: HON'BLE MR. JUSTICE E.S. INDIRESH

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CAV ORDER

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In this writ petition, the petitioner is assailing the Government Order, dated 07.11.2016 (Annexure-A), passed by the respondent No.1.

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2. Relevant facts for the adjudication of this

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writ petition are that, the petitioner claims to be the Class-I contractor, and the petitioner was awarded with work relating to construction of Common Head for Alamatti Left Bank Canal and Chimmalagi, Lift Irrigation Scheme at Alamatti Reservoir. In this regard, the petitioner has produced the Agreement dated 11.05.1994 (Annexure-B). It is averred in the writ petition that respondent No.2 had called upon the petitioner to execute several additional works which were outside the scope of the original Agreement. These works were completed by the petitioner. In this regard, six supplementary agreements for the additional works were executed, which are produced at Annexures–C1 to C6. The petitioner contends that after completion of the work, respondent No.2 issued a “No Due Certificate” (Annexure–E). However, respondent No.2 issued a letter dated 01.02.2006

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stating that the petitioner was liable to pay a sum of Rs.37,52,000/- as the Comptroller and Accountant General’s Office had not approved the final payment during auditing of the accounts of the respondent No.2. Being aggrieved by the same, the petitioner has preferred W.P.No.2234 of 2006 and this court vide order dated 13.02.2008, (Annexure-F), allowed the writ petition, and quashed the claim made by the respondent No.2. Subsequently, the respondent No.2 has again deducted Rs.37,52,000/- by issuing an order dated 01.04.2008, from the bills payable to the petitioner under the 'Balki Project' and same was questioned before this Court in W.P.No.40140 of 2008, which came to be allowed, on 25.08.2009, and the said order of the learned Single Judge, was challenged in Writ Appeal No.10446 of 2009. The Division Bench

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of this Court vide judgment dated 29.10.2009, (Annexure-G), dismissed the appeal preferred by the

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respondent No.2. Despite these orders, respondent No.2 did not refund the deducted amount of Rs.37,52,000/- to the petitioner. Consequently, the petitioner issued a legal notice dated 08.12.2009 calling upon respondent No.2 to refund the said amount. In the meanwhile, the petitioner filed C.C.C. (Civil) No.3006 of 2010 against respondent No.2. In the meantime, the respondent No.2 filed Civil Appeal No. 10007 of 2010 before the Hon’ble Supreme Court. The appeal preferred by the respondent No.2 was dismissed by the Hon’ble Supreme Court by order dated 23.07.2025. It is also stated in the writ petition that, the petitioner was issued with the order dated 09.02.2012, seeking recovery of Rs.37,52,000/- as arrears of land revenue and same was questioned by the petitioner before this court in W.P.No.7493 of 2012. This court vide order dated 28.07.2014 (Annexure-H), allowed the writ petition consequently,

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quashed the order dated 09.02.2012. Thereafter, the respondent No.1, passed the impugned order dated 07.11.2016 (Annexure-A), claiming recovery of

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Rs.37,52,000/- which is impugned in this writ petition.

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I have heard Sri. K. Arun Kumar, learned Senior Counsel appearing on behalf of the learned counsel Sri. Sundara Raman M.R, for the petitioner; Sri. Manjunath B, learned Additional Government Advocate, for the respondent-State and Sri. Prashanth B.R., learned counsel appearing for learned counsel Sri. K. Ramachandra, for the respondent No.2.

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Sri. K. Arun Kumar, learned Senior counsel

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for the petitioner contended that, the respondent No.2, having suffered orders of this Court in three earlier writ petitions and in view of the judgment of the Hon’ble Supreme Court in Civil Appeal No.10007

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of 2010, the impugned order passed by respondent

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No.1 seeking recovery does not survive for

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consideration. It is further submitted that the respondent No.2 had issued a completion certificate and a 'No-Due Certificate' (Annexure–E), indicating that full and final settlement had been made between the parties. Therefore, it is contended that, neither party can raise further claims on a concluded contract. Accordingly, the petitioner seeks quashing of the impugned order at Annexure–A. In this regard, learned Senior Counsel appearing for the petitioner places reliance in the judgment of the Hon'ble Supreme Court in the case of ONGC Mangalore Petrochemicals Limited v. ANS Constructions

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Limited and Another reported in (2018) 3 SCC, 373 .

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Nextly, it is contended by the learned Senior

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Counsel for the petitioner that, audit objections or Board Resolution of respondent No.2 are not binding

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on the petitioner in view of the orders passed by this Court and confirmed in appeal. Any further claim, if at all, must be adjudicated only in a properly instituted legal proceedings. Therefore, it is pleaded that, the impugned order at Annexure–A is liable to be quashed Learned Senior counsel places on the decision of the Hon'ble Supreme Court in the case of National Insurance Company Ltd., vs. Boghara Polyfab Private Ltd., reported in (2009) 1 SCC 267 and argued that, the impugned order is to be quashed as there is no outstanding claim between the parties.

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Per contra, Sri. Prashanth B.R., learned

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counsel for the respondent No.2, submitted that, the Accountant General’s report dated 20.02.2006 raised audit objections regarding the proposal of the Board and the revised financial implications, stating that an excess payment of Rs.37,00,000/- lakhs had been made to the petitioner due to non-adherence to Board

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instructions. Hence, respondent No.2 seeks to justify

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the impugned order at Annexure–A. It was also argued that under the supplementary Agreements produced at Annexure-C series, the petitioner admitted to a difference in rates and, therefore, the writ petition deserves to be dismissed.

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Sri. Manjunath B., learned Additional

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Government Advocate appearing for the respondentState adopted similar arguments and sought for dismissal of the writ petition.

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Having heard the learned counsel appearing for the parties and on careful examination of the writ papers, it is evident that an agreement was entered into between the petitioner and respondent Nos.1 and 2 for the construction of the Common Head works for the Alamatti Left Bank Canal (Annexure–B). Thereafter, six supplementary agreements were

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entered into for additional works (Annexures–C

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series). It is not in dispute that respondent No.2 issued a completion certificate (Annexure–D) stating that the work was completed on 31.08.2001 and in this regard issued 'No-Due Certificate' (Annexure–E). It is forthcoming that on 01.02.2006, subsequently,

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respondent No.2, by letter dated 01.02.2006, demanded payment of Rs.37,52,000/- from the petitioner, alleging that excess payment had been made. The said demand was quashed by this Court in W.P. No. 2234 of 2006 dated 13.02.2008 (Annexure–

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F), while reserving liberty to the respondent No.2 to take action in accordance with law. Thereafter, respondent No.2 deducted Rs.37,52,000/- from bills related to another project executed by the petitioner, which was again quashed by this Court in W.P. No.40140 of 2008 dated 25.08.2009. The said order was confirmed by the Division Bench in W.A. No.

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10446 of 2009 dated 29.10.2009 (Annexure–G). The order of the Division Bench was further challenged before the Hon’ble Supreme Court in Civil Appeal No.10007 of 2010, which was dismissed on 23.07.2025. Paragraphs 3 to 7 reads as under:

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"3. Based on the Audit Report, the appellants herein recommended recovery of a sum of approximately Rs.37 lakhs, in exercise of Clause 39 of the Agreement entered into between the parties. The Agreement pertains to execution of a works contract and Clause 39 empowers the Government to recover amounts due from the contractor, without prejudice to other remedies. It is also not in dispute that the amount sought to be recovered pertains to an earlier contract, though the recovery was attempted from the works executed under a subsequent agreement awarded to the respondent.

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4. The learned Single Judge, finding such action to be illegal, directed refund of the amount to the writ petitioner.

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5. In an intra-Court appeal, the Division Bench, in our considered view, rightly held that Clause 29 and Clause 36 of the subsequent Agreement would not enable the

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Government to hive off such sums, which admittedly stood barred by limitation. Before us, it is not in dispute that the amount sought to be recovered pertains to works executed under a contract of the year 1994, while the Audit Report is dated 19.11.2004 and recovery was attempted only in the year 2008.

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6. In our considered view, the High Court rightly observed that the appellants herein had “made a feeble attempt to wake up from the slumber” for they slept over the issue for an inordinate period, which delay cannot be attributed to the contractor.

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7. For the aforesaid reasons, the civil appeal is dismissed."

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Perusal of the judgment of the Hon'ble

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Supreme Court makes it clear that, the claim made by the respondent No.2, has reached finality. It is further noted that, on the 3^rd round of litigation, the respondent No.2 again, issued the order dated 09.02.2012, claiming refund of Rs.37,52,000/- which came to be rejected by this court in W.P.No.7493 of 2012 dated 28.07.2014 (Annexure-H).

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In view of the judgment of the Hon’ble Supreme Court in Civil Appeal No. 10007 of 2010 dated 23.07.2025, respondent No.2 is barred from raising any further claim or recovery against the petitioner. At this stage, it is relevant to extract the observation made by the Hon'ble Supreme Court in

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the case of ' National Insurance Company Ltd .', supra, paragraph 25 to 29 reads as under:

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"25. We may next examine some related and incidental issues. Firstly, we may refer to the consequences of discharge of a contract. When a contract has been fully performed, there is a discharge of the contract by performance, and the contract comes to an end. In regard to such a discharged contract, nothing remains — neither any right to seek performance nor any obligation to perform. In short, there cannot be any dispute. Consequently, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract. Whether the contract has been discharged by performance or not is a mixed question of fact and law, and if there is a dispute in regard to that question, that is arbitrable. But there is an exception. Where both the parties to a contract confirm

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in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Similarly, where one of the parties to the contract issues a full and final discharge voucher (or no-dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher/certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim.

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26. When we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be

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acted upon. Consequently, any dispute raised by such party would be arbitrable.

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27. While discharge of contract by performance refers to fulfilment of the contract by performance of all the obligations in terms of the original contract, discharge by “accord and satisfaction” refers to the contract being discharged by reason of performance of certain substituted obligations. The agreement by which the original obligation is discharged is the accord, and the discharge of the substituted obligation is the satisfaction. A contract can be discharged by the same process which created it, that is, by mutual agreement. A contract may be discharged by the parties to the original contract either by entering into a new contract in substitution of the original contract; or by acceptance of performance of modified obligations in lieu of the obligations stipulated in the contract.

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28. The classic definition of the term “accord and satisfaction” given by the Privy Council in Payana Reena Saminathan v. Pana Lana Palaniappa [(1913-14) 41 IA 142] (reiterated in Kishorilal Gupta [AIR 1959 SC 1362 : (1960) 1 SCR 493] ) is as under: (IA pp. 145-46) “… The ‘receipt’ given by the appellants and accepted by the respondent, and acted on by both parties proves conclusively that all the parties agreed to a settlement of all their existing disputes by the arrangement

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formulated in the ‘receipt’. It is a clear example of what used to be well known as common law pleading as ‘accord and satisfaction by a substituted agreement’. No matter what were the respective rights of the parties inter se they are abandoned in consideration of the acceptance by all for a new agreement. The consequence is that when such an accord and satisfaction takes place the prior rights of the parties are extinguished. They have in fact been exchanged for the new rights; and the new agreement becomes a new departure, and the rights of all the parties are fully represented by it.”

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(emphasis supplied)

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29. It is thus clear that the arbitration agreement contained in a contract cannot be invoked to seek reference of any dispute to arbitration, in the following circumstances, when the contract is discharged on account of performance, or accord and satisfaction, or mutual agreement, and the same is reduced to writing (and signed by both the parties or by the party seeking arbitration):

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(a) where the obligations under a contract are fully performed and discharge of the contract by performance is acknowledged by a full and final discharge voucher/receipt, nothing survives in regard to such discharged contract;

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(b) where the parties to the contract, by mutual agreement, accept performance of altered, modified and substituted obligations and confirm in writing the discharge of contract by performance of the altered, modified or substituted obligations;

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(c) where the parties to a contract, by mutual agreement, absolve each other from performance of their respective obligations (either on account of frustration or otherwise) and consequently cancel the agreement and confirm that there are no outstanding claims or disputes."

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Following the declaration of law by the

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Hon’ble Supreme Court and considering the fact that respondent No.2 has issued both the completion certificate (Annexure–D) and 'No-Due Certificate' (Annexure–E), I am of the considered opinion that, the impugned order dated 07.11.2016 (Annexure–A) is erroneous and constitutes a false and unsustainable claim against the petitioner. In the result, I pass the following:

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ORDER

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i) The writ petition is allowed .

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ii) The Government Order dated 07.11.2016 (Annexure–A) passed by respondent No.1 is hereby quashed.

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iii) Respondent Nos.1 and 2 are directed to pay the litigation cost of Rs.25,000/- to the petitioner within four weeks from the date of receipt of a certified copy of this order.

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Sd/(E.S.INDIRESH) JUDGE

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SB

M/S Mycon Constructions Limited v. the Secretary

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M/S Mycon Constructions Limited v. the Secretary

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