Allowed

H.Dileep Kumar v. the Secretary of Industry Department

Kerala HC26 Nov 2020WP(C)/13419/2013

Case brief

AI extract

What is this about?

Petitioner, a contractor, approached the Court for payment of a final bill for street lighting works executed for Kerala Government entities. The respondents delayed payment citing variations and lack of approval. The Court found the work completed and material substitution approved, directing payment of the balance amount.

What did the court decide?

Respondents directed to process the final bill within four weeks and pay the balance amount within a further four weeks.

H.Dileep Kumar Vs the Secretary of Industry… — Contract and Commercial Disputes | Kerala HC (2020)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE N.NAGARESH

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THURSDAY, THE 26TH DAY OF NOVEMBER 2020/5TH AGRAHAYANA, 1942

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WP(C).No.13419 OF 2013(B)

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PETITIONER:

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H.DILEEP KUMAR, AGED 46 YEARS, S/O. K. HARIDASAN NAIR, PROPRIETOR, HI-ELECT ENTERPRISES, TC 42/1305(1), ANRA 111, ASAN NAGAR, VALLAKKADAVU.P.O., THIRUVANANTHAPURAM-695008.

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BY ADVS. SRI.K.RAMAKUMAR (SR.) SRI.K.R.SUNIL

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RESPONDENTS:

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1 THE SECRETARY, INDUSTRIES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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2 THE PROJECT MANAGER, PROJECT IMPLEMENTATION UNIT, KERALA SUSTAINABLE URBAN DEVELOPMENT PROJECT CORPORATION OF KOLLAM, KOLLAM-10.

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3 THE MANAGER DIRECTOR, UNITED ELECTRICAL INDUSTRIES LTD., A KERALA GOVERNMENT CO. PALLIMUKKU, KOLLAM-10.

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WPC No.13419/2013

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ADDL. 4 PRINCIPAL SECRETARY, LOCAL SELF GOVERNMENT DEPARTMENT, STATE OF KERALA, 4TH FLOOR, SECRETARIAT ANNEX, ROOM NO.403, SECRETARIATE, THIRUVANANTHAPURAM-695 001

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IS IMPLEADED AS ADDITIONAL R4 AS PER ORDER DATED 02-11-2020 IN IA 1/2020

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R1, R3 BY ADV. SRI.K.SUBASH CHANDRA BOSE R2 BY ADV. SRI.M.K.CHANDRA MOHAN DAS, SC, KOLLAM MPT R3 BY ADV. SRI.THOUFEEK AHAMED R1 BY GOVERNMENT PLEADER SMT. RESHMI K.M

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-11-2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WPC No.13419/2013

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N. NAGARESH, J.

W.P.(C) No.13419 of 2013

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Dated this the 26^th day of November, 2020

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J U D G M E N T

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~ ~ ~ ~ ~ ~ ~ ~ ~

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This writ petition of the year 2013, has been filed

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by the Proprietor of High-Elect Enterprises, Thiruvananthapuram seeking to compel respondents 1, 2 and 3 to release the balance amount shown in Ext.P4 to the petitioner forthwith.

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The case of the petitioner in short, is as follows:The petitioner is an electrical contractor. The 3^rd

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respondent is a company under the Kerala Government. On 01.10.2009, the 3^rd respondent issued a work order to the petitioner for supply and execution of street lights under the project implementation scheme of the 3^rd respondent,

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for road upgradation and junction improvement for Kollam, Kappalandimukku-Muneeswaram Temple Road. The project was implemented by the 2^nd respondent-Project Manager, Kerala Sustainable Urban Development Project, Corporation of Kollam, through the 3^rd respondent.

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The 3^rd respondent entrusted the said work to the petitioner as per Ext.P1 sub-contract dated 01.10.2009 and the Articles of Agreement was executed by the 3^rd respondent as per Ext.P2 on 07.10.2009. The drawings submitted by the petitioner were approved by the 2^nd and 3^rd respondents on 26.06.2012. The petitioner completed the work and the 3^rd respondent issued Ext.P3 completion certificate certifying that actual date of completion of work is 31.12.2011. The 3^rd respondent further certified that no material deviations from the sanctioned plans and specification other than those sanctioned by the competent authority, are effected by the petitioner.

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The petitioner on receipt of Ext.P3, submitted Ext.P4 final bill dated 02.07.2012 for ₹52,32,312.63.

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Though the 2^nd respondent acknowledged the receipt of Ext.P4, the amount was not disbursed. The petitioner thereafter submitted Exts.P5 to 7 representations and reminders, which were not heeded to. Hence, the petitioner is before this Court.

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The 3^rd respondent contested the writ petition and filed counter affidavits. The 3^rd respondent stated that the writ petition is not maintainable. All disputes have to be redressed in Kollam. The 3^rd respondent pointed out that as per Clause 14 of Ext.P2 agreement, the 3^rd respondent has been passing on the amount that is received from the 2^nd respondent to the petitioner. The payment of the contract amount to the writ petitioner is contingent upon the amount received from the 2^nd respondent.

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According to the 3^rd respondent, the entire problem in delayed payment is invited by the petitioner due to the variation in substituting the stipulated MS painted polls as per specifications, with Galvanised Octagonal Poles, though Octagonal Poles are more durable and safe.

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The 3^rd respondent further submitted that the petitioner quoted higher rates for certain items in excess of the rates quoted by the 3^rd respondent.

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The writ petitioner decided to use Galvanised Octagonal Poles made out of galvanised iron instead of MS tubular type. This variation has not been approved by the 2^nd respondent. The 3^rd respondent has issued the completion certificate in consequence to the completion certificate issued by the 2^nd respondent. However, the 2^nd respondent has not yet approved the bill for variations and additions and extras.

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On 24.03.2014, this Court passed an interim order directing the 2^nd respondent to forthwith pay to the 3^rd respondent the amount claimed in the final bill submitted by the 3^rd respondent expeditiously.

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The 3^rd respondent filed an additional counter affidavit dated 20.07.2016 wherein it has been stated that the writ petitioner has no right to claim amount of ₹52,32,312.63. The petitioner is eligible for only an amount

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of ₹7,19,628/-. The company issued a request to the 2^nd respondent to settle the final bill of the company for enabling the company to settle the amount to the sub contractor in order to comply with the interim direction of this Court. The 2^nd respondent issued Ext.R3(e) letter wherein it was stated that the 3^rd respondent is entitled for only an amount of ₹7,19,628/-.

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The 2^nd respondent filed a one page statement in the writ petition. The 2^nd respondent took a technical approach and stated that neither the 2^nd respondent nor Kollam Corporation are parties to Ext.P2 agreement and therefore the petitioner has no locus standi to raise any claim against the 2^nd respondent.

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Heard learned counsel for the petitioner, learned Government Pleader appearing for the 1^st respondent, learned Standing Counsel appearing for the 2^nd respondent and the learned counsel appearing for the 3^rd respondent.

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The basic facts in the writ petition are not in

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dispute, though the exact amount payable by the 2^nd

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respondent is disputed. The 3^rd respondent-Company is a Government of Kerala undertaking. The 3^rd respondent undertook the work of 2^nd respondent- Kerala Sustainable Urban Development Project of Kollam Corporation, the work being Street Lighting-Kollam. It was a project implemented with the assistance of Asian Development Bank. As the 3^rd respondent had no expertise in doing the work, the 3^rd respondent entered into Ext.R3(a) agreement with the petitioner.

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The petitioner carried out the work. But, while carrying out the work, the petitioner used Galvanised Octagonal Poles instead of the original specification of MS painted poles. It is not in dispute that the Galvanised Octagonal Poles used and installed by the petitioner is costlier and more durable. However, variation permit was necessary as there was change in specifications.

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Ext.P1 is the purchase order issued by the 3^rd respondent to the petitioner for ₹1,11,52,500/-. Ext.P2 is the Articles of Agreement between the 3^rd respondent and

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the petitioner. Payment Terms for the Supply and Installation as per Ext.P2, are as follows:-

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“ On progress of supply : 75% of the payment from KSUDP on the basis of supply value assessed by Engineer-in-charge shall be passed on to the HiElect Enterprises.

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On Progress of erection : 75% of the amount for the completed work, less initial payment till date shall be paid on final completion of the entire suppliers and installation work under contract, for which payments are claimed.

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On taking over : 100% of the contract amount, less amount already paid and security deposits due, and retention money if any, shall be paid on completion of testing, trail run and satisfactory commissioning of the installation and issued of the final completion certificate and on acceptance of the same by UNITED ELECTRICAL INDUSTRIES LTD, after obtaining the clearance from the Electrical Inspectorate.

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Refund of Security : 10% of the payment from first payment to each payment upto a maximum 10% of the contract amount is kept as retention money. The retention money can be refunded on the basis of Bank Guarantee issued by a Nationalized Bank infavour of United Electrical Industries Ltd., which is valid for period of one year form the date of execution of Bank Guarantee.”

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One Objection now raised by the 3^rd respondent

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in these proceedings is that the petitioner has substituted MS Painted Poles with Galvanized Octagonal Poles without

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approval for variation.

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The 3^rd respondent, as per Ext.P3, has certified that the work mentioned was completed on 31.12.2011 and handed over on 30.06.2012. The 3^rd respondent has further certified that there have been no material deviations from the sanctioned plans and specifications other than those sanctioned by the competent authority.

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In view of Ext.P3 Completion Certificate issued by the 3^rd respondent and Ext.R3(b) Completion Certificate issued by the 2^nd respondent, it is evident that respondents 2 and 3 were satisfied that the work has been completed satisfactorily, the site with completed work was handed over by the petitioner and there was no material deviation.

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The 2^nd respondent-KSUDP has issued Ext.R3(b) certifying that the work mentioned was completed on 31.12.2011 and handed over on 30.06.2012 and further that there have been no material deviations from the sanctioned plans and specifications other than those sanctioned by the competent authority. The 3^rd

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respondent has stated in its counter affidavit dated 23.09.2013 that Galvanized Octagonal Poles are claimed as more durable and safe. The 2^nd respondent has not disputed this fact. The petitioner is not claiming any higher amount for the better and costlier Poles used. Therefore, going through Exts.P3 and R3(b), the only conclusion possible is that substitution of poles by using better material is with the sanction of respondents 2 and 3. If variation order in this regard is to be passed, it has to be passed by the 2^nd respondent, taking into account the fact that better material has been used and if the deviation, if any, is made, it is with the sanction of the competent authority, as certified in Exts.P3 and R3(b). The petitioner is therefore entitled to receive the balance amount as per the contract.

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Ext.P4 would show that the petitioner has received only ₹60,42,998/- towards the contractual amount. Therefore, the contract amount being ₹1,11,52,500/- as is evident from Ext.P1, the petitioner has yet to be paid the

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WPC No.13419/2013

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balance amount which will be more than ₹51 lakhs.

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As regards the amount payable to the petitioner, Ext.P1 of the 3^rd respondent would show that the total purchase value is 1,11,52,500/-. The petitioner has admitted receipt of 60,42,998/- in Ext.P4. Going by Exts.P1 and P4, the balance payable would be 51,09,502/-, subject to statutory deductions, if any. However, by Ext.R3(e), the 3<sup>rd</sup> respondent has taken a stand that the balance due is 4,14,430/- only.

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Ext.P8 of the 3^rd respondent would indicate that the amount payable to the petitioner is 67,80,387/-. This amount outstanding must necessarily be as on 27.05.2014, the date of Ext.P8. In Ext.P8, the 3<sup>rd</sup> respondent again deducted 59,65,252/- from the outstanding of 67,80,387/-, stating that 59,65,252/- is already paid to the petitioner. The outstanding of 63,79,682/- being after adjusting the amounts already paid to the petitioner, the further deduction of 59,65,252/- therefrom can only be an

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arithmetical mistake. The balance payable to the petitioner, indeed is much higher than `4,14,430/-.

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Another reason for not settling the Bill of the petitioner, advanced by the 3^rd respondent, is that in the invoice submitted by KSUDP, the total value of work executed by the Company is shown as ₹94,07,794/-. This is for the reason that the KSUDP has not approved the Bill for extra items. In fact, the Team leader of KSUDP as per Ext.P11 has required the 2^nd respondent for approval for the substituted street poles and extra items. The 2^nd respondent is bound to consider whether the extra items were necessary for the work and whether actually used by the contractor and take an informed decision. The 2^nd respondent may accept or refuse payment for extra items, but it should be for reasons recorded. Without considering these aspects, the 2^nd respondent just cannot sit on the bills and say that those are not approved.

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In the afore circumstances, respondents 2 and 3

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are directed to process the Final Bill of the petitioner in the

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light of the observations made hereinabove, within a period

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of four weeks and pay the balance amount to the petitioner

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within a further period of four weeks.

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The writ petition is disposed of with the above

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directions.

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Sd/-

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N. NAGARESH, JUDGE

aks/23.11.2020

WPC No.13419/2013

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APPENDIX

PETITIONER'S EXHIBITS:

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EXHIBIT P1	TRUE COPY 1.10.2009	OF THE WORK ORDER	DATED
EXHIBIT P2	TRUE COP AGREEMENT	Y OF THE ARTICLE DATED 7-10-2009.	S OF
EXHIBIT P3	TRUE COP CERTIFICAT BY THE 3RD	Y OF THE COMP E DATED 30-6-2012 RESPONDENT.	LETION ISSUED
EXHIBIT P4	TRUE COPY 7-12 SUBM BEFORE THE	OF THE FINAL BILL DA ITTED BY THE PETI 2ND RESPONDENT.	TED 2- TIONER
EXHIBIT P5	TRUE COPY 5.3.13.	OF THE LETTER	DATED
EXHIBIT P6	TRUE COPY 15.3.13.	OF THE LETTER	DATED
EXHIBIT P7	TRUE COPY 29.4.13.	OF THE LETTER	DATED
EXHIBIT P8	THE TRUE	COPY OF THE LETTER	DATED
	27.5.2014 RESPONDENT	ISSUED BY THE .	3RD
EXHIBIT P9	THE TRUE	COPY OF THE LETTER	DATED
	18.2.2010 RESPONDENT	ISSUED BY THE UNEQUIVOCALLY AC	2ND CEPTED
	THE VARIA	TIONS WITH THE REPO	RT OF
	THE CO ENGINEER.	NSTRUCTION SUPER	VISION
EXHIBIT P10	THE TRUE	COPY OF THE LETTER	DATED
	26.3.2010	ISSUED BY THE	2ND
	RESPONDENT	UNEQUIVOCALLY AC	CEPTED
	THE VARIA	TIONS WITH THE REPO	RT OF
	THE CO ENGINEER.	NSTRUCTION SUPER	VISION

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EXHIBIT P11	THE	TRUE	COPY	OF	THE	LETTER	DATED
	18.	5.2010	ISS	UED	BY	THE	2ND
	RES	PONDENT	UN	EQUI	VOCAL	LY AC	CEPTED
	THE	VARIA	TIONS	WI	TH T	HE REPO	RT OF
	THE ENG	C INEER.	ONSTRU	CTI	ON	SUPER	VISION
EXHIBIT P12	THE	TRUE	COPY	OF	THE	LETTER	DATED
	4.6	.2010	ISSU	ED	BY	THE	2ND
	RES	PONDENT	UN	EQUI	VOCAL	LY AC	CEPTED
	THE	VARIA	TIONS	WI	TH T	HE REPO	RT OF
	THE ENG	C INEER.	ONSTRU	CTI	ON	SUPER	VISION
EXHIBIT P13	THE 25.	TRUE 4.2014.	COPY	OF	THE	CHEQUE	DATED

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RESPONDENTS' EXHIBITS:

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EXHIBIT R3(A)	TRUE COPY	OF T	HE AGREEMENT	DATED
	18.4.2009 AND 3RD RES	BETWEE PONDEN	N WRIT PET T.	ITIONER
EXHIBIT R3(B)	TRUE COPY	COMP	LETION CERT	IFICATE
	WITH DET	AILED	REPORT A	S ON
	30.06.2012 THE 3RD RES	ISSUE PONDEN	D BY THE KS T.	UDP TO
EXHIBIT R3(C)	TRUE COPY	OF	THE LETTER	DATED
	25.04.2014 PETITIONER.	ISSU	ED TO THE	WRIT
EXHIBIT R3(D)	TRUE COPY No.62/2014 FROM THE O	OF TH DATED FFICE	E SHOW CAUSE 15-05-2014 R OF THE COMMI	NOTICE ECEIVED SSIONER
	OF CENTRA SERVICE TAX	L EX .	CISE, CUSTOM	S AND
EXHIBIT R3(E)	TRUE COPY	OF	THE LETTER	DATED
	22.4.2014,	INVOIC	E AND THE CO	RRECTED
	C.C.III AN THE KSUDP.	D FINA	L BILL RETUR	NED BY
EXHIBIT R3(F)	TRUE COPY	OF	THE LETTER	DATED
	27.5.2014,	WITH	THE STATEME	NT OF
	ACCOUNTS PETITIONER.	SENT	TO THE	WRIT

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EXHIBIT R3(G)	TRUE COPY OF ISSUED THROUGH WRIT PETITIONER	THE CONTEMPT NOTICE THE COUNSEL OF THE .
EXHIBIT R3(H)	TRUE COPY OF T	HE REPLY NOTICE DATED
	10.07.2014 TO ISSUED THROUGH 3RD RESPONDENT	THE CONTEMPT NOTICE THE COUNSEL OF THE COMPANY.
EXHIBIT R3(I)	TRUE COPY O	F THE JUDGMENT IN
	CONTEMPT CASE 7.8.2014.	NO.1060 OF 2014 DATED

H.Dileep Kumar v. the Secretary of Industry Department

Case brief

What is this about?

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H.Dileep Kumar v. the Secretary of Industry Department

Case brief

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