Allowed

Thambi Sebastian, v. State of Kerala

Kerala HC22 Oct 2020WP(C)/7303/2020

Case brief

AI extract

What is this about?

This writ petition challenged the issuance of an order imposing a penalty and terminating a PWD contractor agreement. The Court found the termination illegal and arbitrary as it ignored genuine reasons for delay and allowed re-tendering at the same rate, finding no loss to the State. Consequently, the penalty was set aside, and the security deposit was ordered refunded.

What did the court decide?

Petitioner's pending exhibits P10 and P11 were set aside. Respondents directed to refund the petitioner's EMD/Security Deposit within one month.

Thambi Sebastian, Vs State of Kerala — Contract and Commercial Disputes | Kerala HC (2020)

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶2

PRESENT

¶3

THE HONOURABLE MR.JUSTICE N.NAGARESH

¶4

THURSDAY,THE 22ND DAY OF OCTOBER 2020/30TH ASWINA, 1942

¶5

WP(C).No.7303 OF 2020(K)

¶6

PETITIONER:

¶7

THAMBI SEBASTIAN,S/O.T.J.DEVASSY, AGED 46 YEARS, THAZHATHEL HOUSE, IRINGATTIRI P.O., KARUVARAKUNDU, MALAPPURAM DISTRICT, PIN - 679 326.

¶8

BY ADVS. SRI.JACOB SEBASTIAN SRI.K.V.WINSTON SMT.ANU JACOB

¶9

RESPONDENTS:

¶10

1 STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM, PIN -695 001.

¶11

2 THE EXECUTIVE ENGINEER, BUILDINGS DIVISION, PUBLIC WORKS DEPARTMENT, CIVIL STATION, OFFICE OF THE EXECUTIVE ENGINEER, MALAPPURAM DISTRICT, PIN - 676 505.

¶12

3 THE ASSISTANT EXECUTIVE ENGINEER, BUILDINGS DIVISION, PUBLIC WORKS DEPARTMENT, OFFICE OF THE ASSISTANT EXECUTIVE ENGINEER, PERINTHALMANNA, MALAPPURAM DISTRICT, PIN - 679 322.

¶13

4 THE ASSISTANT ENGINEER, PWD BUILDING SECTION, WANDOOR, MALAPPURAM DISTRICT, PIN - 679 328.

¶14

R1-R4 BY GOVERNMENT PLEADER SRI K.V.MANOJ KUMAR

¶15

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22.10.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WPC.7303/2020

: 2 :

J U D G M E N T

~ ~ ~ ~ ~ ~ ~ ~ ~

Dated this the 22^nd day of October, 2020

¶21

The petitioner, who is A Class Contractor with the PWD, is before this Court seeking to quash Exts.P10 and P11 and to declare that imposition of penalty by Ext.P10 on the petitioner and the termination of contract at the risk and cost

¶22

of the petitioner by Ext.P11, is illegal and arbitrary. The petitioner has also sought to return the EMD/Security Deposit submitted by him.

¶23

The petitioner submits that he bid for the work “Construction of the Sub Registrar‘s Office, Melattur in Malappuram District”. The bid of the petitioner was found acceptable and he was selected for the work as per Ext.P1 on 01.03.2017. Agreement for the work was executed on 25.04.2017.

¶24

Though the work site was handed over to the petitioner, the petitioner noticed even before commencing

¶25

WPC.7303/2020

¶26

: 3 :

¶27

construction that considerable amount of ordinary earth will have to be removed from the site. There were objections from the local public also against removal of earth. Even for removal of earth, earth cutting work should be included in the estimate and the estimate should be revised. Furthermore, removal of earth required concurrence of Department of Geology. The petitioner therefore submitted Ext.P3 representation to the 2^nd respondent-Executive Engineer. The 2^nd respondent, however, ignored the petitioner’s request. The petitioner again submitted Ext.P4 representation dated 20.02.2018. The 3^rd respondent-Assistant Executive Engineer, having convinced of the requirements, recommended as per Ext.P5 letter dated 21.02.2018 that the time for completion of the work may be extended up to 31.08.2018.

¶28

The petitioner contends that even without considering Ext.P5 recommendation made by the 3^rd respondent-Assistant Executive Engineer, the petitioner was issued with Ext.P6 show-cause notice dated 23.04.2018 requiring the petitioner to commence construction within a

¶29

WPC.7303/2020

¶30

: 4 :

¶31

week, failing which it was threatened that the contract would be terminated at his risk and cost. The petitioner appeared before the 2^nd respondent and explained that it is not possible to commence construction without removing the earth and to remove the earth, permission from the Department of Geology is required and the estimate also will have to be revised.

¶32

The petitioner submits that the respondents failed to address to the problems faced by the petitioner and instead, re-tendered the work and the work was awarded to another Contractor named Mohammed Akbar, as per Ext.P7 selection notice dated 17.01.2018. The said Mohammed Akbar was awarded the work for exactly the work amount quoted by the petitioner. Therefore, it is evident that the respondents have not suffered any loss due to the re-tendering.

¶33

The petitioner further submits that the said Mohammad Akbar also could not commence the work since there was no provision in the agreement for removal of earth work. The said Mohammed Akbar also submitted Ext.P8

¶34

WPC.7303/2020

¶35

: 5 :

¶36

representation, seeking revision of estimate by including earth cutting work. According to the petitioner, the Department is now in the process of revising the estimate for the work by including charges for earth cutting work also.

¶37

However, to the surprise and predicament of the petitioner, he was served with Ext.P10 order dated 30.01.2020 of the 2^nd respondent imposing a penalty of ₹12,10,170/-. Ext.P10 order refers to Ext.P11 proceedings of the Executive Engineer by which it was ordered to terminate the contract with the petitioner, at the risk and cost of the petitioner.

¶38

The petitioner contends that Exts.P10 and P11 are illegal and arbitrary. The petitioner had pointed out genuine reasons for not commencing the contract work in the absence of necessary permission from the Department of Geology and revision of estimates so as to include earth cutting work. Without adverting to the grievances of the petitioner, the respondents have terminated the contract of the petitioner and re-tendered the work. Even thereafter, the subsequent

¶39

WPC.7303/2020

¶40

: 6 :

¶41

tenderer also required the respondents to revise the estimates so as to include earth cutting work. It is obvious that the work cannot be carried out without revising the estimate by including the earth cutting work and without obtaining the permission of the Department of Geology. The facts being so,

¶42

it is highly illegal and arbitrary to impose penalty on the petitioner.

¶43

The 2^nd respondent filed a statement on behalf of all the respondents. The 2^nd respondent stated that he issued Ext.P6 notice to the petitioner and it was on the petitioner’s failure to commence the work even after the expiry of completion period that the work was terminated. The 2^nd respondent, however, admitted that the new Contractor requested the 2^nd respondent to take steps to revise the estimate by including earth cutting work and that steps have been taken on his request.

¶44

The 2^nd respondent further stated that on termination of the contract, the petitioner was demanded to pay ₹12,10,170/- (30% of contract amount) as per Ext.P10.

¶45

WPC.7303/2020

¶46

: 7 :

¶47

The 2^nd respondent contended that as per Clause 2116.2.1 of the PWD Manual, an amount equal to 30% of the cost of remaining work at the agreed rate shall be recovered from the terminated Contractor and it is not necessary to wait till the work is arranged alternatively to assess the actual loss suffered by the Government. The Contractor, whose agreement is terminated, is liable to pay the 30% amount irrespective of the loss or gain sustained by the Government. Therefore, the writ petition is without any force or merit and it is liable to be dismissed, contended the 2^nd respondent.

¶48

I have heard learned counsel for the petitioner and the learned Government Pleader appearing for respondents 1 to 4.

¶49

It is an admitted position that the petitioner was awarded the work in question for an amount of ₹40,33,890/-. Agreement was executed on 25.04.2017. Before commencement of the work, the petitioner informed the respondents on 23.09.2017 that to commence the work, earth cutting is required for which the estimate has to be revised

¶50

WPC.7303/2020

¶51

: 8 :

¶52

and further it requires permission of the Department of Geology. The requests made by the petitioner as per Exts.P3 and P4 were not responded to. In fact, the 3^rd respondent, finding merits in the requests made by the petitioner, issued Ext.P5 letter dated 21.02.2018 recommending that for completion of the work, time has to be extended. Nevertheless, on 23.04.2018 as per Ext.P6, the petitioner was informed that unless he commences the work within one week, his contract will be terminated at his own risk and cost.

¶53

In his statement, the 2^nd respondent has stated that he has not received Ext.P3 representation of the petitioner which sought to revise the estimate and to get permission of the Geologist. But, Ext.P5 letter dated 21.02.2018 of the Assistant Executive Engineer addressed to the 2^nd respondent would show that the 3^rd respondent was aware of the request, he found the request of the petitioner for extension of time genuine and he recommended to the 2^nd respondent extension of time without imposition of any fine. In Ext.P7 reply also, the petitioner reiterated the request. However, the

¶54

WPC.7303/2020

¶55

: 9 :

¶56

contract with the petitioner was terminated on 24.10.2018, without adverting to the issues pointed out and request made by the petitioner and without referring to the recommendations of the 3^rd respondent-Assistant Executive Engineer. In the circumstances, this Court is inclined to hold that termination of contract at the risk and cost of the petitioner, is grossly arbitrary and illegal.

¶57

The work was re-tendered and was awarded to one Mohammed Akbar. The said Mohammed Akbar accepted the work for ₹40,33,890/- which is the exact amount for which the petitioner was earlier awarded the terminated contract. As the subsequent Contractor also has accepted the work for the very same amount, the respondents cannot be heard to contend that they have suffered monetary loss due to retendering.

¶58

The learned Government Pleader argued that in view of Clause 2116.2.1 of the PWD Manual, on termination of contract on risk and cost, an amount equal to 30% of the cost of remaining work can be recovered from the defaulted

¶59

WPC.7303/2020

¶60

: 10 :

¶61

Contractor towards risk and cost. The argument is not acceptable, primarily because I have found that the very termination of the contract is illegal.

¶62

Even otherwise the question of risk and cost would arise only when there is at least some likelihood of Government incurring monetary loss due to termination of contract. In this case, the person who has accepted the re-tender has undertaken the work for the same amount quoted by the petitioner. In such circumstances, there cannot be any possible loss to the Government due to termination of contract with the petitioner and consequential re-tender.

¶63

For the afore reasons, the writ petition is allowed. Exts.P10 and P11 are set aside. The respondents are directed to refund the EMD/Security Deposit made by the petitioner within a period of one month.

¶64

Sd/- N. NAGARESH, JUDGE

aks/30.10.2020

WPC.7303/2020

: 11 :

APPENDIX

PETITIONER'S EXHIBITS:

¶70

EXHIBIT P1	A TRUE COPY OF THE SELECTION NOTICE DATE 1 MARCH 2017 ISSUED BY THE SECOND RESPONDENT.
EXHIBIT P2	A TRUE COPY OF THE AGREEMENT DATED APRIL 25, 2017 ALONG WITH THE SCHEDULE.
EXHIBIT P3	A TRUE COPY OF THE REPRESENTATION DATED SEPTEMBER 23, 2017 SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT.
EXHIBIT P4	A TRUE COPY OF THE REPRESENTATION DATED
	FEBRUARY 20, 2018 SUBMITTED BY THE PETITIONER.
EXHIBIT P5	A TRUE COPY OF THE LETTER DATED FEBRUARY 21, 2018 ISSUED BY THE THIRD RESPONDENT.
EXHIBIT P6	A TRUE COPY OF THE LETTER DATED APRIL 23, 2018 ISSUED BY THE SECOND RESPONDENT.
EXHIBIT P7	A TRUE COPY OF THE SELECTION NOTICE DATED JANUARY 17,2018 ISSUED BY THE SECOND RESPONDENT IN THE NAME OF MOHAMMED AKBAR.
EXHIBIT P8	A TRUE COPY OF THE REPRESENTATION DATED DECEMBER 6, 2019 SUBMITTED BY MOHAMMED AKBAR.
EXHIBIT P9	A TRUE COPY OF THE MEASUREMENTS TAKEN BY THE FOURTH RESPONDENT RELATING TO EARTH CUTTING.
EXHIBIT P10	A TRUE COPY OF THE ORDER DATED JANUARY 30, 2020 ISSUED BY THE SECOND RESPONDENT.
EXHIBIT P11	A TRUE COPY OF THE ORDER DATED OCTOBER 24, 2018 ISSUED BY THE SECOND RESPONDENT.
EXHIBIT P12	A TRUE COPY OF THE NOTICE DATED 8 SEPTEMBER 2020 ISSUED BY THE SECOND RESPONDENT

Thambi Sebastian, v. State of Kerala

Case brief

What is this about?

What did the court decide?

Thambi Sebastian, v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Parties & counsel

Coram

Case details

Similar cases

Nelsy @ Nelsy Robin Vs Registrar of Marriages

V.N.Public Health and Educational Trust Vs State of Kerala

V.N.Public Health and Education Trust Vs State of Kerala

Jain Builders Vs Union of India

Rekha Nair, Vs the District Telecom Committee

Dr.Mahesh P.G., Vs the Commissioner for Entrance Examinations