Partly allowed

T.K. Kesavan v. Kerala Police Housing Construction Corporation Limited

Kerala HC5 Feb 2021WP(C)/8786/2014

Case brief

AI extract

What is this about?

In a writ petition under Article 226, the Kerala HC directed the State Corporation to reconsider the quantum of a substantial penalty imposed on a contractor for construction delays, granting an opportunity of hearing, as the original calculation was mechanical and disproportionate to circumstances. Quality: thin.

What did the court decide?

Directed the second respondent to reconsider the quantum of fine/compensation within three months, granting petitioner a hearing.

T.K. Kesavan Vs Kerala Police Housing… — Contract and Commercial Disputes | Kerala HC (2021)

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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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FRIDAY, THE 05TH DAY OF FEBRUARY 2021/16TH MAGHA,1942

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WP(C).No.8786 OF 2014

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PETITIONER:

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T.K. KESAVAN, THALIYARA HOUSE, P.O.NIRAMARUDUR, TIRUR, MALAPPURAM DISTRICT-676 109.

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BY ADV. SRI.O.D.SIVADAS

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RESPONDENTS:

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1 KERALA POLICE HOUSING AND CONSTRUCTION CORPORATION LIMITED, CHANDRASEKHARAN NAIR STADIUM, VIKAS BHAVAN P.O., THIRUVANANTHAPURAM-695 033, REPRESENTED BY ITS MANAGING DIRECTOR.

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2 THE CHAIRMAN-CUM-MANAGING DIRECTOR, KERALA POLICE HOUSING AND CONSTRUCTION CORPORATION LIMITED, CHANDRASEKHARAN NAIR STADIUM, VIKAS BHAVAN P.O., THIRUVANANTHAPURAM-695 033.

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3 THE SENIOR PROJECT ENGINEER, KERALA POLICE HOUSING AND CONSTRUCTION CORPORATION LIMITED, CHANDRASEKHARAN NAIR STADIUM, VIKAS BHAVAN P.O., THIRUVANANTHAPURAM-695 033.

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BY ADV. SRI.C.K.GOVINDAN, SC BY ADV. SRI.V.J.JOSEPH, SC

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05.02.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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J U D G M E N T

~ ~ ~ ~ ~ ~ ~ ~ ~

Dated this the 5^th day of February, 2021

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The petitioner, a Building Contractor, has filed this

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writ petition seeking the following reliefs:-

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“i) Call for the records leading to the proceeding and quash Ext.P5 by issuing a writ of certiorari.

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ii) Issue a writ of mandamus or any other appropriate writ, order or direction to the respondents to release the security deposit of one lakh rupees without any further delay.

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iii) Declare that Ext.P5 order issued 2^nd respondent imposing penalty for the delay in completing the work is illegal, arbitrary and without any authority.”

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2. The work of construction of Lower Subordinate

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Quarters, Pandikkad, Malappuram was awarded by the respondents to the petitioner as per Ext.P1 dated 09.01.2006.

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An Agreement was executed on 11.07.2006. The agreed

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contract amount was ₹65,13,600/-. The work site was handed over to the petitioner on 14.08.2006. The work was agreed to be completed within nine months.

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The petitioner would submit that the original plan was to construct two buildings with two floors each. However, there was shortage of space to construct two buildings. The respondents therefore required the petitioner to execute the work as a primary structure with four floors, pending revision of estimates. The change from the original plan caused considerable delay, contended the petitioner.

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When the site was handed over, it was noted that a Three-Phase Electric Line was passing very close by the proposed building, endangering the life of the workers. The Project Engineer insisted that work can be started only after shifting the electric line. The electric line was shifted only in March, 2007.

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The supply of laterite in the area was short and the petitioner was forced to stop the works for weeks together. The petitioner had to bring laterite from quarries situated

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40 Km. away from the work site. Furthermore, there was acute water scarcity in the area which forced the petitioner to stop work frequently. Machine cut first quality bricks were also not readily available. On account of the afore facts, there occurred a delay of 14 months in completing the work.

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The work was completed on 24.03.2010 and the completion report was submitted by the Project Officer. Taking into account the aforesaid facts and circumstances, the final bill of the petitioner was settled and disbursed to the petitioner on 28.04.2010. However, the security deposit of ₹1,00,000/- was retained for the defect liability period. The respondents did not release the security deposit in spite of Ext.P2 request made by the petitioner.

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Surprisingly, the 2^nd respondent issued Ext.P3 show-cause notice dated 25.06.2012 to the petitioner proposing to impose a penalty of ₹32,17,622/- on account of the delay in completion of work. The petitioner submitted Ext.P4 objection dated 23.07.2012. However, the 2^nd respondent issued Ext.P5 proceedings dated 12.11.2013

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imposing a penalty of ₹18,57,351/- for the delay in execution of work. The petitioner challenges Ext.P5.

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According to the petitioner, the delay occurred in completion of the work is due to the fact that there was initially a change of plan. Three-phase electric lines were to be shifted by the KSEB before starting the construction work. There was acute nonavailability of bricks which are extremely necessary for the construction. The petitioner had to bring laterite from far away quarries. And the scarcity of water also hampered the work intermittently. The respondents were aware of all these facts. There is no complaint against the work of the petitioner. The respondents have settled the final bill of the petitioner. In the circumstances, imposing such a heavy penalty is highly arbitrary, illegal and unsustainable, contended the counsel for the petitioner.

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The Standing Counsel pointed out that the total delay on the part of the petitioner in completing the work is 1130 days. The respondents condoned delay of 857 days. However, there was no reason to condone the balance 273

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days delay. The compensation for delay was calculated on the basis of Clause 2 of the Causes of Contract contained in the tender document. Therefore, the respondents are perfectly justified in quantifying and demanding the amount as per Ext.P5.

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I have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondents.

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It is an admitted fact that the respondents directed the petitioner to change the agreed plan for constructing the building with two floors into one building with four floors. It is also not disputed that a three-phase electrical line was passing by the proposed building, making it unsafe to start construction of the building without shifting the electric line by the KSEB. Such shifting of the KSEB line also took considerable time. The petitioner would submit that there was shortage of machine cut bricks, lack of laterite and scarcity of water, without which any construction work cannot be proceeded smoothly.

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It is to be noted that the total consideration for the agreed work was ₹65,13,600/- and the petitioner satisfactorily completed the work, though there was a delay. The bills of the petitioner were also settled. Apparently there was no complaint as regards the work of the petitioner. Still, an amount of ₹18,57,351/- has been imposed on the petitioner towards compensation for delayed work. The said amount is a substantial part of the total amount, more than 28%. Though there may be a provision in the tender documents for claiming compensation at specified rates, the respondents are bound to consider the totality of the circumstances and levy or demand just compensation.

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If the petitioner has shown sufficient reasons for the delay, imposition of fine or demand for compensation cannot be mechanical. However, this Court is disabled from examining the adequacy or proportionality of the fine/compensation claimed due to non-availability of sufficient data. In the said circumstances, this Court deem it appropriate to direct the 2^nd respondent to reconsider the

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quantum of penalty imposed on the petitioner, taking into account the entire circumstances which caused delay.

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Accordingly, the writ petition is disposed of directing

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the 2^nd respondent to reconsider the quantum of fine/compensation imposed on the petitioner, untrammelled by any observations contained in Ext.P5 proceedings, within a period of three months. The petitioner shall be granted an opportunity of hearing before passing the final order.

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Sd/- N. NAGARESH, JUDGE

aks/08.02.2021

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APPENDIX

PETITIONER'S EXHIBITS:

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EXHIBIT P1 TRUE COPY OF THE LETTER DTD.9.1.2006. EXHIBIT P2 TRUE COPY OF THE REQUEST SUBMITTED BY THE PETITIONER DTD.23.6.2012. EXHIBIT P3 TRUE COPY OF THE PROCEEDINGS DTD.25.6.2012. EXHIBIT P4 TRUE COPY OF THE REPLY SUBMITTED BY THE PETITIONER DTD.23.7.2012. EXHIBIT P5 TRUE COPY OF THE PROCEEDINGS DTD.12.11.2013 OF THE 2ND RESPONDENT.

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T.K. Kesavan v. Kerala Police Housing Construction Corporation Limited

Case brief

What is this about?

What did the court decide?

T.K. Kesavan v. Kerala Police Housing Construction Corporation Limited

Case brief

What is this about?

What did the court decide?

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T.K.Kesavan Vs Kerala Police Housing Construction Corporation Limited