Partly allowed

Roopam Engineers and Contractors Private Limited v. Indian Space Research Organization (Isro)

Kerala HC9 Dec 2022WP(C)/17515/2022

Case brief

AI extract

What is this about?

The High Court directed the respondent to reconsider the petitioner's claim for price escalation compensation under Clause 10C(ii) of a construction contract. The court held that arbitrary extension of bid validity and subsequent suspension prevented the 12-month completion norm from being applied to deny compensation for material cost hikes.

What did the court decide?

Ext. P17 and P19 set aside; 2nd respondent directed to reconsider representations and award compensation for escalation after adhering to judgment observations.

Roopam Engineers and Contractors Private… — Contract and Commercial Disputes | Kerala HC (2022)

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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 V.G.ARUN

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FRIDAY, THE 9^TH DAY OF DECEMBER 2022 / 18TH AGRAHAYANA, 1944

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WP(C) NO. 17515 OF 2022

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PETITIONER:

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M/S.ROOPAM ENGINEERS AND CONTRACTORS PRIVATE LIMITED VIII/129, PAREKKATTIL BUILDING COCHIN BANK JUNCTION, NAD ROAD ASHOKAPURAM, ALUVA, ERNAKULAM REPRESENTED BY ITS MANAGING DIRECTOR V.S. MYTHEEN, PIN - 683101 BY ADVS. C.HARIKUMAR SANDRA SUNNY ARUN KUMAR M.A P.K.SURESH KUMAR (SR.)

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RESPONDENTS:

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1 INDIAN SPACE RESEARCH ORGANIZATION (ISRO) DEPARTMENT OF SPACE, GOVERNMENT OF INDIA LIQUID PROPULSION SYSTEMS CENTRE VALIAMALA P.O., THIRUVANANTHAPURAM REPRESENTED BY ITS CHAIRMAN, PIN - 695547 2 SECTION HEAD, MAJOR CIVIL WORKS CONSTRUCTION AND MAINTENANCE GROUP (CMG) LIQUID PROPULSION SYSTEMS CENTRE (LPSC) ISRO, DEPARTMENT OF SPACE GOVERNMENT OF INDIA, VALIAMALA P.O. THIRUVANANTHAPURAM, PIN - 695547

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3 GROUP HEAD CONSTRUCTION AND MAINTENANCE GROUP (CMG) LIQUID PROPULSION SYSTEMS CENTRE (LPSC) ISRO, DEPARTMENT OF SPACE GOVERNMENT OF INDIA, VALIAMALA P.O. THIRUVANANTHAPURAM, PIN - 695547

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4 UNION OF INDIA, REPRESENTED BY ITS SECRETARY DEPARTMENT OF SPACE, 3RD FLOOR, LOKNAYAK BHAWAN NEW DELHI, PIN – 110003.

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W.P.(C).17515/2022

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BY ADV R.MURALEEKRISHNAN (MALAKKARA)

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OTHER PRESENT:

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DSGI S.MANU

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02.12.2022, THE COURT ON 09.12.2022 DELIVERED THE FOLLOWING:

W.P.(C).17515/2022

JUDGMENT

Dated this the 9^th day of December, 2022

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The petitioner responded to the notice inviting e-tender for the work titled 'MECHANICAL TESTING RESEARCH LABORATORY FOR PROPULSION SYSTEM AT LPSC, VALIAMALA' published by the 1^st respondent. Although 06.06.2019 was fixed as the the due date for opening of tenders, the tenders were opened only on 05.11.2019. The petitioner's quote of Rs.8,31,18,768/- against the estimated cost of Rs.8,94,18,054/- being the lowest, the contract was awarded to the petitioner. The bid validity period was fixed as 120 days from the due date of receipt of tender having expired even before opening of the bids, Ext.P3 letter was sent to the petitioner, requesting to extend the validity of the tender upto 13.12.2019. This was followed by Exts. P4, P5 and P6 request for further extension of the validity period. Thus the bid validity period was extended upto 31.03.2020. In the

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meanwhile, selection notice was issued on 16.03.2020 and

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the agreement was executed on 19.03.2020. By that time, Covid-19 pandemic had reached its peak and national lockdown was imposed. The 2^nd respondent therefore issued Ext.P10 instruction on 21.03.2020 directing all contractors to stop construction activities from 23.03.2020 onwards, as a preventive measure to avoid community spread of the corona virus. By that time, the petitioner arranged men and machinery at the site. By Ext P11 dated 23.06.2020, the petitioner was requested to submit willingness to execute the work at a later date. Thereupon, the petitioner addressed Ext.P12 letter to the 2^nd respondent on 14.12.2020 requesting early sanction for commencement of the work. To the petitioner's dismay it was served with Ext. P13 notice dated 21.12.2020, once again requesting to postpone execution of the work. Finally, by Ext.P14 communication dated 10.03.2021, the petitioner was directed to resume construction activities. Immediately on receipt of Ext. P14, the petitioner submitted Ext. P15 representation pointing out

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that, as the cost of construction materials and labour had undergone steep hike during the period of suspension of the work, the 2^nd respondent should do the needful to compensate the petitioner for the price variation of steel and cement. The request was rejected by Ext. P17 stating that, as per Clause 10C(ii) of the Contract agreement, no compensation for escalation in price/labour is payable for works for which the stipulated period of completion is equal to or less than 12 months. Further, as per Clause 15, no claim, other than extension of time for completion for the period during which the work was suspended, is admissible. The petitioner made one more attempt at compensation as per Ext.P18, that request also having been rejected as per Ext.P19, this writ petition is filed seeking the following reliefs;

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i. issue a writ of certiorari or other appropriate writ, order or direction quashing Ext.P17 and P19 orders rejecting the petitioner's request for price escalation'

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ii. declare that the petitioner is eligible for the benefit of Clause 10C(ii) of the General Conditions of Contract and is entitled to be compensated for the escalation in the prices of materials;

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iii. issue a writ of mandamus or other appropriate writ, order or direction directing the respondents to consider Ext. P15 and P16 requests of the petitioner and award appropriate escalation costs by invoking Clause 10 C(ii) of the General Conditions of Contract.

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Senior Advocate P. K. Suresh Kumar, appearing for the petitioner as instructed by Adv. C. Harikumar, put forth the following contentions challenging the rejection of petitioner's claim;

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As per the tender notification dated 07.05.2019 the period fixed for completion of the work was 12 months, the last date for receipt of tenders was 06.06.2019 and the date for opening of tenders was also fixed as 06.06.2019. But the bids were finally opened only on 05.11.2019, five months from the original date. The validity period of the bids was 120 days from the due date of receipt of tender. That period expired by 06.10.2019 and was extended upto 31.03.2020. The work was awarded on 16.03.2020 and the agreement was executed on 19.03.2020. In the meanwhile, the petitioner had brought men, materials and machineries to the site and had actually

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commenced the work. Within two days the petitioner was served with Ext.P10 communication directing to stop the construction work from 23.03.2020 onwards. Thereafter, the work stood suspended till the issuance of Ext.P14 communication dated 10.03.2021. As a result, 18 months was lost before the work could be commenced in earnest. The cost of materials, labour and ancillary charges had increased manifold during this interregnum. In such circumstances, it is unjust and unethical for the respondents to deny compensation for the enhanced price of materials. Clause 10C(ii) of the agreement has no application, since the time limit of 12 months stood violated even before the work could commence. Clause 10C(ii) would apply only to cases where suspension of work is only for a short duration.

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Adv. Muraleekrishnan. R (Malakkara), learned Central Government Standing Counsel, questioned the maintainability of the writ petition, contending that contractual disputes cannot be resolved in a writ petition. Further, the petitioner has an efficacious remedy of arbitration under Clause 25 of the

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agreement. On merits it is contended that Clause 10C(ii) specifically excludes compensation for works for which the period of completion is less than 12 (twelve) months. Further, as per Clause 15 of the agreement, except extension of time for completion of the work equivalent to the period of suspension, no claim for compensation is admissible. The petitioner was fully aware of the above clauses and had agreed for the extension subject to the terms of the agreement. As such, the petitioner is estopped from claiming compensation at a later stage.

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In reply to the contention regarding maintainability, learned Senior Counsel referred to the decision in ABL International Ltd. And Another Vs. Export Credit Guarantee Corporation of India Ltd. And Others [(2004) 3 SCC 553) to submit that the High Court can intervene under Article 226 even in a matter of contract, if the State or its instrumentality acts in an arbitrary manner.

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As rightly pointed out by the learned Senior Counsel, there is no absolute rule that in all cases pertaining to

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contracts, the parties should be relegated to their alternative remedy. In ABL International Ltd. And Another [(2004) 3 SCC 553) the Apex Court held that merely because the respondent wants to dispute the meaning of a Clause of the contract, it does not become a disputed fact. Here, there is no factual dispute since the dates and events are admitted by both sides. The dispute is essentially with regard to the applicability or otherwise of Clause 10C(ii) of the agreement. Going by the dates and events, the petitioner had submitted its bid on 06.06.2019. The contract period being 12 months, the petitioner would have taken into account the possible hike in rates of materials and labour for the one year period. But contrary to expectation, the work got unduly delayed and by the time the agreement was executed, almost ten months had elapsed. Even after executing the agreement, the petitioner was disabled from commencing and continuing the work on a regular basis till 10.03.2021. Thus, by the time the work actually commenced, 21 months had elapsed after submission of the bid. Clause 10C(ii) of the agreement has to be

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interpreted in the above factual background. Thus interpreted, the completion period of 12 months should be reckoned atleast from the date of issuance of work order. If so, the contract period will be more than 12 months and thereby entitling the petitioner to claim compensation in accordance with Clause 10C(ii). In my opinion, the principle of novation under Section 62 of the Contract Act may come into play since the time limit stipulated in the notice inviting tender had voluntarily been extended by the contracting parties. Being so, the petitioner's request for compensation could not have been rejected relying on Clauses 10C(ii) and 15 of the agreement. Being an instrumentality of the State falling within the ambit of Article 12 of the Constitution, the 2^nd respondent is expected to function in a just and proper manner and refrain from acting in an irrational and arbitrary manner.

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For the aforementioned reasons, Ext. P17 and P19 are set aside and the 2^nd respondent is directed to reconsider Exts. P16 and P18 representations and take a reasoned decision on

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the petitioner's request for compensation, after adverting to the observations in this judgment. The decision, as directed

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above, shall be taken within one month of receipt of a copy of this judgment.

Sd/-

V.G.ARUN JUDGE

W.P.(C).17515/2022

APPENDIX OF WP(C) 17515/2022

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PETITION	ER EXHIB	ITS
EXHIBIT	P1	THE TRUE COPY OF THE BRIEF NOTICE INVITING E- TENDER PUBLISHED IN HINDU DAILY DATED 7.5.2019 BY THE 1ST RESPONDENT
EXHIBIT	P2	THE TRUE COPY OF DETAILED TENDER NOTICE NO. VM/ CMG/CS/ 01/ 1071/ C/T-E(01)/19-20 DATED 4.5.2019
EXHIBIT	P3	THE TRUE COPY OF THE LETTER ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER DATED 04.11.2019
EXHIBIT	P4	THE TRUE COPY OF THE LETTER ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER DATED 09.12.2019
EXHIBIT	P5	THE TRUE COPY OF THE LETTER ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER DATED 30.01.2020
EXHIBIT	P6	THE TRUE COPY OF THE LETTER ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER DATED 25.02.2020
EXHIBIT	P7	THE TRUE COPY OF THE WORK ORDER NO VM/ CMG/ CS/ 01/1071/ C/WO(11)/ 2019-20/ 392 ISSUED TO THE PETITIONER DATED 16.03.2020
EXHIBIT	P8	THE TRUE COPY OF THE RELEVANT PORTION OF THE AGREEMENT NO VM/ CMG/ CS/01/1071/C/ AG(12)/ 19-20 ENTERED INTO BY THE PETITIONER AND THE 1ST RESPONDENT FOR THE EXECUTION OF THE CONTRACT DATED 19.03.2020
EXHIBIT	P9	THE TRUE COPY OF THE PERFORMANCE GUARANTEE ALONG WITH COVERING LETTER ISSUED BY BANK OF BARODA DATED 30.04.2020
EXHIBIT	P10	THE TRUE COPY OF THE EMAIL ISSUED BY 2ND RESPONDENT DATED 21.03.2020

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EXHIBIT	P11	THE TRUE COPY OF THE LETTER ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER DATED 23.06.2020
EXHIBIT	P12	THE TRUE COPY OF THE LETTER SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT DATED 14.12.2020
EXHIBIT	P13	THE TRUE COPY OF THE LETTER SEEKING EXTENSION ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER DATED 21.12.2020
EXHIBIT	P14	THE TRUE COPY OF THE LETTER ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER DATED 10.03.2021
EXHIBIT	P15	THE TRUE COPY OF THE LETTER SUBMITTED BY THE PETITIONER SEEKING COMPENSATION FOR ESCALATION IN PRICES DATED 12.03.2021
EXHIBIT	P16	THE TRUE COPY OF THE LETTER SUBMITTED BY THE PETITIONER SEEKING COMPENSATION FOR ESCALATION IN PRICES DATED 08.03.2022
EXHIBIT	P17	THE TRUE COPY OF THE REJECTION LETTER DATED 10.03.2022
EXHIBIT	P18	THE TRUE COPY OF THE LETTER SUBMITTED BY THE PETITIONER CLAIMING ESCALATION CHARGES AS PER THE CONTRACT DATED 17.03.2022
EXHIBIT	P19	THE TRUE COPY OF THE REJECTION LETTER DATED 19.4.2022
EXHIBIT	P20	THE TRUE COPY OF THE LETTER NO VM/CMD/MCW/1071/21-22 ISSUED BY THE 2ND RESPONDENT DATED 25.03.2022
RESPOND	ENT EXHIBITS
Exhibit	R1 a	TRUE COPY OF THE LETTER DATED 24.6.2020 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT`
Exhibit	R1 b	TRUE COPY OF THE LETTER DATED 7.1.2021 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT

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Exhibit R1 c TRUE COPY OF THE OM NO F/9/4/2020 PPD DATED 12.11.2020 ISSUED BY THE MINISTRY OF FINANCE GOVERNMENT OF INDIA Exhibit R1 d TRUE COPY OF THE LETTER DATED 25.3.3021 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER Exhibit R1 e TRUE COPY OF THE RELEVANT PORTION OF THE AGREEMENT NO VM/CMG/CS/01/C/AG/19-20 DATED 19.3.2020 ENTERED INTO WITH THE PETITIONER BY THE 2ND RESPONDENT FOR THE EXECUTION OF THE CONTRACT Exhibit R1 f TRUE COPY OF THE LETTER DATED 10.3.2021 ISSUED BY THE 2ND RESONDENT TO THE PETITIONER PETITIONER EXHIBITS EXHIBIT P22 The true copy of the statement showing the estimated loss suffered by the petitioner

Roopam Engineers and Contractors Private Limited v. Indian Space Research Organization (Isro)

Case brief

What is this about?

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Roopam Engineers and Contractors Private Limited v. Indian Space Research Organization (Isro)

Case brief

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