Dismissed

M/S Ramratan Ghanshyam v. State Pub Health and Engg Dept Anr.

Rajasthan HC30 Oct 2017CW/17231/2017

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging a demand for risk and cost and the assignment of work to a new contractor under a Phase II contract agreement held invalid due to non-discovery of a necessary party. An alternative remedy via the Empowered Standing Committee was noted.

What did the court decide?

The writ petition is dismissed; liberty is granted to approach the Empowered Standing Committee.

M/S Ramratan Ghanshyam Vs State Pub Health and Engg… — Service and Employment | Rajasthan HC (2017)

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Civil Writ Petition No. 17231 / 2017

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M/s Ramratan Ghanshyam, a Class PHED Contractor Through Its Proprietor Ghanshyam Meena, Resident of Village Post Nangal Sherpur, Tehsil Todabhim, District Karauli (Raj.)

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----Petitioner

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Versus

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State of Rajasthan Through the Principal Secretary, Public Health Engineering Department, Secretariat, Jaipur.

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Additional Chief Engineer, PHED Region, Bharatpur.

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----Respondents

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For Petitioner(s) : Mr. Anil Mehta For Respondent(s) :

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HON'BLE MR. JUSTICE M.N.BHANDARI

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Order

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30/10/2017

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It is a case where an agreement was executed between the parties. The petitioner performed the work but finding default thereof, an order of termination of contract was passed. The respondents thereupon issued letter dated 11^th May, 2017 demanding amount towards risk and cost. It is on account of nonperformance of work by the petitioner thus was assigned to the other contractor. The difference of amount between two contractors has been claimed. According to the petitioner, termination of contract is not valid, however, order of termination dated 12^th September, 2013 has not been challenged by the petitioner. In view of the above, what remains is the challenge to

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(2 of 5)

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[CW-17231/2017]

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the order dated 11^th May, 2017 demanding amount towards risk and cost and other prayers.

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During course of the argument, learned counsel for petitioner made much emphasis on the justification of termination of the contract. It is without challenge to the order of termination dated 12^th September, 2013.

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The writ petition seems to have been filed treating imposition of amount towards risk and cost to be damages. According to the petitioner, damages cannot be determined by the department but by a civil court. A direction is, accordingly, sought on the respondents to initiate the proceedings for determination of the amount of damages and it can be initiated by the competent court.

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The petitioner has failed to make difference between determination of the amount of damages than demand of amount towards risk and cost. The damages have to be determined after ascertaining the loss. For the risk and cost, the calculation is based on the amount of contract given to a defaulting party and subsequent contractor. The difference of amount between two is the amount of risk and cost. If contracting party fails to complete the work or any such contingency arises resulting in termination and work is subsequently assigned to other party then as per terms and conditions of the contract, the amount over and above first contracting party has to be recovered as risk and cost. In view of the above, amount of Rs.12,76,489/- has been demanded from the petitioner. It needs no determination from the competent civil court, as prayed by the petitioner.

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(3 of 5)

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[CW-17231/2017]

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A further challenge is made to the assignment of work to a new contractor at the rate 49% higher than original price on which the work was assigned to the petitioner. The challenge aforesaid has been made without impleading new contractor as party respondent though necessary. If this court comes to the conclusion that assignment of work on higher rate was illegal, it will have serious consequences on the subsequent contracting party. He would not be entitled to claim amount of work at the rate decided mutually by the parties. Any challenge to the amount, on which subsequent contract was given, suffers from non-joinder of necessary party and, accordingly, direction sought in the writ petition cannot be granted.

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Learned counsel for petitioner has made reference of the judgment of the Apex Court in the case of State of Karnataka Vs. Shree Rameshwara Rice Mills, Thirthahalli, reported in (1987) 2 SCC 160 . Para 9 of the said judgment has been referred and is quoted hereunder for ready reference:

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“9. The further question requiring consideration is regarding the power of the State to recover damages as arrears of land revenue under the Revenue Recovery Act. The Full Bench has taken the view that the State is not entitled to recover damages as arrears of land revenue because damages for breach of conditions will not amount to "money due under the contract". The Full Bench has relied upon a decision of this Court in Divisional Forest Officer v. Mool Chand :[1971]3SCR298 in support of its view. This decision cannot be an authority for the view taken by the Full Bench because it has been rendered with reference to facts which are entirely different. What fell for consideration in that case was whether a tender amount could be recovered from a defaulting forest contractor as

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(4 of 5)

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[CW-17231/2017]

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arrears of land revenue when Section 75 of the Forest Regulation and Rule 10 of the Rules made thereunder did not provide for such realisation. We are, however, concerned with cases where the agreement entered into between the Government and the private persons specifically provides for recovery of damages as arrears of land revenue. What the Full Bench has failed to notice is that even though the damages become payable on account of breach of conditions of the contract, the liability to pay damages does not fall outside the terms of the contract but within the terms of the contract. The words "any amount that may become due or payable by the first party to the second party under any part of this agreement" have to be read in conjunction with the earlier portion of the clause stipulating liability on the party contracting with the State to pay damages for breach of conditions. Therefore, it follows that though damages become payable on account of breach of conditions of the agreement they nevertheless constitute amounts payable under the contract i.e. under one of the terms of the contract imposing liability to pay damages for breach of conditions. To illustrate the position if the agreement provides for a liquidated sum being paid as damages for breach of conditions instead of a sum to be assessed by the Deputy Commissioner, it cannot be said that the specified damages will not be money due under the contract and hence the damages cannot be recovered under the Revenue Recovery Act. What applies to specified damages will likewise apply to damages which are quantified after assessment. We, therefore, hold that the opinion of the Full Bench in so far as the recovery of damages and arrears of land revenue is concerned is not in accordance with law.”

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The perusal of para shows an issue about recovery of the amount of damages. Whether it can recovered as land revenue. The issue was not about determination of amount towards risk or cost, rather, it was of the amount of damages and mode of its

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(5 of 5)

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[CW-17231/2017]

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recovery. Taking into consideration the aforesaid, judgment of the Apex Court in the case of State of Karnataka Vs. Shree Rameshwara Rice Mills (supra) would not be applicable on this case. In view of the above, I do not find that a case is made out for grant of prayer.

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It is also a fact that if petitioner is aggrieved by termination or even amount towards risk and cost, it can be taken before the Empowered Standing Committee as per Clause 23 of the agreement. It is not considered to be arbitration. The alternative mechanism is provided where all the factual issues can be considered. The members of the committee are different than officer passed the order. In the instant case, order dated 11^th May, 2017 has been passed by the Superintending Engineer and order of termination is by the Additional Chief Engineer. They are not Members of the Empowered Standing Committee.

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Thus, while dismissing the writ petition, liberty is given to the petitioner to approach the Empowered Standing Committee on all the issues pertaining to termination of contract and consequential effect. For the aforesaid, judgment would not come in the way. It has been decided taking into consideration the prayer made in the writ petition.

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(MN BHANDARI) J.

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FRBOHRA

M/S Ramratan Ghanshyam v. State Pub Health and Engg Dept Anr.

Case brief

What is this about?

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M/S Ramratan Ghanshyam v. State Pub Health and Engg Dept Anr.

Case brief

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