Kerala High Court
Njattumkalayil Construction Company vs State Of Kerala on 16 January, 2020
Author: N.Nagaresh
Bench: N.Nagaresh
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
THURSDAY, THE 16TH DAY OF JANUARY 2020 / 26TH POUSHA, 1941
WP(C).No.10798 OF 2013(Y)
PETITIONER:
NJATTUMKALAYIL CONSTRUCTION COMPANY
KADAYIRUPPU P O, KOLENCHERRY, ERNAKULAM-682311,
REPRESENTED BY ITS MANAGING PARTNER
KURIAKOSE ABRAHAM, RESIDING AT NJATTUMKALAYIL HOUSE,
KADAYIRUPPU P O, KOLENCHERRY, ERNAKULAM-682311
BY ADVS.
SRI.MURALI PURUSHOTHAMAN
SRI.JOBY K A
SRI.DEEPU LAL MOHAN
SMT.S.LEENA
RESPONDENTS:
1 STATE OF KERALA
REPRESENTED BY THE SECRETARY TO GOVERNMENT,
WATER RESOURCES DEPARTMENT,
GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM-695001
2 THE SECRETARY TO GOVERNMENT
WATER RESOURCES DEPARTMENT,
GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM-695001
3 THE SUPERINTENDING ENGINEER
SIRUVANI PROJECT CIRCLE, PALAKKAD-678012
GOVERNMENT PLEADER SRI. RENIL ANTO KANDAMKULATHY
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 16.01.2020, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
WP(C) No.10798 OF 2013(Y)
2
JUDGMENT
~~~~~~~~~ Dated this the 16th day of January, 2020 Petitioner, a Company engaged in construction works, filed the writ petition seeking to direct the respondents to forthwith disburse to the petitioner the admitted amounts due under Ext.P1 contract along with current market rate of interest and to quash Ext.P6 order. The petitioner further seeks to declare that it is entitled to be granted suitable rate revision in respect of the work executed under Ext.P1 contract at the then existing PWD schedule of rates for the work executed beyond the originally stipulated contractual period of completion.
2. The petitioner states that the Water Resources Department of the Government of Kerala flouted tender for the work "Palakappandy Diversion Scheme - Construction of aqueduct bet.Ch:2/110km. to 2/520Km". The estimate of the WP(C) No.10798 OF 2013(Y) 3 work was for ₹1,55,57,863/- and the work had to be completed within nine months. The estimate in respect of this work was prepared on the basis of 2004 PWD schedule of rates. The petitioner bid for the work at 28% above the estimate PAC. The bid of the petitioner being the lowest one, the petitioner was awarded the work. Ext.P1 agreement was executed on 16.02.2006.
3. The petitioner states that though the site was handed over to the petitioner on 23.02.2006, the officers of the respondents instructed the petitioner that there is going to be a change in the design of the work. Due to this, the petitioner could not start the work immediately. The revised design of the respondents was approved and obtained from IDRB on 27.10.2006 only i.e., nearly eight months after the site was handed over. Therefore, the work could actually be commenced only on 28.10.2006. The petitioner had to keep its men and machinery idle during all this period. The petitioner was directed to stop the work when nearly 25% of the work was completed. Later, on 01.06.2007, the petitioner WP(C) No.10798 OF 2013(Y) 4 was directed to continue the work as per the original agreed design. Since there were a lot of disparity and discrepancy between the Schedule to Agreement and the original design, the work could not be proceeded with as per the original design.
4. After deliberations and discussions, the work could further commence only after 23.11.2007. On 30.07.2008, the petitioner sent a registered letter to the Superintending Engineer pointing out the difficulties faced by it in execution of the work and requested for revision of rates as per the then PWD Schedule of rates for completing the remaining work. The said letter was not responded to. However, the petitioner was granted extension of time for completion of work without any penalty. According to the petitioner, the extension was granted without any penalty because the respondents were aware that the delay in execution of work was entirely due to their fault.
5. While so, the petitioner was served with a Supplementary Agreement Schedule for Additional Excess WP(C) No.10798 OF 2013(Y) 5 Quantities on Revised Estimate-I and Additional Extra Items along with a letter dated 20.01.2010 of the Superintending Engineer. The said letter required the petitioner to enter into a supplementary agreement. The petitioner submitted Ext.P2 letter to the Superintending Engineer informing him that to enter into supplementary agreement, revised estimate has to be made applicable on the basis of PWD schedule of rates prevalent at the time of preparing the original estimate. The petitioner again addressed Ext.P3 letter dated 22.02.2010 to the respondents stating that the petitioner would be able to execute the additional work, only if the petitioner was given enhanced rate as required under Ext.P2 letter. In Ext.P3, the petitioner pointed out that Clause No.3 of the draft supplementary agreement is totally arbitrary.
6. The petitioner, however, entered into a supplementary agreement on 27.02.2010 and completed the work. A completion certificate was issued on 22.11.2011. Thereafter, on 22.02.2012, the petitioner submitted Ext.P4 demand requiring the respondents to give suitable revision of WP(C) No.10798 OF 2013(Y) 6 rates to it corresponding to the PWD schedule of rates prevalent during the execution of the subject work so that the loss sustained by them in execution of work is mitigated. As Ext.P4 was not responded to, the petitioner filed W.P.(C) No.16797/2012. By Ext.P5 judgment dated 25.07.2012, this Court directed the 2nd respondent-Secretary to the Government to examine the matter in accordance with law and take a decision and communicate the same to the petitioner.
7. Thereupon, the Government passed Ext.P6 order. By Ext.P6 order, the request of the petitioner for revision of rates was rejected as the same was found to be devoid of merits. In Ext.P6, the 1st respondent stated that the Department is following standard procedures with regard to extension of time of completion of work and for arriving at the rates for extra items and excess quantities. Since the request of the petitioner for revision of rates contained in Ext.P4 representation is at variance with the agreement entered into by two parties supportable with rules, it is not entertainable. It WP(C) No.10798 OF 2013(Y) 7 is challenging Ext.P6 that the petitioner has approached this Court.
8. The writ petition was opposed by the 1st respondent filing counter affidavit. The 1 st respondent contended that the site was handed over to the petitioner on 23.02.2006. During execution of work, it was found that certain changes are required in the design to suit the site conditions. The grievance of the petitioner regarding loss due to idling of men and machinery is not true. The petitioner had not engaged in any machinery during that time. The 1 st respondent stated that the revised estimate was sanctioned on 22.10.2007 by the Chief Engineer on condition that the work may be carried out only if the petitioner is willing to carry out the work as per the revised estimate at the agreed rate. According to the 1 st respondent, once the petitioner has agreed to execute the work at a specified rate, it cannot make a claim for excess rate which is against the agreed conditions. The 1 st respondent further stated that for escalation of price of items like cement and steel, the Contractor did not claim timely with WP(C) No.10798 OF 2013(Y) 8 supporting bills.
9. Referring to the supplementary agreement executed by the petitioner on 15.05.2008, the 1st respondent stated that the petitioner had agreed to carry out the additional work at the existing rates. The Department cannot entertain the claim for excess rate as the supplementary agreement was executed and the petitioner had declared that the petitioner will not claim any enhanced rate. The respondents, though admitted that the petitioner has completed the works satisfactorily, refuted the claim of the petitioner for payment at the revised rates.
10. Heard the learned counsel for the petitioner and learned Government Pleader representing the respondents.
11. The learned counsel for the petitioner pointed out that the delay in execution of work was admittedly due to the change of design as required by the respondents. There was no fault on the part of the petitioner in this regard. The respondents have impliedly admitted in their counter affidavit that the delay was due to the change of design. Even though WP(C) No.10798 OF 2013(Y) 9 the original agreement was executed in the year 2006, the rates made applicable to the petitioner's contract were of the PWD rates of the year 2004. When the work was delayed, the petitioner had put the respondents on notice by sending Exts.P2 and P3 letters wherein the petitioner had made it clear that the petitioner will be completing the work only if the respondents are agreeable to apply revised rates for the remaining works. The counsel for the petitioner stated that the supplementary agreement should be treated as a part and parcel of the original agreement. In view of Exts.P2 and P3, the petitioner can legitimately and legally claim the revised rates, contended the learned counsel for the petitioner.
12. The learned counsel for the petitioner relied on the judgment of the Apex Court in Northern Railway v. Sarvesh Chopra [(2002) 4 SCC 45], wherein the Apex Court has held that if the Contractor makes it clear that escalation of rates of compensation for delay shall have to be made by the employer and the employer accepts performance by the Contractor in spite of delay and such notice by the contractor WP(C) No.10798 OF 2013(Y) 10 putting the employer on terms, then the Contractor can legally claim enhanced rates for work. Relying on the judgment of this Court in Union of India v. Haji C.M. Abdul Khader and Others [2020 (1) KHC 211(DB)], the learned counsel for the petitioner contended that the law laid down by the Apex Court in Northern Railway (supra) was followed by this Court and in a case where the Arbitrator awarded price escalation in similar circumstances, this Court found such award to be legal.
13. The learned counsel for the petitioner further relied on a Division Bench judgment of this Court in State of Kerala and another v. T.E. Mohammed Kunju [2008 (3) KLT 424]. The said judgment was in a case where also a supplementary agreement was entered into by the Contractor therein. In spite of the supplementary agreement agreeing to continue the work at the original rates, this Court held that in spite of there being a contract between parties whereunder the Contractor has undertaken not to raise any claim for enhancement for damages, for the delay of performance of WP(C) No.10798 OF 2013(Y) 11 the obligations by the employer, still the Contractor will be entitled to claim at enhanced rates, if he makes it clear that escalation of rates or compensation for delay shall have to be made by the employer. In such circumstances, if the employer accepts performance by the Contractor in spite of delay and such notice by the Contractor putting the employer on terms, the employer will have to provide for enhanced payment.
14. Again, in the judgment in State of Kerala and another v. M.A. Mathai [(2007) 10 SCC 195], the Apex Court held that under the Indian law, in spite of there being a contract between the parties whereunder the Contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of employer, still a claim would be entertainable if the Contractor makes it clear that escalation of rates for compensation for delay shall have to be paid by the employer and the employer accepts performance by the Contractor in spite of delay and such notice by the Contractor putting the employer on terms. The learned WP(C) No.10798 OF 2013(Y) 12 counsel therefore, on the basis of the aforesaid judgments, contended that Ext.P6 order has been passed by the 1 st respondent without taking into account any of these legal provisions. The statement of the 1st respondent as contained in Ext.P6 that once the company has agreed to execute the work at specified rate, it cannot claim excess rate against the condition, goes against the law laid down by the Apex Court and Division Bench of this Court.
15. The learned Government Pleader vehemently opposed the claim of the petitioner. The learned Government Pleader pointed out that the petitioner had entered into an agreement with open eyes. There is no material on record to show that the petitioner incurred loss due to the idling of men and machinery. There is no evidence whatsoever to show that the escalation of price has in any way affected the work of the petitioner. When the contract itself does not provide for such extra payments on the basis of revised rates, the petitioner cannot make such a claim in law. Even when the work was delayed and prolonged, the Department had WP(C) No.10798 OF 2013(Y) 13 decided that the work can be carried out through the same agency, viz. the petitioner, only if the petitioner undertakes to take up the work at the same terms.
16. The learned Government Pleader highlighted the fact that the contract was granted to the petitioner at a rate 28% above the estimated rate. The petitioner has made huge profits from the work due to the high rates quoted by the petitioner. The petitioner has been paid 95% of the contract amount. After receiving almost the entire contractual amount and after making huge profit, the attempt of the petitioner is to extract more money from the Government. If the petitioner has any grievance in this regard, the remedy available to the petitioner is either to approach the civil court or to invoke the arbitration proceedings if the same is available to it. Such enhancement cannot be granted in a proceeding initiated under Article 226 of the Constitution of India. The writ petition is therefore only to be dismissed.
17. I have considered the pleadings and the arguments raised on either side. This is a case where material facts are WP(C) No.10798 OF 2013(Y) 14 not in dispute. The agreement was entered into on 16.02.2006. It is not much in dispute that in spite of handing over of site to the petitioner, the work could not be promptly commenced due to the change of design required by the respondents. The revised design had to get approval of IDRB. The work could be commenced only on 28.10.2006 by which time, almost eight of the nine months period allocated for completion of work was over. Due to the subsequent events and changes in the design of the project, the work could actually be completed only on 22.11.2011. In the meanwhile, certain additional work was required to be carried out by the petitioner at the instance of the respondents. At this stage, the petitioner sent Exts.P2 and P3 communications to the respondents making it clear that they will be able to carry out the additional work only if revised rates are made applicable to the work. The respondents have not denied receipt of such communication. In spite of Exts.P2 and P3, the supplementary agreement was entered into on 27.02.2010 and the work admittedly was completed by WP(C) No.10798 OF 2013(Y) 15 22.11.2011.
18. The Apex Court has considered the eligibility of the Contractors for enhancement of rates/price escalation when the period of contract prolongs. In the Northern Railway (supra), the Apex Court held that even if there is a contract to the contrary, if the Contractor makes it clear that escalation of rates of compensation for delay shall have to be made by the employer and the employer accepts performance by the Contractor in spite of delay and such notice, the Contractor can legitimately claim compensation at enhanced rates. This Court followed the said judgment of the Apex Court in Union of India (supra). State of Kerala and another v. T.E. Mohammed Kunju (supra) was a case having similar circumstances. In the said case also, there was a supplementary agreement by the Contractor. However, in spite of such supplementary agreement, this Court held that when the Contractor put the employer on notice stating that he will complete the work only if enhanced rates are legitimately given, the employer will be liable to consider the WP(C) No.10798 OF 2013(Y) 16 claim for enhanced payments.
19. In the judgment dated 18.08.2016 in W.P.(C) No.14949/2006, the learned Single Judge considered an identical issue. In the said case also, the Government took a stand that once the petitioner enters into supplementary agreements agreeing for the rates which was specified in the original agreement, the petitioner cannot be permitted to seek any further revision of rates. After considering the facts, this Court noted that there had been revision of rates in PWD Schedule in subsequent orders even before the work was completed. In such circumstances, especially when the petitioner could commence the work belatedly and complete the work beyond the period stipulated in the agreement, the claim of the petitioner for enhanced rates has to be considered when there is no fault on the part of the petitioner in delaying the work.
20. In the judgment dated 03.04.2002 in O.P. No.5937/2001, this Court considered a similar claim and held that when the delay was not due to any reasons attributable to WP(C) No.10798 OF 2013(Y) 17 the Contractor, the Government cannot take a stand that they will pay only at the rate as agreed in the original contract.
21. It is evident that there was no fault on the part of the petitioner in delaying the project. The delay occurred due to the change of design imposed and additional work required to be done by the respondents. Though the original work had to be completed in 2006, the work could be completed only in 2011. There is no dispute that the original rates were fixed in the year 2006 taking into account the PWD scheduled rates of the year 2004. The petitioner does not claim revision of rates for the work originally agreed upon. The claim is limited and is to apply revised PWD rates for the work additionally carried out consequent to supplementary agreement. The claim is to make applicable revised PWD rates as existed at the time of carrying out additional work. In view of the said facts and taking into account the judgments of the Apex Court and of this Court cited above, I am of the opinion that Ext.P6 order impugned in this writ petition cannot stand the scrutiny of law. Ext.P6 is liable to be set aside.
WP(C) No.10798 OF 2013(Y) 18 In such circumstances, the writ petition is allowed setting aside Ext.P6 order dated 06.11.2012 of the 1 st respondent. Consequently, there will be a direction to the 1 st respondent to reconsider Ext.P4 claim of the petitioner taking into account the law laid down by the Apex Court and by this Court as discussed hereinabove and take a fresh decision in the matter. The petitioner will be granted an opportunity of hearing before the 1st respondent takes a final decision. The petitioner will be at liberty to produce such documents before the 1st respondent as they find necessary in the matter. A final decision in this regard shall be taken by the 1 st respondent within a period of three months.
Sd/-
N. NAGARESH, JUDGE aks/17.01.2020 WP(C) No.10798 OF 2013(Y) 19 APPENDIX PETITIONER'S EXHIBITS:
EXHIBIT P1 EXT.P1:-THE PHOTOCOPY OF AGREEMENT NO 09/SE/SPC/2005-06 DTD 16/2/2006 ENTERED INTO BY THE PETITIONER WITH THE 2ND RESPONDENT SUPERINTENDING ENGINEER EXHIBIT P2 EXT.P2:-THE PHOTOCOPY OF THE LETTER DTD 10/2/2010 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT EXHIBIT P3 EXT.P3:-THE PHOTOCOPY OF THE LETTER DTD 22/2/2010 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT EXHIBIT P4 EXT.P4:-THE PHOTOCOPY OF THE REPRESENTATION DTD 22/2/2012 SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P5 EXT.P5:-THE PHOTOCOPY OF THE JUDGMENT DTD 25/7/2012 OF THIS HON'BLE COURT IN WPC NO 16797/2012 EXHIBIT P6 EXT.P6:-THE PHOTOCOPY OF THE GO(RT)1315/2012/WRD DTD 6/11/2012 EXHIBIT P7 EXT.P7:-THE PHOTOCOPY OF THE GO(RT)NO 245/03/WRD DTD 28/2/2003 EXHIBIT P8 EXT.P8:-THE PHOTOCOPY OF GO(MS)NO 19/96/IRD DTD 20/3/1996 EXHIBIT P9 EXT.P9:-TEH PHOTOCOPY OF GO(RT)NO 825/94/IRD DTD 18/8/1994 EXHIBIT P10 EXT.P10:-THE TRUE COPY OF GO(RT)NO 1260/2004/WRD DTD 28/10/2004 WP(C) No.10798 OF 2013(Y) 20 EXHIBIT P11 EXT.P11:-THE PHOTOCOPY OF THE JUDGMENT DTD 3/4/2002 OF THIS HON'BLE COURT IN OP NO 5937/2001 EXHIBIT P12 EXT.P12:-THE PHOTOCOPY OF THE REPRESENTATION DTD 8/3/2013 SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P13 THE PHOTOCOPY OF THE JUDGMENT DATED 18.08.2016 IN WPC NO.14949/2006 OF THIS HON'BLE COURT.