Karnataka High Court
B.C. Raju vs Karnataka Housing Board And Others on 10 February, 1995
Equivalent citations: AIR1995KANT356, ILR1995KAR1104, AIR 1995 KARNATAKA 356, (1995) ILR (KANT) 1104 (1995) 2 KANT LJ 11, (1995) 2 KANT LJ 11
ORDER
1. The petitioner is a P.W.D. Electrical Contractor. He was entrusted with the work of internal electrification to the composite Housing Scheme IV Phase in the new township, Yelahanka 1 Stage consisting of group I and II numbering 345 houses and II Stage consisting of 362 houses in group I and II by the respondent-Karnataka Housing Board ('the Board' for short). According to the petitioner, he completed the work worth Rs. 7 lakhs. On a representation made by the petitioner to the Board for entrustment of mains to be provided in respect of 1293 houses at Kallahally II phase, Shimoga, stating that he fell into difficulties as he was not allowed to complete the contract work entrusted to him in respect of 707 houses at Yelahanka, the petitioner submits that the Board, after taking into consideration the financial loss incurred by the petitioner, decided to entrust the service main portion of the work in respect of 1293 houses at Kallahally in lieu of internal electrification of 707 houses at Yelahanka and the said decision was communicated by the first respondent to the 2nd respondent with a copy to the petitioner in Annexure-B and the petitioner accepted the work agreeing to do the same at the rate of PWD electrical SR rates of the year 1992-93.
2. The petitioner further stated that the Board approved by a letter dated 24-8-1994 to carry out the service mains in respect of the houses and the petitioner was instructed through the officials of the Board to provide service mains by laying underground cables and accordingly the petitioner provided service mains in respect of about 400 houses by investing huge amount of money. The petitioner alleged that in spite of the entrustment of the work to him, the Chairman of the Board instructed the officers of the Board to issue tender notice in respect of the work already entrusted to the. petitioner as the petitioner refused to yield to the demand for payment of money to the Chairman and the other officials of the Board. The impugned tender notice was issued in Annexure-F dated 14-11-1994 calling for tenders for carrying out the work and the same is assailed as mala fide, illegal and arbitrary. The petitioner claims that the entrustment of the work to him resulted in a concluded contract and he prays for a direction to the respondent not to entrust the work of service mains relating to electrification of 1293 houses at Kallahally village to others.
3. On behalf of the respondents objections are filed stating that the Board has formulated a Scheme called Composite Housing Scheme at Kallahally, Shimoga and the State of Karnataka has sanctioned the scheme under Government Order No. HUD 92 KHB, 89, dated 30-3-1989 under which 1293 houses at Kallahally II phase were constructed and the electrification work was to be compieted. The houses have been allotted to succeessful applicants and the allottees are pressing for handing over possession of the houses for occupation. A short term tender notification was issued calling for tenders for execution of work of underground service mains from poles to individual houses under the impugned notification. The petitioner was entrusted with the work of providing external electrification for arranging power supply to the houses at KHB Housing Colony, Kallahally, II phase, Shimoga on tender basis, but the petitioner failed to carry out the work within the time stipulated and even on date about 20% of the work was still pending and the performance of the petitioner in execution of the work was not satisfactory and there was inordinate delay in completion of the work. The petitioner failed to approach the Executive Engineer, KHB, Shimoga to observe the formality of execution of contract for the work of service mains for poles to individual houses and there was no concluded contract. The allegations made against the Chairman and other officials were denied. In calling for tender, the procedure was strictly following and there was no irregularity and the petitioner has no right to question the same. The claim of the petitioner relating to his laying underground cables in respect of 400 houses was denied and it is stated that the petitioner laid cables in respect of only 156 houses without obtaining the works contract and work order from the Executive Engineer while carrying out the electrification work in the lay out. However, the tender notification is issued in respect of other group and as such the petitioner's rights have not been in any way affected in so far as two groups for which the Board will take separate action. It is further averred that the delay in completing ' the work on account of the order of stay granted by this Court would cause great hardship to the allottees.
4. The learned counsel for the petitioner contended that the work was entrusted to the petitioner for providing external electrification for 1293 houses as evidenced by the various orders issued by the respondents. He referred to Annexure-B dated 23-9-1992, in which the second respondent-Chief Engineer stated that approval was accorded to entrust the work to the petitioner after observing the necessary formalities. He also relies on Annexure-D dated 1-7-1994 which is a letter addressed to the petitioner by the 3rd respondent directing him to go ahead with the underground cable service mains to all the houses. He therefore contends that the work was entrusted to the petitioner with the approval of the Board pursuant to which, the petitioner commenced the work and therefore the respondents are estopped from entrusting the work to third parties by inviting tenders. He submits that on the application of principle of promissory estoppel the impugned tender notice should be quashed and the respondents should be directed not to entrust the work to third parties. He further contends that the tender notice was issued without authority of law as there was no sanction of the Government as required under S. 15 of the Karnataka Housing Board Act, 1962 ('the Act' for short).
5. In reply Sri U. L. Narayana Rao, learned senior counsel appearing for the respondents contended that the principle of promissory estoppel did not arise inasmuch there was no concluded contract between the parties. The petitioner was not entitled to proceed with the work without executing a contract in the manner and form as prescribed under sub-sec. (3) of S. 15 of the Act. He contends that sub-sec. (4) of S. 15 specifically lays down that a contract not made or executed as provided in this section and the rules made thereunder shall not be binding on the Board and in the face of an express statutory prohibition, no, contract which is not entered into as required under the provisions of the Act and the rules and in the prescribed form can be enforced against the Board. He further submitted that the entire scheme was sanctioned by the Government and therefore the issuance of the tender notice was made in accordance with law and cannot be questioned. He argued that the doctrine of legitimate expectation would not be applicable inasmuch as the petitioner could not have proceeded with the execution of the work without entering into a contract in the prescribed form and manner. Even if the said doctrine is applicable, the petitioner would be entitled only to the issuance of notice in respect of 156 houses for which he appears to have laid the underground cables without obtaining the works contract and work order from the Executive Engineer.
6. The petitioner was entrusted with the work of providing external electrification for arranging power supply to the houses at Kallahally on tender basis. According to the petitioner the work was satisfactorily completed whereas the respondents dispute the same. We are however not concerned with the said dispute in the present writ petition. The execution of work of service mains from poles to individual houses remained to be done. As seen from Annexure-B, dated 23-9-1992, the first respondent stated that approval is accorded for entrusting the work to the petitioner after observing the formalities. The third respondent in Annexure-D stated that the work can go ahead with underground cable service mains to all the houses in the KHB Colony, Kallahally. Annexure R.4 would show that approval has been accorded to entrust the work to the petitioner and he was requested to go ahead with the work as it was necessary to provide service mains on urgent basis. Annexure-R.6 dated 5-4-1994 is another letter from the 3rd respondent to the petitioner to start the service mains work and intimation to him. Annexure-R.7 is another letter from the third respondent to the petitioner requesting to resume the work and to complete the same early. From these documents the learned counsel for the petitioner contended that the principle of promissory estoppel is applicable and the respondents are precluded from entrusting the work to others.
7. In support of his contention the learned counsel relied on M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh, , and contended that even though the promise is not in the form of a formal contract it does not militate against the applicability of the doctrine of promissory estoppel against the respondents. The Supreme Court held that "It was thus laid down that a party who was acting in reliance of a promise made by the Government, altered his position, is entitled to enforce promise against the Government, even though the promise is not in the form of formal contract as required by Art. 299 and the Article does not militate against" the applicability of the doctrine of promissory estoppel against the Government". Sub-section (4) of S. 15 of the Act reads as follows :--
"A contract not made or executed as provided in this section and the rules made thereunder shall not be binding on the Board."
Thus a prohibition of enforcing a contract which is not made or executed as provided by Sec. 15 and the rules shall not be binding on the Board. There was no provision akin to sub-sec. (4) of Sec. 15 in Article 299 of the Constitution. In the absence of any statutory provisions prohibiting the enforcement of a contract which is not made in accordance with law, the Supreme Court held that the contract made under Art. 299 of the Constitution is enforceable by applying the principle of promissory estoppel.
8. It is well settled law that there will be no estoppel against statute. In the very same decision referred to above, the Supreme Court held "It may also be noted that promissory estoppel cannot be invoked to compel the Government or even private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The Legislature can never be precluded from exercising its Legislative function by resort to the doctrine of promissory estoppel". The learned Judges quoted with approval the following passage from Howell v. Falmouth Boat Construction Co. Ltd., 1951 AC 837, which is as follows :
"What it laid down was merely this, namely, that no representation or promise made by an officer can preclude the Government from enforcing a statutory prohibition. The doctrine of promissory estoppel cannot be availed to permit or condone a breach of the law. The rate of the decision was succinctly put by Lord Normand when he said :
"..... neither a minister nor any subordinate officer of the Crown can by any conduct or representation bar the Crown from enforcing a statutory prohibition or entitled the subject to maintain that there has been no breach of it"."
9. Sri Narayana Rao contended that Art. 226 of the Constitution of India cannot be invoked in contractual field as the relations between the parties are no longer governed by the constitutional provisions but by the rights and obligations of the parties inter se. In support of his contention he relied on M/s. Radhakrishna Agarwal v. State of Bihar, AIR 1977 SC 1496. The decision does not apply to the facts of the present case. In the matter before the Supreme Court, there was a concluded contract between the State and the petitioner therein. In the present case, there was no concluded contract between the petitioner and the first respondent as there was no contract as required under sub-sec. (3) of S. 15 of the Act.
10. In Union of India v. Godfrey Philips India Ltd., it was held that "there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make".
11. In Vasanthkumar Radhakisan Vora v. The Board of Trustees of the Port of Bombay, , it was held "the promissory estoppel cannot be used compelling the Government or a public authority to carry out a representation or, promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make". In M/s. Jit Ram Shiv Kumar v. The State of Haryana, , it was held that "the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of its authority."
12. From a reading of sub-sec. (4) of Section 15 of the Karnataka Housing Board Act, 1962, it is clear that a contract which is made or executed as provided under sub- sec. (3) and the rules made thereunder shall not be binding on the Government. There is a clear statutory prohibition in sub-sec. (4) which mandates that such contracts shall not be binding on the Board. Admittedly, no contract was entered into between the petitioner and the Housing Commissioner on behalf of the Board in the prescribed manner and in the prescribed form. Such a contract shall not be binding on the Board and cannot be enforced. The plea of promissory estoppei is not available to. the petitioner as there can be no estoppel against the statute and there can be no direction to the Board to act contrary to the legislative mandate and to give effect to the contract. Respondents 2 and 3 had no authority to direct the petitioner to proceed to execute the work without the contract required in accordance with sub-sec. (3) of Sec. 15, coming into existence. Such directions are clearly made in violation of the mandatory provision contained in sub-sec. (4) of S. 15 and cannot bind the Board.
13. The petitioner has not placed any material in support of his contention that the impugned action in issuing the tender notice is made with a mala fide intention. He could not substantiate his contention that the Chairman and the officials of the Board resorted to calling for tenders as a result of the petitioner's refusal to accede to their demand of illegal gratification.
14. The submission of the learned counsel for the petitioner that calling for tenders in Annexure-F is not valid as there was no sanction of the Government as required by S. 15(1) of the Act is without substance. The entire scheme received the previous sanction of the Government and it was not necessary to obtain the previous sanction of the Government for each one of the works that had to be carried out pursuant to the scheme. The tenders were called for by the competent authority and the same cannot be questioned.
15. The last submission of the learned counsel for the petitioner that the petitioner had a legitimate expectation that the entrustment of the contract to the petitioner will be continued and therefore it is not open to the respondents to go back on the same, is based on Union of India v. Hindustan Development Corporation, . After reviewing the entire case law on the subject, the Supreme Court held "In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors ..... It can therefore be seen that legitimate expectation can at the most be one of the grounds which may give rise to judicial review but the granting of relief is very much limited. It would thus appear that there are stronger reasons as to why legitimate expectation should not be sub-stantively protected than the reason as to why it should be protected."
16. The petitioner contends that he had a legitimate expectation that he would be permitted to carry out the entire work. He contends that he laid the underground cables for about 400 houses and the said assertion is denied by the respondents by stating that the petitioner laid underground cables only to 156 houses and that the said houses are left out of the purview of the tender notice in Annexure-F. Applying the principle in Union of India v. Hindustan Development Corporation (supra), the petitioner may be entitled to issuance of notice with regard to the work carried out by him in respect of 156 houses.
17. Annexure-F relates to only BCDE-G.1 and G.2 divisions. The 156 houses falling within divisions A and F were omitted from Annexure-F. The petitioner cannot assail in Annexure-F as that would be contrary to the statutory prohibition. The respondents who have left out the 156 houses from the purview of Annexure-F will give a notice to the petitioner and will take a decision thereon. The challenge to Annexure-F and the prayer for issuance of directions to the respondents not to entrust the work to others is rejected.
18. I.A.III. This application is filed by the General Secretary of Kallanally (II Stage) Allottees' Assocation, Shimoga. The respondent-Association is interested in the early electrification of the houses allotted to the members of the association who are interested in the outcome of this writ petition.
I.A.III is allowed.
19. I.A.II--This application is filed, by the petitioner for impleading the former Chairman of the Karnataka Housing Board by name, as personal allegations were made against him. In the view I have taken that the petitioner failed to place any material to show that the former Chairman of the Board demanded illegal gratification with mala fide intention, it is not necessary to implead him as a party. Application dismissed. The impleaded association is only interested in providing electricity to the houses of the allottees expeditiously. The Board is directed to make all efforts to finalise the tenders and to have the work executed as early as possible.
20. Writ petition is accordingly dismissed with the above observation. No costs.
21. Petition dismissed.