Kerala High Court
M/S Mapsglobal Constructions Pvt Ltd vs Superintending Engineer on 17 March, 2025
2025:KER:22293
W.A.No.2101 of 2024 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR. NITIN JAMDAR
&
THE HONOURABLE MR. JUSTICE S.MANU
MONDAY, THE 17TH DAY OF MARCH 2025 / 26TH PHALGUNA, 1946
WA NO. 2101 OF 2024
AGAINST THE JUDGMENT DATED 13.11.2024 IN WP(C) NO.20310
OF 2024 OF HIGH COURT OF KERALA
APPELLANTS/PETITIONERS:
1 M/S MAPSGLOBAL CONSTRUCTIONS PVT LTD
32/595, AMBIKALAYAM, CHELAVOOR, KARANTHUR P.O,
KOZHIKODE REPRESENTED BY ITS MANAGING DIRECTOR,
PIN - 673571.
2 SATHEESH KUMAR
AGED 57 YEARS
S/O APPUKUTTAN NAIR, MANAGING DIRECTOR,
M/S MAPSGLOBAL CONSTRUCTIONS PVT LTD RESIDING AT
AMBIKALAYAM, KOLAYITHAZHAM, KARANTHUR P.O,
KUNNAMANGALAM KOZHIKODE DISTRICT, PIN - 673571.
BY ADVS.
MOHAN PULICKKAL
MANJU RAJAN
A.AMRUTHA VIDYADHARAN
2025:KER:22293
W.A.No.2101 of 2024 2
RESPONDENTS/RESPONDENTS:
1 SUPERINTENDING ENGINEER
OFFICE OF SUPERINTENDING ENGINEER,
KERALA WATER AUTHORITY, PH CIRCLE, KOZHIKODE,
MALAPARAMBA P.O, PIN - 637009.
2 DEPUTY BRANCH HEAD
MCB, KERALA FINANCIAL CORPORATION,
KOZHIKODE, PIN - 673001.
3 CHIEF MANAGER
KERALA FINANCIAL CORPORATION, MANUELSONS BUILDING,
G.H ROAD, KOZHIKODE, PIN - 673001.
BY ADVS. P.M.JOHNY, SC, KWA
V.V.JOSHI, SC, KWA
ADV.M.R.VENUGOPAL, SC, KFC
DHANYA P.ASHOKAN (SR.)(K/001671/2000)
S. MUHAMMAD ALIKHAN(K/000644/2020)
ANJANA S. RAJ(K/001318/2024)
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON
10.03.2025, THE COURT ON 17.03.2025 DELIVERED THE FOLLOWING:
2025:KER:22293
W.A.No.2101 of 2024 3
NITIN JAMDAR, C.J.
&
S.MANU, J.
--------------------------------------------------
W.A.No.2101 of 2024
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Dated this the 17th day of March, 2025
JUDGMENT
S.MANU, J.
First Appellant is a private limited company and the second Appellant is its Managing Director. Appellants undertook a work of the 1st Respondent Kerala Water Authority (KWA ) related to 'JMM Phase II - 21 - 22 - CWSS to Karassery, Kodiyathur, Thiruvambady and Koodaranhi Grama Panchayaths in Kozhikode District, construction of CW Pump House, supply and erection of CE pump sets, construction, testing and commissioning of 50LL OHSR, providing FHTCs by laying new distribution lines at Karassery Grama Panchayath'.
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2. A line of credit facility to the tune of Rupees Twenty crore was availed by the Appellants from the Kerala Financial Corporation (KFC). Ext.P1 is the agreement between the Appellants and the KFC. A total amount of ₹15,72,82,000/- was disbursed by the KFC to the Appellants. A power of attorney was executed by the Appellants in favour of the KFC which authorised the KFC to receive all payments due to the Appellants. Thereafter, the KFC issued a letter on 3 February 2023 to the 1st Respondent intimating that in view of the execution of the power of attorney all payments in favour of the Appellants may be made through the virtual account mentioned in the letter. 1st Respondent by proceedings dated 7 February 2023 agreed to honour the power of attorney. There is no dispute that the Appellants have been regularly making re-payments as demanded by the KFC and no default has ever been committed.
3. The KFC issued Ext.P2 loan recall notice dated 6 May 2024 to the Appellants stating that the Appellants received an amount of ₹19,49,39,947/- from the Kerala Water Authority through an account maintained in Canara Bank and it amounted to breach of the covenants 2025:KER:22293 W.A.No.2101 of 2024 5 and conditions contained in the loan agreements. It was stated in the notice that in view of the power of attorney executed, with effect from 4 February 2023 any payment to the Appellants with respect to the work covered by Ext.P1 agreement should have been routed only through the virtual account maintained by the company with KFC. The 3rd Respondent also stated in the notice that a criminal complaint was submitted to police and FIR was registered against the Appellants. The Appellants were called upon to take steps to close loan accounts within a period of 30 days from the date of receipt of the notice failing which coercive measures were warned of.
4. Appellants replied to the notice by Ext.P3 dated 17 May 2024. Thereafter, they approached this Court in W.P.(C)No.20310/2024. The challenge in the writ petition was against Ext.P2 notice. KFC filed a counter affidavit and a statement refuting the contentions of the Appellants. The Kerala Water Authority filed a counter affidavit. Appellants filed a reply controverting the contentions of the KFC. The learned Single Judge on completion of the pleadings heard the writ petition and dismissed it by judgment dated 13 November 2024.
2025:KER:22293 W.A.No.2101 of 2024 6 Aggrieved by the judgment, this writ appeal was filed.
5. We heard Mr.Mohan Pulickkal, the learned counsel for the Appellants, Mrs.Dhanya P.Ashokan, learned Senior Counsel appearing for the KFC and Mr.V.V.Joshi, the learned Standing Counsel for Kerala Water Authority.
6. The learned counsel for the Appellants contended that the issuance of Ext.P2 notice by the KFC was without sufficient reasons. He submitted that there was no breach of any of the covenants and terms of Ext.P1 agreement as alleged in Ext.P2 notice. He submitted that the Appellant Company has undertaken various works of the KWA and the credit facility was availed with respect to the particular work after the work actually commenced. Though the power of attorney was executed authorising the KFC to receive the payments due to the Appellants, it was for the KFC to maintain the virtual account operational/active and to ensure follow-up with the KWA to receive payments through the account. The KFC had not conveyed the details of the virtual account to the Appellants and placed any 2025:KER:22293 W.A.No.2101 of 2024 7 obligation on the Appellants to convey the same to the KWA. The KFC had intimated KWA about the power of attorney and provided the virtual account number also. Referring to the counter affidavit filed by the KWA the learned counsel submitted that according to KWA attempt was made to transfer the amount to the virtual account and when it failed intimation was given to the KFC. He pointed out that the KFC later furnished another account number and received some payments due to the Appellants through the said account. He hence contended that the KFC realized that the account of which the details were initially intimated was not active. He argued that the Appellants have so far made all payments due under Ext.P1 agreement as demanded by the KFC from time to time. Payment of installments towards the principal amounts are yet to begin as per the payment schedule. He also submitted that sufficient security was offered for the amount received and the total amount involved in the work is much more than the amount disbursed by the KFC. He therefore submitted that there was no occasion for the KFC to assume that its interest is at risk. He also submitted that the Appellants never requested the KWA to disburse the payment through its account. The KWA was compelled 2025:KER:22293 W.A.No.2101 of 2024 8 to transfer the amount mentioned in Ext.P2 notice to the account of the Appellants since the virtual account maintained by the KFC was not operational. It was also submitted that some payments with respect to the same work were received by the Appellants through their account in Canara Bank from the KWA before availing the credit facilities from the KFC. Hence the KWA might have made payment to the same account when it could not transfer fund to the virtual account of KFC. He hence submitted that no willful breach of any of the conditions of the agreement or the power of attorney had occurred. He also submitted that the entire amount received from the KWA was utilized for the work and no amount was diverted for any other purpose. He further contended that no show-cause notice was issued or any opportunity was provided to the Appellants to explain their version before the KFC took the drastic step of recalling the loan arrangement and initiating criminal proceedings. He hence submitted that Ext.P2 notice is liable to be set aside solely for the reason that the same was issued unilaterally and in a highly arbitrary manner without following the basic principle of natural justice apart from being uncalled for on merits.
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7. The learned Senior Counsel for the KFC submitted that the Appellant Company received more than Rupees Fifteen Crores from the KFC for the work and thereafter received payments for more than Rupees Nineteen Crores from the KWA directly. She pointed out that the Appellants illegally enriched themselves by receiving the payment directly from KWA without routing it through the virtual account maintained with the KFC, when the amount received from KFC remained outstanding. She contended that the arrangement was well known to the Appellants as well as the KWA and therefore the KWA ought not have transferred the funds to the account of the Appellants maintained with Canara Bank. She also submitted that the Appellants have acted in a highly unscrupulous manner by receiving the payment other than through the virtual account maintained with the KFC. She argued that receiving of a huge amount from the KWA directly while the amount received from the KFC was remaining as outstanding and appropriating the amount without intimating the KFC was a dishonest act on the part of the Appellants and it definitely offended the terms and conditions of Ext.P1 agreement. She vehemently denied the 2025:KER:22293 W.A.No.2101 of 2024 10 contention of the KWA in its counter affidavit that the KWA had intimated the KFC about inability to transfer the amount to the virtual account. She pointed out that the KWA has no specific case regarding any such intimation. No communication is produced or not even the dates are mentioned. The learned Senior Counsel hence justified the decision to recall the loan arrangement and issuance of Ext.P2. She submitted that the learned Single Judge was perfectly justified in dismissing the writ petition.
8. The learned Standing Counsel for the KWA submitted that there was no fault on the part of the KWA in disbursing the amounts due to the Appellants through their account. He submitted that the KWA attempted to transfer the amounts due to the Appellants to the virtual account intimated by the KFC but was unable to do it. This was properly intimated to the KFC. He pointed out that the KFC later furnished details of another account and all subsequent payments have been made through the said account only. He also pointed out that the amount was disbursed to the Appellants without waiting much, taking into account the urgent and important nature of the work undertaken 2025:KER:22293 W.A.No.2101 of 2024 11 by the Appellants. He further submitted that total volume of the amount involved in the work is much more than the credit facility availed by the Appellants from the KFC and therefore the interest of the KFC will not be adversely affected by the payment mentioned in Ext.P2 notice.
9. Apart from the contentions as noticed above, the learned Senior Counsel appearing for the KFC also submitted that the writ petition was not maintainable as the dispute is purely contractual. She relied on the following judgments of the Hon'ble Supreme Court:-
(i) Radhakrishna Agarwal and others v. State of Bihar and others1
(ii) Joshi Technologies International Inc v. Union of India and others2
(iii) Union of India and others v. Puna Hinda3
(iv) Tata Motors Limited v. Brihan Mumbai Electric Supply & Transport Undertaking (BEST) and others4 1 (1977) 3 SCC 457 2 (2015) 7 SCC 728 3 (2021) 10 SCC 690 4 2023 SCC OnLine SC 671 2025:KER:22293 W.A.No.2101 of 2024 12
10. On the other hand, the learned counsel for the Appellants placed reliance over Subodh Kumar Singh Rathour v. The Chief Executive officer & others5 and contended that contractual disputes involving entities falling within the scope of Article 12 of the Constitution are not totally beyond the purview of writ jurisdiction and in the nature of the dispute involved in the instant case interference under Article 226 will be perfectly justified.
11. In this case we see both the contracting parties blaming each other for lapses. The KFC alleges that the Appellants breached the terms of Ext.P1 agreement and also of the power of attorney by receiving the amounts directly from the KWA through its account in Canara bank. The Appellants allege that the KFC failed to maintain the virtual account active and also to do follow-up with the KWA to receive amounts in the virtual account. The KWA states that the virtual account was not maintained by the KFC and it was unable to transfer of funds to the account suggested by the KFC. The KFC on coming to 5 [(2024) 7 S.C.R. 532] 2025:KER:22293 W.A.No.2101 of 2024 13 know about the transfer of amounts directly to the Appellants decided to terminate the loan arrangement and to initiate criminal prosecution against the Appellants. Thereafter it issued Ext.P2 notice.
12. Clause XVI of Ext.P1 agreement reads thus:-
"XVI. It is further agreed that the Corporation will have first charge over all moneys receivables including cheques in payment of bills and shall also be entitled to realize the amount of the bills, direct from the Government or other institutions which awards works to the borrower and the remittances of such bills will be made by direct by the Government or other institutions to the account and in the name Corporation as Attorneys and the Corporation shall repay themselves such receipts of moneys due from the Borrower."
13. It has been stipulated in the above Clause that remittances of bills will be made to the account and in the name of KFC and the Corporation in turn shall repay themselves such receipts of moneys due from the borrower. Ext.P4 power of attorney was executed by the borrower in terms of Ext.P1 agreement. Paragraph 3 of the power of attorney is extracted hereunder:-
2025:KER:22293 W.A.No.2101 of 2024 14 "3. AND WHEREAS to secure the interest of our said Attorney in the execution of the above work, the said Kerala Financial Corporation, has requested us to appoint as our Attorney for the purpose and subject to the terms and conditions herein contained, to which we have agreed. We hereby authorize our said Attorney to act in our name and on our behalf and to do all matters relating to the receipt of all payments due to us under the said Agreement other than payments of any kind hereunder specified. We hereby further authorise our said Attorney to receive any amounts due to us under the terms and conditions of the said Agreement and to receive payments of all kinds of bills other than those specified hereunder for sums payable to us under the said Agreement in our name which bills will be accepted and signed by us and to cash and receive the amounts thereof and appropriate such receipts to itself towards amount spent by it or to be due to it and all other moneys agreed to be payable to it under the arrangement between us and to grant receipt on our behalf in respect thereof."
14. KFC issued Ext.R2(a) letter to the KWA on the strength of Exts.P1 and P4. KWA, by Ext.R2(b) conveyed its acceptance for the arrangement.
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15. Relevant Clause of Ext.P1 agreement and the terms of Ext.P4 power of attorney leaves no room for any doubt regarding the arrangement between the Appellant, KFC and KWA. All amounts were to be remitted to the account suggested by the KFC by the KWA. As we noted above, the KWA maintains that the amount could not be transferred to the virtual account and therefore it remitted the amount to the account of the Appellants. We do not find any specific averment by the KFC in its pleadings that the virtual account was operational at the relevant time. We also note that the KFC later gave another account number to the KWA for remitting remaining amounts. It seems that the KFC is not sure whether the account was operational at the relevant time or not. Certainly it was for the KFC to ensure that the account remained active. Nevertheless the Appellants who were bound by the terms of Ext.P1 agreement and Ext.P4 power of attorney did not even intimate the KFC when the amount was credited in their account. They maintain that the entire amount was spent for the same work and there was no diversion of funds for any other purpose. But their action of receiving the fund in their account and utilizing it without any intimation to the KFC was not in accordance with the 2025:KER:22293 W.A.No.2101 of 2024 16 terms of Ext.P1 agreement. Appellants have a contention that they have never defaulted any payments under Ext.P1 and more amounts than what has been provided by the KFC would be due to them for the remaining works and hence the interests of KFC was not adversely affected. But it is to be noted that a sizable amount, which could have been utilised by the KFC to repay itself, perhaps to the full satisfaction of the outstanding sum of money as of then, was diverted. As the Appellants obviously acted in breach of Clause XVI of the agreement, in our view, the termination of the arrangement by the KFC was well within their rights under Ext.P1 agreement. The learned Single Judge has found so and we do not find any reason to view the matter in any other perspective this intra-court appeal. The appeal is therefore dismissed.
Sd/-
NITIN JAMDAR CHIEF JUSTICE Sd/-
S.MANU
skj JUDGE
2025:KER:22293
W.A.No.2101 of 2024 17
APPENDIX OF WA 2101/2024
PETITIONERS' EXHIBITS
Exhibit P4 IN WPC OF EXHIBIT P4, CLEAR COPY OF THE
POWER OF ATTORNEY EXECUTED BY THE
PETITIONERS IN FAVOUR OF THE 3RD
RESPONDENT DATED 04.02.2023
Exhibit P5 IN WP(C) OF EXT.P5, ENGLISH TRANSLATION
OF THE PORTIONS IN MALAYALAM IS
ATTACHED
Exhibit P6 IN WP(C) OF EXT.P6, ENGLISH TRANSLATION
OF THE PORTIONS IN MALAYALAM IS
ATTACHED
Exhibit P8 IN WP(C) OF EXT.P8, ENGLISH TRANSLATION
OF THE PORTIONS IN MALAYALAM IS
ATTACHED