Karnataka High Court
M/S Mycon Constructions Limited vs The Secretary on 12 November, 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE E.S.INDIRESH
WRIT PETITION NO.4108 OF 2017 (GM-RES)
BETWEEN:
M/S. MYCON CONSTRUCTIONS LIMITED
HAVING ITS REGISTERED OFFICE AT
INDUSTRY HOUSE
45, RACE COURSE ROAD
BENGALURU - 560 001.
REPRESENTED BY ITS
DIRECTOR
SHRI. ANIL KUMAR MALPANI.
...PETITIONER
(BY SRI. K. ARUN KUMAR, SENIOR COUNSEL FOR
SRI. SUNDARA RAMAN M.V., ADVOCATE)
AND:
Digitally signed 1. THE SECRETARY
by ARUNKUMAR
MS DEPARTMENT OF WATER RESOURCES
Location: HIGH NO.305, WATER RESOURCES
COURT OF
KARNATAKA DEPARTMENT, 3RD FLOOR,
VIKASA SOUDHA,
BENGALURU .
2. THE KRISHNA BHAGYA JALA NIGAM LTD
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956 AND
HAVING ITS REGISTERED OFFICE AT
3RD FLOOR, PWD NEW ANNEXE,
K.R. CIRCLE,
BENGALURU - 560001.
AND HEREIN REPRESENTED BY ITS
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MANAGING DIRECTOR.
3. THE STATE OF KARNATAKA
REPRESENTED BY ITS CHIEF SECRETARY
VIDHANA SOUDHA
VIDHANA VEEDHI
BENGALURU - 560 001.
...RESPONDENTS
(BY SRI. MANJUNATH B., AGA FOR R1 & R3;
SRI. PRASHANTH B. R., ADVOCATE FOR
SRI. K. RAMACHANDRAN, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
DIRECT THE RESPONDENT TO QUASH THE IMPUGNED ORDER
NAMELY GOVERNMENT ORDER NO.WRD 248 KBN 2014
BENGALURU DATED 07.11.2016 VIDE ANNEXURE-A.
THIS WRIT PETITION HAVING BEEN RESERVED FOR
ORDERS, COMING FOR PRONOUNCEMENT THIS DAY,
E.S. INDIRESH J., MADE THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE E.S. INDIRESH
CAV ORDER
In this writ petition, the petitioner is assailing the
Government Order, dated 07.11.2016 (Annexure-A),
passed by the respondent No.1.
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2. Relevant facts for the adjudication of this
writ petition are that, the petitioner claims to be the
Class-I contractor, and the petitioner was awarded
with work relating to construction of Common Head
for Alamatti Left Bank Canal and Chimmalagi, Lift
Irrigation Scheme at Alamatti Reservoir. In this
regard, the petitioner has produced the Agreement
dated 11.05.1994 (Annexure-B). It is averred in the
writ petition that respondent No.2 had called upon the
petitioner to execute several additional works which
were outside the scope of the original Agreement.
These works were completed by the petitioner. In this
regard, six supplementary agreements for the
additional works were executed, which are produced
at Annexures-C1 to C6. The petitioner contends that
after completion of the work, respondent No.2 issued
a "No Due Certificate" (Annexure-E). However,
respondent No.2 issued a letter dated 01.02.2006
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stating that the petitioner was liable to pay a sum of
Rs.37,52,000/- as the Comptroller and Accountant
General's Office had not approved the final payment
during auditing of the accounts of the respondent
No.2. Being aggrieved by the same, the petitioner has
preferred W.P.No.2234 of 2006 and this court vide
order dated 13.02.2008, (Annexure-F), allowed the
writ petition, and quashed the claim made by the
respondent No.2. Subsequently, the respondent No.2
has again deducted Rs.37,52,000/- by issuing an
order dated 01.04.2008, from the bills payable to the
petitioner under the 'Balki Project' and same was
questioned before this Court in W.P.No.40140 of 2008,
which came to be allowed, on 25.08.2009, and the
said order of the learned Single Judge, was challenged
in Writ Appeal No.10446 of 2009. The Division Bench
of this Court vide judgment dated 29.10.2009,
(Annexure-G), dismissed the appeal preferred by the
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respondent No.2. Despite these orders, respondent
No.2 did not refund the deducted amount of
Rs.37,52,000/- to the petitioner. Consequently, the
petitioner issued a legal notice dated 08.12.2009
calling upon respondent No.2 to refund the said
amount. In the meanwhile, the petitioner filed C.C.C.
(Civil) No.3006 of 2010 against respondent No.2. In
the meantime, the respondent No.2 filed Civil Appeal
No. 10007 of 2010 before the Hon'ble Supreme Court.
The appeal preferred by the respondent No.2 was
dismissed by the Hon'ble Supreme Court by order
dated 23.07.2025. It is also stated in the writ petition
that, the petitioner was issued with the order dated
09.02.2012, seeking recovery of Rs.37,52,000/- as
arrears of land revenue and same was questioned by
the petitioner before this court in W.P.No.7493 of
2012. This court vide order dated 28.07.2014
(Annexure-H), allowed the writ petition consequently,
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quashed the order dated 09.02.2012. Thereafter, the
respondent No.1, passed the impugned order dated
07.11.2016 (Annexure-A), claiming recovery of
Rs.37,52,000/- which is impugned in this writ petition.
3. I have heard Sri. K. Arun Kumar, learned
Senior Counsel appearing on behalf of the learned
counsel Sri. Sundara Raman M.R, for the petitioner;
Sri. Manjunath B, learned Additional Government
Advocate, for the respondent-State and Sri. Prashanth
B.R., learned counsel appearing for learned counsel
Sri. K. Ramachandra, for the respondent No.2.
4. Sri. K. Arun Kumar, learned Senior counsel
for the petitioner contended that, the respondent
No.2, having suffered orders of this Court in three
earlier writ petitions and in view of the judgment of
the Hon'ble Supreme Court in Civil Appeal No.10007
of 2010, the impugned order passed by respondent
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No.1 seeking recovery does not survive for
consideration. It is further submitted that the
respondent No.2 had issued a completion certificate
and a 'No-Due Certificate' (Annexure-E), indicating
that full and final settlement had been made between
the parties. Therefore, it is contended that, neither
party can raise further claims on a concluded contract.
Accordingly, the petitioner seeks quashing of the
impugned order at Annexure-A. In this regard,
learned Senior Counsel appearing for the petitioner
places reliance in the judgment of the Hon'ble
Supreme Court in the case of ONGC Mangalore
Petrochemicals Limited v. ANS Constructions
Limited and Another reported in (2018) 3 SCC,
373.
5. Nextly, it is contended by the learned Senior
Counsel for the petitioner that, audit objections or
Board Resolution of respondent No.2 are not binding
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on the petitioner in view of the orders passed by this
Court and confirmed in appeal. Any further claim, if at
all, must be adjudicated only in a properly instituted
legal proceedings. Therefore, it is pleaded that, the
impugned order at Annexure-A is liable to be quashed
Learned Senior counsel places on the decision of the
Hon'ble Supreme Court in the case of National
Insurance Company Ltd., vs. Boghara Polyfab
Private Ltd., reported in (2009) 1 SCC 267 and
argued that, the impugned order is to be quashed as
there is no outstanding claim between the parties.
6. Per contra, Sri. Prashanth B.R., learned
counsel for the respondent No.2, submitted that, the
Accountant General's report dated 20.02.2006 raised
audit objections regarding the proposal of the Board
and the revised financial implications, stating that an
excess payment of Rs.37,00,000/- lakhs had been
made to the petitioner due to non-adherence to Board
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instructions. Hence, respondent No.2 seeks to justify
the impugned order at Annexure-A. It was also
argued that under the supplementary Agreements
produced at Annexure-C series, the petitioner
admitted to a difference in rates and, therefore, the
writ petition deserves to be dismissed.
7. Sri. Manjunath B., learned Additional
Government Advocate appearing for the respondent-
State adopted similar arguments and sought for
dismissal of the writ petition.
8. Having heard the learned counsel appearing
for the parties and on careful examination of the writ
papers, it is evident that an agreement was entered
into between the petitioner and respondent Nos.1 and
2 for the construction of the Common Head works for
the Alamatti Left Bank Canal (Annexure-B).
Thereafter, six supplementary agreements were
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entered into for additional works (Annexures-C
series). It is not in dispute that respondent No.2
issued a completion certificate (Annexure-D) stating
that the work was completed on 31.08.2001 and in
this regard issued 'No-Due Certificate' (Annexure-E).
It is forthcoming that on 01.02.2006, subsequently,
respondent No.2, by letter dated 01.02.2006,
demanded payment of Rs.37,52,000/- from the
petitioner, alleging that excess payment had been
made. The said demand was quashed by this Court in
W.P. No. 2234 of 2006 dated 13.02.2008 (Annexure-
F), while reserving liberty to the respondent No.2 to
take action in accordance with law. Thereafter,
respondent No.2 deducted Rs.37,52,000/- from bills
related to another project executed by the petitioner,
which was again quashed by this Court in W.P.
No.40140 of 2008 dated 25.08.2009. The said order
was confirmed by the Division Bench in W.A. No.
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10446 of 2009 dated 29.10.2009 (Annexure-G). The
order of the Division Bench was further challenged
before the Hon'ble Supreme Court in Civil Appeal
No.10007 of 2010, which was dismissed on
23.07.2025. Paragraphs 3 to 7 reads as under:
"3. Based on the Audit Report, the appellants herein
recommended recovery of a sum of approximately
Rs.37 lakhs, in exercise of Clause 39 of the Agreement
entered into between the parties. The Agreement
pertains to execution of a works contract and Clause 39
empowers the Government to recover amounts due
from the contractor, without prejudice to other
remedies. It is also not in dispute that the amount
sought to be recovered pertains to an earlier contract,
though the recovery was attempted from the works
executed under a subsequent agreement awarded to
the respondent.
4. The learned Single Judge, finding such action to be
illegal, directed refund of the amount to the writ
petitioner.
5. In an intra-Court appeal, the Division Bench, in our
considered view, rightly held that Clause 29 and Clause
36 of the subsequent Agreement would not enable the
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Government to hive off such sums, which admittedly
stood barred by limitation. Before us, it is not in dispute
that the amount sought to be recovered pertains to
works executed under a contract of the year 1994,
while the Audit Report is dated 19.11.2004 and
recovery was attempted only in the year 2008.
6. In our considered view, the High Court rightly
observed that the appellants herein had "made a feeble
attempt to wake up from the slumber" for they slept
over the issue for an inordinate period, which delay
cannot be attributed to the contractor.
7. For the aforesaid reasons, the civil appeal is
dismissed."
9. Perusal of the judgment of the Hon'ble
Supreme Court makes it clear that, the claim made by
the respondent No.2, has reached finality. It is further
noted that, on the 3rd round of litigation, the
respondent No.2 again, issued the order dated
09.02.2012, claiming refund of Rs.37,52,000/- which
came to be rejected by this court in W.P.No.7493 of
2012 dated 28.07.2014 (Annexure-H).
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10. In view of the judgment of the Hon'ble
Supreme Court in Civil Appeal No. 10007 of 2010
dated 23.07.2025, respondent No.2 is barred from
raising any further claim or recovery against the
petitioner. At this stage, it is relevant to extract the
observation made by the Hon'ble Supreme Court in
the case of 'National Insurance Company Ltd.',
supra, paragraph 25 to 29 reads as under:
"25. We may next examine some related and incidental
issues. Firstly, we may refer to the consequences of
discharge of a contract. When a contract has been fully
performed, there is a discharge of the contract by
performance, and the contract comes to an end. In
regard to such a discharged contract, nothing remains
-- neither any right to seek performance nor any
obligation to perform. In short, there cannot be any
dispute. Consequently, there cannot obviously be
reference to arbitration of any dispute arising from a
discharged contract. Whether the contract has been
discharged by performance or not is a mixed question
of fact and law, and if there is a dispute in regard to
that question, that is arbitrable. But there is an
exception. Where both the parties to a contract confirm
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in writing that the contract has been fully and finally
discharged by performance of all obligations and there
are no outstanding claims or disputes, courts will not
refer any subsequent claim or dispute to arbitration.
Similarly, where one of the parties to the contract
issues a full and final discharge voucher (or no-dues
certificate, as the case may be) confirming that he has
received the payment in full and final satisfaction of all
claims, and he has no outstanding claim, that amounts
to discharge of the contract by acceptance of
performance and the party issuing the discharge
voucher/certificate cannot thereafter make any fresh
claim or revive any settled claim nor can it seek
reference to arbitration in respect of any claim.
26. When we refer to a discharge of contract by an
agreement signed by both the parties or by execution
of a full and final discharge voucher/receipt by one of
the parties, we refer to an agreement or discharge
voucher which is validly and voluntarily executed. If the
party which has executed the discharge agreement or
discharge voucher, alleges that the execution of such
discharge agreement or voucher was on account of
fraud/coercion/undue influence practised by the other
party and is able to establish the same, then obviously
the discharge of the contract by such
agreement/voucher is rendered void and cannot be
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acted upon. Consequently, any dispute raised by such
party would be arbitrable.
27. While discharge of contract by performance refers
to fulfilment of the contract by performance of all the
obligations in terms of the original contract, discharge
by "accord and satisfaction" refers to the contract being
discharged by reason of performance of certain
substituted obligations. The agreement by which the
original obligation is discharged is the accord, and the
discharge of the substituted obligation is
the satisfaction. A contract can be discharged by the
same process which created it, that is, by mutual
agreement. A contract may be discharged by the
parties to the original contract either by entering into a
new contract in substitution of the original contract; or
by acceptance of performance of modified obligations in
lieu of the obligations stipulated in the contract.
28. The classic definition of the term "accord and
satisfaction" given by the Privy Council in Payana Reena
Saminathan v. Pana Lana Palaniappa [(1913-14) 41 IA
142] (reiterated in Kishorilal Gupta [AIR 1959 SC 1362
: (1960) 1 SCR 493] ) is as under: (IA pp. 145-46)
"... The 'receipt' given by the appellants and accepted
by the respondent, and acted on by both parties proves
conclusively that all the parties agreed to a settlement
of all their existing disputes by the arrangement
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formulated in the 'receipt'. It is a clear example of what
used to be well known as common law pleading as
'accord and satisfaction by a substituted
agreement'. No matter what were the respective rights
of the parties inter se they are abandoned in
consideration of the acceptance by all for a new
agreement. The consequence is that when such an
accord and satisfaction takes place the prior rights of
the parties are extinguished. They have in fact been
exchanged for the new rights; and the new agreement
becomes a new departure, and the rights of all the
parties are fully represented by it."
(emphasis supplied)
29. It is thus clear that the arbitration agreement
contained in a contract cannot be invoked to seek
reference of any dispute to arbitration, in the following
circumstances, when the contract is discharged on
account of performance, or accord and satisfaction, or
mutual agreement, and the same is reduced to writing
(and signed by both the parties or by the party seeking
arbitration):
(a) where the obligations under a contract are fully
performed and discharge of the contract by
performance is acknowledged by a full and final
discharge voucher/receipt, nothing survives in regard to
such discharged contract;
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(b) where the parties to the contract, by mutual
agreement, accept performance of altered, modified
and substituted obligations and confirm in writing the
discharge of contract by performance of the altered,
modified or substituted obligations;
(c) where the parties to a contract, by mutual
agreement, absolve each other from performance of
their respective obligations (either on account of
frustration or otherwise) and consequently cancel the
agreement and confirm that there are no outstanding
claims or disputes."
11. Following the declaration of law by the
Hon'ble Supreme Court and considering the fact that
respondent No.2 has issued both the completion
certificate (Annexure-D) and 'No-Due Certificate'
(Annexure-E), I am of the considered opinion that,
the impugned order dated 07.11.2016 (Annexure-A)
is erroneous and constitutes a false and unsustainable
claim against the petitioner. In the result, I pass the
following:
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ORDER
i) The writ petition is allowed.
ii) The Government Order dated 07.11.2016 (Annexure-A) passed by respondent No.1 is hereby quashed.
iii) Respondent Nos.1 and 2 are directed to pay the litigation cost of Rs.25,000/- to the petitioner within four weeks from the date of receipt of a certified copy of this order.
Sd/-
(E.S.INDIRESH) JUDGE SB