Gujarat High Court
Ranjit Buildcon Limited Through ... vs Gujarat Water Supply And Sewerage Board on 6 August, 2021
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/9793/2021 ORDER DATED: 06/08/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9793 of 2021
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RANJIT BUILDCON LIMITED THROUGH MANAGING DIRECTOR GAURAV
RANCHHODBHAI PATEL
Versus
GUJARAT WATER SUPPLY AND SEWERAGE BOARD
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Appearance:
MR SHALIN MEHTA, SENIOR ADVOCATE WITH MS ADITI S RAOL(8128)
for the Petitioner(s) No. 1
MR HS MUNSHAW(495) for the Respondent(s) No. 1,2,3
NOTICE SERVED BY DS(5) for the Respondent(s) No. 4
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 06/08/2021
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. By this writ-application under article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs:-
21(A) Be pleased to issue a writ of certiorari or any other writ, order or direction declaring the impugned circular letter dated 06.04.2021 issued by the vigilance cell of the respondent Board to all the zonal offices directing them to withhold the payments due to the petitioner as bad in law, illegal, arbitrary, contrary to the principles of natural justice and thus violative of Article 14 of the Constitution of India and quashing and setting aside the same;
(B) Be pleased to issue a writ of mandamus or any other appropriate writ, order or direction commanding the respondent authorities to release the payments due to the petitioner in respect of other ongoing works in all the zones without any regard for the proposed recovery from petitioner in respect of the Mangrol-Junagadh Project;
Page 1 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021C/SCA/9793/2021 ORDER DATED: 06/08/2021 (C) Be pleased to pass cease and desist order refraining the respondent authorities from coercively enforcing the proposed recovery of Rs.15.87 crores from the petitioner;
(D) Pending admission and final hearing of the present petition, be pleased to stay the operation and implementation of the circular letter dated 06.04.2021 issued to all the zonal offices;
(E) Pending admission and final hearing of the present petition, be pleased to restrain the respondents from using any direct or indirect coercive measures for the proposed recovery of Rs.15.87 crores; and (F) Be pleased to pass any other and/or further order, as deemed fit, in the interest of justice.
2. The facts giving rise to this writ-application may be summarized as under:-
2.1 The writ-applicant is a company engaged in the business of civil engineering since 1967. In 2015 online tenders on item rate/EPC basis were invited and published by the Executing Engineer, P.H. Works Division No.2, Gujarat Water Supply and Sewerage Board, [for short 'The Board'] Junagadh for the work of Mangrol Augmentation Regional Water Supply Scheme (Part-II) and Junagadh City Water Supply Scheme of District Junagadh from the contractors registered in "AA" Class and above in the R & B Department or Narmada Water Resources, Water Supply & Kalpsar Department and equivalent or class in CPWD/Railway/Other State Governments.
2.2 It appears from the materials on record that the contract referred to aforesaid was awarded in favour of the writ-applicant.
The nature of the contract was for part design engineering, full Page 2 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 procurement, total construction, testing and commissioning, including total working survey for the pipeline network, as well as operation and maintenance for five years in case of Distribution Network for the Mangrol Augmentation Regional Water Supply Scheme and remaining pipeline work in the City of Junagadh.
2.3 It is not in dispute that the work was completed on 31.03.2018. It is also not in dispute that the Deputy Executive Engineer, P.H. Works Sub-Division Mangrol issued a Work Completion Certificate certifying that the work had been completed by the agency i.e. the writ-applicant as per the terms and conditions of the agreement and in accordance with the design, drawings and specifications. It is also not in dispute that the 26 th and final bill for Rs.2,57,25,572/- was also cleared and paid to the writ-applicant on 25.07.2018.
2.4 It appears that thereafter the respondent - board started complaining about the quality of work undertaken by the writ- applicant. The State took up the issue seriously and having noticed few deficiencies and problems in the supply of water and sewerage drainage system, thought fit to get it repaired through another agency by incurring huge costs. It is the case of the board that it is on account of inferior quality of work and pipelines installed by the writ-applicant that the problems cropped up in the supply of water and sewerage drainage system. In other words, the board is now complaining that the work as assigned to the writ-applicant was not carried out in a proper manner, as a result, the board had to suffer a lot of hardship and had also to incur lot of expenses to replace Page 3 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 the pipelines etc. 2.5 In such circumstances referred to above, the board issued a notice in the form of letter dated 06.04.2021, Annexure-H to this petition, Page-58 informing the writ-applicant that the amount of Rs.15.87 crore is to be recovered from him towards the damages by way of compensation and such amount would be realized or set off from the pending bills of the writ-applicant with respect to other works of contract.
2.6 In such circumstances referred to above, the writ-applicant had to come before this Court by way of the present writ- application.
3. Mr. Shalin Mehta, the learned senior counsel appearing for the writ-applicant vehemently submitted that the proposed action on the part of the board is illegal and unreasonable. Mr. Mehta would submit that the board on its own could not have determined the amount to be paid by his client towards damages by way of compensation and the board cannot be permitted to realize or set off such amount from the pending bills of his client with respect to the other contracts with the board are concerned. Mr. Mehta would submit that one letter addressed by his client to the board dated 15.04.2021 would make the picture clear. The letter reads thus:-
RANJIT BUILDCON LIMITED To, Date:15.04.2021 The Executive Engineer, P.H. Work division, G.W.S. & S. BOARD, VERAVAL Page 4 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 Subject: Work of Mangrol augmentation regional water supply scheme (part-ii) and Junagadh city water supply scheme of district Junagadh.
Ref. 1) Your letter No.AB/Mangrol sudharana part-ii/HDPE/374 Date: 17/02/2020
2) Your letter No.AB/Mangrol/Notice/1018/ Date: 08/06/2020
3) Our letter Date: 01/10/2020
4) GWSSB letter No.O.W. No.Takedari Unit/Mangrol/2018/ 392 Date: 06.04.2021.
Dear Sir, The above work was awarded to us by you wide your work order no.AB/tender/Mangrol-Junagadh/852 Date-27/04/2015, as per tender we have to carry out the work on EPC basis wherein we have to procure the material from the approved vendors.
After getting the work order for supply of HDPE pipes and other material we had finalised the agencies from the vendor list and the QAP was approved by PMC appointed by you. For supply of HDPE pipe we had finalized the agency M/s. Purma Plst Pvt. Ltd. And as per term and conditions of the contract the pipes are to be inspected by PMC as per the relevant IS code. Accordingly the HDPE pipes and other material which are to be used in the work are already inspected by the PMC and as such for the quality of the material we are not responsible, as PMC agency has carried out all the test at factory and also has supervise the work at side and periodically PMC agency has issued the required inspection notes which are available in your record which may kindly be refer.
As per condition of the contract the defect liability of the work is one year. In this connection it is to inform you that the above work is completed with all respect on 31/03/2018 and all the necessary field test were carried out in present of representative of PMC and representative of GWSSB. After passing the field test, the completion certificate was issued by you, since then the system is running satisfactory except in fue sections in which trouble has started after defect liability period and department has inform us to replace the above section wide the letter dated 17/02/2020 and 08/06/2020 which we have already replied on 01/10/2020 which may kindly be refer too.
As stated earlier since the material is procured from approved vendor as well as laying work is carried out in supervision of PMC. There is no question of replacement of the pipe by us as the matter is cropped up after the period of defect liability.
From the reliable sources we came to know that instead of replying our letter dated 01/10/2020, the GWSSB has invited the tenders to carry out the work at our risk and cost, which is injustice Page 5 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 to us. In this connection our humble submission is as under.
1. Since the defect liability period is already over and we have already started the operation and maintenance of the work and most of the villages are getting its requirement regularly and pani patrak is being submitted to you regularly which may kindly be verify in your office.
2. As per contract act when a tender is invited at the risk and cost of the agency there should not be any change in the provision of original contract agreement. In this case our agreement is to provide and lay HDPE pipe, where as you have invited the tender for DI pipe since you have make all changes in the tender, it cannot be executed as a risk and cost of us, as there is basically change of pipe material and terms and conditions of the contract. Thus the circular which GWSSB have issued on 06/04/2021 to withheld our payment of work which we carry out with other zone which is not legal and not tenable in court. In this connection we hereby inform you that kindly release our outstanding payment and cancel the order dated 06/04/2021 issued by GWSSB for withholding our payment by other zones. If no actions are taken by you and due to which if any financial loss will occur to us you will be held responsible for the same which may kindly be noted.
3. As stated earlier the HDPE pipes are manufactured by pipe vendor as per the QAP approved by your and PMC and all the pipes are tested and inspected by PMC and as such we are not held responsible for any kind of defect in the pipe. In Junagadh section and other section of Mangrol zone the working of HDPE pipe of the same size are satisfactory and as such to consider whole lot defective is not proper. The section which is giving trouble may be due to other reason.
We have examine the GIRDA report in which they have stated that the samples are failed in Melt flow rate as well hydro test, however we were not asked to witness the test and as such test carried out by you through FIRDA is not acceptable to us as in the inspection note of the PMC all the test are found satisfactory and you have carried out all the test after defect liability period and has as such we are not at fault.
4. The most of the pipeline are laid cross country, that is through filed and as per ROU the farmer can cultivate the land after laying the pipeline. There are possibility that while cultivation of the field heavy vehicle might have pass over the laid line, which might have damaged the sections and as such your presumption of defective material is not correct.
As per agreement the contract condition is as per fidic first edition 1999 is to follow. In this connection kindly refer the contract Page 6 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 condition 5.2, 7.3, 7.4, 7.5, 9.4, 10.1, 11.1, 11.9, 12.1 we have strictly followed the above all the conditions and as such we are not at fault.
In view of above it earnestly requested that kindly release our outstanding dues and withdraw you letter dated 06/04/2021 as otherwise we will compelled to proceed legally, if no action are taken by you within fifteen days from the date of receipt of this letter.
Thanking you, You're faithfully, For, Ranjit Buildcon Ltd.
Sd/-
Authorized Signatory D.A. Statement Copy submitted to Superintending Enginner, P.H. Circle, GWSSB, Junagadh for information and kindly do needful in the matter.
D.A. as above Submitted to Chief Engineer, Zone-5, GWSSB, Junagadh for information and in reference to kindly do needful in the matter.
D.A. as above.
4. Mr. Mehta would submit that it may be open to the board to adjust the requisite amount sought to be recovered only if the claim is crystallized and not otherwise.
5. In such circumstances referred to above, Mr. Mehta prays that there being merit in his writ-application, the same be allowed and the board be restrained from recovering the amount of Rs.15.87 crore from other pending bills for the work already undertaken and almost on the verge of completion.
6. On the other hand, this writ-application has been vehemently opposed by Mr. Munshaw, the learned counsel appearing for the board. Mr. Munshaw would submit that in terms of Clause 43A of the agreement between the writ-applicant and the board, it is Page 7 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 permissible for the board to set off against any claim for the payment of a particular sum of money arising out or under any other contracts. Clause-43A upon which strong reliance has been place by Mr. Munshaw reads thus:-
"(Clause-43A) Set off Clause -
Any sum of money due and payable to the contractor (including the security deposit returnable to the contractor) executing and Government work or work of any District Panchayat wholly financed as grant-in-aid under this contract shall be appropriated by any District Panchayat/ Government and shall be set off against any claim of the Government/ District Panchayat of Gujarat State by the District Panchayat of Gujarat. State/ Government for the payment of a sum of money arising out or under any other contract made by the contractor with the Government/ District Panchayat of Gujarat State for the work wholly financed as grant-in-aid by Government of Gujarat State. When no such amount for purpose of the recovery from the contractor against any claim of the Government/ District Panchayat of Gujarat State is available, such a recovery shall be made from the contractor as arrears of land revenue."
7. Mr. Munshaw, thereafter, invited the attention of this Court to the reply filed by his client. We quote the relevant averments.
"3. The respondent no.3 most humbly and respectfully submits that, the project known as "Mangrol Augmentation Regional Water Supply Scheme, Part II" was granted administrative/ technical sanction by the head office of the Board and estimated cost of the project was of Rs.105,77,41,065=34/-. It is submitted that, the tenders were invited on-line and due procedure was followed for entrusting the said project on Turn- Key Basis. The respondent No.3 submits that, offer of the petitioner being Rs.110,85,12,636=47/- (4.80% above) was the lowest one and therefore, contract was executed on 27.04.2015 and the work order was also issued in favour of the petitioner on the same day. It is submitted that, time limit for completion of the project was of 15 months commencing from the date of issuance of Letter of Acceptance i.e.08.04.2015.
4. The respondent No.3 most respectfully submits that, M/s. Tata Consultancy Services was appointed as Project Monitoring Page 8 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 Consultancy (PMC for short) and required agreement was also executed with it. It is submitted that, as such the work was to be completed within a period of 15 months, time limit was extended for in all 814 days by order passed by the Chief Engineer, Zone-5, Junagadh. It is further submitted that, accordingly, work project was completed by 31.03.2018, and 26 th and final bill was cleared on 21.08.2018. Completion certificate was also issued by the Deputy Executive Engineer at Mangrol prior thereto on 31.03.2018.
5. The respondent No.3 most respectfully submits that, as per the terms and conditions of the tender and contract, the petitioner was to look after the operation and maintenance of the project for a period of 5 years commencing from 01.07.2017. It is stated that, even as on today, the petitioner is looking after operation and maintenance of the project and is to be paid in all amount of Rs.2,40,00,000/- for the said period.
6. The respondent No.3 further submits that, during execution of the project, complaint dated 11.12.2017 was addressed by the local villager to his Excellency Governor of Gujarat, Gandhinagar as well as others about the poor execution of the scheme resulting into manifold problems.
7. The respondent no.3 most respectfully submits that Gujarat Vigillance Commission, Gujarat State, Gandhinagar looked into the matter and addressed a letter dated 01.01.2018 to the Member Secretary of the board instructing to submit preliminary report eith his opinion.
8. The respondent no.3 most respectfully submits that another complaint was addressed by one Hamirbhai L. Dhama and thereupon, again Gujarat Vigilance Commission, Gandhinagar istructed on 06.02.2018 to furnish a preliminary report.
9. The respondent No.3 most respectfully submits that the matter was looked into by the Vigilance Cell, Gujarat Water Supply and Sewerage Board and ultimately, detailed report dated 07.01.2020 was addressed to the Gujarat Vigilance Commission, Gandhinagar by the Member Secretary of the Board.
10. It is submitted that Gujarat Vigilance Commission, Gandhinagar through letter dated 31.01.2020 instructed to initiate actions against retiring Executive Engineer Mr. Sahu.
The respondent No.3 craves leave to state that thereafter further detailed report dated 29.01.2021 was addressed by the Member Page 9 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 Secretary of the Board to the Gujarat Vigilance Commission, Gandhinagar giving complete details about irregularities as well as responsibility of the number of officers of the Board as well as M/s. Tata Consultancy Services as project monitoring consultancy.
11. The respondent No.3 most respectfully submits that thereafter, the Gujarat Vigilance Commission through letter dated 22.02.2021 instructed the Member Secretary of the Board to take actions against retiring officers at once as well as others in due course. It is pertinent to note that the Gujarat Vigilance Commission also observed for recovery actions due to heavy financial loss caused to the Board and instructed to submit a report in that regard. At this stage, it is further pertinent to note that, the issue relating to the defective implementation of the project was also raised in the Legislative Assembly.
12. The respondent No.3 most respectfully submits that Chief Engineer, Zone 5, Junagadh instructed on 17.02.2020 to take necessary actions against the petitioner and thereupon, the deponent issued a notice on 17.02.2020 instructing to replace the pipes as GIRDA at Vadodara had submitted a failure report of the quality of pipes used in the said project.
It is stated that the petitioner failed to reply the same and take corrective measures and thereupon, he was issued another notice dated 08.06.2020. Surprisingly and shockingly, the same were replied to on 01.10.2020 by the petitioner refusing to undertake any activity for replacement and repairs on the ground that defect liability period of one year has expired.
13. The respondent No.3 most respectfully submits that the project completed by the petitioner only on 31.03.2018 was not upto the mark and there were number of complaints and defects, more particularly of the quality of HDPE pipes having length of 48.42 Kms. It is stated that water supply was affected due to major leakage during supply of water. Respondent No.3 further submits that, as water supply was very much affected, the issue was examined at the highest level.
14. The respondent No.3 submits that, considering the hue and cry from public at large and their representatives, the Hon'ble Minister, Water Supply, Animal Husbandry & Rural Development Department, Government of Gujarat also addressed a letter dated 18.07.2019 to the Member Secretary of the board instructing to take necessary action for laying D.I. pipelines at Vallabhgadh to Antroli and to see that water supply is provided Page 10 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 regularly.
15. The respondent no.3 crave leave to state that considering manifold problems being faced owing to defective pipelines for water supply from Vallabhgadh - Aajak - Shepa - Antroli section, having length of 48 Kms approximately and covering 30 villages, the board was compelled to take up replacement work for the defective pipes, laid by the petitioner, and therefore, the Chief Engineer, Zone-5, Junagadh had to forward a proposal to the Chief Engineer, Technical Cell of the Board on 03.06.2020 to lay a new D.I. pipeline at the estimated cost of Rs.15,61,17,000/-.
It is submitted that, thereafter, Board Members of the Gujarat Water Supply and Sewerage Board considered the said agenda item in its meeting dated 06.06.2020 and approved the proposal.
16. The respondent No.3 most respectfully submits that due to usage of the defective pipes by the petitioner the laid HDPE pipeline was not serving its purpose to supply water, hence a tender of Rs.15,61,17,000/- was invited for laying DI pipeline in lieu of defective HDPE pipeline, by publishing an advertisement in the newspapers as well as online on 11.07.2020 and ultimately, lowest bid of M/s. Pruthvi Builders (quoting Rs.12,79,34,780=65 i.e. below 8.5595%) was accepted by the Tender Purchase Committee of the Board at Gandhinagar on 01.12.2020 and Acceptance Letter dated 03.12.2020 was issued in its favour.
17. The respondent no.3 further submits that, immediately thereafter work order was issued on 15.12.2020 for rectification work of defective pipeline laid by the petitioner and contract was executed on the same day.
It is stated that time limit for execution of the rectification work was of 12 months and up till now 50% of the work is completed, an amount of Rs.6,31,87,742=48/- is paid to M/s. Pruthvi Builders from the board fund and the balance amount will be paid after completion of the rectification work again from the board fund.
18. The respondent no.3 humbly submits that heavy monetary burden of approximately Rs.12,79,34,780=65/- is now to be borne by the Board due to installation of defective HDPE pipelines by the petitioner. The respondent no.3 further submits that Gujarat Water Supply and Sewerage Board as well as other authorities including Municipal Corporations are using HDPE Page 11 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 pipes, PVC pipes, D.I. pipes, MS pipes etc., for water supply lines. It is stated that HDPE pipes (High Density Polyethylene Pipes) for water supply as per Indian Standard Code IS 4984-
1995 is having 50 years of service life.
19. The respondent no.3 most respectfully submits that in view of the fact that heavy monetary burden has fallen on public exchequer due to defective pipes used by the petitioner at the site having length of 48 kms. and as the Gujarat vigilance Commission in its confidential report dated 22.02.2021 has instructed to provide details about recovery made by the board in respect of the defective pipes used by the petitioner. The entire issue was taken up at the highest level and ultimately, decision was taken to recover an amount of Rs.12,79,34,780=65/- from the present petitioner as that much amount is to be spent by the Board for installation of D.I. pipelines in lieu of the pipeline of the poor quality of HDPE pipes used by the petitioner.
It is pertinent to point out that, a decision was also taken to recover the amount from the petitioner as defective pipes replacement cost from the amount payable towards other works of the petitioner.
20. The respondent No.3 most humbly submits that, accordingly, all six Chief Engineers of different zones of the Board were instructed through letter dated 06.04.2021 to make recovery of Rs.12,79,34,780=65 which is the cost of the new pipelines to be used in place of the pipeline of poor quality as used by the petitioner agency. Further it is submitted that pursuant to the GVC's instructions dated 31.01.2020 an undue excess payment of Rs.3.08 crore is also required to be recovered. As such, all the Chief Engineers of the board were instructed vide the said letter dated 06.04.2021 to make total recovery of Rs.15.87 Crore (Rs.12.79 Crore + Rs.3.08 Crore = Rs.15.87 Crore) from the petitioner from any other works of the petitioner.
It is stated that, accordingly, all Chief Engineers of the board have instructed their subordinate officers to take necessary actions for recovery of an amount in the interest of public at large. Respondent no.3 further submits that simultaneously, the Board has also taken action against supplier of defective HDPE pipes by way of removing M/s. Purma Plast Pvt. Ltd., Bhivandi, from the approved vendors' list for a period of 5 years for supplying poor quality pipes.
Page 12 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021C/SCA/9793/2021 ORDER DATED: 06/08/2021 It is further stated that, Material Cell of the Board is also instructed in this regard through letter dated 15.04.2021.
It is also submitted that, even the actions against M/s. Tata Consultancy Services (TCS) which was appointed as Project Monitoring Consultancy for implementation of same project are also to be initiated for its negligence in functioning/ monitoring services.
21. The respondent no.3 most respectfully submits that the facts narrated herein above make it clear that the petitioner company was responsible for using defective HDPE pipelines resulting into failure of the project and heavy monetary burden of Rs.12,79,34,780=65 is to be borne by the Board. It is stated that public at large and all the beneficiary citizens of this project were deprived from getting clean, filtered and sufficient drinking water. Normally, HDPE pipes is having its design period or life - span of 50 years (approx.). The petitioner has not at all paid any attention to the quality of such used and laid pipes, which have failed miserably within only 18 months of installation and is now instead of taking responsibility, is citing 12 months defect liability period. In other words, though the project has failed miserably within 18 months due to callous approach of the petitioner, administration and public at large have not only to suffer heavily, but a public exchequer is also caused monetary burden of Rs.12,79,34,780=65.
22. The respondent No.3 further submits that, the petitioner cannot be allowed to escape from his liability, just on the basis of issuance of completion certificate and completion of defect liability period, when it is not only a case of total negligence on part of the petitioner agency but also a case of collusion with the field staff of the board who accepted the defective pipes and for that, the acts of commission on part of the involved field staff, departmental proceedings for disciplinary actions and inquiry have also been initiated against the involved field staff of the board under the Gujarat Civil Service (Discipline & Appeal) Rules, 1971.
It is humbly and respectfully stated that, though the petitioner is looking after operation and maintenance of the project for a period of 5 years, it has not bothered to repair and substitute such pipes in spite of several instructions during execution of the project and also has not cared to replace them during the defect liability period of one year. So, the petitioner and all involved field staff and PMC (M/s. Tata Consultancy Service) aggregately Page 13 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 committed grave financial irregularity and raised financial liability to the board. Therefore, the respondent board is compelled and required to recover an amount of Rs.12,79,34,780=65/- (from the amount payable to it by the board for other works.) towards additional cost borne by the board due to total callous approach of the petitioner in execution of the work.
It is also pertinent to note that, cost of the replacement of the said network in case of use of HDPE pipes was of Rs.13.96 crore (quoted ratess), while in the present case, cost of entire replacement by way of using D.I. pipes is of Rs.12.79 crores. As per the Gujarat Vigilance Commission's instructions, the board is also required to recover an amount of Rs.3.08 crores towards undue excess payment made to the petitioner.
23. The respondent no.3 most respectfully submits that the contention raised by the petitioner that it is not liable to pay any amount to the Board is totally baseless. In view of all the facts noted above, the Board is entitled to recover any amount from other works as per the provisions of Clause-43(A) Set off Clause of Volume-I relating to technical bid which are applicable in the present case. The board is, therefore, required to recover such amount from security deposit or any other amount payable to the petitioner from his other works."
8. In such circumstances referred to above, Mr. Munshaw prays that there being no merit in this writ-application, the same be rejected.
ANALYSIS:-
9. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the board is entitled in law to invoke the set off clause i.e. Clause-43A as stipulated in the agreement.
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10. On 23.07.2021 this Court passed the following order:-
"Mr. Munshaw, the learned counsel has instructions to appear on behalf of the respondents. He prays for some time in the matter to file reply.
There is no problem in granting time to Mr. Munshaw to file reply but at the same time, we may draw the attention of Mr. Munshaw to a judgment rendered by a Co-ordinate Bench of this Court in the case of Kunal Structure (India) Ltd. Vs. Gujarat Industrial Development Corporation & Another; Special Civil Application No.12115 of 2016, decided on 20.03.2017. This decision rendered by the Co-ordinate Bench is based on the decision of the Supreme Court in the case of Karnataka Vs. Shree Rameshwara Rice Mills, Thirthahalli, AIR 1987 SC 1359. We also request Mr. Munshaw to look into one another judgment rendered by this Court in the case of Narmada Cement Co. Vs. State of Gujarat & Another, Special Civil Application No.821 of 1995, decided on 22.19.1996.
Post the matter on 30.07.2021 on top of the board.
One copy of this order shall be furnished at the earliest to Mr. Munshaw so that Mr. Munshaw can look into the case laws referred to in our order."
11. The issue we are called upon to consider is no longer res- integra. We can do no well then to refer to a Division Bench decision of this High Court in the case of State of Gujarat & Another Vs. Narmada Cement Company Ltd.; Letters Patent Appeal No.6 of 1997; decided on 16th September 2009. We quote the entire order.
"The question that has come up for our consideration in this case is whether Clause 26 of the Tender Agreement No.D-3 of 1990-91 would enable the State Government to appropriate any sum of money due and payable to the contractor by way of set off against any claim of the Government arising out of any other contracts with that contractor.Page 15 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021
C/SCA/9793/2021 ORDER DATED: 06/08/2021 Petitioner-company is engaged in the manufacture of cement. Respondent No.2 - Executive Engineer, Irrigation Mechanical Division No.3 invited tender for the supply of ordinary port-land cement and possolone portland cement to the extent of 1,00,000 M.T. as per tender notice No.4 of 1990-91. In response to the tender notice, petitioner submitted its tender which was accepted and an agreement in Form-D was entered into between the petitioner and the respondent No.2. Petitioner supplied 40,621-75 MT cement under the contract costing Rs.6,76,27,702.31, against which, the respondent made payment of Rs.6, 52,38,900.80. Amount of Rs.23,88,801.49 was due and payable to the contractor, but was withheld by the respondent No.2 alleging that the said amount had to be adjusted towards other claims against the contractor. Aggrieved by the same, petitioner has approached this Court.
Learned Single Judge, on facts as well as on law, come to the conclusion that Clause 26 of the Tender Conditions would not empower the respondent authority to withhold and set off those accounts in respect of other claims pertaining to the other contracts. Direction was given to the respondent Authority to release amount of Rs.18,68,508.56 with interest at the rate of 18 %. Aggrieved by the order, the State has preferred this Letters Patent Appeal.
Learned Assistant Government Pleader Ms.Monali Bhatt appearing for the appellant has submitted that the learned Single Judge has committed an error in interpreting Clause 26 of the Tender Agreement. Learned AGP submitted that heading of Clause 26 says "set off of money" and "not set off of money due and payable". Learned AGP submitted that such a Clause has been incorporated in public interest, so that there will be certainty in satisfying the claim of the State. She drew a parallel referring to Clause 18 of the Standard Contract pertaining to the Central Government Works. Reference was also made to the judgments of the Apex Court in the case of Union of India v. Raman Iron Foundry, AIR 1974 SC 1265 and H.M.K.Ansari vs. Union of India, 1984 SC 29 and submitted that the principle laid down by the Apex Court in above mentioned decisions while interpreting Clause 18 would apply to Clause 26 of the Tender Conditions.
Learned Senior Counsel Mr.Manish R.Bhatt appearing for the respondent company submitted that there is no illegality in the view expressed by the learned Single Judge and referred to the judgment of the Apex Court in the case of M/s.Page 16 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021
C/SCA/9793/2021 ORDER DATED: 06/08/2021 Lakshmichand & Balchand v. State of Andhra Pradesh, AIR 1987 SC 20. Learned Senior Counsel further submitted that if Clause 26 is interpreted as stated by the learned AGP, then the entire defence taken by the company in Special Suit No.351 of 1992 filed by the State before the learned Civil Judge (S.D.), Surat would be thrown to the winds. Learned counsel submitted that the petitioner is seriously disputing various claims raised by the State Government in respect of other contracts. Learned counsel also submitted that principle laid down by the Apex Court in the decision referred to by the learned AGP are in support of the petitioner.
Learned Single Judge in para-6 of the judgment compared Clause 18 of the Standard Contract and Clause 26 of the Tender Conditions. Clause 18 of the Standard Contract has been interpreted by the Apex Court in the case of Union of India vs. Air Foam Industries (P) Ltd. (Supra) interpreting the words "any claim for the payment of a sum of money" of clause 18 of the Contract, the Apex Court held that the above words occurring in Clause 18 of the contract must be read not in isolation but in the context of the whole clause, for the intention of the parties is to be gathered not from one part of the clause or the other but from the clause taken as a whole. Apex Court held if so read, Clause 18 does no more than merely provide an additional mode of recovery to the purchaser, and the purchaser is entitled to exercise the right conferred under that clause only where there is a claim for a sum which is presently due and payable by the contractor. Above-referred decision came up for consideration before the three Judges' Bench of the Apex Court in the case of M/s. H.M.Kamaluddin Ansari and Co. v. Union of India and others, (Supra), wherein the Court impliedly over-ruled reasoning of the judgment in Union of India vs. Air Foam Industries (P) Ltd. (Supra), but all the same, while interpreting Clause 18, the Apex Court took the view that clause gives wide powers to the Union of India to recover the amount claimed by appropriating any sum then due or which at any time thereafter may become due to the contractor under other contracts. When we look at Clause 26 of the Tender Condition in the instant case, it altogether stands on different footing. Question of appropriation of amount in respect of any other contract arises only when the claim of the State Government is crystallized. Otherwise, any objection raised by the Contractor against other claims of the State Government in respect of other contracts would be effectively frustrated. In the instant case, the State Government has preferred a Civil Suit in which the contractor has taken various defences. All those defences would be set at Page 17 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 naught and a possible judgment in favour of the contractor would be rendered otiose if interpretation of the State Government is accepted on Clause 26.
We are of the view that only in cases where the claim is crystallized, the State Government can set off and adjust those amounts from the money due and payable in respect of the other contract. So far as the facts of the present case, we are of the view that the judgment rendered by the Apex Court in the case of M/s. Lakshmichand & Balchand (Supra) would squarely apply. Interpreting Clause 71 of the Contract, the Apex Court held as under:
"In regard to the claim to adjustment on the second count the position is more controversial. The claim is founded in the doctrine of equitable set off, but we do not find evidence before us to bring the case within the operation of the doctrine. It is not a case where cross demands rise out of the same transaction or the demands are so connected in their nature and circumstances that they can be looked upon as part of one transaction. Nor can assistance be derived from Clause 71. The benefit of that provision can be claimed only if the amount sought to be retained is an ascertained sum, an amount which can be readily adjusted against the amount payable under the other contract. Here, the amount sought to be adjusted has yet to be determined as a liability against the contractor. It has been disputed by the appellant. Accordingly, Clause 71 cannot be invoked. xxx xxx "
In our view, Clause 26 would come to the rescue of the State Government only if the amount is adjusted towards a claim which is crystallized, not otherwise. We, therefore, fully endorse the view of the learned Single Judge on the interpretation of Clause 26.
Under the circumstances, Letters Patent Appeal lacks merits and the same is dismissed.
12. Thus, the Clause 26 referred to in the order passed by a Co- ordinate Bench of this Court referred to above is para-materia to Clause-43A i.e. set off clause with which we are concerned. The principle of law as explained by this Court in the above referred Page 18 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 order is that such set off clause would come to the rescue of the State or Board or any other instrumentality of State only if the amount is adjusted towards a claim which is crystallized and not otherwise.
13. In the aforesaid context, Mr. Munshaw, the learned counsel appearing for the Board fairly conceded that the claim in the present case cannot be said to have been crystallized. The claim could be said to be crystallized only if there is an award passed by an Arbitrator in any arbitration proceedings or there is a decree passed by a competent civil court.
14. We may refer to and rely upon a decision of the Supreme Court in the case of State of Karnataka Vs. Shree Rameshwara Rice Mills, Thirthhalli reported in AIR 1987 SC 1359, wherein, the Supreme Court observed in Para-7 as under:-
"On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyenger. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the power of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are "and for any breach of conditions set forth herein-before, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of Clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess Page 19 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests or justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12."
15. In the aforesaid view of the matter, we have reached to the conclusion that the board cannot recover the amount of Rs.15.87 crore from the pending bills of the writ-applicant in connection with the other works of contract assigned by the board to the writ- applicant.
16. We have confined our adjudication only to the question whether the board can invoke the set off clause referred to above in the absence of any crystallized claim. The board otherwise may be justified in redressing various grievances against the writ- applicant so far as the work undertaken by the writ-applicant is concerned. We have not gone into all such issues. If the board wants to recover a particular amount from the writ-applicant towards damages by way of compensation, then it shall be open to the board to initiate appropriate proceedings before the appropriate forum in accordance with law. In future, if the board initiates any Page 20 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021 C/SCA/9793/2021 ORDER DATED: 06/08/2021 such proceedings, then the appropriate forum shall adjudicate such claim on its own merits in accordance with law without being influenced in any manner by any of the observations made by this Court.
17. With the aforesaid, this writ-application stands disposed of.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) A. B. VAGHELA Page 21 of 21 Downloaded on : Wed Sep 08 13:22:13 IST 2021