Andhra Pradesh High Court - Amravati
N. Kumar vs Union Of India on 8 July, 2019
Author: M.Ganga Rao
Bench: M.Ganga Rao
THE HON'BLE SRI JUSTICE M.GANGA RAO
Writ Petition No. 4979 of 2019
ORDER:
The petitioner prays to declare the Memo No.DWA/ AP/HYD/Snl/A/2016-17/No.217 dated 22.08.2016 insofar as it affects the petitioner's right and Letter No.PAG (Audit)/AP/2018-19/ESCAP-3 dated 03.07.2018 of the Principal Accountant General (Audit) as illegal and arbitrary and to direct the respondents not to deduct the amounts in respect of project rehabilitation and upgradation of NH-18 (new NH-40) Level Crossing No.23/SPL Class at KM 3.6 between Chittoor and RVS Nagar railway stations on Chittoor
- Pakala Railway station road to 4 lane road over bridge with paved shoulder and LC.No.18A/SPL Class at KM 7.8 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor-Pakala railway stations from the running bills.
2. Heard finally at the stage of admission with the consent of both the learned counsel.
3. The case of the petitioner is that M/s.Krishi Infratech Engineering Contractors, Bangalore is a Special Class Contractor. The 1st respondent issued a tender notification inviting bids for the work relating to Rehabilitation and Upgradation of existing LC.No.23/SPL Class at Km 3.6 on NH-18 (New NH-40) between Chittoor and RVS Nagar railway stations on Chittoor-Pakala railway station road to 4-lane 2 with paved shoulder and LC.No.18/SPL Class at Km 7.8 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor-Pakala railway station in the State of Andhra Pradesh on Engineering, Procurement and Construction (EPC) mode. In pursuance of the tender notification, the petitioner being a successful bidder was entrusted with the work of construction of 4-lane ROB and its approaches in lieu of existing Level Crossing No.23/SPL class at Km 3.6 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor-Pakala railway section in the State of Andhra Pradesh vide L.S C.R agreement No.29/2017-18 dated 12.02.2018 and construction of 4-lane ROB and its approaches in lieu of existing Level Crossing No.18A/SPL class at Km 7.8 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor - Pakala railway section in the State of Andhra Pradesh on Engineering Procurement & Construction (EPC) mode vide L.S C.R agreement No.17/2017-18 dated 20.11.2017.
4. The writ petition is filed by one individual by name Sri N.Kumar S/o.Narasimha Naidu claiming to be the authorized Signatory of M/s.Krishi Infratech, Bangalore. But, no authorization letter is filed by the petitioner and the M/s.Krishi Infratech Engineering Contractors, Bangalore is not a party to the writ petition. As seen from the cause-title of the writ petition, only N.Kumar S/o.Narasimha Naidu claiming to be the authorized signatory is a party, but he is 3 not representing the contractor - M/s.Krishni Infratech, Bangalore. Therefore, on this ground alone, the writ petition is not maintainable and is liable to be dismissed in limini.
5. However, learned counsel for the petitioner submits that when the contractor executing the entrusted works of the estimated contracted value is Rs.49,61,00,000/- and Rs.49,65,50,000/-. The 6th respondent addressed a letter No.PAG(Audit)/AP/2018-19/ESCAP-3 dated 03.07.2018 to the 4th respondent stating that the audit party had conducted Compliance Audit and found that excess payments were made to the contractors, based on the Memo dated 22.08.2016 and Memo dated 29.12.2016. Assailing the said order, the present writ petition is filed, mainly contending that the contract was awarded in favour of the contractor on Engineering Procurement and Construction mode and article 19 of the Agreement clearly states that the authority should make payments to the contractor for the works on the basis of the lump sum price accepted by the authority as specified in the agreement. The parties should abide by the terms and conditions of the agreement, the contract price should be valid and effective until issuance of completion certificate. The price adjustment clause is applicable to any price variations in respect of labour, cement, steel, bitumen, fuel, lubricants, and other material inputs and plant and machinery as per clause 19.10 of the agreement. The agreement further states that as per clause 19.17, if there is 4 any change of law and if the contractor suffers any additional cost in the execution of the work or in case the contractor benefits from any decrease in costs, the contractor or either party shall intimate the same to the authority engineer. The price adjustment clause in the agreement shall be made applicable to the above said components. It is further submitted that the State of Andhra Pradesh vide Memo No.3066/M II (1) 2016-3 dated 04.03.2016 changed the sand policy and the sand is made available to the public without charging any fee with effect from 02.03.2016. The Board of Chief Engineers took a decision on 28.05.2016 to revise the rates of sand with effect from 02.03.2016. As the sand is made available free of cost, the initial cost of the sand included in the detailed project reports/approved estimates shall be recovered from the payments made to the contractors. The 4th respondent calculated the amount of sand utilized by looking at seigniorage statements appended to the running bills. On the basis of the above, the audit came to the conclusion that the agreement was entered on 12.02.2018 with a stipulation to complete the works within 18 months from the date of agreement. So far, the initial cost of the sand was not recovered from the running account bills paid or the works executed. A lump sum contract/EPC contract is a fixed rate contract for the performance of the work and the employer agrees to make the payments as per the schedule of payments. The financial risk and 5 commitment of the employer in such contracts is fixed normally in projects where the EPC mode adopted. The Engineers had prepared the plans, specifications and other documents on the basis of which a contractor could provide a reasonable accurate cost estimate for bidding, so that it could be awarded to the lowest bidder. Hence, the letter dated 03.07.2018 of the 6th respondent asking the 4th respondent to deduct the excess payments made to the contractors, is illegal and contrary to the terms and conditions of the contract agreement.
The learned counsel for the petitioner further states that in a similar set of circumstances, the High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh, passed orders in Writ Petition No.47346 of 2018 dated 28.12.2018 following the order passed in I.A.No.1 of 2018 in W.P.No.25504 of 2018, granted interim stay of recovery of amounts from the petitioner's bills therein. But, order in I.A.No.1 of 2018 in W.P.No.38186 of 2018 dated 23.10.2018 was passed suspending the impugned memo dated 22.08.2016 and the 5th respondent's Memo dated 17.05.2018 and G.O.Ms.No.125 dated 29.12.2016, pending disposal of the writ petition, whereas the order in I.A.No.1 of 2018 in W.P.No.25504 of 2018 dated 02.08.2018 reads thus:
"Learned counsel for the petitioner submits that the petitioner was entrusted with the work of laying two lanes with paved shoulders under NHDP-IV through Engineering Procurement & Construction (EPC) basis. The petitioner completed the said work and work completion certificate was issued on 05.09.2017. Instead of releasing 6 the amounts, the respondents have issued impugned letters for recovery of certain amount from the running maintenance bills.
Maintenance contract is separate contract entered into between the petitioner and the respondent and the petitioner already completed the execution of work and completion certificate was issued on 05.09.2017.
Basing on the audit report, learned counsel for the petitioner submits that it is a EPC contract i.e., work allotted on lump sum amount. As per Clause 19.1 of the agreement Contract price shall not include the cost of maintenance which shall be paid separately in accordance with the provisions of Clause 19.7. Learned counsel for the petitioner also submits that sand is not included regarding variation in contract price. Only labour, cement, steel and fuel are included for the purpose of price adjustment. Since there is no clause in the agreement with respect to price variation in relation to sand, it cannot be deducted on account of sand policy as per G.O.Ms.No.125, dated 29.12.2016.
Learned Assistant Government Pleader for respondents 4 and 5 submits that the impugned order is based on G.O.Ms.No.125 only and since the same is not challenged, no relief can be granted. A perusal of the impugned order would go to show that there is no clause in the agreement in respect of price variation in relation to sand and the amount which is sought to be deducted on account of sand policy. This Court also considered the same in W.P.No.3232 of 2017 and granted interim order.
In view of the same, there shall be interim direction as prayed for. However, the payments will be subject to further orders in the writ petition."
A reading of the order shows that the said order was passed on the ground that the petitioner therein completed the work and completion certificate was issued on 05.09.2017. Instead of releasing the amounts, the respondents have issued impugned letter dated 03.07.2018 for recovery of the amounts from the running bills of the maintenance contract which is a separate contract entered into between the parties and the petitioner has already completed the execution of the work and completion certificate was issued on 05.09.2017. Basing on the audit report stating that there is no clause in the agreement in respect of price variation in relation to the sand, the amount 7 which is sought to be deducted on account of the sand policy following the order in Writ Petition No.3232 of 2017 and granted interim order directing the respondents not to deduct the amounts.
6. In the facts and circumstances of the case and considering the submissions of both the learned counsel and perused the record, this Court found that the contractor was entrusted the work of construction of 4-lane ROB and its approaches in lieu of existing Level Crossing No.23/SPL class at Km 3.6 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor-Pakala railway section in the State of Andhra Pradesh vide L.S C.R agreement No.29/2017-18 dated 12.02.2018 and construction of 4-lane ROB and its approaches in lieu of existing Level Crossing No.18A/SPL class at Km 7.8 on NH-18 between Chittoor and RVS Nagar railway stations on Chittoor - Pakala railway section in the State of Andhra Pradesh on Engineering Procurement & Construction (EPC) mode vide L.S C.R agreement No.17/2017-18 dated 20.11.2017. When the works are in progress, the impugned memos are issued.
7. A perusal of the impugned memos dated 22.08.2016 and 29.12.2016 and letter dated 03.07.2018 of the Principal Accountant General (Audit), the impugned orders refer to the Government Memo dated 04.03.2016 and minutes of the Board of Chief Engineers in the meeting held on 28.05.2016. 8 In the memo dated 04.03.2016, it is stated that the sand must be made available to the public without charging any fee and the sand shall not be used for filling purpose or any other purpose other than building construction. The minutes of the Board dated 28.05.2016 states that the board had taken a decision for revision of rates of sand with effect from 02.03.2016, wherein sand prices for cubic meter is shown as existing rate at Rs.677 per cubic meter as per SOR 2016-18 and revised rate of sand was fixed by the Board of Chief Engineers including screening charges at Rs.152.13 per cubic meter.
8. The Government issued G.O.Ms.No.125, Water Resources (WRG-GRC) Department, dated 29.12.2016, fixing sand rates for all Engineering works in view of sand policy with necessary recoveries from 02.03.2016 retrospectively. Based on the State Government sand policy, now the office of the Principal Accountant General (Audit), Andhra Pradesh, Hyderabad, by impugned letter dated 03.07.2018 asked the Superintending Engineer, Roads and Buildings, National Highways Circle, Bandar Road, Vijayawada, stating that the audit party had conducted compliance audit on the accounts/records of the Office of the Executive Engineer, National Highways, Kadapa for the year 2018-19. An Audit Para titled "Excess payment to Contractors - Non recovery of initial Cost of Sand vis-a-vis Sand Policy in Andhra Pradesh"
was raised and the same was communicated to the Divisional 9 Officer/Superintending Engineer concerned for taking necessary action and also asked for the information pertaining to the works viz., 1) Rehabilitation and Upgradation of NH 67 from Km 695 to 741.950 (Atmakur - Nellore Section) in the State of Andhra Pradesh to two lanes with paved shoulders; 2) Rehabilitation and Upgradation of NH 67 from Km 589.00 to Km 641.00 (Mydukur to Kornala T Junction Section) of the State of Andhra Pradesh to two lane with paved shoulders; 3) Rehabilitation and Upgradation of NH 67 from Km 641.00 to Km 695 (Dornala T Junction to Atmakur Section) in the State of Andhra Pradesh; and 4) Rehabilitation and Upgradation of NH 18 from Km 108/850 to Km 160/200 (Rayachoty to Kadapa Section) to two lane with paved shoulders in the State of Andhra Pradesh, and that audit party informed to the Superintending Engineer. However, none of the works pertaining to this writ petition was mentioned therein which affects the contractor.
9. This Court found that the main challenge in the writ petition is communication of the audit para dated 03.07.2018 by the Principal Accountant General (Audit) to the Superintending Engineer, no recovery is ordered but they only sought for information about sand component and its price after free sand policy of the State Government for audit. Against communication of the audit para, the authorities as well as the contractor is entitled to submit a detailed explanation with regard to the works entrusted and the sand 10 component shown in the various kinds of works and its price given for the sand component has to be looked into. If the contractor submits any explanation to the satisfaction of the audit party, the authority engineer, considering the same the audit para could be dropped, but without submitting any explanation to the audit para, the present writ petition is filed, which is not maintainable.
10. In view of the above discussion, the writ petition against the audit para is not maintainable. However, on merits also as per the agreement clause 19.10 titled as 'Price adjustment for the Works', wherein clause 19.10.4 speaks that the contract price shall be adjusted for increase or decrease in rates and price of labour, cement, steel, plant, machinery and spares, butmen, fuel and lubricants, and other material inputs in accordance with the principles, procedures and formula shown in the contract. Clause 19.12 titled as 'Price adjustment for Maintenance of Project Highway' says that lump sum payment for maintenance shall be adjusted every quarter for change in rates and prices of various inputs in accordance with the formula. Clause 19.17.1 under the title 'Change in law' says that if as a result of change in Law, the Contractor suffers any additional costs in the execution of the Works or in relation to the performance of its other obligations under this Agreement, the Contractor shall, within 15 (fifteen) days from the date it becomes reasonably aware of such addition in cost, notify the Authority with a copy to the 11 Authority's Engineer of such additional cost due to Change in Law. Further, Clause 19.17.2 states that if as a result of Change in Law, the Contractor benefits from any reduction in inputs cost for the execution of this agreement or in accordance with the provisions of this Agreement, either Party shall, within 15 (fifteen) days from the date it becomes reasonably aware of such reduction in cost, notify the other Party with a copy to the Authority's Engineer of such reduction in inputs cost due to Change in Law.
11. Here, in this writ petition, as per the State Government sand policy, the sand is made available free of cost. On taking into consideration, the Board of Chief Engineers has taken a decision and revised the sand rates in the on-going existing contracts as per the policy of the State Government and re-fixed the sand price including the loading and unloading charges and manual labour in respect of the sand component of the price shown in the estimates from Rs.677/- for cubic meter to Rs.152.13 Ps. Based on the said decision, the 6th respondent - audit party had come to the conclusion that excess payments were made to the contractors and asked for further information on the execution of the works mentioned in the impugned order dated 03.07.2018, but it not relates to the works entrusted and executed by the contractor in this writ petition. Hence, the decision of the 6th respondent audit party could not be found fault with as it is based on the decision of the minutes of the Engineer-in- 12 Chief with regard to the revision of sand price as per the Government policy.
12. Hence, the averments in the writ petition that the Government is taking steps to recover the cost of the sand from the excess bills paid to the contractors without notice or opportunity, merit no consideration at this stage as the letter dated 03.07.2018 is only communication of the audit para and the contractor has every right to submit his explanation through Superintending Engineer. The same could be considered and they would take a decision based on the explanation whether to continue the audit para or to drop the same. Therefore, the writ petition is not maintainable against the concluded contract as the petitioner failed to show violation of any principles of natural justice as explained above. Even the impugned memos and audit para did not pertaining to the agreements of contract work referred in the writ petition. Hence, filing of the writ petition is misconceived and no writ lies against the audit para. Further, the writ petition is not maintainable at the instance of the petitioner who is an individual having no authorization to file the writ petition and he is not representing the contractor company.
13. Accordingly, the Writ Petition is dismissed at the stage of admission. No order as to costs.
(Contd...) 13
14. Miscellaneous Petitions, if any, pending in this writ petition shall also stand dismissed.
___________________________ JUSTICE M.GANGA RAO 08-07-2019 IVD/anr 14 THE HON'BLE SRI JUSTICE M.GANGA RAO Writ Petition No. 4979 of 2019 08-07-2019 IVD/anr