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8. It is the further case of the plaintiff that on 12.10.1994, vide Ex.D-41, defendant no.3 passed an order rescinding the contract and levied penalty on the plaintiff, which order was communicated to the plaintiff by defendant no.4 vide letter dated 24.10.1994 marked as Ex.D-42. Before rescinding the contract, defendant no.3 neither issued notice nor heard the plaintiff, as required under clause 3(d) of the agreement, though the contract is rescinded by invoking clause 3(d) of the agreement by him.

9. The plaintiff, being aggrieved by the rescinding of the contract and failure on the part of the defendants to make payments for the work done and return of earnest money and security deposit amount, filed eight original suit nos. 35 to 42 of 1997 against the defendants before the Civil Judge (Senior Division) Gadag seeking for grant of declaratory relief that the order of rescinding the contract passed by defendant no. 3 in respect of works of canal is illegal and not binding on him. Further, the plaintiff sought decrees of permanent injunction restraining the defendants from either forfeiting or adjusting the earnest money and security deposit amount made by him and for payment of bill amount in respect of the work executed by him and also to restrain the defendants from recovering the alleged risk and cost amount from him from out of the amount due from the works executed by him in any other Division or Department (Exs. P-1 to P-6 produced in the Original Suits) of Alur combined branch and work of canal at K.M. no. 97 and 102 and Malaprabha right bank canal. He had further prayed for settlement of final bill amount in relation to the execution of work and return of earnest money and security deposit amount along with 18% interest and also on the withheld amount along with damages, costs and other reliefs.

31. It is needless to observe that the conclusion and findings arrived at by the High Court on the basis of re-appreciation of evidence is contrary to the pleadings and evidence on record, the trial judge being the fact finding authority has duly considered the entire evidence after proper analysis and it has recorded the finding of fact on the contentious issue nos. 1,2,3,5 and 6 in favour of the plaintiff.

32. Answer to point no.3 - The High Court, on the issue of rescission of the contract with the plaintiff by defendant no.3, vide order dated 12.10.1994, which order was communicated by defendant no.4 to the plaintiff, has relied on letters sent by the defendants to the plaintiff, wherein he was requested to resume and complete the work and all the items of tender as agreed upon by him. The High Court has erroneously recorded the finding of fact stating that no infirmity can be found in the action taken by the Department in rescinding the agreement and levying of penalty and forfeiture of earnest money, security deposit and withholding of final bill amount, as the plaintiff did not resume work nor had he shown his willingness to resume or complete the work as per the terms and conditions of the agreement, nor did he request for any fresh terms and conditions to complete the same, and so the Department was left with no option but to rescind the tender agreement. We find the above findings of the High Court in reversing the finding of the trial court on issue nos. 4, 5 and 7 are wholly untenable both on facts and in law and we have to hold that the rescinding of the contract by defendant no.3 is illegal, and penalty imposed upon the plaintiff and forfeiture of earnest money, security deposit and withholding of bill amount after rescinding the contract is not legal and valid as the plaintiff himself has requested the defendants to conclude the contract without any penalty or the risk and cost amount. Defendant no. 3 passed the order of rescinding the contract, without issuing any show cause notice or holding an enquiry, as required under clause 3(d) of the contract and therefore the learned trial judge has rightly recorded the findings on the aforesaid contentious issues in favour of the plaintiff and rightly held that the rescinding of the contract was not justified. The unilateral rescission of the contract of the plaintiff by defendant No. 3 is arbitrary and unreasonable. The action of defendant no.3 in rescinding the contract has resulted in serious civil consequences of imposition of penalty and forfeiture of the earnest money deposit amount, security deposit and withholding the bill amount in relation to the execution of the work by the plaintiff. Therefore, defendant no. 3 before rescinding the contract, by invoking his power under clause 3(d) of the agreement, should have complied with the conditions mentioned in the said clause as the same is mandatory. The rescinding of the contract is also bad in law for one more reason that the State Government has accorded permission to defendant no.3- the Chief Engineer, Irrigation (North), Belgaum to rescind the contract as per terms and conditions of the agreement vide letter dated 29.8.1994, which document is marked as Ex. D-40. The Chief Engineer directed the Superintending Engineer, M.R.B.C. Circle, Dharwad to levy penalty and rescinded the contract vide letter dated 12.10.1994, which document is marked as Ex. D-41, the relevant portions of this letter is extracted below :

“(ii) to rescind the contract and to take up the balance work at the risk and cost of the contract as per clause-3 of Agreement.
In addition to the above, the expenditure incurred towards the work charged establishment if any, beyond the tender period till the date of rescinding the agreement may be recovered, duly observing all the formalities of the agreement. The Superintending Engineer is requested to call for tenders for the balance works.” We have to infer from the last unnumbered paragraph of the said letter, that the contract of the plaintiff is rescinded. Thus, we have to hold that defendant no.3 rescinded the contract, which order is communicated by defendant no.4 vide letter 24.10.1994 which document is marked as Ex. D-