M/s. Chandragiri Construction Company v. The Chief Engineer, P.W.D. Water Resources Organisation & Ors

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :27.06.2008CORAMTHE HONOURABLE MR.JUSTICE S.NAGAMUTHUWrit Petition Nos.8450 of 2006, 31909 of 2007,W.P.M.P.No.9367 of 2006,W.V.M.P.No.1033 of 2006 in W.P.8450 of 2006 andM.P.No.1 of 2007 in W.P.No.31909 of 2007M/s.Chandragiri Construction Company.Partnership Firm, rep. by itsManaging Partner – K.M.Moideen Kunji,P.O.Thekkil, Kerala.... Petitioner in both WPsvs.1.The Chief Engineer,P.W.D. Water Resources Organisation,Chennai Region,Chepauk, Chennai – 600 005.2.The Superintending Engineer,P.W.d. Water Resources Organisation,Shenbagathope Reservoir Project Division (I/c)I.B at Bagamarpet, Polur – 606 803.3.The Executive Engineer,P.W.D. Water Resources Organisation,Shenbagathope Reservoir Project Division,Vellore.... Respondents in W.P.8450/061.State of Tamil Nadu rep. by itsSecretary to Government,Public Works Department,Fort St. George, Chennai – 600 009.2.The Chief Engineer,P.W.D. Water Resources Organisation,Chennai Region,Chepauk, Chennai – 600 005.3.The Superintending Engineer,Public Work Department (Water Resources Organisation),Project Circle, Vellore- 4. https://hcservices.ecourts.gov.in/hcservices/

4.The Executive Engineer,Public Work Department,(Water Resources Organisation),Shenbagathope Reservoir Project,Thiruvannamalai District.... Respondents in W.P.31909/07Prayer in W.P.No.8450/06:-Writ Petition filed under Article 226of the Constitution of India praying for the issuance of a writ ofcertiorari, calling for the records relating to the impugned noticeissued by the second respondent vide letter No.DO.2/F.11(A)/2005/09M/dated 03.03.2006 and quash the same.Prayer in W.P.No.31909/07:-Writ Petition filed under Article 226of the Constitution of India praying for the issuance of a writ ofmandamus, directing the second respondent to pay the followingadmitted amount due to the petitioner in respect of the contractwork viz., formation of a Reservoir with allied component worksacross Kamandalar near Shenbagathope Village, Polur Taluk,Thiruvannamalai District, State of Tamil Nadu.For Petitionerin both W.Ps :Mr.R.Krishnamoorthy, Senior Counsel for Mr.K.PremkumarFor Respondents:Mr.V.Arun Addl.Govt.PleaderCOMMON ORDERThough the miscellaneous petitions are listed today, byconsent of both sides, the writ petitions are taken up for finaldisposal.2.The managing partner of the partnership firm,M/s.Chandragiri Construction Company, has filed both the writpetitions representing the said firm. The petitioner is aregistered state level contractor with the Public Works Departmentof the Government of Tamil Nadu and entitled to do works worth morethan Rs.7500 lakhs. The first respondent called for eligibletenders in respect of the work of "Formation of a Reservoir withallied component works across Kamandalar near Shenbagathope villagein Polur Taluk of Thiruvannamalai District", with a sanctionedestimate value of Rs.23.47 crores as early as in 1996-1997. In thatprocess, the petitioner’s tender was accepted and a contract wasentered into between the first respondent and petitioner on24.08.2001. https://hcservices.ecourts.gov.in/hcservices/

3.It is stated by the petitioner that owing to additionalitems of work as well as additional quantities, a revised estimatefor a sum of Rs.34 crores was sanctioned by the first respondentwhich was later on increased to Rs.35.71 crores. It is furtherstated that due to non availability of good quality of sand fromthe quarry specified in the agreement as the source of procurement,the petitioner had to find out the source of sand that couldprovide good quality sand and sizable quantities to meet out therequirement for the project. Ultimately, such quantity of good sandwas found out in the sand quarry at Cheyyar River near OkoorVillage in Polur Taluk which is at distance of 40 kilo meters fromthe Shenbagathope Reservoir Project. For taking sand from the saidquarry, necessary sanction was also obtained by the petitioner fromthe District Collector, Thiruvannamalai. For procuring sand fromthe said quarry and to transport the same to a distance of 40 kilometers, the petitioner had to incur an additional expenditure.According to the petitioner, he is entitled for a sum of Rs.470/-per cubic meter of sand inclusive of its handling charges, cost ofsand and Seniorage payable at quarry and the other incidentalsincurred thereon for the quantity of about 65000 cubic meters orfor the quantity as per the actuals reflected in the measurementbooks maintained by the Department. The petitioner has completedthe work in all respects despite of all the hurdles. But therespondents have settled only 95% of the bills and 5% of balancewhich may work out to Rs.110 lakhs is due from the department.4.Claiming the above said amount under various heads, thepetitioner caused a notice on the first respondent on 14.11.2005thereby making a demand for Rs.3.5 crores approximately and alsoprayed for appointment of an Arbitrator to decide the disputebetween the parties as per the contract. Admittedly, the firstrespondent sent a reply on 27.01.2006 thereby refusing to appointan Arbitrator. Thereafter, the petitioner filed an applicationunder Section 11 of the Arbitration and Conciliation Act, 1996before this Court, praying for appointment of sole Arbitrator todecide the issue. The said application came to be dismissed on30.03.2007 as not maintainable.5.While so, according to the petitioner, the second respondentissued a show cause notice vide letter No.DO.2/F.11(A)/2005/09M/dated 03.03.2006 calling upon the petitioner to repay asum of Rs.257.25 lakhs on the ground that in respect of thepayments made there was an objection from the Accountant Generalstating that the said amount had been paid in excess. Thepetitioner was further called upon to pay the said sum within 15days from the date of such notice. 6.Challenging the above show cause notice dated 03.03.2006issued by the second respondent, the petitioner has filed https://hcservices.ecourts.gov.in/hcservices/ W.P.No.8450 of 2006. Subsequently, seeking for a writ of mandamus,to direct the second respondent to pay a sum of Rs.2,37,00,000/-,the petitioner has filed W.P.No.31909 of 2007.7.Heard Mr.R.Krishnamoorthy, learned Senior counsel appearingfor the petitioner in both the writ petitions and the learnedAdditional Government Pleader Mr.Arun appearing for therespondents.8.Since the disputes in both the writ petitions emanate fromthe terms and conditions of the contract dated 24.08.2001, it isnecessary to look into the relevant clauses in the said agreement.Clause 35 of the agreement, which deals with settlement of disputesis as follows:- "35.SETTLEMENT OF DISPUTES:In case of any dispute or differencebetween the parties to the contract eitherduring the progress or with in the 3 months ofthe date of the completion of the works orafter the determination abandonment or breachof the contract, or as to any matter or thingarising there under except as to the mattersleft to the sole discretion of the ExecutiveEngineer under clauses 18,20,25.3,27,32,34,6and 37 of the "General Conditions of Contract"or as to the with holding by the ExecutiveEngineer or payment of any bill to which thecontractor may claim to be entitled, the eitherparty shall forth with give to the other noticeof such dispute or difference and such disputeor difference shall be and is hereby referredto the arbitration of the superintendingEngineer, PWD, WRO., Palar basin Circle,Chennai (hereinafter called the Arbitration) incases where the value of claim is less than andupto Rs.50,000/-. In cases where the value ofthe claim is more than Rs.50,000/- the partieswill seek remedy through the competent civilcourt.Subject as aforesaid to the provisions ofthe Arbitration Act 1940, or any statutorymodification or re-enactment thereof and therules made there under and for the time beingin force shall apply to the Arbitrationproceedings under this clause.Upon every and any such references, thecosts of and incidental to the reference andaward respectively shall be in the discretion https://hcservices.ecourts.gov.in/hcservices/ of the Arbitrator subject to the conditionsthat the amount of such costs to be awarded toeither party shall not, in respect of amonetary claim exceed the percentage set outbelow of any such award irrespective of theactual fees, costs and expenses incurred byeither party; provided that where a monetaryclaim is disallowed in full, the saidpercentage shall be calculated on the amount ofthe claim. The Arbitrator may determine theamount of the costs to be awarded or direct thesame to be taxed as between solicitor andclient or as party and party and shall directby whom and to whom in what manner the sameshall be borne and paid.The fees for arbitration shall be levied,based on the value of claims referred to forarbitration. The fess shall be calculated ar 5%of the first Rs.10,000/- at 3% on the nextRs.40,000/-.Provided that the Government shall not beliable to any claim in respect of any suchdispute or difference until the liability andthe amount thereof shall have been referred toand decided by the Arbitrator.The Department may make payment to thecontractors according to the arbitration award,as soon as the award is passed, when neitherparty object to the award and without obtaininga degree in the Court of Law."9.Though initially arguments and counter arguments wereadvanced as to whether, as per the above clause, the disputesinvolved in these writ petitions are liable to be referred to anArbitrator, later on the learned counsel for both parties agreedthat these disputes cannot be referred to Arbitrator as per clause35 of the agreement since the value of the claim made in both thewrit petitions are more than Rs.50,000/-.10.In cases where the value of the claim is more thanRs.50,000/-, the parties will seek remedy through the competentCivil Court. Relying on this clause in the agreement, the learnedAdditional Government Pleader would submit that in respect of theclaim for Rs.2.37 crores made in W.P.No.31909 of 2007, it is forthe petitioner to work out his remedies through a competent CivilCourt and so, according to him, these writ petitions are notmaintainable. https://hcservices.ecourts.gov.in/hcservices/

11.But the learned Senior Counsel appearing for the petitionerwould rely on the judgment of the Hon’ble Supreme Court in ABLINTERNATIONAL LTD., V. EZPORT CREDIT GUARANTEE CORPORATION OF INDIALTD., (2004 (3) SCC 553) to submit that a writ petition involving aconsequential relief of monetary claim is maintainable. Therefore,according to the learned Senior Counsel, though there are certaindisputed questions of fact, the writ petition in W.P.No.31909 of2007, where the petitioner has made a monetary claim ismaintainable.12.In paragraph Nos.27 and 28 of the said judgment (citedsupra) the Hon'ble Supreme Court has held as follows:-"27.From the above discussion of ours, thefollowing legal principles emerge as to themaintainability of a writ petition.:(a)In an appropriate case, a writ petition asagainst a State or an instrumentality of a Statearising out of a contractual obligation ismaintainable.(b)Merely because some disputed questions offact arise for consideration,same cannot be a groundto refuse to entertain a writ petition in all casesas a matter of rule.(c)A writ petition involving a consequentialrelief of monetary claim is also maintainable.28.However, while entertaining an objection asto the maintainability of a writ petition underArticle 226 of the Constitution of India, the courtshould bear in mind the fact that the power to issueprerogative writs under Article 226 of theConstitution is plenary in nature and is not limitedby any other provisions of the Constitution. The Highcourt having regard to the facts of the case, has adiscretion to entertain or not to entertain a writpetition. The court has imposed upon itself certainrestrictions in the exercise of this power. (SeeWhirlpool Corpn. Vs. Registrar of Trade Marks.)Andthis plenary right of the High Court to issue aprerogative writ will not normally be exercised bythe Court to the exclusion of other availableremedies unless such action of the State or itsinstrumentality is arbitrary and unreasonable so asto violate the constitutional mandate of Article 14or for other valid and legitimate reasons, for whichthe Court thinks it necessary to exercise the saidjurisdiction." https://hcservices.ecourts.gov.in/hcservices/

13.In this case it is seriously disputed that therespondents are not liable to pay any amount to the petitioner andinstead, the petitioner alone has to repay the amount as per theImpugned order in W.P.No.8450 of 2006. Considering the huge amountinvolved in the claims made by the respective parties and alsoconsidering the nature of the disputes actually raised by theparties, though the Hon'ble Supreme Court in the above saidjudgement has held that merely because some disputed questions offact arise for consideration, the same cannot be a ground to refuseto entertain a writ petition in all cases as a matter of rule, inmy considered opinion, the said disputed questions of fact arisingfor consideration in both these writ petitions cannot beadjudicated upon as they can be resolved only on evidence to be letin by the parties. Even in the said judgment, the Hon'ble SupremeCourt has only held that refusal to entertain a writ petitionshould not be a matter of rule simply because more disputedquestions of fact arise for consideration. In this case as I havealready held the disputed questions are not only very serious innature but also complicated. Therefore, in my considered opinionthe writ petition in W.P.No.31909 of 2007 is not sustainable.14.In Noble Resources Limited Vs. State of Orissa (2006(10)SCC 236), while dealing with the scope of Judicial review inrespect of contractual matters after referring to various earlierjudgments of the Hon'ble Supreme Court including ABL INTERNATIONALLTD., V. EZPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD., (citedsupra) the Hon'ble Supreme Court has held as follows:-"27.Contractual matters are, thus, not beyondthe realm of judicial review. Its application may,however, be limited.28.Although the terms of the invitation totender may not be open to judicial scrutiny, but thecourts can scrutinise the award of contract by theGovernment or its agencies in exercise of theirpower of judicial review to prevent arbitrariness offavouritism. (See Directorate of Education Vs.Educomp Datamatics Ltd) However, the court mayrefuse to exercise its jurisdiction, if it does notinvolve any public interest.29.Although the scope of judicial review orthe development of law in this field has beennoticed hereinbefore particularly in the light ofthe decision of this Court in ABL International Ltdeach case, however, must be decided on its ownfacts. Public interest as noticed hereinbefore, maybe one of the factors to exercise the power ofjudicial review. In a case where a public law https://hcservices.ecourts.gov.in/hcservices/ wlement is involved, judicial review may bepermissible.(Binny Ltd., Vs. V. Sadasivan and G.B.Mahajan Vs. Jalgaon Municipal Council)30.In State of U.P. Vs. Johri Mal it washeld: "30.It is well settled that while exercisingthe power of judicial review the court is moreconcerned with the decision making process than themerit of the decision itself. In doing so, it isoften argued by the defender of an impugned decisionthat the court is not competent to exercise itspower when there are serious disputed question offacts; when the decision of the Tribunal or thedecision of the fact-finding body or the arbitratoris given finality by the statue which governs agiven situation or which, by nature of the activity,the decision-maker's opinion on facts is final. Butwhile examining and scrutinising the decision makingprocess it becomes inevitable to also appreciate thefacts of a given case as otherwise the decisioncannot be tested under the grounds of illegality,irrationality or procedural impropriety. How far thecourt of judicial review can reappreciate thefindings of facts depends on the ground of judicialreview. For example, if a decision is challenged asirrational, it would be well-nigh impossible torecord a finding whether a decision is rational orirrational without first evaluating the facts of thecase and coming to a plausible conclusion and thentesting the decision of the authority on thetouchstone of the tests laid down by the court withspecial reference to a given case. This position iswell settled in the Indian Administrative law.Therefore, to a limited extent of scrutinising thedecision-making process, it is always open to thecourt to review the evaluation of facts by thedecision-maker."31. Another field where judicial review ispermissible would be when mala fide or ulteriormotive is attributed. In Asis Foundation andConstruction Ltd. Vs. Trafalgar House Construction(I) Ltd. This court held: SCC p.746, para 9)" We are of the considered opinion that itwas not within the permissible limits ofinterference for a court of law, particularly whenthere has been no allegation of malice or ulteriormotive and particularly when the court has not foundany mala fides or favouritism in the grant. It wasfurther held:(SCC p.746, para 10) https://hcservices.ecourts.gov.in/hcservices/ "10.Therefore, though the principle ofjudicial review cannot be denied so far as exerciseof contractual powers of government bodies areconcerned, but it is intended to preventarbitrariness or favouritism and it is exercised inthe larger public interest or if it is brought tothe notice of the court that in the matter of awardof a contract, power has been exercised for anycollateral purpose. But on examining the facts andcircumstances of the present case and on goingthrough the records we are of the considered opinionthat none of the criteria has been satisfiedjustifying Court's interference in the grant ofcontract in favour of the appellant."15.Having regard to the aforesaid legal principles, if thedisputes in both the writ petitions are considered, in myconsidered opinion, there is no public interest at all involvedthese claims. As held by the Hon'ble Supreme Court if publicinterest is involved then this Court can have judicial review ofthe disputes. Since in the cases on hand, there is no element ofpublic interest involved at all, these writ petitions are notmaintainable.16. It is settled law, that even in respect of contractualmatters involving the State instrumentalities, though publicinterest is not involved, still, if any action of the State suffersfrom arbitrariness or favouritism, the said action can be subjectedto judicial review under article 226 of the constitution of India.In the present case in W.P.No.31909 of 2007, so far, in respect ofthe claims made by the petitioner for additional sanction of amountto the tune of 3.5 crores, there has been no decision taken by theGovernment and thus there is no order available so as to review thesame on the ground of arbitrariness or favourtism.17.In respect of the Impugned order in W.P.No.8450 of 2006,on examination, I am convinced that the same suffers fromarbitrariness and so this court should have judicial review of thesaid order. Admittedly before passing of the impugned order, noopportunity whatsoever was given to the petitioner to make hissubmissions. The impugned order has been made solely on the basisof the objection said to have been raised by the AccountantGeneral. No copy of the said objection was furnished to thepetitioner so as to enable him to submit his explanation. Thepetitioner has been completely kept in dark in respect of thedetails of the objection raised by the Accountant General. For allthese reasons I have to necessarily hold that the said impugnedorder suffers from arbitrariness and so it requires to be setaside. https://hcservices.ecourts.gov.in/hcservices/

18.As per clause 35 of the agreement when there is anydispute in regard to payment of any bill, the parties have to workout their remedy only through a competent civil Court. The secondrespondent has unilaterally passed the impugned order. Thus it hasbeen passed in gross violation of clause 35 of the agreement. Sinceas concluded above, the impugned order under challenge inw.P.No.8450 of 2006 has been passed in arbitrary manner, I deem itappropriate to exercise the power under article 226 of theConstitution of India to set aside the said order leaving theoption for the respondents to workout their remedies throughcompetent Civil Court. Similarly in respect of the claim made bythe petitioner in W.P.31909 of 2007 also it is open for thepetitioner to work out his remedy through a competent Civil Court.19.In the result,(a) W.P.No.8450 of 2006 is allowed and impugned order ofthe second respondent in letter No.DO.2/F.11(A)/2005/09M/ dated03.03.2006 is quashed. However liberty is given to the respondentsto work out their remedies through a competent Civil Court or inany other manner known to law, if any amount is due to be recoveredfrom the petitioner as per audit report.(b)W.P.No.31909 is dismissed with a liberty to thepetitioner to work out his remedy through a competent Civil Court.(c) It is made clear that if any such Civil Suit isinstituted by any of the parties to these writ petitions, the CivilCourt shall not be influenced by any of the observations made inthis order. No costs. Consequently, connected miscellaneouspetitions are closed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.jbm/kprTo1.The Chief Engineer,P.W.D. Water Resources Organisation,Chennai Region,Chepauk, Chennai – 600 005. https://hcservices.ecourts.gov.in/hcservices/

2.The Superintending Engineer,P.W.D. Water Resources Organisation,Shenbagathope Reservoir Project Division (I/c)I.B at Bagamarpet, Polur – 606 803.3.The Executive Engineer,P.W.D. Water Resources Organisation,Shenbagathope Reservoir Project Division,Vellore.4.The Secretary to GovernmentState of Tamil Nadu Public Works Department,Fort St. George,Chennai – 600 009.5.The Superintending Engineer,Public Work Department (Water Resources Organisation),Project Circle, Vellore- 4.2 ccs to Mr.K. Premkumar, Advocate, Sr. 33166, 33163W.P.Nos.8450 of 2006 & 31909 of 2007SSN (CO)kk 9/7