Sr. No. 29 v. Union Territory of Jammu and Kashmir

CORAM: HON’BLE MS. JUSTICE MOKSHA KHAJURIA KAZMI, JUDGE ORDER 01.11.2023 (ORAL) 1. In instant petition, the petitioner-Company herein seeking direction upon the respondents to release the admitted payment of Rs.1,89,51,180/- (Rupees One Crore Eighty Nine Lacs Fifty One 2 WP (C) No. 1754/2020 Thousand One Hundred Eighty only) due to the petitioner-Company on account of works executed by the petitioner at Block Buffliaz and Block Mandi in PWD Sub-Division Mandi and PWD Sub-Division Surankote falling under PWD (R&B) Division Poonch pertaining improvement/upgradation of Mandi Phagla Buffliaz Road From KM 6th to KM 15th on Mandi Side and KM 6th to KM 16th on Buffliaz side and construction of road (new) from KM 16th to KM 25th on Mandi side and KM 17th to KM 37th on Buffliaz side by way of earth work cutting, X- drainage work, protection works, pavements etc. under CRF; with a further direction to the respondents to make funds available so as to enable the petitioner to execute the balance work after releasing the admitted payment of Rs.1,89,51,180/- due to the petitioner on account of works already executed by the petitioner. FACTUAL MATRIX : 2. The petitioner is a Company registered under the Indian Companies Act. It is stated that the petitioner-Company is a leading EPC (Engineering, Procurement and Construction) Company in India in the energy and infrastructure sectors and is providing the services of Project Management, Engineering and Civil infrastructure since 1994.

3. Respondent No.4 vide NIT No.8006-44 dated 14.12.2009 invited bids for execution of the following works: “Improvement/upgradation of Mandi Phagla Buffliaz Road From KM 6th to KM 15th on Mandi Side and KM 6th to KM 16th on Buffliaz side and construction of road (new) from KM 16th to KM 25th on Mandi side and KM 17th to KM 37th on Buffliaz side by way of earth work cutting, X-drainage work, protection works, pavements etc. under CRF.”

4. It is stated that the petitioner-Company being fully eligible also participated in the bidding process and the bid of the petitioner was accepted vide Letter of acceptance bearing No. CEJ/DB/1601-04 dated

30.04.2010, the work in question was allotted to the petitioner for the contract price of Rs.38,80,33,524/- (Rupees Thirty Eight Crore Eighty Lac and Thirty Three Thousand Five Hundred and Twenty Four only), vide allotment letter No. CEJ/G/3931-33 dated 04.06.2010. It is further stated that the contract was allotted to the petitioner after the same was approved the Contract Committee Meeting held under Chairmanship of Commissioner/Secretary to Government Public Works 3 WP (C) No. 1754/2020 (R&B) department i.e. respondent No.1 on 16.04.2010 and subsequently in the minutes of the meeting issued by the office of respondent No.2 vide Office No. CEJ/CC/PWD (R&B)/Minutes/S/2003-07 dated

29.04.2010.

5. It is stated that after having been allotted the work, the petitioner- Company was handed over the site and the work was strictly initiated in accordance with the terms and conditions of the allotment in the year 2010 itself. Since the work was executed in phases, as such, during the period of the execution of the work, bills were submitted in running account i.e. after executing a particular portion of the work, bills were submitted to the department and department after verifying the works, releases the payment. Similarly, after executing the further work, the next running account bill was submitted and after completion of the work a final bill was submitted for the release of the final payment.

6. It is stated that with respect to the work in question, after the acceptance of the bid of the petitioner-Company, it commenced work as per the terms and conditions of the allotment of contract and as much as 95.15% of the total work was completed by the petitioner in the year 2019. Since the contract in question was an item rated contract i.e. for each and every item of work, rates had been quoted and thereafter final value of the bid amount was given, as such, with execution of work in part, running account bills were submitted and payments were also released in favour of the petitioner.

7. It is further stated that the petitioner submitted running account bills and payments amounting to Rs.35,02,59,902/- were released in favour of the petitioner which was about 90.26% of the allotted amount. Petitioner- Company thereafter submitted its last two bills having Serial No. 54 for an amount of Rs.1,13,79,380/- and Serial No. 55 for an amount of Rs.75,71,800/- but the same have not been released in favour of the petitioner till date.

8. It is stated that the claim of the petitioner-Company was verified by the respondent-department but the bills submitted by the petitioner were returned on 01.08.2019 with the remarks that “funds are not available”. It is further stated that the respondents have not disputed the amount due to the petitioner but the same has not been released despite 4 WP (C) No. 1754/2020 the fact that the amount due to the petitioner is admitted by the respondents. It is also stated by the petitioner that it is absolutely illegal on the part of the respondents to withhold the admitted amount due to the petitioner for the works already being executed by the petitioner.

9. Per contra, the reply has been filed by the respondents and in reply to para nos. 8 to 11, it is stated that the work done claim was again raised by the department against the work executed by the Contractor in CC 54th and CC 55th amounting to Rs.113.79 lacs and Rs.75.71 lacs respectively but due to non-availability of funds payment could not be made/processed to the contractor till date.

10. Heard learned counsel for the parties and perused the material on record. 11. The only grievance of the petitioner in the instant petition is that though the respondents have admitted the liability and have already released an amount of Rs.35,02,59,902/- out of the total contract amount but the remaining admitted amount of Rs.1,89,51,180/- is still pending to be released in favour of the petitioner which as per respondents could not be released due to paucity of funds.

12. Mr. Rahul Pant, learned Senior counsel, has relied upon the Division Bench Judgment of this Court rendered in LPA No. 137/2020 titled “Union Territory of J&K and others vs. Sanjeev Kumar” dated

23.02.2021, wherein it is held as under : “15. The extent of applicability of Article 14 in contractual matters, where the State was a party, came up for consideration in the case of “M/s Radhakrishna Agarwal and ors Vs State of Bihar & ors,” (1977) 3 SCC 457, wherein the Apex Court held as under:- “10. It is thus clear that the Erusian Equipment & Chemicals Ltd.'s case (supra) involved discrimination at the very threshold or at the time of entry into the field of consideration of persons with whom the Government could contract at all. At this stage, no doubt, the State acts purely in its executive capacity and is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional powers. But, after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps 5 WP (C) No. 1754/2020 in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract.”

16. Subsequently, however, in “Verigamto Naveen Vs Govt. of A.P. & ors,” (2001) 8 SCC 344, the Apex Court held that if the breach of contract involved breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action even when arising out of contract, brought it within the sphere of public law. It was held in paragraph 21 as under:- “21……. In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in M/s Dwarkadas Marfatia & Sons vs. Board of Trustees of the Port of Bombay; Mahabir Auto Stores & Ors. vs. Indian Oil Corporation & Ors.; and Srilekha Vidyarthi vs. State of U.P.. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings within the sphere of public law because the power exercised is apart from contract.” “19. The issue was also considered at length in ABL International Limited Vs Export Credit Guarantee Corporation of India Limited and noticing the various judgments on the point, the regarding following maintainability of the writ petition:- principles were crystallized a. In an appropriate case, a writ petition as against the State or an instrumentality of the State arising out of the contractual obligations is maintainable. b. Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases, as a matter of rule. A writ petition involving the consequential benefit of monetary claims is also maintainable. c. “20. The Court further proceeded to hold that in entertaining the writs under Article 226, the Court has the discretion to entertain or not to entertain the petition and with reference to “Whirlpool Corporation Vs Registrar of Trade Marks, Mumbai & ors,” 1998 (8) SCC 1, it was held that the prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the writ jurisdiction.” the State or

13. Learned Senior counsel, Mr. Rahul Pant, has stated that respondents herein can neither delay nor refuse the payment to the tune of 6 WP (C) No. 1754/2020 Rs.1,89,51,180/- due to the petitioner-Company on the ground of non- availability of funds. Admittedly, the petitioner-Company has been allotted contract by the competent authority and after execution of the allotted work it has been verified by the concerned authority, as such, it doesn‟t lie in the mouth of the respondents to withhold the admitted amount/liability in favour of the petitioner on account of non-availability of funds.

14. Mr. Ravinder Gupta, learned Additional Advocate General, has stated that the liability has been admitted by the respondents but due to paucity of funds, the same could not be released in favour of the petitioner till date.

15. The petitioner-Company cannot be made to wait endlessly and indefinitely for the release of the payments on the ground of unavailability of funds. The work was executed and verified in the year 2010 but the bills have not been cleared from the last more than 13 years, which is not only illegal but also arbitrary action on the part of the respondents.

16. In RFA No. 136/2017 & CM Appl. 4704/2017 titled “North Delhi Municipal Corporation and anr. V. Amit Tanwar” decided on 22nd March, 2018, the Delhi High Court has held as under : “34. It is slightly unfathomable as to how the Corporation can postpone the payment to the Contractor, indefinitely. The issuance of the tender and the work order in favour of the Contractor has to be on the pre-condition that funds are available with the Corporation. To ask the Contractor to wait endlessly for his payment is wholly arbitrary. The Corporation which hands over the works contract to the Contractor cannot say "Do the work now, I will pay when I have the money". Even if such a clause has been signed and accepted by the Contractor, it does not make the clause valid inasmuch as it would render a fundamental condition of contract being hit by provisions of the Indian Contract Act, 1872 (hereinafter, „Contract Act‟). Every contract, to be valid, has to indefinite postponement of consideration would be wholly unconscionable. In fact a Single Judge of this Court in Jagbir Singh Sharma v. Municipal Corporation of Delhi [order dated 15th July, 2007 in CS(OS) 1797/2007] (hereinafter, „Jagbir Singh‟), while dealing with Clause 9 of the General Conditions of Contract (as it then stood) has held as under: consideration "7. ...A careful reading of the said clause indicates that it stipulates two different time periods for making payment. In cases where tendered value of the work is up to Rs.5 lakhs, payment is required to be made within three months and where the tendered value of the work exceeds Rs.5 lakhs, 7 WP (C) No. 1754/2020 the payment is to be made within six months. Learned counsel for the defendant submitted that the contract uses the expression "as far as possible". This expression to my mind supports the case of the Plaintiffs. The expression "as far as possible" is a pointer that every endeavor should be made by MCD to make payment within the time period stipulated in Clause 9. Normally and in due course, payments will be made within the time limit mentioned. The applications filed for leave to defend do not set out and give any reason for the delay in making the payments. Normally, payment should be made within a reasonable time after the contract has been executed and the party has performed his obligations under the contract. Section 46 of the Indian Contract Act, 1872 stipulates that where no time limit is specified, the engagement must be performed within a reasonable time.

8. In the applications for leave to defend, it is stated that payments will be made as and when funds in a particular budget head are available with the MCD. Ex facie, the stand taken in the leave to defend applications cannot be accepted and has to be rejected. Once the defendant-MCD admits its obligation to make payment, the said payment has to be arranged for and budgeted for by them. The plaintiffs have no role to play in the said exercise. How the defendant manages their internal affairs is their own business. In fact, Clause 9 of the Contract stipulates that “as far as possible the MCD will make endeavor to make the payment within the said period”.....”

17. As such, the delay in releasing the admitted liability only on the ground of paucity/unavailability of funds cannot be a defense that the petitioner- Company should suffer for non-payment for years endlessly, for the works already executed by the petitioner-Company.

18. In view of the aforesaid discussion, the instant writ petition is disposed of with a direction to the respondents to release an admitted liability to the tune of Rs.1,89,51,180/- in favour of the petitioner-Company within a period of six months from the date a certified copy of this order is furnished to them by the petitioner. (MOKSHA KHAJURIA KAZMI) JUDGE Jammu : 01.11.2023 Pawan Chopra PAWAN CHOPRA 2023.11.02 12:53 I attest to the accuracy and integrity of this document Whether the order is speaking : Yes/No Whether the order is reportable: Yes/No